References in this report (the "Quarterly Report") to the "registrant," "we,"
"us," "our" or the "Company" refer to The Beauty Health Company (formerly known
as Vesper Healthcare Acquisition Corp.). Unless the context otherwise requires,
in this Quarterly Report on Form 10-Q, the "registrant" and the "Company" refer
to Vesper Healthcare Acquisition Corp. prior to the Closing and to the combined
company and its subsidiaries following the Closing and "HydraFacial" refers to
the business of LCP Edge Intermediate, Inc. and its subsidiaries prior to the
Closing and the business of the combined company and its subsidiaries following
the Closing. References to our "management" or our "management team" refer to
our officers and directors, and references to the "Sponsor" refer to BLS
Investor Group 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" 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 Quarterly Report
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding 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. 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 Annual Report on Form 10-K/A filed with 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.
Overview
We are a blank check company formed under the laws of the State of Delaware on
July 8, 2020, for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses.
Recent Developments
On May 4, 2021 (the "Closing Date"), the registrant consummated the previously
announced business combination pursuant to that certain Agreement and Plan of
Merger, dated December 8, 2020, by and among Vesper Healthcare Acquisition Corp.
("Vesper Healthcare"), Hydrate Merger Sub I, Inc. ("Merger Sub I"), Hydrate
Merger Sub II, LLC ("Merger Sub II"), LCP Edge Intermediate, Inc., the indirect
parent of Edge Systems LLC d/b/a The HydraFacial Company ("HydraFacial"), and
LCP Edge Holdco, LLC ("LCP," and, in its capacity as the stockholders'
representative, the "Stockholders' Representative") (the "Merger Agreement"),
which provided for: (a) the merger of Merger Sub I with and into HydraFacial,
with HydraFacial continuing as the surviving corporation (the "First Merger"),
and (b) immediately following the First Merger and as part of the same overall
transaction as the First Merger, the merger of HydraFacial with and into Merger
Sub II, with Merger Sub II continuing as the surviving entity (the "Second
Merger" and, together with the First Merger, the "Mergers" and, together with
the other transactions contemplated by the Merger Agreement, the "Business
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Combination"). As a result of the First Merger, the registrant owns 100% of the
outstanding common stock of HydraFacial and each share of common stock and
preferred stock of HydraFacial has been cancelled and converted into the right
to receive a portion of the consideration payable in connection with the
Mergers. As a result of the Second Merger, the registrant owns 100% of the
outstanding interests in Merger Sub II. In connection with the closing of the
Business Combination (the "Closing"), the registrant owns, directly or
indirectly, 100% of the stock of HydraFacial and its subsidiaries and the
stockholders of HydraFacial as of immediately prior to the effective time of the
First Merger (the "HydraFacial Stockholders") hold a portion of the Class A
Common Stock, par value $0.0001 per share, of the registrant (the "Class A
Stock").
In connection with the Merger Agreement, certain accredited investors (the "PIPE
Investors") entered into subscription agreements (the "PIPE Subscription
Agreements") pursuant to which the PIPE Investors agreed to purchase 35,000,000
shares (the "PIPE Shares") of The Beauty Health Company Class A Common Stock at
a purchase price per share of $10.00 and an aggregate purchase price of
$350,000,000 (the "PIPE Investment"). The PIPE Investment was consummated
substantially concurrently with the Closing.
In connection with the Closing, holders of 2,672,690 shares of Class A Stock
exercised their rights to redeem those shares for cash at an approximate price
of $10.00 per share, for an aggregate of approximately $26,737,737, which was
paid to such holders at Closing.
In connection with the Closing, the registrant changed its name from "Vesper
Healthcare Acquisition Corp." to "The Beauty Health Company".
Results of Operations
Through March 31, 2021, we had neither engaged in any operations nor generated
any revenues. Our only activities through March 31, 2021 were organizational
activities, those necessary to prepare for the Initial Public Offering,
described below, and, after our Initial Public Offering, identifying and
preparing for the Business Combination. We did not generate any operating
revenues until after the completion of the Business Combination. Prior to the
Business Combination, we generated 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 March 31, 2021, we had a net income of $13,637,202,
which consisted of operating costs of $602,319, offset by interest income on
marketable securities held in the Trust Account of $85,152, a change in the fair
value of warrant liabilities of $14,153,333 and an unrealized gain on marketable
securities held in the Trust Account of $1,036.
Liquidity and Capital Resources
On October 2, 2020, we consummated the Initial Public Offering of 46,000,000
Units, which includes the full exercise by the underwriters of the
over-allotment option of 6,000,000 Units, at $10.00 per unit, generating gross
proceeds of $460,000,000. Simultaneously with the closing of the Initial Public
Offering, we consummated the sale of 9,333,333 Private Placement Warrants to the
Sponsor at a price of $1.50 per warrant, generating gross proceeds of
$14,000,000.
Following the Initial Public Offering, the exercise of the over-allotment option
and the sale of the Private Placement Warrants, a total of $460,000,000 was
placed in the Trust Account. We incurred $25,777,859 in transaction costs,
including $9,200,000 of underwriting fees, $16,100,000 of deferred underwriting
fees and $477,859 of other costs.
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For the three months ended March 31, 2021, cash used in operating activities was
$511,921. Net income of $13,637,202 was offset by interest income on marketable
securities held in the Trust Account of $85,152, a change in the fair value of
warrant liabilities of $14,153,333 and an unrealized gain on marketable
securities held in the Trust Account of $1,036. Changes in operating assets and
liabilities used $90,398 of cash from operating activities.
As of March 31, 2021, we had marketable securities held in the Trust Account of
$460,184,400. 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, 2021, we had $2,753,154 of cash held outside of the Trust
Account. We used 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 the 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 directors and officers could have, but were not
obligated to, loan us funds as may be required. We did not need to raise
additional funds in order to meet the expenditures required for operating our
business.
We used substantially all of the funds held in the Trust Account to complete the
Business Combination on May 4, 2021. Of the funds held in the Trust Account, we
used $26,737,737 to fund the redemption of 2,672,690 shares of Class A Stock.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of March 31, 2021.
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 affiliate
of the our Chief Executive Officer a monthly fee of $10,000 for office space,
administrative and support services. We began incurring these fees on
September 30, 2020 and continued to incur these fees monthly until the
completion of the Business Combination.
The underwriters were entitled to a deferred fee of $0.35 per Unit, or
$16,100,000 in the aggregate, which was paid upon completion of the Business
Combination.
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.
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Warrant Liability
We account for the warrants issued in connection with our Initial Public
Offering and Private Placement Warrants in accordance with the guidance
contained in ASC 815-40, under which the warrants do not meet the criteria for
equity treatment and must be recorded as liabilities. Accordingly, we classify
the warrants as liabilities at their fair value and adjust the warrants to fair
value at each reporting period. This liability is subject to re-measurement at
each balance sheet date until exercised, and any change in fair value is
recognized in our statement of operations. The fair value of the warrants issued
in the IPO has been estimated using a Monte Carlo simulation methodology as of
the date of the IPO and such warrants' quoted market price as of March 31, 2021
and December 31, 2020. The Private Placement Warrants were valued using a Monte
Carlo simulation model as of the date of the IPO, December 31, 2020, and
March 31, 2021. In each case, the model reflected the specific features of the
warrants, including redemption considerations.
Class A Common Stock Subject to Possible Redemption
We account for our shares of Class A common stock subject to possible redemption
in accordance with the guidance in Accounting Standards Codification ("ASC")
Topic 480 "Distinguishing Liabilities from Equity." Shares of Class A common
stock subject to mandatory redemption is classified as a liability instrument
and is 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, the
Class A common stock subject to possible redemption is presented as temporary
equity, outside of the stockholders' equity section of our consolidated balance
sheets.
Net Income (Loss) per Common Share
The Company's statement of operations includes a presentation of income (loss)
per share for common shares subject to possible redemption in a manner similar
to the two-class method of income (loss) per share. Net income (loss) per common
share, basic and diluted, for Common stock subject to possible redemption is
calculated by dividing the proportionate share of income or loss on marketable
securities held by the Trust Account, net of applicable franchise and income
taxes, by the weighted average number of Common stock subject to possible
redemption outstanding since original issuance.
Net loss per share, basic and diluted, for non-redeemable common stock is
calculated by dividing the net income (loss), adjusted for income or loss on
marketable securities attributable to Class A common stock subject to possible
redemption, by the weighted average number of non-redeemable common stock
outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable Class A
shares as these shares do not have any redemption features. Non-redeemable
common stock participates in the income or loss on marketable securities based
on Class A non-redeemable share's proportionate interest.
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 financial statements.
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