free-20220930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


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

For the quarterly period ended September 30, 2022


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

For the transition period from to

Commission File No. 001-38880


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

Delaware (State or other jurisdiction of incorporation or organization)						38-4101973 (I.R.S. Employer Identification No.)
125 S. Wacker Drive, Suite 1250 Chicago, Illinois						60606
(Address of Principal Executive Offices)						(Zip Code)


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

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

Title of each class

Trading Symbol(s)

Name of each exchange on which
registered

Common stock, par value $0.0001 per share

FREE

The NASDAQ Stock Market LLC

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

FREEW

The NASDAQ Stock Market LLC

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

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

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

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

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

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

As of November 7, 2022, there were 41,982,944 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.

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WHOLE EARTH BRANDS, INC.

Quarterly Report on Form 10-Q

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		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3.	Defaults Upon Senior Securities	35
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	36
Item 6.	Exhibits	36
Signatures		37

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

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Whole Earth Brands, Inc.

Condensed Consolidated Financial Statements (Unaudited)

For the Quarter Ended September 30, 2022


Condensed Consolidated Financial Statements

Condensed Consolidated Balance Sheets			5

Condensed Consolidated Statements of Operations			6

Condensed Consolidated Statements of Comprehensive Income (Loss)			7

Condensed Consolidated Statements of Equity			8

Condensed Consolidated Statements of Cash Flows			10

Notes to Condensed Consolidated Financial Statements			11
Note 1: Basis of Presentation and Significant Accounting Policies			11
Note 2: Business Combinations			13
Note 3: Inventories			15
Note 4: Goodwill and Other Intangible Assets			16
Note 5: Debt			17
Note 6: Warrants			18
Note 7: Fair Value of Financial Instruments			18
Note 8: Commitments and Contingencies			19
Note 9: Income Taxes			19
Note 10: Pension Benefits			20
Note 11: Stock-Based Compensation			21
Note 12: Earnings Per Share			23
Note 13: Accumulated Other Comprehensive Income (Loss)			24
Note 14: Related Party Transactions			24
Note 15: Business Segments			25

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

	September 30, 2022		December 31, 2021
Assets
Current Assets
Cash and cash equivalents	$	20,846	$	28,296
Accounts receivable (net of allowances of $1,815 and $1,285, respectively)	69,420		69,590
Inventories	228,830		212,930
Prepaid expenses and other current assets	11,849		7,585
Total current assets	330,945		318,401

Property, Plant and Equipment, net	55,900		58,503

Other Assets
Operating lease right-of-use assets	20,781		26,444
Goodwill	233,578		242,661
Other intangible assets, net	245,809		266,939
Deferred tax assets, net	3,964		1,993
Other assets	9,346		7,638
Total Assets	$	900,323	$	922,579

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	50,872	$	55,182
Accrued expenses and other current liabilities	26,978		30,733
Contingent consideration payable	—		54,113
Current portion of operating lease liabilities	8,338		7,950
Current portion of long-term debt	3,750		3,750
Total current liabilities	89,938		151,728
Non-Current Liabilities
Long-term debt	435,741		383,484
Warrant liabilities	208		2,053
Deferred tax liabilities, net	30,351		35,090
Operating lease liabilities, less current portion	15,841		22,575
Other liabilities	13,191		13,778
Total Liabilities	585,270		608,708
Commitments and Contingencies (Note 8)	—		—
Stockholders’ Equity
Preferred shares, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding at September 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value; 220,000,000 shares authorized; 41,977,814 and 38,871,646 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	4		4
Additional paid-in capital	360,826		330,616
Accumulated deficit	(24,905)		(26,436)
Accumulated other comprehensive income (loss)	(20,872)		9,687
Total stockholders’ equity	315,053		313,871
Total Liabilities and Stockholders’ Equity	$	900,323	$	922,579

See Notes to Unaudited Condensed Consolidated Financial Statements

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

	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Product revenues, net	$	135,280	$	128,941	$	399,375	$	361,259
Cost of goods sold	100,263		85,912		287,486		241,224
Gross profit	35,017		43,029		111,889		120,035

Selling, general and administrative expenses	23,566		24,838		76,314		85,573
Amortization of intangible assets	4,629		4,675		13,998		13,532

Restructuring and other expenses	—		—		—		4,503

Operating income	6,822		13,516		21,577		16,427

Change in fair value of warrant liabilities	186		2,178		1,240		(425)
Interest expense, net	(8,214)		(6,553)		(20,674)		(18,027)
Loss on extinguishment and debt transaction costs	—		—		—		(5,513)
Other income (expense), net	92		(780)		2,745		(280)
(Loss) income before income taxes	(1,114)		8,361		4,888		(7,818)
Provision (benefit) for income taxes	1,407		(445)		3,357		(8,294)
Net (loss) income	$	(2,521)	$	8,806	$	1,531	$	476

Net (loss) earnings per share:
Basic	$	(0.06)	$	0.23	$	0.04	$	0.01
Diluted	$	(0.06)	$	0.17	$	0.04	$	0.01

See Notes to Unaudited Condensed Consolidated Financial Statements

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

	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Net (loss) income	$	(2,521)	$	8,806	$	1,531	$	476
Other comprehensive income (loss), net of tax:
Net change in pension benefit obligations recognized, net of taxes of $(63), $(5), $(129) and $(18), respectively	21		202		(186)		165
Foreign currency translation adjustments	(13,522)		(3,599)		(30,373)		(324)
Total other comprehensive loss, net of tax	(13,501)		(3,397)		(30,559)		(159)
Comprehensive (loss) income	$	(16,022)	$	5,409	$	(29,028)	$	317

See Notes to Unaudited Condensed Consolidated Financial Statements

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

	Common Stock			Additional Paid-in		Accumulated		Accumulated Other Comprehensive		Total Stockholders’
	Shares	Amount		Capital		Deficit		Income		Equity
Balance at December 31, 2020	38,426,669	$	4	$	325,679	$	(25,442)	$	8,605	$	308,846
Reclassification of Private Warrants (Note 1)	—	—		(7,062)		(1,077)		—		(8,139)
Transfer of Private Warrants to Public Warrants	—	—		2,502		—		—		2,502
Net loss	—	—		—		(12,025)		—		(12,025)
Other comprehensive loss, net of tax	—	—		—		—		(2,038)		(2,038)
Stock-based compensation	—	—		1,639		—		—		1,639
Balance at March 31, 2021	38,426,669	4		322,758		(38,544)		6,567		290,785
Net income	—	—		—		3,695		—		3,695
Other comprehensive income, net of tax	—	—		—		—		5,276		5,276
Stock-based compensation	—	—		2,392		—		—		2,392
Net share settlements of stock-based awards	29,090	—		—		—		—		—
Balance at June 30, 2021	38,455,759	4		325,150		(34,849)		11,843		302,148
Transfer of Private Warrants to Public Warrants (Note 6)	—	—		3,555		—		—		3,555
Net income	—	—		—		8,806		—		8,806
Other comprehensive loss, net of tax	—	—		—		—		(3,397)		(3,397)
Warrant exercises	50	—		1		—		—		1
Stock-based compensation	—	—		2,534		—		—		2,534
Net share settlements of stock-based awards	21,914	—		(115)		—		—		(115)
Balance at September 30, 2021	38,477,723	$	4	$	331,125	$	(26,043)	$	8,446	$	313,532

See Notes to Unaudited Condensed Consolidated Financial Statements

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

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

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

Net income	—	—		—		1,326		—		1,326
Other comprehensive loss, net of tax	—	—		—		—		(14,831)		(14,831)

Stock-based compensation	—	—		1,564		—		—		1,564
Net share settlements of stock-based awards	92,253	—		(91)		—		—		(91)
Net share settlements under management bonus plan	203,763	—		1,402		—		—		1,402
Balance at June 30, 2022	41,973,680	4		359,095		(22,384)		(7,371)		329,344

Net loss	—	—		—		(2,521)		—		(2,521)
Other comprehensive loss, net of tax	—	—		—		—		(13,501)		(13,501)

Stock-based compensation	—	—		1,743		—		—		1,743
Net share settlements of stock-based awards	4,134	—		(12)		—		—		(12)
Balance at September 30, 2022	41,977,814	$	4	$	360,826	$	(24,905)	$	(20,872)	$	315,053

See Notes to Unaudited Condensed Consolidated Financial Statements

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

	Nine Months Ended
	September 30, 2022		September 30, 2021
Operating activities
Net income	$	1,531	$	476
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Stock-based compensation	4,957		7,191
Depreciation	4,324		3,230
Amortization of intangible assets	13,998		13,532
Deferred income taxes	(4,586)		2,210

Amortization of inventory fair value adjustments	(2,537)		(882)
Non-cash loss on extinguishment of debt	—		4,435
Change in fair value of warrant liabilities	(1,240)		425
Changes in current assets and liabilities:
Accounts receivable	(3,746)		(2,452)
Inventories	(20,926)		(4,200)
Prepaid expenses and other current assets	(1,972)		(894)
Accounts payable, accrued liabilities and income taxes	(5,196)		(16,706)
Other, net	(1,871)		190
Net cash (used in) provided by operating activities	(17,264)		6,555

Investing activities
Capital expenditures	(6,947)		(7,076)
Acquisitions, net of cash acquired	—		(190,231)
Proceeds from the sale of fixed assets	50		4,257
Net cash used in investing activities	(6,897)		(193,050)

Financing activities
Proceeds from revolving credit facility	54,000		25,000
Repayments of revolving credit facility	—		(47,855)
Long-term borrowings	—		375,000
Repayments of long-term borrowings	(2,812)		(138,376)
Debt issuance costs	(682)		(11,589)
Payment of contingent consideration	(29,108)		—
Proceeds from sale of common stock and warrants	—		1
Tax withholdings related to net share settlements of stock awards	(874)		(115)
Net cash provided by financing activities	20,524		202,066

Effect of exchange rate changes on cash and cash equivalents	(3,813)		1,110
Net change in cash and cash equivalents	(7,450)		16,681
Cash and cash equivalents, beginning of period	28,296		16,898
Cash and cash equivalents, end of period	$	20,846	$	33,579

Supplemental disclosure of cash flow information
Interest paid	$	19,161	$	15,627
Taxes paid, net of refunds	$	7,510	$	3,999
Supplemental disclosure of non-cash investing
Non-cash capital expenditures	$	—	$	3,796

See Notes to Unaudited Condensed Consolidated Financial Statements

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 1: BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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

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

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

As a result of the Business Combination, for accounting purposes, Act II was deemed to be the acquirer and Mafco Worldwide and Merisant Company were deemed to be the acquired parties.

Basis of Presentation—The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. The balance sheet data as of December 31, 2021 was derived from the audited consolidated financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated and combined financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K.

In the opinion of management, the financial statements contain all adjustments necessary to state fairly the financial position of the Company as of September 30, 2022 and the results of operations and cash flows for all periods presented. All adjustments in the accompanying unaudited condensed consolidated financial statements, which management believes are necessary to state fairly the financial position, results of operations and cash flows, have been reflected and are of a normal recurring nature. Results of operations for interim periods are not necessarily indicative of results to be expected for the full year.

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

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

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Accounting Standards Codification “ASC” 740) - Simplifying the Accounting for Income Taxes.” The standard enhances and simplifies various aspects of the income tax accounting guidance. For public entities, the standard is effective for annual periods and interim periods beginning after December 15, 2020. This standard is effective for the Company as an EGC for the fiscal years beginning after December 15, 2021. Early adoption is permitted. The Company adopted this standard on January 1, 2022. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” Subject to meeting certain criteria, the new guidance provides optional expedients and exceptions to applying contract modification accounting under existing U.S. GAAP, to address the expected phase out of the London Inter-bank Offered Rate (“LIBOR”) by the end of 2021. The amendments in ASU 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The new standard was effective upon issuance and upon adoption can be applied prospectively to applicable contract modifications made on or before December 31, 2022. The Company adopted this standard during the second quarter of 2022. The adoption of this standard did not have a material impact on the Company’s unaudited condensed consolidated financial statements.

Accounting Standards Not Yet Adopted—In June 2016, the FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326).” The standard requires entities to estimate losses on financial assets measured at amortized cost, including trade receivables, debt securities and loans, using an expected credit loss model. The expected credit loss differs from the previous incurred losses model primarily in that the loss recognition threshold of “probable” has been eliminated and that expected loss should consider reasonable and supportable forecasts in addition to the previously considered past events and current conditions. Additionally, the guidance requires additional disclosures related to the further disaggregation of information related to the credit quality of financial assets by year of the asset’s origination for as many as five years. Entities must apply the standard provision as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. This standard is effective for the Company as an EGC for fiscal years beginning after December 15, 2022 including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting ASU 2016-13 on its consolidated financial statements.

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

In connection with the restructuring plans, the Company recognized restructuring and other expenses of $4.5 million for the nine months ended September 30, 2021, primarily consisting of facility exit and other related costs. During the nine months ended September 30, 2022, the Company paid employee termination benefits of $0.4 million. The Company had accrued severance expense related to the restructuring plans of $0.4 million and $0.8 million at September 30, 2022 and December 31, 2021, respectively, which is recorded in accrued expenses and other current liabilities in its unaudited condensed consolidated balance sheets.

Warrant Liabilities—The Company accounts for the Private Warrants in accordance with ASC Topic 815, “Derivatives and Hedging.” Under the guidance contained in ASC Topic 815-40, the Private Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Private Warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. The liability is subject to re-measurement at each balance sheet date, and any change in fair value is recognized in the Company’s statement of operations. The Private Warrants are valued using a Black-Scholes option pricing model.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Based on the views expressed in the SEC’s Staff Statement of April 12, 2021 in which the SEC staff clarified its interpretations of certain generally accepted accounting principles related to certain terms common in warrants issued by Special Purpose Acquisition Companies (“SPACs”), the Company determined that the Private Warrants should be treated as derivative liabilities rather than as components of equity, as previously presented as of December 31, 2020. Accordingly, the Company recorded out of period adjustments to the unaudited Condensed Consolidated Balance Sheet at January 1, 2021 to reclassify warrant liabilities of $8.1 million and transaction costs incurred by Act II of $1.1 million related to the issuance of the Private Warrants. Additionally, during the first quarter of 2021, the Company recognized the cumulative effect of the error on prior periods by recording a $1.2 million gain in the Statement of Operations to reflect the cumulative decrease in the fair value of the Private Warrants from the date of issuance through December 31, 2020. The Company concluded that this misstatement was not material to the current period or the previously filed financial statements.

NOTE 2: BUSINESS COMBINATIONS

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

On February 5, 2021, pursuant to the terms of the Wholesome Purchase Agreement, the Company purchased and acquired all of the issued and outstanding shares of capital stock for an initial cash purchase price of $180 million plus up to an additional $55 million (the “Earn-Out Amount”) upon the satisfaction of certain post-closing financial metrics. Subject to the terms and conditions of the Wholesome Purchase Agreement payment of the Earn-Out Amount, in whole or in part, was subject to Wholesome achieving certain EBITDA thresholds at or above approximately $30 million during the period beginning August 29, 2020, and ending December 31, 2021 (the “Earn-Out Period”). A portion of the Earn-Out Amount (up to $27.5 million) could be paid, at the Company’s election, in freely tradeable, registered shares of Company common stock calculated using the 20-day volume weighted average trading price per share as of the date of determination. Calculation of the achievement of the Earn-Out Amount was subject to certain adjustments more thoroughly described in the Wholesome Purchase Agreement. In connection with the acquisition of Wholesome, the Company incurred transaction-related costs of $0.1 million in the three months ended September 30, 2021 and $0.2 million and $4.7 million in the nine months ended September 30, 2022 and 2021, respectively.

Following the completion of the Earn-Out Period, the Company determined, in accordance with the terms of the Purchase Agreement, that the sellers were entitled to receive the Earn-Out Amount in full. The Company elected to satisfy part of the Earn-Out Amount in common stock and on February 23, 2022, issued 2,659,574 shares of the Company’s common stock. The remaining $30 million portion of the $55 million Earn-Out Amount was paid in cash which was funded from available capacity under the Company’s revolving credit facility. The settlement of the earn-out resulted in a non-cash gain of $1.1 million that was recorded in the first quarter of 2022 which represents the difference in the value of the common stock issued using the 20-day volume weighted average trading price per share as compared to the trading price on the date of issuance.

The following summarizes the purchase consideration (in thousands):


Base cash consideration	$	180,000
Closing adjustment	13,863
Fair value of Earn-Out Amount	52,395
Total Purchase Price	$	246,258

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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


Cash and cash equivalents	$	2,664
Accounts receivable	15,868
Inventories	76,879
Prepaid expenses and other current assets	1,322
Property, plant and equipment, net	3,134
Operating lease right-of-use assets	7,585
Intangible assets	104,500

Other assets	1,189
Total assets acquired	213,141
Accounts payable	5,251
Accrued expenses and other current liabilities	10,576
Current portion of operating lease liabilities	1,435
Operating lease liabilities, less current portion	6,150
Deferred tax liabilities, net	24,234

Total liabilities assumed	47,646
Net assets acquired	165,495
Goodwill	80,763
Total Purchase Price	$	246,258

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


Identifiable intangible assets	Fair Value (in thousands)		Useful Life (in years)
Customer relationships	$	55,700	10
Tradenames	48,800		25
	$	104,500

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

The Company’s allocation of purchase price was based upon valuations performed to determine the fair value of the net assets as of the acquisition date and was subject to adjustments for up to one year after the closing date of the acquisition to reflect final valuations. The allocation of purchase price was finalized in the first quarter of 2022.

In 2021, the Company recorded measurement period adjustments to its initial allocation of purchase price as a result of ongoing valuation procedures on assets and liabilities assumed, including (i) an increase in purchase price of $3.6 million due to the finalization of the closing adjustment; (ii) a decrease to inventory of $1.8 million; (iii) an increase in prepaid expenses and other current assets of $0.5 million; (iv) an increase in property, plant and equipment of $0.4 million; (v) a decrease to intangible assets of $1.9 million; (vi) a decrease to other assets of $0.1 million; (vii) a decrease to accrued expenses and other current liabilities of $2.7 million; (viii) a decrease to deferred tax liabilities, net of $2.8 million; and (ix) an increase to goodwill of $1.0 million due to the incremental measurement period adjustments discussed in items (i) through (viii). The impact of measurement period adjustments to the results of operations was immaterial.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The results of the Company’s operations for the three and nine months ended September 30, 2021 include the results of Wholesome since February 5, 2021. Product revenues, net and operating income of Wholesome included in the Company’s condensed consolidated statement of operations for the three months ended September 30, 2021 was $53.1 million and $7.5 million, respectively, and for the nine months ended September 30, 2021 was $125.3 million and $12.6 million, respectively.

Pro Forma Financial Information—The following unaudited pro forma financial information summarizes the results of operations of the Company for the three and nine months ended September 30, 2021 as though the Wholesome acquisition had occurred on January 1, 2020 (in thousands):


	Pro Forma Statement of Operations

	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Revenue	$	128,941	$	381,639
Net income	$	9,551	$	10,656

The unaudited pro forma financial information does not assume any impacts from revenue, cost or other operating synergies that could be generated as a result of the acquisition. The unaudited pro forma financial information is for informational purposes only and is not indicative of the results of operations that would have been achieved had the Wholesome acquisition been consummated on January 1, 2020.

The pro forma financial information for the three and nine months ended September 30, 2021 includes adjustments to reflect intangible asset amortization based on the economic values derived from definite-lived intangible assets, interest expense on the new debt financing, and the release of the inventory fair value adjustments into cost of goods sold. These adjustments are net of taxes. The results of the Company’s operations for the three and nine months ended September 30, 2022 include Wholesome for the entire period and therefore pro forma financial information is not required.

NOTE 3: INVENTORIES

Inventories consisted of the following (in thousands):



	September 30, 2022		December 31, 2021
Raw materials and supplies	$	130,359	$	129,712
Work in process	2,912		1,480
Finished goods	95,559		81,738
Total inventories	$	228,830	$	212,930

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 4: GOODWILL AND OTHER INTANGIBLE ASSETS

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



	September 30, 2022						December 31, 2021
	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Other intangible assets subject to amortization
Customer relationships (useful life of 5 to 10 years)	$	104,656	$	(23,000)	$	81,656	$	106,013	$	(14,478)	$	91,535
Tradenames (useful life of 25 years)	166,869		(13,416)		153,453		173,522		(8,818)		164,704
Total	$	271,525	$	(36,416)	235,109		$	279,535	$	(23,296)	256,239
Other intangible assets not subject to amortization
Product formulations					10,700						10,700
Total other intangible assets, net					245,809						266,939
Goodwill					233,578						242,661
Total goodwill and other intangible assets					$	479,387					$	509,600

At September 30, 2022 and December 31, 2021, goodwill at Branded CPG was $230.0 million and $238.9 million, respectively. Goodwill at Flavors & Ingredients was $3.6 million and $3.8 million at September 30, 2022 and December 31, 2021, respectively.

The amortization expense for intangible assets was $4.6 million and $14.0 million for the three and nine months ended September 30, 2022, respectively, and $4.7 million and $13.5 million for the three and nine months ended September 30, 2021, respectively.

Amortization expense relating to amortizable intangible assets as of September 30, 2022 for the next five years is expected to be as follows (in thousands):


Remainder of 2022	$	4,680
2023	18,721
2024	18,721
2025	18,488
2026	18,267
2027	17,040

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 5: DEBT

Debt consisted of the following (in thousands):


	September 30, 2022		December 31, 2021
Term loan, due February 2028	$	369,375	$	372,187
Revolving credit facility, due February 2026	79,000		25,000
Less: current portion	(3,750)		(3,750)
Less: unamortized discount and debt issuance costs	(8,884)		(9,953)
Total long-term debt	$	435,741	$	383,484

At December 31, 2021, the Company’s senior secured loan agreement consisted of a senior secured term loan facility (the “Term Loan Facility”) of $375 million and a revolving credit facility of up to $75 million (the “Revolving Facility,” and together with the Term Loan Facility, the “Credit Facilities”). At December 31, 2021, there were $2.1 million of outstanding letters of credit that reduced the Company’s availability under the revolving credit facility. The Company’s unamortized discounts and debt issuance costs related to the Term Loan Facility and the Revolving Facility were $10.0 million and $1.8 million, respectively, at December 31, 2021. The unamortized debt issuance costs related to the Revolving Facility are included in other assets in the condensed consolidated balance sheet. See Note 7 to the Company’s consolidated and combined financial statements in its Annual Report on Form 10-K for the year ended December 31, 2021 for further information and significant terms and conditions associated with the Term Loan Facility and Revolving Facility.

In connection with the closing of the Wholesome Transaction, on February 5, 2021, the Company and certain of its subsidiaries entered into an amendment and restatement agreement (the “Amended and Restated Agreement”) which amended and restated its then existing senior secured loan agreement dated as of June 25, 2020. As of the date of the Amended and Restated Agreement, the aggregate unamortized debt issuance costs totaled $6.2 million, of which $4.4 million was expensed as a loss on extinguishment of debt in the first quarter of 2021. Additionally, in connection with the Amended and Restated Credit Agreement, the Company paid fees to certain lenders of $3.8 million, which was considered a debt discount, all of which was deferred, and incurred transaction costs of $8.9 million, of which $7.8 million was deferred and $1.1 million was expensed as part of loss on extinguishment and debt transaction costs in the first quarter of 2021.

As further described in Note 2, following the completion of the Wholesome Earn-Out Period, the Company determined, in accordance with the terms of the Purchase Agreement, that the sellers were entitled to receive the Earn-Out Amount in full. The Company elected to satisfy part of the Earn-Out Amount in common stock and on February 23, 2022, issued 2,659,574 shares of the Company’s common stock. The remaining $30 million portion of the $55 million Earn-Out Amount was paid in cash which was funded from available capacity under the Company’s revolving credit facility.

On June 15, 2022, the Company and certain of its subsidiaries entered into a first amendment (the “Amendment”) to the Amended and Restated Agreement dated as of February 5, 2021. The Amendment increased the aggregate principal amount of the Revolving Credit Facility from $75 million to $125 million (the “Amended Revolving Credit Facility”) and transitioned from LIBOR to Secured Overnight Financing Rate (“SOFR”) as the benchmark for purposes of calculating interest for all loans outstanding under the Amended and Restated Credit Agreement. At the election of the Company, loans outstanding under the Amended and Restated Credit Agreement will accrue interest at a rate per annum equal to (i) term SOFR plus 0.10%, 0.15%, or 0.25% in case of, respectively, a one-month, three-month, or six-month interest period (“Adjusted Term SOFR”), or (ii) the greater of the prime rate, the federal funds effective rate plus 0.50%, and one-month Adjusted Term SOFR plus 1.00%, in each case plus the applicable margin which is equal to (i) with respect to Amended Revolving Credit Facility and letters of credit, (A) 2.75%, in the case of base rate advances, and (B) 3.75% in the case of SOFR advances, and (ii) with respect to the Term Loan Facility, (A) 3.50%, in the case of base rate advances, and (B) 4.50% in the case of SOFR advances. In connection with the Amendment, the Company paid fees and incurred transaction costs of $0.7 million, all of which was deferred.

The transition to SOFR did not materially impact the interest rates applied to the Company’s borrowings. No other material changes were made to the terms of the Company’s Amended and Restated Agreement as a result of the Amendment.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

At September 30, 2022, the Company’s senior secured loan agreement consisted of the Term Loan Facility and the Amended Revolving Credit Facility. At September 30, 2022, there were $2.1 million of outstanding letters of credit that reduced the Company’s availability under the Amended Revolving Credit Facility. The Company’s unamortized discounts and debt issuance costs related to the Term Loan Facility and the Amended Revolving Credit Facility were $8.9 million and $2.1 million, respectively, at September 30, 2022. The unamortized debt issuance costs related to the Amended Revolving Credit Facility are included in other assets in the Company’s condensed consolidated balance sheets.

NOTE 6: WARRANTS

As of the date of the Business Combination, the Company had approximately 20,263,500 warrants outstanding, consisting of (i) 15,000,000 public warrants originally sold as part of the units issued in Act II’s initial public offering (the “Public Warrants”) and (ii) 5,263,500 Private Warrants that were sold by Act II to the PIPE Investors in conjunction with the Business Combination (collectively with the Public Warrants, the “Warrants”). Each warrant is exercisable for one-half of one share of the Company’s common stock at a price of $11.50 per whole share, subject to adjustment. Warrants may only be exercised for a whole number of shares as no fractional shares will be issued. As of September 30, 2022 and December 31, 2021, the Company had 19,491,320 and 18,929,880 Public Warrants outstanding, respectively, and 771,980 and 1,333,420 Private Warrants outstanding, respectively.

There were no Warrants exercised for shares of the Company’s common stock in the nine months ended September 30, 2022. There were 100 Warrants exercised for 50 shares of the Company’s common stock in the three and nine months ended September 30, 2021.

NOTE 7: FAIR VALUE OF FINANCIAL INSTRUMENTS

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

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

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

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

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

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

Contingent Consideration Payable—The Company measured the contingent consideration payable at fair value. The fair value of the contingent consideration utilized Level 3 inputs as it is based on significant inputs not observable in the market as of December 31, 2021, such as projected financial information and discount rate.

Debt—The Company measures its term loan and revolving facilities at original carrying value, net of unamortized deferred financing costs and fees. At September 30, 2022, the estimated fair value of the term loan was $347.2 million as compared to a carrying value of $360.5 million. At December 31, 2021, the estimated fair value of the term loan approximated the carrying value of $362.2 million. The estimated fair value of the outstanding principal balance of the term loan utilized Level 2 inputs as it is based on quoted market prices for identical or similar instruments. The fair value of the revolving facility at both September 30, 2022 and December 31, 2021 approximated carrying value.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Warrant Liabilities—The Company classifies its Private Warrants as liabilities in accordance with ASC Topic 815. The Company estimates the fair value of the Private Warrants using a Black-Scholes options pricing model. The fair value of the Private Warrants utilized Level 3 inputs as it is based on significant inputs not observable in the market as of September 30, 2022 and December 31, 2021.

The fair value of the Private Warrants was estimated at September 30, 2022 and December 31, 2021 using a Black-Scholes options pricing model and the following assumptions:


Input	September 30, 2022		December 31, 2021
Asset price	$	3.84	$	10.74
Exercise price	$	11.50	$	11.50
Risk-free interest rate	4.24%		1.04%
Expected volatility	62.0%		41.0%
Expected term (years)	2.74		3.49
Dividend yield	0.0%		0.0%

The fair value of warrant liabilities as of September 30, 2022 was $0.2 million. The changes in the warrant liabilities during the nine months ended September 30, 2022 were as follows (in thousands):


Fair value of warrant liabilities as of December 31, 2021	$	2,053
Transfer of Private Warrants to Public Warrants	(605)
Change in fair value of warrant liabilities in Q1 2022	(861)
Fair value of warrant liabilities as of March 31, 2022	587

Change in fair value of warrant liabilities in Q2 2022	(193)
Fair value of warrant liabilities as of June 30, 2022	394

Change in fair value of warrant liabilities in Q3 2022	(186)
Fair value of warrant liabilities as of September 30, 2022	$	208

NOTE 8: COMMITMENTS AND CONTINGENCIES

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

NOTE 9: INCOME TAXES

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

The Inflation Reduction Act of 2022 (the “Act”) was signed into U.S. law on August 16, 2022. The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives, and a corporate alternative minimum tax that generally applies to U.S. corporations with average adjusted financial statement income over a three-year period in excess of $1 billion. The Company does not expect the Act to materially impact its financial statements.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

The Company’s income tax provision was $1.4 million for the three months ended September 30, 2022, which includes a discrete tax provision of $0.4 million related primarily to the finalization of the Company’s 2021 U.S. federal and state tax returns during the quarter ended September 30, 2022. The effective tax rate for the three months ended September 30, 2022 was an income tax provision of 126.3% on a pre-tax loss of $1.1 million which differs from the statutory federal rate of 21% primarily due to state and local taxes, non-deductible permanent differences, limited benefit on current year interest deductions and losses in certain jurisdictions, the change in the fair value of warrant liabilities, foreign income at different rates and the U.S. tax effect of international operations including Global Intangible Low-Taxed Income (“GILTI”) recorded during the period, and the discrete tax provision described above.

The Company’s income tax provision was $3.4 million for the nine months ended September 30, 2022, which includes a discrete tax provision of $0.5 million related primarily to the finalization of the Company’s 2021 U.S. federal and state tax returns during the quarter ended September 30, 2022. The effective tax rate for the nine months ended September 30, 2022 was an income tax provision of 68.7% on pre-tax income of $4.9 million which differs from the statutory federal rate of 21% primarily due to state and local taxes, non-deductible permanent differences, limited benefit on current year interest deductions and losses in certain jurisdictions, the change in the fair value of warrant liabilities, foreign income at different rates and the U.S. tax effect of international operations including GILTI recorded during the period, and the discrete tax provision described above.

The Company’s income tax benefit was $0.4 million for the three months ended September 30, 2021, which includes a discrete income tax benefit of $0.3 million related to the finalization of a Switzerland tax ruling (as further described below) and $0.2 million in connection with the filing of the Company’s 2020 U.S. federal and state tax returns during the quarter. The effective tax rate for the three months ended September 30, 2021 was an income tax benefit of 5.3% on pre-tax income of $8.4 million which differs from the statutory federal rate of 21% primarily due to non-deductible permanent differences, state and local income taxes, benefit from losses in certain jurisdictions, foreign income at different rates, and the discrete tax benefits described above.

The Company’s income tax benefit was $8.3 million for the nine months ended September 30, 2021, which includes discrete income tax benefits of $4.8 million. The Company recorded a discrete tax benefit of $4.0 million related to the receipt of a beneficial tax ruling in Switzerland which allows for future amortization deductions, $1.0 million related to the reversal of uncertain tax position liabilities as a result of the lapse of applicable statute of limitations, and $0.2 million related to the finalization of the Company’s 2020 U.S. federal and state tax returns during the quarter ended September 30, 2021, partially offset with a deferred tax provision of $0.5 million related to a tax law change in the United Kingdom which was enacted in June 2021. The effective tax rate for the nine months ended September 30, 2021 was an income tax benefit of 106.1% on a pre-tax loss of $7.8 million. The effective tax rate differs from the federal rate of 21% primarily due to non-deductible permanent differences, state and local income taxes and the discrete tax benefits described above.

At both September 30, 2022 and December 31, 2021, the Company had an uncertain tax position liability of $0.2 million, including interest and penalties. The unrecognized tax benefits include amounts related primarily to various state and foreign tax issues.

NOTE 10: PENSION BENEFITS

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

In February 2021, the Compensation Committee approved the termination of the Company’s qualified defined benefit retirement plan at Flavors & Ingredients. During the fourth quarter of 2021, the Company offered the option of receiving a lump sum payment to certain participants with vested benefits in lieu of receiving monthly annuity payments. Approximately 125 participants elected to receive the settlement, and lump sum payments of approximately $16.8 million were paid from plan assets to these participants in December 2021. The benefit obligation settled approximated payments to plan participants and a pre-tax settlement gain of $0.5 million was recorded in the fourth quarter of 2021.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

On February 11, 2022, the Company purchased non-participating annuity contracts to settle the remaining liabilities of the plan for approximately $9.5 million which was fully funded by plan assets. The annuity contracts purchased resulted in a settlement gain of approximately $1.0 million that was recorded in the first quarter of 2022. The remaining surplus of the plan will be used, as prescribed in the applicable regulations, to fund future contributions to the defined contribution plan at Flavors & Ingredients. At September 30, 2022, the remaining surplus of the plan was approximately $2.6 million.

The components of net periodic benefit cost (credit) for the Company’s defined benefit pension plans was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Service cost	$	10	$	15	$	30	$	47
Interest cost	66		259		260		778
Expected return on plan assets	85		(398)		144		(1,197)
Recognized actuarial loss	—		9		—		27

Settlement gain	(130)		(97)		(1,273)		(97)
Net periodic benefit cost (credit)	$	31	$	(212)	$	(839)	$	(442)

Net periodic benefit cost (credit) is reflected in the Company’s condensed consolidated financial statements as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021

Selling, general and administrative expense	$	10	$	15	$	30	$	47
Other income, net	21		(227)		(869)		(489)
Net periodic benefit cost (credit)	$	31	$	(212)	$	(839)	$	(442)

NOTE 11: STOCK-BASED COMPENSATION

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

RSUs generally vest ratably on the anniversary of the grant date over a period of one to three years, depending on the specific terms of each RSU agreement.

PSU awards generally cliff vest subsequent to the completion of a cumulative three-year performance period, depending on the period specified in each respective PSU agreement. The number of PSUs that ultimately vest depends on the Company’s performance relative to specified three-year cumulative financial targets established for each grant and are expected to be settled in stock.

Stock-based compensation expense for the three and nine months ended September 30, 2022 was $1.7 million and $5.0 million, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2021 was $2.7 million and $7.2 million, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2021 included $0.2 million and $0.6 million of expense, respectively, related to 2021 management bonuses that were settled in stock during the second quarter of 2022.

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Whole Earth Brands, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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


			Nine Months Ended September 30, 2022