CRIXUS BH3 ACQUISITION CO MANAGEMENT REPORT OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-K)

The statements in the discussion and analysis regarding industry outlook, our
expectations regarding the performance of our business and the forward-looking
statements are subject to numerous risks and uncertainties, including, but not
limited to, the risks and uncertainties described in "Risk Factors" and
"Cautionary Note Regarding Forward-Looking Statements." Our actual results may
differ materially from those contained in or implied by any forward-looking
statements. You should read the following discussion together with the sections
entitled "Risk Factors"," "Business" and the audited consolidated financial
statements, including the related notes, appearing elsewhere in this Form
10-K.
All references to years, unless otherwise noted, refer to our fiscal years,
which end on December 31. As used in this Form
10-K,
unless the context suggests otherwise, "we," "us," "our," or "the Company" refer
to Crixus BH3 Acquisition Company.

Overview

We are a newly organized blank check company incorporated on February 23, 2021
as a Delaware corporation and formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, share purchase, reorganization or
similar business combination with one or more businesses. We were initially
incorporated under the name BH3 Acquisition Corp. and subsequently changed our
name to Crixus BH3 Acquisition Company on July 21, 2021. We intend to effectuate
our initial business combination using cash from the proceeds of the initial
public offering and the private placement of the private placement warrants, our
capital stock, debt or a combination of cash, stock and debt.

Our units began trading on October 5, 2021 on the Nasdaq Global Market (the
"Nasdaq") under the symbol "BHACU." Commencing on November 26, 2021, the shares
of Class A common stock and warrants comprising the units began separate trading
on the Nasdaq under the symbols "BHAC" and "BHACW," respectively. Those units
not separated continue to trade on the Nasdaq under the symbol "BHACU."

Transaction costs of the initial public offering amounted to $22,407,388,
consisting of $12,650,000 of underwriters' fees and discounts, $9,276,147 for
the excess fair value of founder shares attributable to the anchor investors,
and $481,242 of other offering costs. In addition, the underwriters agreed to
defer $8,050,000 in underwriting discounts and commissions.

Our management has broad discretion with respect to the specific application of
the net proceeds of the initial public offering and the sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a business combination.

If we are unable to consummate an initial business combination within 18 months
from the closing of the initial public offering (or 21 months or 24 months, as
applicable), we will, as promptly as reasonably possible but not more than ten
business days thereafter, redeem 100% of the outstanding public shares, at a
per-share
price, payable in cash, equal to the aggregate amount then on deposit in the
trust account, including any interest earned on the funds held in the trust
account, less up to $100,000 of interest to pay dissolution expenses and net of
interest that may be used by us to pay our franchise and income taxes payable,
divided by the number of then outstanding public shares, which redemption will
completely extinguish public stockholders' rights as stockholders (including the
right to receive further liquidation distributions, if any), subject to
applicable law and as further described herein, and then seek to dissolve and
liquidate. We expect the pro rata redemption price to be approximately $10.20
per share of common stock if we extend the period of time to consummate a
business combination once, and approximately $10.30 per share of common stock if
we extend the period of time to consummate a business combination twice (in each
case, regardless of whether or not the underwriters exercise their
over-allotment option), without taking into account any interest earned on such
funds. However, we cannot assure you that we will in fact be able to distribute
such amounts as a result of claims of creditors which may take priority over the
claims of our public stockholders.

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Cash and capital resources

Our liquidity needs from the period of February 23, 2021 (inception) through
October 7, 2021 (date of the initial public offering) had been satisfied through
the cash receipt of $25,000 from our initial stockholders to purchase the
Founder Shares, and a loan of $300,000 pursuant to a note issued to our Sponsor
(the "Note"). Subsequent to the consummation of the initial public offering, our
liquidity needs have been satisfied with the net proceeds from the consummation
of the Private Placement not held in the Trust Account. In addition, in order to
finance transaction costs in connection with a business combination, our Sponsor
or its affiliates may, but are not obligated to, provide us working capital
loans ("Working Capital Loans"). To date, there are no amounts outstanding under
any Working Capital Loans.

As of December 31, 2021, the Company had approximately $1.13 million in cash
outside of the trust account available for working capital needs and
$232.3 million of cash and investment in liquid securities held in trust, which
is not available for working capital needs.

Based on the foregoing, our management believes that we will have sufficient
working capital and borrowing capacity to meet our needs through the earlier of
the consummation of a Business Combination or one year from this filing. Over
this time period, we will be using these funds for paying existing accounts
payable, identifying and evaluating prospective initial Business Combination
candidates, performing due diligence on prospective target businesses, paying
for travel expenditures, selecting the target business to merge with or acquire,
and structuring, negotiating and consummating the Business Combination.

Our management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that the specific impact is not readily determinable
as of the date of the financial statements. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

Operating results

Our entire activity from inception up to October 7, 2021 was in preparation for
our initial public offering and, since the consummation of our initial public
offering, the search for a prospective target business. We will not generate any
operating revenues until the closing and completion of our initial Business
Combination, at the earliest.

For the period from February 23, 2021 (inception) through December 31, 2021, we
had net income of approximately $12.43 million, which consisted of gain of
$14.40 million from change in fair market valuation of derivative warrant
liability, $.56 million in general and administrative expenses, $1.39 million in
offering costs related to the public warrants, and loss from investment in the
Trust Account of approximately $15,000.

Founder Shares

In March 2021, our initial stockholders purchased 5,750,000 shares of our
Class B common stock, par value $0.0001 per share (the "Founder Shares"), for an
aggregate price of $25,000 (1,450,758 of which were subsequently sold to our
anchor investors at cost). Our Sponsor agreed to forfeit up to 750,000 Founder
Shares to the extent that the over-allotment option was not exercised in full by
the underwriters. The underwriters exercised their over-allotment option in full
on October 7, 2021. As a result, these shares were no longer subject to
forfeiture.

Holders of our Founder Shares (including the anchor investors) have agreed not
to transfer, assign or sell any of their founder shares and any shares of our
Class A common stock issuable upon conversion thereof until the earlier to occur
of: (i) one year after the completion of our initial business combination; and
(ii) subsequent to our initial business combination, (x) if the last reported
sale price of our Class A common stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock capitalizations, reorganizations,
recapitalizations and the like) for any 20 trading days within any
30-trading
day period commencing at least 150 days after our initial business combination,
or (y) the date on which we complete a liquidation, merger, capital stock
exchange or other similar transaction that results in all of our public
stockholders having the right to exchange their shares of common stock for cash,
securities or other property (except to certain permitted transferees). Any
permitted transferees will be subject to the same restrictions and other
agreements of our initial stockholders with respect to any founder shares
(except that our anchor investors will be permitted to abstain from voting
founder shares).

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Private Placement Mandates

Simultaneously with the closing of the initial public offering, on October 7,
2021, we consummated the Private Placement of 6,400,000 Private Placement
Warrants in the aggregate at a price of $1.50 per Private Placement Warrant to
our Sponsor, generating proceeds of $9,600,000.

Each whole Private Placement Warrant is exercisable for one whole share of
Class A common stock at a price of $11.50 per share. A portion of the proceeds
from the sale of the Private Placement Warrants to our Sponsor was added to the
proceeds from the initial public offering held in the Trust Account. If we do
not complete a Business Combination by April 7, 2023 (or by July 7, 2023 or
October 7, 2023, as applicable, if the Company extends the period of time to
consummate a Business Combination), the Private Placement Warrants will expire
worthless. The Private Placement Warrants will be
non-redeemable
for cash and exercisable on a cashless basis so long as they are held by our
Sponsor or permitted transferees.

The Limited Partner and our officers and directors have agreed, subject to limited exceptions, not to transfer, assign or sell any of their private placement warrants until 30 days after the completion of the initial business combination.

Loans to related parties

On March 12, 2021, the Sponsor and the Company executed an unsecured promissory
note pursuant to which the Company had the ability to borrow up to $300,000 in
the aggregate to cover expenses in connection with the Initial Public Offering
(the "Promissory Note"). The Promissory Note was
non-interest
bearing and payable on the earlier of December 31, 2021 or the completion of the
Initial Public Offering. The Company borrowed $145,000 under the Promissory Note
and the full amount was repaid on October 7, 2021. No subsequent draws were made
against the Promissory Note following repayment on October 7, 2021 and the
outstanding balance remained at $0 as of December 31, 2021.

In order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the Sponsor, or certain of the Company's officers
and directors may, but are not obligated to, loan the Company funds as may be
required ("Working Capital Loans"). If the Company completes a Business
Combination, the Company would repay the Working Capital Loans out of the
proceeds of the Trust Account released to the Company. Otherwise, the Working
Capital Loans would be repaid only out of funds held outside the Trust Account.
In the event that a Business Combination does not close, the Company may use a
portion of proceeds held outside the Trust Account to repay the Working Capital
Loans but no proceeds held in the Trust Account would be used to repay the
Working Capital Loans. Except for the foregoing, the terms of such Working
Capital Loans, if any, have not been determined and no written agreements exist
with respect to such loans. The Working Capital Loans would either be repaid
upon consummation of a Business Combination or, at the lender's discretion, up
to $1.5 million of such Working Capital Loans may be convertible into warrants
of the post Business Combination entity at a price of $1.50 per warrant. The
warrants would be identical to the Private Placement Warrants. To date, the
Company had no borrowings under the Working Capital Loans.

The Sponsor, officers and directors, or any of their respective affiliates will
be reimbursed for any
out-of-pocket
expenses incurred in connection with activities on the Company's behalf such as
identifying potential target businesses and performing due diligence on suitable
Business Combinations. The Company's audit committee will review on a quarterly
basis all payments that were made to the Sponsor, officers or directors, or
their affiliates.

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Contractual Obligations

Registration Rights

The holders of the founder shares, private placement warrants and warrants that
may be issued upon conversion of working capital loans (and any Class A common
stock issuable upon the exercise of the private placement warrants and warrants
that may be issued upon conversion of working capital loans) will be entitled to
registration rights pursuant to a registration rights agreement to be signed
prior to or on the effective date of the initial public offering. The holders of
these securities are entitled to make up to three demands, excluding short form
demands, that we register such securities. In addition, the holders have certain
"piggy-back" registration rights with respect to registration statements filed
subsequent to our completion of our initial business combination.

However, the registration rights agreement provides that we will not permit any
registration statement filed under the Securities Act to become effective until
termination of the applicable lockup period, which occurs (i) in the case of the
founder shares, as described in the following paragraph, and (ii) in the case of
the private placement warrants and the respective shares of our Class A common
stock underlying such warrants, 30 days after the completion of our initial
business combination. We will bear the expenses incurred in connection with the
filing of any such registration statements.

Except as described in this Annual Report, the holders of the founder shares
(including the anchor investors) have agreed not to transfer, assign or sell any
of their founder shares until the earlier to occur of (a) one year after the
completion of our initial business combination, or (b) subsequent to our initial
business combination, (x) if the last reported sale price of our Class A common
stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock
capitalizations, reorganizations, recapitalizations and the like) for any 20
trading days within any
30-trading
day period commencing at least 150 days after our initial business combination,
or (y) the date on which we complete a liquidation, merger, capital stock
exchange or other similar transaction that results in all of our public
stockholders having the right to exchange their shares of common stock for cash,
securities or other property. Any permitted transferees will be subject to the
same restrictions and other agreements of our sponsor with respect to any
founder shares. We refer to such transfer restrictions throughout this Annual
Report as the
lock-up.

In addition, pursuant to the registration rights agreement, our sponsor, upon
completion of an initial business combination, will be entitled to nominate up
to three individuals for election to our board of directors, as long as the
sponsor holds any securities covered by the registration rights agreement.

Subscription Agreement

The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$4,600,000 in the aggregate, paid upon the closing of the initial public
offering and Over-Allotment. In addition, the underwriters will be entitled to a
deferred fee of $0.35 per Unit, or $8,050,000 in the aggregate. The deferred fee
will become payable to the underwriters from the amounts held in the Trust
Account solely in the event that the Company completes a Business Combination,
subject to the terms of the underwriting agreement.

Critical accounting policies

The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:

Responsibilities Related to Warrants

We account for warrants issued in connection with our initial public offering in accordance with Accounting Standards Codification (“ASC”) 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity

 ("ASC 815"), under which the warrants do not meet the criteria for equity
classification and must be recorded as liabilities. As the warrants meet the
definition of a derivative as contemplated in ASC 815, the Warrants are measured
at fair value at inception and at each reporting date in accordance with ASC
820,
Fair Value Measurement
, with changes in fair value recognized in the Statement of Operations in the
period of change.

Investments held in trust account

Our portfolio of investments held in the Trust Account is comprised of U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less, or investments in
money market funds that invest in U.S. government securities, or a combination
thereof. The investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in gain on marketable securities,
dividends and interest held in Trust Account in the accompanying statement of
operations. The estimated fair values of investments held in the Trust Account
are determined using available market information.

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Redeemable Class A Common Shares

We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of Class A common stock subject to mandatory redemption (if any)
are classified as liability instruments and are measured at fair value. Shares
of conditionally redeemable Class A common stock (including Class A common stock
that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within our control) are classified as temporary equity. At all other times,
shares of Class A common stock are classified as stockholders' equity. Our
Class A common stock features certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, at December 31, 2021, 23,000,000 shares of Class A common
stock subject to possible redemption are presented as temporary equity, outside
of the stockholders' equity section of the accompanying balance sheet.

Net earnings (loss) per common share

Net income (loss) per common share is computed by dividing net income (loss) by
the weighted-average number of shares of common stock outstanding during the
period. In order to determine the net income (loss) attributable to both the
Class A common stock and Class B common stock, the Company first considered the
total income (loss) allocable to both sets of shares. This is calculated using
the total net income (loss) less any dividends paid. For purposes of calculating
net income (loss) per share, any remeasurement of the accretion to redemption
value of the Class A common stock subject to possible redemption was considered
to be dividends paid to the holders of the Class A common stock. Subsequent to
calculating the total income (loss) allocable to both sets of shares, the
Company split the amount to be allocated pro rata between Class A and Class B
common stock for the period from March 12, 2021 through December 31, 2021,
reflective of the respective participation rights.

The following table reflects the calculation of basic and diluted net earnings per common share (in dollars, except per share amounts):

                                             For the Period from February 23, 2021 (Date of Inception)

                                                             Through December 31, 2021
Net Income                                  $                                                12,427,342

Accretion of Class A
common stock to
redemption amount                           $                                               (37,127,388 )

Net loss including
accretion of temporary
equity to redemption
value                                       $                                               (24,700,046 )




                                             For the Period from February 23, 2021 (Date of Inception)

                                                             Through December 31, 2021
                                                  Class A                                Class B
Basic and diluted net income (loss)
per share:
Numerator:
Net loss including accretion of
temporary equity to redemption value    $                (13,458,849 )         $                (11,241,197 )
Accretion of Class A common stock to
redemption amount                                         37,127,388                                     -

Net income (loss)                       $                 23,668,539           $                (11,241,197 )

Denominator:

Weighted Average Shares                                    6,884,354                              5,750,000

Basic and diluted income (loss) per
ordinary share                          $                       3.44           $                      (1.95 )



As of December 31, 2021, no Founder Shares remain subject to forfeiture, as such
the Company did not have any dilutive securities and other contracts that could,
potentially, be exercised or converted into common stock and share in earnings.
As a result, diluted income (loss) per share is the same as basic income (loss)
per share for the period presented

Recent accounting pronouncements

Our management does not believe that there are any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, that would have a
material effect on our financial statements.

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Off-Balance
Sheet Arrangements

As of December 31, 2021, we did not have any
off-balance
sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation
S-K.

Employment Act

The JOBS Act contains provisions that, among other things, relax certain
reporting requirements for qualifying public companies. We qualify as an
"emerging growth company" and under the JOBS Act are allowed to comply with new
or revised accounting pronouncements based on the effective date for private
(not publicly traded) companies. We are electing to delay the adoption of new or
revised accounting standards, and as a result, we may not comply with new or
revised accounting standards on the relevant dates on which adoption of such
standards is required for
non-emerging
growth companies. As a result, the financial statements may not be comparable to
companies that comply with new or revised accounting pronouncements as of public
company effective dates.

Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of
non-emerging
growth public companies under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, (iii) comply with any requirement that may be adopted by the
PCAOB regarding mandatory audit firm rotation or a supplement to the auditor's
report providing additional information about the audit and the financial
statements (auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our initial public offering or until we are no
longer an "emerging growth company," whichever is earlier.

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