Beard Energy Transition Acquisition (BRD) - 2023 Q2 - Quarterly Report

Cover Page This section provides key corporate identification details, stock exchange listings, and outstanding share information for Beard Energy Transition Acquisition Corp - Beard Energy Transition Acquisition Corp. is a Delaware corporation, classified as a non-accelerated filer, smaller reporting company, and emerging growth company[24][34] - The company's Units (BRD.U), Class A Common Stock (BRD), and Warrants (BRD.WS) are registered on the New York Stock Exchange[24][32] - The registrant has submitted all required Interactive Data Files during the preceding 12 months[25] Outstanding Shares as of August 1, 2023 | Share Type | Number of Shares | | :----------------- | :--------------- | | Class A Common Stock | 7,128,354 | | Class V Common Stock | 5,751,250 | Table of Contents This section outlines the report's structure, detailing financial information, management's discussion, risk factors, and exhibits - The report is structured into PART I - FINANCIAL INFORMATION and PART II - OTHER INFORMATION, covering financial statements, management's discussion and analysis, risk factors, and exhibits[27] PART I - FINANCIAL INFORMATION This part presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations Item 1. Financial Statements This section provides the unaudited condensed consolidated financial statements for Beard Energy Transition Acquisition Corp., including the balance sheets, statements of operations, statements of changes in stockholders' deficit, and statements of cash flows, along with comprehensive notes explaining the company's organization, accounting policies, initial public offering, related party transactions, warrants, stockholders' deficit, commitments, income tax, fair value measurements, and subsequent events Condensed Consolidated Balance Sheets This section presents the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Consolidated Balance Sheet Summary | Metric | June 30, 2023 | December 31, 2022 | | :--------------------------- | :------------ | :---------------- | | Cash | $366,798 | $1,076,578 | | Total Current Assets | $3,440,653 | $1,403,838 | | Investments in Trust Account | $75,213,164 | $237,947,675 | | Total Assets | $78,653,817 | $239,351,513 | | Total Current Liabilities | $3,470,163 | $1,434,679 | | Total Liabilities | $11,520,163 | $9,484,679 | | Total Stockholders' Deficit | $(8,079,510) | $(8,080,842) | Condensed Consolidated Statements of Operations This section details the company's financial performance, including revenues, expenses, and net income or loss over specific periods Statements of Operations Summary (3 Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | | :---------------------------- | :------------ | :------------ | | Operating and formation costs | $(67,917) | $313,415 | | Franchise tax | $50,000 | $50,000 | | Income (loss) from operations | $17,917 | $(363,415) | | Interest & dividend income | $2,153,794 | $307,345 | | Income (loss) before income taxes | $2,171,711 | $(56,070) | | Income tax expense | $(441,797) | $(9,619) | | Net income (loss) | $1,729,914 | $(65,689) | | Net income (loss) attributable to BETAC | $1,729,820 | $(65,685) | | Basic & diluted EPS (Class A) | $0.08 | $0.00 | | Basic & diluted EPS (Class V) | $0.06 | $(0.01) | Statements of Operations Summary (6 Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | | :---------------------------- | :------------ | :------------ | | Operating and formation costs | $616,310 | $682,443 | | Franchise tax | $100,000 | $100,000 | | Income (loss) from operations | $(716,310) | $(782,443) | | Interest & dividend income | $4,674,461 | $322,489 | | Income (loss) before income taxes | $3,958,151 | $(459,954) | | Income tax expense | $(960,637) | $(9,619) | | Net income (loss) | $2,997,514 | $(469,573) | | Net income (loss) attributable to BETAC | $2,997,351 | $(469,547) | | Basic & diluted EPS (Class A) | $0.15 | $(0.01) | | Basic & diluted EPS (Class V) | $0.00 | $(0.03) | Condensed Consolidated Statements of Changes in Stockholders' Deficit This section tracks changes in the company's equity, including net income, redemptions, and other adjustments affecting stockholders' deficit - Total stockholders' deficit slightly decreased from $(8,080,842) as of December 31, 2022, to $(8,079,510) as of June 30, 2023[43][181] - Key movements for the six months ended June 30, 2023, included net income of $2,997,514, offset by subsequent accretion of Class A common stock subject to redemption of $(2,996,182) and redemption of Class A common stock of $(165,730,694)[43][181] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Summary (Six Months Ended June 30) | Activity | 2023 ($) | 2022 ($) | | :------------------------------------------ | :------------ | :------------ | | Net cash used in operating activities | $(2,546,283) | $(410,395) | | Net cash provided by investing activities | $167,408,972 | $0 | | Net cash (used in) provided by financing activities | $(165,572,469) | $1,553 | | Net Change in Cash | $(709,780) | $(408,842) | | Cash - End of period | $366,798 | $1,323,932 | - Investing activities for the six months ended June 30, 2023, included $165,730,694 withdrawn from the Trust Account for redeeming stockholders and $1,838,278 for tax payments, partially offset by $160,000 deposited into the Trust Account[66][242] - Financing activities for the six months ended June 30, 2023, primarily involved payments to redeeming stockholders of $(165,730,694) and proceeds from a promissory note for trust extension payments of $160,000[66][217] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, transactions, and subsequent events NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS This note describes the company's formation as a blank check company, its purpose of effecting a Business Combination, and its non-operating income sources - Beard Energy Transition Acquisition Corp. is a blank check company formed on February 8, 2021, for the purpose of effecting a Business Combination[49][67] - The company generates non-operating income from interest on proceeds held in the Trust Account, as it will not generate operating revenues until after a Business Combination[49] - An amount of $234,625,500 from the Initial Public Offering and Private Placement Warrants was placed in a Trust Account, invested in U.S. government treasury obligations or money market funds[68] - The company has 25 months from the closing of its Initial Public Offering to complete a Business Combination, after which it will redeem Public Shares and liquidate if unsuccessful[184] - On May 18, 2023, the company entered into a Business Combination Agreement with Suntuity Inc. and its subsidiaries[73] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the key accounting principles applied in preparing the financial statements, including consolidation, fair value measurements, and warrant classification - The condensed consolidated financial statements include the accounts of the Company and its majority-controlled operating subsidiary (Opco), with intercompany transactions eliminated[165] - Investments held in the Trust Account are comprised solely of U.S. government securities or money market funds, presented at fair value[83] - Warrants are accounted for as equity-classified instruments based on ASC 480 and ASC 815[199] - Total offering costs amounted to $13,308,754, including $4,600,000 in cash underwriting fees, $8,050,000 in deferred underwriting fees, and $658,754 in other offering costs[69][85] - Class A common stock subject to redemption is classified outside of permanent equity due to redemption provisions not solely within the company's control, with changes in redemption value reflected in accumulated deficit[114][138] - Income taxes are accounted for using the asset and liability method under ASC Topic 740, recognizing deferred tax assets and liabilities and establishing valuation allowances when necessary[139][140] NOTE 3. INITIAL PUBLIC OFFERING This note details the consummation of the company's Initial Public Offering, including the number of units issued and gross proceeds generated - The Initial Public Offering was consummated on November 29, 2021[117][183][240] - 23,000,000 Units were issued, including 3,000,000 Units from the full exercise of the underwriter's over-allotment option, generating gross proceeds of $230,000,000[117][183][240] - Each Unit consisted of one share of Class A common stock and one-half of one redeemable warrant ('Public Warrant')[117] NOTE 4. RELATED PARTY TRANSACTIONS This note describes transactions and agreements with related parties, including founder shares, private placement warrants, and administrative support reimbursements - Founder Shares (Class B Units of Opco and Class V common stock) and Sponsor Shares (Class A common stock, Class A Units of Opco, and Class V common stock) are exchangeable for Class A common stock post-Business Combination[120][121] - The Sponsor purchased 12,225,000 Private Placement Warrants for $1.00 each, generating $12,225,000, with proceeds added to the Trust Account[50][145] - The company reimburses an affiliate of the Sponsor up to $25,000 per month for administrative support, incurring $50,001 and $100,002 for the three and six months ended June 30, 2023, respectively[127] - The Sponsor or affiliates may provide Working Capital Loans for transaction costs, convertible into warrants, with no outstanding balance as of June 30, 2023, and December 31, 2022[148] NOTE 5. WARRANTS This note explains the terms and accounting treatment of the company's public and private placement warrants, including exercisability and redemption conditions - Public Warrants become exercisable 30 days after the completion of a Business Combination and expire five years thereafter[149] - The company may redeem outstanding Public Warrants for $0.01 per warrant if the Class A common stock price equals or exceeds $18.00 per share for 20 trading days within a 30-trading day period[171] - Private Placement Warrants are substantially identical to Public Warrants but are non-redeemable and may be exercised for cash or on a 'cashless basis' when held by the Sponsor or permitted transferees[152] - All 23,725,000 warrants (Public and Private Placement) are equity-classified in accordance with ASC 480 and ASC 815[173] NOTE 6. STOCKHOLDERS' DEFICIT This note details the authorized and outstanding shares of common stock, changes due to redemptions, and the conversion rights of different share classes - The company is authorized to issue 1,000,000 shares of preferred stock and 200,000,000 shares of Class A common stock; no preferred shares were issued or outstanding[152][174] - Outstanding Class A common stock decreased from 23,001,250 shares at December 31, 2022, to 7,128,354 shares at June 30, 2023, due to redemptions[174] - 15,872,896 shares of Class A common stock were redeemed at approximately $10.44 per share, resulting in approximately $165.7 million removed from the Trust Account[70][207] - 5,751,250 shares of Class V common stock are issued and outstanding, no longer subject to forfeiture[153] - Class B Units of Opco convert into Class A Units of Opco on a one-for-one basis upon a Business Combination, and Class A Unit holders have exchange rights for Class A common stock or cash[155][177] NOTE 7. COMMITMENTS AND CONTINGENCIES This note outlines the company's contractual obligations and potential liabilities, including registration rights and underwriting commission agreements - Holders of Founder Shares, Sponsor Shares, Private Placement Warrants, and Working Capital Loan warrants are entitled to registration rights[179] - The underwriter was paid a cash underwriting discount of $4,600,000, and Citi waived its $8,050,000 deferred underwriting commission contingent on the Business Combination consummation[69][180] NOTE 8. INCOME TAX This note provides information on the company's income tax expense, effective tax rates, and the impact of valuation allowances on deferred tax assets Effective Tax Rates | Period | 2023 | 2022 | | :-------------------------- | :---- | :----- | | Three months ended June 30 | 20.3% | (17.2)%| | Six months ended June 30 | 24.3% | (2.1)% | - The difference from the statutory rate is primarily due to recording a full valuation allowance on deferred tax assets and using a discrete effective tax rate method[19] NOTE 9. FAIR VALUE MEASUREMENTS This note explains the company's fair value hierarchy for financial instruments, categorizing inputs into Level 1, Level 2, and Level 3 - The fair value hierarchy categorizes inputs into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[91][112][135] - Investments held in the Trust Account are primarily U.S. government securities or money market funds, generally having a readily determinable fair value[20] NOTE 10. SUBSEQUENT EVENTS This note discloses significant events occurring after the balance sheet date, including additional draws on the Suntuity Promissory Note - On July 28, 2023, an additional $160,000 was drawn on the Suntuity Promissory Note for direct payment to the Trust Account[21] - The outstanding balance under the Promissory Note as of the filing date amounted to an aggregate of $320,000[21] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operational results, highlighting its status as a blank check company, recent developments related to its business combination with Suntuity, financial performance, liquidity challenges, related party transactions, and critical accounting policies. It emphasizes the ongoing efforts to complete a business combination and the associated going concern risks Overview This section provides an introduction to the company's nature as a blank check company and its primary focus on identifying a business combination - Beard Energy Transition Acquisition Corp. is a blank check company incorporated on February 8, 2021, for the purpose of effecting an initial business combination[10] - The company has not generated any operating revenues to date, with activities focused on organizational efforts and the search for a prospective initial business combination[195] Recent Developments This section details significant recent events, including the proposed business combination with Suntuity Inc. and related agreements Business Combination This section outlines the agreement with Suntuity Inc. and the structure of the proposed merger, including consideration for equityholders - On May 18, 2023, the company entered into a Business Combination Agreement with Suntuity Inc., New PubCo, and merger subsidiaries[4][73] - The transaction involves a series of mergers where the company and Suntuity will become wholly-owned subsidiaries of New PubCo[4][14][74][93] - Suntuity equityholders will receive an aggregate of 19,000,000 shares of New PubCo Class A Common Stock and New PubCo Warrants as consideration[14][94][96] Related Agreements (Support, Sponsor, Lock-up) This section describes key agreements supporting the business combination, including voting commitments, forfeitures, and transfer restrictions - TJFT STY Holdings, LLC entered into a Support Agreement to approve the Business Combination[16][98] - The Sponsor Agreement outlines certain forfeitures of OpCo Class B Units and Acquiror Warrants by the Sponsor and an agreement to vote in favor of the Business Combination[17][99] - Lock-Up Agreements restrict Suntuity members from transferring New PubCo Class A Common Stock for one year post-closing, with early release conditions based on stock price or liquidation[97][190] Suntuity Reimbursement and Promissory Note This section details Suntuity's agreement to reimburse expenses and provide a promissory note for extension payments to the Trust Account - Suntuity agreed to reimburse all expenses incurred by the company in connection with the Business Combination Agreement, including deferred IPO fees and advisor fees[101][192][227] - Suntuity agreed to loan the company up to $1,120,000 via a non-interest bearing, unsecured promissory note, with monthly $160,000 payments directly to the Trust Account for extension payments[100][194] - The outstanding balance under the Suntuity Promissory Note was $320,000 as of the filing date, following an additional draw on July 28, 2023[21] Citi Fee Waiver and Extension Amendment This section covers the waiver of deferred underwriting fees by Citi, the extension of the business combination deadline, and the impact of redemptions - Citigroup Global Markets Inc. (Citi) waived its $8,050,000 deferred underwriting discounts and commissions, contingent on the consummation of the Business Combination[205][250] - Stockholders approved an amendment to extend the business combination deadline to December 29, 2023[193][206] - Following redemptions, 15,872,896 Class A common shares were redeemed at approximately $10.44 per share, resulting in approximately $165.7 million removed from the Trust Account[207] - After redemptions, the company had 7,128,354 Class A common shares outstanding and $75,213,164 remained in the Trust Account[207] Amended and Restated Registration Rights Agreement This section discusses the planned amendment of the registration rights agreement and New PubCo's commitment to file a resale registration statement - The existing registration rights agreement will be amended and restated concurrently with the closing of the Business Combination[204][232] - New PubCo will file a registration statement for the resale of certain securities within 20 business days post-closing, aiming for effectiveness within 60 business days[204] Results of Operations This section analyzes the company's financial performance, highlighting net income or loss primarily driven by interest income from Trust Account investments - The company has not engaged in any operations nor generated any revenues to date, as it is a blank check company[195] - For the three months ended June 30, 2023, the company reported net income of $1,729,914, primarily due to $2,153,794 in interest income from Trust Account investments[211] - For the six months ended June 30, 2023, the company reported net income of $2,997,514, primarily due to $4,674,461 in interest income from Trust Account investments[239] - In contrast, for the three and six months ended June 30, 2022, the company reported net losses of $65,689 and $469,573, respectively[221][222] Liquidity, Capital Resources and Going Concern This section addresses the company's financial viability, discussing working capital, cash reserves, and the substantial doubt about its ability to continue as a going concern - As of June 30, 2023, the company had a working capital deficit of $29,510 and cash of $366,798 held outside the Trust Account[197][218][277] - The company anticipates that its cash outside the Trust Account will be insufficient to operate until the December 29, 2023, business combination deadline[197][219][277] - These conditions raise substantial doubt about the company's ability to continue as a going concern for a period of time within one year after the financial statements' issuance date[197][219][244][277] - Management plans to address this uncertainty through a Business Combination and expects access to Working Capital Loans, though there is no current commitment for additional capital[80][197][219][243][244][260] Related Party Transactions (MD&A Section) This section details transactions with related parties, including administrative support reimbursements and potential working capital loans from the Sponsor - The company reimburses an affiliate of the Sponsor up to $25,000 per month for administrative support, incurring $50,001 and $100,002 for the three and six months ended June 30, 2023, respectively[228][245] - The Sponsor or affiliates may provide Working Capital Loans to finance transaction costs, which may be convertible into warrants, with no outstanding balance as of June 30, 2023[229][243][246] - The Sponsor purchased 12,225,000 private placement warrants for $12,225,000, which are non-redeemable and transferable to permitted transferees[247] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements for the reported periods - The company did not have any off-balance sheet arrangements as of June 30, 2023, and December 31, 2022[248] Contractual Obligations This section outlines the company's contractual commitments, including the amended registration rights agreement and underwriting arrangements - The registration rights agreement will be amended and restated concurrently with the closing of the Business Combination[232] - Citi, the underwriter, purchased 3,000,000 Units to cover over-allotments at the initial public offering price[233] Registration and Stockholder Rights Agreement (MD&A Section) This section describes the registration rights granted to holders of founder shares, Sponsor shares, private placement warrants, and working capital loan warrants - Holders of founder shares, Sponsor shares, private placement warrants, and working capital loan warrants are entitled to registration rights[249] - These rights include making up to three demands for registration (for holders with at least $25 million in aggregate) and customary 'piggy-back' registration rights[249] - The company will bear the expenses incurred in connection with the filing of any such registration statements[249] Underwriting Agreement (MD&A Section) This section details the underwriting fees paid and waived, specifically the cash underwriting discount and the deferred commission waiver by Citi - The underwriter received a cash underwriting discount of $4,600,000 (2% of gross proceeds)[250] - Citi waived its $8,050,000 deferred underwriting commission, contingent on the consummation of the Business Combination[250] Critical Accounting Policies This section highlights key accounting policies requiring significant judgment, such as the classification of warrants and redeemable Class A common stock - Warrants are accounted for as equity-classified instruments based on ASC 480 and ASC 815, requiring professional judgment[235] - Class A common stock subject to redemption is classified outside of permanent equity due to redemption provisions not solely within the company's control, with changes in redemption value reflected in accumulated deficit[252][269][270] Net Income (Loss) Per Share of Common Stock (MD&A Section) This section explains the methodology for computing net income (loss) per common share, including the treatment of redeemable Class A common stock and warrants - Net income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding[236] - Remeasurement of the accretion to redemption value of Class A common stock subject to possible redemption is considered dividends paid to Class A common stock holders[236] - Warrants are not considered in the calculation of diluted income (loss) per share, as their exercise is contingent upon future events[236] Recent Accounting Standards This section states management's assessment that recently issued, but not yet effective, accounting standards will not materially impact the financial statements - Management does not believe that any recently issued, but not yet effective, accounting standards would have a material effect on the condensed consolidated financial statements if currently adopted[202][237] JOBS Act This section explains the company's status as an 'emerging growth company' under the JOBS Act and its election to delay adoption of certain accounting standards - As an 'emerging growth company' under the JOBS Act, the company benefits from relaxed reporting requirements, including exemptions from certain attestation reports and compensation disclosures[255][271] - The company has elected to delay the adoption of new or revised accounting standards applicable to private companies[271] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Beard Energy Transition Acquisition Corp. is exempt from providing the quantitative and qualitative disclosures about market risk typically required by Item 305(e) of Regulation S-K - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[256] Item 4. Controls and Procedures The company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective as of June 30, 2023. Furthermore, there have been no material changes in the company's internal control over financial reporting during the most recently completed fiscal quarter Disclosure Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as assessed by its principal officers - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[272] Internal Control over Financial Reporting This section reports that there have been no material changes to the company's internal control over financial reporting during the most recent fiscal quarter - There has been no change in the company's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting during the most recently completed fiscal quarter[258] PART II – OTHER INFORMATION This part provides additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits Item 1. Legal Proceedings Beard Energy Transition Acquisition Corp. reported that there is no material litigation, arbitration, or governmental proceeding currently pending against the company or any members of its management team - There is no material litigation, arbitration, or governmental proceeding currently pending against the company or its management team[275] Item 1A. Risk Factors The primary risk factor identified is the substantial doubt about the company's ability to continue as a 'going concern' due to a working capital deficit and insufficient cash outside the Trust Account to operate until the business combination deadline. There is no assurance that the approved extension will lead to a successful business combination or that sufficient capital will be available - The company's financial condition raises substantial doubt about its ability to continue as a 'going concern' through one year from the date of the financial statements if a business combination is not consummated[276][277] - As of June 30, 2023, the company had a working capital deficit of $29,510 and $366,798 in its operating bank account, which is anticipated to be insufficient to operate until the December 29, 2023, business combination deadline[277] - There is no assurance that the approved extension will enable the company to consummate a business combination, and redemptions could leave insufficient cash[261][278] - Management plans to address this uncertainty through a business combination and expects the sponsor to provide Working Capital Loans, but there is no assurance that financing sources will be available[260] Item 2. Recent Sales of Securities; Use of Proceeds from Registered Offerings This item states that it is 'Not applicable,' indicating no recent sales of unregistered securities or changes in the use of proceeds from registered offerings to report - This item is not applicable, indicating no recent sales of securities or changes in the use of proceeds from registered offerings to report[282] Item 3. Defaults Upon Senior Securities The company reported 'None' for defaults upon senior securities, indicating no such events occurred during the reporting period - The company reported no defaults upon senior securities[280] Item 4. Mine Safety Disclosures The company reported 'None' for mine safety disclosures, indicating no relevant information to report under this item - The company reported no mine safety disclosures[283] Item 5. Other Information The company reported 'None' for other information, indicating no additional material information to disclose under this item - The company reported no other information[283] Item 6. Exhibits This section lists all exhibits filed as part of the Quarterly Report, including the Business Combination Agreement, various corporate certificates, warrant agreements, and certifications required by SEC rules - Key exhibits include the Business Combination Agreement (2.1), Second Amended and Restated Certificate of Incorporation (3.4), Private and Public Warrant Agreements (4.5, 4.6), Support Agreement (10.1), Sponsor Agreement (10.2), Lock-Up Agreement (10.3), Promissory Note (10.4), and various certifications (31.1, 31.2, 32.1, 32.2)[212][285] SIGNATURE This section provides the official signature and date of filing for the financial report - The report was signed by Sarah James, Chief Financial Officer and Chief Accounting Officer, on August 7, 2023[268]