Item 9A. Controls and Procedures
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act were effective as of December 31, 2022 to provide reasonable assurance that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Inherent Limitations over Internal Controls
The Company’s management, including our principal executive officer and principal financial officer , does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well-designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Annual Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting based on the criteria set forth in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the Company’s assessment, management has concluded that its internal control over financial reporting was effective as of December 31, 2022 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. The Company’s independent registered public accounting firm, Deloitte & Touche LLP, has issued an audit report on the Company’s internal control over financial reporting, which is included herein.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors of The Beauty Health Company
Opinion on Internal Control over Financial Reporting
We have audited the internal control over financial reporting of The Beauty Health Company and its consolidated subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.
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We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated March 1, 2023, expressed an unqualified opinion on those financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Deloitte & Touche LLP
Los Angeles, California
March 1, 2023
Item 9B. Other Information.
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this Item will be included in the Company’s definitive proxy statement to be filed with the SEC Securities and Exchange Commission within 120 days after our fiscal year end December 31, 2022, in connection with the solicitation of proxies for the Company’s 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”), under the captions “Proposal 1: Election of Three Directors — Directors and Nominees,” and “Corporate Governance — Board Committees — Audit Committee,” and is incorporated herein by reference.
Item 11. Executive Compensation.
The information required by this Item will be included in the 2023 Proxy Statement under the captions “Compensation Discussion and Analysis,” “Executive Compensation,” “2022 Director Compensation,” “Corporate Governance - Compensation committee interlocks and insider participation,” “Compensation Committee Report,” “Compensation Risk Assessment” and “CEO Pay Ratio – 2022” and is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item will be included in the 2023 Proxy Statement under the captions “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management,” and is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item will be included in the 2023 Proxy Statement under the captions “Certain Relationships and Related Party Transactions” and “Corporate Governance - Affirmative Determinations Regarding Director and Nominee Independence,” and is incorporated herein by reference.
Item 14. Principal Accountant Fees and Services.
The information required by this Item will be included in the 2023 Proxy Statement under the caption “Proposal 2: Ratification of Approval of Independent Registered Public Accounting Firm,” and is incorporated herein by reference.
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PART IV
Item 15. Exhibit and Financial Statements
(a)(1) Financial Statements
See Index to Financial Statements in Item 8 of this Annual Report on Form 10-K.
(a)(2) Financial Statement Schedules
All financial statement schedules have been omitted as the information is not required under the related instructions or is not applicable or because the information required is already included in the financial statements or the notes to those financial statements.
(a)(3) Exhibits
List of Exhibits required by Item 601 of Regulation S-K. See part (b) below .
(b) Exhibits
The following exhibits are filed or furnished with this Annual Report on Form 10-K.
EXHIBIT INDEX
No. Description of Exhibit Form
File No.
Exhibit
Filing Date
Filed Herewith
2.1
Agreement and Plan of Merger, dated as of December 8, 2020, by and among Vesper Healthcare Acquisition Corp., Hydrate Merger Sub I, Inc., Hydrate Merger Sub II, LLC, LCP Edge Intermediate, Inc. and LCP Edge Holdco, LLC, in its capacity as the Stockholders’ Representative
8-K 001-39565 2.1 December 9, 2020
2.2
Stock Purchase Agreement by and among Dr. Lawrence Groop, Kristin Groop, Esthetic Education, LLC, and Edge Systems Intermediate, LLC, dated as of February 27, 2023
8-K 001-39565 2.1 February 28, 2023
3.1
Second Amended and Restated Certificate of Incorporation of The Beauty Health Company
8-K 001-39565 3.1 May 10, 2021
3.2
Amended and Restated Bylaws of The Beauty Health Company
8-K 001-39565 3.2 May 10, 2021
4.1
Indenture, dated as of September 14, 2021, between The Beauty Health Company and U.S. Bank National Association, as trustee
8-K 001-39565 4.1 September 14, 2021
4.2
Form of certificate representing the 1.25% Convertible Senior Notes due 2026 (included as Exhibit A to Exhibit 4.1)
8-K 001-39565 4.2 September 14, 2021
4.3
Warrant Agreement, dated September 29, 2020, between the Company and Continental Stock Transfer & Trust Company, as warrant agent
8-K
001-39565 4.1 October 5, 2020
4.4
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
10-K
001-39565 4.4 March 1, 2022
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EXHIBIT INDEX
No. Description of Exhibit Form
File No.
Exhibit
Filing Date
Filed Herewith
10.1
Amended and Restated Registration Rights Agreement dated as of May 4, 2021, by and among the Company, BLS Investor Group LLC and the stockholders of LCP Edge Intermediate, Inc.
8-K 001-39565 10.2 May 10, 2021
10.2
Investor Rights Agreement dated as of May 4, 2021, by and between the Company and LCP Edge Holdco, LLC
8-K 001-39565 10.3 May 10, 2021
10.3#
The Beauty Health Company 2021 Incentive Award Plan
8-K 001-39565 10.1 April 30, 2021
10.4#
The Beauty Health Company 2021 Employee Stock Purchase Plan
8-K 001-39565 10.2 April 30, 2021
10.5#
Employment Agreement, dated as of January 20. 2022 , between Andrew Stanleick, Ed ge Systems LLC d/b/a The Hydrafacial Company and The Beauty Health Company
8-K 001-39565 10.1 January 20, 2022
10.6#
Employment Agreement, dated as of May 4, 2021, between Liyuan Woo, Edge Systems LLC d/b/a The Hydrafacial Company and The Beauty Health Company
8-K 001-39565 10.7 May 10, 2021
10. 7 #
Offer Letter dated as of April 29, 2021, between Daniel Watson, Edge Systems LLC d/b/a The Hydrafacial Company and The Beauty Health Company
8-K 001-39565 10.8 May 10, 2021
10. 8 #
Form of Stock Option Award Agreement (CEO and CFO)
8-K 001-39565 10.9 May 10, 2021
10. 9 #
Form of Stock Option Award Agreement Form (Non-CEO and CFO)
8-K 001-39565 10.10 May 10, 2021
10.1 0 #
Form of Performance-Based Restricted Stock Unit Agreement
8-K 001-39565 10.11 May 10, 2021
10.1 1 #
The Beauty Health Company Executive Severance Plan
8-K 001-39565 10.12 May 10, 2021
10.1 2 #
Form of Indemnity Agreement.
8-K 001-39565 10.13 May 10, 2021
10.1 3 #
Amended and Restated Management Services Agreement dated as of May 4, 2021, by and among Linden Manager III LP, Edge Systems LLC d/b/a The Hydrafacial Company and The Beauty Health Company
8-K 001-39565 10.14 May 10, 2021
10.1 4 #
Form of Confirmation for Capped Call Transactions
8-K 001-39565 10.1 September 14, 2021
10.1 5
Credit Agreement, dated as of December 30, 2021, among Edge Systems LLC, as borrower, the other loan parties thereto, the other lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent
8-K 001-39565 10.1 January 4, 2022
10.16
Amended and Restated Credit Agreement, dates as of November 14, 2022, among The Beauty Health Company, as borrower, the other loan parties thereto, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent
8-K 001-39565 10.1 November 15, 2022
10.17
Master Confirmation - Uncollared Accelerated Share Repurchase, dates as of September 27, 2022, between JPMorgan Chase Bank, National Association and The Beauty Health Company
8-K 001-39565 10.1 September 27, 2022
10.18#
Retention Agreement, dated May 7, 2022, between Daniel Watson and The Beauty Health Company
10-Q 001-39565 10.2 August 9, 2022
10.19 †
Separation Agreement, dates as of August 3, 2022, between HydraFacial LLC and Indra Pamamull
10-Q 001-39565 10.2 November 9, 2022
21.1
Subsidiaries of registrant
X
127
EXHIBIT INDEX
No. Description of Exhibit Form
File No.
Exhibit
Filing Date
Filed Herewith
23.1
Consent of Deloitte & Touche LLP
X
31.1
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
31.2
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
X
32.1*
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
32.2*
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
X
101.INS**
Inline XBRL Instance Document
X
101.SCH**
Inline XBRL Taxonomy Extension Schema Document
X
101.CAL**
Inline XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF**
Inline XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB**
Inline XBRL Taxonomy Extension Labels Linkbase Document X
101.PRE**
Inline XBRL Taxonomy Extension Presentation Linkbase Document
X
104** Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 attachments
_______________
* These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
** The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.
† Certain confidential information (indicated by brackets and asterisks) has been omitted from this exhibit because it is both (i) not material and (ii) the type of information that the registrant treats as private or confidential.
# Management contract or compensatory plan or arrangement.
(c) Financial Statement Schedule
See Item 15(a)(2) above.
128
Item 16. Form 10–K Summary.
None.
129
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE BEAUTY HEALTH COMPANY
Date: March 1, 2023
By: /s/ Andrew Stanleick
Name: Andrew Stanleick
Title: Chief Executive Officer
(Principal Executive Officer)
130
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Name Title Date
/s/ Brenton L. Saunders Executive Chairman March 1, 2023
Brenton L. Saunders
/s/ Andrew Stanleick President, Chief Executive Officer and Director March 1, 2023
Andrew Stanleick (Principal Executive Officer)
/s/ Liyuan Woo Chief Financial Officer March 1, 2023
Liyuan Woo (Principal Financial and Accounting Officer)
/s/ Marla Beck Director March 1, 2023
Marla Beck
/s/ Michael D. Capellas Director March 1, 2023
Michael D. Capellas
/s/ Julius Few Director March 1, 2023
Julius Few
/s/ Desiree Gruber Director March 1, 2023
Desiree Gruber
/s/ Michelle Kerrick Director March 1, 2023
Michelle Kerrick
/s/ Brian Miller Director March 1, 2023
Brian Miller
/s/ Doug Schillinger Director March 1, 2023
Doug Schillinger
131