This Quarterly Report on Form 10-Q includes forward-looking statements. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team's expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words "anticipate," "believe," "continue," "could," "estimate," "expect," "intends," "may," "might," "plan," "possible," "potential," "predict," "project," "should," "would" and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Factors that might cause or contribute to such forward-looking statements include, but are not limited to, those set forth in the Risk Factors section of the Company's registration statement and prospectus for the Company's initial public offering filed with the SEC. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this report.





Overview

We are a blank check company incorporated on July 27, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (a "Business Combination"). We consummated our Public Offering (as defined below) on July 14, 2021, on September 27, 2022 we signed a letter of intent ("LOI") with Direct Biologics and on October 12, 2022 we signed a Business Combination Agreement (the "BCA"), by and among Good Works, Direct Biologics, Inc., a Delaware corporation ("Company Topco"), DB Merger Sub, Inc., a Delaware corporation ("Company Merger Sub"), DB DRE LLC, a Delaware limited liability company ("DRE LLC"), and Direct Biologics, LLC, a Wyoming limited liability company ( "Direct Biologics"), which is described in further detail below. We intend to use the cash proceeds from our Public Offering and the Private Placement described below as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the Business Combination.

We expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to complete our initial Business Combination will be successful.

We completed the sale of 23,000,000 units (the "Units" and, with respect to the shares of common stock included in the Units being offered, the "Public Shares") at $10.00 per Unit on July 14, 2021. Simultaneous with the closing of the Public Offering, we completed the sale of 350,000 Private Units (the "Private Units") at a price of $10.00 per Private Unit in a private placement to certain funds and accounts managed by Glazer Capital LLC, Magnetar Financial LLC, Mint Tower Capital Management B.V., Periscope Capital, Inc., and Polar Asset Management Partners Inc. (collectively, the "Anchor Investors").

As of September 30, 2022, a total of $231,258,637 of the net proceeds from the IPO (including the partial exercise of the over-allotment option) and the Private Placements were in a trust account established for the benefit of the Company's public shareholders. The trust fund account is invested in interest-bearing U.S. government securities and the income earned on those investments is also for the benefit of our public shareholders.

Our management has broad discretion with respect to the specific application of the net proceeds of IPO and the Private Placement, although substantially all of the net proceeds are intended to be applied generally towards consummating a business combination.

Results of Operations and Known Trends or Future Events

As of September 30, 2022, we have not commenced any operations. All activity for the period from July 27, 2020 (inception) through September 30, 2022, relates to our formation and initial public offering ("Public Offering" of "IPO") that occurred on July 14, 2021, and, since the completion of the IPO, searching for a target to consummate a Business Combination. We will not generate any operating revenues until after the completion of a Business Combination, at the earliest. We will generate non-operating income in the form of interest income from the proceeds derived from the Public Offering and placed in the Trust Account (defined below). There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements, December 31, 2021.





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For the three months ended September 30, 2022, we had a net income of $246,439 which consisted of $578,495 in operating expenses incurred and a $219,634 provision for income tax offset by $1,044,568 in interest income from investments held in the Trust Account. For the nine months ended September 30, 2022, we had a net loss of $81,170 which consisted of $1,120,173 in operating expenses incurred and a $219,634 provision for income tax offset by $1,258,637 in interest income from investments in the Trust Account.

For the three months ended September 30, 2021, we had a net loss of $197,601 which consisted of $212,360 in operating expenses incurred offset by $14,759 in interest income from the investments held in the Trust Account. For the nine months ended September 30, 2021, we had a net loss of $199,754 which consisted of $214,513 in operating expenses incurred offset by $14,759 in interest income from investments in the Trust Account.

The loss in the three and nine months ended September 30, 2022 was greater than the losses in the three and nine months ended September 30, 2021 because the Company had only just completed its IPO in July 2021.





Proposed Business Combination

On October 12, 2022, Good Works II Acquisition Corp., a Delaware corporation ("Good Works"), entered into a Business Combination Agreement (the "BCA"), by and among Good Works, Direct Biologics, Inc., a Delaware corporation ("Company Topco"), DB Merger Sub, Inc., a Delaware corporation ("Company Merger Sub"), DB DRE LLC, a Delaware limited liability company ("DRE LLC"), and Direct Biologics, LLC, a Wyoming limited liability company ( "Direct Biologics"). Upon consummation of the transactions contemplated by the BCA (the "Business Combination"), Company Topco would become the Nasdaq-listed parent company of both Good Works and Direct Biologics. The BCA supersedes the non-binding letter of intent between Good Works and Direct Biologics announced via press release on September 27, 2022.

Direct Biologics is using its proprietary extracellular vesicle platform technology to harness the power of bone marrow-derived mesenchymal stem cells to develop cell-free therapeutic candidates. Its product candidate, ExoFlo, is in a Phase 3 clinical trial for treating moderate-to-severe acute respiratory distress syndrome ("ARDS") in hospitalized adults with severe-to-critical COVID-19 (the "EXTINGuish COVID-19 trial"). ExoFlo received regenerative medicine advanced therapy designation for this indication from the U.S. Food and Drug Administration ("FDA"), which is designed to expedite the approval of promising regenerative medical products in the U.S. that demonstrate clinical evidence indicating the ability to address an unmet medical need for a serious life-threatening disease or condition.

On October 11, 2022, the Company held a vote to amend its amended and restated certificate of incorporation to extend the date by which the Company must consummate a Business Combination from October 14, 2022 to April 14, 2023 (the "Extension Meeting"). At the Extension Meeting, the Company stockholders had the opportunity to redeem their shares of the Company for a proportional amount of the money held in the Company's trust account. The Company's stockholders elected redemptions of 20,525,530 shares at a redemption value of $10.04 each for an aggregate redemption value of $206,139,296.

If the proposed transaction is consummated, cash from this proposed transaction, net of transaction fees, is intended to be used to fund clinical trials and provide working capital for commercializing Direct Biologics' lead product.





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The Business Combination

The BCA provides, among other things, that on the terms and subject to the conditions set forth therein, (i) Company Merger Sub will merge with and into Good Works, with Good Works surviving the merger and becoming a wholly-owned subsidiary of Company Topco (the "Topco Merger"), (ii) DRE LLC will merge with and into Direct Biologics, with Direct Biologics surviving the merger (the "Rollover Merger", and together with the Topco Merger, the "Mergers"). Following the closing of the Mergers, the combined company will be organized in an "Up-C" structure, and Company Topco's only direct assets will consist of equity in Good Works and Direct Biologics. The date on which the closing of the Mergers (the "Closing") actually occurs is hereinafter referred to as the "Closing Date."

Immediately following the Mergers, certain members of Direct Biologics will contribute a portion of their equity in Direct Biologics to Company Topco in exchange for equity in Company Topco (the "Topco Contribution"), with Direct Biologics continuing as a partially-owned subsidiary of Company Topco. Following the Topco Contribution, Good Works will contribute to Direct Biologics all funds remaining in its trust account following its stockholder vote to approve the Business Combination, less any amounts used to pay transaction expenses associated with the Business Combination.

Business Combination Consideration

The aggregate consideration available to be received by the members of Direct Biologics is based on an enterprise value of $1,025,000,000 and consists of (i) shares of Company Topco common stock and Direct Biologics Up-C units based on a pre-money enterprise value of $625 million with equity consideration valued at $10.00 per share, (ii) shares of Company Topco common stock and Direct Biologics Up-C units currently valued at $50 million that are subject to forfeiture if Direct Biologics does not achieve a primary efficacy endpoint of 60-day all-cause mortality in its Phase 3 EXTINGuish trial by December 31, 2023, and (iii) shares of Company Topco common stock and Direct Biologics Up-C units currently valued at $350 million that are subject to forfeiture if Direct Biologics does not obtain either Biologics License Application approval or Emergency Use Authorization from the FDA for its ExoFlo product (or a derivative product for any applicable indication) by December 31, 2024.

The BCA and the Business Combination have been approved by the boards of directors of each of Good Works, and Company Topco and the board of managers of Direct Biologics. The Business Combination is expected to close in the first half of 2023, subject to customary closing conditions, including the satisfaction of the minimum Available Cash conditions, the receipt of certain governmental approvals and the required approval by Good Works' stockholders and Direct Biologics' unit holders.





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Liquidity and Capital Resources

As of September 30, 2022, we had cash outside our trust account of $699,231, available for working capital needs. All remaining cash was held in the trust account and is generally unavailable for our use, prior to an initial business combination.

Pursuant to the IPO on July 14, 2021 the Company sold 23,000,000 Units (including 3,000,000 Units of over-allotment options that was fully exercised) at a price of $10.00 per Unit. Each Unit consists of one share of common stock and one-half of one warrant ("Public Warrant"). Each whole Public Warrant entitles the holder to purchase one share of common stock at a price of $11.50 per share, subject to adjustment. An aggregate of $10.00 per Unit sold in the Initial Public Offering was held in the Trust Account and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 180 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. As of September 30, 2022, $231,258,637 of the IPO proceeds were held in the Trust Account.

On October 11, 2022, we held a vote to amend our amended and restated certificate of incorporation to extend the date by which we must consummate a Business Combination from October 14, 2022 to April 14, 2023 (the "Extension Meeting"). At the Extension Meeting, our stockholders elected redemptions of 20,525,530 shares at a value of $10.04 per share for an aggregate redemption value of $206,139,296.

We intend to use substantially all of the funds held in the trust account, including any amounts representing interest earned on the trust account (excluding the business combination marketing fees payable to I-Bankers) to complete our initial Business Combination. We may withdraw interest to pay our taxes and liquidation expenses if we are unsuccessful in completing a Business Combination. We estimate our annual franchise tax obligations to be $200,000, which is the maximum amount of annual franchise taxes payable by us as a Delaware corporation per annum, which we may pay from funds from the Public Offering held outside of the trust account or from interest earned on the funds held in the trust account and released to us for this purpose. Our 2021 franchise tax was calculated using a partial year proration and amounted to $97,219. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the trust account reduced by our operating expense and franchise taxes. We expect the interest earned on the amount in the trust account will be sufficient to pay our income taxes. To the extent that our equity or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining proceeds held in the trust account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business prior to our initial business combination. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our initial stockholders or one of its affiliates or certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts (subject to the conversion rights described below). In the event that our initial business combination does not close, we may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account would be used for such repayment. Up to $1,500,000 of such loans may at the option of the lender determined at the time of the loan be convertible into private placement units at a price of $10.00 per unit of the post business combination entity. The units would be identical to the private placement units, including as to exercise price, exercisability and exercise period of the underlying warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to the completion of our initial business combination, we do not expect to seek loans from parties other than our initial stockholders or their affiliates as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.





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Our primary liquidity requirements incurred to date in advance of our initial business combination include approximately $223,000 for legal, accounting, due diligence, travel and other expenses associated with structuring, negotiating and documenting successful business combinations; $185,000 for legal and accounting fees related to regulatory reporting requirements; $247,000 for Franchise Taxes to the State of Delaware; $144,000 for Nasdaq continued listing fees; and approximately $495,000 for general working capital that will be used for miscellaneous expenses and reserves. We have also paid an affiliate of one of our officers $10,000 per month, for a total to date of $150,000, for office space, secretarial and administrative services provided to members of our management team.

We will need to obtain additional financing either to complete our Business Combination or because as a result of the Extension Meeting we have become obligated to redeem 20,525,530 public shares. in which case we may issue additional securities or incur debt in connection with such Business Combination. We may also obtain financing prior to the closing of our initial business combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial business combination. There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop agreements we may enter into following consummation of our initial public offering. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our Business Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangement as of September 30, 2022.





Contractual Obligations

As of September 30, 2022, we did not have any long-term debt, capital or operating lease obligations.

We entered into an administrative support agreement pursuant to which we will pay an affiliate of one of our directors for office space and secretarial and administrative services provided to members of our management team, in an amount not to exceed $10,000 per month.

We have engaged I-Bankers as an advisor in connection with our acquiring, engaging in a share exchange, share reconstruction and amalgamation with, purchasing all or substantially all of the assets of, entering into contractual arrangements with, or engaging in any other similar Business Combination with one or more businesses or entities. We will pay I-Bankers for such services a fee equal to 3.5% of the gross proceeds of the Public Offering, or $8,050,000.





Critical Accounting Policies

Management's discussion and analysis of our results of operations and liquidity and capital resources are based on our financial information. We describe our significant accounting policies in Note 2 - Summary of Significant Accounting Policies, of the Notes to Financial Statements included in this report, with those considered critical outlined below. Our financial statements have been prepared in accordance with U.S. GAAP. Certain of our accounting policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.





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Common Stock Subject to Possible Redemption

We account for common stock subject to possible redemption in accordance with the guidance in the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." Common stock subject to mandatory redemption (if any) is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including 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, common stock is classified as stockholders' equity. Our 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, 23,000,000 shares of common stock subject to possible redemption are presented as temporary equity, outside of the stockholders' equity section of our balance sheet at September 30, 2022 and December 31, 2021.

Net Income (loss) Per Common Stock

We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share". Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. We apply the two-class method in calculating income per share of common stock. Accretion associated with the redeemable shares of common stock is excluded from income (loss) per common share as the redemption value approximates fair value.

The calculation of diluted income (loss) per share of common stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. As of September 30, 2022 and September 30, 2021, we did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common stock and then share in our earnings. As a result, diluted net income (loss) per common share is the same as basic net income (loss) per common share for the periods presented.





Recent Accounting Standards

Our management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.





JOBS 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" under the JOBS Act and 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, our 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 independent registered public accounting firm'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 independent registered public accounting firm'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 this offering or until we are no longer an "emerging growth company," whichever is earlier.


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