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As filed with the Securities and Exchange Commission on July 24, 2020
Registration No. 333-      
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Whole Earth Brands, Inc.
(Exact name of registrant as specified in its charter)
Delaware
2060
38-4101973
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification Number)
125 S. Wacker Drive
Suite 3150
Chicago, IL 60606
(312) 840-6000
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Andrew Rusie
Chief Financial Officer
125 S. Wacker Drive
Suite 3150
Chicago, IL 60606
(312) 840-3005
(Address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Christopher P. Giordano
Jon Venick
Stephen P. Alicanti
DLA Piper LLP (US)
1251 Avenue of the Americas
New York, NY 10022
(212) 335-4500
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box.   ☒
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 comply with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act.   ☐

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CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities to be Registered
Amount to be
Registered(*)
Proposed Maximum
Offering Price
Per Share
Proposed Maximum
Aggregate Offering
Price
Amount of
Registration Fee(3)
Primary Offering:
Common stock, par value $0.0001 per share
10,131,750(1)
$ 11.50(2) $ 116,515,125 $ 15,123.66
Secondary Offering:
Common stock, par value $0.0001 per share
14,631,750(4)
$ 8.04(5) $ 117,639,270.00 $ 15,269.58
Warrants to purchase common stock
5,263,500(6)
$ 0.93(7) $ 4,895,055.00 $ 635.38
Aggregate Fee
$ 31,028.62
*
Pursuant to Rule 416 under the Securities Act of 1933, as amended (the “Securities Act”), the registrant is also registering an indeterminate number of additional shares of common stock issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction.
(1)
Represents common stock issuable upon the exercise of warrants, with each warrant exercisable for one half of one share of common stock, subject to adjustment, for an exercise price of $5.75 per one-half share ($11.50 per whole share).
(2)
Represents the exercise price of the warrants for one whole share.
(3)
Calculated by multiplying the proposed maximum aggregate offering price of securities to be registered by 0.0001298.
(4)
Represents (i) 12,000,000 shares of common stock and (ii) 2,631,750 shares of common stock issuable upon the exercise of warrants, with each warrant exercisable for one half of one share of common stock, subject to adjustment, for an exercise price of $5.75 per one-half share ($11.50 per whole share), registered for resale by the selling security holders named in this registration statement.
(5)
Pursuant to Rule 457(c) under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum offering price for shares of common stock is $8.04, which is the average of the high and low prices of shares of common stock on July 20, 2020 (such date being within five business days of the date that this registration statement was filed with the U.S. Securities and Exchange Commission) on The Nasdaq Stock Market (“Nasdaq”).
(6)
Represents the resale of 5,263,500 warrants to purchase shares of common stock that were issued in a private placement, which represent warrants to acquire shares of 2,631,750 common stock.
(7)
Pursuant to Rule 457(c) under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum offering price for warrants exercisable for shares of common stock is $0.93, which is the average of the high and low prices of shares of common stock on July 20, 2020 (such date being within five business days of the date that this registration statement was filed with the U.S. Securities and Exchange Commission) on Nasdaq.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED JULY 24, 2020
PRELIMINARY PROSPECTUS
10,131,750 Shares of Common Stock
14,631,750 Shares of Common Stock by the Selling Security Holders
5,263,500 Warrants by the Selling Security Holders
Whole Earth Brands, Inc.
This prospectus relates to (a) the issuance by us of up to 10,131,750 shares of our common stock, par value $0.0001 per share (“common stock”), upon the exercise of the private placement warrants and public warrants, each exercisable to purchase one half of one share of common stock at $5.75 per half share ($11.50 per whole share); and (b) the resale from time to time of (i) an aggregate of 14,631,750 shares of common stock, consisting of (x) 12,000,000 shares of common stock and (y) 2,631,750 shares of common stock issuable upon the exercise of the private placement warrants, and (ii) 5,263,500 private placement warrants by the selling security holders named in this prospectus (each a “selling security holder” and collectively, the “selling security holders”).
On June 25, 2020, we consummated the business combination (the “Business Combination”) contemplated by that certain Purchase Agreement dated as of December 19, 2019, as amended on each of February 12, 2020, May 8, 2020 and June 15, 2020 (as amended, the “Purchase Agreement”), with Flavors Holdings Inc., a Delaware corporation, MW Holdings I LLC, a Delaware limited liability company, MW Holdings III LLC, a Delaware limited liability company, and Mafco Foreign Holdings, Inc., a Delaware corporation and, for the purposes of Amendment Nos. 2 and 3 to the Purchase Agreement, Project Taste Intermediate LLC, a Delaware limited liability company.
We are registering the resale of common stock and private placement warrants as required by (i) a registration rights agreement (the “registration rights agreement”) entered into by and between us and Act II Global LLC, a Delaware limited liability, and (ii) certain subscription agreements we entered into with certain private placement investors in connection with the Business Combination. We will receive the proceeds from the exercise of the warrants but not from the resale of the common stock or warrants by the selling security holders.
We will bear all costs, expenses and fees in connection with the registration of the common stock and warrants. The Selling Security Holders will bear all commissions and discounts, if any, attributable to their respective sales of the common stock and warrants.
Investing in our common stock or warrants involves risks that are described in the “Risk Factors” section beginning on page 9 of this prospectus.
Our common stock and warrants are listed on The Nasdaq Stock Market (“Nasdaq”) under the symbols “FREE” and “FREEW,” respectively. On July 23, 2020, the closing sale price of our common stock was $7.88 per share, and the closing sale price of our warrants was $0.80 per warrant.
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, and as such, are subject to certain reduced public company reporting requirements.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The date of this prospectus is           , 2020.

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ABOUT THIS PROSPECTUS
Neither we nor the selling security holders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus, any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the selling security holders take any responsibility for, nor provide any assurance as to the reliability of, any other information that others may give you. Neither we nor the selling security holders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.
This prospectus includes market data and industry statistics and forecasts that are based on independent industry publications and other publicly available information. Although we believe these sources are reliable, neither we nor the selling security holders guarantee the accuracy or completeness of this information and neither we nor the selling security holders have independently verified this information. In addition, the market and industry data and forecasts that may be included in this prospectus, any prospectus supplement or any applicable free writing prospectus may involve estimates, assumptions and other risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” contained in this prospectus, any applicable prospectus supplement and any applicable free writing prospectus. Accordingly, investors should not place undue reliance on this information.
As used in this prospectus, unless otherwise indicated or the context otherwise requires, the terms “we,” “our,” “us” and the “Company” mean Whole Earth Brands, Inc. and its subsidiaries, which was formerly a special purpose acquisition company called “Act II Global Acquisition Corp.” prior to the closing of the Business Combination (as defined herein) on June 25, 2020. When we refer to “you,” we mean the potential holders of our securities.
In this prospectus, we refer to our common stock and warrants to purchase shares of common stock, collectively, as “securities.”
 
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PROSPECTUS SUMMARY
The following summary highlights information contained elsewhere in this prospectus. It may not contain all of the information that may be important to you. You should read this entire prospectus carefully, including the section titled “Risk Factors,” “Act II’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Merisant and MAFCO’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Condensed Combined Financial Statements” and the financial statements included elsewhere in this prospectus.
Overview
We are a global industry-leading platform, focused on the “better for you” consumer packaged goods (“CPG”) and ingredients space. Our branded products and ingredients are uniquely positioned to capitalize on the global secular consumer shift away from sugar and toward clean label products and natural alternatives. We operate a proven platform organized into two segments, comprised of our operating companies 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”):

Branded CPG, comprised of our Merisant division of operating companies, 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 brands in the low- and zero-calorie sweetener market, such as Whole Earth,® Equal,® Canderel® and Pure Via,® and existing branded adjacencies.

Flavors & Ingredients, comprised of our Mafco Worldwide division of operating companies, is our global business-to-business focused operations 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 Flavors & Ingredients segment operates as our licorice-derived products business.
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Our platform can be leveraged to support new product development, further geographic expansion and to pursue M&A activity. We will seek to expand our branded products platform through investment opportunities in the natural alternatives and clean label categories across the global consumer products industry. Over time, we intend to become a portfolio of brands that Open a World of Goodness™ to consumers and their families.
 
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Competitive Strengths
Global Leader in the Tabletop Zero-Calorie Sweetener Category
Our Branded CPG segment is a global leader in the tabletop zero-calorie sweetener category. We have an established, highly recognizable portfolio of leading brands in large and growing markets across the globe. Legacy brands Equal® and Canderel® have an approximate 40-year sales history and hold the #1 rank in most of our key markets, putting them among the most recognized tabletop sweetener brands in the world. Management estimates brand awareness is between 80% and 95% in our top markets.
Our portfolio also includes two rapidly growing brands targeting the high-growth natural sweetener category, Whole Earth® and Pure Via®. Both Whole Earth® and Pure Via® are in the early stages of their growth and are supported by cost-effective marketing and promotional spend.
Leading Global Manufacturer of Natural Licorice Extract and Derivative Products
Our Flavors & Ingredients segment is the world’s leading manufacturer of licorice extract and derivative products. For over 150 years, the business has played a key role as a supplier of licorice products and has developed valuable, long-term relationships with many key customers, including large, domestic tobacco companies and global flavor house companies. We maintain this position by delivering high-quality licorice extract and derivative products that meet our customers’ strict requirements and by providing a high level of security of supply and superior service to our customers. Historically, the extracts and derivatives businesses of Merisant and MAFCO consistently secured multi-year contracts, illustrating the strategic importance of our products within customer supply chains. Management expects to continue to secure multi-year contracts going forward.
Diversified Customer Base Serving a Variety of End Markets
We maintain a large and diverse global customer base across the Branded CPG and Flavors & Ingredients segments. In 2019, no single customer accounted for more than 10% of our total sales. Management has identified significant opportunities for increasing the customer base via geographic expansion, distribution gains and product innovation.
Low Capital Expenditure Requirements and Attractive Cash Flow Generation Profile
We operate with low capital expenditure requirements. The stable free cash flow profile of our business provides flexibility to drive growth through research and development, brand investment and acquisitions. Branded CPG cash flows benefit from strong brand equity and robust margins. Furthermore, Flavors & Ingredients cash flows benefit from certain barriers to entry, such as long-term customer relationships and an integrated supply chain. Recent restructuring initiatives across both the Branded CPG and Flavors & Ingredients segments support margin gains and help maintain attractive free cash flow conversion going forward.
Global Platform Serving Over 100 Countries
We serve customers in over 100 countries, with robust infrastructure in place to support these operations and grow our business. We have five manufacturing sites serving our Flavors & Ingredients segment and one manufacturing site serving our Branded CPG segment. In addition, we utilize a global network of 20 co-manufacturers and a strong and scalable distribution network of third-party logistics companies and distributors that can support a growing business. Our management team has strong global relationships with many customers and channels, including grocery, club stores, distributors and food service operators across a number of key geographies that accelerates new product placement and will help us expand our presence in currently under-penetrated markets, such as India and China.
Proven Management Team
We have an experienced management team that intends to execute on various value creation strategies honed at The Hain Celestial Group, Inc. (Nasdaq: HAIN) (“Hain Celestial”), PepsiCo, Inc. (Nasdaq: PEP),
 
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and other successful CPG companies. We are led by our Chief Executive Officer, Albert Manzone, who is supported by Chief Financial Officer, Andy Rusie, and President of Flavors & Ingredients, Luke Bailey. In addition, Irwin D. Simon, founder and former Chief Executive Officer of Hain Celestial, serves as our Executive Chairman.
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Growth Strategies
Continue to Drive Product Innovation and Selected Product Extensions
Our management team focuses on product innovation in both fast-growing, natural products (Whole Earth, ® Pure Via®) and the artificial business (Equal, ® Canderel®). Recent product launches across various geographical markets have been well-received by consumers, and we believe that sales of new products will continue to have a positive impact on revenue going forward. In the Branded CPG segment, the recently-launched and soon-to-be-launched product pipeline includes:

Flavors:   French Vanilla and Pumpkin Spice sold under the Equal® brand name

Functionals:   Vitamins, caffeine and anti-inflammatory (turmeric) sold under both the Equal® and Whole Earth® brand names

Baking Products:   Sweeteners using erythritol, allulose and monk fruit sold under the Whole Earth® brand names

Sugar-Laden Adjacencies:   Jams, chocolate and granola sold under the Pure Via, ® Canderel® and Whole Earth® brand names
In our Flavors & Ingredients segment, we sell over 400 customer-specific licorice products, which are used across a wide variety of end markets and applications. We are able to adapt to changing market conditions, and our management team has identified opportunities for continued research and development, and expansion of product offerings as consumer preferences shift towards natural products.
Licorice derivatives, including our trademark line of Magnasweet® products, are widely used in low-calorie, low-salt and low-fat food and beverage applications. Licorice derivatives have specific functional properties that solve problems for product developers across a wide range of applications. In food and beverage applications, licorice derivatives are effective as flavoring agents and are used for masking undesirable
 
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tastes and enhancing, intensifying and prolonging sweetness and other flavors. Our licorice derivatives are also important functional ingredients in personal care products, principally for their moisturizing properties, and are used to help soothe topical skin conditions and irritations. In cosmetics, they are used for skin smoothing and to brighten skin appearance. In pharmaceuticals, licorice derivatives are used in a variety of products such as over-the-counter cough medicines, gastrointestinal and liver medications.
Support North American Growth with Natural Product Sales, New Product Innovation Launches, and Distribution Gains
We have a strong market presence in North America, which is enhanced by growth in consumer demand for natural products, new product innovation and distribution gains. Our Branded CPG division’s North American net sales grew 2% in 2019, outperforming key competing brands in the retail grocery sales channel in 2019. The primary driver was increased sales of Whole Earth® branded products and new innovation launches for products under the Equal® brand.
We believe that there is a large opportunity for growth in North America and that we have benefited from contacts and relationships in the natural retailer channel, and increased brand support and reinvestment of cash flow. These efforts are intended to drive retailer support and engagement with club stores and super regional grocers to help increase distribution of our new products. Higher brand support is intended to engage consumers in a targeted way to increase product awareness amongst natural affinity groups. In addition, we believe there is an opportunity to grow our brands during the COVID-19 period as consumers have a greater need for in-home consumption. This includes usage of our products in hot beverages like coffee and tea as well as our baking products.
Support Continued Growth in Developing Economies and Entrance Into New Geographies
Sugar-related health problems are becoming a critical concern to governments and populations in developing economies as diabetes and obesity rates rise. Our management team believes that the need for solutions, together with rising incomes in these geographies, represent macro tailwinds driving local consumers to seek alternatives to sugar. Positive consumption and awareness trends are driving sweetener penetration rates and expanding the category in these countries. Moreover, consumer affinity for developed economy brands such as Equal® and Canderel,® position them as premier products. We focus on accelerating brand-building, innovation and marketplace execution in geographies where Equal® and Canderel® are considered premier brands.
In the Latin America and Asia Pacific regions, adoption of our original products has been strong and, on a constant currency basis, net sales grew 5% and 8%, respectively, in 2019. In addition, we are expected to have significant new opportunities for growth in India and China. We believe that we are underpenetrated in these two large markets and that our management team can help increase distribution by accessing prior relationships.
Supplement Organic Growth with Targeted Tuck-In M&A
Our management team and board of directors have significant experience in executing and integrating M&A transactions and view targeted tuck-in M&A as a core part of our value creation strategy. Our directors and officers maintain a robust list of potentially actionable acquisition opportunities across end markets to build scale, strengthen market position, enter new geographies globally, and expand into new product verticals. These potential targets cover both the Branded CPG and Flavors & Ingredients segments and include companies in a variety of sizes and geographies.
Our Business Segments
Overview
Our Branded CPG and Flavors & Ingredient 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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Our Merisant and MAFCO operating companies are organized in a way that leverages long histories of brand leadership across their respective product categories, which allows us to align our product and commercial strategies to meet the needs of a broad set of consumers, and facilitates an efficient and effective innovation pipeline.
Merisant
Merisant is a worldwide leader in tabletop zero-calorie and low-calorie sweeteners. Merisant manufactures, markets and distributes packaged zero-calorie and low-calorie tabletop sweeteners for the domestic and international consumer food markets, primarily under the Whole Earth,® Equal,® Canderel® and Pure Via® brands. Merisant distributes its products via the retail, food service and e-commerce channels. Merisant does not make or sell ingredients. A summary of Merisant’s flagship brands includes:

Whole Earth®:   A fast growing, global low-calorie sweetener brand in the natural segment of the market, primarily marketed in North America, Australia and New Zealand.

Equal®:   primarily marketed in North America, the Asia/Pacific region, and Latin America.

Canderel®:   primarily marketed in Europe, Africa and the Middle East.

Pure Via®:   A fast growing, global low-calorie sweetener brand in the natural segment of the market, primarily marketed in Western Europe.
Since the introduction of the original Canderel® and Equal® products in 1979 and 1982, respectively, Merisant and its predecessor entities have offered consumers high quality alternatives to sugar for daily use. As the global health crisis related to sugar consumption continues to grow, consumers remain focused on finding substitutes for tabletop sugar and sugar-laden products. In recent years, Merisant has met consumer demand by introducing new natural sweeteners made from stevia and naturally derived sugar alcohols under Whole Earth® and Pure Via® brands (as well as under the Canderel® and Equal® brands) and introduced low- or no-sugar alternatives to traditionally sugar-laden products such as chocolate, jams, granola, and cereal bars. These initiatives have further established Merisant as a leader in the “better for you” movement away from sugar.
Mafco Worldwide
Founded in 1850, Mafco Worldwide has been a leading global manufacturer and supplier of licorice derivative and extract products, primarily serving beverage, confectionary, cosmetic, food, nutritional, pharmaceutical, personal care and tobacco end markets. Mafco Worldwide’s products provide a variety of solutions to its customers including flavoring enhancement, flavor / aftertaste masking, moisturizing, product mouth feel modification and skin soothing characteristics. A summary of Mafco Worldwide’s products includes:

Derivative Products:   Derivative products are based on a unique compound found only in licorice root, glycyrrhizic acid. Mafco Worldwide sells derivative products both as a line of proprietary compound flavors under the Magnasweet® brand as well as in a pure isolated form.

Extract Products:   Extract products are a concentrated form of the water-soluble extractible solids from the raw licorice root. Once extraction is complete, the extract is converted into powder, semi-fluid or blocks, depending on the customer’s requirements.
Mafco Worldwide’s ability to reliably deliver a consistent, highly customized, superior product has been at the core of its longevity and long-term customer relationships. As of December 31, 2019, Mafco Worldwide sells over 400 customer-specific licorice products, consistently meeting demanding taste, chemical, physical, microbiological and regulatory specifications and standards. Mafco Worldwide’s ability to deliver this breadth of products is due to its extensive knowledge and experience with the raw material sourcing and manufacturing processes. This is further supported by Mafco Worldwide’s industry-leading supply security and availability, which consists of best-in-class supply chain capabilities, long-standing relationships with key raw material suppliers, and maintenance of substantial raw material reserve inventory around the world.
 
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Emerging Growth Company
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. We have elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of our financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” have the meaning associated with it in the JOBS Act.
Risk Factors
Our business is subject to numerous risks and uncertainties, including those highlighted in the section titled “Risk Factors,” that represent challenges that we face in connection with the successful implementation of our strategy and growth of our business.
Corporate Information
We were originally formed as Act II Global Acquisition Corp., a Cayman Islands exempted company formed as a blank check company (“Act II”), which consummated its initial public offering in April 2019. On June 24, 2020, we domesticated into a Delaware corporation and changed our name from “Act II Global Acquisition Corp.” to “Whole Earth Brands, Inc.” On June 25, 2020, we consummated the remainder of the Business Combination and, in connection therewith, became (i) a successor issuer to Act II by operation of Rule 12g-3(a) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (ii) the ultimate parent of Merisant and MAFCO.
Our principal executive offices are located at 125 S. Wacker Drive, Suite 3150, Chicago, IL 60606, and our telephone number is (312) 840-6000. We maintain a website at www.wholeearthbrands.com. The information contained on our website is not intended to form a part of, or be incorporated by reference into, this prospectus or the registration statement of which this prospectus is a part.
 
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THE OFFERING
We are registering the issuance by us of up to 10,131,750 shares of common stock that may be issued upon exercise of warrants to purchase common stock at an exercise price of $11.50 per whole share of common stock, including the private placement warrants and the public warrants.
We are also registering the resale by the selling security holders or their permitted transferees of (i) up to 14,631,750 shares of common stock and (ii) up to 5,263,500 warrants, each exercisable for one-half share of common stock.
Issuance of Common Stock
The following information is as of July 24, 2020, and does not give effect to issuances of our common stock or warrants after such date, or the exercise of warrants after such date.
Issuer
Whole Earth Brands, Inc.
Shares of our common stock to be issued upon exercise of all private placement warrants and public warrants
Up to 10,131,750 shares of common stock
Use of Proceeds
We will receive up to an aggregate of approximately $86,250,000 from the exercise of all public warrants and $30,265,125 from the exercise of private placement warrants, assuming the exercise in full of all such warrants for cash.
Market for Securities
Our common stock and warrants are listed on Nasdaq under the symbols “FREE” and “FREEW,” respectively.
Risk Factors
Investing in our common stock involves a high degree of risk. See “Risk Factors” beginning on page 9 of this prospectus for a discussion of factors you should carefully consider before investing in our common stock.
Resale of Common Stock and Warrants
Issuer
Whole Earth Brands, Inc.
Shares of common stock offered by the selling security holders (including 2,631,750 shares of common stock that may be issued upon exercise of the private placement warrants)
14,631,750 shares of common stock
Warrants offered by the selling security holders (representing the private placement
warrants)
5,263,500 warrants
Exercise price
$5.75 per one-half share ($11.50 per whole share)
Redemption
The warrants are redeemable in certain circumstances. See “Description of Securities — Warrants” for further discussion.
Use of proceeds
We will not receive any proceeds from the sale of the common stock and warrants to be offered by the selling security holders. With respect to shares of common stock underlying the warrants, we will not receive any proceeds from such shares except with respect to amounts received by us upon exercise of such warrants to the extent such warrants are exercised for cash.
Ticker symbols
“FREE” and “FREEW” for the common stock and warrants, respectively
 
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RISK FACTORS
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition, or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment.
Risks Related to Our Branded Consumer Packaged Goods (CPG) Segment
Competition and consolidation may reduce sales and margins.
We operate in a highly competitive industry and compete with companies that have greater capital resources, facilities and diversity of product lines. Increased competition for products could result in reduced volumes and/or prices, both of which would reduce our sales and margins. Our competitors may also introduce new low-calorie sweeteners and other alternatives to sugar. To the extent that current users of our products switch to other low-calorie sweeteners or sugar alternatives, there could be a decrease in the demand for our products. In addition, competitors with larger marketing budgets can influence consumer preferences. There is no assurance that Merisant’s existing marketing spending is sufficient to stay competitive with other product manufacturers.
Our margins are also under pressure from consolidation in the retail food industry in many regions of the world. In the United States, we have experienced a shift in the channels where consumers purchase our products from the higher margin retail to the lower margin club and mass merchandisers. Such consolidation may significantly increase our cost of doing business and may further result in lower sales of our products and/or lower margins on sales. In addition, increased competition from private label manufacturers of low-calorie tabletop sweeteners may have a negative impact on sales and/or margins.
If we do not manage costs in the highly competitive tabletop sweetener industry, profitability could decrease.
The success of our Branded CPG segment depends in part on our ability to manage costs and be efficient in the highly competitive tabletop sweetener industry. If we do not continue to manage costs and achieve additional efficiencies, profitability could decrease. Inability to manage fluctuations in the price and availability of raw materials, energy, freight and other operating inputs could contribute to decreased profitability. Such fluctuations could stem alternative crops and varying local or regional harvests because of, for example, weather conditions, crop disease, climate change or crop yields. In some cases, we may not be able to pass the full increase in raw material prices, or higher energy, freight or other operating costs, on to our customers.
Rapid growth of natural sweetener products may not be sustainable and launches of new products may not be successful
The rapid net sales growth experienced in our natural sweetener category may not be sustainable long term and could moderate in the coming years or quarters. In addition, adoption of the Whole Earth® and Pure Via® brands may be slower or cost more than has been historically experienced. New sweeteners may be introduced into the market which could impact net sales growth.
We use exclusive distributors in certain jurisdictions to represent a portion of our products and any failure by such distributors to effectively represent us could adversely affect our business.
We use exclusive distributors in certain jurisdictions for our products. Our Branded CPG segment would suffer disruption if these distributors were to fail to perform their expected services or to effectively represent us, which could adversely affect our business.
Changes in consumer preferences could decrease revenues and cash flow.
We are subject to the risks of evolving consumer preferences and nutritional and health-related concerns. A substantial component of our revenues are derived from the sale of low-calorie tabletop
 
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sweeteners in which either aspartame, sucralose, saccharine (collectively, “Artificial Sweeteners”), or stevia are the primary ingredient. To the extent that consumer preferences evolve away from Artificial Sweeteners, there will be a decreased demand for certain of our products. Consumer perception that there are low-calorie tabletop sweetener alternatives that are healthier or more natural than Artificial Sweeteners could also decrease demand for certain of our products even while it may benefit certain other products. Any shift in consumer preferences away from our products, including any shift in preferences from Artificial Sweetener products to other low-calorie tabletop sweetener products or sugar, could significantly decrease our revenues and cash flows and impair our ability to operate our business.
We must expend resources to maintain consumer awareness of our brands, build brand loyalty and generate interest in our products. Our marketing strategies and channels will evolve and our programs may or may not be successful.
We believe that our consumer packaged goods are broadly known and followed in the United States and many other countries in which we operate. In order to remain competitive and expand and keep shelf placement for our products, we may need to increase our marketing and advertising spending to maintain and increase consumer awareness, protect and grow our existing market share or promote new products, which could affect our operating results. Substantial advertising and promotional expenditures may be required to maintain or improve our brand’s market position or to introduce new products to the market, and participants in our industry are increasingly engaging with non-traditional media, including consumer outreach through social media and web-based channels, which may not prove successful. An increase in our marketing and advertising efforts may not maintain our current reputation, or lead to increased brand awareness. In addition, we consistently evaluate our product lines to determine whether or not to discontinue certain products. Discontinuing product lines may increase our profitability but could reduce our sales and hurt our brands, and a reduction in sales of certain products could result in a reduction in sales of other products. The discontinuation of product lines may have an adverse effect on our business, financial condition and results of operations.
Health-related allegations could damage consumer confidence in our products.
Periodically, claims are made regarding the safety of Artificial Sweeteners consumption. Past claims include allegations that Artificial Sweeteners lead to various health problems. Although we believe that we have been successful in presenting scientific evidence to dispute these claims and restore consumer confidence in the face of each of these claims, there can be no assurance that we will be similarly successful if health-related allegations are made in the future. If consumers lose confidence in the safety of our products, regardless of the accuracy or supportability of such claims, our sales and margins would be negatively impacted. Furthermore, actions by the FDA and other federal, state or local agencies or governments domestically or abroad may impact the acceptability of or access to certain sweeteners. For example, the FDA could ban or recall certain sweeteners for safety reasons.
Product liability claims or product recalls could adversely affect our business reputation.
The sale of food products for human consumption involves the risk of injury to consumers. Such hazards could result from:

tampering by unauthorized third parties;

product contamination;

the presence of foreign objects, substances, chemicals and other agents; or

residues introduced during the manufacturing, packaging, storage, handling or transportation phases.
Some of the products we sell are produced for us by third parties and such third parties may not have adequate quality control standards to ensure that such products are not adulterated, misbranded, contaminated or otherwise defective. In addition, we license our brands for use on products produced and marketed by third parties, for which we receive royalties. We, as well as the manufacturers of aspartame, may
 
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be subject to claims made by consumers as a result of products manufactured by these third parties which are marketed under our brand names.
Consumption of adulterated products may cause serious health-related illnesses and we may be subject to claims or lawsuits relating to such matters. Even an inadvertent shipment of adulterated products is a violation of law and may lead to an increased risk of exposure to product liability claims, product recalls and increased scrutiny by federal and state regulatory agencies. Such claims or liabilities may not be covered by our insurance or by any rights of indemnity or contribution which we may have against third parties. In addition, even if a product liability claim is not successful or is not fully pursued, the negative publicity surrounding any assertion that our products caused illness or injury could have a material adverse effect on our reputation with existing and potential consumers and on our brand image, all of which could negatively impact our earnings and cash flows.
Our Branded CPG segment may be adversely affected by concentration in our customer base.
In 2019, our top five customers accounted for approximately 22.7% of our Branded CPG revenues.
There can be no assurance that our customers will continue to purchase our products in the same mix or quantities or on the same terms as in the past. The loss of or disruptions related to significant customers could result in a material reduction in sales or change in the mix of products we sell to a significant customer. This could materially and adversely affect our product sales, financial condition and results of operations.
Our Branded CPG segment may be adversely affected by concentration in our manufacturer and supplier base.
We currently rely upon an external manufacturer in the U.S., as well as an internal manufacturer in the Czech Republic, a number of key tollers, external manufacturers, packaging suppliers, ingredient suppliers, and 3PL (logistics) vendors globally. There are a limited number of manufacturing service suppliers, ingredient and packaging suppliers with the capability and capacity to meet our strict product requirements effectively. Failure by our external manufacturers, internal plant, ingredients or packaging suppliers to manufacture, or supply, as applicable, or our logistics vendors to transport our products, in accordance with our agreements with each supplier could result in inventory shortages. Inventory practices and redundant sourcing contingencies have been established in the event of protracted product supply interruptions; however, regulatory, manufacturing, and replenishment lead times for contingent sources could extend beyond safety stock coverage, which would have a negative impact on earnings and cash flows and impair our ability to operate our business.
Our Branded CPG segment is subject to transportation risks.
An extended interruption in our ability to ship or distribute products could have a material adverse effect on our Branded CPG segment, financial condition and results of operations. We cannot be sure that we would be able to transport or distribute our products by alternative means if it were to experience an interruption due to strike, natural disasters, epidemics or pandemics, political conflict, civil unrest or otherwise, in a timely and cost-effective manner.
Our Branded CPG segment may be adversely affected by conditions in the countries where we operate.
We operate in many countries throughout the world. Economic and political changes in the countries where we market and produce our products, such as inflation rates, recession, foreign ownership restrictions, restrictions on transfer of funds into or out of a country and similar factors may adversely affect our results of operations. The imposition of tariffs by the United States and other countries could have a material adverse effect on our Branded CPG business, financial condition and operations.
Risks Related to Our Flavors & Ingredients Segment
Our ability to reduce costs of operation and meet increasing customer requirements or preferences for compliance with global food safety initiatives (“GFSI”) depends on timely and successful completion of our factory reorganization project.
Because of changes in the volume and make-up of our Flavors & Ingredients business and the age of our Camden, New Jersey facility, we are in the process of moving certain operations from our Camden
 
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facility to our Richmond, Virginia facility and to our subsidiaries’ facilities in France and China. This will enable us to realize greater efficiencies in the manufacturing process, to reduce costs by manufacturing product at locations closer to our suppliers, and to comply with GFSI standards which are being demanded by more of our customers. Successful completion of the project depends on the ability to hire, train and retain qualified workers at the new locations, to fund equipment purchases and other investments in the facilities, and to obtain customer and other approvals. In addition, there could be significant costs and expenses incurred in connection with downsizing the Camden facility, including costs associated with the disposition of assets.
Products manufactured and sold by our Flavors & Ingredients segment are regulated within the U.S. market by the FDA and the principles of the Food Safety Modernization Act (FSMA). Changes to FDA requirements and increased requirements for the manufacture of food products are being addressed through the factory reorganization project undertaken by Mafco Worldwide. Such changes are being evaluated to allow for continued compliance with FDA manufacturing requirements. Changes to FSMA requirements beyond the current plans of the factory reorganization project may impact the marketability of our Flavors & Ingredients products or result in increased cost of our operations.
Our business is heavily dependent on sales to the worldwide tobacco industry, and negative developments and trends within the tobacco industry could have a material adverse effect on our business, financial condition and results of operations.
In 2019, approximately 46.7% of our Flavors & Ingredients sales and 18.2% of our consolidated net revenues for our Flavors & Ingredients segment were to the worldwide tobacco industry for use as tobacco flavor enhancing and moistening agents in the manufacture of American blend cigarettes, moist snuff, chewing tobacco and pipe tobacco. Negative developments and trends within the tobacco industry, such as those described below, could have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations.
The tobacco industry has been subject to increased governmental taxation and regulation and in recent years has been subject to substantial litigation. These trends are likely to continue and it is likely that these trends will negatively affect tobacco product consumption and tobacco product manufacturers.
Producers of tobacco products are subject to regulation in the United States at the federal, state and local levels, as well as in foreign countries. In 2009, the United States government enacted the Family Smoking Prevention and Tobacco Control Act, which provides greater regulatory oversight for the manufacture of tobacco products, including the ability to regulate tobacco product additives. As a result, the United States Food & Drug Administration (“FDA”) has the power to limit the type or quantity of additives that may be used in the manufacture of tobacco products in the United States. This power has been extended to include e-cigarettes and other electronic nicotine delivery systems (“ENDS”). Actions by the FDA and other federal, state or local agencies or governments may impact the acceptability of or access to tobacco products, limit consumer choice as to tobacco products, delay or prevent the launch of new or modified tobacco products, require the recall or other removal of tobacco products from the marketplace (for example, as a result of product contamination, rulemaking that bans menthol, a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence, because the FDA requires that a currently-marketed tobacco product proceed through the pre-market review process or because the FDA otherwise determines that removal is necessary for the protection of public health), restrict communications to tobacco consumers, restrict the ability to differentiate tobacco products, or otherwise significantly increase the cost of doing business, or restrict or prevent the use of specified tobacco products in certain locations or the sale of tobacco products by certain retail establishments. For example, in 2020, the FDA issued a statement effectively banning certain unauthorized ENDS products containing flavors other than tobacco or menthol which had previously constituted a significant percentage of the overall revenues of that category.
Similarly, countries outside the United States have rules restricting the use of various ingredients in tobacco products. During 2005, the World Health Organization promulgated its Framework Convention for Tobacco Control (the “FCTC”). The FCTC is the first international public health treaty and establishes a global agenda for tobacco regulation in order to limit the use of tobacco products. More than 160 countries,
 
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as well as the European Union, have become parties to the FCTC. In November 2010, the governing body of the FCTC issued guidelines that provide non-binding recommendations to restrict or ban flavorings and additives that increase the attractiveness of tobacco products and require tobacco product manufacturers to disclose ingredient information to public health authorities who would then determine whether such ingredients increase attractiveness. The European Commission and individual governments are also considering regulations to further restrict or ban various cigarette ingredients. Future tobacco product regulations may be influenced by these FCTC recommendations.
Over the years, there has been substantial litigation between tobacco product manufacturers and individuals, various governmental units and private health care providers regarding increased medical expenditures and losses allegedly caused by use of tobacco products. Some of this litigation has been settled through the payment of substantial amounts to various state governments, and United States cigarette companies significantly increased the wholesale price of cigarettes in order to recoup a portion of the settlement cost. Cigarette companies have also sought to offset the cost of these payments by changing product formulations and introducing new products with decreased ingredient costs. There may be an increase in health-related litigation against the tobacco industry, and it is possible that Mafco Worldwide, as a supplier to the tobacco industry, may become a party to such litigation. This litigation, if successful, could have a material adverse effect on our Flavors & Ingredients business.
The tobacco business, including the sale of cigarettes and smokeless tobacco, has been subject to federal, state, local and foreign excise taxes for many years. In recent years, federal, state, local and foreign governments have increased such taxes as a means of both raising revenue and discouraging the consumption of tobacco products. New proposals to increase taxes on tobacco products are also regularly introduced in the United States and foreign countries. Additional taxes may lead to an accelerated decline in tobacco product sales. Tax increases are expected to continue to have an adverse impact on sales of tobacco products through lower consumption levels.
We are unable to predict whether there will be additional price or tax increases for tobacco products or the size of any such increases, or the effect of other developments in tobacco regulation or litigation or consumer attitudes on further declines in the consumption of either tobacco products containing licorice extract or on sales of licorice extract to the tobacco industry. Further material declines in sales to the tobacco industry are likely to have a significant negative effect on the financial performance of our Flavors & Ingredients business.
Consumption of tobacco products worldwide has declined steadily for years.
Changing public attitudes toward tobacco products, an increased emphasis on the public health aspects of tobacco product consumption, increases in excise and other taxes on tobacco products and a constant expansion of tobacco regulations in a number of countries have contributed significantly to this worldwide decline in consumption. Moreover, the trend is toward increasing regulation of the tobacco industry and taxation of tobacco products. Restrictive tobacco legislation has also included restrictions on where and how tobacco may be sold and used, imposition of warning labels and other graphic packaging images and, recently, restrictions on tobacco product ingredients.
Publicly available information suggests that the annual cigarette consumption decline is between 1% to 2% on a worldwide volume basis over the last few years. Tobacco products other than cigarettes, mainly chewing tobacco and moist snuff, also contain licorice extract and consumption of these products is concentrated primarily in the United States. Domestic consumption of chewing tobacco products has declined by approximately 3% in 2018. Moist snuff consumption has increased approximately 1% in 2018 due at least in part to the shift away from cigarettes and other types of smoking and smokeless tobacco.
Changes in, or interpretations of, regulations regarding licorice or its components may reduce our sales and profits.
Our Flavors & Ingredients line of products are derived from licorice root and may contain components which are inherently natural to the raw material origin. As further research is conducted on raw materials and testing technology and capabilities increase, additional items may be identified within the natural licorice matrix which may be a source for limitation of application of our Flavors & Ingredients products.
 
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Restrictions on certain components vary worldwide, as countries, or states may have varying limits on specific components. Regulations issued by the European Chemicals Agency, the FDA, U.S. Department of Agriculture, the California Office of Environmental Health Hazard Assessment (Proposition 65) or other agencies may impact the potential markets for our Flavors & Ingredients products.
Our Flavors & Ingredients products are currently marketed as natural flavors in the U.S. and other major markets. As the definition of “natural” varies throughout the world, changes in worldwide governmental regulatory agency definitions of natural may impact the potential market for our Flavors & Ingredients products.
European Union regulators are currently evaluating the health effects of 15 ingredients, including licorice, used in tobacco products, and are scheduled to recommend in May 2021 whether the use of any of these ingredients should be reduced or eliminated in cigarettes sold in the European Union. An adverse recommendation with respect to licorice may have a negative impact on our revenues and operations in Europe, to the extent that new restrictions are imposed by the European Union or its member states on the use of licorice in tobacco products manufactured or sold in the European Union or such member states.
Competition and consolidation in the functional ingredients industry may reduce our sales and profit margins.
Our Flavors & Ingredients segment competes in a highly-competitive industry with companies that manufacture products which perform functions similar to our products and that have greater capital resources, facilities and diversity of product lines. Increased competition as to our Flavors & Ingredients products could result in decreased demand for our products, reduced volumes and/or prices, each of which would reduce our sales and margins and have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations.
Our Flavors & Ingredients customers are under pressure to reduce costs, which could cause them to reformulate their products and substitute cheaper ingredients for our Flavors & Ingredients products. In addition, the ingredients industry is undergoing consolidation, which could enable our customers to negotiate lower prices for our Flavors & Ingredients products. These customer and industry pressures may result in lower sales of our Flavors & Ingredients products and/or lower margins on our Flavors & Ingredients sales.
We are heavily dependent on certain of our customers for a significant percentage of our net revenues.
In 2019, our ten largest Flavors & Ingredients customers, six of which are manufacturers of tobacco products, accounted for approximately 58% of our net revenues. If any of these significant customers were to stop purchasing licorice products from us, it would have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations.
In 2019, one of our top European tobacco licorice extract customers, which represented approximately 4.3% of our Flavors & Ingredients revenue in 2019, informed us that it intends to materially reduce its business with us. Also, one of our top licorice derivative customers has recently adjusted the formulation of its products to exclude ingredients produced by Shanghai Mafco Biotech Co., one of our Flavors & Ingredients subsidiaries.
Many of our employees belong to labor unions, and strikes, work stoppages and other labor disturbances could adversely affect our operations and could cause our costs to increase.
Mafco Worldwide is a party to collective bargaining agreements with respect to its employees at the Camden, New Jersey and Richmond, Virginia facilities. These agreements expire in September 2021 and December 2020, respectively. Disputes with regard to the terms of these agreements or our potential inability to negotiate an acceptable contract upon expiration of the existing contracts could result in, among other things, strikes, work stoppages or other slowdowns by the affected workers. If the unionized workers were to engage in a strike, work stoppage or other slowdown, or other employees were to become unionized or the terms and conditions in future labor agreements were renegotiated, our Flavors & Ingredients business could experience a significant disruption of its operations and higher ongoing labor costs. In addition, our collective bargaining agreements and labor laws may impair our ability to reduce labor costs by streamlining
 
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existing manufacturing facilities and in restructuring our Flavors & Ingredients business because of limitations on personnel and salary changes and similar restrictions.
Changes in our relationships with our suppliers could have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations.
We operate a complex supply chain which is critical to our Flavors & Ingredients operations. In the event of disruption, the operations risk carrying inadequate supplies to meet customer demand. If we are unable to manage our supply chain efficiently, our operating costs could increase and our profit margins decrease.
Our Flavors & Ingredients business is dependent on our relationships with suppliers of licorice raw materials (which includes licorice root, intermediary licorice extract and licorice derivatives). Licorice is derived from the roots of the licorice plant, a shrub-like leguminous plant that is indigenous to the Middle East and Central Asia. The licorice raw materials we purchase originates in Afghanistan, the Peoples’ Republic of China, Pakistan, Iraq, Azerbaijan, Uzbekistan, Turkmenistan, Kazakhstan, Tajikistan, Georgia, Armenia, Russia and Turkey. During 2019, one of our suppliers of licorice raw materials supplied approximately 37% of our total licorice raw materials purchases. Mafco Worldwide has an exclusive supply arrangement with a manufacturer of licorice extract and crude derivatives in Uzbekistan. The agreement expires in October 2025 and gives Mafco Worldwide the right to purchase all of the licorice products manufactured at the facility. Mafco Worldwide agreed to purchase a certain minimum amount of licorice products each year during the term and to assist in funding the purchase of raw materials inventory to be used in manufacturing product, with the timing of such funding at Mafco Worldwide’s discretion. The price of the products is determined according to a pricing formula, taking into account the cost of raw materials and the product yield. The licorice products must meet quality specifications set forth in the agreement. Although alternative sources of licorice raw materials are available to Mafco Worldwide, Mafco Worldwide could incur higher costs if the supplier is unable to produce sufficient quantities of licorice raw materials at the quality levels required by Mafco Worldwide. In addition, operations in Uzbekistan could be disrupted for reasons beyond our supplier’s control, such as political or economic instability or changes in government policies or regulations. If any material licorice raw materials supplier modifies its relationship with Mafco Worldwide, such a loss, reduction or modification could have a material adverse effect on our Flavors & Ingredients business, results of operations and financial condition.
Fluctuations in costs of licorice root and intermediary licorice extract could have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations.
The price of licorice raw materials moderately decreased in 2019 from 2018. The price of licorice raw materials is affected by many factors, including monetary fluctuations and economic, political and weather conditions in countries where our flavors and ingredients suppliers are located. Although Mafco Worldwide often enters into purchase contracts for these products, significant or prolonged increases in the prices of licorice raw materials could have a material adverse effect on our Flavors & Ingredients business, results of operations and financial condition.
We are subject to risks associated with economic, climatic or political instability in countries in which we source licorice root and intermediary licorice extract.
We purchase licorice raw materials from suppliers in Afghanistan, the People’s Republic of China, Pakistan, Iraq, Azerbaijan, Uzbekistan, Turkmenistan, Kazakhstan, Tajikistan, Georgia, Armenia, Russia and Turkey. Producers of intermediary licorice extract are located primarily in the People’s Republic of China, Iraq and Central Asia. Our wholly-owned derivative manufacturing facilities, the primary source of our licorice derivatives, are located in the People’s Republic of China. These countries and regions have, from time to time, been subject to political instability, corruption and violence. Economic, climatic or political instability, government intervention or civil unrest in these countries and regions could result in reduced supply, material shipping delays, fluctuations in foreign currency exchange rates, customs duties, tariffs and import or export quotas, embargos, sanctions, significant increases in the cost of energy, significant raw material price increases or exposure to liability under the Foreign Corrupt Practices Act or under regulations promulgated by OFAC and could have a material adverse effect on our Flavors & Ingredients business, results
 
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of operations and financial condition. Furthermore, military action as well as continuing threats of terrorist attacks and unrest, have caused instability in the world’s financial and commercial markets and have significantly increased political and economic instability in some of the countries and regions from which our raw materials originate. Acts of terrorism and threats of armed conflicts in or around these countries and regions could adversely affect our Flavors & Ingredients business, results of operations and financial condition in ways we cannot predict at this time.
Any failure to maintain the quality of our manufacturing processes or raw materials could harm its operating results.
The manufacture of our Flavors & Ingredients products is a multi-stage process that requires the use of high-quality materials and manufacturing technologies. We are dependent on our suppliers to provide licorice raw materials meeting our quality standards. In spite of stringent quality controls, weaknesses in process control or minute impurities in materials may cause a substantial percentage of a product in a lot to be defective. If we were not able to maintain our manufacturing processes or to maintain stringent quality controls, or if contamination problems arise, the operating results of our Flavors & Ingredients business would be harmed.
Our Flavors & Ingredients segment is subject to risks related to weather, disease and pests that could adversely affect our business.
Licorice production is subject to a variety of agricultural risks. Extreme weather conditions, disease and pests can materially and adversely affect the quality and quantity of licorice produced.
We maintain large inventories of raw material stock as part of our operating plan. The stability of licorice raw materials is dependent upon the ability of the product to remain dry and free of infestation. Increased governmental restrictions on the application of pesticides or fumigants could reduce our ability to maintain long-term storage of licorice root or result in increased cost of operations.
We generally maintain a substantial inventory of licorice raw materials to mitigate against the risks of any temporary supply interruption, including an interruption due to agricultural factors, but a sustained interruption could have a material adverse effect on our Flavors & Ingredients business, results of operations and financial condition.
Our Flavors & Ingredients segment is subject to transportation risks.
An extended interruption in our ability to ship or distribute products could have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations. We cannot be sure that we would be able to transport our products by alternative means if we were to experience an interruption due to strike, natural disasters, epidemics or pandemics, political conflict, civil unrest or otherwise, in a timely and cost-effective manner.
Our failure to accurately forecast and manage inventory could result in an unexpected shortfall of our Flavors & Ingredients products, which could harm our business.
We monitor our inventory levels based on our own projections of future demand. Because of the length of the supply chain cycle and the time necessary to produce licorice products, we must make production decisions well in advance of sales. An inaccurate forecast of demand can result in the unavailability of licorice products in high demand. This unavailability may negatively impact sales volumes and adversely affect customer relationships. Furthermore, from time to time, changes in manufacturing processes or in customer demand may cause certain inventory to become obsolete or require substantial reserves.
The imposition of tariffs by the United States and other countries could have a material adverse effect on our Flavors & Ingredients business, financial condition and results of operations.
We import licorice raw materials from various countries and exports products from the U.S., France and China. The imposition of tariffs by a country from which we import goods or to which it exports goods could result in increased costs of production and higher prices and reduced demand for our Flavors & Ingredients products.
 
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Our Flavors & Ingredients business may be adversely affected by the inability to hire and retain qualified employees.
Operations of our Flavors & Ingredients segment, including the implementation of the factory reorganization project, depend on our ability to hire, train and retain qualified employees throughout our global operations. We are experiencing a general tightening of the labor market, especially in the U.S. and France, which could impair our ability to efficiently operate our business or result in increased labor costs.
Risks Related to Our Business
The ongoing novel coronavirus (COVID-19) outbreak and consequent travel and other restrictions could adversely affect our business.
In response to the ongoing coronavirus outbreak, China, the United States and other countries have implemented travel and other restrictions. If these restrictions remain in effect for an extended period of time, they could have a material impact on our financial performance and their ability to source necessary raw materials.
On March 11, 2020, as COVID-19 spread outside of China, the World Health Organization designated the outbreak as a global pandemic. This pandemic could affect our operations, major facilities, or employees’ and consumers’ health. Governments in additional nations have implemented quarantines and significant restrictions on travel as well as work restrictions that prohibit many employees from going to work. As thousands of cases have been confirmed, including in China, Europe, and the United States, we expect COVID-19 to interfere with general commercial activity related to our supply chain and customer base, which could have a material adverse effect on our business, financial condition, or results of operations.
To the extent that COVID-19 continues or worsens, governments may impose additional restrictions or additional governments may impose restrictions. The result of COVID-19 and those restrictions could result in additional businesses being shut down, additional work restrictions and supply chains being interrupted, slowed, or rendered inoperable. As a result, it may be challenging to obtain and process raw materials to support our business needs, and individuals could become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely impact our business, financial condition or results of operations. Further, if our customers’ businesses are similarly affected, they might delay or reduce purchases from us, which could adversely affect our results of our business, financial condition or results of operations.
If we fail to successfully implement our growth strategies on a timely basis, or at all, our ability to increase our revenue and operating profits could be materially and adversely affected.
Our future success depends, in large part, on our ability to implement our growth strategies effectively. However, we may not succeed in implementing our growth strategies effectively. As a multi-brand business, we face increased complexities and greater uncertainty with respect to consumer trends and demands than as a single-brand business. Our ability to successfully expand our consumer packaged goods and ingredients brands and other growth strategies depends on, among other things, our ability to identify, and successfully cater to, new demographics and consumer trends, develop new and innovative products, identify and acquire additional product lines and businesses, secure shelf space in grocery stores, wholesale clubs and other retailers, increase consumer awareness of our brands, enter into distribution and other strategic arrangements with third-party retailers and other potential distributors of our products, and compete with numerous other companies and products. We may not be successful in reaching and maintaining the loyalty of new consumers to the same extent, or at all, as we have with our historical consumers. If we are unable to identify and capture new audiences and demographics, our ability to successfully integrate additional brands will be adversely affected. Accordingly, we may not be able to successfully implement our growth strategies, expand our brands, or continue to maintain growth in our sales at our current rate, or at all. If we fail to implement our growth strategies or if we invest resources in growth strategies that ultimately prove unsuccessful, our sales and profitability may be negatively affected, which would materially and adversely affect our business, financial condition and results of operations.
 
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Changes in consumer preferences could decrease our revenues and cash flow.
We are subject to the risks of evolving consumer preferences and nutritional and health-related concerns. To the extent that consumer preferences evolve away from low-calorie tabletop sweeteners, there will be a decreased demand for our Branded CPG products. Consumer perception that there are low-calorie tabletop sweetener alternatives that are healthier or more natural could decrease demand for such products. Any shift in consumer preferences away from our Branded CPG products, including any shift in preferences from aspartame-based products or stevia-based products to other low-calorie tabletop sweetener products could significantly decrease our revenues and cash flows and impair our ability to operate our Branded CPG business segment.
A portion of our Flavors & Ingredients revenues are derived from the sale of licorice to worldwide confectioners. To the extent that consumer preferences shift away from licorice-flavored candy, operating results relating to the sale of licorice to worldwide confectioners could be impaired, which could have a material adverse effect on our business, financial condition and results of operations. In addition, a portion of our revenues are derived from the sale of licorice derivatives to food processors for use as flavoring or masking agents, including our Magnasweet® brand products, which are used in various brands of chewing gum, lip balm, energy bars, non-carbonated beverages, chewable vitamins, aspirin, and other products and can be identified in the United States as a natural flavor. To the extent that consumer preferences evolve away from products that use licorice derivatives, operating results relating to the sale of licorice derivatives could be impaired, which could have a material adverse effect on our business, financial condition and results of operations.
Negative information, including inaccurate information, about us on social media may harm our reputation and brand, which could have a material and adverse effect on our business, financial condition and results of operations.
There has been a marked increase in the use of social media platforms and similar channels that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate, as is its effect. Many social media platforms immediately publish the content their subscribers and participants post, often without filters or checks on accuracy of the content posted. The opportunity for dissemination of information, including inaccurate information, is potentially limitless. Information concerning our business and/or products may be posted on such platforms at any time. Negative views regarding our products and the efficacy of our products have been posted on various social media platforms, may continue to be posted in the future, and are out of our control. Regardless of their accuracy or authenticity, such information and views may be adverse to our interests and may harm our reputation and brand. The harm may be immediate without affording an opportunity for redress or correction. Ultimately, the risks associated with any such negative publicity cannot be eliminated or completely mitigated and may materially and adversely affect our business, financial condition and results of operations.
The United Kingdom’s withdrawal from the European Union could have an adverse impact on our business, financial condition, operating results and cash flows.
On January 31, 2020, the United Kingdom (“U.K.”) withdrew from the European Union (“E.U.”), commonly referred to as “Brexit.” The U.K. and E.U. agreed to participate in a transition period (the “transition period”), due to expire on December 31, 2020, to negotiate a trade agreement and other aspects of their future relationship. Following the transition period, the U.K. will no longer be a part of the single market and customs union of the E.U. Currently the relationship between the U.K. and E.U. following the transition period is unknown.
We have operations in the U.K. related to our Branded CPG segment. Changes resulting from Brexit could subject our Branded CPG segment to increased risk, including changes in regulatory oversight, disruptions to supply, increases in prices, fees, taxes or tariffs on goods that are sold between the E.U. and the U.K. and difficulty staffing.
During the transition period, free trade will continue between the U.K. and E.U. without checks or extra charges. We do not know if the U.K. and E.U. will succeed in negotiating a new trade agreement by
 
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the end of the transition period, or what the terms of any such agreement may be. Changes in trade regulations between the U.K. and E.U. may result in extra charges, inspections or barriers on goods sold between the U.K. and E.U.
Brexit may cause fluctuations in the value of the U.K. pound sterling and E.U. euro. Fluctuations in exchange rates between the U.S. dollar and foreign currencies may adversely affect our expenses, earnings, cash flows, results of operations, and revenues.
Our international operations involve the use of foreign currencies, which subjects us to exchange rate fluctuations and other currency risks.
The revenues and expenses of our international operations generally are denominated in local currencies, which subject us to exchange rate fluctuations between such local currencies and the U.S. dollar. These exchange rate fluctuations subject us to currency translation risk with respect to the reported results of our international operations, as well as to other risks sometimes associated with international operations. In the future, we could experience fluctuations in financial results from our operations outside of the United States, and there can be no assurance we will be able, contractually or otherwise, to reduce the currency risks associated with our international operations.
Inability to protect our trademarks and other proprietary rights could damage our competitive position.
Any infringement or misappropriation of our intellectual property could damage its value and limit our ability to compete. We rely on copyrights, trademarks, trade secrets, confidentiality provisions and licensing arrangements to establish and protect our intellectual property. We may have to engage in litigation to protect our rights to our intellectual property, which could result in significant litigation costs and require significant amounts of management’s time.
We do not own any issued patents relating to any of our products, but we do have a number of patent applications currently pending. Certain naturally occurring materials may not, themselves, be eligible for patent protection.
If other parties infringe on our intellectual property rights, the value of our brands in the marketplace may be diluted. In addition, any infringement of our intellectual property rights would likely result in a commitment of our time and resources to protect these rights through litigation or otherwise. One or more adverse judgments with respect to these intellectual property rights could negatively impact our ability to compete and could adversely affect our results of operations and financial condition.
We believe that the formulas and blends for our products are trade secrets. We rely on security procedures and confidentiality agreements to protect this proprietary information; however, such agreements and security procedures may be insufficient to keep others from acquiring this information. Any such dissemination or misappropriation of this information could deprive us of the value of our proprietary information.
Further, the laws of some countries do not protect proprietary rights to the same extent as the laws of the United States, and mechanisms for enforcement of intellectual property rights in some foreign countries may be inadequate. To the extent we expand our international activities, our exposure to unauthorized copying and use of our technologies and proprietary information may increase. Accordingly, despite our efforts, we may be unable to prevent third parties from infringing upon, misappropriating or otherwise violating our technology and intellectual property.
If we fail to comply with the many laws applicable to our business, we may incur significant fines and penalties.
Our facilities and products are subject to laws and regulations administered by the Federal Food and Drug Administration, and other federal, state, local, and foreign governmental agencies relating to the processing, packaging, storage, distribution, advertising, labeling, quality, and safety of food products. Our failure to comply with applicable laws and regulations could subject us to administrative penalties and injunctive relief, civil remedies, including fines, injunctions and recalls of our products. Our operations are also subject to regulations administered by the Environmental Protection Agency and other state, local and foreign governmental agencies. Failure to comply with these regulations can have serious consequences, including civil and administrative penalties and negative publicity. Any environmental or health and safety
 
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legislation or regulations enacted in the future, or any changes in how existing or future laws or regulations are enforced, administered or interpreted, as well as any material cost incurred in connections with liabilities or claims from these regulations may lead to an increase in costs, which could have a material adverse effect on our business, our consolidated financial conditions, results of operations and/or liquidity.
Personal data, including personal data of our customers and employees, is increasingly subject to legal and regulatory protections around the world, which vary widely in approach. We risk exposure to potential liabilities and costs resulting from the compliance with, or any failure to comply with, applicable legal requirements. Our business could be materially adversely affected by our inability, or the inability of our vendors who receive personal data from us, to comply with legal obligations regarding the use of personal data.
In addition to the possible fines and penalties discussed above, changes in laws and regulations in domestic and foreign jurisdictions, including changes in food and drug laws, accounting standards, taxation requirements (including tax rate changes, new tax laws and revised tax law interpretations) and environmental laws could have a significant adverse effect on our results of operations.
The countries in which we operate and from which we purchase raw materials could result in exposure to liability under the Foreign Corrupt Practices Act or under regulations promulgated by the U.S. Treasury’s Office of Foreign Assets Control (OFAC). Our failure to comply with applicable laws and regulations could subject us to administrative penalties and injunctive relief, civil remedies, including fines, injunctions and product recalls. The complexity of the many laws and regulations applicable to our business and the cost of compliance increases our costs of operations compared to some foreign competitors which are subject to less regulation.
There is no assurance that our senior management team or other key employees will remain with us.
We believe that our ability to successfully implement our business strategy and to operate profitably depends on the continued employment of our senior management team and other key employees. If members of the management team or other key employees become unable or unwilling to continue in their present positions, the operation of our business would be disrupted and we may not be able to replace their skills and leadership in a timely manner to continue our operations as currently anticipated.
Any acquisitions, partnerships or joint ventures that we enter into could disrupt our operations and have a material adverse effect on our business, financial condition and results of operations.
From time to time, we may evaluate potential strategic acquisitions of businesses, including partnerships or joint ventures with third parties. We may not be successful in identifying acquisition, partnership and joint venture candidates. In addition, we may not be able to continue the operational success of such businesses or successfully finance or integrate any businesses that we acquire or with which we form a partnership or joint venture. We may have potential write-offs of acquired assets and/or an impairment of any goodwill recorded as a result of acquisitions. Furthermore, the integration of any acquisition may divert management’s time and resources from our core business and disrupt our operations or may result in conflicts with our business. Any acquisition, partnership or joint venture may not be successful, may reduce our cash reserves, may negatively affect our earnings and financial performance and, to the extent financed with the proceeds of debt, may increase our indebtedness. We cannot ensure that any acquisition, partnership or joint venture we make will not have a material adverse effect on our business, financial condition and results of operations.
We could fail to maintain effective internal control over financial reporting.
The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting. Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations. These limitations include, among others, the possibility of human error, inadequacy or circumvention of controls and fraud. If we do not maintain effective internal control over financial reporting or design and implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, including in connection
 
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with controls executed for us by third parties, we might fail to timely detect any misappropriation of corporate assets or inappropriate allocation or use of funds and could be unable to file accurate financial reports on a timely basis. As a result, our reputation, results of operations and stock price could be materially adversely affected.
We may become involved in litigation that may materially adversely affect us.
From time to time, we may become involved in various legal proceedings relating to matters incidental to the ordinary course of our business, including intellectual property, commercial, product liability, employment, class action, whistleblower and other litigation and claims, and governmental and other regulatory investigations and proceedings. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liability or require us to change our business practices. Because of the potential risks, expenses and uncertainties of litigation, we may, from time to time, settle disputes, even where we believe that we have meritorious claims or defenses. Because litigation is inherently unpredictable, we cannot give any assurance that the results of any of these actions will not have a material adverse effect on our business.
Changes in tax laws or regulations may increase tax uncertainty and adversely affect results of our operations and our effective tax rate.
We will be subject to taxes in the United States and certain foreign jurisdictions. Due to economic and political conditions, tax rates in various jurisdictions, including the United States, may be subject to change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws or their interpretation. In addition, we may be subject to income tax audits by various tax jurisdictions. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles, an adverse resolution by one or more taxing authorities could have a material impact on the results of our operations.
Recent U.S. tax legislation could adversely affect our business and financial condition.
Legislation enacted in December 2017 significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate, limiting interest deductions, permitting immediate expensing of certain capital expenditures, adopting elements of a territorial tax system, imposing a one-time transition tax, or repatriation tax, on all undistributed earnings and profits of certain U.S.-owned foreign corporations, revising the rules governing net operating losses and the rules governing foreign tax credits, and introducing new anti-base erosion provisions. Notwithstanding the reduction in the corporate income tax rate, the overall impact of this tax reform or of any future administrative guidance interpreting the provisions thereof is uncertain, and our business and financial condition could be adversely affected.
We may have exposure for historic tax liabilities.
As a result of our acquisition of Merisant and MAFCO through the Business Combination, we inherited the historic liabilities of Merisant and MAFCO including their historic tax liabilities. Therefore, to the extent that there is any liability for historic tax exposure of any of the companies acquired through the Business Combination, this exposure can impact the value of our securities. Such exposure could also impact our tax liability for future years. As a part of the Business Combination we have negotiated certain indemnities for historic tax liabilities, however, these indemnities do not cover all potential historical tax liabilities.
Our tax position may differ from that of MacAndrews
As a result of Merisant and MAFCO being purchased as a carve out of the continuing businesses of MacAndrews and Forbes Incorporated (“MacAndrews”), it is possible that our overall tax position as a result of owning Merisant and MAFCO on a stand-alone basis will differ from the overall historical tax position of MacAndrews as a result of owning Merisant and MAFCO in past years.
 
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We face risks associated with our defined benefit pension plan obligations.
We maintain a defined benefit pension plan that covers approximately 12.5% of our employees which was frozen as of December 31, 2019. While the risk could be minimized for a frozen defined benefit pension plan, a deterioration in the value of plan assets resulting from poor market performance, a general financial downturn or otherwise could cause an increase in the amount of contributions we are required to make to the plan. For example, our defined benefit pension plan may from time to time move from an overfunded to underfunded status driven by decreases in plan asset values that may result from changes in long-term interest rates and disruptions in U.S. or global financial markets. Additionally, historically low interest rates coupled with poor market performance would have the effect of decreasing the funded status of the plan which would result in greater required contributions.
We may be exposed to the threat of cyber-attacks and/or data breaches.
Cybersecurity breaches of our or third-party systems, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks such as hacking, phishing attacks, computer viruses, ransomware or malware, employee or insider error, malfeasance, social engineering, physical breaches or other actions may cause confidential information belonging to us or our employees, customers, consumers, partners, suppliers, or governmental or regulatory authorities to be misused or breached. When risks such as these materialize, the need for us to coordinate with various third-party service providers and for third party service providers to coordinate amongst themselves might increase challenges and costs to resolve related issues.
Cyber-attacks can vary in scope and intent from economically driven attacks to malicious attacks targeting our key operating systems with the intent to disrupt, disable or otherwise cripple our Branded CPG and Flavors & Ingredients segments. This can include any combination of phishing attacks, malware and/or viruses targeted at our key systems. The breadth and scope of this threat has grown over time, and the techniques and sophistication used to conduct cyber-attacks, as well as the sources and targets of the attacks, change frequently. While we invest time, effort and capital resources to secure our key systems and networks, we cannot provide assurance that we will be successful in preventing or responding to all such attacks.
A successful cyber-attack may target us directly, or may be the result of a third party’s inadequate care. In either scenario, we may suffer damage to our key systems and/or data that could interrupt our operations, adversely impact our reputation and brands and expose us to increased risks of governmental investigation, litigation and other liability, any of which could adversely affect our business. Furthermore, responding to such an attack and mitigating the risk of future attacks could result in additional operating and capital costs in systems technology, personnel, monitoring and other investments.
Risks Related to Our Capital Structure
Our substantial indebtedness could adversely affect our financial condition.
In connection with the Business Combination, on June 25, 2020, we entered to into a senior secured credit facility consisting of (x) a term loan facility of up to $140,000,000 and (y) a revolving loan facility of up to $50,000,000, each maturing in five years. Loans outstanding under these credit facilities are expected to accrue interest at a rate per annum equal to LIBOR, with a LIBOR floor of 1.00%, plus a margin ranging from 3.00% to 3.75%, or, at our option, a 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 2.00%, in each case plus an applicable margin between 2.00% and 2.75%, with the margin in each case depending on the achievement of certain leverage ratios, and undrawn amounts under the first lien revolving loan 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 a step down to 0.30% upon achievement of certain leverage ratios. Principal payments on the first lien term loan facility will be due quarterly, in amounts expected to be equal to (i) 1.25% per annum of the original principal amount of the first lien term loan facility during the first, second and third years after the closing date of the credit facilities and (ii) 2.50% per annum of the original principal amount of the first lien term loan facility during the fourth and fifth years after the closing date of the credit facilities.
 
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Our substantial indebtedness could:

require us to dedicate a substantial portion of cash flow from operations to payments in respect of our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, potential acquisition opportunities, a level of marketing necessary to maintain the current level of sales and other general corporate purposes;

increase the amount of interest that we have to pay, because some of our borrowings are at variable rates of interest, which will result in higher interest payments if interest rates increase, and, if and when we are required to refinance any of our indebtedness, an increase in interest rates would also result in higher interest costs;

increase our vulnerability to adverse general economic or industry conditions;

require refinancing, which we may not be able to do on reasonable terms;

limit our flexibility in planning for, or reacting to, competition and/or changes in our business or the industry in which we operate;

limit our ability to borrow additional funds;

restrict us from making strategic acquisitions or necessary divestitures, introducing new brands and/or products or exploiting business opportunities; and

place us at a competitive disadvantage compared to our competitors that have less debt and/or more financial resources.
We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions to satisfy our obligations under our indebtedness that may not be successful.
Our ability to pay principal and interest on our debt obligations will depend upon, among other things, (a) our future financial and operating performance (including the realization of any cost savings described herein), which will be affected by prevailing economic, industry and competitive conditions and financial, business, legislative, regulatory and other factors, many of which are beyond our control; and (b) our future ability to borrow under our revolving credit facility, the availability of which depends on, among other things, our complying with the covenants in the credit agreement governing such facility.
We cannot assure you that our business will generate cash flow from operations, or that we will be able to draw under our revolving credit facility or otherwise, in an amount sufficient to fund our liquidity needs, including the payment of principal and interest on our debt. If our cash flows and capital resources are insufficient to service our indebtedness, we may be forced to reduce or delay capital expenditures, sell assets, seek additional capital, or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. In addition, the terms of existing or future debt agreements may restrict us from adopting some of these alternatives. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. We may not be able to consummate those dispositions for fair market value or at all. Furthermore, any proceeds that we could realize from any such dispositions may not be adequate to meet our debt service obligations then due. Our inability to generate sufficient cash flow to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms or at all, could have a material adverse effect on our business, results of operations, and financial condition, and could negatively impact our ability to satisfy our debt obligations.
Our indebtedness could adversely affect our financial condition and ability to conduct our operations, and we may incur additional debt
The total indebtedness under the new credit facility may be equal to $190,000,000 (including an undrawn revolving credit facility of $50,000,000 at the date of closing). Our debt level and the terms of our financing arrangements could adversely affect our financial condition and limit our ability to successfully
 
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implement our growth strategies. In addition, under our credit facilities, certain of our direct subsidiaries granted the lenders a security interest in substantially all of their assets. We are permitted, under the terms of our credit facilities, to incur additional indebtedness, both under our credit facilities and otherwise. If such additional indebtedness is incurred, we may exacerbate the risks of our indebtedness described herein.
Our ability to meet our debt service obligations will depend on our future performance, which will be affected by the other risk factors described herein. If we do not generate enough cash flow to pay our debt service obligations, we may be required to refinance all or part of our existing debt, sell assets, borrow more money or raise equity. We may not be able to take any of these actions on a timely basis, on satisfactory terms, or at all.
Our credit facilities contain financial and other covenants. The failure to comply with such covenants could have an adverse effect.
Our credit facilities as contemplated by the credit facilities documents contain certain financial and other covenants, including a maximum consolidated total net leverage ratio equal to or less than 4.00:1.00 and a minimum fixed charge coverage ratio equal to or greater than 1.25:1.00, and limitations on our and our subsidiaries’ ability to, among other things, incur additional indebtedness and make guarantees; incur liens on assets; engage in mergers or consolidations, dissolutions or other fundamental changes; sell assets; pay dividends and distributions or other restricted payments or repurchase stock; make investments, loans and advances, including acquisitions; amend organizational documents or other material agreements; enter into certain agreements that would restrict our and our subsidiaries’ ability to pay dividends; repay certain junior, unsecured or subordinated indebtedness; issue certain equity; engage in certain activities; and engage in certain transactions with affiliates, in each case, subject to customary exceptions materially consistent with credit facilities of such type and size. Any failure to comply with the restrictions of our credit facilities may result in an event of default under the credit facilities. Our contemplated credit facilities bear interest at variable rates. If market interest rates increase, variable rate debt will create higher debt service requirements, which could adversely affect our cash flow.
Risks Related to Ownership of Our Securities
The price of our common stock and warrants and may be volatile.
The trading price of our common stock as well as our warrants may fluctuate due to a variety of factors, including:

changes in the industries in which we and our customers operate;

developments involving our competitors;

variations in our operating performance and the performance of our competitors in general;

actual or anticipated fluctuations in our quarterly or annual operating results;

publication of research reports by securities analysts about us or our competitors or our industry;

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

additions and departures of key personnel;

changes in laws and regulations affecting our business;

commencement of, or involvement in, litigation involving the combined company;

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

the volume of shares of our common stock available for public sale; and

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations, corruption, political instability and acts of war or terrorism.
 
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These market and industry factors may materially reduce the market price of our common stock and warrants regardless of our operating performance, including the Merisant and MAFCO businesses acquired in the Business Combination.
In the past, securities class-action litigation has often been instituted against companies following periods of volatility in the market price of their shares. This type of litigation could result in substantial costs and divert our management’s attention and resources, which could have a material adverse effect on us.
The Sponsor and the PIPE Investors own a significant portion of our common stock and have representation on our board of directors; the Sponsor and the PIPE Investors may have interests that differ from those of other stockholders
Approximately 11.7% of our outstanding shares of common stock are beneficially owned by the Sponsor, and approximately 27.8% of our common stock (including common stock underlying warrants) is beneficially owned by certain investors that, in connection with the Business Combination entered into subscription agreements pursuant to which, among other things, such investors agreed to subscribe for and purchase, and we agreed to issue and sell to such investors, 7,500,000 shares of our common stock and 5,263,500 private placement warrants exercisable for 2,631,750 shares of our common stock for gross proceeds of approximately $75 million (the “PIPE Financing”), in each case, prior to giving effect to the exercise of warrants. These levels of ownership interest include (i) those securities issued in connection with the PIPE Financing, (ii) any other securities held by the PIPE Investors and (iii) shares issuable upon exercise of the warrants. In addition, one of our directors was designated by a PIPE Investor and two of directors are affiliated with the Sponsor. As a result, the Sponsor and the PIPE Investors may be able to significantly influence the outcome of matters submitted for director action, subject to our directors’ obligation to act in the interest of all of our stockholders, and for stockholder action, including the designation and appointment of our board of directors (and committees thereof) and approval of significant corporate transactions, including business combinations, consolidations and mergers. The influence of the Sponsor and the PIPE Investors over our management could have the effect of delaying or preventing a change in control or otherwise discouraging a potential acquirer from attempting to obtain control of us, which could cause the market price of our securities to decline or prevent our stockholders from realizing a premium over the market price for our securities.
If securities or industry analysts do not publish research or reports about our business, or they publish inaccurate or unfavorable reports about our business, the price of our securities and trading volume could decline.
The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish about us or our business, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares of common stock or warrants or change their opinion of our common stock or warrants, our common stock or warrant price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our common stock or warrant price or trading volume to decline.
Future issuances of debt securities and/or equity securities may adversely affect us, including the market price of our securities, and may be dilutive to our existing security holders
In the future, we may incur debt and/or issue equity ranking senior to our common stock. Those securities will generally have priority upon liquidation. Such securities also may be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock. Because our decision to issue debt and/or equity in the future will depend, in part, on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, nature or success of our future capital raising efforts. As a result, future capital raising efforts may reduce the market price of our common stock and be dilutive to our existing security holders.
 
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Risks Related to the Business Combination
We may be exposed to unknown or contingent liabilities and may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.
We cannot assure you that the due diligence conducted in relation to Merisant and MAFCO identified all material issues or risks associated with the Branded CPG or Flavors & Ingredients business or the industry in which they compete. Furthermore, we cannot assure you that factors outside of our control will not later arise. As a result of these factors, we may be exposed to liabilities and incur additional costs and expenses and we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in us reporting losses. Even if our due diligence had identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. If any of these risks materialize, this could have a material adverse effect on our financial condition and results of operations and could contribute to negative market perceptions about us or our securities.
The historical financial results of Merisant and MAFCO and unaudited pro forma financial information included elsewhere in this prospectus may not be indicative of what our actual financial position or results of operations would have been.
The historical financial results of Merisant and MAFCO included in this prospectus do not reflect the financial condition, results of operations or cash flows they would have achieved as a standalone company during the periods presented or those we will achieve in the future. For example, we will incur additional ongoing costs as a result of the Business Combination, including costs related to public company reporting, investor relations and compliance with the Sarbanes-Oxley Act. Therefore, it may be difficult for investors to compare our future results to historical results or to evaluate our relative performance or trends in our business segments.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements (including within the meaning of the Private Securities Litigation Reform Act of 1995) 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 various risks and uncertainties, many of which are outside our control. Therefore, you should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, the following:

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 our 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;

our public securities’ potential liquidity and trading;

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 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 continue to use, maintain, enforce, protect and defend our owned and licensed intellectual property, including the Whole Earth® brand; and

other factors detailed under the section entitled “Risk Factors.”
 
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USE OF PROCEEDS
All of the common stock and warrants offered by the selling security holders pursuant to this prospectus will be sold by the selling security holders for their respective accounts. We will not receive any of the proceeds from these sales.
The selling security holders will pay any underwriting fees, discounts, selling commissions, stock transfer taxes and certain legal expenses incurred by such selling security holders in disposing of their common stock, and we will bear all other costs, fees and expenses incurred in effecting the registration of the common stock covered by this prospectus, including, without limitation, all registration and filing fees, Nasdaq listing fees and fees and expenses of our counsel and our independent registered public accountants.
We will receive the proceeds from the exercise of the warrants, but not from the sale of the common stock issuable upon such exercise.
 
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DETERMINATION OF OFFERING PRICE
Our common stock and warrants are listed on Nasdaq under the symbols “FREE” and “FREEW,” respectively. The actual offering price by the selling security holders of the shares of common stock and warrants covered by this prospectus will be determined by prevailing market prices at the time of sale, by private transactions negotiated by the selling security holders or as otherwise described in the section entitled “Plan of Distribution.”
 
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MARKET PRICE OF COMMON STOCK AND DIVIDENDS
Market Price of Our Common Stock
Our common stock and warrants are currently listed on Nasdaq under the symbols “FREE,” and “FREEW,” respectively.
On July 23, 2020, the closing price of our common stock was $7.88 per share. As of July 24, 2020, there were 38,426,669 shares of our common stock outstanding, held of record by 13 holders. The number of record holders of our common stock does not include DTC participants or beneficial owners holding shares through nominee names.
Dividend Policy
We have not paid any cash dividends to date. Our board of directors (our “board”) intends to evaluate adopting a policy of paying cash dividends. In evaluating any dividend policy, our board may consider our financial condition and results of operations, certain tax considerations, capital requirements, alternative uses for capital, industry standards and economic conditions. Whether we adopt such a dividend policy and the frequency and amount of any dividends declared will be within the discretion of our board.
 
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
On June 25, 2020, Whole Earth Brands, Inc. (f/k/a Act II Global Acquisition Corp. (“Act II”)) and 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 II, the “Sellers”), announced the consummation of the transactions contemplated by that certain Purchase Agreement entered into as of December 19, 2019, which was subsequently amended on each of February 12, 2020, May 8, 2020, and June 15, 2020 (as amended, the “Purchase Agreement,” and the transactions contemplated therein, the “Business Combination”), by and among Act II, the Sellers and for the purposes of Amendments No. 2 and 3 to the Purchase Agreement, Project Taste Intermediate LLC (as amended or supplemented from time to time, the “Purchase Agreement”). In connection with the closing of the Business Combination, the registrant changed its name from “Act II Global Acquisition Corp.” to “Whole Earth Brands, Inc.” (the “Company”).
Refer to the definitive proxy statement/prospectus filed by Act II on May 13, 2020 (the “Proxy Statement/Prospectus”) and the supplement thereto filed by Act II on June 18, 2020 (the “Supplement”), for further details, including capitalized terms not otherwise defined in the Current Report on Form 8-K12B to which the unaudited pro forma condensed combined financial information is incorporated.
The unaudited pro forma condensed combined income statement for the year ended December 31, 2019 was derived from Merisant and MAFCO’s audited combined income statement for the year ended December 31, 2019 and Act II’s audited income statement for the year ended December 31, 2019. The unaudited pro forma condensed combined balance sheet and income statement as of and for the three months ended March 31, 2020 were derived from Merisant and MAFCO’s unaudited condensed combined financial statements as of and for the three months ended March 31, 2020 and Act II’s unaudited condensed financial statements as of and for the three months ended March 31, 2020.
The unaudited pro forma condensed combined income statements for the year ended December 31, 2019 and for the three months ended March 31, 2020 give pro forma effect to the Business Combination as if it had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of March 31, 2020 gives effect to the Business Combination as if it was completed on March 31, 2020.
This information should be read together with Merisant and MAFCO’s and Act II’s respective financial statements and the related notes, “Act II’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Merisant and MAFCO’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in the Supplement in the appendices titled “Act II’s Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Three Months Ended March 31, 2020 and 2019,” “Merisant and MAFCO’s Management’s Discussion and Analysis for the Three Months Ended March 31, 2020 and 2019,” and the other financial information included elsewhere in the Proxy Statement/Prospectus and Supplement.
The unaudited pro forma condensed combined financial statements give effect to the Business Combination in accordance with the acquisition method of accounting for business combinations, with the Company deemed to be the accounting acquirer because, among other reasons:

cash consideration was transferred from the Company to the Sellers; and

the Company’s public shareholders, PIPE Investors and the Sponsor, own, in the aggregate, 89.85% of the shares of Whole Earth Brands, Inc. common stock, which represents a controlling interest in Whole Earth Brands, Inc., immediately after giving effect to the Business Combination.
The unaudited pro forma condensed combined financial statements reflect adjustments to the historical financial information that are expected to have a continuing impact on the results of the combined company, factually supportable and directly attributable to the following events and transactions:

the Business Combination;

the payment of the cash consideration to the Sellers;

the closing of the Private Placement;
 
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the conversion of each Act II Class A Share into one fully paid and non-assessable share of Whole Earth Brands, Inc. common stock;

each Act II public warrant becoming exercisable for one-half of one share of Whole Earth Brands, Inc. common stock, on the same terms and conditions as those applicable to the Act II public warrants (after giving effect to the Warrant Amendment);

the cancellation of 3,000,000 of Act II Class B Shares, and the remaining 4,500,000 Act II Class B Shares being converted into 4,500,000 shares of Whole Earth Brands, Inc. common stock; and

the redemption of 3,573,331 Act II Class A Shares by Act II’s public shareholders, in accordance with Act II’s Cayman Constitutional Documents.
Act II provided its public shareholders with the opportunity to redeem, upon the closing of the Business Combination, each Act II Class A Share then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of June 22, 2020, two business days prior to the Shareholders Meeting) in the trust account, which held the proceeds (including interest, net of taxes payable) of the Act II IPO.
Based on funds in the trust account of $305,363,912.64 as of June 22, 2020, the per share redemption price was approximately $10.179.
 
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PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Three Months Ended March 31, 2020
(Dollars in thousands, except per share amounts)
COMBINED
MERISANT/
MAFCO
ACT II
ADJUSTMENTS
DEBIT (CREDIT)
ADJ. #
PRO FORMA
Product revenues
$ 66,000 $ 66,000
Cost of goods sold
39,900 39,900
GROSS PROFIT
26,100 26,100
Selling, general & administrative expenses .
15,900 $ 575 $ 290 g 16,765
Restructuring and other non-recurring expenses
400 400
Asset impairment charges
40,600 $ (40,600) f
Amortization of intangibles
2,500 (98) a 2,402
OPERATING INCOME (LOSS)
(33,300) (575) (40,408) 6,533
Interest expense on bank debt
1,976 c 1,976
Interest (income)
(754) 754 b
Other (income) expense, net
(1,700) (1,700)
INCOME (LOSS) BEFORE INCOME TAXES
(31,600) 179 (37,678) 6,257
(Benefit) provision for income taxes
(3,100) 4,414 d 1,314
NET INCOME (LOSS)
$ (28,500) $ 179 $ (33,264) $ 4,943
(Loss) Earnings Per Share:
HISTORICAL
PRO FORMA
Weighted Average number of shares
8,997,643(1) 38,426,669
Basic and diluted
$ (0.06)(2) $ 0.13
(1)
Excludes an aggregate of 28,449,516 shares subject to possible redemption at March 31, 2020.
(2)
Net loss per share — basic and diluted excludes income attributable to shares subject to possible redemption of $715,207 for the three months ended March 31, 2020.
(3)
See “Notes to Unaudited Pro Forma Condensed Combined Financial Information” for description of adjustments.
 
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PRO FORMA CONDENSED COMBINED INCOME STATEMENT
For the Year Ended December 31, 2019
(Dollars in thousands, except per share amounts)
COMBINED
MERISANT/
MAFCO
ACT II
ADJUSTMENTS
DEBIT (CREDIT)
ADJ. #
PRO FORMA
Product revenues
$ 272,200 $ 272,200
Cost of goods sold
163,600 163,600
GROSS PROFIT
108,600 108,600
Selling, general & administrative expenses
65,900 $ 351 $ 1,160 g 67,411
Restructuring and other non-recurring expenses
2,200 2,200
Amortization of intangibles
10,700 (1,090) a 9,610
OPERATING INCOME
29,800 (351) (70) 29,379
Interest expense on bank debt
7,903 c 7,903
Interest income
(4,255) 4,255 b 0
Unrealized gain on Trust Account investments
(28) 28 b 0
Other expense, net
1,400 1,400
INCOME BEFORE INCOME TAXES
28,400 3,932 12,256 20,076
(Benefit) provision for incomes taxes
(2,500) 6,716 d 4,216
NET INCOME
$ 30,900 $ 3,932 $ 18,972 $ 15,860
(Loss) Earnings Per Share:
HISTORICAL
PRO FORMA
Weighted Average number of shares
8,410,915(1) 38,426,669
Basic and diluted
$ (0.02)(2) $ 0.41
(1)
Excludes an aggregate of 28,502,357 shares subject to possible redemption at December 31, 2019.
(2)
Net loss per share — basic and diluted excludes income attributable to shares subject to possible redemption of $4,069,302 for the year ended December 31, 2019.
(3)
See “Notes to Unaudited Pro Forma Condensed Combined Financial Information” for description of adjustments.
 
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PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 31, 2020
(Dollars in thousands, except per share data)
(Unaudited)
Combined
Merisant/MAFCO
Act II
Adjustments
Adj #
Pro Forma
ASSETS
Current Assets
Cash and cash equivalents
$ 10,500 $ 583 $ 42,571 a $ 53,654
Accounts receivable – net
53,100 53,100
Inventories
116,400 116,400
Prepaid expenses and other current assets
6,800 104 1,678 k 8,582
TOTAL CURRENT ASSETS
186,800 687 44,249 231,736
Marketable securities held in Trust Account
305,037 (305,037) a 0
Property, plant and equipment – net
20,200 20,200
Right of use asset
267 267
Goodwill
113,100 (63,363) c 49,737
Other intangible assets – net
225,900 2,800 b 228,700
Other assets
3,700 38 3,738
TOTAL ASSETS
$ 549,700 $ 306,029 $ (321,351) $ 534,378
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable
$ 27,200 $ 195 $ 27,395
Current portion of bank debt
$ 5,250 c 5,250
Operating lease liability
217 217
Accrued expenses and other current liabilities
21,600 21,600
TOTAL CURRENT LIABILITIES
48,800 412 5,250 54,462
Bank debt, net of current portion
127,611 c 127,611
Operating lease liability, net of current portion
65 65
Deferred underwriting fee payable
11,280 (11,280) e 0
Due to related party
6,900 (6,900) j 0
Deferred tax liabilities, net
30,900
Other liabilities
18,100 (5,900) j 12,200
TOTAL LIABILITIES
104,700 11,757 108,781 225,238
Ordinary shares subject to redemption
289,272 (289,272) f
Net parent investment
445,000 (445,000) g
Class A ordinary Shares, $0.0001 par value;
200,000,000 shares authorized; 1,550,484 shares
issued and outstanding (excluding 28,449,516
shares subject to possible redemption) historically
and 38,426,669 shares proforma
3 3
Class B ordinary shares, $0.0001 par value; 200,000,000 shares authorized; 7,500,000 shares issued and outstanding historically and none pro forma
1 (1) 0
Additional capital
888 316,686 i 317,574
Retained earnings
4,111 (12,548) d (8,437)
TOTAL SHAREHOLDERS’ EQUITY
445,000 5,000 (140,860) 309,140
TOTAL LIABILITIES AND EQUITY
$ 549,700 $ 306,029 $ (321,351) $ 534,378
 
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Notes to Unaudited Pro Forma Condensed Combined Financial Information
1.   Basis of Pro Forma Presentation
Overview
The unaudited pro forma condensed combined financial statements have been prepared assuming the Business Combination is accounted for using the acquisition method of accounting with Act II as the acquiring entity and Merisant and MAFCO as the acquiree. Under the acquisition method of accounting, Act II’s assets and liabilities will retain their carrying amounts and the assets and liabilities of Merisant and MAFCO will be recorded at their fair values measured as of the acquisition date. The excess of the purchase price over the estimated fair values of net assets acquired will be recorded as goodwill. The pro forma adjustments have been prepared as if the Business Combination and the other related transactions had taken place on December 31, 2019 in the case of the unaudited pro forma condensed combined balance sheet and on January 1, 2019 in the case of the unaudited pro forma condensed combined income statements.
The acquisition method of accounting is based on Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 805, Business Combinations (“ASC 805”), and uses the fair value concepts defined in FASB ASC 820, Fair Value Measurements (“ASC 820”). ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date by Act II, who was determined to be the accounting acquirer.
Under ASC 805, acquisition-related transaction costs are not included as a component of consideration transferred but are accounted for as expenses in the periods in which such costs are incurred, or if related to the issuance of debt, capitalized as debt issuance costs. Acquisition-related transaction costs expected to be incurred as part of the business combination, include estimated fees related to the issuance of long-term debt, as well as advisory, legal and accounting fees.
The unaudited pro forma condensed combined financial statements should be read in conjunction with (i) Act II’s historical financial statements and related notes for the year ended December 31, 2019 and for the three months ended March 31, 2020, as well as “Act II’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in the Definitive Proxy Statement and Supplement, (ii) Merisant and MAFCO’s historical financial statements and related notes for the year ended December 31, 2019 and for the three months ended March 31, 2020 , as well as “Merisant and MAFCO’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in the Definitive Proxy Statement and Supplement.
The pro forma adjustments represent management’s estimates based on information available as of the date of Supplement and are subject to change as additional information becomes available and additional analyses are performed. The unaudited pro forma condensed combined financial statements do not reflect possible adjustments related to restructuring or integration activities that have yet to be determined or transaction or other costs following the Business Combination that are not expected to have a continuing impact. In addition, the unaudited pro forma condensed combined financial statements do not reflect additional costs and expenses that Whole Earth Brands, Inc. may incur as a public company (other than those incurred by Act II and reflected in the unaudited pro forma condensed combined financial statements). Further, one-time transaction-related expenses anticipated to be incurred prior to, or concurrent with, closing the Business Combination and the other related transactions are not included in the unaudited pro forma condensed combined income statements. However, the impact of such transaction expenses is reflected in the unaudited pro forma condensed combined balance sheet as a decrease to retained earnings and a decrease to cash, unless otherwise noted.
2.   Preliminary Allocation of Purchase Price
The total purchase consideration for the Business Combination has been allocated to the assets acquired, liabilities assumed, for purposes of the unaudited pro forma condensed combined financial information based on their estimated relative fair values. The allocation of the purchase consideration herein is preliminary. The final allocation of the purchase consideration for the Business Combination will be
 
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determined after the completion of a thorough analysis to determine the fair value of all assets acquired, liabilities assumed and non-controlling interest but in no event later than one year following the completion of the Business Combination.
Accordingly, the final acquisition accounting adjustments could differ materially from the preliminary amounts presented in these unaudited pro forma condensed combined financial statements.
Any increase or decrease in the fair value of the assets acquired, liabilities assumed, as compared to the information shown herein, could also change the portion of the purchase consideration allocable to goodwill and could impact the operating results of Whole Earth Brands, Inc. following the Business Combination due to differences in the allocation of the purchase consideration, depreciation and amortization related to some of these assets and liabilities. The purchase consideration was preliminarily allocated as follows:
Cash paid to selling shareholder
$ 386,737
Accounts receivable
$ 53,100
Inventories
116,400
Prepaids expenses and other current assets
6,800
Property, plant and equipment
20,200
Other assets
3,700
Intangible assets
228,700
Goodwill
49,737
Accounts payable
(27,200)
Accrued expenses and other current liabilities
(21,600)
Deferred tax liabilities
(30,900)
Other liabilities
(12,200)
$ 386,737
The preliminary allocation of the purchase consideration to identifiable intangibles and property and equipment was based on the estimated fair value of such assets. Amortization of identifiable intangibles and depreciation expense for property and equipment was preliminarily estimated based on a straight-line methodology, which approximates the remaining weighted useful life of such underlying assets. The fair value of the inventory was determined through use of the replacement cost approach.
The amount that will ultimately be allocated to these identified intangible assets, property and equipment and inventory and the related amount of amortization and depreciation, may differ materially from this preliminary allocation.
Goodwill represents the excess of the total purchase consideration over the fair value of the underlying net assets, largely arising from the workforce and extensive efficient distribution network that has been established by Merisant and MAFCO.
3.   Pro Forma Adjustments and Assumptions
The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Business Combination and other transactions described above and has been prepared for informational purposes only. The unaudited pro forma condensed combined income statements are not necessarily indicative of what the actual results of operations would have been had the Business Combination taken place on the date indicated, nor is it indicative of the future consolidated results of operations of the combined company. The unaudited pro forma condensed combined financial information is based upon the historical financial statements of Act II and Merisant and MAFCO and should be read in conjunction with their historical financial statements included elsewhere in the Definitive Proxy Statement.
The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are (1) directly attributable to the Business
 
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Combination, the Private Placement and the Debt Financing, (2) factually supportable, and (3) with respect to the income statements, expected to have a continuing impact on the results of Whole Earth Brands, Inc.
There were no intercompany balances or transactions between Act II and Merisant and MAFCO as of the dates and for the periods of these unaudited pro forma combined financial statements.
The pro forma combined consolidated provision for income taxes does not necessarily reflect the amounts that would have resulted had the companies filed consolidated income tax returns during the periods presented.
The pro forma basic and diluted earnings per share amounts presented in the unaudited pro forma condensed combined income statements are based upon the number of Whole Earth Brands, Inc.’s shares outstanding, assuming the Business Combination and Private Placement occurred on January 1, 2019.
Pro Forma Adjustments to Income Statement:
(a)
Intangible assets were valued based upon a preliminary valuation exercise, which will be updated upon applying the final purchase price allocation. Trademarks and trade names, and product formulations were preliminarily valued using an income approach, more specifically the relief from royalty method. Customer relationships were preliminarily valued using the multi-period excess earnings method or the distributor method, depending on the selling practice of the geographic market served. The adjustments to intangible assets to reflect values and the amortization expense are as follows:
Preliminary
Fair Value
Estimated
Useful Life
in Years
Amortization
Expense for the
Year Ended
December 31,
2019
Amortization
Expense for
the Three
Months
Ended
March 31,
2020
Trademarks and trade names
$ 116,700 25 $ 4,668 $ 1,167
Customer relationships
93,900 19 4,942 1,235
Product formulations
18,100 Indefinite
Total
228,700 9,610 2,402
Less: Merisant/Mafco historical intangibles and amortization expense
225,900 10,700 2,500
Pro forma adjustments
$ 2,800 $ (1,090) $ (98)
(1)
Historical useful lives utilized by Merisant and MAFCO have been applied on a preliminary basis pending a final purchase price allocation which will be based on a full valuation.
(b)
Represents the adjustment to eliminate the historical interest income and unrealized gains of Act II associated with the funds that were held in the Trust Account, which will be used to fund portions of the aggregate cash obligations (as defined under the Purchase Agreement) in connection with the Business Combination.
(c)
In connection with the Business Combination, Whole Earth Brands, Inc. entered into (x) a first lien term loan facility of $140,000,000 that matures in five years and (y) a first lien revolving loan facility of up to $50,000,000 that matures in five years. Loans outstanding under the first lien term loan facility and the first lien revolving loan facility will accrue interest at a rate per annum equal to LIBOR plus a margin ranging from 2.25% to 3.00% depending on the achievement of certain leverage ratios, and undrawn amounts under the first lien revolving loan facility will 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. Principal payments on the first lien term loan facility will be due quarterly, in amounts equal to (i) 1.25% of the original principal amount of the first lien term loan facility during the first through third years after the closing date of the credit
 
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facilities, (ii) 2.5% of the original principal amount of the first lien term loan facility during the fourth and fifth years after the closing date of the credit facilities and (iii) the balance of original principal amount of the first lien term loan facility maturity date of the credit facilities. No drawdowns under the revolving credit facility were made at closing.
Pro forma interest expense assumes a weighted average interest rate of approximately 6%. Each 1% change in the assumed rate would create a $1,400,000 change in annual interest expense and a $350,000 change in quarterly interest expense.
Included in the adjustments to interest expense is amortization of deferred financing costs of $1,160,000 for the year ended December 31, 2019 and $290,000 for the three months ended March 31, 2020.
Excluded from the adjustments to interest expense is the effect of any interest rate hedging activities. (d) This adjustment represents the estimated income tax effect of the pro-forma adjustments to reflect income taxes at an estimated 21% rate.
(e)
Pro forma basic earnings per share was computed by dividing pro forma net income attributable to shares of Whole Earth Brands, Inc. common stock by the weighted average of Act II Class A Shares, as if such shares were issued and outstanding as of January 1, 2019. Basic shares outstanding were calculated based on the following ordinary shares outstanding:
Shares
Outstanding
%
Shares held by Act II Sponsor
4,500,000 11.71%
Shares held by Seller
600,000 1.56%
Shares held by PIPE investors
7,500,000 19.52%
Shares held by Dicalite Management Group, Inc
3,300,000 8.59%
Shares held by public
22,526,669 58.62%
Total common shares o/s
38,426,669 100.00%
Pro forma dilutive earnings per share was computed using the “treasury stock buyback” method to determine the potential dilutive effect of its outstanding options. The currently outstanding Act II public warrants with an exercise price of $11.50 per share will become exercisable for one share of Whole Earth Brands, Inc. common stock. The Act II public warrants are not dilutive on a pro forma basis; however, the potential dilutive impact will ultimately be recognized based on the actual market price on the date of measurement.
For further details, see “Beneficial Ownership of Securities” herein.
(f)
To eliminate the Seller’s asset impairment charge.
(g)
Represents incremental insurance expense.
 
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Pro Forma Adjustments to the Balance Sheet:
(a)
Represents the net adjustment to cash associated with Act II’s payment of cash consideration in the Business Combination:
Pro forma net adjustment to cash associated with purchase adjustments:
Act II cash previously in trust as of March 31, 2020(1)
$ 305,037,000
Proceeds from PIPE(2)
75,000,000
Proceeds from new bank debt(3)
132,861,000
Shareholder redemptions(4)
36,334,000
Cash retained by seller
(10,500,000)
Repurchase of warrants(5)
(11,250,000)
Cash consideration(6)
(386,737,000)
Payment of transaction costs(7)
(23,828,000)
Expenses prepaid at closing
(1,678,000)
$ 42,571,000
(1)
Represents the adjustment related to the reclassification of the cash equivalents held in the Trust Account in form of investments to cash and cash equivalents to reflect the fact that these investments were used in connection with the Business Combination, the payment for shares redeemed and the payment of a portion of the aggregate cash obligations (as defined under the Purchase Agreement).
(2)
Represents the shares and warrants Act II sold to the PIPE Investors for gross proceeds of approximately $75,000,000.
(3)
Represents additional funds raised through the new loan. Financing fees of $7,139,000 have been deducted from the bank debt as presented on the accompanying pro forma balance sheet.
(4)
Represents cash paid for redemptions of Act II Class A Shares.
(5)
Represents the cash paid to repurchase the warrants.
(6)
Represents the cash consideration portion of the total consideration paid to effectuate the Business Combination net of preliminary adjustments.
(7)
Reflects the impact of preliminary transaction costs of $23,828,000. This amount excludes financing fees, which are reflected in footnote (3) above, related to the new bank debt.
(b)
Represents the adjustment to intangible assets to reflect their estimated fair values on the preliminary purchase price allocation (see Note a — Pro Forma Adjustments to the Income Statement).
(c)
Represents the adjustment to goodwill based on the preliminary purchase price allocation (see Note 2).
(d)
Represents the transaction cost expense at closing going against retained earnings.
(e)
Represents the elimination of deferred underwriting costs.
(f)
Represents an adjustment to reflect that at the time of issuance, certain Act II ordinary shares were subject to a possible redemption and, as such, an amount of $289,272,046 was classified as redeemable equity in Act II’s historical balance sheet as of March 31, 2020.
(g)
Represents the elimination of the Seller’s Net Parent Investment in Merisant and MAFCO, and the elimination of the amount due to a related party.
(h)
Represents the cancellation of 3,000,000 of Act II Class B Shares and the remaining 4,500,000 Act II Class B Shares being converted into 4,500,000 shares of Whole Earth Brands, Inc. common stock.
 
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(i)
Represents the pro forma adjustments to additional paid-in capital.
Conversion of redeemable shares held by Act II public shareholders to APIC net of par value amount
$ 252,936,000
Increase in APIC attributable to stock issued to PIPE investors
74,999,250
Decrease in APIC as the result of the repurchase of warrants
(11,250,000)
Cancellation of Act II Sponsor shares
300
$ 316,685,550
(j)
Represents the elimination of Seller liabilities not assumed in the Business Combination.
(k)
Represents insurance premiums prepaid at closing.
 
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ACT II’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us,” or “our” refer to Act II Global Acquisition Corp. prior to the consummation of the Business Combination and to Whole Earth Brands, Inc. and its subsidiaries after the Business Combination.
Special Note Regarding Forward-Looking Statements
This prospectus includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this prospectus including, without limitation, statements in this “Act II’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of this prospectus. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
Overview
As of March 31, 2020, we were a blank check company organized in the Cayman Islands on August 16, 2018, and formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
On December 19, 2019, we entered into a Purchase Agreement, as amended on February 12, 2020, May 8, 2020, and June 15, 2020 (as amended, the “Purchase Agreement”), with Flavors Holdings Inc. (“Flavors Holdings”), MW Holdings I LLC (“MW Holdings I”), MW Holdings III LLC (“MW Holdings III”) and Mafco Foreign Holdings, Inc. (together with Flavors Holdings, MW Holdings I and MW Holdings III, the “Sellers”), and, for the purposes of Amendment Nos. 2 and 3 to the Purchase Agreement, Project Taste Intermediate LLC (“Intermediate Holdco”), in connection with our indirect acquisition of (i) all of the outstanding equity interests of Merisant Company (“Merisant”), Merisant Luxembourg (“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, the “Transferred Entities”) and (ii) certain assets and liabilities of the Transferred Entities included in the Transferred Assets and Liabilities (as defined in the Purchase Agreement),
On June 24, 2020, following approval of the Business Combination by our shareholders at an extraordinary general meeting and approval of the Warrant Amendment (as hereafter defined) of our public warrant holders at a special meeting of our public warrant holders, each held on June 24, 2020, we domesticated into a Delaware corporation (the “Domestication”), and changed our name from “Act II Global Acquisition Corp.” to “Whole Earth Brands, Inc.,” and on June 25, 2020, consummated the remainder of the transactions contemplated by the Purchase Agreement (collectively, the “Business Combination”). In connection with the Domestication, each of our issued and outstanding ordinary shares, par value $0.0001 per share, was converted, on a one-for-one basis, into a share of common stock, par value $0.0001 per share.
Recent Developments
Purchase Agreement
On June 25, 2020, in connection with the closing of the Business Combination (the “Closing”), the Sellers sold, conveyed, assigned, transferred and delivered to Intermediate Holdco, our direct and wholly-owned subsidiary and designee, and Intermediate Holdco purchased all of the issued and outstanding equity
 
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interests of the Transferred Entities and certain assets thereof, and assumed certain liabilities included in the Transferred Assets and Liabilities (as defined in the Purchase Agreement), in each instance, free and clear of all liens (subject to certain exceptions set forth in the Purchase Agreement), in exchange for approximately $386.7 million of net proceeds to the Sellers (after giving effect to various customary purchase price adjustments).
In addition, pursuant to the Purchase Agreement, immediately following the Closing, our sponsor, Act II Global LLC (the “Sponsor”), placed 3,000,000 shares of common stock (which were converted at Closing from Class B ordinary shares then-held by the Sponsor) (the “Escrowed Sponsor Shares”) into an escrow account, which are held in escrow by our transfer agent. The Escrowed Sponsor Shares will be released to the Sponsor upon the earliest to occur of (i) the volume weighted-average per-share trading price of common stock being at or above $20.00 per share for twenty (20) trading days in any thirty (30)-trading day continuous trading period during the 5-year period following the Closing, (ii) a change in control of our company, and (iii) 5-year anniversary of the Closing.
Debt Financing
In connection with the Business Combination, on June 25, 2020, we entered into a senior secured loan agreement (the “Credit Agreement”) with Toronto Dominion (Texas) LLC, as administrative agent, and certain lenders, consisting of the following credit facilities (the “Credit Facilities”): (x) a term loan facility of $140 million (the “Term Loan Facility”) and (y) a revolving loan facility of up to $50 million (the “Revolving Facility”). The Revolving Facility included (x) a borrowing capacity available for letters of credit up to $5 million and (z) a $10 million sublimit for swingline loans. Any issuance of letters of credit or swingline loan advances reduces the amount available under the Revolving Facility. Each of the Credit Facilities matures on June 25, 2025.
Loans outstanding under the Credit Facilities will accrue interest at a rate per annum equal to LIBOR, with a LIBOR floor of 1.00%, plus a margin between 3.00% and 3.75%, or, at our option, a 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 2.00%, in each case plus an applicable margin between 2.00% and 2.75%, with the margin in each case depending upon a total net leverage ratio, and undrawn amounts under the Revolving Facility will accrue a commitment fee at a rate per annum between ranging between 0.30% and 0.40% on the average daily undrawn portion of the commitments thereunder, with the applicable depending upon a total net leverage ratio.
The obligations under the Credit Facilities are guaranteed by certain of our direct or indirect wholly-owned domestic subsidiaries, other than certain excluded subsidiaries, including, but not limited to, immaterial subsidiaries and foreign subsidiaries. The Credit Facilities are secured by substantially all of our personal property 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 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 Credit Agreement, with a reduction to 25% if the total net leverage ratio for the fiscal year is less than or equal to 2.50 to 1.00 but greater than 2.00:1.00, and a reduction to 0% if the total net leverage ratio for the fiscal year is less than or equal to 2.00 to 1.00. We also are required to make quarterly amortization payments equal to (i) 1.25% 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 Credit Facilities, 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 Credit Facilities (subject to reductions by optional and mandatory prepayments of the loans). We may prepay the Credit Facilities at any time without premium or penalty, subject to payment of customary breakage costs.
 
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The Credit Facilities contain 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 transaction.
Private Placement Transactions
In connection with the foregoing Purchase Agreement, on February 12, 2020, we entered into subscription agreements with certain accredited investors (collectively, the “Private Placement Investors”), pursuant to which, among other things, such investors agreed to subscribe for and purchase, and we agreed to issue and sell to such investors, 7,500,000 of our shares of common stock, par value $0.0001 per share, and 5,263,500 private placement warrants representing the right to purchase 2,631,750 shares of common stock (the “private placement warrants”) for gross proceeds of approximately $75,000,000 (the “Private Placement”). We granted certain customary registration rights to the Private Placement Investors.
The Private Placement closed on June 25, 2020, and the issuance of an aggregate of 7,500,000 common stock and 5,263,500 private placement warrants exercisable for 2,631,750 shares of common stock occurred immediately after the consummation of the Business Combination. The shares of common stock and private placement warrants offered and sold in connection with the Private Placement were not registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance upon the exemption provided in Section 4(a)(2) of the Securities Act and Regulation S promulgated thereunder, without any form of general solicitation or general advertising. The proceeds from the Private Placement were used to fund a portion of the our cash obligations for the Business Combination.
In connection with the above agreements, our public warrant holders approved an amendment (the “Warrant Amendment”) to the prior warrant agreement that governed all of our outstanding warrants to provide that, immediately prior to the Closing, (i) each of our outstanding warrants, which previously entitled the holder thereof to purchase one Class A ordinary share at an exercise price of $11.50 per share, became exercisable for one-half of one share at an exercise price of $5.75 per one-half share ($11.50 per whole share) and (ii) each holder of a warrant received, for each such warrant, a cash payment of $0.75 (although the holders of the private placement warrants waived their rights to receive such payment).
Sponsor Support Agreement
In connection with the Purchase Agreement, we entered into a Sponsor Support Agreement with the Sellers and the Sponsor on December 19, 2019, as amended on February 12, 2020 and June 15, 2020 (as amended, the “Sponsor Support Agreement”), pursuant to which the Sponsor agreed to certain covenants and agreements related to the Business Combination, particularly with respect to taking supportive actions to consummate the Business Combination. In addition, the Sponsor irrevocably waived its anti-dilution protections under Act II’s Amended and Restated Memorandum and Articles of Association in connection with any new issuances of ordinary shares.
In accordance with the terms of the Sponsor Support Agreement, in connection with the Closing, the Sponsor (a) forfeited (i) 3,000,000 shares of common stock (which were converted at Closing from Class B ordinary shares then-held by the Sponsor); and (ii) 6,750,000 warrants to purchase Class A ordinary shares at a price of $11.50 per share (the “Founder Warrants”); and (b) waived any rights that it might otherwise have to receive any cash payment with respect to its Founder Warrants.
Registration Statement
In connection with the Business Combination and Warrant Amendment, we filed a final prospectus and definitive proxy statement with the Securities and Exchange Commission (the “SEC”) on May 13, 2020, and a supplement thereto filed with the SEC on June 18, 2020.
Results of Operations
Through March 31, 2020, we had neither engaged in any operations nor generated any revenues. Our only activities from inception through March 31, 2020 were organizational activities, those necessary to
 
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prepare for our initial public offering, described below, our search for a target business with which to complete a Business Combination and activities in connection with the Business Combination. We have generated and expect to generate non-operating income in the form of interest income on marketable securities. We have incurred and expect to incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence and transaction expenses.
For the three months ended March 31, 2020, we had net income of $179,260, which consists of interest income on marketable securities held in our trust account of $754,199, offset by operating costs of $574,939.
For the three months ended March 31, 2019, we incurred a net loss of $15,517, which consisted of operating costs.
For the year ended December 31, 2019, we had net income of $3,932,144, which consists of interest income on marketable securities held in the trust account of $4,254,861 and an unrealized gain on marketable securities held in the trust account of $28,164, offset by operating costs of $350,881.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. Since the outbreak of the virus, the United States has imposed a travel ban on certain countries in Europe and Asia. On March 20, 2020, President Trump imposed additional travel restrictions, including the closure of both the Canadian and Mexican borders to any non-essential travel. A significant outbreak of COVID-19 and other infectious diseases could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and the business of any potential target business with which we consummate a business combination could be materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and services providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extensive period of time, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.
Liquidity and Capital Resources
Until the consummation of our initial public offering, our only source of liquidity was an initial purchase of ordinary shares by the Sponsor and loans from our Sponsor.
On April 30, 2019, we consummated the initial public offering of 30,000,000 units, inclusive of the underwriters’ election to partially exercise their option to purchase an additional 3,900,000 units, at a price of $10.00 per unit, generating gross proceeds of $300,000,000. Simultaneously with the closing of the initial public offering, we consummated the sale of 6,750,000 private placement warrants to the Sponsor at a price of $1.00 per warrant (the “Founder Warrants”), generating gross proceeds of $6,750,000.
Following our initial public offering and the sale of the Founder Warrants, a total of $300,000,000 was placed in our trust account. We incurred $16,614,355 in transaction costs, including $5,220,000 of underwriting fees, $11,280,000 of deferred underwriting fees and $114,355 of other costs.
For the three months ended March 31, 2020, cash used in operating activities was $422,635. Net income of $179,260 was impacted by interest earned on marketable securities held in the trust account of $754,199, amortization of right of use asset of $33,878 and changes in operating assets and liabilities, which provided $118,426 of cash.
 
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As of March 31, 2020, we had cash and marketable securities held in the trust account of $305,037,224. We may withdraw interest to pay our income taxes, if any. We used substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the trust account (which interest shall be net of taxes payable and excluding deferred underwriting fees) to complete our Business Combination.
As of March 31, 2020, we had cash of $583,196. We used the funds held outside the trust account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete the Business Combination.
As of December 31, 2019, we had cash of $1,005,831.
For the year ended December 31, 2019, cash used in operating activities was $396,814. Net income of $3,932,144 was offset by interest earned on marketable securities held in the trust account of $4,254,861, an unrealized gain on marketable securities of $28,164 and changes in operating assets and liabilities, which used of $45,933 of cash.
As of December 31, 2019, we had cash and marketable securities held in the trust account of $304,283,025.
Off-balance sheet financing arrangements
We had no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of March 31, 2020. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual obligations
As of March 31, 2020, we did not have any long-term debt, capital lease obligations, or long-term liabilities, other than: (a) an agreement to pay the Sponsor a monthly fee of $10,000 for office space, and administrative and support services, provided to us. We began incurring these fees on April 25, 2019 and continued to incur these fees monthly until the completion of the Business Combination; and (b) a sub-lease agreement providing us with office space. The sub-lease provides that our occupancy begins January 2020 with monthly rental payments of $19,000 commencing May 1, 2020. The sub-lease terminates on July 13, 2021.
The underwriters of our initial public offering were entitled to a deferred fee of $11,280,000 in connection with the completion of the Business Combination.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Ordinary shares subject to redemption
Prior to the consummation of the Business Combination, we accounted for our ordinary shares subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Ordinary shares subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder
 
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or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. Our ordinary shares featured certain redemption rights that were considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, ordinary shares subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our condensed balance sheets.
Net income (loss) per ordinary share
Prior to the consummation of the Business Combination, we applied the two-class method in calculating earnings per share. Ordinary shares subject to possible redemption, which were not redeemable as of March 31, 2020, and were not redeemable at fair value, have been excluded from the calculation of basic net income (loss) per ordinary share since such shares, if redeemed, only participate in their pro rata share of the trust account earnings. Our net income is adjusted for the portion of income that is attributable to ordinary shares subject to redemption, as these shares only participate in the earnings of the trust account and not our income or losses.
Recent accounting pronouncements
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting company.
Independent Auditors’ Fees
Through March 31, 2020, the firm of Marcum LLP (“Marcum”) acted as our independent registered public accounting firm. The following is a summary of fees paid or to be paid to Marcum for services rendered. Marcum has not waived its right to make claims against the funds in the trust account for fees of any nature owed to it.
Audit Fees
Audit fees consist of fees billed for professional services rendered for the audit of our financial statements for the year ended December 31, 2019 and services that were normally provided by Marcum in connection with regulatory filings. The aggregate fees billed by Marcum for professional services rendered for the audit of our annual financial statements, review of the financial information included in our quarterly reports on Form 10-Q for the respective periods and other required filings with the SEC since inception totaled $109,180.
All Other Fees
During the fiscal year ended December 31, 2019, there were no fees billed for services provided by Marcum other than those set forth above.
Audit Committee Pre-Approval Policies and Procedures
Our audit committee is responsible for appointing, setting compensation and overseeing the work of the independent auditors. In recognition of this responsibility, the audit committee will review and, in its sole discretion, pre-approve all audit and permitted non-audit services to be provided by the independent auditors as provided under the audit committee charter.
 
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MERISANT AND MAFCO’S MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Unless the context otherwise requires, all references in this section to the “Company,” “we,” “us,” or “our” refer to the business of Merisant and MAFCO and their subsidiaries prior to the consummation of the Business Combination and Whole Earth Brands, Inc. following the consummation of the Business Combination.
You should read the following discussion and analysis of our financial condition and results of operations together with our combined financial statements and the related notes appearing elsewhere in this prospectus. This discussion contains forward-looking statements that reflect our plans, estimates, and beliefs that involve risks and uncertainties. As a result of many factors, such as those set forth under the “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” sections and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.
Key Financial Definitions
Product Revenues, net.   Product revenues, net consists primarily of sales of tabletop sweeteners and natural licorice products. The following is a brief description of the components of Merisant and MAFCO’s revenues:
Merisant revenues.   Merisant revenues consists primarily of sales of tabletop sweeteners for the domestic and international consumer food markets, primarily under the Whole Earth,® Equal,® Canderel,® and Pure Via,® brands.
Mafco Worldwide revenues.   Mafco Worldwide’s revenues consists primarily of sales of natural licorice products, many of which are under the Magnasweet® brand which are used in a wide range of applications, including food, beverage, pharmaceutical, confectionary, cosmetic, personal care and tobacco products.
Cost of goods sold.   Cost of goods sold consists primarily of the cost of products produced and sold through Merisant and MAFCO’s various methods of distribution.
Selling, general and administrative expenses.   Selling, general and administrative expenses are comprised of expenses associated with corporate and administrative functions that support Merisant and MAFCO’s business, including fees for professional services, insurance, rent, employee salary and benefits, and other general corporate expenses.
Amortization of intangible assets.   Amortization of intangible assets are comprised of expenses associated with the amortization of other intangible assets with definite useful lives (e.g. customer relationships and trade names).
Asset impairment charges.   Non-recurring expenses related to write-down of certain assets to its fair value.
Restructuring and non-recurring expense.   Restructuring and non-recurring expenses are primarily related to employee termination benefits and facility closure costs.
Other (income), net.   Other (income) primarily consists of foreign exchange transaction gains and losses.
(Benefit) provision for income taxes.   (Benefit) provision for income taxes includes current and deferred federal tax expenses, as well as state, local and foreign income taxes.
Net (loss) income.   Net (loss) income consists of (loss) income from operations less income tax expense plus income tax (benefit).
 
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Comparison of Results for the Three-Month Period Ended March 31, 2020 (unaudited) and March 31, 2019 (unaudited)
Three Months Ended March 31,
(In millions)
2020
2019
(Unaudited)
(Unaudited)
Product revenues, net
$ 66.0 $ 70.3
Cost of goods sold
39.9 40.3
Gross profit
26.1 30.0
Selling, general and administrative expenses
15.9 15.7
Amortization of intangible assets
2.5 2.7
Asset impairment charges
40.6
Restructuring and other non-recurring expenses
0.4 1.4
Operating (loss) income
(33.3) 10.2
Other (income), net
(1.7) (1.6)
Income before income taxes
(31.6) 11.8
(Benefit) provision for income taxes
(3.1) 2.6
Net (loss) income
$ (28.5) $ 9.2
Product Revenues, net. Product revenues decreased approximately 6.1%, or $4.3, to $66.0 in the three months ended March 31, 2020, from $70.3 in the three months ended March 31, 2019.
Merisant revenues. Merisant revenues decreased approximately 3.1%, or $1.3, to $40.2 in the three months ended March 31, 2020, from $41.5 in the three months ended March 31, 2019. Excluding the $0.7 unfavorable impact of foreign currency fluctuations, product revenues decreased by 1.4% or $0.6. The decrease in net revenue was driven primarily by shipment delays in the three months ended March 31, 2020 due to retailers and distributors having difficulty receiving product due to strong demand for consumer packaged goods. In addition, there was an inventory build in the prior year in anticipation of Brexit.
Mafco Worldwide revenues. Mafco Worldwide revenues decreased approximately 10.4%, or $3.0, to $25.8 in the three months ended March 31, 2020, from $28.8 in the three months ended March 31, 2019. The decrease was driven by the decline in international tobacco revenues.
Cost of goods sold. Cost of goods sold decreased $0.4 to $39.9 in the three months ended March 31, 2020, from $40.3 in the three months ended March 31, 2019. Cost of goods sold as a percentage of products revenue, net increased to 60.5% in the three months ended March 31, 2020, from 57.3% in the three months ended March 31, 2019. Excluding the $0.1 favorable impact of foreign currency fluctuations, the increase in cost of goods sold as a percentage of product revenue was driven by higher raw material costs, tariffs, and changes in Merisant’s product mix.
Selling, general and administrative. Selling, general and administrative expenses (“SG&A”) remained relatively flat, $15.9 in the three months ended March 31, 2020 compared to $15.7 in the three months ended March 31, 2019.
Amortization of intangible assets. Amortization of intangible assets remained relatively flat, $2.5 in the three months ended March 31, 2020 compared to $2.7 in the three months ended March 31, 2019.
Asset impairment charges. Asset impairment charges of $40.6 in the three months ended March 31, 2020 related to the write down of indefinite lived assets and goodwill.
Restructuring and non-recurring expense. Restructuring and non-recurring expenses decreased $1.0 to $0.4 in in the three months ended March 31, 2020, from $1.0 in the three months ended March 31, 2019. The decrease is primarily related to lower employee termination costs and a decrease in facility closure costs.
Other (income), net. Other (income), net remained relatively flat, $1.7 in the three months ended March 31, 2020 compared to $1.6 in the three months ended March 31, 2019.
 
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(Benefit) provision for income taxes. (Benefit) provision for income taxes decreased $5.7 to a benefit of $3.1 in the three months ended March 31, 2020 from provision of $2.6 in the three months ended March 31, 2019. The effective tax for the three months ended March 31, 2020 was 9.8% compared to an effective tax rate for the three months ended March 31, 2019 of 22.0%. The effective tax rate decreased in the three months ended March 31, 2020 due to the discrete impact of the impairment charges of non-deductible goodwill for which no tax benefit was recorded for the three months ended March 31, 2020.
Net (loss) income. Net loss was $28.5 in the three months ended March 31, 2020, compared to net income of $9.2 in the three months ended March 31, 2019 due to all of the factors listed above.
Comparison of Results for the Years Ended December 31, 2019 (audited), December 31, 2018 (audited), and December 31, 2017 (audited)
Year Ended December 31,
(In millions)
2019
2018
2017
(Audited)
(Audited)
(Audited)
Product revenues, net
$ 272.2 $ 291.0 $ 288.0
Cost of goods sold
163.6 167.9 167.5
Gross profit
108.6 123.1 120.5
Selling, general and administrative expenses
65.9 74.8 77.5
Amortization of intangible assets
10.7 11.1 11.1
Restructuring and other non-recurring expenses
2.2 9.5 13.1
Operating income
29.8 27.7 18.8
Other expense, net
1.4 1.5 3.9
Income before income taxes
28.4 26.2 14.9
(Benefit) Provision for income taxes
(2.5) 5.3 (10.2)
Net income
$ 30.9 $ 20.9 25.1
Comparison of Results for the Years Ended December 31, 2019 (audited) and December 31, 2018 (audited)
Product Revenues, net.   Product revenues decreased approximately 6.5%, or $18.8 million, to $272.2 million in 2019, from $291.0 million in 2018.

Merisant revenues.   Merisant revenues decreased approximately 4.5%, or $7.9 million, to $165.9 million in 2019, from $173.8 million in 2018. Excluding the $9.0 million unfavorable impact of foreign currency fluctuations, product revenues increased by 0.6% or $1.1 million. The increase in net revenue was driven by strong growth from Whole Earth® in North America, growth in Asia Pacific and Latin America partially offset by trade marketing investments in North America and by the discontinuing of sales in the Middle East and Germany.

Mafco Worldwide revenues.   Mafco Worldwide revenues decreased approximately 9.3%, or $10.9 million, to $106.3 million in 2019, from $117.2 million in 2018. The decrease was driven by volume declines in licorice extracts and derivatives.
Cost of goods sold.   Cost of goods sold decreased $4.3 million to $163.6 million in 2019, from $167.9 million in 2018. Cost of goods sold as a percentage of products revenue, net increased to 60.1% in 2019, from 57.7% in 2018. Excluding the $3.6 million favorable impact of foreign currency fluctuations, the increase in cost of goods sold as a percentage of product revenue was driven by North America.
Selling, general and administrative. Selling, general and administrative expenses (“SG&A”) decreased $8.9 million to $65.9 million in 2019, from $74.8 million in 2018. Excluding the $3.2 million favorable impact of foreign currency fluctuations, the decrease in SG&A was driven by lower brand support and lower compensation expense.
Amortization of intangible assets.   Amortization of intangible assets remained relatively flat, $10.7 million in 2019 compared to $11.1 million in 2018.
 
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Restructuring and non-recurring expense. Restructuring and non-recurring expenses decreased $7.3 million to $2.2 million in 2019, from $9.5 million in 2018. The decrease is primarily related to lower employee termination costs and a decrease in facility closure costs.
Other expense, net. Other expense, net remained relatively flat, $1.4 million in 2019 compared to $1.5 million in 2018.
(Benefit)/provision for income taxes. (Benefit)/provision for income taxes decreased $7.8 million to (benefit) of $2.5 million in 2019, from provision of $5.3 million in 2018. The effective tax rate for 2019 was 8.8% compared to an effective tax rate for 2018 of 20.2%. The (benefit) provision for income taxes decreased in 2019 predominantly due to the tax benefit related to the impact of foreign restructuring and the change in tax rates enacted during the year.
Net income. Net income was $30.9 million in 2019, compared to net income of $20.9 million in 2018 due to all of the factors listed above.
Comparison of Results for the Years Ended December 31, 2018 (audited) and December 31, 2017 (audited)
Product Revenues, net. Product revenues increased approximately 1.0%, or $3.0 million, to $291.0 million in 2018, from $288.0 million in 2017.

Merisant revenues. Merisant revenues increased approximately 3.4%, or $5.7 million, to $173.8 million in 2018, from $168.1 million in 2017. Excluding the $1.0 million unfavorable impact of foreign currency fluctuations, the increase in net revenues was mainly due to growth from Whole Earth® in the natural category in North America ($2.7 million), Europe ($4.4 million) and Asia ($1.7 million) partially offset by decline in Artificial North America ($1.4 million) in part due to the decision to discontinue the production of certain low margin private label products, and in Latin America ($1.5M).

Mafco Worldwide revenues. Mafco Worldwide revenues decreased approximately 2.3%, or $2.7 million, to $117.2 million in 2018, from $119.9 million in 2017. The decrease was driven by price declines directly related to declining licorice raw material costs.
Cost of goods sold. Cost of goods sold increased $0.4 million to $167.9 million in 2018, from $167.5 million in 2017. Cost of goods sold as a percentage of products revenue, net decreased to 57.7% in 2018, from 58.0% in 2017. Excluding the $1.5 million favorable impact of foreign currency fluctuations, cost of goods sold as a percentage of products revenue, net remained relatively constant in 2018 and 2017.
Selling, general and administrative. Selling, general and administrative expenses decreased $2.7 million to $74.8 million in 2018, from $77.5 million in 2017. Excluding the $0.3 million of favorable foreign currency fluctuations, the decrease is largely driven by lower Whole Earth® North America brand support.
Amortization of intangible assets. Amortization of intangible remained flat at $11.1 in 2018 and 2017.
Restructuring and non-recurring expense. Restructuring and non-recurring expenses decreased $3.6 million to $9.5 million in 2018, from $13.1 million in 2017. The decrease is primarily related to lower employee termination costs and a decrease in facility closure costs.
Other expense, net. Other expense, net decreased $2.4 million to expense of $1.5 million in 2018, from expense of $3.9 million in 2017, primarily due to lower foreign exchange losses.
Provision for income taxes. Provision for income taxes increased $15.5 million to provision of $5.3 million in 2018 from benefit of $10.2 million in 2017. The effective tax rate for the year ended December 31, 2018 was 20.2% compared to an effective tax rate for the year ended December 31, 2017 of (68.5%) The provision for income taxes increased in 2018 predominately due to the fact that the provision from income taxes for 2017 was favorably impacted as a result of the Tax Cuts and Jobs Act, including the recognition of a discrete income tax benefit as a result of the remeasurement of the Company’s deferred tax liabilities at the new U.S. federal statutory rate of 21%.
Net income. Net income was $20.9 million in 2018, compared to net income of $25.1 million in 2017 due to all of the factors listed above.
 
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Liquidity and Capital Resources
Overview
Merisant and MAFCO have historically funded its operations with cash flow from operations. Excess cash from the business is transferred to its parent and accounted for within net parent investment.
Cash Flows
The following table shows summary cash flow information for the three-month periods ended March 31, 2020 (unaudited) and March 31, 2019 (unaudited), the years ended December 31, 2019 (audited), December 31, 2018 (audited), and December 31, 2017 (audited).
Three Months Ended March 31,
Years Ended December 31,
(In millions)
2020
2019
2019
2018
2017
(Unaudited)
(Unaudited)
(Audited)
(Audited)
(Audited)
Net cash provided by operating activities
$ 14.6 $ 10.5 $ 32.0 $ 34.0 $ 39.3
Net cash used in investing activities
(0.9) (0.4) (4.1) (2.2) (0.7)
Net cash used in financing activities
(13.9) (12.2) (24.2) (28.8) (41.1)
Effect of exchange rates on cash and cash equivalents
0.3 0.1 (0.5) (0.1)
Net increase (decrease) in cash and cash equivalents
$ 0.1 $ (2.0) $ 3.2 $ 3.0 $ (2.6)
Comparison of Results for the Three Month Period Ended March 31, 2020 (unaudited) and March 31, 2019 (unaudited)
Operating activities.   Merisant and MAFCO’s net cash provided by operating activities increased $4.1 to $14.6 in the three months ended March 31, 2020, from $10.5 in the three months ended March 31, 2019. This increase was due primarily to the change in other working capital.
Investing activities.   Merisant and MAFCO’s net cash used in investing activities increased $0.5 to $0.9 in the three months ended March 31, 2020, from $0.4 in the three months ended March 31, 2019. This increase was driven by an increase in capital expenditures in the three months ended March 31, 2020, compared to the three months ended March 31, 2019.
Financing activities.   Merisant and MAFCO’s net cash used in financing activities increased $1.7 to $13.9 in the three months ended March 31, 2020, from $12.2 in the three months ended March 31, 2019. This increase was largely due to net repayments of revolver in 2020 of $1.5 in the three months ended March 31, 2020.
Comparison of Results for the Years Ended December 31, 2019 (audited) and December 31, 2018 (audited)
Operating activities.   Merisant and MAFCO’s net cash provided by operating activities decreased $2.0 million to $32.0 million in 2019, from $34.0 million in 2018. This decrease was due primarily to a decrease in deferred income taxes, offset by an increase in net income.
Investing activities.   Merisant and MAFCO’s net cash used in investing activities increased $1.9 million to $4.1 million in 2019, from $2.2 million 2018. This increase was largely driven by proceeds from the sale of certain fixed assets in 2018.
Financing activities.   Merisant and MAFCO’s net cash used in financing activities decreased $4.6 million to $24.2 million in 2019, from $28.8 million in 2018. The decrease is due to reduced funding to parent offset by a decrease in net borrowing.
Comparison of Results for the Years Ended December 31, 2018 (audited) and December 31, 2017 (audited)
Operating activities. Merisant and MAFCO’s net cash provided by operating activities decreased $5.3 million to $34.0 million in the year ended December 31, 2018, from $39.3 million in year ended December 31, 2017. This decrease was due primarily to lower net income.
 
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Investing activities. Merisant and MAFCO’s net cash used in investing activities increased $1.5 million to $2.2 million in the year ended December 31, 2018, from $0.7 million in the year ended December 31, 2017. This increase was largely driven by higher capital expenditures and a decrease in proceeds from the sale of certain fixed assets.
Financing activities. Merisant and MAFCO’s net cash used in financing activities decreased $12.3 million to $28.8 million in the year ended December 31, 2018, from $41.1 million in the year ended December 31, 2017. This decrease was largely due to net borrowing in 2018 of $6.9 million and a decrease in distributions to its parent.
COVID-19
The outbreak of the COVID-19 coronavirus has been declared a pandemic by the World Health Organization and continues to spread across many of the countries in which Merisant and MAFCO operate. Merisant and MAFCO are following the guidelines provided by the various governmental entities in the jurisdictions where they operate and are taking additional measures to protect its employees. Merisant and MAFCO are executing a comprehensive set of actions to prudently manage their resources, while ensuring continued product supply to its customers. While Merisant and MAFCO are currently experiencing stable to increasing consumer and customer demand for its products and have no supply disruptions, Merisant and MAFCO are unable to fully determine the future impact of COVID-19 on demand for its products or its ability to supply its products.
Off-Balance Sheet Arrangements
Other than the operating lease arrangements described below, Merisant and MAFCO have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on its 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 Merisant and MAFCO’s obligations as of December 31, 2019 and the estimated timing and effect that such obligations are expected to have on liquidity and cash flows in future periods (in millions):
2020
2021
2022
2023
2024
Thereafter
Minimum lease obligations(a)
$ 3.2 $ 2.8 $ 2.6 $ 2.4 $ 1.0 $ 2.2
(a)
Minimum lease obligations do not include the $3.7 of sublease rental income
In addition, at December 31, 2019, MAFCO had obligations to purchase $12.6 million of raw materials through 2025, however, is unable to make reasonably reliable estimates of the timing of such payments, therefore the related commitment has been excluded from the table above.
The contractual obligations at March 31, 2020 have not changed materially since December 31, 2019.
Critical Accounting Policies
General
Merisant and MAFCO’s combined financial statements present, on a historical cost basis, the combined assets, liabilities, revenues and expenses related to the licorice and sweetener businesses (“Mafco Worldwide” and “Merisant”, respectively or the “Business”) of Flavors Holdings Inc. (“Flavors” or “Parent”). Flavors is an indirect, wholly owned subsidiary of MacAndrews & Forbes Incorporated (“MacAndrews”).
Mafco Worldwide produces a variety of licorice products from licorice root, intermediary licorice extracts and crude derivatives produced by others and certain other ingredients. Approximately 47% of Mafco Worldwide’s licorice product sales are to the worldwide tobacco industry for use as tobacco flavor
 
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enhancing and moistening agents in the manufacture of American blend cigarettes, moist snuff, chewing tobacco and pipe tobacco. Certain of the tobacco industry customers also purchase Mafco Worldwide’s processed natural products. Mafco Worldwide also sells licorice products to food and beverage processors, confectioners, cosmetic companies, and pharmaceutical manufacturers for use as flavoring or masking agents, including its Magnasweet brand flavor enhancer, which is used in various brands of chewing gum, energy bars, non-carbonated beverages, lip balm, chewable vitamins, aspirin and other products.
Merisant manufactures, markets and distributes tabletop sweeteners for the domestic and international consumer food markets, primarily under the Equal,® Canderel,® Pure Via,® and Whole Earth Sweetener® brands. Merisant distributes its products via the food retail, e-commerce, and food service channels. Approximately 84% of the business goes through the retail and e-commerce channels with only 16% going through food service.
The combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and present fairly the combined financial position and results of the Business. All significant intercompany transactions and balances within the Business have been eliminated. Transactions with affiliated companies which are not a part of the Business are reflected as related party transactions and the related payable or receivable balances are included in net parent investment on the combined balance sheets.
Throughout the period covered by the combined financial statements, the Business operated as part of Flavors. Consequently, stand-alone financial statements have not been historically prepared for the Business. The accompanying combined financial statements have been prepared from Flavors’ historical accounting records and are presented on a stand-alone basis as if the operations had been conducted independently from Flavors’ other businesses. The operations of the Business are in various legal entities with or without a direct ownership relationship. Accordingly, Flavors and its subsidiaries’ net parent investment in these operations is shown in lieu of a statement of stockholder’s equity in the combined financial statements.
The accompanying combined financial statements reflect all assets and liabilities of Flavors that are either specifically identifiable or are directly attributable to the Business and have been extracted from the Flavors accounting records on the basis of the accounting policies and procedures further described in this footnote.
As more fully described in Note 2 and Note 10, current and deferred income taxes and related tax expense have been determined based on the stand-alone results of the combined Business by applying Accounting Standards Codification (“ASC”) 740, “Income Taxes”, issued by the Financial Accounting Standards Board (“FASB”), to the Business’ operations in each country as if it were a separate taxpayer (i.e. following the separate return methodology).
All allocations and charges of cost to and from Flavors as further described in Note 3 have been deemed paid in the period in which the cost was recorded in the combined statements of operations. The Business’ portion of certain current income taxes payable is deemed to have been remitted to Flavors in the period the related tax expense was recorded. The Business’ portion of certain current income taxes receivable is deemed to have been remitted by Flavors in the period to which the receivable applies only to the extent that a refund of such taxes could have been recognized by the Business on a stand-alone basis under the law of the relevant taxing jurisdiction.
Long-term third party debt and the related interest expense of Flavors has not been allocated to the combined financial statements as the Business will not be assigned any of the current third party debt and Flavors’ borrowings are not directly attributable to the Business. Flavors’ third party debt is collateralized by certain of Flavors’ U.S. assets (including the voting interests of Mafco Worldwide LLC, Merisant Company and Merisant US, Inc. and all of their assets), as well as two-thirds of the voting stock of Flavors’ first tier non-U.S. subsidiaries. The cash and cash equivalents held by Flavors at the corporate level are not specifically identifiable to the Business and therefore were not allocated for any of the periods presented.
All of the allocations and estimates in the combined financial statements are based on assumptions that management of Flavors believes are reasonable. However, the combined financial statements included
 
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herein may not be indicative of the financial position, results of operations, and cash flows of the Business in the future or if the Business had been a separate, stand-alone entity during the periods presented. See Note 3.
Actual costs that would have been incurred if Mafco Worldwide and Merisant had been a stand-alone business would depend on multiple factors, including organizational structure and strategic decisions.
Mafco Worldwide and Merisant have identified the policies outlined below as critical to its business operations and an understanding of its results of operations. This discussion is not intended to be a comprehensive description of all accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact on Mafco Worldwide and Merisant’s business operations and any associated risks related to these policies is discussed under results of operations, below, where such policies affect its reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, please see Note 2 in the Notes to the Combined Financial Statements of Mafco Worldwide and Merisant.
Inventories
Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business less reasonably predicable costs of completion, disposal, and transportation. The cost of inventory is determined principally by the first in, first out method.
Goodwill and Intangible Assets
Goodwill represents the excess of consideration transferred over the fair value of identifiable net assets acquired. Intangible assets consist of product formulations, trade names and customer relationships. Acquired intangibles are recorded at fair value as of the date acquired. Goodwill and other intangibles determined to have an indefinite life are not amortized, but are tested for impairment annually in the fourth quarter, or when events or changes in circumstances indicate that the assets might be impaired, such as a significant adverse change in the business climate.
When goodwill is assessed for impairment, the Business has the option to perform an assessment of qualitative factors of impairment prior to necessitating a quantitative impairment test. Qualitative factors to consider include cost factors, projected financial performance, macroeconomic conditions (including changes in interest rates and discount rates), business, contractual, legal, regulatory or other relevant events and factors affecting the reporting unit, and results from prior quantitative tests. If we elect to bypass the qualitative assessment or the Business determines that it is more likely than not that the fair value of the Business’ reporting units is less than its carrying value, a quantitative assessment is then performed utilizing both the income and market approaches to estimate the fair value of its reporting units. The income approach involves discounting future estimated cash flows. The discount rate used is the value-weighted average of the reporting unit’s estimated cost of equity and debt (“cost of capital”) derived using both known and estimated customary market metrics. The Business performs sensitivity tests with respect to growth rates and discount rates used in the income approach. In applying the market approach, valuation multiples are derived from historical and projected operating data of selected guideline companies; evaluated and adjusted, if necessary, based on the strengths and weaknesses of the reporting unit relative to the selected guideline companies; and applied to the appropriate historical and/or projected operating data to arrive at an indication of fair value. The Business weights the results of the income and market approaches equally. If the reporting unit’s carrying value exceeds its estimated fair value, then an impairment is recorded for the difference, limited to the total amount of goodwill allocated to the reporting unit. In 2018 and 2017, the Business performed a qualitative assessment for its reporting units. Based on these assessments, the Business qualitatively concluded that it was more likely than not that the fair value of its reporting units exceeded their respective carrying values and therefore, did not result in an impairment.
The annual impairment evaluations for goodwill involve significant estimates made by management. The discounted cash flow analyses require various judgmental assumptions about sales, operating margins, growth rates, and discount rates. Assumptions about sales, operating margins and growth rates are based on
 
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the Business’ budgets, business plans, economic projections, anticipated future cash flows, and marketplace data. Changes in estimates could have a material impact on the carrying amount of goodwill in future periods.
The Business typically evaluates impairment of its indefinite-lived intangible assets by first performing a qualitative assessment. As part of this assessment, the Business considers its financial performance, including projected earnings and business trends, as well as the difference between the fair value and the carrying amount from any recent fair value calculation. If after assessing the totality of events and circumstances the Business determines that it is not more likely than not that the indefinite-lived intangible assets are impaired, then the Business need not calculate the fair value of the indefinite-lived intangible assets. The Business also continues to re-evaluate the useful life of these assets to determine whether events and circumstances continue to support an indefinite useful life.
Intangible assets that are deemed to have a finite life are amortized over their estimated useful life. They are also evaluated for impairment as discussed below in “Long-Lived Assets.”
Long-Lived Assets
Long-lived assets, other than goodwill and indefinite-lived intangible assets, are tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. When such events occur, the Business compares the sum of the future undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group to the carrying amount of that long-lived asset. If this comparison indicates that there is an impairment, the carrying amount of the long-lived asset would then be reduced to the estimated fair value, which generally approximates discounted cash flows. The Business also evaluates the amortization periods of assets to determine whether events or circumstances warrant revised estimates of useful lives. The Business’ applicable long-lived assets include its property, plant and equipment and definite-lived intangible assets.
Income Taxes
Income taxes as presented herein attribute current and deferred income taxes of Flavors to the Business’ stand-alone financial statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by ASC 740, “Income Taxes”. Accordingly, the Business’ income tax provision was prepared following the separate return method. The separate return method applies ASC 740 to the stand-alone financial statements of each member of the combined group as if the group member were a separate taxpayer and a stand-alone enterprise. As a result, actual tax transactions included in the consolidated financial statements of Flavors may not be included in the separate combined financial statements of the Business. Similarly, the tax treatment of certain items reflected in the separate combined financial statements of the Business may not be reflected in the consolidated financial statements and tax returns of Flavors; therefore, deferred tax assets and liabilities presented below, such items as net operating losses, credit carryforwards, and valuation allowances may exist in the stand-alone financial statements that may or may not exist in the consolidated financial statements of Flavors and may never be realizable or payable to taxing authorities.
The breadth of the Business’ operations and the global complexity of tax regulations require assessments of uncertainties and judgements in estimating the taxes that the Business will ultimately pay. The final taxes paid are dependent upon many factors, including negotiations with taxing authorities in various jurisdictions and resolution of disputes arising from federal, state and international tax audits in the normal course of business.
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. The provision for income taxes represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from differences between the financial and tax basis of the Business’ assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.
 
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The taxable income (loss) of certain Mafco Worldwide and Merisant entities was included in parent consolidated tax returns, where applicable. As such, separate income tax returns were not prepared for certain of the Business’ entities. Consequently, for such entities, income taxes currently payable are deemed to have been remitted to Flavors, in cash, in the period the liability arose and income taxes currently receivable are deemed to have been received from Flavors in the period that a refund could have been recognized by the Business had it been a separate taxpayer.
As stated above in Note 1, the operations comprising the Business are in various legal entities which have no direct ownership relationship. Consequently, no provision has been made for income taxes on unremitted earnings of subsidiaries and affiliates.
The Business records any tax assessed by a governmental authority that is both imposed on and concurrent with a specific revenue-producing transaction between a seller and a customer, which may include, but is not limited to, sales, use, value added, and some excise taxes on a net basis in the accompanying combined statements of operations.
Uncertainty in Income Taxes
As part of the process of preparing its combined financial statements, the Business is required to calculate the amount of income tax in each of the jurisdictions in which it operates. On a regular basis, the amount of taxable income is reviewed by various federal, state and foreign taxing authorities. As such, the Business provides reserves, when applicable, for unrecognized tax benefits that it believes could be challenged by these taxing authorities. Uncertain income tax positions must be “more likely than not” (i.e., greater than 50% likelihood of receiving benefit) before the Business recognizes the uncertain income tax positions in the financial statements. Further, the benefit to be recorded in the financial statements is the amount most likely to be realized assuming a review by the tax authorities having all relevant information and applying current conventions.
Revenue Recognition
Effective January 1, 2018, the Business adopted Accounting Standards Codification (“ASC”) 606, and all related amendments, which provides updated accounting guidance on recognizing revenue. This updated accounting guidance outlines a single comprehensive model for entities to utilize to recognize revenue when they transfer goods or services to customers in an amount that reflects the consideration that will be received in exchange for the goods or services.
The Business adopted this new accounting guidance using the modified retrospective method. Results for the reporting period beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported in accordance with the Business’s historic accounting practices under previous guidance. However, given the nature of the Business’ products and the terms and conditions applicable to sales to its customers, the timing and amount of revenue recognized based on the underlying principles of ASC 606 are consistent with the Business’ revenue recognition policy under previous guidance. There was no impact to the combined balance sheets or the combined statements of operations and comprehensive income as of January 1, 2018 for the adoption of the standards update.
The Business recognizes revenue when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Business expects to be entitled to in exchange for those goods or services. The Business made an accounting policy election to exclude from the measurement of the transaction price sales taxes and all other items of a similar nature, and also elected to account for shipping and handling activities as a fulfillment of the promise to transfer the goods. Accordingly, shipping and handling costs are included in cost of sales.
The terms and conditions of sale under the supply agreements and/or purchase orders for Merisant call for FOB Destination and FOB Origin shipping terms with its customers. The customer payment terms are usually 40 days from invoice date. The terms and conditions of sale under the supply agreements and/or purchase orders for Mafco Worldwide have various shipping terms with its customers depending upon the customer requests. The customer payment terms range from 30-120 days from invoice date based upon geographic location of the customer.
 
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Merisant usually offers promotional activities (e.g. coupons, trade discounts and other promotional activities) to the customers. These Variable Consideration amounts are estimated for each customer based on specific arrangement/agreement, an analysis of historical volume and/or current activity with that customer. Reassessment of Variable Consideration estimates is done at each reporting date throughout the contract period until the uncertainty is resolved (e.g. promotional campaign is closed and settled with customer)
Historically, the Business has encountered limited instances whereby customers rejected products as a result of orders being materially inaccurate and/or products being defective. The Business is tracking the reason codes for those customer returns to understand what was the return reason. Based on that the materiality of such returns is assessed. A return reserve is calculated (based on historical data as described above) every month to record this net sales adjustment, and these adjustments have not been significant.
The following table presents the Company’s revenues disaggregated by product categories:
2019
2018
2017
Sweeteners
$ 165.9 $ 173.8 $ 168.1
Licorice products
106.3 117.2 119.9
Total Product revenues, net
$ 272.2 $ 291.0 $ 288.0
The following table presents the Merisant and MAFCO’s revenues disaggregated by operating segment:
2019
2018
2017
Merisant – North America
$ 60.0 $ 59.0 $ 57.6
Merisant – Europe, Middle East and Africa
76.0 82.0 77.9
Merisant – Asia-Pacific
17.8 17.0 15.4
Merisant – Latin America
12.1 15.8 17.2
Mafco Worldwide
106.3 117.2 119.9
Total Product revenues, net
$ 272.2 $ 291.0 $ 288.0
Prior to January 1, 2018, pursuant to prior accounting guidance, the Business recognized product revenue when persuasive evidence of a non-cancelable arrangement existed, products had been shipped, the price was fixed or determinable, collectability was reasonably assured, legal title and economic risk had transferred to the customer and an economic exchange had taken place. Title for product sales may pass to customers upon leaving the Business’ facilities, upon receipt at a specific destination (such as a shipping port) or upon arrival at the customer’s facilities, depending on the terms of the contractual agreements for each customer.
The Business records an allowance for doubtful accounts as an estimate of the inability of its customers to make their required payments. The determination of the allowance requires the Business to make assumptions about the future ability to collect amounts owed from customers.
Foreign Currency Translation
The Business has determined that the functional currency for each combined subsidiary is its local currency, except for certain entities whose functional currency is the U.S. dollar. Assets and liabilities of entities outside the U.S. are translated into U.S. dollars at the exchange rates in effect at the end of each period; income and expense items are translated at each period’s average exchange rate; and any resulting translation difference is reported and accumulated as a separate component of combined statements of net parent investment, except for any entities which may operate in highly inflationary economies. Gains and losses resulting from transactions in other than functional currencies are reflected in operating results, except for transactions of a long-term nature.
Remeasurements of European entities whose functional currency is the U.S. dollar as well as translation adjustments for entities operating in highly inflationary economies and impacts of foreign currency transactions are recognized currently in other expense (income), net. Total foreign exchange losses, net of 
 
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$1.9 and $3.0 in 2018 and 2017, respectively, were recorded in other expense (income), net in the accompanying combined statements of operations.
Beginning January 1, 2019, the Business will be required to apply highly-inflationary accounting to its Argentinian subsidiary. This accounting treatment requires a change in the subsidiary’s functional currency from the local currency (Argentinian Peso) to the parent’s reporting currency (USD). This highly-inflationary classification results from the fact that the cumulative inflation rate for the preceding 3 year period exceeded 100 percent as of June 30, 2018. When the Business changes the functional currency, it will remeasure the subsidiary’s financial statements as if the new functional currency (USD) were the reporting currency. Accordingly, effective January 1, 2019, all Argentinian Peso denominated monetary assets and liabilities will be considered foreign currency denominated assets and liabilities and will be remeasured to USD (the functional currency) with remeasurement adjustments in the period recorded in the income statement. The USD will be the functional currency until the economic environment in Argentina ceases to be considered highly-inflationary. Accumulated remeasurement gain amounted to $0.1 as of August 2019.
Use of Estimates
The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the combined financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
New Accounting Guidance
In May 2014, the FASB amended the existing accounting standards for revenue recognition. The amendments are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Business adopted these amendments early effective January 1, 2018 on a modified retrospective basis. The adoption did not have a material impact on the Business’ combined financial statements and related disclosures.
In February 2016, the FASB issued new guidance that will require organizations that lease assets with lease terms of more than 12 months to recognize assets and liabilities for the rights and obligations created by those leases on their balance sheets. The new guidance will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. This guidance will be effective in fiscal year 2021, with early adoption permitted. The Business is currently evaluating the adoption date and the effect that the updated standard will have on its combined financial statements and related disclosures.
In June 2016, the FASB issued new guidance, which was subsequently amended in November 2018, which will require entities to estimate lifetime expected credit losses for trade and other receivables, net investments in leases, financing receivables, debt securities and other instruments, which will result in earlier recognition of credit losses. Further, the new credit loss model will affect how entities in all industries estimate their allowance for losses for receivables that are current with respect to their payment terms. This new guidance further clarifies that impairment of receivables from operating leases should be accounted for in accordance with existing lease accounting guidance. This guidance will be effective in fiscal year 2023. The Business is currently evaluating the effect that the new guidance will have on its combined financial statements and related disclosures.
In February 2018, the FASB issued new guidance, which was issued to address the income tax accounting treatment of the stranded tax effects within other comprehensive income as a result of the enactment of the Tax Cuts and Jobs Act (“TCJA”) on December 22, 2017, which changed the Business’ income tax rate from 35% to 21%. This new guidance changed US GAAP whereby an entity may elect to reclassify the stranded tax effect from accumulated other comprehensive income to retained earnings. The amendments may be adopted in total or in part using a full retrospective or modified retrospective method. The amendments are effective for periods beginning after December 15, 2018. Early adoption is permitted. The Business is assessing the effect that the new guidance will have on its combined financial statements.
 
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Inflation and Economic Conditions
MAFCO and Merisant does not believe that inflation has had a material adverse effect on its revenues or results of operations.
Quantitative and Qualitative Disclosures of Market Risks
Not applicable as a smaller reporting company.
 
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BUSINESS
Overview
We are a global industry-leading platform, focused on the “better for you” consumer packaged goods (“CPG”) and ingredients space. Our branded products and ingredients are uniquely positioned to capitalize on the global secular consumer shift away from sugar and toward clean label products and natural alternatives. We operate a proven platform organized into two segments, comprised of our operating companies 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”):

Branded CPG, comprised of our Merisant division of operating companies, 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 brands in the low- and zero-calorie sweetener market, such as Whole Earth,® Equal,® Canderel® and Pure Via,® and existing branded adjacencies.

Flavors & Ingredients, comprised of our Mafco Worldwide division of operating companies, is our global, business-to-business focused operations 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 Flavors & Ingredients segment operates as our licorice-derived products business.
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Our platform can be leveraged to support new product development, further geographic expansion and to pursue M&A activity. We will seek to expand our branded products platform through investment opportunities in the natural alternatives and clean label categories across the global consumer products industry. Over time, we will look to become a portfolio of brands that Open a World of Goodness™ to consumers and their families.
Competitive Strengths
Global Leader in the Tabletop Zero-Calorie Sweetener Category
Our Branded CPG segment is a global leader in the tabletop zero-calorie sweetener category. We have an established, highly recognizable portfolio of leading brands in large and growing markets across the globe. Legacy brands Equal® and Canderel® have an approximate 40-year sales history and hold the #1 rank in most of our key markets, putting them among the most recognized tabletop sweetener brands in the world. Management estimates brand awareness is between 80% and 95% in our top markets.
 
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Our portfolio also includes two rapidly growing brands targeting the high-growth natural sweetener category, Whole Earth® and Pure Via®. Both Whole Earth® and Pure Via® are in the early stages of their growth and are supported by cost-effective marketing and promotional spend.
Leading Global Manufacturer of Natural Licorice Extract and Derivative Products
Our Flavors & Ingredients segment is the world’s leading manufacturer of licorice extract and derivative products. For over 150 years, the business has played a key role as a supplier of licorice products and has developed valuable, long-term relationships with many key customers, including large, domestic tobacco companies and global flavor house companies. We maintain this position by delivering high-quality licorice extract and derivative products that meet our customers’ strict requirements and by providing a high level of security of supply and superior service to our customers. Historically, the extracts and derivatives businesses of Merisant and MAFCO consistently secured multi-year contracts, illustrating the strategic importance of our products within customer supply chains. Management expects to continue to secure multi-year contracts going forward.
Diversified Customer Base Serving a Variety of End Markets
We maintain a large and diverse global customer base across the Branded CPG and Flavors & Ingredients segments. In 2019, no single customer accounted for more than 10% of our total sales. Management has identified significant opportunities for increasing the customer base via geographic expansion, distribution gains and product innovation.
Low Capital Expenditure Requirements and Attractive Cash Flow Generation Profile
We operate with low capital expenditure requirements. The stable free cash flow profile of our business provides flexibility to drive growth through research and development, brand investment and acquisitions. Branded CPG cash flows benefit from strong brand equity and robust margins. Furthermore, Flavors & Ingredients cash flows benefit from certain barriers to entry, such as long-term customer relationships and an integrated supply chain. Recent restructuring initiatives across both the Branded CPG and Flavors & Ingredients segments support margin gains and help maintain attractive free cash flow conversion going forward.
Global Platform Serving Over 100 Countries
We serve customers in over 100 countries, with robust infrastructure in place to support these operations and grow our business. We have five manufacturing sites serving our Flavors & Ingredients segment and one manufacturing site serving our Branded CPG segment. In addition, we utilize a global network of 20 co-manufacturers and a strong and scalable distribution network of third-party logistics companies and distributors that can support a growing business. Our management team has strong global relationships with many customers and channels, including grocery, club stores, distributors and food service operators across a number of key geographies that accelerates new product placement and will help us expand our presence in currently under-penetrated markets, such as India and China.
Proven Management Team
We have an experienced management team that intends to execute on various value creation strategies honed at The Hain Celestial Group, Inc. (Nasdaq: HAIN) (“Hain Celestial”), PepsiCo, Inc. (Nasdaq: PEP), and other successful CPG companies. We are led by our Chief Executive Officer, Albert Manzone, who is supported by Chief Financial Officer, Andy Rusie, and President of Flavors & Ingredients, Luke Bailey. In addition, Irwin D. Simon, founder and former Chief Executive Officer of Hain Celestial, serves as our Executive Chairman.
 
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Growth Strategies
Continue to Drive Product Innovation and Selected Product Extensions
Our management team focuses on product innovation in both fast-growing, natural products (Whole Earth, ® Pure Via®) and the artificial business (Equal, ® Canderel®). Recent product launches across various geographical markets have been well-received by consumers, and we believe that sales of new products will continue to have a positive impact on revenue going forward. In the Branded CPG segment, the recently-launched and soon-to-be-launched product pipeline includes:

Flavors: French Vanilla and Pumpkin Spice sold under the Equal® brand name

Functionals: Vitamins, caffeine and anti-inflammatory (turmeric) sold under both the Equal® and Whole Earth® brand names

Baking Products: Sweeteners using erythritol, allulose and monk fruit sold under the Whole Earth® brand names

Sugar-Laden Adjacencies: Jams, chocolate and granola sold under the Pure Via, ® Canderel® and Whole Earth® brand names
In our Flavors & Ingredients segment, we sell over 400 customer-specific licorice products, which are used across a wide variety of end markets and applications. We are able to adapt to changing market conditions, and our management team has identified opportunities for continued research and development, and expansion of product offerings as consumer preferences shift towards natural products.
Licorice derivatives, including our trademark line of Magnasweet® products, are widely used in low-calorie, low-salt and low-fat food and beverage applications. Licorice derivatives have specific functional properties that solve problems for product developers across a wide range of applications. In food and beverage applications, licorice derivatives are effective as flavoring agents and are used for masking undesirable tastes and enhancing, intensifying and prolonging sweetness and other flavors. Our licorice derivatives are also important functional ingredients in personal care products, principally for their moisturizing properties, and are used to help soothe topical skin conditions and irritations. In cosmetics, they are used for skin smoothing and to brighten skin appearance. In pharmaceuticals, licorice derivatives are used in a variety of products such as over-the-counter cough medicines, gastrointestinal and liver medications.
 
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Support North American Growth with Natural Product Sales, New Product Innovation Launches, and Distribution Gains
We have a strong market presence in North America, which is enhanced by growth in consumer demand for natural products, new product innovation and distribution gains. Our Branded CPG division’s North American net sales grew 2% in 2019, outperforming key competing brands in the retail grocery sales channel in 2019. The primary driver was increased sales of Whole Earth®-branded products and new innovation launches for products under the Equal® brand.
We believe that there is a large opportunity for growth in North America and that we have benefited from contacts and relationships in the natural retailer channel, and increased brand support and reinvestment of cash flow. These efforts are intended to drive retailer support and engagement with club stores and super regional grocers to help increase distribution of our new products. Higher brand support is intended to engage consumers in a targeted way to increase product awareness amongst natural affinity groups. In addition, we believe there is an opportunity to grow our brands during the COVID-19 period as consumers have a greater need for in-home consumption. This includes usage of our products in hot beverages like coffee and tea as well as our baking products.
Support Continued Growth in Developing Economies and Entrance Into New Geographies
Sugar-related health problems are becoming a critical concern to governments and populations in developing economies as diabetes and obesity rates rise. Our management team believes that the need for solutions, together with rising incomes in these geographies, represent macro tailwinds driving local consumers to seek alternatives to sugar. Positive consumption and awareness trends are driving sweetener penetration rates and expanding the category in these countries. Moreover, consumer affinity for developed economy brands such as Equal® and Canderel,® position them as premier products. We focus on accelerating brand-building, innovation and marketplace execution in geographies where Equal® and Canderel® are considered premier brands.
In the Latin America and Asia Pacific regions, adoption of our original products has been strong and, on a constant currency basis, net sales grew 5% and 8%, respectively, in 2019. In addition, we are expected to have significant new opportunities for growth in India and China. We believe that we are underpenetrated in these two large markets and that our management team can help increase distribution by accessing prior relationships.
Supplement Organic Growth with Targeted Tuck-In M&A
Our management team and board of directors have significant experience in executing and integrating M&A transactions and view targeted tuck-in M&A as a core part of our value creation strategy. Our directors and officers maintain a robust list of potentially actionable acquisition opportunities across end markets to build scale, strengthen market position, enter new geographies globally, and expand into new product verticals. These potential targets cover both the Branded CPG and Flavors & Ingredients segments and include companies in a variety of sizes and geographies.
Our Business Segments
Overview
Our Branded CPG and Flavors & Ingredient 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.
Our Merisant and MAFCO operating companies are organized in a way that leverages long histories of brand leadership across their respective product categories, which allows us to align our product and commercial strategies to meet the needs of a broad set of customers, and facilitates an efficient and effective innovation pipeline.
 
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The table below describes the percentage of our total annual revenue attributable to each of our segments over each of the three years ended December 31, 2019. For additional financial information relating to our reportable business segments, please refer to Note 14 in the Audited Combined Financial Statements of Merisant and MAFCO included elsewhere in this prospectus.
2019
2018
2017
Branded CPG
61% 60% 58%
Flavors & Ingredients
39% 40% 42%
Merisant
Merisant is a worldwide leader in tabletop zero-calorie and low-calorie sweeteners. Merisant manufactures, markets and distributes packaged zero-calorie and low-calorie tabletop sweeteners for the domestic and international consumer food markets, primarily under the Whole Earth,® Equal,® Canderel® and Pure Via® brands. Merisant distributes its products via the retail, food service and e-commerce channels. Merisant does not make or sell ingredients. A summary of Merisant’s flagship brands includes:

Whole Earth®: A fast growing, global low-calorie sweetener brand in the natural segment of the market, primarily marketed in North America, Australia and New Zealand.

Equal®: primarily marketed in North America, the Asia/Pacific region, and Latin America.

Canderel®: primarily marketed in Europe, Africa and the Middle East.

Pure Via®: A fast growing, global low-calorie sweetener brand in the natural segment of the market, primarily marketed in Western Europe.
Since the introduction of the original Canderel® and Equal® products in 1979 and 1982, respectively, Merisant and its predecessor entities have offered consumers high quality alternatives to sugar for daily use. As the global health crisis related to sugar consumption continues to grow, consumers remain focused on finding substitutes for tabletop sugar and sugar-laden products. In recent years, Merisant has met consumer demand by introducing new natural sweeteners made from stevia and naturally derived sugar alcohols under Whole Earth® and Pure Via® brands (as well as under the Canderel® and Equal® brands) and introduced low- or no-sugar alternatives to traditionally sugar-laden products such as chocolate, jams, granola, and cereal bars. These initiatives have further established Merisant as a leader in the “better for you” movement away from sugar.
Mafco Worldwide
Founded in 1850, Mafco Worldwide has been a leading global manufacturer and supplier of licorice derivative and extract products, primarily serving beverage, confectionary, cosmetic, food, nutritional, pharmaceutical, personal care and tobacco end markets. Mafco Worldwide’s products provide a variety of solutions to its customers including flavoring enhancement, flavor / aftertaste masking, moisturizing, product mouth feel modification and skin soothing characteristics. A summary of Mafco Worldwide’s products includes:

Derivative Products: Derivative products are based on a unique compound found only in licorice root, glycyrrhizic acid. Mafco Worldwide sells derivative products both as a line of proprietary compound flavors under the Magnasweet® brand as well as in a pure isolated form.

Extract Products: Extract products are a concentrated form of the water-soluble extractible solids from the raw licorice root. Once extraction is complete, the extract is converted into powder, semi-fluid or blocks, depending on the customer’s requirements.
Mafco Worldwide’s ability to reliably deliver a consistent, highly customized, superior product has been at the core of its longevity and long-term customer relationships. As of December 31, 2019, Mafco Worldwide sells over 400 customer-specific licorice products, consistently meeting demanding taste, chemical, physical, microbiological and regulatory specifications and standards. Mafco Worldwide’s ability to deliver this breadth of products is due to its extensive knowledge and experience with the raw material sourcing and manufacturing processes. This is further supported by Mafco Worldwide’s industry-leading supply security
 
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and availability, which consists of best-in-class supply chain capabilities, long-standing relationships with key raw material suppliers, and maintenance of substantial raw material reserve inventory around the world.
Our Industry
Branded CPG
There is an ongoing shift in consumer and retailer demand for sugar alternatives due to the public health risks associated with sugar intake such as obesity, diabetes and heart disease. As the incidence rates of these health issues continue to increase around the world, demand for non-sugar substitutes is expected to grow.
In the developed world, consumer demand has notably shifted towards natural non-sugar alternatives. Natural sweeteners appeal to consumers seeking natural, organic and non-GMO products for their diet. Globally, the stevia market is expected to experience 6.0% CAGR from 2016 to 2021, reflecting an increase from $366 million to $489 million, respectively.
In the developing world, both artificial and natural sweeteners are gaining momentum as consumers understand the consequences of excessive sugar consumption. Given the relative purchasing power of consumers in the developing world and the lower price point of artificial versus natural products, we expect artificial products will be the primary growth driver of tabletop sweetener demand in those markets in the near-term. From 2013 through 2018, artificial sweetener volume in the developing world grew at a 3.2% CAGR.
Flavors & Ingredients
The functional ingredients market consists of products that typically account for a small amount of the customer’s cost of sales, but are vitally important to functionality. Within the functional ingredients market, the licorice category is comprised of various companies that provide this type of product to end markets such as food and beverage, OTC pharma, cosmetics, personal care, confectionery and tobacco. Companies in the licorice category can sell directly to end-use consumer packaged goods companies, flavor houses, distributors, or other intermediaries within the licorice category. Different operators focus on root collection, intermediate manufacturing, finished goods manufacturing, selling, distribution, or some combination of each item listed.
Our Brands / Products
Our portfolio consists of three main product groups: sweeteners, adjacencies and ingredients. Our key product lines include newly developed innovative products such as our Whole Earth® Allulose Baking Blends. We have the #1 branded market share in product categories that comprised over 60% of our total revenue in fiscal year 2019.
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Branded CPG
Our Branded CPG products are sold under both our global flagship brands as well as local and private label brands. Our global flagship brands include Canderel,® Equal,® Whole Earth® and Pure Via.® Our Branded CPG segment offers a variety of sweetener formulations under each brand to address local consumer preferences and price points. The key ingredients utilized in these products include aspartame, sucralose, saccharine, stevia and monk fruit, all of which are sourced through Merisant’s global supply chain.
Merisant sweetener products are sold under a variety of forms to satisfy consumers growing usage across diverse consumption occasions. Those forms include powder sachet, mini tablets, cubes, powder bags, powder jars, and liquid bottles.
We have expanded our product offerings in recent years into adjacent consumer packaged goods such as jams and chocolate under our well-known CPG brands. We also invest in innovation to develop new product offerings to distribute under our various brands, providing differentiation from our competitors and exciting new products for customers. In addition, our adjacent branded packaged goods such as jams and chocolate are sold in chocolate bars, dried chocolate powder, and jam jars.
Brand
Key Markets
Price Point
Key Product Type
Whole Earth®
United States, Puerto Rico, Australia, New Zealand, Canada Premium Sweeteners
Pure Via®
France, UK, Belgium, Netherlands, South Africa, Mexico, Hungary, Portugal
United States
Premium
Mid-Priced
Sweeteners, jams
Sweeteners
Equal®
United States, Mexico, Puerto Rico, Australia, New Zealand, Canada
South Africa
Premium
Mid-Priced
Sweeteners, chocolates
Sweeteners
Canderel®
France, UK, Belgium, Netherlands, South Africa, Mexico, Hungary, Portugal, Middle East Premium Sweeteners, jams, chocolates, granola, bars
Sugarly Sweet®
United States Mid-Priced Sweeteners
SweetMate®
United States, Mexico Mid-Priced Sweeteners
EqualSweet®
Argentina Premium Sweeteners
Misura,®
Mivida™
Italy Premium Sweeteners, supplements