References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Bright Lights Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Bright Lights Sponsor LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding the
completion of the Proposed Business Combination (as defined below), the
Company's financial position, business strategy and the plans and objectives of
management for future operations, are forward-looking statements. Words such as
"expect," "believe," "anticipate," "intend," "estimate," "seek" and variations
and similar words and expressions are intended to identify such forward-looking
statements. Such forward-looking statements relate to future events or future
performance, but reflect management's current beliefs, based on information
currently available. A number of factors could cause actual events, performance
or results to differ materially from the events, performance and results
discussed in the forward-looking statements, including that the conditions of
the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the Risk
Factors section of the Company's final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). The
Company's securities filings can be accessed on the EDGAR section of the SEC's
website at www.sec.gov. Except as expressly required by applicable securities
law, the Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021 and June 30, 2021. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly valued our Class A common
stock subject to possible redemption. We previously determined the Class A
common stock subject to possible redemption to be equal to the redemption value
of $10.00 per share of Class A common stock while also taking into consideration
a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Class A common stock issued during the Initial
Public Offering can be redeemed or become redeemable subject to the occurrence
of future events considered outside of the Company's control. Therefore,
management concluded that the redemption value should include all Class A common
stock subject to possible redemption, resulting in the Class A common stock
subject to possible redemption being equal to their redemption value. As a
result, management has noted a reclassification error related to temporary
equity and permanent equity. This resulted in a restatement to the initial
carrying value of the Class A common stock subject to possible redemption with
the offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on
September 15, 2020 for the purpose of effectuating a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or other similar
business combination with one or more businesses. We intend to effectuate our
Business Combination using cash from the proceeds of the Initial Public Offering
and the sale of the Private Placement Warrants, our capital stock, debt or a
combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from September 15, 2020 (inception) through September 30,
2021 were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account. We incur expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the three months ended September 30, 2021, we had a net loss of $4,888,408,
which consists of operational and due diligence costs of $1,814,941 and changes
in the fair value of warrant liabilities of $3,077,000, offset by interest
earned on marketable securities held in the Trust Account of $3,533.
For the nine months ended September 30, 2021, we had a net loss of $1,372,649,
which consists of operational and due diligence costs of $4,308,085, a loss on
the initial issuance of the Private Placement Warrants of $1,716,000 and
transaction costs associated with the Initial Public Offering of $788,627,
offset by interest earned on marketable securities held in the Trust Account of
$10,063 and changes in the fair value of warrant liabilities of $5,430,000.
For the period from September 15, 2020 (inception) through September 30, 2020,
we had net loss of $1,000, which consisted of formation costs.
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Liquidity and Capital Resources
On January 11, 2021, we consummated the Initial Public Offering of 23,000,000
Units at $10.00 per Unit, generating gross proceeds of $230,000,000 .
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 6,600,000 Private Placement Warrants at a price of $1.00 per Private
Placement Warrant in a private placement to the Sponsor generating gross
proceeds of $6,600,000.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Units, a total of $230,000,000 was placed in
the Trust Account. We incurred $12,301,684 in Initial Public Offering related
costs, including $4,325,000 of underwriting fees, $7,568,750 of deferred
underwriting fees and $407,934 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities
was $1,662,067. Net loss of $1,372,649 was affected by the change in fair value
of warrant liabilities of $5,430,000, transaction costs associated with Initial
Public Offering of $788,627, a loss on the initial issuance of the Private
Placement Warrants and interest earned on marketable securities held in the
Trust Account of $10,063. Changes in operating assets and liabilities provided
$2,646,018 of cash for operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account
of $230,010,063 (including $10,063 of interest income) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. Interest income on the
balance in the Trust Account may be used by us to pay taxes. Through September
30, 2021, we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our 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.
As of September 30, 2021, we had cash of $229,867. We intend to use the funds
held outside the Trust Account primarily to identify and evaluate target
businesses, perform business due diligence on prospective target businesses,
travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents
and material agreements of prospective target businesses, and structure,
negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a 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 be convertible into warrants
at a price of $1.00 per warrant, at the option of the lender. The warrants would
be identical to the Private Placement Warrants.
We will need to raise additional capital through loans or additional investments
from its Sponsor, stockholders, officers, directors, or third parties. The
Company's officers, directors and Sponsor may, but are not obligated to, loan
the Company funds, from time to time or at any time, in whatever amount they
deem reasonable in their sole discretion, to meet the Company's working capital
needs. Accordingly, the Company may not be able to obtain additional financing.
If the Company is unable to raise additional capital, it may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, curtailing operations, suspending the pursuit of a
potential transaction, and reducing overhead expenses. The Company cannot
provide any assurance that new financing will be available to it on commercially
acceptable terms, if at all. These conditions raise substantial doubt about the
Company's ability to continue as a going concern through January 29, 2023, the
date that the Company will be required to cease all operations, except for the
purpose of winding up, if a Business Combination is not consummated.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay the Sponsor
a total of $10,000 per month for office space, secretarial and administrative
support. We began incurring these fees on January 7, 2021 and will continue to
incur these fees monthly until the earlier of the completion of the Business
Combination and our liquidation.
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The underwriters are entitled to a deferred fee of $0.35 per Unit, up to
$7,568,750 in the aggregate. The deferred fee will become payable to the
underwriter 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. Certain investors identified by our Sponsor may purchase
units in this offering at the initial public offering price. The underwriters
did not receive any underwriting discounts or commissions on units sold in this
offering that were purchased by certain investors identified by the sponsor.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Warrant Liabilities
The Company accounts for the Public Warrants and Private Placement Warrants
(together, the "Warrants") in accordance with the guidance contained in ASC
815-40. The Warrants are not considered indexed to the Company's own common
stock, and as such, the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. The Private Placement Warrants and the
Public Warrants for periods where no observable traded price was available were
valued using the Modified Monte Carlo Simulation and Modified Black Scholes
option pricing models.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance
with the guidance in Accounting Standards Codification ("ASC") Topic 480
"Distinguishing Liabilities from Equity." Common stock subject to mandatory
redemption is classified as a liability instrument and measured at fair value.
Conditionally redeemable common stock (including common stock that features
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) is 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
occurrence of uncertain future events. Accordingly, common stock subject to
possible redemption is presented at redemption value as temporary equity,
outside of the stockholders' equity section of our condensed balance sheets.
Net Loss Per Common Share
Net loss per common share is computed by dividing net loss by the weighted
average number of common stock outstanding during the period. We apply the
two-class method in calculating net loss per common share. Accretion associated
with the redeemable shares of Class A common stock is excluded from net loss per
common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the Financial Accounting Standards Board ("FASB") issued ASU
2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and
Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40)
("ASU 2020-06") to simplify accounting for certain financial instruments. ASU
2020-06 eliminates the current models that require separation of beneficial
conversion and cash conversion features from convertible instruments and
simplifies the derivative scope exception guidance pertaining to equity
classification of contracts in an entity's own equity. The new standard also
introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective January 1, 2022 and should be applied on a full or modified
retrospective basis, with early adoption permitted beginning on January 1, 2021.
We adopted ASU 2020-06 and the adoption did not have an impact on our financial
position, results of operations or cash flows.
Management does not believe that any other recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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