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 ~~September~~June 30, ~~2020~~2021


☐			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)

~~Act II Global Acquisition Corp.~~

~~745 5th Avenue~~

~~New York, New York 10151~~

~~(Former name, former address and former fiscal year, if changed since last report)~~

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 ~~November 13, 2020,~~August 6, 2021, there were ~~38,426,669~~38,485,613 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.

TABLE OF CONTENTS

WHOLE EARTH BRANDS, INC.

~~(f/k/a ACT II GLOBAL ACQUISITION CORP.)~~

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Condensed Consolidated and Combined Financial Statements (Unaudited)

For the Quarter Ended ~~September~~June 30, ~~2020~~2021


Condensed Consolidated and Combined Financial Statements

Condensed Consolidated Balance Sheets ~~as of~~ Se ~~ptember~~ ~~30, 2020 (Successor) and December 31, 2019 (Predecessor)~~			5

Condensed Consolidated and Combined Statements of Operations for the three months ended September 30, 2020 (Successor), the periods June 26, 2020 through September 30, 2020 (Successor), January 1, 2020 through June 25, 2020 (Predecessor), and the three and nine months ended September 30, 2019 (Predecessor)			6

Condensed Consolidated and Combined Statements of Comprehensive Income (Loss)for the three months ended September 30, 2020 (Successor), the periods June 26, 2020 through September 30, 2020 (Successor), January 1, 2020 through June 25, 2020 (Predecessor), and the three and nine months ended September 30, 2019 (Predecessor)			7

Condensed Consolidated and Combined Statements of Equity for the three months ended September 30, 2020 (Successor), the periods June 26, 2020 through September 30, 2020 (Successor), January 1, 2020 through June 25, 2020 (Predecessor), and the three and nine months ended September 30, 2019 (Predecessor)			8

Condensed Consolidated and Combined Statements of Cash Flows ~~for the periods June 26, 2020 through September 30, 2020 (Successor), January 1, 2020 through June 25, 2020 (Predecessor) and the nine months ended September 30, 2019~~			9

Notes to Condensed Consolidated and Combined Financial Statements			1011
Note 1: Basis of Presentation and Significant Accounting Policies			1011
Note 2: Business ~~Combination~~Combinations			1213

Note ~~3: Leases~~			143
~~Note 4:~~: Inventories			15
~~Note 5: Goodwill and Other Intangible Assets~~			16
~~Note 6: Debt~~			16
~~Note 7: Fair Value of Financial Instruments~~			17
~~Note 8: Commitments and Contingencies~~			18
Note ~~9: Income Taxes~~			184
~~Note 10: Pension Benefits~~: Goodwill and Other Intangible Assets			19
Note ~~11: Stock-Based~~ ~~Compensation~~5 : Debt			20
Note ~~12:~~6 : Warrants			21
Note 7 : Fair Value of Financial Instruments			22
Note 8 : Commitments and Contingencies			23
Note 9 : Income Taxes			23
Note 1 0 : Pension Benefits			24
Note 1 1 : Stock-Based Compensation			25
Note 1 2 : Stockholders’ Equity			2026
Note 1 3 : Earnings Per Share			2126
Note 1 4 : Accumulated Other Comprehensive Income (loss)			2228
Note 1 5 : Related Party Transactions			2228
Note 1 6 : Business Segments			23
N ~~ote 1~~7 ~~: Su~~b ~~sequent Events~~			2429

TABLE OF CONTENTS


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

		(Successor)		(Predecessor)			June 30, 2021		December 31, 2020
		September 30, 2020		December 31, 2019
Assets	Assets					Assets
Current Assets	Current Assets					Current Assets
Cash and cash equivalents	Cash and cash equivalents	$	49,081	$	10,395	Cash and cash equivalents	$	24,054	$	16,898
Accounts receivable (net of allowances of $15 and $2,832, respectively)		54,281		55,031
Accounts receivable (net of allowances of $817 and $955, respectively)						Accounts receivable (net of allowances of $817 and $955, respectively)	76,088		56,423
Inventories	Inventories	103,546		121,129		Inventories	195,976		111,699
Prepaid expenses and other current assets	Prepaid expenses and other current assets	5,134		7,283		Prepaid expenses and other current assets	16,632		5,045
Total current assets	Total current assets	212,042		193,838		Total current assets	312,750		190,065

Property, Plant and Equipment, net	Property, Plant and Equipment, net	41,398		20,340		Property, Plant and Equipment, net	52,544		47,285

Other Assets	Other Assets					Other Assets
Operating lease right-of-use assets	Operating lease right-of-use assets	12,378		0		Operating lease right-of-use assets	19,890		12,193
Goodwill	Goodwill	124,874		130,870		Goodwill	241,717		153,537
Other intangible assets, net	Other intangible assets, net	144,809		251,243		Other intangible assets, net	277,912		184,527
Deferred tax assets, net	Deferred tax assets, net	1,023		1,368		Deferred tax assets, net	2,481		2,671
Other assets	Other assets	3,772		2,192		Other assets	7,072		6,260
Total Assets	Total Assets	$	540,296	$	599,851	Total Assets	$	914,366	$	596,538

Liabilities and Stockholders’ Equity	Liabilities and Stockholders’ Equity					Liabilities and Stockholders’ Equity
Current Liabilities	Current Liabilities					Current Liabilities
Accounts payable	Accounts payable	$	21,643	$	26,240	Accounts payable	$	34,176	$	25,200
Accrued expenses and other current liabilities	Accrued expenses and other current liabilities	29,777		28,040		Accrued expenses and other current liabilities	37,852		29,029
Contingent consideration payable						Contingent consideration payable	53,149		0
Current portion of operating lease liabilities	Current portion of operating lease liabilities	3,423		0		Current portion of operating lease liabilities	5,334		3,623
Current portion of long-term debt	Current portion of long-term debt	7,000		0		Current portion of long-term debt	3,750		7,000
Total current liabilities	Total current liabilities	61,843		54,280		Total current liabilities	134,261		64,852
Non-Current Liabilities	Non-Current Liabilities					Non-Current Liabilities
Long-term debt	Long-term debt	126,281		0		Long-term debt	384,659		172,662
Due to related party		0		8,400
Warrant liabilities						Warrant liabilities	8,240		0
Deferred tax liabilities, net	Deferred tax liabilities, net	17,400		31,538		Deferred tax liabilities, net	51,255		23,297
Operating lease liabilities, less current portion	Operating lease liabilities, less current portion	11,659		0		Operating lease liabilities, less current portion	18,437		11,324
Other liabilities	Other liabilities	15,892		17,883		Other liabilities	15,366		15,557
Total Liabilities	Total Liabilities	233,075		112,101		Total Liabilities	612,218		287,692
Commitments and contingencies (Note 8)		0		0
Stockholders’ equity
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; 0ne issued and outstanding		0		0
Common stock, $0.0001 par value; 220,000,000 shares authorized; 38,426,669 shares issued and outstanding		4		0
Commitments and Contingencies (Note 8)						Commitments and Contingencies (Note 8)	0		0
Stockholders’ Equity						Stockholders’ Equity
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; 0ne issued and outstanding at June 30, 2021 and December 31, 2020						Preferred shares, $0.0001 par value; 1,000,000 shares authorized; 0ne issued and outstanding at June 30, 2021 and December 31, 2020	0		0
Common stock, $0.0001 par value; 220,000,000 shares authorized; 38,455,759 and 38,426,669 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively.						Common stock, $0.0001 par value; 220,000,000 shares authorized; 38,455,759 and 38,426,669 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively.	4		4
Additional paid-in capital	Additional paid-in capital	324,417		0		Additional paid-in capital	325,150		325,679
Accumulated deficit	Accumulated deficit	(20,345)		0		Accumulated deficit	(34,849)		(25,442)
Accumulated other comprehensive income	Accumulated other comprehensive income	3,145		0		Accumulated other comprehensive income	11,843		8,605
Net parent investment		0		487,750
Total stockholders’ equity	Total stockholders’ equity	307,221		487,750		Total stockholders’ equity	302,148		308,846
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	540,296	$	599,851	Total Liabilities and Stockholders’ Equity	$	914,366	$	596,538

See Notes to Unaudited Consolidated and Combined Financial Statements

TABLE OF CONTENTS


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

		(Successor)				(Predecessor)							(Successor)						(Predecessor)
		Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019			Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Product revenues, net	Product revenues, net	$	67,002	$	71,480	$	128,328	$	64,060	$	203,354	Product revenues, net	$	126,493	$	232,318	$	4,478	$	62,356	$	128,328
Cost of goods sold	Cost of goods sold	48,357		51,065		77,627		38,173		121,037		Cost of goods sold	85,138		155,312		2,708		37,515		77,627
Gross profit	Gross profit	18,645		20,415		50,701		25,887		82,317		Gross profit	41,355		77,006		1,770		24,841		50,701

Selling, general and administrative expenses	Selling, general and administrative expenses	14,881		16,827		43,355		14,770		49,020		Selling, general and administrative expenses	27,828		60,735		1,946		27,307		43,355
Amortization of intangible assets	Amortization of intangible assets	2,700		2,841		4,927		2,656		7,968		Amortization of intangible assets	4,706		8,857		141		2,393		4,927
Asset impairment charges	Asset impairment charges	0		0		40,600		0		0		Asset impairment charges	0		0		0		0		40,600
Restructuring and other expenses	Restructuring and other expenses	0		0		0		608		1,150		Restructuring and other expenses	2,846		4,503		0		0		0

Operating income (loss)	Operating income (loss)	1,064		747		(38,181)		7,853		24,179		Operating income (loss)	5,975		2,911		(317)		(4,859)		(38,181)

Change in fair value of warrant liabilities												Change in fair value of warrant liabilities	(241)		(2,603)		0		0		0
Interest expense, net	Interest expense, net	(2,045)		(2,161)		(238)		(237)		(342)		Interest expense, net	(6,396)		(11,474)		(116)		(66)		(238)
Other (expense) income, net		(170)		(232)		801		(716)		(666)
(Loss) income before income taxes		(1,151)		(1,646)		(37,618)		6,900		23,171
Provision (benefit) for income taxes		1,684		1,694		(3,482)		1,627		5,228
Net (loss) income		$	(2,835)	$	(3,340)	$	(34,136)	$	5,273	$	17,943
Loss on extinguishment and debt transaction costs												Loss on extinguishment and debt transaction costs	0		(5,513)		0		0		0
Other income (expense), net												Other income (expense), net	190		500		(62)		(920)		801
Loss before income taxes												Loss before income taxes	(472)		(16,179)		(495)		(5,845)		(37,618)
(Benefit) provision for income taxes												(Benefit) provision for income taxes	(4,167)		(7,849)		10		(364)		(3,482)
Net income (loss)												Net income (loss)	$	3,695	$	(8,330)	$	(505)	$	(5,481)	$	(34,136)

Net loss per share – Basic and diluted		$	(0.07)	$	(0.09)
Net earnings (loss) per share:												Net earnings (loss) per share:
Basic												Basic	$	0.10	$	(0.22)	$	(0.01)
Diluted												Diluted	$	0.09	$	(0.22)	$	(0.01)

See Notes to Unaudited Consolidated and Combined Financial Statements

TABLE OF CONTENTS


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

		(Successor)				(Predecessor)							(Successor)						(Predecessor)
		Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019			Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Net (loss) income		$	(2,835)	$	(3,340)	$	(34,136)	$	5,273	$	17,943
Net income (loss)												Net income (loss)	$	3,695	$	(8,330)	$	(505)	$	(5,481)	$	(34,136)
Other comprehensive income (loss), net of tax:	Other comprehensive income (loss), net of tax:											Other comprehensive income (loss), net of tax:
Net change in pension benefit obligations recognized		0		0		318		0		0
Net change in pension benefit obligations recognized, net of taxes of $(13), $(13), $0, $65 and $65												Net change in pension benefit obligations recognized, net of taxes of $(13), $(13), $0, $65 and $65	(46)		(37)		0		270		318
Foreign currency translation adjustments	Foreign currency translation adjustments	3,130		3,145		(2,286)		(3,013)		(4,067)		Foreign currency translation adjustments	5,322		3,275		15		(402)		(2,286)
Total other comprehensive income (loss), net of tax	Total other comprehensive income (loss), net of tax	3,130		3,145		(1,968)		(3,013)		(4,067)		Total other comprehensive income (loss), net of tax	5,276		3,238		15		(132)		(1,968)
Comprehensive income (loss)	Comprehensive income (loss)	$	295	$	(195)	$	(36,104)	$	2,260	$	13,876	Comprehensive income (loss)	$	8,971	$	(5,092)	$	(490)	$	(5,613)	$	(36,104)

See Notes to Unaudited Consolidated and Combined Financial Statements

TABLE OF CONTENTS


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

	(Predecessor)
	Total Equity
~~Balance at January 1, 2019~~	$	~~484,492~~
~~Funding to Parent, net~~	~~(12,117)~~
~~Net income~~	~~9,164~~
~~Other comprehensive loss, net of tax~~	~~(2,439)~~
~~Balance at March 31, 2019~~	$	~~479,100~~
~~Funding to Parent, net~~	~~(3,237)~~
~~Net income~~	~~3,506~~
~~Other comprehensive income, net of tax~~	~~1,385~~
~~Balance at June 30, 2019~~	$	~~480,754~~
~~Funding to Parent, net~~	~~(8,586)~~
~~Net income~~	~~5,273~~
~~Other comprehensive loss, net of tax~~	~~(3,013)~~
~~Balance at September 30, 2019~~	$	~~474,428~~

Balance at ~~January 1, 2020~~December 31, 2019	$	487,750
Funding to Parent, net	(12,262)
Net loss	(28,655)
Other comprehensive loss, net of tax	(1,836)
Balance at March 31, 2020	$	444,997
Funding to Parent, net	338
Net loss	(5,481)
Other comprehensive loss, net of tax	(132)
Balance at June 25, 2020	$	439,722


		Common Stock			Preferred Stock			Additional Paid-in		Accumulated		Accumulated Other Comprehensive		Total Stockholders’			Common Stock			Preferred Stock			Additional Paid-in		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
		Shares	Amount		Shares	Amount		Capital		Deficit		Income		Equity			Shares	Amount		Shares	Amount		Capital		Deficit		Income		Equity
Balance at June 26, 2020		30,926,669	$	3	0	$	0	$	250,366	$	(16,703)	$	0	$	233,666
Balance at June 26, 2020 (Successor)																Balance at June 26, 2020 (Successor)	30,926,669	$	3	0	$	0	$	250,366	$	(16,703)	$	0	$	233,666
Issuance of warrants	Issuance of warrants	—	—		—	—		7,895		—		—		7,895		Issuance of warrants	—	—		—	—		7,895		—		—		7,895
Issuance of common stock	Issuance of common stock	7,500,000	1		—	—		67,104		—		—		67,105		Issuance of common stock	7,500,000	1		—	—		67,104		—		—		67,105
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—	—		—		—		15		15		Other comprehensive income, net of tax	—	—		—	—		—		—		15		15
Net loss	Net loss	—	—		—	—		—		(505)		—		(505)		Net loss	—	—		—	—		—		(505)		—		(505)
Balance at June 30, 2020 (Successor)	Balance at June 30, 2020 (Successor)	38,426,669	$	4	0	$	0	$	325,365	$	(17,208)	$	15	$	308,176	Balance at June 30, 2020 (Successor)	38,426,669	$	4	0	$	0	$	325,365	$	(17,208)	$	15	$	308,176

Other		—	—		—	—		(948)		(302)		—		(1,250)

Balance at December 31, 2020 (Successor)																Balance at December 31, 2020 (Successor)	38,426,669	$	4	0	$	0	$	325,679	$	(25,442)	$	8,605	$	308,846
Reclassification of Private Warrants (Note 1)																Reclassification of Private Warrants (Note 1)	—	—		—	—		(7,062)		(1,077)		—		(8,139)
Transfer of Private Warrants to Public Warrants (Note 6)																Transfer of Private Warrants to Public Warrants (Note 6)	—	—		—	—		2,502		—		—		2,502
Net loss																Net loss	—	—		—	—		—		(12,025)		—		(12,025)
Other comprehensive loss, net of tax																Other comprehensive loss, net of tax	—	—		—	—		—		—		(2,038)		(2,038)
Stock-based compensation																Stock-based compensation	—	—		—	—		1,639		—		—		1,639
Balance at March 31, 2021 (Successor)																Balance at March 31, 2021 (Successor)	38,426,669	$	4	0	$	0	$	322,758	$	(38,544)	$	6,567	$	290,785

Net income																Net income	—	—		—	—		—		3,695		—		3,695
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—	—		—		—		3,130		3,130		Other comprehensive income, net of tax	—	—		—	—		—		—		5,276		5,276
Net loss		—	—		—	—		—		(2,835)		—		(2,835)
Balance at September 30, 2020 (Successor)		38,426,669	$	4	0	$	0	$	324,417	$	(20,345)	$	3,145	$	307,221
Stock-based compensation																Stock-based compensation	—	—		—	—		2,392		—				2,392
Net share settlements of stock-based awards																Net share settlements of stock-based awards	29,090	—		—	—		—		—		—		—
Balance at June 30, 2021 (Successor)																Balance at June 30, 2021 (Successor)	38,455,759	$	4	0	$	0	$	325,150	$	(34,849)	$	11,843	$	302,148

See Notes to Unaudited Consolidated and Combined Financial Statements

TABLE OF CONTENTS


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

		(Successor)		(Predecessor)					(Successor)				(Predecessor)
		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Nine Months Ended September 30, 2019			Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From January 1, 2020 to June 25, 2020
Operating activities	Operating activities							Operating activities
Net (loss) income		$	(3,340)	$	(34,136)	$	17,943
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Net loss								Net loss	$	(8,330)	$	(505)	$	(34,136)
Adjustments to reconcile net loss to net cash provided by operating activities:								Adjustments to reconcile net loss to net cash provided by operating activities:
Stock-based compensation								Stock-based compensation	4,464		0		0
Depreciation	Depreciation	797		1,334		2,232		Depreciation	2,120		43		1,334
Amortization of intangible assets	Amortization of intangible assets	2,841		4,927		7,968		Amortization of intangible assets	8,857		141		4,927
Deferred income taxes	Deferred income taxes	(3,490)		(5,578)		1,857		Deferred income taxes	808		9		(5,578)
Asset impairment charges	Asset impairment charges	0		40,600		0		Asset impairment charges	0		0		40,600
Pension benefit (credit) expense, net		(154)		126		705

Amortization of inventory fair value adjustments								Amortization of inventory fair value adjustments	1,727		0		0
Non-cash loss on extinguishment of debt								Non-cash loss on extinguishment of debt	4,435		0		0
Change in fair value of warrant liabilities								Change in fair value of warrant liabilities	2,603		0		0
Changes in current assets and liabilities:	Changes in current assets and liabilities:							Changes in current assets and liabilities:
Accounts receivable	Accounts receivable	(6,535)		7,726		2,312		Accounts receivable	(4,891)		(1,834)		7,726
Inventories	Inventories	5,022		3,576		2,580		Inventories	(8,142)		311		3,576
Prepaid expenses and other current assets	Prepaid expenses and other current assets	(2,516)		3,330		(569)		Prepaid expenses and other current assets	762		(29)		3,330
Accounts payable, accrued liabilities and income taxes	Accounts payable, accrued liabilities and income taxes	(5,618)		507		(6,589)		Accounts payable, accrued liabilities and income taxes	(14,895)		(2,161)		507
Other, net	Other, net	278		(2,504)		(1,870)		Other, net	1,028		28		(2,378)
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	(12,715)		19,908		26,569		Net cash (used in) provided by operating activities	(9,454)		(3,997)		19,908

Investing activities	Investing activities							Investing activities
Capital expenditures	Capital expenditures	(2,139)		(3,532)		(2,276)		Capital expenditures	(4,624)		(10)		(3,532)
Acquisitions, net of cash acquired	Acquisitions, net of cash acquired	(376,674)		0		0		Acquisitions, net of cash acquired	(186,601)		(376,674)		0
Proceeds from the sale of fixed assets								Proceeds from the sale of fixed assets	4,257		0		0
Transfer from trust account	Transfer from trust account	178,875		0		0		Transfer from trust account	0		178,875		0
Net cash used in investing activities	Net cash used in investing activities	(199,938)		(3,532)		(2,276)		Net cash used in investing activities	(186,968)		(197,809)		(3,532)

Financing activities	Financing activities							Financing activities
Proceeds from revolving credit facility	Proceeds from revolving credit facility	0		3,500		0		Proceeds from revolving credit facility	25,000		0		3,500
Repayments of revolving credit facility	Repayments of revolving credit facility	0		(8,500)		0		Repayments of revolving credit facility	(47,855)		0		(8,500)
Long-term borrowings	Long-term borrowings	140,000		0		0		Long-term borrowings	375,000		140,000		0
Repayments of long-term borrowings	Repayments of long-term borrowings	(1,750)		0		0		Repayments of long-term borrowings	(137,438)		0		0
Debt issuance costs	Debt issuance costs	(7,139)		0		0		Debt issuance costs	(11,589)		(7,139)		0
Proceeds from sale of common stock and warrants	Proceeds from sale of common stock and warrants	75,000		0		0		Proceeds from sale of common stock and warrants	0		75,000		0
Funding to Parent, net	Funding to Parent, net	0		(11,924)		(23,940)		Funding to Parent, net	0		0		(11,924)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	206,111		(16,924)		(23,940)		Net cash provided by (used in) financing activities	203,118		207,861		(16,924)

Effect of exchange rate changes on cash and cash equivalents		88		215		117
Net change in cash and cash equivalents		(6,454)		(333)		470
Cash and cash equivalents, beginning of period		55,535		10,395		7,205
Cash and cash equivalents, end of period		$	49,081	$	10,062	$	7,675

Supplemental disclosure of cash flow information
Interest paid		$	1,667	$	798	$	0
Taxes paid, net of refunds		$	1,722	$	2,244	$	4,160

See Notes to Unaudited Consolidated and Combined Financial Statements

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

	(Successor)				(Predecessor)
	Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From January 1, 2020 to June 25, 2020

Effect of exchange rate changes on cash and cash equivalents	460		17		215
Net change in cash and cash equivalents	7,156		6,072		(333)
Cash and cash equivalents, beginning of period	16,898		55,535		10,395
Cash and cash equivalents, end of period	$	24,054	$	61,607	$	10,062

Supplemental disclosure of cash flow information
Interest paid	$	10,037	$	113	$	798
Taxes paid, net of refunds	$	4,364	$	0	$	2,244
Supplemental disclosure of non-cash investing
Non-cash capital expenditure	$	3,554	$	0	$	0

See Notes to Unaudited Consolidated and Combined Financial Statements

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Whole Earth Brands, Inc. and its consolidated subsidiaries (“Whole Earth Brands” or the “Company”) is a global industry-leading platform, focused on the “better for you” consumer packaged goods (“CPG”) and ingredients space. The Company has a global platform of branded products and ingredients, focused on the consumer transition towards natural alternatives and clean label products.

On June 24, 2020, Act II Global Acquisition Corp., a Cayman Islands exempted company (“Act II”), domesticated into a Delaware corporation (the “Domestication”), and on June 25, 2020 (the “Closing”), consummated the indirect acquisition (the ~~“Acquisition”~~“Business Combination”) of (i) all of the issued and outstanding equity interests of Merisant Company (“Merisant”), Merisant Luxembourg Sarl (“Merisant Luxembourg”), Mafco Worldwide LLC (“Mafco Worldwide”), Mafco Shanghai LLC (“Mafco Shanghai”), EVD Holdings LLC (“EVD Holdings”), and Mafco Deutschland GmbH (together with Merisant, Merisant Luxembourg, Mafco Worldwide, Mafco Shanghai, and EVD Holdings, and their respective direct and indirect subsidiaries, “Merisant and Mafco Worldwide”), and (ii) certain assets and liabilities of Merisant and Mafco Worldwide included in the Transferred Assets and Liabilities (as defined in the Purchase Agreement (as hereafter defined)), from Flavors Holdings Inc. (“Flavors Holdings”), MW Holdings I LLC (“MW Holdings I”), MW Holdings III LLC (“MW Holdings III”), and Mafco Foreign Holdings, Inc. (“Mafco Foreign Holdings,” and together with Flavors Holdings, MW Holdings I, and MW Holdings III, the “Sellers”), pursuant to that certain Purchase Agreement (the “Purchase Agreement”) entered into by and among Act II and the Sellers dated as of December 19, 2019, as amended. In connection with the Domestication, Act II changed its name to “Whole Earth Brands, Inc.”

Upon the completion of the Domestication, each of Act II’s then-issued and outstanding ordinary shares converted, on a 1-for-one basis, into shares of common stock of Whole Earth Brands. ~~Additionally, immediately after~~In conjunction with the ~~Acquisition,~~Business Combination, the Company issued an aggregate of 7,500,000 shares of Whole Earth Brands common stock and 5,263,500 private placement warrants (the “Private Warrants”) exercisable for 2,631,750 shares of Whole Earth Brands common stock to certain investors. On the date of Closing, the Company’s common stock and warrants began trading on The Nasdaq Stock Market under the symbols “FREE” and “FREEW,” respectively.

As a result of the ~~Acquisition,~~Business Combination, for accounting purposes, Act II was deemed to be the acquirer and Mafco Worldwide and Merisant Company were deemed to be the acquired parties and, collectively, the accounting predecessor. The Company’s financial statement presentation includes the combined financial statements of Mafco Worldwide and Merisant Company as the “Predecessor” for periods prior to the completion of the ~~Acquisition~~Business Combination and includes ~~the consolidation of Mafco Worldwide~~Whole Earth Brands, Inc. and ~~Merisant Company,~~its subsidiaries for periods after the Closing (referred to as the “Successor”).

Basis of Presentation—The accompanying unaudited consolidated and combined interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. The balance sheet data as of December 31, ~~2019~~2020 was derived from the audited Combined Financial Statements for Mafco Worldwide and Merisant included in the final prospectus and definitive proxy statement (the “proxy statement/prospectus”) filed with the Securities and Exchange Commission on May 13, 2020 by Act II.consolidated financial statements. These unaudited condensed consolidated and combined interim financial statements should be read in conjunction with the Company’s audited consolidated and combined financial statements ~~and accompanying notes of Mafco Worldwide and Merisant for each of the two years ended December 31, 2019 and 2018 and the audited financial statements and accompanying notes for Act II~~ for the year ended December 31, ~~2019, which are~~2020 included in the ~~proxy statement/prospectus.~~Company’s Annual Report on Form 10-K.

In the opinion of management, the financial statements contain all adjustments necessary to state fairly the financial position of the Company as of ~~September~~June 30, ~~2020~~2021 and the results of operations and cash flows for all periods presented. All adjustments reflected in the accompanying unaudited consolidated and combined financial statements, which management believes are necessary to state fairly the financial position, results of operations and cash flows, have been reflected and are of a normal recurring nature. Results of operations for interim periods are not necessarily indicative of results to be expected for the full year. Certain prior year amounts have been reclassified to conform to the current year presentation.

Principles of Consolidation—The consolidated and combined financial statements include the accounts of Whole Earth Brands, Inc., and its indirect and wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

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~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Use of Estimates—The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes. Actual results could differ from these estimates.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

Recently Adopted Accounting Pronouncements—The Company qualifies as an emerging growth company (an “EGC”) and as such, has elected the extended transition period for complying with certain new or revised accounting pronouncements. During the extended transition period, the Company is not subject to certain new or revised accounting standards applicable to public companies. The accounting pronouncements pending adoption below reflect effective dates for the Company as an EGC with the extended transition period.

In ~~February 2016,~~March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-2, “Leases (Topic 842)”, and issued subsequent amendments to the initial guidance. The new guidance requires lessees to recognize assets and liabilities arising from leases as well as extensive quantitative and qualitative disclosures. The lessee needs to recognize on its balance sheet a right-of-use asset and a lease liability for the majority of its leases (other than leases with a term of less than 12 months). The lease liabilities should be equal to the present value of lease payments not yet paid. The right-of-use asset is measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial indirect costs. For public entities, the updated standard is effective for fiscal years beginning after December 15, 2018. This standard is effective for the Company as an EGC for fiscal years beginning after December 15, 2020 and interim periods within fiscal years beginning after December 15, 2021, with early adoption permitted. Act II adopted the standard as of January 1, 2020. The Company recognized the leases acquired as part of the Acquisition on June 25, 2020, which were recorded pursuant to the aforementioned ASU. Refer to Note 3 for additional details.

~~In March 2017, the FASB issued ASU~~ 2017-7, “Compensation - Retirement Benefits (Topic 715).” Under the new guidance, employers are required to present the service cost component of net periodic benefit cost in the same statement of operations caption as other employee compensation costs arising from services rendered during the period. Employers are required to present the other components of the net periodic benefit cost separately from the caption that includes the service costs and outside of any subtotal of operating profit and are required to disclose the caption used to present the other components of net periodic benefit cost, if not presented separately on the statement of operations. The Company adopted ASU 2017-7 effective in the second quarter of 2020. The adoption of this standard did not have an effect on the Company’s historically reported net income (loss) but resulted in a presentation reclassification which increased the Company’s historically reported operating profit by $0.1 million for the ~~period from January 1, 2020 to~~six months ended June 25, 2020.

In February 2018, the FASB issued ASU 2018-2, “Income Statement-Reporting Comprehensive Income (Topic 220),” which amends existing standards for income statement-reporting comprehensive income to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and Jobs Act and improve the usefulness of information reported to financial statements users. ASU 2018-2 was effective for years beginning after December 15, 2018, and early adoption was permitted. On January 1, 2019, the Predecessor elected to adopt this standard on a full retrospective approach and reclassified $2.1 million from accumulated other comprehensive income within net parent investment.

New Accounting Standards—In March 2020, the FASB issued ASU 2020-4, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”) by the end of 2021. The amendments in ASU 2020-4 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The new standard was effective upon issuance and ~~generally~~upon adoption can be applied prospectively to applicable contract modifications ~~through~~made on or before December 31, 2022. The Company is currently evaluating the impact of adopting this standard but does not expect it to have a material impact on its consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (ASC 740) - Simplifying the Accounting for Income Taxes.” The standard enhances and simplifies various aspects of the income tax accounting guidance. For public entities, the standard is effective for annual periods and interim periods beginning after December 15, 2020. This standard is effective for the Company as an EGC for the fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12 on its consolidated financial statements.

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~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

In August 2018, the FASB issued ASU 2018-14, “Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20).” The standard modifies certain disclosure requirements for employers that sponsor defined benefit pension and other postretirement benefit plans by removing disclosures that are no longer considered cost beneficial, clarifying specific requirements of disclosures, and adding disclosure requirements identified as relevant. This standard is effective for the Company as an EGC for the fiscal years beginning after December 15, 2021. Early adoption is permitted. The amendments in ASU 2018-14 should be applied retrospectively to each period presented. The Company is currently evaluating the impact of adopting ASU 2018-14 on its consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The standard requires entities to estimate losses on financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset’s origination for as many as five years. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This standard is effective for the Company as an EGC for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

~~Stock-Based Compensation~~Restructuring and Employee Termination Benefits—During 2020, the Company adopted restructuring plans to streamline processes and realize cost savings by consolidating facilities and eliminating various positions in operations and general and administrative areas.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

In connection with the restructuring plans, the Company recognized restructuring and other expenses of $2.8 million and $4.5 million, respectively, for the three and six months ended June 30, 2021. This included facility exit and other related costs of $2.3 million and $3.9 million in the three and six months ended June 30, 2021, respectively, and employee termination benefits of $0.6 million in the three and six months ended June 30, 2021. During the six months ended June 30, 2021, the Company paid employee termination benefits of $0.1 million. The Company has accrued severance expense related to the restructuring plans of $1.5 million and $1.0 million at June 30, 2021 and December 31, 2020, respectively, which is recorded in accrued expenses and other current liabilities in the unaudited condensed consolidated balance sheets.

Warrant Liabilities—The Company accounts for the Private Warrants in accordance with Accounting Standards Codification “ASC” Topic 815, “Derivatives and Hedging.” Under the guidance contained in ASC Topic ~~718, “Compensation—Stock Compensation,”~~815-40, the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company ~~recognizes stock-based compensation cost in its Consolidated Statements of Operations. Stock-based compensation cost is measured~~classifies the Private Warrants as liabilities at their fair value and adjusts the ~~grant date for equity-classified awards and~~warrants to fair value at ~~the end of~~ each reporting ~~period for liability-classified awards based~~period. The liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s statement of operations. The Private Warrants are valued using a Black-Scholes option pricing model.

Based on the ~~estimated~~views expressed in the SEC’s Staff Statement of April 12, 2021 in which the SEC staff clarified its interpretations of certain generally accepted accounting principles related to certain terms common in warrants issued by Special Purpose Acquisition Companies (“SPACs”), the Company determined that the Private Warrants should be treated as derivative liabilities rather than as components of equity, as previously presented as of December 31, 2020. Accordingly, the Company recorded out of period adjustments to the unaudited Condensed Consolidated Balance Sheet at January 1, 2021 to reclassify warrant liabilities of $8.1 million and transaction costs incurred by Act II of $1.1 million related to the issuance of the Private Warrants. Additionally, during the first quarter of 2021, the Company recognized the cumulative effect of the error on prior periods by recording a $1.2 million gain in the Statement of Operations to reflect the cumulative decrease in the fair value of the ~~awards. ASC Topic 718 requires stock-based compensation expense to be recognized over the period~~Private Warrants from the date of ~~grant~~issuance through December 31, 2020. The Company concluded that this misstatement was not material to the ~~date when~~current period or the ~~award is no longer contingent on the employee providing additional service. Additional information pertaining to the Company’s stock-based compensation is provided in Note 11.~~previously filed financial statements.

NOTE 2: BUSINESS ~~COMBINATION~~COMBINATIONS

On June 25, 2020, pursuant to the ~~Acquisition,~~Business Combination, the Company indirectly acquired Merisant and Mafco Worldwide in a transaction accounted for as a business combination under ASC Topic 805, “Business Combinations,” and was accounted for using the acquisition method. Under the acquisition method, the acquisition date fair value of the consideration paid by the Company was allocated to the assets acquired and the liabilities assumed based on their estimated fair values.

The following summarizes the ~~preliminary~~ purchase consideration (in thousands):


Base cash consideration	$	387,500
Closing adjustment ~~estimate~~	(764)
Total Purchase Price	$	386,736

1213

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The Company recorded the fair value of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):


Cash and cash equivalents	$	10,062
Accounts receivable	45,769
Inventories	106,436
Prepaid expenses and other current assets	2,461
Property, plant and equipment, net	43,554
Operating lease right-of-use assets	12,541
Intangible assets	148,750
Deferred tax assets, net	1,065
Other assets	1,398
Total assets acquired	372,036
Accounts payable	18,590
Accrued expenses and other current liabilities	35,063
Current portion of operating lease liabilities	3,007
Operating lease liabilities, less current portion	12,208
Deferred tax liabilities, net	24,630
Other liabilities	16,227
Total liabilities assumed	109,725
Net assets acquired	262,311
Goodwill	124,425
Total Purchase Price	$	386,736

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:


Identifiable intangible assets	Fair Value (in thousands)		Useful Life (in years)
Customer relationships	$	47,359	0.5 to 10
Tradenames	90,691		25
Product formulations	10,700		Indefinite
	$	148,750

Goodwill represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and expected future market opportunities. Of the purchase price allocated to goodwill, a total of $2.5 million will be deductible for income tax purposes pursuant to Internal Revenue Code (“IRC”) Section 197 over a 15-year period.

The Company’s allocation of purchase price was based upon valuations performed to determine the fair value of the net assets as of the acquisition date and was subject to adjustments for up to one year after the closing date of the acquisition to reflect final valuations. The allocation of purchase price was finalized in the second quarter of 2021.

In the six months ended June 30, 2021, the Company recorded measurement period adjustments to its allocation of purchase price resulting in an increase in deferred tax liabilities, net of $1.5 million, other liabilities of $0.7 million and goodwill of $2.2 million.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

Direct transaction-related costs consist of costs incurred in connection with the Business Combination. Act II incurred transaction costs of $18.1 million prior to the Business Combination which are reflected within the accumulated deficit within the Consolidated Statement of Equity. During the three months ended March 31, 2021, the Company reclassified $1.1 million of Act II transaction costs related to the issuance of the Private Warrants that had been previously recorded in additional paid-in capital in connection with the Business Combination to accumulated deficit (See Note 1).

Swerve Acquisition—On November 10, 2020, the Company executed and closed a definitive Equity Purchase Agreement (the “Purchase Agreement”) with RF Development, LLC (“RF Development”), Swerve, L.L.C. (“Swerve LLC”) and Swerve IP, L.L.C. (“Swerve IP” and together with Swerve LLC, “Swerve”). Swerve is a manufacturer and marketer of a portfolio of zero sugar, keto-friendly, and plant-based sweeteners and baking mixes. The Company purchased all of the issued and outstanding equity interests of both Swerve LLC and Swerve IP from RF Development for $80 million in cash, subject to customary post-closing adjustments. In connection with the acquisition of Swerve, the Company incurred transaction-related costs of $0.3 million in the six months ended June 30, 2021. Swerve is included within the Company’s Branded CPG reportable segment. Swerve’s results are included in the Company’s consolidated statement of operations from the date of acquisition.

The following summarizes the purchase consideration (in thousands):


Base cash consideration	$	80,000
Closing adjustment	(968)
Total Purchase Price	$	79,032

The Company recorded the fair value of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):



Accounts receivable	$	3,223
Inventories	6,824
Prepaid expenses and other current assets	223
Property, plant and equipment, net	143
Operating lease right-of-use assets	76
Intangible assets	36,300

Other assets	3
Total assets acquired	46,792
Accounts payable	3,477
Accrued expenses and other current liabilities	288
Current portion of operating lease liabilities	48
Operating lease liabilities, less current portion	28


Total liabilities assumed	3,841
Net assets acquired	42,951
Goodwill	36,081
Total Purchase Price	$	79,032

The values allocated to identifiable intangible assets and their estimated useful lives are as follows:


Identifiable intangible assets	Fair Value (in thousands)		Useful Life (in years)
Customer relationships	$	3,200	10
Tradenames	33,100		25
	$	36,300

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

Goodwill represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and expected future market opportunities. The entire amount of the purchase price allocated to goodwill will be deductible for income tax purposes pursuant to IRC Section 197 over a 15-year period.

The Company’s allocation of purchase price was based upon valuations performed to determine the fair value of the net assets as of the acquisition date and is subject to adjustments for up to one year after the closing date of the acquisition to reflect final valuations.

Wholesome Acquisition—On December 17, 2020, the Company entered into a stock purchase agreement (the “Wholesome Purchase Agreement”) with WSO Investments, Inc. (“WSO Investments” and together with its subsidiaries “Wholesome” and affiliates). WSO Investments is the direct parent of its wholly-owned subsidiary Wholesome Sweeteners, Incorporated, which was formed to import, market, distribute, and sell organic sugars, unrefined specialty sugars, and related products. Wholesome is included within the Company’s Branded CPG reportable segment. Wholesome’s results are included in the Company’s consolidated statement of operations from the date of acquisition.

On February 5, 2021, pursuant to the terms of the Wholesome Purchase Agreement, the Company purchased and acquired all of the issued and outstanding shares of capital stock for an initial cash purchase price of $180 million plus up to an additional $55 million (the “Earn-Out Amount”) upon the satisfaction of certain post-closing financial metrics. Subject to the terms and conditions of the Wholesome Purchase Agreement payment of the Earn-Out Amount, in whole or in part, is subject to Wholesome achieving certain EBITDA thresholds at or above approximately $30 million during the period beginning August 29, 2020, and ending December 31, 2021 and is expected to be paid by March 31, 2022. A portion of the Earn-Out Amount (up to $27.5 million) may be paid, at the Company’s election, in freely tradeable, registered shares of Company common stock. The fair value of the Earn-Out Amount assumes a full payout. In connection with the acquisition of Wholesome, the Company incurred transaction-related costs of $0.2 million and $4.6 million in the three and six months ended June 30, 2021, respectively.

The following summarizes the preliminary purchase consideration (in thousands):


Base cash consideration	$	180,000
Estimated closing adjustment	13,294
Fair value of Earn-Out Amount	52,395
Total Purchase Price	$	245,689

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The Company preliminarily recorded the fair value of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed as follows (in thousands):


Cash and cash equivalents	$	~~10,062~~2,664
Accounts receivable	~~46,959~~15,868
Inventories	~~106,436~~78,522
Prepaid expenses and other current assets	~~2,461~~1,271
Property, plant and equipment, net	~~39,814~~3,134
Operating lease right-of-use assets	~~12,541~~7,585
Intangible assets	~~147,650~~104,500
~~Deferred tax assets, net~~	~~1,202~~
Other assets	~~1,585~~1,189
Total assets acquired	~~368,710~~214,733
Accounts payable	~~19,356~~5,251
Accrued expenses and other current liabilities	~~35,728~~10,576
Current portion of operating lease liabilities	~~3,007~~1,435
Operating lease liabilities, less current portion	~~12,208~~6,150
Deferred tax liabilities, net	~~21,082~~26,685
~~Other liabilities~~	~~15,467~~
Total liabilities assumed	~~106,848~~50,097
Net assets acquired	~~261,862~~164,636
Goodwill	~~124,874~~81,053
Total Purchase Price	$	~~386,736~~245,689

The preliminary values allocated to identifiable intangible assets and their estimated useful lives are as follows:


Identifiable intangible assets	Identifiable intangible assets	Fair Value (in thousands)		Useful life (in Years)	Identifiable intangible assets	Fair Value (in thousands)		Useful Life (in years)
Customer relationships	Customer relationships	$	44,640	0.5 to 10	Customer relationships	$	55,700	10
Tradenames	Tradenames	92,310		25	Tradenames	48,800		25
Product formulations		10,700		Indefinite
		$	147,650			$	104,500

Goodwill represents the excess of the purchase price over the estimated fair value assigned to tangible and identifiable intangible assets acquired and liabilities assumed and represents the future economic benefits expected to arise from other intangible assets acquired that do not qualify for separate recognition, including assembled workforce and expected future market opportunities. Of the purchase price allocated to goodwill, a total of $4.7 million will be deductible for income tax purposes pursuant to IRC Section 197 over a 9-year period.

The Company’s preliminary allocation of purchase price was based upon preliminary valuations performed to determine the fair value of the net assets as of the acquisition date and is subject to adjustments for up to one year after the closing date of the acquisition to reflect final valuations. The accounting for the Wholesome acquisition is not complete as the valuation for certain acquired assets and liabilities have not been finalized. These final valuations of the assets and liabilities could have a material impact on the preliminary purchase price allocation disclosed above.

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~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

In the ~~third~~second quarter of ~~2020,~~2021, the Company recorded measurement period adjustments to its initial allocation of purchase price as a result of ongoing valuation procedures on assets ~~acquired~~ and liabilities assumed, including (i) an increase in purchase price of $3.1 million due to a ~~decrease~~change in ~~accounts receivable of $0.3 million;~~the closing adjustment estimate; (ii) a decrease into inventory of ~~$2.7~~$0.2 million; (iii) ~~a decrease~~an increase in prepaid expenses and other current assets of ~~$10.4 million (see discussion below);~~$0.5 million; (iv) an increase in property, plant and equipment of ~~$17.9 million due to the valuation of certain real estate;~~$0.4 million; (v) a decrease ~~in operating lease right-of-use~~to intangible assets of ~~$2.7 million to adjust the value of the Company’s leases to market value;~~$1.9 million; (vi) a decrease ~~in intangible assets of $9.8 million; (vii) an increase in~~to other assets of ~~$0.6~~$0.1 million; (vii) a decrease to accrued expenses and other current liabilities of $2.7 million; (viii) ~~an increase in accounts payable of $0.4 million; (ix)~~ a decrease into deferred tax liabilities, net of ~~$2.9 million; (x) a decrease in other liabilities of $1.0~~$0.3 million; and ~~(xi) a decrease~~(ix) an increase to goodwill of ~~$6.2~~$1.3 million due to the incremental measurement period adjustments discussed in items (i) through ~~(x)~~(viii). The impact of measurement period adjustments to the results of operations ~~resulted in an increase in cost~~was immaterial.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The results of ~~goods sold related to~~ the ~~fair value step-up in inventory acquired that was subsequently sold of $0.8 million~~Company’s operations for the ~~period of June 26, 2020 to~~three and six months ended June 30, ~~2020.~~

~~The initial allocation~~2021 includes the results of ~~purchase price reflects a $10.1 million adjustment to prepaid expenses~~Wholesome since February 5, 2021. Product revenues, net and ~~other current assets as a result~~operating income of ~~a change to~~Wholesome included in the consideration transferred relative to the initial purchase price allocation. This adjustment was also reflected as a reduction to the estimated closing adjustments, and therefore, the total purchase price.

~~Direct transaction-related costs consist~~Company’s condensed consolidated statement of costs incurred in connection with the Acquisition. Act II incurred transaction costs of $17.0 million prior to the Acquisition which are reflected within the accumulated deficit within the Condensed Consolidated Statement of Changes in Equity. Duringoperations for the three months ended ~~September~~June 30, 2020, the Company identified $1.2 million of additional Act II transaction costs that had been incurred in connection with the Acquisition. The effect of correcting for these costs decreased additional paid-in capital by $0.92021 was $44.6 million and ~~accumulated deficit by $0.3 million.~~$3.4 million, respectively, and for the six months ended June 30, 2021 was $72.2 million and $5.1 million, respectively.

Pro Forma Financial Information—The following unaudited pro forma financial information summarizes the results of operations for the Company as though the ~~Acquisition~~Business Combination and Swerve acquisition had occurred on January 1, 2019 and the Wholesome acquisition had occurred on January 1, 2020 (in thousands):


		Pro Forma Statements of Operations									Pro Forma Statements of Operations
		Three Months Ended				Nine Months Ended					Three Months Ended				Six Months Ended
		September 30, 2020		September 30, 2019		September 30, 2020		September 30, 2019			June 30, 2021		June 30, 2020		June 30, 2021		June 30, 2020
Revenue	Revenue	$	67,002	$	64,060	$	199,808	$	203,354	Revenue	$	126,493	$	128,297	$	252,698	$	246,182
Net income (loss)	Net income (loss)	$	4,971	$	5,037	$	(20,350)	$	4,317	Net income (loss)	$	5,828	$	3,043	$	4,468	$	(44,173)

The ~~unaudited pro forma financial information does not include any costs related to the Acquisition. In addition, the~~ unaudited pro forma financial information does not assume any impacts from revenue, cost or other operating synergies that could be generated as a result of the ~~acquisition.~~acquisitions. The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved had the Business Combination and Swerve acquisitions been consummated on January 1, 2019 and the Wholesome acquisition been consummated on January 1, ~~2019.~~2020.

The Successor and Predecessor periods have been combined in the pro forma for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020~~2021 and ~~2019~~2020 and include adjustments to reflect intangible asset amortization based on the economic values derived from definite-lived intangible assets, interest expense on the new debt financing, depreciation expense for certain ~~real estate~~property, plant and equipment that ~~has~~have been adjusted to fair value, and the release of the inventory fair value ~~step-down~~adjustments into cost of goods ~~sold and the elimination of non-recurring expense related to Predecessor transaction bonuses.~~sold. These adjustments are net of taxes.

NOTE 3: ~~LEASES~~

The Company measured Merisant and Mafco’s legacy lease agreements as if the leases were new at the Acquisition date and applied the provisions of Topic 842. This resulted in the recognition of right-of-use assets and operating lease liabilities of $15.2 million as of June 26, 2020. The right-of-use assets and operating lease liabilities at June 26, 2020 also included approximately $0.3 million related to 1 lease that Act II had applied the provisions of Topic 842 to effective January 1, 2020. In the third quarter of 2020, the Company recorded a measurement period adjustment that reduced the right-of-use assets by $2.7 million to adjust the value of the leases to market value. All leases are classified as operating leases.

~~The Company’s lease portfolio includes a factory building, office space, warehouses, material handling equipment, vehicles and office equipment.~~

~~TABLE OF CONTENTS~~

~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Certain leases include one or more options to renew, with renewal terms that can extend the lease term from~~ ~~one~~ to five years or more. The exercise of lease renewal options is at the Company’s sole discretion. For purposes of calculating operating lease liabilities, lease terms include options to extend the lease when it is reasonably certain that the Company will exercise that option.

Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment.

The Company’s lease agreements do not contain any residual value guarantees. Some leases include variable payments that are based on the usage and occupancy of the leased asset. The Company has elected not to record leases with an initial term of twelve months or less on the balance sheet.

For real estate and vehicle leases, the Company elected the practical expedient to not separate lease from non-lease components within the contract. Electing this practical expedient means the Company would account for each lease component and the related non-lease component together as a single component. For equipment leases, the Company has not elected this practical expedient and separates the non-lease components from the lease component.

The right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the lease liability. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Lease expense for the period from June 26, 2020 through June 30, 2020 was not material. Lease expense for the three months ended September 30, 2020 was $1.1 million.

~~The following table presents the future maturities of the Company’s lease obligations as of September 30, 2020 (in thousands):~~

Remainder of 2020 $ 1,004
2021 3,738
2022 3,462
2023 3,387
2024 1,865
Thereafter 2,896
Total lease payments 16,352
Less: imputed interest 1,270
Total operating lease liabilities $ 15,082

~~The weighted-average remaining lease term is 4.9 years and the weighted-average discount rate is 3.42%.~~

Cash paid for amounts included in the measurement of the lease liability and for supplemental non-cash information for the three months ended September 30, 2020 was $0.9 million and for the period from June 26, 2020 through June 30, 2020 was not material.

~~NOTE 4:~~ INVENTORIES

Inventories consisted of the following (in thousands):

(Successor) (Predecessor)
September 30, 2020 December 31, 2019
Raw materials and supplies $ 60,418 $ 89,611
Work in process 1,122 387
Finished goods 42,006 31,131
Total inventories $ 103,546 $ 121,129



	June 30, 2021		December 31, 2020
Raw materials and supplies	$	113,204	$	66,487
Work in process	1,227		562
Finished goods	81,545		44,650
Total inventories	$	195,976	$	111,699

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

NOTE 5:4: GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill and other intangible assets consisted of the following (in thousands):


		(Successor)						(Predecessor)
		September 30, 2020						December 31, 2019							June 30, 2021						December 31, 2020
		Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net			Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Other intangible assets subject to amortization	Other intangible assets subject to amortization													Other intangible assets subject to amortization
Customer relationships (useful life of 0.5 to 10 years)		$	44,640	$	(1,866)	$	42,774	$	105,000	$	(38,731)	$	66,269
Customer relationships (useful life of 5 to 10 years)														Customer relationships (useful life of 5 to 10 years)	$	106,113	$	(8,453)	$	97,660	$	50,877	$	(3,020)	$	47,857
Tradenames (useful life of 25 years)	Tradenames (useful life of 25 years)	92,310		(975)		91,335		95,055		(19,939)		75,116		Tradenames (useful life of 25 years)	174,950		(5,398)		169,552		128,155		(2,185)		125,970
Total	Total	$	136,950	$	(2,841)	$	134,109	$	200,055	$	(58,670)	$	141,385	Total	$	281,063	$	(13,851)	$	267,212	$	179,032	$	(5,205)	$	173,827
Other intangible assets not subject to amortization	Other intangible assets not subject to amortization													Other intangible assets not subject to amortization
Product formulations	Product formulations					10,700						109,858		Product formulations					10,700						10,700
Total other intangible assets, net	Total other intangible assets, net					144,809						251,243		Total other intangible assets, net					277,912						184,527
Goodwill	Goodwill					124,874						130,870		Goodwill					241,717						153,537
Total goodwill and other intangible assets	Total goodwill and other intangible assets					$	269,683					$	382,113	Total goodwill and other intangible assets					$	519,629					$	338,064

At June 30, 2021 and December 31, 2020, goodwill at Branded CPG was $237.9 million and $150.3 million, respectively, and goodwill at Flavors & Ingredients was $3.8 million and $3.2 million, respectively.

The Successor’s amortization expense for intangible assets was ~~$2.7~~$4.7 million and ~~$2.8~~$8.9 million for the three and six months ended ~~September~~June 30, ~~2020~~2021 and $0.1 million for the period from June 26, 2020 through ~~September~~June 30, ~~2020, respectively.~~2020. The Predecessor’s amortization expense for intangible assets was ~~$4.9 million, $2.7~~$2.4 million and ~~$8.0~~$4.9 million for the periods from April 1, 2020 to June 25, 2020 and January 1, 2020 to June 25, 2020, ~~and for the three and nine months ended September 30, 2019,~~ respectively.

Amortization expense relating to amortizable intangible assets as of ~~September~~June 30, ~~2020~~2021 for the next five years is expected to be as follows (in thousands):

Remainder of 2020 $ 2,667
2021 9,004
2022 9,004
2023 9,004
2024 9,004
2025 8,963

~~NOTE 6: DEBT~~

~~Debt consisted of the following (in thousands):~~

(Successor) (Predecessor)
September 30, 2020 December 31, 2019
Term Loan $ 138,250 $ 0
Less: current portion (7,000) 0
Less: debt issuance costs (4,969) 0
Total non-current borrowings $ 126,281 $ 0


Remainder of 2021	$	9,358
2022	18,717
2023	18,717
2024	18,717
2025	18,483
2026	18,263

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

~~Loan Agreement—The Company entered into a Loan Agreement (the “Loan Agreement”) on June 25,~~NOTE 5: DEBT

Debt consisted of the following (in thousands):


	June 30, 2021		December 31, 2020
Term loan	$	374,063	$	136,500
Revolving credit facility	25,000		47,855
Less: current portion	(3,750)		(7,000)
Less: unamortized discount and debt issuance costs	(10,654)		(4,693)
Total long-term debt	$	384,659	$	172,662

On December 31, 2020, ~~with Toronto Dominion (Texas) LLC, as administrative agent, BMO Capital Markets Corp. and Truist Bank, as documentation agents, and~~ the ~~other lenders party thereto, which provided (x)~~Company’s senior secured loan agreement consisted of a senior secured first lien term loan facility of $140 million ~~that matures in five years on June 25, 2025~~ and ~~(y)~~ a first lien revolving credit facility of up to $50 million that also matures in five years. Loans outstanding under the first lien term loan facility and the first lien revolving credit facility accrue interest at a rate per annum equal to LIBOR subject to a floor of 1% plus a margin ranging from 3.00% to 3.75% or, at Company’s option, a base rate subject to a floor of 2% plus a margin ranging from 2.00% to 2.75%, depending on the achievement of certain leverage ratios. Undrawn amounts under the first lien revolving credit facility are expected to accrue a commitment fee at a rate per annum of 0.40% on the average daily undrawn portion of the commitments thereunder, with step downs to 0.30% upon achievement of certain leverage ratios.million. As of ~~September 30,~~December 31, 2020, there were $2.1 million of outstanding letters of credit that reduced the Company’s availability under the revolving credit facility. ~~Additionally, approximately $1.9~~

As of December 31, 2020, term loan borrowings were $131.8 million, net of debt issuance costs ~~allocated to the revolving credit facility were capitalized as an asset as~~ of ~~June 30, 2020 and are being amortized ratably over the commitment period of five years.~~$4.7 million. There were 0$47.9 million of borrowings under the revolving credit facility as of December 31, 2020. Additionally, as of December 31, 2020, the Company’s unamortized debt issuance costs related to the revolving credit facility were $1.7 million which are included in other assets in the condensed consolidated balance sheet.

In connection with the closing of the Wholesome Transaction, on February 5, 2021, further discussed in Note 2, the Company and certain of its subsidiaries entered into an amendment and restatement agreement (the “Amendment Agreement”) with Toronto Dominion (Texas) LLC, which amended and restated its existing senior secured loan agreement dated as of June 25, 2020 (as amended on September ~~30, 2020.~~4, 2020, the “Existing Credit Agreement,” and as further amended by the Amendment Agreement, the “Amended and Restated Credit Agreement”), by and among Toronto Dominion (Texas) LLC, as administrative agent, certain lenders signatory thereto and certain other parties.

The Amended and Restated Credit Agreement provides for senior secured financing consisting of the following credit facilities: (a) a senior secured term loan facility in the aggregate principal amount of $375 million (the “Term Loan Facility”); and (b) a revolving credit facility in an aggregate principal amount of up to $75 million (the “Revolving Facility,” and together with the Term Loan Facility, the “Credit Facilities”). The Revolving Facility has a $15 million sub-facility for the issuance of letters of credit and a $15 million sublimit for swing line loans. The Company ~~converted~~used the proceeds under the Term Loan Facility to (i) repay and refinance existing indebtedness of WSO Investments; (ii) pay the cash consideration for the Wholesome Transaction; (iii) repay and refinance outstanding borrowings under the Existing Credit Agreement; and (iv) pay fees and expenses incurred in connection with the foregoing. The proceeds of the Revolving Facility can be used to finance working capital needs, for general corporate purposes, and for working capital adjustments payable under the Wholesome Purchase Agreement.

Loans outstanding under the Credit Facilities accrue interest at a rate per annum equal to (i) with respect to the Revolving Facility and letters of credit, (A) 2.75%, in the case of base rate ~~term loan~~advances, and (B) 3.75% in the case of LIBOR advances, and (ii) with respect to the Term Loan Facility, (A) 3.50%, in the case of base rate advances, and (B) 4.50% in the case of LIBOR advances, with a LIBOR ~~loan~~floor of 1.00% with respect to the Term Loan Facility, and 0.00% with respect to the Revolving Facility and letters of credit, and base rate based on ~~July 1, 2020 at an~~the highest of the prime rate, the federal funds rate plus 0.50%, LIBOR for a one-month interest ~~rate~~period plus 1.00%, and with respect to the Revolving Facility and letters of ~~4.50%. Borrowings~~credit, 0.00%, or with respect to the Term Loan Facility, 2.00%, and undrawn amounts under the ~~Loan Agreement~~Revolving Facility will accrue a commitment fee at a rate per annum equal to 0.50% on the average daily undrawn portion of the commitments thereunder. As of June 30, 2021, there were $2.1 million of outstanding letters of credit that reduced the Company’s availability under the revolving credit facility. The Company’s unamortized debt issuance costs related to the revolving credit facility were $2.0 million as of June 30, 2021 and are ~~collateralized~~included in other assets in the condensed consolidated balance sheet.

The obligations under the Credit Facilities are guaranteed by certain direct or indirect wholly-owned domestic subsidiaries of the Company, other than certain excluded subsidiaries, including, but not limited to, immaterial subsidiaries and foreign subsidiaries. The Credit Facilities are secured by substantially all of the ~~Company’s assets,~~personal property of the Company and the ~~Loan~~guarantor subsidiaries (in each case, subject to certain exclusions and qualifications).

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The Credit Facilities require the Company to make certain mandatory prepayments, with (i) 100% of net cash proceeds of all non-ordinary course asset sales or other dispositions of property in excess of $5 million in any fiscal year, subject to the ability to reinvest such proceeds and certain other exceptions, (ii) 100% of the net cash proceeds of any debt incurrence, other than debt permitted under the definitive agreements (but excluding debt incurred to refinance the Credit Facilities) and (iii) 50% of “Excess Cash Flow,” as defined in the Amended and Restated Credit Agreement, ~~includes restrictive qualitative~~with a reduction to 25% if the total net leverage ratio for the fiscal year is less than or equal to 3.50 to 1.00 but greater than 3.00 to 1.00, and ~~quantitative covenants.~~a reduction to 0% if the total net leverage ratio for the fiscal year is less than or equal to 3.00 to 1.00. The Company ~~was in compliance with its covenants under~~also is required to make quarterly amortization payments equal to 0.25% per annum of the ~~Loan Agreement on September 30, 2020. The unpaid~~original principal amount of the ~~term loan~~Term Loan Facility (subject to reductions by optional and mandatory prepayments of the loans).

As of the date of the amendment of the credit facilities, the aggregate unamortized debt issuance costs totaled $6.2 million, of which $4.4 million was expensed as a loss on extinguishment of debt. Additionally, in connection with the Amended and Restated Credit Agreement, the Company paid fees to certain lenders of $3.8 million, which was considered a debt discount, all of which was deferred, and incurred transaction costs of $8.9 million, of which $7.8 million was deferred and $1.1 million was expensed as part of loss on extinguishment and debt transaction costs.

NOTE 6: WARRANTS

As of the date of the Business Combination, the Company had approximately 20,263,500 warrants outstanding, consisting of (i) 15,000,000 public warrants originally sold as part of the units issued in Act II's initial public offering (the “Public Warrants”) and (ii) 5,263,500 Private Warrants that were sold by Act II to the PIPE Investors in conjunction with the Business Combination (collectively with the Public Warrants, the “Warrants”). Each warrant is ~~payable~~exercisable for one-half of one share of the Company’s common stock at a price of $11.50 per whole share, subject to adjustment. Warrants may only be exercised for a whole number of shares as no fractional shares will be issued. As of June 30, 2021 and December 31, 2020, the Company had 17,256,300 and 15,982,520 Public Warrants outstanding, respectively, and 3,007,200 and 4,280,980 Private Warrants outstanding, respectively.

The exercise price and number of ordinary shares issuable upon exercise of the Warrants may be adjusted in ~~quarterly installments~~certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. If the number of shares of Common Stock purchasable upon the exercise of the Warrants is adjusted, the Warrant price shall be adjusted proportionally. In no event will the Company be required to net cash settle the Warrants. Additionally, the Warrants became exercisable as of July 27, 2020 and expire five years from the date of the Business Combination or earlier upon redemption or liquidation.

There were 0 Warrants exercised as of June 30, 2021.

Public Warrants—The Public Warrants are subject to redemption by the Company:

•in whole and not in part;

•at a price of $0.01 per public warrant;

•upon not less than 30 days’ prior written notice of redemption to each warrant holder; and

•if, and only if, the reported last sale price of the ordinary shares for any 20 trading days within a 30-day trading period ending on the ~~last~~third trading day prior to the date on which the Company sends the notice of ~~each fiscal quarter commencing on September 30, 2020.~~ redemption to the warrant holders equals or exceeds $18 per share (as adjusted).

The ~~payment for each~~Company may not redeem the warrants as described above unless a registration statement under the Securities Act covering the issuance of the ~~first 12 fiscal quarters is equal to 1.25%~~ordinary shares issuable upon exercise of the ~~beginning principal amount,~~warrants is then effective and a current prospectus relating to those ordinary shares is available throughout the 30-day redemption period. If any such registration statement does not remain effective after closing of the Business Combination, the Company has the right to redeem the warrants on a “cashless” exercise basis. The public warrant holders only have the right to exercise their warrants pursuant to a “cashless” exercise if the Company does not maintain an effective registration statement.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

Private Warrants—The Private Warrants are identical to the Public Warrants, except that so long as they are held by the PIPE Investors or ~~$1.75 million,~~any permitted transferees, as applicable, the Private Warrants: (i) may be exercised for cash or on a cashless basis, (ii) were not allowed to be transferred, assigned or sold until thirty (30) days after the closing of the Business Combination, and (iii) shall not be redeemable by the Company. Upon the transfer of a Private Warrant to a party other than a PIPE Investor or a permitted transferee, the Private Warrants become Public Warrants and the fair market value of the Private Warrants at the date of transfer is reclassified to equity. See Note 1 for ~~the following 7 fiscal quarters thereafter is 2.50%, or $3.5 million. The remaining principal payment on the term loan is due upon maturity.~~additional discussion.

NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company measures and records in its consolidated financial statements certain assets and liabilities at fair value. ASC Topic 820 “Fair Value Measurement and Disclosures,” establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). This hierarchy consists of the following three levels:

•Level 1 – Assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market.

•Level 2 – Assets and liabilities whose values are based on inputs other than those included in Level 1, including quoted market prices in markets that are not active; quoted prices of assets or liabilities with similar attributes in active markets; or valuation models whose inputs are observable or unobservable but corroborated by market data.

•Level 3 – Assets and liabilities whose values are based on valuation models or pricing techniques that utilize unobservable inputs that are significant to the overall fair value measurement.

Certain assets are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).

Current Assets and Other Financial Assets and Liabilities—Cash and cash equivalents, trade accounts receivable and trade accounts payable are measured at carrying value, which approximates fair value because of the short-term maturities of these instruments.

Contingent Consideration Payable—The Company measures the contingent consideration payable at fair value. The fair value of the contingent consideration utilized Level 3 inputs as it is based on significant inputs not observable in the market as of June 30, 2021, such as projected financial information and discount rate.

Debt—The Company measures its ~~first lien~~ term loan and revolving facilities at original carrying value including accrued interest, net of unamortized deferred financing costs and fees. The fair value of the credit facilities approximates carrying value, as they consist of variable rate loans.

Warrant Liabilities—The Company classifies its Private Warrants as liabilities in accordance with ASC Topic 815. The Company estimates the fair value of the Private Warrants using a Black-Scholes options pricing model. The fair value of the Private Warrants utilized Level 3 inputs as it is based on significant inputs not observable in the market as of June 30, 2021.

The fair value of the Private Warrants was estimated at June 30, 2021 using a Black-Scholes options pricing model and the following assumptions:


Input	June 30, 2021
Asset price	$	14.50
Exercise price	$	11.50
Risk-free interest rate	0.66		%
Expected volatility	36.0		%
Expected term (years)	3.99
Dividend yield	0.0		%

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The fair value of warrant liabilities as of June 30, 2021 was $8.2 million. The changes in the warrant liabilities during the six months ended June 30, 2021 were as follows (in thousands):



Reclassification of fair value of Private Warrants to warrant liabilities as of January 1, 2021	$	8,139
Cumulative impact of change in fair value of Private Warrants in 2020	(1,161)
Transfer of Private Warrants to Public Warrants	(2,502)
Change in fair value of warrant liabilities in Q1 2021	3,523
Fair value of warrant liabilities as of March 31, 2021	$	7,999

Change in fair value of warrant liabilities in Q2 2021	241
Fair value of warrant liabilities as of June 30, 2021	$	8,240

NOTE 8: COMMITMENTS AND CONTINGENCIES

The Company is subject to various claims, pending and possible legal actions for product liability and other damages, and other matters arising out of the conduct of the business. The Company believes, based on current knowledge and consultation with counsel, that the outcome of such claims and actions will not have a material adverse effect on the Company’s consolidated financial position or results of operations.

As of ~~September~~June 30, ~~2020,~~2021, the Company had obligations to purchase ~~$22~~$27.5 million of raw materials through ~~2025;~~2026; however, it is unable to make reasonably reliable estimates of the timing of such payments.

NOTE 9: INCOME TAXES

For the Successor period, the Company’s provision for income taxes consists of U.S., state and local, and foreign taxes. The Company has significant operations in various locations outside the U.S. The annual effective tax rate is a composite rate reflecting the earnings in the various locations at their applicable statutory tax rates.

For the Predecessor period, income taxes as presented herein attribute current and deferred income taxes of the Company’s financial statements in a manner that is systematic, rational, and consistent with the asset and liability method described by ASC Topic 740, “Income Taxes.” Accordingly, the Company’s income tax provision during the predecessor period was prepared following the separate return method. The separate return method applies ASC Topic 740 to the stand-alone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a stand-alone enterprise. Use of the separate return method may result in differences when the sum of the amounts allocated to stand-alone tax provisions are compared with amounts presented in consolidated financial statements. In that event, the related deferred tax assets and liabilities could be significantly different from those presented herein. The consolidated financial statements reflect the Company’s portion of income taxes payable as if the Company had been a separate taxpayer.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to the COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period in which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest (ii) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k) (iii) made modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhanced recoverability of alternative minimum tax credit carryforwards. The income tax provisions of the CARES Act had limited applicability to the Company and did not have a material impact on the Company’s consolidated financial statements.

The Successor’s income tax ~~provision~~benefit was ~~$1.7~~$4.2 million for the three months ended ~~September~~June 30, ~~2020.~~2021, which includes a discrete income tax benefit of $4.2 million related to the receipt of a beneficial tax ruling in Switzerland which allows for future amortization deductions, the reversal of uncertain tax position liabilities as a result of the lapse of applicable statute of limitations, partially offset by a deferred tax provision related to a tax law change in the United Kingdom which was enacted during the quarter ended June 30, 2021. The effective tax rate for the three months ended ~~September~~June 30, ~~2020~~2021 was an income tax ~~provision~~benefit of ~~(146.3%)~~882.8% on a pretax loss of ~~$1.2~~$0.5 million which differs from the statutory federal rate of 21% primarily due to these discrete tax items.

The Successor’s income tax benefit was $7.8 million for the six months ended June 30, 2021, which includes a discrete income tax benefit of $4.3 million including the $4.2 million benefit recorded in the three months ended June 30, 2021 described above. The effective tax rate for the six months ended June 30, 2021 was an income tax benefit of 48.5% on a pretax loss of $16.2 million. The effective tax rate differs from the federal rate of 21% primarily due to these discrete tax benefits.

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The Successor’s income tax provision was $0.01 million for the period from June 26, 2020 through June 30, 2020. The effective tax rate was (2.0)% from June 26, 2020 through June 30, 2020 and differs from the statutory federal tax rate of 21% primarily due to the U.S. tax effect of international operations including Global Intangible Low-Taxed Income (“GILTI”) recorded during the ~~period.~~period and U.S. state taxes. The Predecessor’s income tax ~~provision for the three months ended September 30, 2019~~benefit was ~~$1.6 million. The effective tax rate for the three months ended September 30, 2019 was an income tax provision of 23.6% on pretax income of $6.9 million.~~

~~The Successor’s income tax provision was $1.7~~$0.4 million for the period from June 26, 2020 through September 30, 2020. The effective tax rate for the period from June 26, 2020 through September 30, 2020 was computed by applying an estimate of the annual effective tax rate for the Successor period to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Successor’s effective tax rate was an income tax provision of (102.9%) on a pretax loss of $1.6 million for the period from June 26, 2020 through September 30, 2020 which differs from the statutory federal rate of 21% primarily due to the U.S. tax effect of international operations including GILTI recorded during the period. The Predecessor’s income tax provision was an income tax benefit ofand $3.5 million for the ~~period~~periods from ~~January~~April 1, 2020 through June 25, ~~2020. The effective tax rate for the period from~~2020 and January 1, 2020 through June 25, 2020, ~~was computed using a discrete method as if the Company closed its books and records, The Predecessor’s~~respectively, resulting in effective tax ~~rate was~~rates of 6.2% and 9.3%, respectively. The effective tax rates for the ~~period from January 1, 2020 to~~periods ended June 25, 2020 ~~which differs~~differ from the statutory ~~federal~~ rate of 21% primarily due to the impact of the impairment charges of non-deductible goodwill and the U.S. tax effect of international operations including ~~GILTI recorded during the period.~~

~~TABLE OF CONTENTS~~

~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

The Predecessor’s income tax provision was $5.2 million for the nine months ended September 30, 2019. The Predecessor’s effective tax rate for the nine months ended September 30, 2019 was 22.6% on pretax income of $23.2 million which differs from the statutory federal rate of 21% primarily due to state and local taxes and the U.S. tax effect of international operations.GILTI.

As of ~~September~~June 30, 2021 and December 31, 2020, the Company had an uncertain tax position liability of ~~$1.0~~$0.2 million and $1.2 million, respectively, including interest and penalties. The unrecognized tax benefits include amounts related primarily to various state and foreign tax issues.

NOTE 10: PENSION BENEFITS

Certain current and former employees of the Company are covered under a funded qualified defined benefit retirement plan. Plan provisions covering certain of the Company’s salaried employees generally provide pension benefits based on years of service and compensation. Plan provisions covering certain of the Company’s union members generally provide stated benefits for each year of credited service. The Company’s funding policy is to contribute annually the statutory required amount as actuarially determined. The Company froze the pension plan on December 31, 2019. In addition, the Company has unfunded non-qualified plans covering certain salaried employees with additional retirement benefits in excess of qualified plan limits imposed by federal tax law. The Company uses December 31 as a measurement date for the ~~plan. The~~plans.

In February 2021, the Compensation Committee approved the termination of the Company’s qualified defined benefit retirement plan at Flavors & Ingredients. During 2021, the Company ~~froze~~expects to offer a lump-sum payout to plan participants prior to completing the purchase of annuity contracts that will transfer the remaining pension ~~plan on December 31, 2019.~~obligation to an insurance company.

The components of net periodic benefit (credit) cost for the Company’s defined benefit pension ~~plan~~plans for the Successor and Predecessor were as follows (in thousands):


		(Successor)				(Predecessor)							(Successor)						(Predecessor)
		Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019			Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Service cost	Service cost	$	0	$	0	$	0	$	152	$	456	Service cost	$	16	$	32	$	0	$	27	$	41
Interest cost	Interest cost	210		210		452		275		841		Interest cost	260		519		0		542		593
Expected return on plan assets	Expected return on plan assets	(392)		(392)		(818)		(365)		(1,096)		Expected return on plan assets	(400)		(799)		0		(817)		(817)
Recognized actuarial loss	Recognized actuarial loss	0		0		108		276		828		Recognized actuarial loss	9		18		0		236		276
Amortization of prior service cost	Amortization of prior service cost	0		0		0		21		63		Amortization of prior service cost	0		0		0		33		33
Net periodic benefit (credit) cost	Net periodic benefit (credit) cost	$	(182)	$	(182)	$	(258)	$	359	$	1,092	Net periodic benefit (credit) cost	$	(115)	$	(230)	$	0	$	21	$	126

Net periodic benefit (credit) cost is reflected in the Company’s consolidated financial statements as follows for the Successor and Predecessor periods presented (in thousands):


		(Successor)				(Predecessor)							(Successor)						(Predecessor)
		Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019			Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Cost of Goods Sold		$	0	$	0	$	0	$	125	$	387

Selling, general and administrative expense	Selling, general and administrative expense	0		0		0		234		705		Selling, general and administrative expense	$	16	$	32	$	0	$	27	$	41
Other income, net	Other income, net	(182)		(182)		(258)		0		0		Other income, net	(131)		(262)		0		(6)		85
Net periodic benefit (credit) cost	Net periodic benefit (credit) cost	$	(182)	$	(182)	$	(258)	$	359	$	1,092	Net periodic benefit (credit) cost	$	(115)	$	(230)	$	0	$	21	$	126

The Company currently does not expect to make contributions to its funded defined benefit pension plan in ~~2020~~2021 due to the funded status.

In addition to the expense shown above, the Company has an unfunded supplemental benefit plan to provide certain salaried employees with additional retirement benefits due to limitations established by U.S. income tax regulation. The net periodic benefit cost for the three months ended September 30, 2020 and 2019 was $0.1 million and $0.2 million, respectively. The net periodic benefit cost for January 1, 2020 to June 25, 2020 and the nine months ended September 30, 2019 was $0.4 million and $0.5 million, respectively. The net periodic benefit cost for the period June 26, 2020 to June 30, 2020 was insignificant.

1924

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

NOTE 11: STOCK-BASED COMPENSATION

On June 24, 2020, the Whole Earth Brands, Inc. 2020 Long-Term Incentive Plan (the “Plan”) was approved for the purpose of promoting the long-term financial interests and growth of the Company and its subsidiaries by attracting and retaining management and other personnel and key service providers. The Plan provides for the granting of stock options (“SOs”), stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units (“RSUs”), performance shares, performance share units (“PSUs”) and other stock-based awards to officers, employees and non-employee directors of, and certain other service providers to, the Company and its subsidiaries. These awards are settled in shares of the Company’s stock and therefore classified as equity awards. Under the terms of the Plan an aggregate of 9,300,000 shares of common stock are authorized for issuance under the Plan.

RSUs granted in 2021 vest ratably on the anniversary of the grant date over a period of one~~On September 30, 2020, 719,038 restricted stock units (“RSUs”~~ to three years, depending on the specific terms of each RSU agreement.

PSU awards generally cliff vest subsequent to the completion of the cumulative three-year performance period, depending on the period specified in each respective PSU agreement. The number of PSUs that ultimately vest depends on the Company’s performance relative to a specified cumulative financial target for fiscal years 2021, 2022 and 2023 (the “cumulative performance target”) and ~~68,946 restricted stock awards (“RSAs”) were granted and remain outstanding. The RSUs and RSAs have a grant-date fair value equal~~are expected to the fair market value of the underlying stock on the grant date. The RSUs granted to employees on September 30, 2020 cliff vest over the employee service period of approximately 14 months. The RSAs granted to non-employee board members on September 30, 2020 cliff vest over a service period of approximately 19 months. The Company accounts for forfeituresbe settled in ~~the period incurred. As the RSUs and RSAs were granted on September 30, 2020, 0 stock~~stock.

Stock-based compensation expense ~~has been~~for the three and six months ended June 30, 2021 was $2.8 million and $4.5 million, respectively, and no expense was recognized for the same periods in the prior year. Stock-based compensation expense for the three and six months ended ~~September~~June 30, ~~2020. There were 0 units or awards vested or forfeited as~~2021 includes $0.4 million of ~~September 30, 2020.~~

~~The aggregate grant date fair value of RSUs and RSAs granted during the three months ended September 30, 2020 was $6 million and $0.6 million, respectively. The unrecognized compensation costs~~expense related to ~~the RSUs~~2021 management bonuses expected to be settled in stock and ~~RSAs~~accounted for as ~~of September 30, 2020 was $6.6 million. This amount will be recognized over~~ a ~~weighted average period of 1.18 years.~~liability.

A summary of activity and weighted average fair values related to the RSUs is as follows:

Three Months Ended
September 30, 2020
Shares Weighted Average Fair Value
Outstanding at June 30, 2020 0 $ 0
Granted 719,038 8.34
Outstanding and nonvested at September 30, 2020 719,038 $ 8.34


	Six Months Ended June 30, 2021
	Shares	Weighted Average Fair Value
Outstanding at December 31, 2020	633,057	$	8.34
Granted	541,260	13.58
Vested	(16,248)	8.34
Forfeited	(17,920)	8.34
Outstanding and nonvested at June 30, 2021	1,140,149	$	10.83

A summary of activity and weighted average fair values related to the RSAs is as follows:

Three Months Ended
September 30, 2020
Shares Weighted Average Fair Value
Outstanding at June 30, 2020 0 $ 0
Granted 68,946 8.34
Outstanding and nonvested at September 30, 2020 68,946 $ 8.34


	Six Months Ended June 30, 2021
	Shares	Weighted Average Fair Value
Outstanding at December 31, 2020	68,946	$	8.34
Granted	0	0


Outstanding and nonvested at June 30, 2021	68,946	$	8.34

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

A summary of activity and weighted average fair values related to the PSUs is as follows:


	Six Months Ended June 30, 2021
	Shares	Weighted Average Fair Value
Outstanding at December 31, 2020	0	$	0
Granted	322,533	13.65


Outstanding and nonvested at June 30, 2021	322,533	$	13.65

As of June 30, 2021, the Company had not yet recognized compensation costs on nonvested awards as follows (in thousands):


	Unrecognized Compensation Cost		Weighted Ave. Remaining Recognition Period (in years)
Nonvested awards	$	12,474	1.29

NOTE 12: STOCKHOLDERS' EQUITY

Common Stock Repurchase Plan—On September 8, 2020, the Company announced that its board of directors had authorized a stock repurchase plan of up to $20 million of shares of the Company’s common stock. The shares may be repurchased from time to time over a 12-month period expiring on September 15, 2021 (or upon the earlier completion of all purchases contemplated by the repurchase plan or the earlier termination of the repurchase plan), in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with U.S. federal securities laws.

~~During the three months ended September 30, 2020, there~~ There were 0 repurchases of the Company’s common stock under the stock repurchase plan.

~~TABLE OF CONTENTS~~

~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

NOTE 13: EARNINGS PER SHARE

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Warrants issued are not considered outstanding at the date of issuance. ~~Restricted Stock Units~~RSUs and ~~Restricted Stock Awards~~RSAs also are not considered outstanding until ~~the Units and Awards~~they have vested. Contingently issuable shares associated with outstanding PSUs that have cliff vesting based on achievement of a performance condition were not included in the basic earnings per share calculations for the periods presented as the applicable vesting conditions had not been satisfied.

Diluted earnings (loss) per share is calculated by dividing net income (loss) by the weighted average shares outstanding assuming dilution. Dilutive common shares outstanding is computed using the treasury stock method and reflects the additional shares that would be outstanding if dilutive warrants were exercised and restricted stock units and restricted stock awards were settled for common shares during the period.

For warrants that are liability-classified, during the ~~three months ended September 30, 2020 and for~~periods when the ~~period from June 26, 2020 to September 30, 2020, 10,131,748 warrants were excluded from~~impact would be dilutive, the ~~calculation as these warrants were anti-dilutive.~~

For the three months ended September 30, 2020 and for the period from June 26, 2020 to September 30, 2020, 719,038 restricted stock units and 68,946 restricted stock awards, respectively, each weighted for the portionCompany assumes share settlement of the instruments as of the beginning of the reporting period ~~for which they were outstanding, were excluded from~~and adjusts the ~~computation~~numerator to remove the change in the fair value of ~~diluted earnings per share as~~warrant liability and adjusts the ~~effect was determined~~denominator to ~~be anti-dilutive.~~include the dilutive shares using the treasury stock method.

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

The computation of basic and diluted ~~loss~~earnings (loss) per common share for the three and six months ended ~~September~~June 30, ~~2020~~2021 and ~~for the period~~ from June 26, 2020 to ~~September~~June 30, 2020 is shown below (in thousands, except for share and per share data).:


		(Successor)					(Successor)
		Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020			Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020
EPS numerator:	EPS numerator:					EPS numerator:
Net loss attributable to common shareholders		$	(2,835)	$	(3,340)
Net income (loss) attributable to common shareholders						Net income (loss) attributable to common shareholders	$	3,695	$	(8,330)	$	(505)

EPS denominator:	EPS denominator:					EPS denominator:
Weighted average shares outstanding - basic	Weighted average shares outstanding - basic	38,426,669		38,426,669		Weighted average shares outstanding - basic	38,458,278		38,444,590		38,426,669
Effect of dilutive securities	Effect of dilutive securities	0		0		Effect of dilutive securities	1,697,471		0		0
Weighted average shares outstanding - diluted	Weighted average shares outstanding - diluted	38,426,669		38,426,669		Weighted average shares outstanding - diluted	40,155,749		38,444,590		38,426,669

Net loss per share:
Net earnings (loss) per share:						Net earnings (loss) per share:
Basic	Basic	$	(0.07)	$	(0.09)	Basic	$	0.10	$	(0.22)	$	(0.01)
Diluted	Diluted	$	(0.07)	$	(0.09)	Diluted	$	0.09	$	(0.22)	$	(0.01)

For the three months ended June 30, 2021, 415,896 warrants were excluded from the diluted EPS calculation because they were determined to be anti-dilutive. For the six months ended June 30, 2021, 20,263,500 warrants, 1,140,149 RSUs and 68,946 RSAs were excluded from the diluted EPS calculation they were determined to be anti-dilutive. For the period from June 26, 2020 to June 30, 2020, 20,263,500 warrants were excluded from the diluted EPS calculation because they were determined to be anti-dilutive.

2127

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

NOTE 14: ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table summarizes accumulated other comprehensive income (loss) (“AOCI”), net of taxes, by component (in thousands):


		Net Currency Translation Gains (Losses)		Funded Status of Benefit Plans		Total Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2018 (Predecessor)		$	4,428	$	(10,375)	$	(5,947)
Other comprehensive loss before reclassifications		(2,439)		0		(2,439)

Adoption of ASU 2018-02		0		(2,137)		(2,137)
Balance at March 31, 2019 (Predecessor)		1,989		(12,512)		(10,523)
Other comprehensive income before reclassifications		1,385		0		1,385
Balance at June 30, 2019 (Predecessor)		3,374		(12,512)		(9,138)
Other comprehensive loss before reclassifications		(3,013)		0		(3,013)
Balance at September 30, 2019 (Predecessor)		$	361	$	(12,512)	$	(12,151)

									Net Currency Translation Gains (Losses)		Funded Status of Benefit Plans		Total Accumulated Other Comprehensive Income (Loss)
Balance at December 31, 2019 (Predecessor)	Balance at December 31, 2019 (Predecessor)	$	2,836	$	(10,980)	$	(8,144)	Balance at December 31, 2019 (Predecessor)	$	2,885	$	(10,944)	$	(8,059)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	(1,884)		0		(1,884)		Other comprehensive loss before reclassifications	(1,884)		0		(1,884)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		48		48		Amounts reclassified from AOCI	0		48		48
Balance at March 31, 2020 (Predecessor)	Balance at March 31, 2020 (Predecessor)	952		(10,932)		(9,980)		Balance at March 31, 2020 (Predecessor)	1,001		(10,896)		(9,895)
Other comprehensive loss before reclassifications	Other comprehensive loss before reclassifications	(402)		0		(402)		Other comprehensive loss before reclassifications	(402)		0		(402)
Amounts reclassified from AOCI	Amounts reclassified from AOCI	0		270		270		Amounts reclassified from AOCI	0		270		270
Balance at June 25, 2020 (Predecessor)	Balance at June 25, 2020 (Predecessor)	550		(10,662)		(10,112)		Balance at June 25, 2020 (Predecessor)	599		(10,626)		(10,027)
Purchase accounting adjustments to eliminate Predecessor’s accumulated other comprehensive loss (income)	Purchase accounting adjustments to eliminate Predecessor’s accumulated other comprehensive loss (income)	(550)		10,662		10,112		Purchase accounting adjustments to eliminate Predecessor’s accumulated other comprehensive loss (income)	(599)		10,626		10,027
Balance at June 26, 2020 (Successor)	Balance at June 26, 2020 (Successor)	0		0		0		Balance at June 26, 2020 (Successor)	0		0		0
Other comprehensive income before reclassifications		15		0		15

Amounts reclassified from AOCI								Amounts reclassified from AOCI	15		0		15
Balance at June 30, 2020 (Successor)	Balance at June 30, 2020 (Successor)	15		0		15		Balance at June 30, 2020 (Successor)	$	15	$	0	$	15
Other comprehensive income before reclassifications		3,130		0		3,130

Balance at September 30, 2020 (Successor)		$	3,145	$	0	$	3,145
Balance at December 31, 2020 (Successor)								Balance at December 31, 2020 (Successor)	$	7,774	$	831	$	8,605
Other comprehensive loss before reclassifications								Other comprehensive loss before reclassifications	(2,047)		0		(2,047)
Amounts reclassified from AOCI								Amounts reclassified from AOCI	0		9		9
Balance at March 31, 2021 (Successor)								Balance at March 31, 2021 (Successor)	5,727		840		6,567
Other comprehensive income (loss) before reclassifications								Other comprehensive income (loss) before reclassifications	5,322		(55)		5,267
Amounts reclassified from AOCI								Amounts reclassified from AOCI	0		9		9
Balance at June 30, 2021 (Successor)								Balance at June 30, 2021 (Successor)	$	11,049	$	794	$	11,843

NOTE 15: RELATED PARTY TRANSACTIONS

The Predecessor participated in MacAndrews & Forbes’ (“MacAndrews”) directors and ~~officer’s~~officers’ insurance program, which covered the Predecessor along with MacAndrews and its other affiliates. The limits of coverage are available on aggregate losses to any or all of the participating companies and their respective directors and officers. For the period January 1, 2020 to June 25, 2020, ~~and the nine months ended September 30, 2019,~~ the Predecessor reimbursed MacAndrews an immaterial amount for its allocable portion of the premiums for such coverage, which the Predecessor believed was more favorable than the premiums that it could have secured were it to secure its own coverage. The Predecessor also participated in certain other insurance programs with MacAndrews under which it paid premiums directly to the insurance broker.

~~TABLE OF CONTENTS~~

~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

In March 2018, the Predecessor entered into a revolving credit agreement with Wesco US LLC, an indirect and wholly-owned subsidiary of Merisant. This revolving credit facility, as amended, ~~matured on~~had a maturity date of January 3, 2022 and provided for maximum outstanding borrowings of up $9.0 million. The revolving credit facility was unsecured and bore interest at 3-month LIBOR plus 4.0% and provided for periodic interest payments with all principal due upon maturity. MacAndrews had the right to accept or reject any borrowing request made by the Predecessor pursuant to the revolving credit agreement in its sole discretion. The outstanding balance on the revolving credit agreement at June 25, 2020 was $3.4 million and was forgiven by MacAndrews in connection with the ~~Acquisition. Outstanding borrowings at December 31, 2019 were $8.4 million and the interest rate at December 31, 2019 was 5.95%.~~Business Combination. The interest expense for the period from April 1, 2020 to June 25, 2020 and January 1, 2020 to June 25, 2020 was approximately ~~$0.2 million. The interest expense for the three and nine months ended September 30, 2019 was approximately~~ $0.1 million and ~~$0.4~~$0.2 million, respectively.

TABLE OF CONTENTS

Whole Earth Brands, Inc.

Notes to Condensed Consolidated and Combined Financial Statements

(Unaudited)

In July 2020, the Company entered into an agreement with Watermill Institutional Trading LLC, a registered broker-dealer (“Watermill”), to act as one of the Company’s financial advisors for a 12-month period commencing July 22, 2020 for total consideration of $0.9 million, of which $0.2 million and $0.5 million was expensed induring the three and six months ended ~~September~~June 30, ~~2020.~~2021, respectively. Additionally, the Company incurred additional expense of $2.0 million during the six months ended June 30, 2021 related to services provided by Watermill in connection with the acquisition of Wholesome. A former director of Act II is a registered representative of Watermill and is providing services directly to the Company under the agreement.

NOTE 16: BUSINESS SEGMENTS

The Company has 2 reportable segments: Branded CPG and Flavors & Ingredients. ~~The Branded CPG and Flavors & Ingredients segments are managed and organized through~~In addition, beginning with the first quarter of 2021, the Company’s ~~indirect~~corporate office functions are now reported and ~~wholly-owned subsidiaries Merisant~~included under Corporate. Corporate is not a reportable or operating segment but is included for reconciliation purposes and ~~Mafco Worldwide, respectively.~~includes the costs for the corporate office administrative activities as well as transaction-related and other costs. Certain prior year amounts have been reclassified to conform to the current presentation. The Company does not present assets by reportable segments as they are not reviewed by the Chief Operating Decision Maker for purposes of assessing segment performance and allocating resources.

The following table presents selected financial information relating to the Company’s business segments (in thousands):

(Successor) (Predecessor)
Three Months Ended
September 30, 2020 From
June 26, 2020 to September 30, 2020
From
January 1, 2020 to June 25, 2020
Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Product revenues, net
Branded CPG $ 41,006 $ 43,557 $ 80,749 $ 40,292 $ 123,098
Flavors & Ingredients 25,996 27,923 47,579 23,768 80,256
Total product revenues, net $ 67,002 $ 71,480 $ 128,328 $ 64,060 $ 203,354
Operating income (loss)
Branded CPG $ 1,499 $ 1,393 $ (14,463) $ 3,186 $ 7,703
Flavors & Ingredients (435) (646) (23,718) 4,667 16,476
Total operating income (loss) $ 1,064 $ 747 $ (38,181) $ 7,853 $ 24,179

~~TABLE OF CONTENTS~~

~~Whole Earth Brands, Inc.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~


	(Successor)						(Predecessor)
	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Product revenues, net
Branded CPG	$	99,095	$	180,892	$	2,551	$	40,530	$	80,749
Flavors & Ingredients	27,398		51,426		1,927		21,826		47,579
Total product revenues, net	$	126,493	$	232,318	$	4,478	$	62,356	$	128,328

Operating income (loss)
Branded CPG	$	10,258	$	20,417	$	77	$	1,700	$	(5,055)
Flavors & Ingredients	3,738		4,710		(211)		292		(23,718)
	13,996		25,127		(134)		1,992		(28,773)
Corporate	(8,021)		(22,216)		(183)		(6,851)		(9,408)
Total operating income (loss)	$	5,975	$	2,911	$	(317)	$	(4,859)	$	(38,181)

The following table presents geographic information based upon revenues ~~disaggregated by~~of the Company’s major geographic ~~operating segments~~markets (in thousands):

(Successor) (Predecessor)
Three Months Ended
September 30, 2020 From
June 26, 2020 to September 30, 2020
From
January 1, 2020 to June 25, 2020
Three Months Ended
September 30, 2019 Nine Months Ended
September 30, 2019
Branded CPG:
North America $ 14,642 $ 15,515 $ 29,926 $ 15,203 $ 44,967
Europe, Middle East and Africa 19,092 20,197 35,360 17,080 55,013
Asia-Pacific 3,924 4,300 9,584 4,835 13,544
Latin America 3,348 3,545 5,879 3,174 9,574
Flavors & Ingredients 25,996 27,923 47,579 23,768 80,256
Total product revenues, net $ 67,002 $ 71,480 $ 128,328 $ 64,060 $ 203,354

~~NOTE 17: SUBSEQUENT EVENTS~~

On November 10, 2020, the Company executed and closed a definitive Equity Purchase Agreement (the “Purchase Agreement”) with RF Development, LLC (“RF Development”), Swerve, L.L.C. (“Swerve LLC”) and Swerve IP, L.L.C. (“Swerve IP” and together with Swerve LLC, “Swerve”). Swerve is a manufacturer and marketer of a portfolio of zero sugar, keto-friendly, and plant-based sweeteners and baking mixes. The Company purchased all of the issued and outstanding equity interests of both Swerve LLC and Swerve IP from RF Development for $80 million in cash, subject to customary post-closing adjustments. The transaction was funded through a combination of available cash on hand and approximately $47.9 million under the Company’s $50 million revolving loan facility.


	(Successor)						(Predecessor)
	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Branded CPG:
North America	$	66,444	$	118,414	$	872	$	14,679	$	29,927
Europe	20,524		39,938		882		15,867		31,837
India, Middle East and Africa	3,612		6,255		231		1,722		3,778
Asia-Pacific	5,594		10,820		369		5,156		9,328
Latin America	2,921		5,465		197		3,106		5,879
Flavors & Ingredients	27,398		51,426		1,927		21,826		47,579
Total product revenues, net	$	126,493	$	232,318	$	4,478	$	62,356	$	128,328

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read together with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 (“Annual Report”) and our unaudited condensed consolidated and combined financial statements and the related notes ~~to those statements included under Item 1 hereof and the combined financial statements of Mafco Worldwide & Merisant beginning on page F-1~~appearing elsewhere in ~~the final prospectus and definitive proxy statement, each filed with the Securities and Exchange Commission (the “SEC”) by Act II Global Acquisition Corp. on May 13, 2020.~~this Quarterly Report. For purposes of this section, “Whole Earth Brands,” the “Company,” “we,” or “our” refer to (i) Mafco Worldwide & Merisant and their subsidiaries (“Predecessor”) for the ~~period~~Period from January 1, 2020 through June 25, 2020 ~~and the three and nine month periods ended September 30, 2019~~ (each referred to herein as a “Predecessor Period”) prior to the consummation of the ~~Acquisition, as defined hereafter,~~Business Combination and (ii) Whole Earth Brands, Inc. and its subsidiaries (the “Successor”) for the period from January 1, 2021 through June ~~26, 2020 through September~~ 30, ~~2020~~2021 (the “Successor Period”) after the ~~consummation of the Acquisition,~~Business Combination, unless the context otherwise requires. ~~Certain figures have been rounded for ease of presentation and may not sum due to rounding.~~

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act (the “Exchange Act”) concerning us and other matters. These statements may discuss goals, intentions and expectations as to future plans, trends, events, results of operations or financial condition, or otherwise, based on current beliefs of management, as well as assumptions made by, and information currently available to, management.

Forward-looking statements may be accompanied by words such as “achieve,” “aim,” “anticipate,” “believe,” “can,” “continue,” “could,” “drive,” “estimate,” “expect,” “forecast,” “future,” “grow,” “improve,” “increase,” “intend,” “may,” “outlook,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or similar words, phrases or expressions. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, our ability to achieve or maintain profitability; the extent of the impact of the COVID-19 pandemic, including the duration, spread, severity, and any recurrence of the COVID-19 pandemic, the duration and scope of related government orders and restrictions, the impact on our employees, and the extent of the impact of the COVID-19 pandemic on overall demand for our products; local, regional, national, and international economic conditions that have deteriorated as a result of the COVID-19 pandemic including the risks of a global recession or a recession in one or more of our key markets, and the impact they may have on us and our customers and management’s assessment of that impact; the projected financial information, anticipated growth rate, and market opportunity of our Branded CPG and Flavors & Ingredients business segments; the ability to maintain the listing of our securities on Nasdaq; the potential liquidity and trading of our public securities; our expected capital requirements and the availability of additional financing; our ability to attract or retain highly qualified personnel, including in accounting and finance roles; extensive and evolving government regulations that impact the way we operate; the effect of the reclassification and treatment of warrants pursuant ASC Topic 815-40; the impact of the COVID-19 pandemic on our suppliers, including disruptions and inefficiencies in the supply chain; factors relating to the business, operations and financial performance of our Branded CPG and Flavors & Ingredients segments; our success in integrating the various operating companies constituting Merisant and MAFCO; our ability to integrate our acquisitions and achieve the anticipated benefits of the transactions in a timely manner or at all; our ability to continue to use, maintain, enforce, protect and defend its owned and licensed intellectual property, including the Whole Earth® brand; and such other factors as discussed throughout, including in Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations and in Part II, Item 1A. Risk Factors of this Quarterly Report on Form ~~10-Q and in the section entitled “Risk Factors” in the Closing Form 8-K, including the risk factors incorporated by reference therein.~~10-Q.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, our information may be incomplete or limited, and we cannot guarantee future results. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

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Overview

We are a global ~~industry-leading platform, focused on the “better for you” consumer packaged goods (“CPG”)~~food company enabling healthier lifestyles and ~~ingredients space. We have a global platform~~providing access to high-quality, plant-based sweeteners, flavor enhancers and other foods through our diverse portfolio of ~~branded products~~trusted brands and ~~ingredients, focused on the consumer transition towards natural alternatives and clean label~~delicious products. We operate a proven platform organized into two reportable segments.

Our Branded CPG and Flavors & Ingredient reportable segments are managed and organized through our indirect and wholly-owned subsidiaries, Merisant Company (collectively with its subsidiaries, “Merisant”) and Mafco Worldwide LLC (collectively with its subsidiaries and affiliates, “Mafco Worldwide,” and together with Merisant, “Merisant and MAFCO”), respectively.

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•Branded CPG, comprised of our Merisant division of operating companies, Wholesome and Swerve, is a global CPG business focused on building a branded portfolio oriented toward serving customers seeking zero-calorie, low-calorie, natural, no-sugar-added and plant-based products. Our Branded CPG ~~business operates leading~~products are sold under both our global flagship brands, ~~in the low-~~as well as local and ~~zero-calorie sweetener market, such as~~private label brands. Our global flagship brands include Whole Earth®, ~~Equal®, Canderel® and~~ Pure Via®, Wholesome®, Swerve®, Canderel®, Equal® and existing branded adjacencies.

•Flavors & Ingredients, comprised of our Mafco Worldwide division of operating companies, is ~~our~~a global, business-to-business focused ~~operations~~operation with a long history as a trusted supplier of essential, functional ingredients to some of the CPG industry’s largest and most demanding customers. Our products provide a variety of solutions to its customers including flavor enhancement, flavor / aftertaste masking, moisturizing, product mouth feel modification and skin soothing characteristics. Our Flavors & Ingredients segment operates as our licorice-derived products business.

In addition, beginning with the first quarter of 2021, our corporate office functions are now reported and included under Corporate. Corporate is not a reportable segment. Certain prior year amounts have been reclassified to conform to the current presentation.

Acquisition

On ~~June 24,~~December 17, 2020, we ~~domesticated~~entered into a ~~Delaware corporation~~stock purchase agreement (the “Wholesome Purchase Agreement”) with WSO Investments, Inc. (“WSO Investments” and ~~changed our name from “Act II Global Acquisition Corp.~~together with its subsidiaries “Wholesome”), WSO Holdings, LP (“WSO Partnership”), Edwards Billington and Son, Limited (“EBS”), WSO Holdings, LLC (“WSO LLC,” and together with WSO Partnership and EBS, the “WSO Sellers”), and WSO Partnership, in its capacity as representative for the WSO Sellers. WSO Investments is the direct parent of its wholly-owned subsidiary Wholesome Sweeteners, Incorporated, which was formed to ~~“Whole Earth Brands, Inc.”~~ import, market, distribute, and sell organic sugars, unrefined specialty sugars, and related products.

On ~~June 25, 2020, we consummated~~February 5, 2021, pursuant to the ~~indirect acquisition (the “Acquisition”)~~terms of the Wholesome Purchase Agreement, (i) the Company purchased and acquired all of the issued and outstanding ~~equity interests~~shares of ~~Merisant Company, Merisant Luxembourg Sarl (“Merisant Luxembourg”)~~capital stock of WSO Investments from the WSO Sellers, for (x) an initial cash purchase price of $180 million (subject to customary post-closing adjustments), ~~Mafco Worldwide LLC, Mafco Shanghai LLC (“Mafco Shanghai”~~plus (y) as more thoroughly described below, up to an additional $55 million (the “Earn-Out Amount”), EVD Holdings LLC (“EVD Holdings”), and Mafco Deutschland GmbH (together with Merisant Company, Merisant Luxembourg, Mafco Worldwide LLC, Mafco Shanghai, and EVD Holdings, and their respective direct and indirect subsidiaries, “Merisant and Mafco Worldwide”), upon the satisfaction of certain post-closing financial metrics by Wholesome; and (ii) WSO Investments became an indirect wholly-owned subsidiary of the Company (collectively, the “Wholesome Transaction”). Subject to the terms and conditions of the Wholesome Purchase Agreement, and as more thoroughly described therein, payment of the Earn-Out Amount, in whole or in part, is subject to Wholesome achieving certain ~~assets~~EBITDA thresholds at or above approximately $30 million during the period beginning August 29, 2020, and ~~liabilities~~ending December 31, 2021. A portion of ~~Merisant and Mafco Worldwide included~~the Earn-Out Amount (up to $27.5 million) may be paid, at the Company’s election, in freely tradeable, registered shares of Company common stock. Calculation of the achievement of the Earn-Out Amount is subject to certain adjustments more thoroughly described in the ~~Transferred Assets and Liabilities (as defined~~Wholesome Purchase Agreement. While the Earn-Out Amount is currently expected to be payable in the first quarter of 2022, the payment could accelerate upon the breach by the Company of certain covenants more thoroughly described in the Wholesome Purchase Agreement (as hereafter defined)), from Flavors Holdings Inc. (“Flavors Holdings”), MW Holdings I LLC (“MW Holdings I”), MW Holdings III LLC (“MW Holdings III”), and Mafco Foreign Holdings, Inc. (“Mafco Foreign Holdings,” and togetherAgreement.

In connection with Flavors Holdings, MW Holdings I, and MW Holdings III, the “Sellers”), pursuant to that certain Purchase Agreement (the “Purchase Agreement”) entered into with the Sellers dated as of December 19, 2019, as amended.

~~As a result of the Acquisition, Act II was deemed to be the acquirer for accounting purposes, and Merisant and MAFCO, which is the business conducted prior to~~ the closing of the ~~Acquisition, was deemed to be~~Wholesome Transaction, on February 5, 2021, the ~~acquiree~~Company and ~~accounting Predecessor. The Acquisition was accounted~~certain of its subsidiaries entered into an amendment and restatement agreement (the “Amendment Agreement”) with Toronto Dominion (Texas) LLC, as administrative agent, and certain lenders signatory thereto, which amended and restated its existing senior secured loan agreement dated as of June 25, 2020 (as amended on September 4, 2020, the “Existing Credit Agreement,” and as further amended by the Amendment Agreement, the “Amended and Restated Credit Agreement”), by and among Toronto Dominion (Texas) LLC, as administrative agent, certain lenders signatory thereto and certain other parties. See “Liquidity and Capital Resources” below for as a business combination using the acquisition method of accounting, and the Successor’s financial statements reflect a new basis of accounting that is based on the fair value of net assets acquired. As a resultfurther description of the ~~application of the acquisition method of accounting as of the effective time of the Acquisition, the financial statements for the Predecessor Period~~Amended and for the Successor Period are presented on different bases. The historical financial information of Act II prior to the Acquisition has not been reflected in the Predecessor Period financial statements.Restated Credit Agreement.

Covid-19 Impact

COVID-19 surfaced in Wuhan, China in late 2019 and has since spread throughout the rest of the world. In March 2020, COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S. Government. The pandemic has negatively affected the U.S. and global economies, disrupted global supply chains and financial markets, and resulted in significant travel restrictions, including mandated facility closures and shelter-in-place orders.

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We have taken measures to protect the health and safety of our employees and implemented work from home arrangements, where possible, social distancing where working from home is not feasible, including in our manufacturing facilities, deep cleaning protocols at all of our facilities and travel restrictions, among other measures. We have also taken appropriate measures to work with our customers to minimize potential disruption and to support the communities that we serve to address the challenges posed by the pandemic.

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While we ~~are currently experiencing stable to increasing consumer and customer~~have experienced a net increase in the overall demand for our products, ~~and have no supply disruptions,~~ we are unable to fully determine the future impact of COVID-19 on demand for our products or our ability to supply our products. The full extent of the impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the pandemic and related containment and mitigation actions taken by national, state and local government officials across the world to prevent disease spread. While vaccines to prevent COVID-19 were approved by health agencies in the U.S. and other countries in which the Company operates and began to be administered near the end of calendar year 2020, distribution of the vaccines has been slower than anticipated. In addition, new strains of the virus appear to have increased transmissibility, which could complicate treatment and vaccination programs. The extent of the pandemic’s impact on us will also depend upon our employees’ ability to work safely in our facilities, our customers’ ability to continue to operate or receive our products, the ability of our suppliers to continue to operate, and the level of activity and demand for the ultimate product and services of our customers or their customers.

~~Stock Repurchase Plan~~

On September 8, 2020, we announced that the Company’s board of directors had authorized a stock repurchase plan of up to $20 million of shares of our common stock. The shares may be repurchased from time to time over a 12-month period expiring on September 15, 2021 (or upon the earlier completion of all purchases contemplated by the repurchase plan or the earlier termination of the repurchase plan), in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with U.S. federal securities laws.

The timing and actual number of shares of common stock repurchased under the stock repurchase plan will depend on a number of factors, including the market price of our common stock, general market and economic conditions, applicable legal requirements, compliance with the terms of our outstanding indebtedness, alternate uses for capital and other factors. There is no guarantee as to the number of shares that will be repurchased, and the repurchase plan may be extended, suspended or discontinued at any time without prior notice at our discretion.

~~During the three months ended September 30, 2020, there were no repurchases of our common stock under the stock repurchase plan.~~

~~Subsequent Developments~~

On November 10, 2020, we executed and closed a definitive Equity Purchase Agreement (the “Purchase Agreement”) with RF Development, LLC (“RF Development”), Swerve, L.L.C. (“Swerve LLC”, and Swerve IP, L.L.C. (“Swerve IP” and together with Swerve LLC, “Swerve”). Swerve is a manufacturer and marketer of a portfolio of zero sugar, keto-friendly, and plant-based sweeteners and baking mixes. We purchased all of the issued and outstanding equity interests of both Swerve LLC and Swerve IP from RF Development for $80 million in cash, subject to customary post-closing adjustments. The transaction was funded through a combination of available cash on hand and approximately $47.9 million under our $50 million revolving loan facility. For additional information about the Transaction, please read the Current Report on Form 8-K filed with the SEC on November 12, 2020.

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Results of Operations

Consolidated


		(Successor)				(Predecessor)							(Successor)						(Predecessor)
(In thousands)	(In thousands)	Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		(In thousands)	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Product revenues, net	Product revenues, net	$	67,002	$	71,480	$	128,328	$	64,060	$	203,354	Product revenues, net	$	126,493	$	232,318	$	4,478	$	62,356	$	128,328
Cost of goods sold	Cost of goods sold	48,357		51,065		77,627		38,173		121,037		Cost of goods sold	85,138		155,312		2,708		37,515		77,627
Gross profit	Gross profit	18,645		20,415		50,701		25,887		82,317		Gross profit	41,355		77,006		1,770		24,841		50,701
Selling, general and administrative expenses	Selling, general and administrative expenses	14,881		16,827		43,355		14,770		49,020		Selling, general and administrative expenses	27,828		60,735		1,946		27,307		43,355
Amortization of intangible assets	Amortization of intangible assets	2,700		2,841		4,927		2,656		7,968		Amortization of intangible assets	4,706		8,857		141		2,393		4,927
Asset impairment charges	Asset impairment charges	—		—		40,600		—		—		Asset impairment charges	—		—		—		—		40,600
Restructuring and other expenses	Restructuring and other expenses	—		—		—		608		1,150		Restructuring and other expenses	2,846		4,503		—		—		—
Operating income (loss)	Operating income (loss)	1,064		747		(38,181)		7,853		24,179		Operating income (loss)	5,975		2,911		(317)		(4,859)		(38,181)
Change in fair value of warrant liabilities												Change in fair value of warrant liabilities	(241)		(2,603)		—		—		—
Interest expense, net	Interest expense, net	(2,045)		(2,161)		(238)		(237)		(342)		Interest expense, net	(6,396)		(11,474)		(116)		(66)		(238)
Other (expense) income, net		(170)		(232)		801		(716)		(666)
(Loss) income before income taxes		(1,151)		(1,646)		(37,618)		6,900		23,171
Provision (benefit) for income taxes		1,684		1,694		(3,482)		1,627		5,228
Net (loss) income		$	(2,835)	$	(3,340)	$	(34,136)	$	5,273	$	17,943
Loss on extinguishment and debt transaction costs												Loss on extinguishment and debt transaction costs	—		(5,513)		—		—		—
Other income (expense), net												Other income (expense), net	190		500		(62)		(920)		801
Loss before income taxes												Loss before income taxes	(472)		(16,179)		(495)		(5,845)		(37,618)
(Benefit) provision for income taxes												(Benefit) provision for income taxes	(4,167)		(7,849)		10		(364)		(3,482)
Net income (loss)												Net income (loss)	$	3,695	$	(8,330)	$	(505)	$	(5,481)	$	(34,136)

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2019~~2020

Product revenues, net. Product revenues, net for the three months ended ~~September~~June 30, 2021 were $126.5 million. Product revenues, net for the combined three months ended June 30, 2020 ~~were $67.0~~totaled $66.8 million ~~an increase of $2.9~~including $4.5 million for the period from June 26, 2020 through June 30, 2020 and $62.4 million from April 1, 2020 through June 25, 2020. Product revenues, net increased $59.7 million, or 5%89.3%, ~~from $64.1 million for~~in the three months ended ~~September~~June 30, ~~2019~~2021 due to a ~~$2.2~~$56.0 million increase in product revenues in the Branded CPG segment and a $3.6 million increase in product revenues at Flavors & ~~Ingredients and a $0.7 million~~Ingredients. The increase in ~~product~~Branded CPG revenues atwas due to $52.0 million of revenues related to the acquisitions of Wholesome and Swerve, $1.0 million of organic Branded CPG growth, and $3.0 million impact from foreign exchange, as further described below.

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Cost of goods sold. Cost of goods sold for the three months ended ~~September~~June 30, 2021 was $85.1 million. Cost of goods sold for the combined three months ended June 30, 2020 ~~was $48.4~~totaled $40.2 million, ~~an increase~~including $2.7 million for the period from June 26, 2020 through June 30, 2020 and $37.5 million from April 1, 2020 through June 25, 2020. Cost of ~~$10.2~~goods sold increased $44.9 million ~~or 27%, from $38.2 million for~~in the three months ended ~~September~~June 30, ~~2019. The increase was~~2021, primarily driven by ~~$8.7~~$41.0 million related to the acquisitions of Wholesome and Swerve (including $0.9 million of purchase accounting adjustments related to ~~inventory revaluations as well as~~inventory), higher volumes at Branded CPG and Flavors & Ingredients, partially offset by $0.8 million of favorable ~~product mix within Branded CPG.~~purchase accounting adjustments related to inventory revaluations at Flavors & Ingredients.

Selling, general and administrative expenses. Selling, general and administrative expenses for the three months ended ~~September~~June 30, 2021 were $27.8 million. Selling, general and administrative expenses for the combined three months ended June 30, 2020 ~~were $14.9~~totaled $29.3 million, ~~an increase~~including $1.9 million for the period from June 26, 2020 through June 30, 2020 and $27.3 million from April 1, 2020 through June 25, 2020. Selling, general and administrative expenses decreased $1.4 million, primarily due to transaction bonuses of ~~$0.1~~$10.6 million ~~or 1%,~~in 2020 and lower bonus expense of $1.6 million, partially offset by $4.8 million of selling, general and administrative expenses from ~~$14.8~~the acquisitions of Wholesome and Swerve, $2.0 million of stock-based compensation expense and $2.9 million for public company costs including both one-time costs as well as ongoing costs to operate as a public company in the three months ended ~~September~~June 30, 2019 primarily due to higher professional fees related to being a new public company, largely offset by lower bonus expense of $3.0 million primarily related to the reversal of $2.3 million of bonus expense for certain employees receiving a one-time grant of restricted stock units on September 30, 2020 in lieu of an annual cash bonus for 2020.2021.

Amortization of intangible assets. Amortization of intangible assets for ~~both~~ the three months ended ~~September~~June 30, 2021 was $4.7 million. Amortization of intangible assets for the combined three months ended June 30, 2020 was $2.5 million, including $0.1 million for the period from June 26, 2020 through June 30, 2020 and ~~2019 was $2.7 million.~~$2.4 million from April 1, 2020 through June 25, 2020. Amortization of intangible assets increased $2.2 million, or 85.7%, from $2.5 million for the three months ended June 30, 2020 primarily due to higher amortization expense related to the intangible assets acquired as part of the Wholesome and Swerve acquisitions.

Restructuring and other expenses. Restructuring and other expenses for the three months ended ~~September~~June 30, ~~2019~~2021 were ~~$0.6~~$2.8 million and relate primarily to certain disposal costs at our Camden, New Jersey facility, as well as termination benefits related to the elimination and restructuring of positions at Flavors & Ingredients.

Change in fair value of warrant liabilities.Change in fair value of warrant liabilities for the three months ended June 30, 2021 was a non-operating loss of $0.2 million.

Interest expense, net. Interest expense, net for the three months ended ~~September~~June 30, 2021 was $6.4 million. Interest expense, net for the combined three months ended June 30, 2020 ~~was $2.0~~totaled $0.2 million ~~an increase of $1.8~~including $0.1 million for the period from June 26, 2020 through June 30, 2020 and $0.1 million from ~~$0.2~~April 1, 2020 through June 25, 2020. Interest expense, net increased $6.2 million ~~for~~in the three months ended ~~September~~June 30, ~~2019. The increase was~~2021 due to interest expense under our new credit facilities and the amortization of debt issuance costs.

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Other income (expense) ~~income,~~, net. Other ~~(expense)~~ income, net for three months ended ~~September~~June 30, 2021 was $0.2 million. Other expense, net for the combined three months ended June 30, 2020 was ~~expense of $0.2~~$1.0 million, ~~a decrease of $0.5~~including $0.1 million for the period from June 26, 2020 through June 30, 2020 and $0.9 million from ~~$0.7~~April 1, 2020 through June 25, 2020. Other income, net increased $1.2 million ~~for~~in the three months ended ~~September~~June 30, ~~2019. The decrease was~~2021, primarily due to ~~lower~~ foreign exchange ~~losses.~~gains in the second quarter of 2021 compared to foreign exchange losses in the second quarter of 2020.

~~Provision (benefit)~~Benefit for income taxes. The ~~provision~~benefit for income taxes for the three months ended ~~September~~June 30, 2021 was $4.2 million, which includes a discrete tax benefit of $4.2 million related to the receipt of a beneficial tax ruling in Switzerland which allows for future amortization deductions, the reversal of uncertain tax position liabilities as a result of the lapse of applicable statute of limitations, partially offset by a deferred tax provision related to a tax law change in the United Kingdom which was enacted during the quarter ended June 30, 2021. The benefit for income taxes for the combined three months ended June 30, 2020 was ~~$1.7~~$0.4 million, ~~an increase~~including income tax expense of ~~$0.1 million from a tax provision for income taxes of $1.6~~$0.01 million for the ~~three months ended September~~period from June 26, 2020 through June 30, ~~2019.~~2020 and an income tax benefit of $0.4 million from April 1, 2020 through June 25, 2020. The effective tax rate for the three months ended ~~September~~June 30, ~~2020~~2021 was an income tax ~~provision~~benefit of ~~(146.3%)~~882.8%, compared to an income tax provision of ~~23.6%~~2% for the ~~three months ended September~~period from June 26, 2020 through June 30, ~~2019.~~2020 and an income tax benefit of 6.2% for the period from April 1, 2020 to June 25, 2020. The effective tax rate for the three months ended ~~September~~June 30, 2021 differs from the statutory federal rate of 21% primarily due to the discrete tax benefits. The effective tax rate for the period from June 26, 2020 through June 30, 2020 ~~differs~~and for the period from April 1, 2020 through June 25, 2020 differ from the statutory federal rate of 21% primarily due to the U.S. tax effect of international operations including Global Intangible Low-Taxed Income (“GILTI”) recorded during the ~~period.~~period and U.S. state taxes.

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Six Months Ended ~~September~~June 30, ~~2020~~2021 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020

Product revenues, net. Product revenues, net ~~were $71.5~~for the six months ended June 30, 2021 was $232.3 million. Product revenues, net for the combined six months ended June 30, 2020 was $132.8 million, including $4.5 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $128.3 million from January 1, 2020 through June 25, 2020. Product revenues, net ~~for~~increased $99.5 million, or 74.9%, in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 were $199.8 million, a decrease of $3.5 million, or 2%, from $203.4 million for the nine months ended September 30, 2019~~2021 due to a ~~decline~~$97.6 million increase in product revenues ~~of $4.8 million at Flavors & Ingredients, partially offset by~~in the Branded CPG segment and a ~~$1.2~~$1.9 million increase in product revenues at Flavors & Ingredients. The increase in Branded CPG revenues was due to $89.3 million of revenues related to the acquisitions of Wholesome and Swerve, $3.1 million of organic Branded CPG growth and $5.1 million impact from foreign exchange, as further ~~discussed~~described below.

Cost of goods sold. Cost of goods sold for the six months ended June 30, 2021 was ~~$51.1~~$155.3 million. Cost of goods sold for the combined six months ended June 30, 2020 was $80.3 million, including $2.7 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $77.6 million from January 1, 2020 through June 25, 2020. Cost of goods sold ~~for~~increased $75.0 million, or 93.3%, in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 was $128.7 million, an increase of $7.7 million, or 6%, from $121.0 million for the nine months ended September 30, 2019. This increase was~~2021, primarily driven by ~~$8.7~~$69.1 million related to the acquisitions of Wholesome and Swerve (including $1.9 million of purchase accounting adjustments related to ~~inventory revaluations, as well as~~inventory), higher volumes ~~in the~~at Branded CPG ~~segment~~ and ~~$0.4~~$0.6 million of ~~transaction bonuses in 2020, partially offset by lower volumes in the Flavors & Ingredients segment resulting from international tobacco product revenue declines.~~stock-based compensation expense.

Selling, general and administrative expenses. Selling, general and administrative expenses ~~were $16.8~~for the six months ended June 30, 2021 was $60.7 million. Selling, general and administrative expenses for the combined six months ended June 30, 2020 was $45.3 million, including $1.9 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $43.4 million from January 1, 2020 through June 25, 2020. Selling, general and administrative expenses ~~for~~increased $15.4 million, in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 were $60.2~~2021, primarily due to $9.1 million ~~an increase~~ of ~~$11.2~~acquisition related transaction expenses, $8.4 million ~~or 23%,~~of selling, general and administrative expenses from ~~$49.0~~the acquisitions of Wholesome and Swerve, $5.0 million for ~~the nine months ended September 30, 2019 primarily due~~public company costs including both one-time costs as well as ongoing costs to operate a public company and $3.4 million of stock-based compensation expense, partially offset by transaction bonuses of $10.6 million recorded in 2020 and higher professional fees to support being a new public company, partially offset by lower bonus expense of $1 million primarily due to the reversal of certain bonus expense as described above.2020.

Amortization of intangible assets. Amortization of intangible assets for the six months ended June 30, 2021 was ~~$2.8~~$8.9 million. Amortization of intangible assets for the combined six months ended June 30, 2020 totaled $5.1 million, including $0.1 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $4.9 million from January 1, 2020 through June 25, 2020. Amortization of intangible assets ~~for~~increased $3.8 million, or 74.8%, in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 was $7.8 million, a decrease~~2021, primarily due to amortization expense related to the intangible assets acquired as part of ~~$0.2 million, or 3%, from $8.0 million for~~ the ~~nine months ended September 30, 2019.~~Wholesome and Swerve acquisitions.

Asset impairment charges. There were no asset impairment charges for the six months ended June 30, 2021. Asset impairment charges were $40.6 million for the combined ~~nine~~six months ended ~~September~~June 30, 2020 and included an impairment charge recorded in the predecessor period of $22.9 million related to indefinite-lived intangible assets and a goodwill impairment charge of $17.7 million. The goodwill impairment charge of $17.7 million was the result of the Flavors & Ingredients and Branded CPG segments reporting units carrying ~~value~~values exceeding their fair value by $6.6 million and $11.1 million, respectively.

Restructuring and other expenses. Restructuring and other expenses for the six months ended June 30, 2021 were $4.5 million and relate primarily to certain disposal costs at our Camden, New Jersey facility.

Change in fair value of warrant liabilities.Change in fair value of warrant liabilities for the six months ended June 30, 2021 was a non-operating loss of $2.6 million, which is net of a $1.2 million non-operating gain that relates to the fiscal year ended December 31, 2020. See Notes 1, 6 and 7 to our unaudited condensed consolidated and combined financial statements for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2021 for further discussion.

Interest expense, net. Interest expense, net for the six months ended June 30, 2021 was ~~$2.2~~$11.5 million. Interest expense, net for the combined six months ended June 30, 2020 was $0.4 million, including $0.1 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $0.2 million from January 1, 2020 through June 25, 2020. Interest expense, net ~~for~~increased $11.1 million in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 was $2.4 million, an increase of $2.1 million from $0.3 million for the nine months ended September 30, 2019. The increase was~~2021 due to ~~interest expense~~higher debt levels under our new credit facilities and the amortization of debt issuance costs.

Loss on extinguishment and debt transaction costs. Loss on extinguishment and debt transaction costs includes a $5.5 million pretax loss consisting of a write-off of unamortized debt issuance costs of $4.4 million and transaction costs of $1.1 million related to the amendment of our credit facilities on February 5, 2021.

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Other income (expense) ~~income,~~, net. Other ~~(expense)~~ income, net for the six months ended June 30, 2021 was ~~expense~~$0.5 million. Other income, net for the combined six months ended June 30, 2020 was $0.7 million, including $0.1 million of ~~$0.2 million~~expense for the period from June 26, 2020 through ~~September~~June 30, 2020 and income of $0.8 million from January 1, 2020 through June 25, 2020. Other ~~(expense)~~ income, net ~~for the combined nine months ended September 30, 2020 was income of $0.6~~fell $0.2 million, ~~an increase of $1.2 million from expense of $0.7 million for the nine months ended September 30, 2019. The increase was the result of higher~~primarily due to lower foreign exchange ~~gains.~~gains in 2021 compared to 2020.

~~Provision (benefit)~~Benefit for income taxes. The ~~provision~~benefit for income taxes for the six months ended June 30, 2021 was ~~$1.7~~$7.8 million, which includes a discrete tax benefit of $4.3 million primarily related to the receipt of a beneficial tax ruling in Switzerland which allows for future amortization deductions, the reversal of uncertain tax position liabilities as a result of the lapse of applicable statute of limitations, partially offset by a deferred tax provision related to a tax law change in the United Kingdom which was enacted during the quarter ended June 30, 2021. The benefit for income taxes for the combined six months ended June 30, 2020 was $3.5 million, including a provision of $0.01 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and an income tax benefit of $3.5 million from January 1, 2020 through June 25, 2020. The ~~provision for income taxes~~effective tax rate for the ~~nine~~six months ended ~~September~~June 30, ~~2019~~2021 was ~~$5.2 million. The effective~~an income tax ~~rate~~benefit of 48.5%, compared to an income tax provision of 2% for the period from June 26, 2020 through ~~September~~June 30, 2020 ~~was~~and an income tax ~~provision~~benefit of ~~(102.9%).~~9.3% for the period from January 1, 2020 through June 25, 2020. The effective tax rate for the six months ended June 30, 2021 differs from the statutory federal rate of 21% primarily due to the discrete tax benefits. The effective tax rate for the period from June 26, 2020 through ~~September~~June 30, 2020 differs from the statutory federal rate of 21% primarily due to the U.S. tax effect of international operations including GILTI recorded during the ~~period.~~period and U.S. state taxes. The effective tax rate ~~for the nine months ended September 30, 2019 was an income tax provision of 22.6% which~~from January 1, 2020 through June 25, 2020 differs from the statutory federal rate of 21% primarily due to ~~state and local taxes~~the impact of impairment charges on non-deductible goodwill and the U.S. tax effect of international ~~operations.~~operations including GILTI recorded during the period.

~~Results of Operations by Segment~~

Branded CPG


		(Successor)				(Predecessor)							(Successor)						(Predecessor)
(In thousands)	(In thousands)	Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		(In thousands)	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Product revenues, net	Product revenues, net	$	41,006	$	43,557	$	80,749	$	40,292	$	123,098	Product revenues, net	$	99,095	$	180,892	$	2,551	$	40,530	$	80,749
Operating income (loss)	Operating income (loss)	$	1,499	$	1,393	$	(14,463)	$	3,186	$	7,703	Operating income (loss)	$	10,258	$	20,417	$	77	$	1,700	$	(5,055)

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2019~~2020

Segment ~~Product Revenues,~~product revenues, net. Product revenues, net for Branded CPG for the three months ended ~~September~~June 30, ~~2020~~2021 were ~~$41.0 million, an increase of $0.7 million, or 2%, from $40.3 million~~$99.1 million. Product revenues, net for Branded CPG for the combined three months ended ~~September~~June 30, ~~2019~~2020 totaled $43.1 million, including $2.6 million for the period from June 26, 2020 through June 30, 2020 and $40.5 million from April 1, 2020 through June 25, 2020. Product revenues, net for Branded CPG increased $56.0 million in the three months ended June 30, 2021, primarily driven by $52.0 million of revenues related to the ~~positive~~acquisitions of Wholesome and Swerve, $1.0 million increase in organic sales led by international regions and the $3.0 million favorable impact of foreign ~~exchange. Strong growth in product revenues in Western Europe were offset~~exchange, driven primarily by ~~a decline in North America due to softness in the food service channel and lower product revenues in Asia-Pacific due to timing of shipments and retailer and distributor inventories.~~appreciating European currencies.

Segment ~~Operating Income.~~operating income. Operating income for Branded CPG for the three months ended ~~September~~June 30, ~~2020~~2021 was ~~$1.5 million, a decrease of~~ ~~$1.7 million from~~ ~~$3.2 million~~$10.3 million. Operating income for Branded CPG for the combined three months ended ~~September 30, 2019. This decrease was primarily due to higher operating costs including~~ $3.5 million of purchase accounting adjustments related to inventory revaluations and higher professional fees to support being a new public company, partially offset by a decline in amortization expense of $1.3 million due to purchase accounting revaluations and lower bonus expense of $2.5 million primarily due to the reversal of $1.7 million of bonus expense related to certain employees receiving a one-time grant of restricted stock units on SeptemberJune 30, 2020 ~~in lieu of an annual cash bonus for 2020~~.

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

~~Segment Product Revenues, net.~~ ~~Product revenues, net for Branded CPG were $43.6~~totaled $1.8 million, including $0.1 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $1.7 million from April 1, 2020 through June 25, 2020. Operating income for Branded CPG increased $8.5 million, primarily due to additional operating income of $4.0 million related to the acquisitions of Wholesome and Swerve (which includes $0.9 million of amortization of inventory fair value adjustments), a $4.7 million decrease in bonus expense (including $2.7 million related to transaction bonuses in 2020), as well as increased product revenues and productivity gains, partially offset by $1.0 million of stock-based compensation expense.

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Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Segment product revenues, net. Product revenues, net for Branded CPG for the six months ended June 30, 2021 were $180.9 million. Product revenues, net for Branded CPG for the combined six months ended June 30, 2020 totaled $83.3 million, including $2.6 million for the period from June 26, 2020 through June 30, 2020 and $80.7 million from January 1, 2020 through June 25, 2020. Product revenues, net for Branded CPG ~~for~~increased $97.6 million in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 were $124.3 million, an increase of $1.2 million, or 1%, from $123.1 million for the nine months ended September 30, 2019 primarily~~2021, due to ~~strong~~$89.3 million of revenues related to the acquisitions of Wholesome and Swerve, $3.1 million of global organic Branded CPG growth, ~~in Western Europe~~led by retail and ~~Asia-Pacific, partially offset by~~ecommerce growth and the ~~negative~~$5.1 million impact of foreign exchange.

~~TABLE OF CONTENTS~~

Segment ~~Operating Income (Loss)~~operating income (loss). Operating income for Branded CPG for the six months ended June 30, 2021 was ~~$1.4~~$20.4 million. Operating loss for Branded CPG for the combined six months ended June 30, 2020 totaled $5.0 million, including operating income of $0.1 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and an operating loss of ~~$14.5~~$5.1 million from January 1, 2020 through June 25, 2020. Operating ~~loss~~income for Branded CPG ~~for the combined nine months ended September 30, 2020 was $13.1 million, a decrease of $20.8~~increased $25.4 million ~~as compared to~~ ~~operating income of $7.7 million for the nine months ended September 30, 2019. The decline was~~, primarily due to ~~transaction bonuses of $7.2 million,~~ ~~$3.5 million of purchase accounting adjustments related to inventory revaluations,~~ a goodwill impairment charge of $11.1 million ~~recorded~~and transaction bonuses of $2.7 million reflected in the ~~first quarter~~prior year results that did not reoccur in 2021, additional operating income of ~~2020~~$7.9 million related to the acquisitions of Wholesome and ~~higher professional fees,~~Swerve (which includes $1.9 million of amortization of inventory fair value adjustments), a $0.7 million decrease in bonus expense as well as increased product revenues and productivity, partially offset by ~~a decline in amortization expense~~$1.6 million of ~~$1.5 million due to purchase accounting revaluations and~~ ~~lower bonus expense of $1.0 million.~~stock-based compensation expense.

Flavors & Ingredients


		(Successor)				(Predecessor)							(Successor)						(Predecessor)
(In thousands)	(In thousands)	Three Months Ended September 30, 2020		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019		(In thousands)	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Product revenues, net	Product revenues, net	$	25,996	$	27,923	$	47,579	$	23,768	$	80,256	Product revenues, net	$	27,398	$	51,426	$	1,927	$	21,826	$	47,579
Operating (loss) income		$	(435)	$	(646)	$	(23,718)	$	4,667	$	16,476
Operating income (loss)												Operating income (loss)	$	3,738	$	4,710	$	(211)	$	292	$	(23,718)

Three Months Ended ~~September~~June 30, ~~2020~~2021 Compared to Three Months Ended ~~September~~June 30, ~~2019~~2020

Segment ~~Product Revenues,~~product revenues, net. Product revenues, net for Flavors & Ingredients for the three months ended ~~September~~June 30, 2021 were $27.4 million. Product revenues, net for Flavors & Ingredients for the combined three months ended June 30, 2020 ~~were $26.0~~totaled $23.8 million, ~~an increase of $2.2~~including $1.9 million for the period from June 26, 2020 through June 30, 2020 and $21.8 million from April 1, 2020 through June 25, 2020. Product revenues, net increased $3.6 million or 9%15.3%, ~~from $23.8 million for~~in the three months ended ~~September~~June 30, ~~2019,~~2021, primarily driven by ~~growth~~strong increases across most product lines. The results for the second quarter of 2020 were soft as customers temporarily built inventory in the ~~licorice derivatives business and domestic tobacco revenues, partially offset by lower international tobacco revenues.~~first quarter of 2020 in response to the COVID-19 pandemic.

Segment ~~Operating (Loss) Income.~~operating income (loss). Operating ~~loss~~income for Flavors & Ingredients for the three months ended ~~September~~June 30, 2021 was $3.7 million. Operating income for Flavors & Ingredients for the combined three months ended June 30, 2020 ~~was $0.4~~totaled $0.1 million, ~~a decline~~including an operating loss of ~~$5.1~~ $0.2 million for the period from June 26, 2020 through June 30, 2020 and operating income of ~~$4.7~~$0.3 million from April 1, 2020 through June 25, 2020. Operating income for Flavors & Ingredients increased $3.7 million in the three months ended ~~September~~June 30, ~~2019~~2021, primarily driven by ~~higher operating costs including~~ ~~$5.2~~increased product revenues. Operating expenses were flat as $2.8 million of ~~purchase accounting adjustments related to inventory revaluations~~facility closure and ~~a $1.3~~restructuring costs and $0.9 million ~~increase~~ in amortization expense ~~due to purchase accounting revaluations, partially~~were offset by ~~lower bonus expense~~transaction bonuses of ~~$0.5 million.~~$3.8 million recorded in 2020 that did not reoccur.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2019~~2020

Segment ~~Product Revenues,~~product revenues, net. Product revenues, net for Flavors & Ingredients ~~was~~for the six months ended June 30, 2021 were ~~$27.9~~$51.4 million. Product revenues, net for Flavors & Ingredients for the combined six months ended June 30, 2020 totaled $49.5 million, including $1.9 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and $47.6 million from January 1, 2020 through June 25, 2020. Product revenues, net increased $1.9 million or 3.9%, in the six months ended June 30, 2021, primarily driven by growth in derivatives.

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Segment operating income (loss). Operating income for Flavors & Ingredients for the six months ended June 30, 2021 was $4.7 million. Operating loss for Flavors & Ingredients for the combined ~~nine~~six months ended ~~September~~June 30, 2020 ~~were $75.5~~totaled $23.9 million, ~~a decrease~~including an operating loss of $4.8 million, or 6%, from $80.3 million for the nine months ended September 30, 2019, primarily driven by the decline in international tobacco revenues, partially offset by growth in the licorice derivatives business.

~~Segment Operating (Loss) Income.~~ ~~Operating loss for Flavors & Ingredients was $0.6~~$0.2 million for the period from June 26, 2020 through ~~September~~June 30, 2020 and operating loss of $23.7 million from January 1, 2020 through June 25, 2020. Operating income for Flavors & Ingredients increased $28.6 million in the six months ended June 30, 2021, primarily due to asset impairment charges totaling $29.5 million and transaction bonuses of $3.8 million, both included in the prior year results that did not reoccur in 2021, partially offset by $4.5 million of facility closure and restructuring costs and a $1.9 million increase in amortization expense due to purchase accounting revaluations of intangible assets.

Corporate

Beginning with the first quarter of 2021, the Company’s corporate office functions are now reported and included under Corporate. Corporate is not a reportable or operating segment.


	(Successor)						(Predecessor)
(In thousands)	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From April 1, 2020 to June 25, 2020		From January 1, 2020 to June 25, 2020
Operating loss	$	(8,021)	$	(22,216)	$	(183)	$	(6,851)	$	(9,408)

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

Operating loss. Operating loss for Corporate for the three months ended June 30, 2021 was $8.0 million. Operating loss for Corporate for the combined three months ended June 30, 2020 totaled $7.0 million, including $0.2 million for the period from June 26, 2020 through June 30, 2020 and $6.9 million from April 1, 2020 through June 25, 2020. Operating loss for Corporate increased $1.0 million in the three months ended June 30, 2021, primarily driven by $2.9 million for public company costs including both one-time costs as well as ongoing costs to operate as a public company and $1.1 million of stock-based compensation expense, partially offset by lower bonus expense of $3.8 million as 2020 included transaction bonuses of $4.5 million.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

Operating loss. Operating loss for Corporate for the six months ended June 30, 2021 was $22.2 million. Operating loss for Corporate for the combined six months ended June 30, 2020 totaled $9.6 million, including $0.2 million for the period from June 26, 2020 through June 30, 2020 and $9.4 million from January 1, 2020 through June 25, 2020. Operating loss for ~~Flavors & Ingredients for~~Corporate rose $12.6 million in the ~~combined nine~~six months ended ~~September~~June 30, ~~2020 was $24.4 million, a decrease of~~2021, primarily driven by $~~40.8 million~~ ~~as compared to~~ ~~operating income of $16.5 million for the nine months ended September 30, 2019. The decline was primarily due to asset impairment charges totaling $29.5 million recorded in the first quarter of 2020,~~ ~~$5.2~~9.1 million of ~~purchase accounting adjustments~~acquisition related transaction expenses, $5.0 million in public company costs including both one-time costs as well as ongoing costs to ~~inventory revaluations, $1.3~~operate as a public company and $1.8 million of ~~higher amortization~~stock-based compensation expense, ~~due to purchase accounting revaluations,~~partially offset by $3.3 million of lower bonus expense as 2020 included ~~lower revenues, and~~ transaction bonuses of ~~$3.8 million in 2020~~.$4.5 million.

~~TABLE OF CONTENTS~~

Liquidity and Capital Resources

~~The Predecessor has~~We have historically funded operations with cash flow from operations and, when needed, with borrowings, which are described below.

We believe our sources of liquidity and capital, and ~~new Loan Agreement~~our Credit Facilities will be sufficient to finance our continued operations, growth strategy and additional expenses we expect to incur for at least the next twelve months.

TABLE OF CONTENTS

The following table shows summary cash flow information for the ~~periods from~~three months ended June ~~26, 2020 through September~~30, 2021 and June 30, 2020 ~~January 1, 2020 through June 25, 2020 and the nine months ended September 30, 2019~~ (in thousands).:


		(Successor)		(Predecessor)					(Successor)				(Predecessor)
		From June 26, 2020 to September 30, 2020		From January 1, 2020 to June 25, 2020		Nine Months Ended September 30, 2019			Six Months Ended June 30, 2021		From June 26, 2020 to June 30, 2020		From January 1, 2020 to June 25, 2020
Net cash (used in) provided by operating activities	Net cash (used in) provided by operating activities	$	(12,715)	$	19,908	$	26,569	Net cash (used in) provided by operating activities	$	(9,454)	$	(3,997)	$	19,908
Net cash used in investing activities	Net cash used in investing activities	(199,938)		(3,532)		(2,276)		Net cash used in investing activities	(186,968)		(197,809)		(3,532)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	206,111		(16,924)		(23,940)		Net cash provided by (used in) financing activities	203,118		207,861		(16,924)
Effect of exchange rates on cash and cash equivalents		88		215		117
Effect of exchange rate changes on cash and cash equivalents								Effect of exchange rate changes on cash and cash equivalents	460		17		215
Net change in cash and cash equivalents	Net change in cash and cash equivalents	$	(6,454)	$	(333)	$	470	Net change in cash and cash equivalents	$	7,156	$	6,072	$	(333)

Operating activities.Net cash used in operating activities was ~~$12.7~~$9.5 million for the six months ended June 30, 2021. Net cash provided by operating activities for the combined six months ended June 30, 2020 totaled $15.9 million, including net cash used in operating activities of $4.0 million in the period from June 26, 2020 through ~~September~~June 30, ~~2020. Net~~2020 and net cash provided by operating activities ~~was~~of $19.9 million from January 1, 2020 through June 25, 2020. ~~Net cash provided by operating activities for the combined nine month period ended September 30, 2020 was $7.2 million compared to $26.6 million for the nine months ended September 30, 2019.~~ The decrease was primarily attributable to ~~lower cash flow from operating results,~~ unfavorable working capital changes and higher interest and tax payments. Cash paid for interest for the six months ended June 30, 2021 was $10.0 million compared to $0.9 million for the combined six months ended June 30, 2020. Cash paid for income taxes, net of income tax refunds, increased $2.1 million to $4.4 million for the six months ended June 30, 2021 compared to $2.2 million for the combined six months ended June 30, 2020.

Investing activities.Net cash used in investing activities was ~~$199.9~~$187.0 million for the six months ended June 30, 2021 which included cash paid of $187.6 million, net of cash acquired, related to the acquisition of Wholesome, $1 million of cash received for the final working capital settlement related to the acquisition of Swerve, capital expenditures of $4.6 million and proceeds from the sale of one of our facilities of $4.3 million. Net cash used in investing activities was $197.8 million in the period from June 26, 2020 through ~~September~~June 30, 2020 which included cash paid of $376.7 million ~~net of cash acquired,~~ related to the ~~Acquisition,~~Business Combination and $178.9 million of cash transferred from the trust ~~account and capital expenditures of $2.1 million.~~account. Net cash used in investing activities was $3.5 million from January 1, 2020 through June 25, 2020 and was entirely related to capital expenditures. ~~Net cash used in investing activities was $2.3 million in the nine months ended September 30, 2019 and was entirely related to capital expenditures.~~

Financing activities.Net cash provided by financing activities was ~~$206.1~~$203.1 million for the six months ended June 30, 2021 and reflects $400 million of proceeds from the Credit Facilities (as defined and described below), repayment of the revolving credit facility of $47.9 million, repayments of long-term debt of $137.4 million and payments of debt issuance costs of $11.6 million. Net cash provided by financing activities was $207.9 million in the period from June 26, 2020 ~~through September~~to June 30, 2020 ~~and~~which reflects $140 million of proceeds from the ~~Loan Agreement (as defined and described below),~~senior secured first lien term loan facility, net of debt issuance costs of $7.1 million and proceeds from the sale of common stock and warrants of $75 ~~million and repayments of long-term debt of $1.8~~ million. Net cash used in financing activities was $16.9 million from January 1, 2020 through June 25, 2020 due to $8.5 million of ~~repayments,~~payments, offset by $3.5 million of borrowings related to the prior revolving credit facility and $11.9 million due to funding to the parent. ~~Net cash used by financing activities was $23.9 million in the nine months ended September 30, 2019 due to funding to the parent.~~

Indebtedness

~~Loan Agreement~~

~~In connection with the Acquisition, on June 25,~~On December 31, 2020, ~~we entered into a~~our senior secured loan agreement ~~(the “Loan Agreement”) which contained~~consisted of a Revolving Credit Facility and a Term Loan Facility with Toronto Dominion (Texas) LLC, as administrative agent, BOFA Securities Inc., as Syndication Agent, BMO Capital Markets Corp. and Truist Bank, as documentation agents, and the other lenders party thereto. For more information on the Loan Agreement, see the section entitled ~~“Item 1.01 — Entry into Material Definitive Agreement — Credit Agreement”~~ ~~in the~~senior secured first ~~Current Report on Form 8-K we filed with the SEC on June 30, 2020 (the “Closing Form 8-K”).~~

~~The Loan Agreement provides for a~~lien term loan facility of $140 million and a first lien revolving credit facility of up to $50 million. As of ~~September 30,~~December 31, 2020, there were $2.1 million of outstanding letters of credit that reduced our availability under the revolving credit facility.

As of December 31, 2020, term loan borrowings were $131.8 million, net of debt issuance costs of $4.7 million. There were $47.9 million of borrowings under the revolving credit facility as of December 31, 2020. Additionally, as of December 31, 2020, the Company’s unamortized debt issuance costs related to the revolving credit facility were $1.7 million, which are included in other assets in the condensed consolidated balance sheet.

In connection with the Wholesome Transaction, on February 5, 2021, we entered into an amendment and restatement agreement (the “Amendment Agreement”) with Toronto Dominion (Texas) LLC, which amended and restated our existing senior secured loan agreement dated as of June 25, 2020 (as amended on September 4, 2020, the “Existing Credit Agreement,” and as further amended by the Amendment Agreement, the “Amended and Restated Credit Agreement”), by Toronto Dominion (Texas), LLC, as administrative agent, certain lenders signatory thereto and certain other parties.

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The Amended and Restated Credit Agreement provides for senior secured financing consisting of the following credit facilities: (a) a senior secured term loan facility in the aggregate principal amount of $375 million (the “Term Loan Facility”); and (b) a revolving credit facility in an aggregate principal amount of up to $75 million (the “Revolving Facility,” and together with the Term Loan Facility, the “Credit Facilities”). The Revolving Facility has a $15 million sub-facility for the issuance of letters of credit and a $15 million sublimit for swing line loans. We used the proceeds under the Term Loan Facility to (i) repay and refinance existing indebtedness of WSO Investments; (ii) pay the cash consideration for the Wholesome Transaction; (iii) repay and refinance outstanding borrowings under the Existing Credit Agreement; and (iv) pay fees and expenses incurred in connection with the foregoing. The proceeds of the Revolving Facility can be used to finance working capital needs, for general corporate purposes, and for working capital adjustments payable under the Wholesome Purchase Agreement.

Loans outstanding under the Credit Facilities accrue interest at a rate per annum equal to (i) with respect to the Revolving Facility and letters of credit, (A) 2.75%, in the case of base rate advances, and (B) 3.75% in the case of LIBOR advances, and (ii) with respect to the Term Loan Facility, (A) 3.50%, in the case of base rate advances, and (B) 4.50% in the case of LIBOR advances, with a LIBOR floor of 1.00% with respect to the Term Loan Facility, and 0.00% with respect to the Revolving Facility and letters of credit, and base rate based on the highest of the prime rate, the federal funds rate plus 0.50%, LIBOR for a one-month interest period plus 1.00%, and with respect to the Revolving Facility and letters of credit, 0.00%, or with respect to the Term Loan Facility, 2.0%, and undrawn amounts under the Revolving Facility will accrue a commitment fee at a rate per annum equal to 0.50% on the average daily undrawn portion of the commitments thereunder. As of ~~September~~June 30, ~~2020, we had term loan borrowings of $133.3 million, net of debt issuance costs under the Loan Agreement and were in compliance with the related financial covenants. Additionally,~~2021, there were ~~no borrowings~~$2.1 million of outstanding letters of credit that reduced our availability under the revolving credit facility. Our unamortized debt issuance costs related to the revolving credit facility were $2.0 million as of ~~September~~June 30, ~~2020.~~2021 and are included in other assets in the condensed consolidated balance sheet.

The ~~Loan Agreement requires~~obligations under the Credit Facilities are guaranteed by certain direct or indirect wholly-owned domestic subsidiaries of the Company, other than certain excluded subsidiaries, including, but not limited to, immaterial subsidiaries and foreign subsidiaries. The Credit Facilities are secured by substantially all of the personal property of the Company and the guarantor subsidiaries (in each case, subject to certain exclusions and qualifications).

The Credit Facilities require us to make certain mandatory prepayments, with (i) 100% of net cash proceeds of all non-ordinary course asset sales or other dispositions of property in excess of ~~$5,000,000~~$5 million in any fiscal year, subject to the ability to reinvest such proceeds and certain other exceptions, (ii) 100% of the net cash proceeds of any debt incurrence, other than debt permitted under the definitive agreements (but excluding debt incurred to refinance the ~~Loan Agreement)~~Credit Facilities) and (iii) 50% of “Excess Cash Flow,” as defined in the ~~Loan~~Amended and Restated Credit Agreement, ~~which is included as an exhibit to this Quarterly Report on Form 10-Q,~~ with a reduction to 25% if the total net leverage ratio for the fiscal year is less than or equal to ~~2.50~~3.50 to 1.00 but greater than ~~2.00~~3.00 to 1.00, and a reduction to 0% if the total net leverage ratio for the fiscal year is less than or equal to ~~2.00~~3.00 to 1.00. We are also required to make quarterly amortization payments equal to ~~(i) 1.25%~~0.25% per annum of the original principal amount of the Term Loan Facility during the first, second and third years after the closing date of the Credit Facilities, commencing after the first full fiscal quarter after the closing date of the Loan Agreement, and (ii) 2.50% per annum of the original principal amount of the term loan facility during the fourth and fifth years after the closing date of the Loan Agreement (subject to reductions by optional and mandatory prepayments of the loans). ~~We may prepay~~

As of the ~~term loan facility at any time without premium or penalty, subject~~date of the amendment of the credit facilities, the aggregate unamortized debt issuance costs totaled $6.2 million, of which $4.4 million was expensed as a loss on extinguishment of debt. Additionally, in connection with the Amended and Restated Credit Agreement, the Company paid fees to ~~payment~~certain lenders of ~~customary breakage~~$3.8 million, which was considered a debt discount, all of which was deferred, and incurred transaction costs of $8.9 million, of which $7.8 million was deferred and $1.1 million was expensed as part of loss on extinguishment and debt transaction costs.

The Loan Agreement contains financial covenants and a number of traditional negative covenants including negative covenants related to the following subjects: consolidations, mergers, and sales of assets; limitations on the incurrence of certain liens; limitations on certain indebtedness; limitations on the ability to pay dividends; and certain affiliate transactions.

The Loan Agreement also contains certain customary representations and warranties, affirmative covenants and events of default. If an event of default occurs, the lenders under the Loan Agreement are entitled to take various actions, including the acceleration of amounts due under the loan and all actions permitted to be taken by a secured creditor.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on ~~its~~our financial condition, changes in financial condition, income or expenses, results of operations, liquidity, capital expenditures or capital resources.

~~Contractual Obligations~~

The following table summarizes certain of our obligations as of September 30, 2020 and the estimated timing and effect that such obligations are expected to have on liquidity and cash flows in future periods (in thousands):

Total 2020 2021 2022 2023 2024 Thereafter
Debt $ 138,250 $ 1,750 $ 7,000 $ 7,000 $ 10,500 $ 14,000 $ 98,000
Interest on debt 25,935 1,590 6,107 5,788 5,448 4,883 2,119
Minimum lease obligations(a) 16,352 1,004 3,738 3,462 3,387 1,865 2,896
Total $ 180,537 $ 4,344 $ 16,845 $ 16,250 $ 19,335 $ 20,748 $ 103,015

~~(a) Minimum lease obligations do not include sublease rental income.~~

In addition, as of September 30, 2020, Mafco Worldwide had obligations to purchase $22.0 million of raw materials; however, we are unable to make reasonably reliable estimates of the timing of such payments and, therefore, the related commitment has been excluded from the table above.

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Contractual Obligations

The table below includes our future payments for debt and interest as of June 30, 2021, which were materially affected by the Amended and Restated Credit Agreement, as further described under Indebtedness (in thousands):


	Payments Due for the 12-Month Period Ended June 30,
	Total		2022		2023		2024		2025		2026		Thereafter
Debt	$	399,063	$	3,750	$	3,750	$	3,750	$	3,750	$	28,750	$	355,313
Interest on debt	137,927		21,765		21,555		21,405		21,137		20,537		31,528
Total	$	536,990	$	25,515	$	25,305	$	25,155	$	24,887	$	49,287	$	386,841

Critical Accounting Policies and Recently Issued Accounting Pronouncements

~~Leasing~~

~~As of~~See Note 1 to our unaudited condensed consolidated and combined financial statements for the ~~Acquisition date, we account~~six months ended June 30, 2021 for leases pursuant to Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842). Under the new standard, a right-of-use asset and a lease liability is recorded for all leases with a term greater than 12 months. Lease right-of-use assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using our incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable.

~~Our lease portfolio includes a factory building, office space, warehouses, material handling equipment, vehicles and office equipment. All~~discussion of our ~~leases are classified as operating leases as~~accounting policy regarding the accounting for Private Warrants.

Other than the addition of ~~September 30,~~our accounting policy for Private Warrants, there have been no changes to critical accounting policies and estimates from those disclosed in our audited consolidated and combined financial statements for the fiscal year ended December 31, 2020.

~~Stock-Based Compensation~~

In accordance with ASC Topic 718, “Compensation—Stock Compensation,” the Company recognizes stock-based compensation cost in its Consolidated Statements of Operations. Stock-based compensation cost is measured at the grant date for equity-classified awards and at the end of each reporting period for liability-classified awards based on the estimated fair value of the awards. ASC Topic 718 requires stock-based compensation expense to be recognized over the period from the date of grant to the date when the award is no longer contingent on the employee providing additional service.

For information regarding our ~~other~~ critical accounting policies and ~~recently issued~~ accounting pronouncements, see our unaudited condensed consolidated and combined financial statements and the related notes to those statements included under Item 11. hereof and our audited combined financial statements and accompanying notes of Mafco Worldwide and Merisant for each of the two years ended December 31, 2019 and 2018 and the audited financial statements and accompanying notes for Act II for the year ended December 31, 2019, which are included in the final prospectus and definitive proxy statement filed with the Securities and Exchange Commission by Act II2020 Annual Report on ~~May 13, 2020.~~Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not ~~applicable as a smaller reporting company.~~applicable.

Item 4. Controls and Procedures

Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we conducted an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). ~~Based on~~The Company’s management and the ~~evaluation of these disclosure controls and procedures, our~~ Chief Executive Officer and Chief Financial Officer concluded that ~~as of September 30, 2020, our~~the Company’s disclosure controls and procedures were not effective as of June 30, 2021 due solely to ~~ensure~~the previously identified material weakness associated with the accounting for Private Warrants reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021.

The Company’s remediation plan has been implemented. However, the material weakness cannot be considered remediated until the controls operate for a sufficient period and management has concluded, through testing, that our internal controls are operating effectively. In connection with correcting its accounting for the Private Warrants, the Company has implemented additional review procedures and training related to the accounting for equity and liability instruments (including those with warrants) to determine proper accounting in accordance with GAAP.

While management believes that the ~~information required~~remedial efforts will resolve the identified material weakness, there is no assurance that management’s remedial efforts conducted to date will be ~~disclosed by us in reports~~sufficient or that ~~we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.~~additional remedial actions will not be necessary.

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Notwithstanding such material weakness in internal controls over financial reporting, our management concluded that our condensed consolidated and combined financial statements in this report fairly present, in all material respects, the Company’s financial position, results of operations and cash flows as of the dates, and for the periods presented, in conformity with GAAP.

Changes in Internal Control over Financial Reporting

~~During~~There have been no other changes in internal control over financial reporting that occurred during the fiscal quarter ended ~~September~~June 30, ~~2020, we completed the Acquisition and the internal controls of Merisant and MAFCO became our internal controls. We~~2021 that have materially affected, or are ~~engaged in the process of the design and implementation of~~reasonably likely to materially affect, our internal control over financial ~~reporting in a manner commensurate with the scale of our operations subsequent to the Acquisition.~~reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

There have been no material developments in our legal proceedings since we filed our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~quarterly period~~year ended ~~June 30,~~December 31, 2020. Refer to “Part ~~II.~~I. Item 1.3. Legal Proceedings” in our ~~Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~quarterly period~~year ended ~~June 30,~~December 31, 2020 for additional information regarding legal proceedings.

Item 1A. Risk Factors.

We discuss in our filings with the SEC various risks that may materially affect our business. The materialization of any risks and uncertainties identified in forward-looking statements contained in this report together with those previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020 and our other filings with the SEC or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See “Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward-looking Statements.” There have been no material changes ~~from~~in the risk factors previously disclosed in the section entitled “~~Risk Factors~~”“Item 1A-Risk Factors” of the Annual Report on Form 10-K for the year ended December 31, 2020, and in the ~~Closing~~section entitled “Item 1A-Risk Factors” of the Quarterly Report on Form ~~8-K,~~10-Q for the quarter ended March, 31 2021, including the risk factors incorporated by reference therein, other than those listed in this section.

~~Stock repurchases~~The ongoing novel coronavirus (COVID-19) outbreak and consequent travel and other restrictions could ~~increase~~adversely affect our business.

The COVID-19 pandemic continues to create challenging and unprecedented conditions, and we continue our commitment to supporting the ~~volatility~~global response to the crisis. Although there are effective vaccines for COVID-19 that have been approved for use, distribution of the ~~trading~~vaccines has only recently started and a majority of the public globally will likely not have access to a vaccination until sometime later in 2021 or 2022. Accordingly, there remains significant uncertainty about the duration and extent of the impact from the COVID-19 pandemic. To date, we have successfully implemented contingency plans overseen by our global leadership team to monitor the evolving needs of our global business.

From the outset of the pandemic, our first priority has been the well-being of our employees and consumers. We have consistently met or exceeded government guidelines for addressing the health and safety of our employees, including global travel restrictions, prohibitions against visitors, social distancing requirements, the use of thermal temperature scanners, and the provision of personal protective equipment to our employees. We have also enabled the use of new technology to allow many of our office-based employees to work from home effectively.

We may face operational challenges as well as potential increased operating costs in manufacturing our products and making them available to customers and consumers as a result of the COVID-19 pandemic. Shelter-in-place and social distancing behaviors, which are being mandated or encouraged by governments and practiced by businesses and individuals, create challenges for our manufacturing employees as well as for third parties on which we rely to make our products available to consumers. These third parties include our suppliers, contract manufacturers, distributors, logistics providers and other business partners, retailers that ultimately sell our Branded CPG products to consumers and customers of our Flavors and Ingredients business.

To date, consumer behaviors that have resulted from COVID-19 have increased overall demand for our Branded CPG products sold via retail or e-commerce channels. This demand has been partially offset by lower demand for Branded CPG products in the food service channel, working capital reductions by distributors and retailers in emerging markets and temporary impacts on demand for our Flavors and Ingredients products driven by disruptions in our customers’ supply chains or logistics networks.

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While we have experienced a net increase in the overall demand for our products during the COVID-19 pandemic, the continued duration of that increased demand environment is uncertain. Additionally, deteriorating economic conditions arising from the COVID-19 pandemic, or future pandemics, could adversely affect future demand for our products. Factors such as increased unemployment, decreases in disposable income and declines in consumer confidence could cause a decrease in demand for our overall product set, particularly higher priced products. Further, vaccines to prevent COVID-19 were approved by health agencies in the U.S. and other countries in which the Company operates, which began to be administered near the end of calendar year 2020. Distribution of the vaccines has been slower than anticipated. In addition, new strains of the virus appear to have increased transmissibility, which could complicate treatment and vaccination programs. The COVID-19 pandemic is an unprecedented situation and the Company's understanding of and response to its impacts is changing and evolving. The additional risk factors identified here are based upon information known at this time. The COVID-19 pandemic may adversely impact our business, financial condition, and results of operations in one or more ways not identified to date.

We recently identified a material weakness in our internal control over financial reporting and determined that our disclosure controls and procedures were ineffective which, if not remediated, may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.

We identified a material weakness in our controls over the accounting for the Private Warrants issued in connection with the Business Combination. Based on the material weakness, management concluded that, as of March 31, 2021, our internal control over financial reporting was not effective and our disclosure controls and procedures were not effective.

Although our remediation plan has been implemented and was completed as of the filing date of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, the material weakness cannot be considered remediated until the controls operate for a sufficient period and management has concluded, through testing, that our internal controls are operating effectively. While management believes that the remedial efforts will resolve the identified material weakness, there is no assurance that management’s efforts conducted to date will be sufficient or that additional actions will not be necessary. In addition, there can be no assurance that additional material weaknesses will not be identified in the future. If we are unsuccessful in remediating our existing or any future material weaknesses or other deficiencies in our internal control over financial reporting or disclosure controls and procedures, our business, reputation, results of operations, liquidity, financial condition, ability to access the capital markets, perceptions of our creditworthiness, and stock price could be adversely affected.

Our Private Warrants are accounted for as liabilities and changes in the value of these warrants could have a material effect on our financial results.

At each reporting period, the fair value of the warrant liabilities for the Private Warrants will be re-measured and the change in the fair value of the liability will be recorded as other income (expense) in our statement of operations. Changes in the inputs and assumptions for the valuation model we use to determine the fair value of such liability may have a material impact on the estimated fair value of the derivative liability. The share price of our common stock ~~and diminish our cash reserves, and we cannot guarantee~~represents the primary underlying variable that impacts the value of the derivative instruments. Additional factors that impact the value of the derivative instruments include the volatility of our stock ~~repurchase plan~~price and publicly traded warrants and interest rates. As a result, our consolidated financial statements and results of operations will ~~enhance long-term stockholder value.~~

~~In September 2020, our board of directors adopted a stock repurchase plan for up to $20 million~~fluctuate quarterly, based on various factors, such as the share price of our common ~~stock.~~ stock, many of which are outside of our control. In addition, we may change the underlying assumptions used in our valuation model, which could result in significant fluctuations in our results of operations. If our stock price is volatile, we expect that we will recognize non-cash gains or losses on the Private Warrants each reporting period and that the amount of such gains or losses could be material. The ~~stock repurchase plan is currently expected to~~impact of changes in fair value on earnings may have a term of up to 12 months. The shares may be repurchased from time to time in open market transactions at prevailing market prices, in privately negotiated transactions, or by other means in accordance with U.S. federal securities laws. The actual timing, number and value of shares repurchased under the plan will be determined by management and will dependan adverse effect on ~~a number of factors, including~~ the market price of our common ~~stock, general market and economic conditions, applicable legal requirements, compliance with the terms of our outstanding indebtedness, alternate uses for capital and other factors.~~

~~Repurchases of our shares could increase the volatility of the trading price of our stock, which could have a negative impact on the trading price of our~~ stock. Similarly, the future announcement of the termination or suspension of the stock repurchase plan, or our decision not to utilize the full authorized repurchase amount under the stock repurchase plan, could result in a decrease in the trading price of our stock. In addition, the stock repurchase plan could have the impact of diminishing our cash reserves, which may impact our ability to finance our growth, complete acquisitions and execute our strategic plan. There can be no assurance that any stock repurchases we do elect to make will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased our shares. Although our stock repurchase plan is intended to enhance long-term stockholder value, we cannot guarantee that it will do so and short-term stock price fluctuations could reduce the effectiveness of the stock repurchase plan.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.


No.						Description of Exhibit
~~10.1+~~3.1						~~Form~~Certificate of ~~RestrictedStockUnitAgreement~~Incorporation of Whole Earth Brands, Inc. (incorporated by reference to Exhibit ~~10.1~~to ~~theCompany’s~~ ~~Current Report on Form~~ ~~8-K~~ ~~filed~~ on ~~October~~6,~~2020~~).
~~10.2+~~						~~Form~~3.1 of ~~RestrictedStockUnitAgreementforNon-U.S.Participants~~ ~~(incorporated by reference to Exhibit~~ ~~10.2~~to ~~theCompany’s~~ ~~Current Report on Form~~ ~~8-K~~ ~~filed~~ on ~~October~~6,~~2020~~).
~~10.3+~~						~~Form of Incentive Stock Option Agreement (incorporated by reference to Exhibit 10.3 to the Company’s~~Whole Earth Brands, Inc.’s Current Report on Form 8-K filed with the SEC on ~~October 6, 2020~~).June 30, 2020)
~~10.4+~~3.2						~~Form~~Bylaws of ~~Nonstatutory~~ ~~Stock~~ ~~OptionAgreement~~Whole Earth Brands, Inc. (as amended through June 30, 2021) (incorporated by reference to Exhibit ~~10.4~~to ~~theCompany’s~~3.1 of Whole Earth Brands, Inc.’s Current Report on Form 8-K filed with the SEC on ~~October~~6,~~2020~~).July 1, 2021)
~~10.5+~~						~~Form~~ of ~~Restricted~~ ~~Stock~~ ~~Agreement~~ ~~(incorporated by reference to Exhibit~~ ~~10.5~~to ~~theCompany’s~~ ~~Current Report on Form 8-K~~ ~~filed~~ on ~~October~~6,~~2020~~).
31.1*						Certification of Principal Executive Officer, pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*						Certification of Principal Financial Officer, pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**						Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**						Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document
101.SCH*						XBRL Taxonomy Extension Schema Document
101.CAL*						XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*						XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*						XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*						XBRL Taxonomy Extension Presentation Linkbase Document
104*						The cover page for the Company’s Quarterly Report on Form 10-Q has been formatted in Inline XBRL and contained in Exhibit 101


*			Filed herewith.
**			Furnished herewith.
+			~~Indicates a management or compensatory plan~~

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SIGNATURES

Pursuant to the requirements of Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Whole Earth Brands, Inc.

		/s/ Albert Manzone
Date: ~~November 16, 2020~~August 9, 2021	Name:	Albert Manzone
	Title:	Chief Executive Officer
		(Principal Executive Officer)

		/s/ Andrew Rusie
Date: ~~November 16, 2020~~August 9, 2021	Name:	Andrew Rusie
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

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		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2530
Item 3.	Quantitative and Qualitative Disclosures A ~~bout~~About Market Risk	3440
Item 4.	Controls and Procedures	3440
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	3541
Item 1A.	Risk Factors	3541
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3542
Item 3.	Defaults Upon Senior Securities	3542
Item 4.	Mine Safety Disclosures	3542
Item 5.	Other Information	3542
Item 6.	Exhibits	3643
Signatures		3744


Remainder of 2020	$	1,004
2021	3,738
2022	3,462
2023	3,387
2024	1,865
Thereafter	2,896
Total lease payments	16,352
Less: imputed interest	1,270
Total operating lease liabilities	$	15,082


Remainder of 2020	$	2,667
2021	9,004
2022	9,004
2023	9,004
2024	9,004
2025	8,963


	Total		2020		2021		2022		2023		2024		Thereafter
Debt	$	138,250	$	1,750	$	7,000	$	7,000	$	10,500	$	14,000	$	98,000
Interest on debt	25,935		1,590		6,107		5,788		5,448		4,883		2,119
Minimum lease obligations(a)	16,352		1,004		3,738		3,462		3,387		1,865		2,896
Total	$	180,537	$	4,344	$	16,845	$	16,250	$	19,335	$	20,748	$	103,015