free-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-38880


Whole Earth Brands, Inc.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)						38-4101973 (I.R.S. Employer Identification No.)
125 S. Wacker Drive, Suite 3150 Chicago, Illinois						60606
(Address of Principal Executive Offices)						(Zip Code)


(312) 840-6000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which
registered

Common stock, par value $0.0001 per share

FREE

The NASDAQ Stock Market LLC

Warrants to purchase one-half of one share of common stock

FREEW

The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 6, 2022, there were 41,912,356 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.

TABLE OF CONTENTS

WHOLE EARTH BRANDS, INC.

Quarterly Report on Form 10-Q

TABLE OF CONTENTS


		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	30
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
Signatures		32

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Condensed Consolidated Financial Statements (Unaudited)

For the Quarter Ended March 31, 2022


Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets			5

Condensed Consolidated Statements of Operations			6

Condensed Consolidated Statements of Comprehensive Income (Loss)			7

Condensed Consolidated Statements of Equity			8

Condensed Consolidated Statements of Cash Flows			9

Notes to Condensed Consolidated Financial Statements			10
Note 1: Basis of Presentation and Significant Accounting Policies			10
Note 2: Business Combinations			12
Note 3: Inventories			14
Note 4: Goodwill and Other Intangible Assets			15
Note 5: Debt			15
Note 6: Warrants			16
Note 7: Fair Value of Financial Instruments			16
Note 8: Commitments and Contingencies			17
Note 9: Income Taxes			17
Note 10: Pension Benefits			18
Note 11: Stock-Based Compensation			19
Note 12: Earnings Per Share			20
Note 13: Accumulated Other Comprehensive Income (L oss)			21
Note 14: Related Party Transactions			21
Note 15: Business Segments			22

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Whole Earth Brands, Inc.
Condensed Consolidated Balance Sheets
(In thousands of dollars, except for share and per share data)
(Unaudited)

	March 31, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	29,365	$	28,296
Accounts receivable (net of allowances of $1,340 and $1,285, respectively)	73,089		69,590
Inventories	215,058		212,930
Prepaid expenses and other current assets	8,289		7,585
Total current assets	325,801		318,401

Property, Plant and Equipment, net	59,330		58,503

Other Assets
Operating lease right-of-use assets	24,678		26,444
Goodwill	241,535		242,661
Other intangible assets, net	261,592		266,939
Deferred tax assets, net	1,876		1,993
Other assets	8,747		7,638
Total Assets	$	923,559	$	922,579

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	55,426	$	55,182
Accrued expenses and other current liabilities	34,503		30,733
Contingent consideration payable	—		54,113
Current portion of operating lease liabilities	8,101		7,950
Current portion of long-term debt	3,750		3,750
Total current liabilities	101,780		151,728
Non-Current Liabilities
Long-term debt	412,895		383,484
Warrant liabilities	587		2,053
Deferred tax liabilities, net	33,883		35,090
Operating lease liabilities, less current portion	20,437		22,575
Other liabilities	14,003		13,778
Total Liabilities	583,585		608,708
Commitments and Contingencies (Note 8)	—		—
Stockholders’ Equity
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at March 31, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value; 220,000,000 shares authorized; 41,677,664 and 38,871,646 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	4		4
Additional paid-in capital	356,220		330,616
Accumulated deficit	(23,710)		(26,436)
Accumulated other comprehensive income	7,460		9,687
Total stockholders’ equity	339,974		313,871
Total Liabilities and Stockholders’ Equity	$	923,559	$	922,579

See Notes to Unaudited Consolidated Financial Statements

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Whole Earth Brands, Inc.
Condensed Consolidated Statements of Operations
(In thousands of dollars, except for share and per share data)
(Unaudited)

	Three Months Ended
		March 31, 2022		March 31, 2021
Product revenues, net		$	130,592	$	105,825
Cost of goods sold		91,034		70,174
Gross profit		39,558		35,651

Selling, general and administrative expenses		27,788		32,907
Amortization of intangible assets		4,705		4,151

Restructuring and other expenses		—		1,657

Operating income (loss)		7,065		(3,064)

Change in fair value of warrant liabilities		861		(2,362)
Interest expense, net		(6,032)		(5,078)
Loss on extinguishment and debt transaction costs		—		(5,513)
Other income, net		1,956		310
Income (loss) before income taxes		3,850		(15,707)
Provision (benefit) for income taxes		1,124		(3,682)
Net income (loss)		$	2,726	$	(12,025)

Net earnings (loss) per share:
Basic		$	0.07	$	(0.31)
Diluted		$	0.07	$	(0.31)

See Notes to Unaudited Consolidated Financial Statements

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Whole Earth Brands, Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(In thousands of dollars)
(Unaudited)

	Three Months Ended
		March 31, 2022		March 31, 2021
Net income (loss)		$	2,726	$	(12,025)
Other comprehensive income (loss), net of tax:
Net change in pension benefit obligations recognized, net of taxes of $(71) and $0, respectively		(224)		9
Foreign currency translation adjustments		(2,003)		(2,047)
Total other comprehensive income (loss), net of tax		(2,227)		(2,038)
Comprehensive income (loss)		$	499	$	(14,063)

See Notes to Unaudited Consolidated Financial Statements

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Whole Earth Brands, Inc.
Condensed Consolidated Statements of Equity
(In thousands of dollars)
(Unaudited)

	Common Stock			Additional Paid-in		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance at December 31, 2020	38,426,669	$	4	$	325,679	$	(25,442)	$	8,605	$	308,846
Reclassification of Private Warrants (Note 1)	—	—		(7,062)		(1,077)		—		(8,139)
Transfer of Private Warrants to Public Warrants	—	—		2,502		—		—		2,502
Net loss	—	—		—		(12,025)		—		(12,025)
Other comprehensive loss, net of tax	—	—		—		—		(2,038)		(2,038)
Stock-based compensation	—	—		1,639		—		—		1,639
Balance at March 31, 2021	38,426,669	$	4	$	322,758	$	(38,544)	$	6,567	$	290,785


	Common Stock			Additional Paid-in		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance at December 31, 2021	38,871,646	$	4	$	330,616	$	(26,436)	$	9,687	$	313,871
Transfer of Private Warrants to Public Warrants	—	—		605		—		—		605
Net income	—	—		—		2,726		—		2,726
Other comprehensive loss, net of tax	—	—		—		—		(2,227)		(2,227)

Stock-based compensation	—	—		1,354		—		—		1,354
Net share settlements of stock-based awards	146,444	—		(291)		—		—		(291)
Shares issued for payment of contingent consideration	2,659,574	—		23,936		—		—		23,936
Balance at March 31, 2022	41,677,664	$	4	$	356,220	$	(23,710)	$	7,460	$	339,974

See Notes to Unaudited Consolidated Financial Statements

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Whole Earth Brands, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands of dollars)
(Unaudited)

	Three Months Ended
	March 31, 2022		March 31, 2021
Operating activities
Net income (loss)	$	2,726	$	(12,025)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Stock-based compensation	1,650		1,639
Depreciation	1,460		969
Amortization of intangible assets	4,705		4,151
Deferred income taxes	(905)		3,402

Amortization of inventory fair value adjustments	(1,599)		1,619
Non-cash loss on extinguishment of debt	—		4,435
Change in fair value of warrant liabilities	(861)		2,362
Changes in current assets and liabilities:
Accounts receivable	(3,821)		(1,341)
Inventories	(878)		(4,903)
Prepaid expenses and other current assets	(842)		665
Accounts payable, accrued liabilities and income taxes	4,833		(7,052)
Other, net	(2,022)		482
Net cash provided by (used in) operating activities	4,446		(5,597)

Investing activities
Capital expenditures	(3,276)		(1,544)
Acquisitions, net of cash acquired	—		(186,601)
Proceeds from the sale of fixed assets	50		—
Net cash used in investing activities	(3,226)		(188,145)

Financing activities
Proceeds from revolving credit facility	30,000		25,000
Repayments of revolving credit facility

SEC Form 10-Q filed by Whole Earth Brands Inc.