What changed in this filing

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Item 1. Financial Statements

2022-08-09 compared with 2022-05-10 · 190 added, 107 removed, 490 unchanged (38% of the section changed)

3 unchanged sentences

(in thousands, except for share amounts)

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Current assets:

Cash and cash equivalents $ 820,970 $ 901,886

Accounts receivable, net of allowances for doubtful accounts of $ 2,536 and $ 2,681 at March 31, 2022 and December 31, 2021, respectively

Accounts receivable, net of allowances for doubtful accounts of $ 2,482 and $ 2,681 at June 30, 2022 and December 31, 2021, respectively

79,918 46,824

18 unchanged sentences

Total current liabilities 87,058 76,437

Other long-term liabilities 11 —

Lease liabilities, non-current 13,116 12,781

7 unchanged sentences

320,000,000 shares authorized;

150,603,231 and 150,598,047 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

150,855,025 and 150,598,047 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Preferred Stock, $ 0.0001 par value;

1,000,000 shares authorized;

no shares issued and outstanding at March 31, 2022 and December 31, 2021

no shares issued and outstanding at June 30, 2022 and December 31, 2021

Additional paid-in capital 735,682 722,250

Accumulated other comprehensive loss ( 1,402 ) ( 1,257 )

Accumulated other comprehensive income (loss) ( 5,089 ) ( 1,257 )

Accumulated deficit ( 378,274 ) ( 418,712 )

3 unchanged sentences

THE BEAUTY HEALTH COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except for share and per share amounts)

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Net sales $ 103,536 $ 66,508 $ 178,951 $ 114,050

6 unchanged sentences

Total operating expenses 75,067 73,604 139,965 102,962

(Loss) income from operations

Loss from operations

( 3,413 ) ( 26,353 ) ( 16,374 ) ( 23,971 )

1 unchanged sentence

Interest expense, net 3,217 2,060 6,617 7,759

Other expense, net 937 7

Other (income) expense, net ( 1,658 ) 4,307 ( 721 ) 4,314

Change in fair value of warrant liabilities ( 15,185 ) 72,027 ( 67,237 ) 72,027

Foreign currency transaction (gain) loss, net ( 368 ) 256

Change in fair value of earn-out shares liability — 36,525 — 36,525

Foreign currency transaction loss (gain), net 2,206 ( 24 ) 1,838 232

Total other (income) expense ( 11,420 ) 114,895 ( 59,503 ) 120,857

27 unchanged sentences

BALANCE, March 31, 2021 — $ — — $ — 35,501,743 $ 4 $ 13,986 $ ( 554 ) $ 237 $ ( 46,878 ) $ ( 33,205 )

Reverse recapitalization transaction, net — — — — 89,827,310 9 183,301 554 — — 183,864

Issuance of Class A Common Stock in connection with business acquisition — — — — 110,726 — 1,557 — — — 1,557

Stock-based compensation — — — — — — 3,508 — — — 3,508

Net income (loss) — — — — — — — — — ( 139,378 ) ( 139,378 )

Foreign currency translation adjustment — — — — — — — — ( 276 ) — ( 276 )

BALANCE, June 30, 2021 — $ — — $ — 125,439,779 $ 13 $ 202,352 $ — $ ( 39 ) $ ( 186,256 ) $ 16,070

BALANCE, December 31, 2021 — $ — — $ — 150,598,047 $ 16 $ 722,250 $ — $ ( 1,257 ) $ ( 418,712 ) $ 302,297

4 unchanged sentences

BALANCE, March 31, 2022 — $ — — $ — 150,603,231 $ 16 $ 729,299 $ — $ ( 1,402 ) $ ( 386,205 ) $ 341,708

Issuance of Class A Common Stock in connection with asset acquisition — — — — 28,733 — 500 — — — 500

Issuance of common stock pursuant to equity compensation plan — — — — 252,536 — — — — — —

Stock-based compensation — — — — — — 6,378 — — — 6,378

Shares withheld for tax withholdings on vested stock awards — — — — ( 29,475 ) — ( 495 ) — — — ( 495 )

Net income (loss) — — — — — — — — — 7,931 7,931

Foreign currency translation adjustment — — — — — — — — ( 3,687 ) — ( 3,687 )

BALANCE, June 30, 2022 — $ — — $ — 150,855,025 $ 16 $ 735,682 $ — $ ( 5,089 ) $ ( 378,274 ) $ 352,335

The accompanying notes are an integral part of these unaudited financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Provision for doubtful accounts 435 646

Amortization of right-of-use assets 1,055 —

Non-cash lease expense 2,282 —

Amortization of intangible assets 6,468 5,229

5 unchanged sentences

Deferred income tax benefit — ( 3,471 )

Change in fair value of earn-out shares liability — 36,525

Change in fair value adjustment of warrant liabilities ( 67,237 ) 72,027

Debt prepayment expense — 2,014

Amortization of debt issuance costs 2,114 —

10 unchanged sentences

Income taxes payable 2,227 382

Net cash (used in) provided by operating activities ( 38,471 ) 1,261

Net cash used in operating activities ( 69,806 ) ( 31,938 )

Cash flows used in investing activities:

Cash paid for business acquisitions, net of cash acquired — ( 4,920 )

Cash paid for asset acquisition ( 1,475 ) —

Repayment of notes receivables from shareholders — 781

Capital expenditures for intangible assets ( 1,252 ) ( 273 )

2 unchanged sentences

Cash flows from financing activities:

Payment of contingent consideration from acquisition of business ( 783 ) —

Payment of contingent consideration related to acquisitions ( 2,763 ) —

Proceeds from revolving facility — 5,000

Repayment of revolving facility — ( 5,000 )

Proceeds from Business Combination, net of transaction costs (See Note 3) — 358,536

Repayment of term loan — ( 225,487 )

Payments for transaction costs — ( 180 )

Net cash (used in) provided by financing activities ( 2,763 ) 133,049

7 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Supplemental disclosures of cash flow information and non-cash investing and financing activities:

Cash paid for interest $ 5,130 $ 10,249

Cash received for income taxes 3,645 —

Common stock issued for asset acquisition 500 —

Common stock issued for business acquisitions — 1,557

Cash (received) paid for income taxes ( 2,967 ) 96

Capital expenditures included in accounts payable 404 1,440

Deferred unpaid offering costs — 2,203

Change in deferred tax liability due to reverse recapitalization — 90

The accompanying notes are an integral part of these unaudited financial statements.

THE BEAUTY HEALTH COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Description of Business

31 unchanged sentences

We are currently evaluating the impact of adopting this new accounting guidance on our consolidated financial statements.

Note 3 – Business Combinations

Note 3 – Business Combinations and Asset Acquisitions

Business Combination — Reverse Recapitalization

13 unchanged sentences

The Company also issued 70,860 shares related to the working capital adjustment.

Business Acquisitions

The following table reconciles the elements of the Business Combination to the Company’s Consolidated Statements of Cash Flows and the Consolidated Statements of Stockholders’ Equity (Deficit) for the year ended December 31, 2021:

(in thousands) Recapitalization

Cash in trust, net of redemptions $ 433,382

Cash — PIPE 350,000

Cash paid out to Former Parent ( 367,870 )

Transaction costs and advisory fees ( 56,976 )

Cash paid out from net working capital adjustment related to acquisitions ( 902 )

Net Cash Received from Business Combination $ 357,634

The number of shares of Class A Common Stock issued following the consummation of the Business Combination:

Number of Shares

Class A common stock outstanding prior to Business Combination 46,000,000

Redemption of Vesper Class A Common Stock ( 2,672,690 )

Class A common stock of Vesper 43,327,310

Founder shares (Vesper Class B Common Stock) 11,500,000

PIPE Shares 35,000,000

Business Combination and PIPE shares 89,827,310

Legacy HydraFacial shares (1)

Working capital adjustment Class A Common Stock issued 70,860

Total Shares of Class A Common Stock after Business Combination 125,399,913

_______________

(1) The number of Legacy HydraFacial shares was determined from the 54,358 shares of HydraFacial common stock outstanding immediately prior to the closing of the Business Combination multiplied by the Exchange Ratio of 653.109 .

Distributor Acquisitions

On June 4, 2021, the Company acquired High Tech Laser, Australia Pty Ltd (“HTL”), a distributor of the Company’s products in Australia.

On July 1, 2021, the Company acquired Wigmore Medical France (“Wigmore”), Ecomedic GmbH (“Ecomedic”) and Sistemas Dermatologicos Internacionales (“Sidermica”), distributors of the Company’s products in France,

Germany and Mexico, respectively.

Through these acquisitions, the Company plans to directly sell to the respective markets and improve services for its products.

4 unchanged sentences

The goodwill is not deductible for income tax purposes.

The transaction costs for the acquisitions totaled $ 0.8 million.

The estimated fair values and preliminary purchase price allocation were based on information available at the time of acquisition and the Company continues to evaluate the underlying inputs and assumptions.

Accordingly, these preliminary estimates are subject to retrospective adjustments during the measurement period, not to exceed one year, based upon new information obtained about facts and circumstances that existed as of the date of acquisition.

The Company is currently in the process of finalizing the preliminary fair value allocations, and expects this to be completed during the second quarter of 2022.

The Company finalized the valuation of assets acquired and liabilities assumed for the distributor acquisitions as of June 30, 2022.

The following table summarizes the consideration and fair values assigned to the assets acquired and liabilities

assumed at the dates of acquisition for the Wigmore, Ecomedic and Sidermica acquisitions and summarizes the HTL acquisition after measurement period adjustments.

(in thousands) HTL Wigmore (2)

Sidermica (4)

Consideration paid:

Cash, net of cash acquired $ 4,920 $ 2,540 $ 11,338 $ 6,861

Class A Common Stock issued (1)

1,557 456 6,513 815

Trade receivables due from seller 1,027 2,336 1,679 1,581

Notes payable to seller — — 2,153 —

$ 7,504 $ 5,332 $ 21,683 $ 9,257

Identifiable assets acquired and liabilities assumed

Accounts receivable $ 1,110 $ 2,079 $ 15 $ 1,657

Non-compete agreement 100 60 588 100

Customer relationships 2,696 2,276 5,487 2,700

Inventory and other assets 354 341 1,262 454

Accounts payable ( 45 ) ( 456 ) ( 772 ) —

Deferred tax liabilities, net ( 675 ) ( 842 ) ( 2,008 ) —

Accrued and other liabilities ( 802 ) ( 317 ) ( 340 ) —

Total identifiable net assets 2,738 3,141 4,232 4,911

Goodwill $ 4,766 $ 2,191 $ 17,451 $ 4,346

(1) Class A Common Stock issued as consideration for the acquisitions was 110,726 , 28,157 , 401,021 and 50,195 shares for HTL, Wigmore, Ecomedic and Sidermica, respectively.

(2) During the fourth quarter of 2021, adjustments were made to the Wigmore valuation pertaining to contingent consideration and intangible assets.

Goodwill was adjusted due to an increase of $ 0.3 million in contingent consideration and a decrease of $ 1.0 million in intangible assets.

Contingent consideration payments for the Wigmore acquisition were paid during the three months ended March 31, 2022.

(3) During the first quarter of 2022, adjustments were made to the Ecomedic valuation pertaining to acquisition date tax liability.

Goodwill was adjusted due to an increase of $ 0.2 million to acquisition date tax liability.

(4) During the second quarter of 2022, adjustments were made to the Sidermica valuation pertaining to contingent consideration.

Goodwill was adjusted due to an increase in contingent consideration of $ 1.98 million.

Contingent consideration payments for the Sidermica acquisition were paid during the three months ended June 30, 2022.

Intangible assets acquired included customer relationships and non-compete agreements.

The valuation of the acquired intangible asset was estimated by performing projections of discounted cash flows, whereby revenues and costs associated with each intangible asset are forecasted to derive expected cash flow which is discounted to present value at discount rates commensurate with perceived risk.

The valuation and projection process is inherently subjective and relies on significant unobservable inputs (Level 3 inputs).

The weighted average amortization period of customer relationship was 5 years, while the non-compete agreements are amortized over 3 years.

The operating results of the distributor acquisitions from the dates of acquisitions through June 30, 2022 are included in the Condensed Consolidated Statements of Comprehensive Income (Loss).

The operating results are not material to the consolidated financial statements, and, therefore, the Company has not presented pro forma results of operations for the distributor acquisitions.

Acquisition of The Personalized Beauty Company, Inc.

On April 12, 2022, the Company, through its indirect, wholly-owned subsidiary, Edge Systems Intermediate, LLC, acquired The Personalized Beauty Company, Inc., a Delaware corporation d.b.a.

Consideration paid in the aggregate was $ 1.5 million plus equity consideration of $ 0.5 million or 28,733 shares of the Company’s Class A Common Stock.

Depending on the achievement of certain revenue milestones, the former Mxt shareholders are entitled to receive up to $ 30 million of earnout payments.

The estimated fair value of the earnout was not material as of the acquisition date.

The Company accounted for this transaction as an asset acquisition based on an evaluation of the U.S.

GAAP guidance for business combinations and concluded that the Company acquired developed technology of $ 1.9 million and inventory of $ 0.1 million.

The Company concluded that the developed technology acquired from Mxt comprised substantially all of the fair value of the gross assets acquired and that the assets acquired did not meet the definition of a business under the guidance for business combinations.

The developed technology intangible asset is being amortized on a straight-line basis over 3 years and recorded in cost of sales.

Note 4 – Revenue Recognition

4 unchanged sentences

Therefore, revenue associated with product purchases is recognized at a point in time upon shipment to the intended customer.

Typical payment terms provide for the customer to pay within 30 to 120 days, however, we provide an option for qualified customers to pay for delivery systems over 12 monthly installments.

Disaggregated Revenue

4 unchanged sentences

The Company’s revenue disaggregated by major product line consists of the following for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

6 unchanged sentences

Inventories consist of the following as of the periods indicated:

(in thousands) March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Raw materials $ 19,008 $ 12,024

2 unchanged sentences

Accrued payroll-related expenses consist of the following as of the periods indicated:

(in thousands) March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Accrued compensation $ 10,935 $ 15,262

4 unchanged sentences

Other accrued expenses consist of the following as of the periods indicated:

(in thousands) March 31, 2022 December 31, 2021

(in thousands) June 30, 2022 December 31, 2021

Sales and VAT tax payables $ 5,840 $ 5,817

9 unchanged sentences

The Company’s finance leases relate to leased equipment such as office and warehouse equipment.

The finance lease balances are not material but are included in property and equipment, other accrued liabilities, and other long-term liabilities of the Condensed Consolidated Balance Sheets.

There were no material changes to the Company’s lease portfolio subsequent to December 31, 2021.

The finance lease balances are not material but are included in property and equipment, other accrued expenses, and other long-term liabilities of the Condensed Consolidated Balance Sheets.

During the three months ended June 30, 2022 the Company entered into leases for a new experience center in Paris for a right-of-use asset and lease liability of $ 1.1 million and an office in Frankfurt for a right-of-use asset and lease liability of $ 1.6 million.

Note 7 — Fair Value Measurements

8 unchanged sentences

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at March 31, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to

determine such fair value.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.

As of the Business Combination date, the Private Placement Warrants were valued using the Public Warrant Price, and was considered to be a Level 2 financial instrument as of that date.

As of March 31, 2022, the value of the Private Placement Warrants was determined using a Monte Carlo simulation, and as such, were classified as a Level 3 financial instrument.

There were no Public Warrants outstanding as of March 31, 2022.

There were no valuation level transfers during the three months ended March 31, 2022.

As of June 30, 2022, the value of the Private Placement Warrants was determined using their redemption value because these Private Placement Warrants are subject to redemption if the reference value of the common stock, as defined, is between $ 10.00 and $ 18.00 per share.

The Private Placement Warrants are classified as a Level 2 financial instrument.

There were no Public Warrants outstanding as of June 30, 2022.

There were no valuation level transfers during the six months ended June 30, 2022.

Fair Value Measurements on a Recurring Basis

7 unchanged sentences

The Company reviews security pricing and assesses liquidity on a quarterly basis.

As of March 31, 2022 , the Company’s U.S.

As of June 30, 2022 , the Company’s U.S.

portfolio had no material exposure to money market funds with a fluctuating net asset value.

1 unchanged sentence

The Public Warrants and Private Placement Warrants (collectively, the “Warrants”) were accounted for as liabilities in accordance with ASC 815-40 and are presented within Warrant liabilities on the Company’s Condensed Consolidated Balance Sheets.

The Warrants are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the Company’s Condensed Consolidated Statements of Comprehensive Loss .

At March 31, 2022 , the outstanding Private Placement Warrants were valued using a Monte Carlo simulation because these Warrants are subject to redemption if the reference value of the common stock, as defined, is between $ 10.00 and $ 18.00 per share.

The Private Placement Warrants are classified as a Level 3 financial instruments as of March 31, 2022 .

There were no Public Warrants outstanding as of March 31, 2022.

At June 30, 2022 , the outstanding Private Placement Warrants was determined using their redemption value because these Warrants are subject to redemption if the reference value of the common stock, as defined, is between $ 10.00 and $ 18.00 per share.

The Private Placement Warrants are classified as a Level 2 financial instruments as of June 30, 2022 .

There were no Public Warrants outstanding as of June 30, 2022.

On October 4, 2021, the Company issued a press release stating that it would redeem all of the Public Warrants that remained outstanding following 5:00 p.m.

5 unchanged sentences

In addition, 0.3 million Private Placement Warrants were exercised in 2021 for total cash proceeds of $ 3.0 million.

As of March 31, 2022, the Company had approximately 7 million Private Placement Warrants outstanding.

As of June 30, 2022, the Company had approximately 7 million Private Placement Warrants outstanding.

Note 8 – Property and Equipment, net

1 unchanged sentence

(in thousands) Useful life

March 31, 2022 December 31, 2021

June 30, 2022 December 31, 2021

Furniture and fixtures 2 - 7

11 unchanged sentences

Depreciation expense was as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

Note 9 – Goodwill and Intangible Assets, net

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of March 31, 2022 were as follows:

The gross carrying amount and accumulated amortization of the Company’s intangible assets, net, as of June 30, 2022 were as follows:

(in thousands) Gross

22 unchanged sentences

Amortization expense was as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

4 unchanged sentences

The changes in the carrying value of goodwill are as follows:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands) 2022 2021

Beginning balance $ 123,694 $ 98,531

Measurement period adjustments - Ecomedic 174 —

Measurement period adjustments 2,154 4,766

Foreign currency translation impact ( 1,815 ) ( 197 )

Ending balance $ 124,033 $ 103,100

The goodwill arising from the Ecomedic acquisition was increased by $ 0.2 million due to adjustments of acquisition date tax liability estimates during the three months ended March 31, 2022.

The measurement period adjustments include a $ 0.2 million increase due to adjustment of acquisition date tax liability for Ecomedic and a $ 1.98 million increase due to contingent consideration paid to former owner of Sidermica during the six months ended June 30, 2022 .

Note 10 – Long-term Debt

3 unchanged sentences

In addition, the Borrower has the ability from time to time to increase the revolving commitments or enter into one or more tranches of term loans up to an additional aggregate amount not to exceed $ 50 million, subject to receipt of lender commitments and certain conditions precedent.

As of March 31, 2022 the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

As of June 30, 2022 the Credit Agreement remains undrawn and there is no outstanding balance under the revolving credit facility.

Borrowings under the Credit Agreement are secured by certain collateral of the Loan Parties and are guaranteed by the Guarantors, each of whom will derive substantial benefit from the revolving credit facility.

In specified circumstances, additional guarantors are required to be added.

The Credit Agreement contains various restrictive covenants subject to certain exceptions, including limitations on the Borrower’s ability to incur indebtedness and certain liens, make certain investments, become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain

dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00.

become liable under contingent obligations in certain circumstances, make certain restricted payments, make certain dispositions within guidelines and limits, engage in certain affiliate transactions, alter its fundamental business or make certain fundamental changes, and requirements to maintain financial covenants, including maintaining a leverage ratio of no greater than 3.00 to 1.00 and maintaining a fixed charge coverage ratio of not less than 1.15 to 1.00.

As of June 30, 2022 the Company was in compliance with all restricted and financial covenants.

The leverage ratio also determines pricing under the Credit Agreement.

3 unchanged sentences

The revolving credit facility is subject to a commitment fee payable on the unused revolving credit facility commitments ranging from 0.25 % to 0.35 %, depending on the Borrower’s leverage ratio.

As of March 31, 2022 the Company’s unused commitment rate was 0.25 %.

As of June 30, 2022 the Company’s unused commitment rate was 0.25 %.

The Borrower is also required to pay certain fees to the administrative agent and letter of credit issuers under the revolving credit facility.

23 unchanged sentences

In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is converted after it is called for redemption.

price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

If certain corporate events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date.

The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock.

13 unchanged sentences

The total amount of debt issuance costs of $ 21.3 million was recorded as a reduction to “Convertible senior notes, net” in the Company’s Condensed Consolidated Balance Sheets and are being amortized as interest expense over the term of the Notes using the effective interest method.

During the three months ended March 31, 2022, the Company recognized $ 2.3 million in interest expense related to the amortization of the debt issuance costs related to the Notes.

There was no such expense related to the Notes in the three months ended March 31, 2021.

The following is a summary of the Company’s Notes as of March 31, 2022:

During the three and six months ended June 30, 2022, the Company recognized $ 1.1 million and $ 2.1 million in interest expense related to the amortization of the debt issuance costs related to the Notes, respectively.

There was no such expense related to the Notes in the three and six months ended June 30, 2021.

The following is a summary of the Company’s Notes as of June 30, 2022:

(in thousands) Principal Amount Unamortized Issuance Costs Net Carrying

3 unchanged sentences

The Notes are carried at face value less the unamortized debt issuance costs on the Company’s Consolidated Balance Sheets.

As of March 31, 2022, the estimated fair value of the Notes was approximately $ 680 million.

The estimated fair value of the Notes was determined based on the actual bid price of the Notes on March 31, 2022.

As of March 31, 2022, the remaining life of the Notes is approximately 4.5 years.

As of June 30, 2022, the estimated fair value of the Notes was approximately $ 602 million.

The estimated fair value of the Notes was determined based on the actual bid price of the Notes on June 30, 2022.

As of June 30, 2022, the remaining life of the Notes is approximately 4.3 years.

Capped Call Transactions

10 unchanged sentences

T he related write-off of the deferred financing costs totaled $ 2.3 million and prepayment penalties totaled $ 2.0 million in 2021.

Both are included in the Other expense (income), net on the Company’s Consolidated Statements of Comprehensive Loss.

Defer red financing costs expense prior to the Closing of the Business Combination for the three months ended March 31, 2021 amounted to $ 0.4 million and is included in Interest expense, net on the Company’s Consolidated Statements of Comprehensive Loss.

Both are included in the Other expense (income), net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Defer red financing costs expense prior to the Closing of the Business Combination for the three and six months ended June 30, 2021 amounted to $ 0.1 million and $ 0.5 million and is included in Interest expense, net on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Note 11 – Income Taxes

The income tax expense/(benefit) for the three months ended March 31, 2022 and March 31, 2021 is $ 2.6 million and $( 0.3 ) million, respectively.

The effective tax rate for the three months ended March 31, 2022 is 7.45 % which is lower than the federal statutory rate of 21.0% primarily due to forecasted loses adjusted by various non-deductible expenses primarily from the revaluation of the warrants, limitation on officer’s compensation, and meals and entertainment.

The effective tax rate for the three months ended March 31, 2021 is 8.55 % which is lower than the federal statutory rate of 21.0% primarily due to the increase in valuation and non-deductible expense related to stock-based compensation and meals and entertainment.

The income tax expense for the three months and six months ended June 30, 2022 is $ 0.1 million and $ 2.7 million, respectively

The income tax benefit for the three and six months ended June 30, 2021 is $ 1.9 million and $ 2.2 million, respectively.

The effective tax rate for the three and six months ended June 30, 2022 is 0.95 % and 6.24 %, which is lower than the federal statutory rate of 21.0% primarily due to the exclusion of book income from the revaluation of warrant liabilities and adjustments for various non-deductible expenses for officer’s compensation and meals and entertainment.

The effective tax rate for the three and six months ended June 30, 2021 is 1.32 % and 1.50 %, which is lower than the federal statutory rate of 21.0% primarily due to the increase in valuation allowance and non-deductible expense related to stock-based compensation and meals and entertainment.

The Company has established a valuation allowance against a portion of its remaining deferred tax assets because it is more likely than not that certain deferred tax assets will not be realized.

1 unchanged sentence

Additionally, the Company applies ASC 740, the accounting standard governing uncertainty in income taxes that prescribes rules for recognition, measurement and classification in the financial statements of tax positions taken or expected to be taken in a tax return.

The Company has gross unrecognized tax benefits of $ 0.1 million and $ 0.1 million for the three months ended March 31, 2022 and March 31, 2021, respectively.

The Company has gross unrecognized tax benefits of $ 0.2 million and $ 0.1 million for the six months ended June 30, 2022 and June 30, 2021, respectively.

On March 11, 2021 the United States enacted the American Rescue Plan Act of 2021 (“American Rescue Plan”).

3 unchanged sentences

Compensation expense attributable to net stock-based compensation was as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

5 unchanged sentences

Restricted Stock Units (“RSUs”) and Performance-based restricted stock units (“PSUs”)

The following table summarizes the Company’s unvested equity award activity for the three months ended March 31, 2022:

The following table summarizes the Company’s equity award activity for the six months ended June 30, 2022:

Weighted Average Grant Date Fair Value

5 unchanged sentences

Forfeited ( 227,889 ) ( 209,738 ) 15.76 14.30

Outstanding - March 31, 2022

Outstanding - June 30, 2022

2,531,258 2,254,032 14.95 10.22

The following table summarizes the Company’s stock option activity for the six months ended June 30, 2022:

Number of Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value

(in thousands)

Outstanding - January 1, 2022

6,785,020 $ 15.64

Granted 10,500 22.68

Exercised — —

Unvested Forfeited ( 813,850 ) 17.78

Outstanding - June 30, 2022

5,981,670 $ 15.36 8.89 $ ( 14,967 )

Options Exercisable 1,227,750 $ 13.45 8.60 $ ( 727 )

Options vested and expected to vest - June 30, 2022 5,981,670 $ 15.36 8.89 $ ( 14,967 )

Note 13 – Commitments and Contingencies

From time to time the Company may be involved in claims, legal actions and governmental proceedings that arise from its business operations.

As of March 31, 2022, the Company was not a party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, that it believes would have a material adverse effect on its business, financial condition or results of operations.

As of June 30, 2022, the Company was not a party to any legal proceedings or threatened legal proceedings, the adverse outcome of which, individually or in the aggregate, that it believes would have a material adverse effect on its business, financial condition or results of operations.

Note 14 – Concentrations

As of March 31, 2022, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

As of June 30, 2022, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

As of December 31, 2021, the Company had no customers that accounted for 10% or more of the Accounts receivable balance.

No single customer accounted for 10% or more of consolidated Net sales during the three months ended March 31, 2022 and March 31, 2021.

No single customer accounted for 10% or more of consolidated Net sales during the three and six months ended June 30, 2022 and June 30, 2021.

Note 15 – Related-Party Transactions

1 unchanged sentence

In connection with the consummation of the Business Combination, on May 4, 2021, the Company entered into that certain Amended and Restated Registration Rights Agreement (the “Registration Rights Agreement”) with BLS Investor Group LLC and the HydraFacial Stockholders.

Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the HydraFacial Stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of common stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights.

Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding share of Class A Common Stock or any other equity security (including the Private Placement Warrants and including shares of Class A Common Stock issued or issuable upon the exercise of any other equity security) of the Company held by the Sponsor or the HydraFacial Stockholders (together, the “Restricted Stockholders”) as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Common Stock issued upon conversion of the 11,500,000 Founder Shares that were owned by the Sponsor and converted to shares of Class A Common Stock prior in connection with the Business Combination and upon exercise of any Private Placement Warrants) and shares of Class A Common Stock issued as earn-out shares to the HydraFacial Stockholders and (ii) any other equity security of the Company issued or issuable with respect to any such share of common stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise will be entitled to registration rights.

The Registration Rights Agreement provides that the Company will, within 60 days after the consummation of the Business Combination, file with the SEC a shelf registration statement registering the resale of the shares of common stock held by the Restricted Stockholders and will use its reasonable best efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but in no event later than 60 days following the filing deadline.

6 unchanged sentences

The Sponsor and its permitted transferees will also be required, subject to the terms and conditions in the Registration Rights Agreement, not to transfer their Private Placement Warrants (as defined in the Registration Rights Agreement) or shares of common stock issuable upon the exercise thereof for 30 days following the Closing.

Lock-Up Agreement

In connection with the consummation of the Business Combination, on May 4, 2021, the Company, the Sponsor and the HydraFacial Stockholders entered into a Lock-Up Agreement, pursuant to which the HydraFacial Stockholders agreed, subject to certain exceptions, not to sell, transfer to another or otherwise dispose of, in whole or in part, the common stock held by the HydraFacial Stockholders during the period commencing from the closing of the Business Combination and through the earlier of (i) the 180-day anniversary of the date of the closing of the Business Combination and (ii) the date after the closing of the Business Combination on which the Company consummates certain transactions involving a change of control of the Company.

Pursuant to the terms of the Lock-Up Agreement, the restrictions set forth therein expired on October 31, 2021.

Investor Rights Agreement

6 unchanged sentences

(“DW Management Services”) pursuant to which the parties receive quarterly monitoring fees of the greater of (a) $ 125,000 and (b) 1.25 % of Last Twelve Months EBITDA multiplied by the quotient of (x) the aggregate capital invested by the investors of DW Healthcare Partners IV (B), L.P.

(“DWHP Investors”) into LCP and/or its subsidiaries as of such date, divided by (y) the sum of (i) the aggregate capital

invested by the DWHP Investors into LCP and/or its subsidiaries, plus (ii) the aggregate capital invested by Linden Capital Partners III into LCP and/or its subsidiaries as of the date of payment.

(“DWHP Investors”) into LCP and/or its subsidiaries as of such date, divided by (y) the sum of (i) the aggregate capital invested by the DWHP Investors into LCP and/or its subsidiaries, plus (ii) the aggregate capital invested by Linden Capital Partners III into LCP and/or its subsidiaries as of the date of payment.

In addition, the management services agreement provides for other fees in relation to services that may be provided in connection with equity and/or debt financing, acquisition of any other business, company, product line or enterprise, or divestiture of any division, business, and product or material assets.

5 unchanged sentences

However, pursuant to the Linden Management Services Agreement, the Company’s obligation to pay the 1 % Pursuant to the terms of the agreement, the fee expired twelve months after the consummation of the Business Combination on May 4, 2022.

HydraFacial recorded $ 0 and approximately $ 0.1 million of charges related to management services fees for th e three months ended March 31, 2022 and 2021, respectively.

These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Loss.

There were no amounts due to these related parties at March 31, 2022 and 2021 .

HydraFacial recorded approximately $ 0.1 million of charges related to management services fees for th e six months ended June 30, 2021.

There were no management fees during the three and six months ended June 30, 2022.

These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss).

In relation to the consummation of the Business Combination, $ 21.0 million in transaction fees was paid to the Former Parent.

These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Loss.

Former Long-term Debt Due to Related Parties

On April 10, 2020, the Company’s existing Credit Agreement with a bank that is also a related party was amended to include a “PIK” interest component of 2 % that accrues on the outstanding balances of the Term Loan and Revolver.

Additionally, the Company is required to pay an early prepayment fee of 2.00 % of the amount prepaid or repaid on the Term Loan prior to April 10, 2021, and 1.00 % if prepaid between April 11, 2021 and April 10, 2022 .

I n connection with the consummation of the Business Combination, all outstanding debt was paid.

As of March 31, 2022 , there was no amount due to related parties in connection with the Term Loan and Revolver .

On April 10, 2020, HydraFacial also entered into a second credit facility with a related party to provide for borrowings of $ 30.0 million (the “Term A Loan”).

In connection with the consummation of the Business Combination, all outstanding debt was paid.

As of March 31, 2022 , there was no amount due to a related parties in connection with the Term A Loan and related PIK Interest.

Related Party Leases

Signal Hill Office

HydraFacial leases its office in Signal Hill, California, from an entity owned by former minority stockholders of HydraFacial who are no longer active employees.

Lease expense under this lease was $ 0.2 million and $ 0.1 million for the three months ended March 31, 2022 and 2021, respectively.

These amounts are included in General and administrative expenses on the Company’s Consolidated Statements of Comprehensive Income (Loss).

Miami Beach Office

The Company maintains an office in Miami Beach, Florida, whereby the Company, on a monthly basis, reimburses an entity owned by the Company’s Executive Chairman that makes such office available to the Company for its employees and affiliates.

Expense for this property was not material for the three months ended March 31, 2022.

No such expenses existed for the three months ended March 31, 2021 .

Expense for this property was not material for the six months ended June 30, 2022.

No such expenses existed for the six months ended June 30, 2021 .

Note 16 - Stockholders’ Deficit

1 unchanged sentence

Holders of Class A Common Stock are entitled to one vote for each share.

As of March 31, 2022 and December 31, 2021, there were 150,603,231 and 150,598,047 , respectively, of Class A Common Stock issued and outstanding.

As of June 30, 2022 and December 31, 2021, there were 150,855,025 and 150,598,047 , respectively, of Class A Common Stock issued and outstanding.

The Class A Common Stock is entitled t o one vote pe r share and all shares are outstanding.

4 unchanged sentences

The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $ 0.0001 per share with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors.

At March 31, 2022 and December 31, 2021 , there were no shares of preferred stock issued or outstanding.

At June 30, 2022 and December 31, 2021 , there were no shares of preferred stock issued or outstanding.

Note 17 - Segment Reporting

2 unchanged sentences

Net sales by geographic region were as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands) 2022 2021 2022 2021

3 unchanged sentences

Total net sales $ 103,536 $ 66,508 $ 178,951 $ 114,050

As of March 31, 2022 and December 31, 2021 substantially all of the Company’s property, plant and equipment was held in the United States.

As of June 30, 2022 and December 31, 2021 substantially all of the Company’s property, plant and equipment were held in the United States.

Note 18 – Net Income (Loss) Attributable to Common Shareholders

The following table sets forth the calculation of both basic and diluted net income (loss) per share as follows for the periods indicated:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(in thousands, except share and per share amounts) 2022 2021 2022 2021

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The following shares have been excluded from the calculation of the weighted average diluted shares outstanding as the effect would have been anti-dilutive:

March 31, 2022 March 31, 2021

Three Months Ended June 30, Six Months Ended June 30,

2022 2021 2022 2021

Convertible Notes 23,614,425 — 23,614,425 —

2 unchanged sentences

Stock Options 5,981,670 4,769,062 5,981,670 2,411,280

Public and Private Warrants — 15,450,549 — 7,767,956

Note 19 – Subsequent Events

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements