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
"may", "should", "could," "would," "expect," "plan," "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 as well as assumptions made by, and based on
information currently available to, our management. 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 Annual
Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the
"SEC") on March 14, 2022, and as otherwise provided for in Item 1A herein. 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.
The following discussion and analysis of our 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.
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.
Significant Developments During the Quarter
First Amendment to Business Combination Agreement
On January 10, 2022, the parties to the Business Combination Agreement (the
"BCA"), dated as of November 22, 2021, by and among the Company, Bright Lights
Parent Corp., a Delaware corporation and a direct wholly owned subsidiary of the
Company ("ParentCo"), Mower Intermediate Holdings, Inc., a Delaware corporation
and a direct wholly owned subsidiary of the Company ("Intermediate Holdco"),
Mower Merger Sub Corp., a Delaware corporation and a direct wholly owned
subsidiary of ParentCo ("Merger Sub Corp"), Mower Merger Sub 2, LLC, a Delaware
limited liability company and a direct wholly owned subsidiary of Intermediate
Holdco ("Merger Sub LLC"), and Manscaped, LLC, a Delaware limited liability
company ("Manscaped") entered into the First Amendment to Business Combination
Agreement (the "BCA Amendment"). The BCA Amendment provides that each of the
outstanding Company LLC Units (as defined in the BCA) and the shares issuable
pursuant to the applicable earnout milestone will be treated as converted to
ParentCo Class A common stock, as applicable, issued and to be taken into
account in calculating the per share price for purposes of determining whether
any earnout milestone has been achieved in connection with certain transactions
where all or substantially all the holders of outstanding shares of ParentCo
Class A common stock have such shares converted, exchanged or otherwise replaced
with the right to receive cash, securities or other property. Additionally,
pursuant to the BCA Amendment, the definition of "Earnout Consideration" is
amended with respect to each holder of ParentCo Class A common stock and each
holder of restricted stock units of ParentCo to equal a portion of the available
earnout shares or the available earnout restricted stock units, respectively, as
determined by the Board of Managers of Manscaped. The BCA Amendment also removes
the definition of "Earnout Pro Rata Portion". The BCA Amendment also revises the
figure in Section 2.4(a) of the BCA to read "22,244,958 Company LLC Units" and
amends Section 6.3(a) of the BCA such that, if the registration statement filed
in connection with the parties' business combination is not effective by
February 15, 2022, Manscaped shall act in good faith to deliver to the Company
its audited financial statements as of and for the years ended December 31,
2021, as soon as reasonably practicable following such date.
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First Amendment to Sponsor Support Agreement
On January 10, 2022, the parties to the Sponsor Support Agreement entered into
the First Amendment to Sponsor Support Agreement (the "SSA Amendment"). Pursuant
to the SSA Amendment, the definition of "Earnout Strategic Transaction Price,"
which is the price used to determine whether the shares owned by the Sponsor
that, as part of the transactions contemplated by the BCA, as amended, are to be
subjected to potential forfeiture to ParentCo for no consideration until the
occurrence of certain earnout vesting conditions (such shares, the "Sponsor
Earnout Shares"), will vest in connection with certain transactions, was amended
such that the Sponsor Earnout Shares to be issued are to be taken into account
when determining the Earnout Strategic Transaction Price.
Convertible Promissory Note - Related Party
On January 18, 2022, the Company entered into a Convertible Promissory Note (the
"Convertible Promissory Note") with the Sponsor. Pursuant to the Convertible
Promissory Note, the Sponsor agreed to loan to the Company up to $1.5 million to
be used for working capital purposes. In December 2021, the Sponsor advanced
$200,000 to the Company for incurred expenses, which advance is deemed to have
been a drawdown under the Convertible Promissory Note. Up to $1.5 million of the
loans may be settled in whole warrants to purchase Class A common stock of the
Company at a conversion price equal to $1.00 per warrant. The warrants are
identical to the Private Placement Warrants. The loans do not bear any interest,
and will be repayable by the Company to the Sponsor upon the earlier of the date
by which the Company must complete a Business Combination pursuant to its
amended and restated certificate of incorporation (as amended from time to time)
and the consummation of the Business Combination between the Company, the
Company's subsidiaries and Manscaped. If the Company completes a Business
Combination, the Company would repay the Convertible Promissory Note out of the
proceeds of the Trust Account released to the Company. Otherwise, the 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 Convertible Promissory Note, but no
proceeds held in the Trust Account would be used to repay the Convertible
Promissory Note.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our only activities from inception through March 31, 2022 were
organizational activities and 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 initial Business Combination. We expect to continue to
generate non-operating income in the form of interest income on marketable
securities held in the Trust Account. We expect that we will incur increased
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses in
connection with searching for, and completing, a Business Combination.
For the three months ended March 31, 2022, we had a net income of $3,656,694,
which consists of interest earned on marketable securities held in the Trust
Account of $18,772 and changes in fair value of warrant liabilities of
$4,525,000, offset by operating and formation costs of $887,078.
For the three months ended March 31, 2021, we had a net income of $8,607,546,
which consists of changes in fair value of warrant liabilities of $11,584,000
and interest earned on marketable securities held in Trust Account of $3,034,
offset by operating and formation costs of $474,861, 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.
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 three months ended March 31, 2022, cash used in operating activities was
$562,135. Net income of $3,656,694 was affected by the change in fair value of
warrant liabilities of $4,525,000 and interest earned on marketable securities
held in the Trust Account of $18,772. Changes in operating assets and
liabilities provided $324,943 of cash for operating activities.
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For the three months ended March 31, 2021, cash used in operating activities was
$1,409,399. Net income of $8,607,546 was affected by the change in fair value of
warrant liabilities of $11,584,000, transaction costs associated with the
Initial Public Offering of $788,627, a loss on the initial issuance of the
Private Placement Warrants of $1,716,000 and interest earned on marketable
securities held in the Trust Account of $3,034. Changes in operating assets and
liabilities used $934,538 of cash for operating activities.
For the three months ended March 31, 2022, net cash provided by financing
activities was $525,000 as a result of the drawdowns on the Convertible Note.
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
deferred underwriting commissions and 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 March 31, 2022, we had cash of $49,939. 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 an affiliate of the
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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.
Going Concern
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," we have determined that the liquidity condition
raises substantial doubt about the Company's ability to continue as a going
concern through at least one year from issuance date of these financial
statements. These financial statements do not include any adjustments relating
to the recovery of the recorded assets or the classification of the liabilities
that might be necessary should the Company be unable to continue as a going
concern.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. 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 monthly fee of $10,000 for office space, secretarial, and
administrative support services. 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.
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
underwriters from the amounts held in the Trust Account solely in the event that
we complete 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.
Lee Strategic Services Agreement
Commencing on January 6, 2021 the Company agreed to pay its Chief Financial
Officer, Hahn Lee, $12,500 per month for his services prior to the initial
Business Combination. For the three months ended March 31, 2022 and March 31,
2021, the Company incurred and paid $37,500 and $35,484, respectively, in fees
for these services.
21
Vendor Agreements
On June 24, 2021, the Company entered into an agreement with a vendor for
transaction services related to the Business Combination. On August 5, 2021, the
Company entered into an additional agreement with the same vendor for PIPE
services relating to the Business Combination. At the closing of the Business
Combination, this vendor shall receive a cash transaction fee of approximately
$7,500,000, which shall be inclusive of both agreements. These fees will only
become due and payable upon the consummation of a Business Combination.
On September 17, 2021, the Company entered into an agreement with a vendor for
investment banking services related to the pending Business Combination.
Specifically, the agreement relates to assisting in raising the funds as part of
the PIPE financing. The agreement calls for the vendor to receive a capital
markets advisory fee of $1,500,000 and a portion of the placement fee that
equals 4% of the gross proceeds of securities sold in the PIPE placement. These
fees will only become due and payable upon the consummation of an initial
business combination.
Upon the consummation of the Business Combination, the Company will extend its
directors and officers insurance policy for a fee of approximately $2,500,000.
Upon the closing of the Business Combination, the Company expects to pay
approximately $100,000 for fees related to printer and proxy related services.
First Amendment to Business Combination Agreement
On January 10, 2022, the parties to the Business Combination Agreement (the
"BCA"), dated as of November 22, 2021, by and among the Company, Bright Lights
Parent Corp., a Delaware corporation and a direct wholly owned subsidiary of the
Company ("ParentCo"), Mower Intermediate Holdings, Inc., a Delaware corporation
and a direct wholly owned subsidiary of the Company ("Intermediate Holdco"),
Mower Merger Sub Corp., a Delaware corporation and a direct wholly owned
subsidiary of ParentCo ("Merger Sub Corp"), Mower Merger Sub 2, LLC, a Delaware
limited liability company and a direct wholly owned subsidiary of Intermediate
Holdco ("Merger Sub LLC"), and Manscaped, LLC, a Delaware limited liability
company ("Manscaped") entered into the First Amendment to Business Combination
Agreement (the "BCA Amendment"). The BCA Amendment provides that each of the
outstanding Company LLC Units (as defined in the BCA) and the shares issuable
pursuant to the applicable earnout milestone will be treated as converted to
ParentCo Class A common stock, as applicable, issued and to be taken into
account in calculating the per share price for purposes of determining whether
any earnout milestone has been achieved in connection with certain transactions
where all or substantially all the holders of outstanding shares of ParentCo
Class A common stock have such shares converted, exchanged or otherwise replaced
with the right to receive cash, securities or other property. Additionally,
pursuant to the BCA Amendment, the definition of "Earnout Consideration" is
amended with respect to each holder of ParentCo Class A common stock and each
holder of restricted stock units of ParentCo to equal a portion of the available
earnout shares or the available earnout restricted stock units, respectively, as
determined by the Board of Managers of Manscaped. The BCA Amendment also removes
the definition of "Earnout Pro Rata Portion". The BCA Amendment also revises the
figure in Section 2.4(a) of the BCA to read "22,244,958 Company LLC Units" and
amends Section 6.3(a) of the BCA such that, if the registration statement filed
in connection with the parties' business combination is not effective by
February 15, 2022, Manscaped shall act in good faith to deliver to the Company
its audited financial statements as of and for the years ended December 31,
2021, as soon as reasonably practicable following such date.
First Amendment to Sponsor Support Agreement
On January 10, 2022, the parties to the Sponsor Support Agreement entered into
the First Amendment to Sponsor Support Agreement (the "SSA Amendment"). Pursuant
to the SSA Amendment, the definition of "Earnout Strategic Transaction Price,"
which is the price used to determine whether the shares owned by the Sponsor
that, as part of the transactions contemplated by the BCA, as amended, are to be
subjected to potential forfeiture to ParentCo for no consideration until the
occurrence of certain earnout vesting conditions (such shares, the "Sponsor
Earnout Shares"), will vest in connection with certain transactions, was amended
such that the Sponsor Earnout Shares to be issued are to be taken into account
when determining the Earnout Strategic Transaction Price.
Convertible Promissory Note - Related Party
On January 18, 2022, the Company entered into the Convertible Promissory Note
with the Sponsor, which is deemed a Working Capital Loan. Pursuant to the
Convertible Promissory Note, the Sponsor agreed to loan to the Company up to
$1.5 million to be used for working capital purposes. In December 2021, the
Sponsor advanced $200,000 to the Company for incurred expenses, which advance is
deemed to have been a drawdown under the Convertible Promissory Note. Up to $1.5
million of the loans may be settled in whole warrants to purchase Class A common
stock of the Company at a conversion price equal to $1.00 per warrant. The
warrants are identical to the Private Placement Warrants. The loans do not bear
any interest, and will be repayable by the Company to the Sponsor upon the
earlier of the date by which the Company must complete a Business Combination
pursuant to its amended and restated certificate of incorporation (as amended
from time to time) and the consummation of the Business Combination between the
Company, the Company's subsidiaries and Manscaped. If the Company completes a
Business Combination, the Company would repay the Convertible Promissory Note
out of the proceeds of the Trust Account released to the Company. Otherwise, the
Convertible Promissory Note 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 Convertible Promissory Note, but no proceeds held in the Trust Account would
be used to repay the Working Capital Loans.
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Critical Accounting Policies
The preparation of condensed consolidated 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:
Convertible Note - Related Party
The Company accounts for its Convertible Promissory Note under ASC 815,
Derivatives and Hedging ("ASC 815"). Under 815-15-25, the election can be at the
inception of a financial instrument to account for the instrument under the fair
value option under ASC 825. The Company has made such election for its
Convertible Promissory Note. Using fair value option, the Convertible Promissory
Note is required to be recorded at its initial fair value on the date of
issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the note are recognized as non-cash change in the fair value of the
Convertible Promissory Note in the condensed statements of operations. The fair
value of the option to convert into private warrants was valued utilizing the
closed-form model.
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 consolidated
balance sheets.
Net Income Per Common Share
Net income per common share is computed by dividing net income by the weighted
average number of common stock outstanding during the period. Accretion
associated with the redeemable shares of Class A common stock is excluded from
net income per common share as the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed consolidated financial statements.
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BRIGHT LIGHTS ACQUISITION CORP. 
