Unless the context otherwise requires, all references in this section to the
"Company," "Biote," "we," "us, or "our" refer to the business of biote Corp. and
all references in this section to the "BioTE Companies" refer to biote Corp. and
its subsidiaries

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following the Business Combination. Throughout this section, unless otherwise noted, "Holdings" refers to BioTE Holdings, LLC and its consolidated subsidiaries.



The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of our consolidated
results of operations and financial condition. You should read this discussion
and analysis in conjunction with the accompanying consolidated financial
statements and notes thereto included elsewhere in this Annual Report on Form
10-K. Certain amounts may not foot due to rounding. This discussion and analysis
contains forward-looking statements and involves numerous risks and
uncertainties, including, but not limited to, those described under the sections
entitled "Risk Factors" and "Cautionary Note Regarding Forward-Looking
Statements" included elsewhere in this Annual Report on Form 10-K. We assume no
obligation to update any of these forward-looking statements except as required
by law. Actual results may differ materially from those contained in any
forward-looking statements.

Overview



We operate a high growth practice-building business within the hormone
optimization space. Similar to a franchise model, we provide the necessary
components to enable Biote-certified practitioners to establish, build, and
successfully implement a program designed to optimize hormone levels using
personalized solutions for their aging patient populations. The Biote Method is
a comprehensive, end-to-end practice building platform that provides
Biote-certified practitioners with the components specifically developed for
practitioners in the hormone optimization space: Biote Method education,
training and certification, practice management software, inventory management
software, and information regarding available hormone replacement therapy
("HRT") products, as well as digital and point-of-care marketing support. We
also sell a complementary Biote-branded line of dietary supplements. We generate
revenue by charging the Biote-partnered clinics fees associated with the support
Biote provides for HRT and from the sale of Biote-branded dietary supplements.
By virtue of our historical performance over the past 11 years, we believe that
our business model has been successful, remains differentiated, and is well
positioned for future growth.

Our go-to-market strategy focuses on:

•


Increase the number of Biote-certified practitioners. Our primary objective in
marketing to healthcare providers is to inform them of the value in joining the
Biote network. We accomplish this through provider referrals, a dedicated sales
force, and through digital and traditional marketing channels. We target
specific physicians based on their specialty, prescribing data, demographic
information and location match with our existing geographic footprint.

•

Grow the practice of our Biote-certified practitioners and Biote-partnered clinics. When the practices of our Biote-certified practitioners and Biote-partnered clinics grow, we grow. We help our Biote-certified practitioners and Biote-partnered clinics grow by, among other things:

•

providing mentorship, practice management and marketing capability necessary to operate an efficient hormone optimization practice;

•

providing high-quality Biote-branded dietary supplement products;

•

providing Biote-certified practitioners and Biote-partnered clinics a full array of wellness education and marketing materials;

•

directing consumers that are actively seeking care to Biote-certified practitioners via the "Find A Provider" feature on our company website; and

•

utilizing our growing digital outreach capabilities to connect with consumers seeking general information.

•


Increasing sales of Biote-branded dietary supplements. Our Biote-branded dietary
supplement line currently includes 19 dietary supplements that we offer to our
Biote-certified practitioners through our eCommerce site, efficiently leveraging
our core Biote provider platform. Practitioners then re-sell Biote-branded
dietary supplements to their patients, enabling patients to receive
physician-guided therapies to manage the related effects of aging. In August
2021, we launched a direct-to-patient eCommerce platform whereby practitioners
can invite their patients to buy Biote-branded dietary supplements online via
our online store.

The hormone pellet products used by Biote-certified practitioners are
manufactured by third-party compounding pharmacies and shipped directly to
Biote-certified practitioners. Custody of the pellets is with Biote-certified
practitioners. However, the pellets are recorded as inventory on our financial
statements from the date of shipment until such time as they are administered in
a patient treatment as monitored and recorded in our BioTracker system as an
additional service for administrative convenience of Biote-certified
practitioners and Biote-partnered clinics.

These products have a finite life ranging from six to twelve months. We assume
the risk of loss due to expiration, damage or otherwise. Additionally, the
products offered in our Biote-branded dietary supplement portfolio are produced
by third-party manufacturers located in the United States. Prior to 2021, our
Biote-branded dietary supplements were dropped-shipped directly to our customers
from our vendors. Beginning in 2021, Biote contracted with a third-party to
provide warehousing, co-packing and logistics

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services for our Biote-branded dietary supplements. As such our consolidated
balance sheets as of December 31, 2022 and December 31, 2021 reflect inventories
relating to these items.

Revenue generated from individual Biote-partnered clinics varies significantly.
This variability is due to many factors. These include: tenure of its
practitioners as Biote-certified practitioners; the number of certified
practitioners in an individual clinic; the number of patients served by a
clinic; the clinic's patient demographics; and the clinic's geographic location
and population density. The master services agreements ("MSAs") we enter into
with Biote-partnered clinics contain tiered pricing provisions for the
management fees. These provisions provide for decreasing management fees owed to
us based on the number of new patients treated. This can result in declines in
revenue we realize from management fees from existing Biote-partnered clinics
unless these are offset by revenue generated from newly acquired Biote-partnered
clinics which begin at higher fee levels under the MSA.

Our revenue was $165.0 million and $139.4 million, our net income was $1.3 million and $32.6 million, and our Adjusted EBITDA was $50.1 million and $40.2 million, for the years ended December 31, 2022 and 2021, respectively.

Recent Developments

Impact of the COVID-19 Pandemic and Other Trends



In March 2020, the World Health Organization declared the COVID-19 outbreak a
pandemic (the "COVID-19 pandemic"), and the virus continues to spread in areas
where we partner with Biote-certified practitioners and Biote-partnered clinics
and sell our dietary supplements. Several public health organizations have
recommended, and many local governments have implemented, certain measures to
slow and limit the transmission of the virus, including shelter in place and
social distancing ordinances, which have resulted in a significant deterioration
of economic conditions in many of the states in which we operate.

The impact of the COVID-19 pandemic and the related disruptions caused to the
global economy did not have a material impact on our business during the years
ended December 31, 2022 and 2021. We experienced a decrease in Biote-partnered
clinic demand and Biote-branded dietary supplement shipments in the second
quarter of fiscal year 2020. This decrease was primarily the result of closures
or reduced capacity at Biote-partnered clinics in various geographies within the
United States. During the second half of fiscal year 2020, clinic demand
returned to pre-COVID-19 pandemic levels. During this and subsequent periods, we
have not experienced any material disruptions in our supply chain or in our
ability to fulfill orders as a result of the COVID-19 pandemic.

Further, global economic conditions have been worsening, with disruptions to,
and volatility in, the credit and financial markets in the U.S. and worldwide
resulting from the effects of COVID-19 and otherwise. If these conditions
persist and deepen, we could experience an inability to access additional
capital or our liquidity could otherwise be impacted. If we are unable to raise
capital when needed or on attractive terms, we would be forced to delay, reduce
or eliminate our research and development programs and/or other efforts. A
recession or additional market corrections resulting from the impact of the
evolving effects of the COVID-19 pandemic could materially affect our business
and the value of our securities.

Additionally, the recent trends towards rising inflation may also materially
adversely affect our business and corresponding financial position and cash
flows. Inflationary factors, such as increases in the cost of our clinical trial
materials and supplies, interest rates and overhead costs may adversely affect
our operating results. Rising interest and inflation rates also present a recent
challenge impacting the U.S. economy and could make it more difficult for us to
obtain traditional financing on acceptable terms, if at all, in the future.
Although we do not believe that inflation has had a material impact on our
financial position or results of operations to date, we may experience increases
in the near future (especially if inflation rates continue to rise) on our
operating costs, including our labor costs and research and development costs,
due to supply chain constraints, consequences associated with COVID-19 and the
ongoing conflict between Russia and Ukraine, and employee availability and wage
increases, which may result in additional stress on our working capital
resources.


Business Combination

On May 26, 2022 (the "Closing Date"), BioTE Holdings, LLC ("Holdings," inclusive
of its direct and indirect subsidiaries, the "BioTE Companies," and as to its
members, the "Members") completed a series of transactions (the "Business
Combination") with Haymaker Acquisition Corp. III ("Haymaker"), Haymaker Sponsor
III LLC (the "Sponsor"), BioTE Management, LLC, Dr. Gary S. Donovitz, in his
individual capacity, and Teresa S. Weber, in her capacity as the Members'
representative (in such capacity, the "Members' Representative") pursuant to the
business combination agreement (the "Business Combination Agreement") dated
December 13, 2021. The Business Combination was accounted for as a common
control transaction, in accordance with U.S. generally accepted accounting
principles ("U.S. GAAP"). Under this method of accounting, Haymaker's
acquisition of the BioTE Companies was accounted for at their historical
carrying values, and the BioTE Companies were deemed the predecessor entity.
This method of accounting is similar to a reverse recapitalization whereby the
Business Combination was treated as the equivalent of the BioTE Companies
issuing stock for the net assets of Haymaker, accompanied by a recapitalization.
The net assets of Haymaker are stated at historical cost, with no goodwill or
other intangible assets recorded. Operations prior to the Business Combination
are those of the BioTE Companies.

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Following the Closing of the Business Combination, the Company is organized in
an "Up-C" structure in which the business of the Company is operated by Holdings
and its subsidiaries, and Biote's only material direct asset consists of
membership interests in Holdings.

In connection with the Business Combination, on the Closing Date, BioTE Medical
entered into a credit agreement with Truist Bank and Truist Securities, Inc.
providing for (i) the Revolving Loans, a $50.0 million senior secured revolving
credit facility in favor of BioTE Medical and (ii) the Term Loan, a $125.0
million senior secured term loan A facility in favor of BioTE Medical, which was
borrowed in full at the Closing Date.

Components of Results of Operations

Revenue



We sell Biote-partnered clinics the Biote Method, the components of which are
specifically developed for practitioners in the hormone optimization space:
Biote Method education, training and certification, practice management
resources, inventory management resources, and digital and
point-of-care-marketing support. Our revenue represents fees paid for the
training, marketing support, practice development, equipment, IP licensing, and
product sales of Biote-branded dietary supplements, physician-prescribed
procedures, and pellet procedure convenience kits, or trocars.

Our revenue fluctuates in response to a combination of factors, including the following:



•
sales volumes;

•

the mix of male and female patients treated by Biote-certified practitioners, as treatment for males generates more revenue per patient than treatment for females;

•

our overall product mix of dietary supplements sold;

•

the effects of competition on market share;

•

new Biote-partnered clinics acquired as customers, less any existing clinics lost as customers ("net new clinics");

•

number of procedures performed by practitioners;

•

medical industry acceptance of hormone optimization generally as a solution to unmet medical needs;

•

the number of business days in a particular reporting period, including as a result of holidays;

•

weather disruptions impacting medical offices' ability to maintain regular operating schedules;

•

the effects of competition and competitive pricing strategies;

•

governmental regulations influencing our markets; and

•

global and regional economic cycles.



Generally, our MSAs require us to provide (1) initial training to practitioners
on the Biote Method, (2) inventory management services and (3) other
contract-term marketing and practice development services (including recurring
training and licenses of Biote IP). Historically, we have provided the optional
free lease of reusable trocars by Biote-certified practitioners.

Substantially all of our revenue originates from sales to clinic locations in the United States.



Product Revenue

Product revenue includes both pellets, in connection with the service described
above, and the related inventory management services provided to clinics.
Product revenue is recognized at the point in time when the clinic obtains
ownership of the pellet, which we determined to be when the Biote-certified
practitioner performs the procedure to implant the pellet into their patient.
The consideration allocated to this performance obligation is a procedure-based
service fee which we refer to as procedure revenue. Our product revenue also
includes revenue earned from sales of pellet insertion kits and Biote-branded
dietary supplements. Revenue from the sale of pellet insertion kits and
Biote-branded dietary supplements is recognized when the clinic or clinic's
patient (supplements only) obtains control of the product and is generally at
the time of shipment from our distribution facility or supplier. Any shipping or
handling fees paid by clinics are also recorded within product revenue.

Service Revenue



Service revenue is revenue earned from fees paid by Biote-partnered clinics for
training services and other contract term services pursuant to our MSAs. While
the option to receive and right to use the reusable trocars through the term of
the contract represents an embedded lease, we have adopted the practical
expedient within ASC 842 to combine the lease and non-lease components and
account for the combined component under ASC 606.

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For Biote Method arrangements, we recognize revenue for trainings and for management services over time. For initial trainings, progress is measured by the number of training sessions completed, and for contract-term services, progress is measured on a time-elapsed basis.



The training completion and time-elapsed bases represent the most reliable
measure of transfer of control to the clinic for trainings and contract-term
services, respectively. Revenue is deferred for amounts billed or received prior
to delivery of the services.

Cost of Revenue

Cost of service revenue consists primarily of costs incurred to deliver trainings to Biote-partnered clinics. Cost of product revenues include the pass-through cost of pellets purchased from outsourcing facilities, the cost of pellet insertion kits and Biote-branded dietary supplements purchased from manufacturing facilities, and the shipping and handling costs incurred to deliver these products to Biote-partnered clinics.

Commissions



Commissions consist primarily of fees paid to a third-party sales force and fees
paid to Biote-partnered clinics that participate in our clinic mentor program
(our "Mentor Program"), which pairs experienced Biote-certified practitioners
with newly contracted practitioners.

Commissions paid to the Company's third-party sales forces relate to market
support and development activities undertaken to increase sales through the
acquisition of new Biote-partnered clinics and growth from existing clinics.
These are not considered incremental costs to obtain a clinic contract. As a
result of investing in growing our internal sales capabilities beginning in
2019, we rely less on third-party sales forces and our commissions have
decreased over time. We expect external commissions expenses to continue to
decrease as we focus our growth initiatives based on an internal sales force
model. However, the employee salaries we pay to our internal sales force are
considered compensation expense and allocated to Selling, general and
administrative expense.

Marketing

Marketing consists primarily of advertising expenses, other non-advertising marketing and training program costs, and management services costs. These costs are all expensed as incurred.

Selling, General and Administrative Expense



Selling, general and administrative expense consists primarily of software
licensing and maintenance and the cost of employees who engage in corporate
functions, such as finance and accounting, information technology, human
resources, legal, and executive management. Selling, general and administrative
expense also includes rent occupancy costs, office expenses, recruiting
expenses, entertainment allocations, depreciation and amortization, share-based
compensation, transaction related expenses, other general overhead costs,
insurance premiums, professional service fees, research and development and
costs related to regulatory and legal matters.

Interest Expense

Interest expense consists primarily of cash and non-cash interest under our term loan facility and commitment fees for our unused line of credit.

Gain from Change in Fair Value of Warrant Liability



Gain from change in fair value of warrant liability consists of the change in
fair value of the warrant liability from the Closing Date to the balance sheet
date.

Gain from Change in Fair Value of Earnout Liability

Gain from change in fair value of earnout liability consists of the change in fair value of the Member and Sponsor earnouts from the Closing Date to the balance sheet date.

Loss from extinguishment of debt



Loss from extinguishment of debt consists of the remaining unamortized portion
of the debt issuance costs related to the Bank of America Credit Agreement (as
defined below) written off upon repayment in connection with the Business
Combination.

Other Income / Expense

Other income and other expense consist of the foreign currency exchange gains and losses for sales denominated in foreign currencies, interest income and other income or payments not appropriately classified as operating expenses.

Income Taxes



We are subject to federal and state income taxes in the United States and taxes
in foreign jurisdictions in which we operate. We recognize deferred tax assets
and liabilities based on temporary differences between the financial reporting
and income tax bases of

                                       62
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assets and liabilities using statutory rates. We regularly assess the need to
record a valuation allowance against net deferred tax assets if, based upon the
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.

Comparison of the years ended December 31, 2022 and 2021



The table and discussion below present our results for the years ended December
31, 2022 and 2021:

                                             Year Ended December 31,           Increase/(Decrease)
(U.S. dollars, in thousands)                   2022             2021             $              %
Revenue:
Product revenue                            $    163,133       $ 137,598     $    25,535          18.6 %
Service revenue                                   1,824           1,798              26           1.4 %
Total revenue                                   164,957         139,396          25,561          18.3 %
Cost of revenue (excluding depreciation
and amortization included in selling,
general and administrative, below)
Cost of products                                 51,990          46,298           5,692          12.3 %
Cost of services                                  2,585           2,519              66           2.6 %
Cost of revenue                                  54,575          48,817           5,758          11.8 %
Commissions                                         974           2,056          (1,082 )       (52.6 %)
Marketing                                         4,628           4,908            (280 )        (5.7 %)
Selling, general and administrative             165,502          49,054         116,448         237.4 %
Income (loss) from operations                   (60,722 )        34,561         (95,283 )      (275.7 %)
Other income (expense), net:
Interest expense                                 (5,091 )        (1,673 )        (3,418 )       204.3 %
Gain from change in fair value of
warrant liability                                 5,127               -           5,127           0.0 %
Gain from change in fair value of
earnout liability                                61,770               -          61,770           0.0 %
Loss from extinguishment of debt                   (445 )             -            (445 )         0.0 %
Other income                                      1,073              17           1,056             *
Total other income (expense), net                62,434          (1,656 )        64,090             *

Income before provision for income taxes 1,712 32,905 


    (31,193 )       (94.8 %)
Income tax expense (benefit)                        388             286             102          35.7 %
Net income                                 $      1,324       $  32,619     $   (31,295 )       (95.9 %)


* Not a meaningful change

Revenue

Revenue for the year ended December 31, 2022 increased by $25.6 million to
$165.0 million, or 18.3% as compared to the year ended December 31, 2021. The
increase was primarily driven by a $24.7 million increase of procedure and
Biote-branded dietary supplement revenue. Procedures performed increased by
17.8% versus the prior year resulting in a $19.5 million increase in procedure
revenue. During the year ended December 31, 2022, the number of active clinics
billed increased by 13% over the year ended December 31, 2021. Biote-branded
dietary supplement sales increased by 19.0% or $5.2 million over the same period
in the prior year. Service revenue increased by 1.4% over the same period in the
prior year resulting from an increase in the number of training sessions during
the year ended December 31, 2022 compared to the year ended December 31, 2021.

Cost of revenue



Cost of revenue for the year ended December 31, 2022 increased by $5.8 million,
to $54.6 million, or 11.8% as compared to the year ended December 31, 2021. The
increase was primarily due to the net impact of higher volumes at sustained unit
costs. Cost of procedures increased by $4.6 million for the period, consisting
of $4.8 million attributable to volume increases in pellets dispensed which was
offset by a reduction of $0.2 million related to broken, damaged, or expired
pellets. Biote branded dietary supplement costs increased $0.5 million or 3.5%,
due to higher sales volume.

Commissions

Commissions expense for the year ended December 31, 2022 decreased by $1.1
million to $1.0 million, or 52.6%, as compared to the year ended December 31,
2021. The decrease is primarily driven by our shift to an internal sales force
to generate product demand.

Marketing

Marketing expense for the year ended December 31, 2022 decreased by $0.3 million to $4.6 million, or 5.7%, as compared to the year ended December 31, 2021.


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Selling, General and Administrative



Selling, general and administrative expense for the year ended December 31, 2022
increased by $116.4 million to $165.5 million, or 237.4%, as compared to the
year ended December 31, 2021. This increase was primarily driven by stock
compensation expense of $82.2 million. This expense represented the cumulative
impact of unrecognized compensation expense for stockholders upon completion of
the Business Combination as well as subsequent vesting of certain shares
awarded. An additional component of the increase was $21.6 million of
transaction-related expenses related to the Business Combination and other
associated capital structure transactions recognized during the period. These
consisted of the excess closing costs of the Business Combination over the
Business Combination proceeds received; costs associated with sponsor share
transfers and certain compensation paid resulting from the transaction. The
increase also included a $7.2 million increase in payroll and related expenses
due to increases in sales incentives consistent with sales growth for the period
and additional sales and management hiring; $0.7 million of travel and
entertainment expenses due to increases in sales force headcount. Depreciation
and amortization expenses increased by $0.8 million attributable to assets
placed in service at the beginning of the year. Additionally, professional fees
and insurance costs increased during the period by $6.2 million mainly
attributable to increases in costs associated with being a public company.

Interest Expense



Interest expense for the year ended December 31, 2022 increased by $3.4 million
to $5.1 million, or 204.3%, as compared to the year ended December 31, 2021. The
increase is primarily a result of the higher debt balance outstanding from the
new debt issued as part of closing the Business Combination as well as higher
interest rates incurred during the period. Interest expense relates primarily to
interest on an outstanding note payable and amortization of origination fees.

Gain from Change in Fair Value of Warrant Liability



The gain from the change in fair value of our warrant liability of $5.1 million
was primarily a result of the decrease in the trading price of our Public
Warrants listed on Nasdaq to $0.30 per share on December 31, 2022 from $0.68 per
share on the closing of the Business Combination, May 26, 2022.

Gain from Change in Fair Value of Earnout Liability



Upon the closing of the Business Combination on the Closing Date, we recognized
an earnout liability of $93.9 million and subsequently remeasured the earnout
liability to its fair value of $32.1 million as of December 31, 2022. The gain
from the change in fair value of our earnout liability of $61.8 million was
primarily a result of the decrease in the closing price of our Class A common
stock listed on Nasdaq to $3.73 per share on December 31, 2022 from $9.02 per
share on the Closing Date.

Other Income

Other income for the year ended December 31, 2022 increased by $1.1 million to
$1.1 million as compared to the year ended December 31, 2021. The increase was
primarily due to interest income earned on higher on hand cash balances and
currency fluctuations during the period.

Income Tax Expense (Benefit)



Income tax expense for the year ended December 31, 2022 decreased by $0.1
million as compared to the year ended December 31, 2021. This increase reflects
the taxability of the income attributable to Biote that prior to the Business
Combination was taxable to the Company's Members offset by a tax benefit from
certain one-time expenses related to the Business Combination that will be
attributed to Biote.

Non-GAAP Measures



Adjusted EBITDA is a non-GAAP performance measure that provides supplemental
information that we believe is useful to analysts and investors to evaluate the
company's ongoing results of operations when considered alongside net income,
(the most directly comparable U.S. GAAP measure).

We use Adjusted EBITDA as alternative measures to evaluate our operational
performance. We calculate Adjusted EBITDA by excluding from net income: interest
expense; depreciation and amortization expenses; and income taxes. Additionally,
we exclude certain expenses we believe are not indicative of our ongoing
operations or operational performance. We present Adjusted EBITDA because it is
a key measure used by our management to evaluate our operating performance,
generate future operating plans and determining payments under compensation
programs. Accordingly, we believe that Adjusted EBITDA provides useful
information to investors and others in understanding and evaluating our
operating results in the same manner as our management. However, non-GAAP
financial information is presented for supplemental informational purposes only,
has limitations as an analytical tool and should not be considered in isolation
or as a substitute for financial information presented in accordance with U.S.
GAAP. Some of these limitations are as follows:

•


although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized may have to be replaced in the future, and Adjusted
EBITDA does not reflect cash capital expenditure requirements for such
replacements or for new capital expenditure requirements;

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•

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and

•

Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us.



In addition, Adjusted EBITDA is subject to inherent limitations as it reflects
the exercise of judgment by Biote's management about which expenses are excluded
or included. Other companies, including companies in our industry, may calculate
Adjusted EBITDA or similarly titled non-GAAP measures differently or may use
other measures to evaluate their performance, all of which could reduce the
usefulness of our Adjusted EBITDA as a tool for comparison. Investors are
encouraged to review the reconciliation, and not to rely on any single financial
measure to evaluate our business.

The following is a reconciliation of net income (loss) to Adjusted EBITDA (in thousands) for the years ended December 31, 2022 and 2021:



                                                                 Year Ended
                                                                December 31,
                                                            2022             2021
Net income                                              $      1,324     $     32,619
Interest expense                                               5,091            1,673
Income tax expense                                               388              286
Depreciation and amortization                                  2,199

1,400


Loss from extinguishment of debt and other                      (628 )            (17 )
non-operating items
Share-based compensation expense                              82,180                -
Transaction-related expenses                                  21,627            2,387
Litigation and other                                           4,843            1,869
Gain from change in fair value of warrant liability           (5,127 )

-

Gain from change in fair value of earnout liability (61,770 ) 


        -
Adjusted EBITDA                                         $     50,127     $     40,218

Liquidity and Capital Resources



We derive liquidity primarily from debt and equity financing activities. As of
December 31, 2022, our balance of cash and cash equivalents was $79.2 million,
which is an increase of $52.5 million, or 196.0%, compared to December 31, 2021.
Our total outstanding debt principal balance as of December 31, 2022 was $121.9
million, which represents an increase of $84.4 million over the total
outstanding debt principal balance as of December 31, 2021 of $37.5 million.

Our primary sources of cash are our cash flow from operations, less amounts paid
to fund operating expenses, and working capital requirements related to
inventory, accounts payable and accounts receivable, and general and
administrative expenditures. We primarily use cash to fund our debt service
obligations, fund operations, meet working capital requirements, capital
expenditures and strategic investments. As of December 31, 2022, we had cash and
cash equivalents of $79.2 million and a $50 million revolving line of credit.
Based on past performance and current expectations, we believe that our current
available sources of funds (including cash and cash equivalents plus proceeds
from the Business Combination and debt financing) will be adequate to finance
our operations, working capital requirements, capital expenditures, debt
servicing obligations, and potential dividends for at least the next twelve
months.

Since our inception, we have financed our operations and capital expenditures
primarily through capital investment from our founder and other members, debt
financing in the form of short-term lines of credit and long-term notes payable,
and net cash inflows from operations.

We expect our operating and capital expenditures to increase as we increase
headcount, expand our operations and grow our clinic base. If additional funds
are required to support our working capital requirements, acquisitions or other
purposes, we may seek to raise funds through additional debt or equity
financings or from other sources. If we raise additional funds through the
issuance of equity or convertible debt securities, the percentage ownership of
our equity holders could be significantly diluted, and these newly issued
securities may have rights, preferences or privileges senior to those of
existing equity holders. If we raise additional funds by obtaining loans from
third parties, the terms of those financing arrangements may include negative
covenants or other restrictions on our business that could impair our operating
flexibility and also require us to incur additional interest expense. We can
provide no assurance that additional financing will be available at all or, if
available, that we would be able to obtain additional financing on terms
favorable to us.

The exercise price of our Warrants is $11.50 per Warrant. We believe the
likelihood that Warrant holders will exercise their Warrants, and therefore the
amount of cash proceeds that we would receive, is dependent upon the trading
price of our Class A common stock, which was $5.15 per share on March 15, 2023.
If the trading price for our Class A common stock is less than $11.50 per share,
we believe holders of our Public Warrants and Private Placement Warrants will be
unlikely to exercise their Warrants.

Our ability to raise additional capital through the sale of equity or convertible debt securities could be significantly impacted by the resale of shares of Class A common stock by selling securityholders pursuant to the registration statement on Form S-1 filed with


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the SEC on June 17, 2022, which could result in a significant decline in the
trading price of our Class A common stock and potentially hinder our ability to
raise capital at terms that are acceptable to us or at all. In addition, debt
financing and equity financing, if available, may involve agreements that
include covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, making capital expenditures or declaring
dividends. If we are unable to raise additional funds through equity or debt
financings when needed, we may be required to delay, limit, or substantially
reduce our operations. Our future capital requirements and the adequacy of
available funds will depend on many factors, including those set forth in the
section titled "Risk Factors" included in this Annual Report.

Cash Flows



The following table summarizes our consolidated cash flows for the years ended
December 31, 2022 and 2021:

                                                   Year Ended
                                                  December 31,              Increase/(Decrease)
                                               2022          2021             $              %
Consolidated Statements of Cash Flows
Data:
Net cash (used in) provided by operating
activities                                   $  (9,157 )   $  33,720     $   (42,877 )      (127.2 %)
Net cash used in investing activities           (1,838 )      (3,807 )         1,969          51.7 %
Net cash provided by (used in) financing
activities                                      63,460       (20,343 )        83,803         412.0 %


Operating Activities

Comparison of the years ended December 31, 2022 and 2021



Cash flows from operating activities for the year ended December 31, 2022
decreased $42.9 million as compared to the year ended December 31, 2021. Net
income, adjusted for non-cash expenses such as depreciation and amortization,
provisions for bad debts, stock compensation, change in fair value of warrants
and earnout liabilities, and provisions for obsolete inventories, among others,
resulted in a net decrease of $15.9 million as compared to the prior period.
Additionally, our working capital investment in our Biote-branded supplement
inventory increased by $4.1 million as compared to the prior period. This
resulted from the initial investment in our third-party fulfillment centers
during the year ended December 31, 2021. These net changes were offset by a $2.3
million increase in working capital from advances and prepayments made to
certain vendors and increases in accounts receivable of $0.8 million.
Additionally, $31.1 million of transaction closing costs were assumed as accrued
expenses and subsequently paid upon completion of the reverse-merger with
Haymaker which reduced cash flow from operating activities.

Investing Activities

Comparison of the years ended December 31, 2022 and 2021



Net cash used in investing activities for the year ended December 31, 2022
decreased by $2.0 million as compared to the year ended December 31, 2021. This
decrease was primarily driven by a reduction in purchases of property and
equipment of $1.1 million, primarily reusable trocars. Additionally capitalized
software development costs decreased by $0.9 million.

Financing Activities

Comparison of the years ended December 31, 2022 and 2021



Net cash provided by financing activities for the year ended December 31, 2022
increased $83.8 million as compared to the year ended December 31, 2021. The
increase is primarily due to the completion of the Business Combination with
Haymaker. This included $12.3 million of cash proceeds from the Business
Combination and $125.0 million of debt issue proceeds. These were offset by
payments to retire existing debt of $37.5 million, principal payment of $3.1
million on the Truist debt, and $12.4 million of transaction and debt issuance
costs. Other items included a decrease in distributions to Members of $1.5
million.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in accordance with U.S. GAAP requires our management to make judgments, assumptions and estimates that affect the amounts reported in our accompanying consolidated financial statements and the accompanying notes included elsewhere in this Annual Report.



Our management bases its estimates and judgments on historical experience,
current economic and industry conditions and on various other factors that are
believed to be reasonable under the circumstances. Actual results may differ
from these estimates under different assumptions or conditions.

The methods, estimates, and judgments that we use in applying our accounting
policies have a significant impact on the results that we report in our
consolidated financial statements. Some of our accounting policies require us to
make difficult and subjective judgments, often as a result of the need to make
estimates regarding matters that are inherently uncertain.

Our most critical accounting estimates include revenue recognition, the valuation of inventory, the valuation of stock compensation, the valuation of earnout liability and the valuation of warrant liability.


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Our significant accounting policies are described in Note 2 to our consolidated
financial statements. We believe that the accounting policies described reflect
our most critical accounting policies and estimates, which represent those that
involve a significant degree of judgment and complexity. Accordingly, we believe
these policies are critical in fully understanding and evaluating our reported
financial condition and results of operations.

Revenue Recognition



We adopted Financial Accounting Standards Board ("FASB") Accounting Standard
Update ("ASU") 2014-09, Revenue from Contracts with Customers, and subsequent
amendments (collectively, "ASC 606"), on January 1, 2019.

To determine revenue recognition for arrangements within the scope of ASC 606,
we perform the following five steps: (1) identify the contract(s) with a clinic;
(2) identify the performance obligations in the contract; (3) determine the
transaction price; (4) allocate the transaction price to the performance
obligations in the contract; and (5) recognize revenue when (or as) we satisfy
performance obligations. We recognize revenue when the control of the promised
goods or services is transferred to Biote-partnered clinics in an amount that
reflects the consideration we expect to receive in exchange for such goods or
services.

The majority of our revenue is derived from our long-term service agreements for
Biote-partnered clinics of the Biote Method. In determining the transaction
price, we evaluate whether the price is subject to discounts or adjustments to
determine the net consideration to which we expect to be entitled.

Revenue is recognized when control of the product or service is transferred to
the clinic (i.e., when our performance obligation is satisfied), which varies
between the different performance obligations within the contract. In
determining whether control has transferred for a product, we consider if there
is a present right to payment and legal title, and whether risks and rewards of
ownership have transferred to the clinic. For services, we consider whether we
have an enforceable right to payment and when the clinic receives the benefits
of our performance. Refer to Note 2 to our consolidated financial statements for
additional discussion of our revenue recognition policy.

Inventories



Our inventories consist of physician-prescribed pellets used by Biote-certified
practitioners in partnered clinics and Biote-branded dietary supplements which
are sold and distributed to the Biote-partnered clinics and their patients.
Custody of the pellets remains with Biote-certified practitioners. The pellets
are presented as inventory on our financial statements from the date of shipment
until such time as they are administered in a treatment by a Biote-certified
practitioner on their patient for the convenience of Biote-certified
practitioners and Biote-partnered clinics. Beginning the quarter ended June 30,
2021, we maintained our Biote-branded dietary supplement inventory at a
third-party facility that provides Biote with co-packing and logistics services
in the distribution of these products. From April 1, 2019 through March 31,
2021, we did not maintain our own stock of inventories on these products. During
that time period these were distributed to Biote-partnered clinics via drop
shipment arrangements with our respective vendors.

Inventories are valued at the lower of cost or net realizable value. We
regularly review our inventories and write down our inventories for estimated
losses due to obsolescence or expiration. The allowance for pellets is
determined based on the age of the specific manufacturing lots of the product
and its remaining life until expiration. Dietary supplements are evaluated at
the product level based on sales of our products in the recent past and/or
expected future demand. Future demand is affected by market conditions, new
products and strategic plans, each of which is subject to change with little or
no forewarning. In estimating obsolescence, we utilize information that includes
projecting future demand.

The need for strategic inventory levels to ensure competitive delivery performance to our Biote-partnered clinics are balanced against the risk of inventory obsolescence due to clinic requirements.

Share-Based Compensation



Share-based compensation awards previously granted by Holdings were valued using
a Monte-Carlo simulation as of the grant date because the value of the awards
was dependent on future distributions to be received from a change in control or
qualifying liquidity event. The significant assumptions used in the valuation
include the constant risk-free rate, constant volatility factor and the
Geometric Brownian Motion.

Earnout Liability



Our earnout liability was valued using a Monte-Carlo simulation in order to
simulate the future path of our stock price over the earnout period. The
carrying amount of the liability may fluctuate significantly and actual amounts
paid may be materially different from the liability's estimate value. The
significant assumptions used in the valuation include the Company's stock price,
volatility and the drift rate.

Warrant Liability

We value the 5,566,666 private placement warrants sold to the Sponsor (the "Private Placement Warrants") using a Monte-Carlo simulation in order to simulate the future path of our stock price over the term of the Private Placement Warrants. The carrying amount of the liability may fluctuate significantly and actual amounts paid may be materially different from the liability's estimated


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value. The significant assumptions used in the valuation include the Company's stock price, exercise price, risk-free rate, volatility and term.

Off-Balance Sheet Commitments and Arrangements

As of December 31, 2022, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations

Our principal contractual obligations and commitments consist of obligations to pay loan principal and interest under our long-term debt agreement and obligations under our operating lease agreement.



Refer to Note 8 and Note 10 to our consolidated financial statements for a
discussion of the nature and timing of our obligations under these agreements.
The future amount and timing of interest payments under our long-term debt
agreement are expected to vary with the amount and then-prevailing contractual
interest rates of our debt, which are discussed in Note 8 to our consolidated
financial statements.

Recently Issued and Adopted Accounting Pronouncements

See Note 2 to our consolidated financial statements for a discussion of accounting pronouncements recently adopted and recently issued accounting pronouncements not yet adopted and their potential impact to our financial statements.

JOBS Act Accounting Election



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"). Section 107 of the JOBS Act
provides that an emerging growth company can take advantage of an extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for
complying with new or revised accounting standards applicable to public
companies, allowing them to delay the adoption of those standards until those
standards would otherwise apply to private companies. We have elected to use
this extended transition period under the JOBS Act. As a result, following the
Business Combination, our consolidated financial statements may not be
comparable to the financial statements of companies that are required to comply
with the effective dates for new or revised accounting standards that are
applicable to public companies, which may make our common stock less attractive
to investors.

We will remain an emerging growth company under the JOBS Act until the earliest
of (i) March 4, 2026, (ii) the last date of our fiscal year in which we have
total annual gross revenue of at least $1.235 billion, (iii) the date on which
we are deemed to be a "large accelerated filer" under the rules of the SEC with
at least $700.0 million of outstanding securities held by non-affiliates or (iv)
the date on which we have issued more than $1.0 billion in non-convertible debt
securities during the previous three years.

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