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 sections of the Company's (i)
Annual Report on Form 10-K for the year ended December 31, 2021 filed with the
U.S. Securities and Exchange Commission (the "SEC") on March 14, 2022, (ii)
Quarterly Report on Form 10-Q filed with the SEC on May 17, 2022, (iii)
Quarterly Report on Form 10-Q filed with the SEC on August 15, 2022 and (iv) our
proxy statement on Schedule 14A for the Special Meeting as filed with the SEC on
October 31, 2022 and as otherwise provided for in Item 1A herein. 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 2022
Termination of Business Combination Agreement
On August 15, 2022, the Company received a letter from Manscaped purporting to
terminate the BCA. On August 18, 2022, the parties to the BCA entered into a
Mutual Termination and Release Agreement (the "Termination Agreement"), pursuant
to which, among other things, the parties agreed to mutually terminate the BCA,
effective immediately.
Pursuant to the Termination Agreement, subject to certain exceptions, the
Company and Manscaped have also agreed, on behalf of themselves and their
respective related parties, to a release of claims relating to the Contemplated
Business Combination. Manscaped has also agreed to pay the Company (or to such
entity or account as may from time to time be designated by the Company) the sum
of $1.0 million, with $350,000 due on the date of the Termination Agreement
("Termination Date"), $216,666.66 due on each of the first and second
anniversaries of the Termination Date, and $216,666.68 due on the third
anniversary of the Termination Date. The entire amount of $1.0 million has been
recorded as Other income - Termination Fee with the remaining $650,000 disclosed
on the balance sheet as Other Receivable.
As a result of the Termination Agreement, the Company will no longer owe due
diligence fees. The Company recognized other income for the reduction of due
diligence fees that were expensed in prior periods. The total Other Income -
Reduction of Due Diligence Fees for September 30, 2022 is $1,068,000.
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Termination of Related Agreements
As a result of the termination of the BCA, the BCA will be of no further force
and effect, and each of the transaction agreements entered into in connection
with the BCA, including, but not limited to, (i) the Sponsor Support Agreement
(as amended, the "SSA"), dated as of November 22, 2021, by and among the
Company, Bright Lights Sponsor LLC, a Delaware limited liability company, each
of the parties set forth on Schedule I thereto and Manscaped, (ii) the
Equityholder Support Agreement (the "ESA"), dated as of November 22, 2021, by
and among BLTS, the parties set forth on Schedule I thereto and Manscaped, and
(iii) the Assignment, Assumption and Amendment Agreement (the "AAA"), dated as
of November 22, 2021, by and among BLTS, ParentCo and Continental Stock Transfer
& Trust Company, a New York corporation, as warrant agent, will either
automatically be terminated in accordance with their terms or be of no further
force and effect.
Special Meeting of Stockholders
On October 31, 2022, the Company filed a definitive proxy statement in
connection with a special meeting to be held on December 12, 2022 (the "Special
Meeting") for the purpose of voting on: (i) a proposal to amend the Company's
Amended and Restated Certificate of Incorporation to (A) amend the date by which
the Company must either consummate the initial Business Combination from January
11, 2023 (such date, the "Original Termination Date"), to December 12, 2022
(such date, the "Amended Termination Date") or cease all operations except for
the purpose of winding up if it fails to complete such initial Business
Combination, and redeem all of the shares of Class A common stock, par value
$0.0001 per share, of the Company, included as part of the units sold in the
Company's Initial Public Offering that was consummated on January 11, 2021, and
(B) allow the Company to redeem shares of Class A common stock in connection
with the amendment to the Amended and Restated Certificate of Incorporation to
the extent that such redemption would result in the Company having net tangible
assets of less than $5,000,001 (collectively, the "Amendment", and such
proposal, the "Amendment Proposal") and (ii) a proposal to approve the
adjournment of the Special Meeting from time to time to solicit additional
proxies in favor of the Amendment Proposal or if otherwise determined by the
chairperson of the Special Meeting to be necessary or appropriate (the
"Adjournment Proposal"). If the Amendment Proposal is approved, the Company
intends to wind up and liquidate prior to December 31, 2022.
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 was subsequently
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 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). 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.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. Our entire activity from inception through September 30, 2022 were
related to our formation, the preparation for the Initial Public Offering,
described below, and since the closing of our Initial Public Offering,
identifying and evaluating 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 and related expenses in connection
with searching for, and completing, a Business Combination.
For the three months ended September 30, 2022, we had a net income of
$3,404,042, which consists of interest earned on marketable securities held in
the Trust Account of $1,040,054, changes in fair value of warrant liabilities of
$905,000 and other income of $2,068,808, offset by operating and formation costs
of $465,850 and provision for income taxes of $143,970.
For the nine months ended September 30, 2022, we had a net income of
$15,397,060, which consists of interest earned on marketable securities held in
the Trust Account of $1,385,509, $184,795 in changes in fair value of the
convertible promissory note, changes in fair value of warrant liabilities of
$13,937,000, termination fee income of $1,000,000, and other income from a
reduction of due diligence fees of $1,068,808, offset by operating and formation
costs of $2,022,913 and provision for income taxes of $156,139.
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.
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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.
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, 2022, cash used in operating activities
was $623,278. Net income of $15,397,060 was affected by the interest earned on
marketable securities held in the Trust Account of $1,385,509, changes in fair
value of warrant liabilities of $13,937,000 and change in fair value of the
Convertible Promissory Note of $184,795. Changes in operating assets and
liabilities used $513,034 of cash for operating activities.
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.
For the nine months ended September 30, 2022, net cash provided by financing
activities was $755,000 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 September 30, 2022, we had cash of $218,796. 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.
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Going Concern
As of September 30, 2022, the Company had $218,796 in its operating bank
accounts, $231,399,934 in securities held in the Trust Account to be used for a
Business Combination or to repurchase or redeem its common stock in connection
therewith and a working capital deficit of $4,587,666, which excludes franchise
and income taxes payable as such amounts can be paid from the interest earned in
the Trust Account. As of September 30, 2022, $1,399,934 of the amount on deposit
in the Trust Account represented interest income, which is available to pay the
Company's tax obligations.
Until the consummation of a Business Combination, the Company will be using the
funds not held in the Trust Account for identifying and evaluating prospective
acquisition candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
acquire, and structuring, negotiating and consummating the Business Combination.
The Company may 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 11, 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. These
condensed consolidated 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 September 30, 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.
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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 and nine months ended September 30, 2022,
the Company incurred and paid $37,500 and $112,500, respectively, in fees for
these services. For the three and nine months ended September 30, 2021, the
Company incurred and paid $37,500 and $110,484 in fees for these services.
Vendor Agreements
On June 24, 2021, the Company entered into an agreement with a vendor for
transaction services related to the Contemplated Business Combination. On August
5, 2021, the Company entered into an additional agreement with the same vendor
for PIPE services relating to the Contemplated Business Combination. At the
closing of the Contemplated Business Combination, this vendor would receive a
cash transaction fee of approximately $7,500,000, which would be inclusive of
both agreements. These fees would only become due and payable upon the
consummation of a business combination with Manscaped.
On September 17, 2021, the Company entered into an agreement with a vendor for
investment banking services related to the Contemplated Business Combination.
Specifically, the agreement relates to assisting in raising the funds as part of
a PIPE financing in connection with the Contemplated Business Combination. 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 such a PIPE placement. These fees would only
become due and payable upon the consummation of a business combination with
Manscaped.
Upon the consummation of an initial business combination, the Company would
extend its directors and officers insurance policy for a fee of approximately
$2.95 million.
Upon the closing of an initial business combination, the Company expects to pay
approximately $60,000 for fees related to printer and proxy related services.
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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 changes 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 (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income by the
weighted average number of common stock outstanding during the period.
Remeasurement associated with the redeemable shares of Class A common stock is
excluded from net income (loss) 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. 
