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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                             Filed by a Party other than the Registrant  ☐

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  Preliminary Proxy Statement
  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material under §240.14a-12

VESPER HEALTHCARE ACQUISITION CORP.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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VESPER HEALTHCARE ACQUISITION CORP.

1819 West Avenue

Bay 2

Miami Beach, FL 33139

Dear Vesper Healthcare Acquisition Corp. Stockholder:

We cordially invite you to attend a special meeting in lieu of the 2021 annual meeting of the stockholders (the “Special Meeting”) of Vesper Healthcare Acquisition Corp., a Delaware corporation (“we,” “us,” “our” or the “Company”), to be held virtually on April 29, 2021 at 2 p.m. Eastern Time. The Special Meeting will be conducted virtually due to the public health concerns resulting from the COVID-19 pandemic and to support the health and well-being of our stockholders. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/VSPR2021.

On December 8, 2020, the Company, Hydrate Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub I”), Hydrate Merger Sub II, LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (“Merger Sub II”), LCP Edge Intermediate, Inc., a Delaware corporation and 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”), entered into an Agreement and Plan of Merger (as it may be amended from time to time, the “Merger Agreement”), which provides for, among other things: (i) the merger of Merger Sub I with and into HydraFacial, with HydraFacial continuing as the surviving corporation (the “First Merger”); and (ii) 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”). As a result of the Mergers, HydraFacial will be combined with Merger Sub II, which will be a wholly owned subsidiary of the Company. The transactions set forth in the Merger Agreement, including the Mergers, will constitute a “Business Combination” as contemplated by the Company’s Amended & Restated Certificate of Incorporation (the “current certificate of incorporation”). You are being asked to vote on the Business Combination and related matters.

Subject to the terms of the Merger Agreement and customary adjustments set forth therein, the aggregate merger consideration to be paid to HydraFacial’s stockholders in connection with the Business Combination is expected to be approximately $975,000,000 less HydraFacial’s net indebtedness as of the closing of the Business Combination, and subject to further adjustments for transaction expenses, and net working capital relative to a target. This merger consideration will include both cash consideration and consideration in the form of newly issued shares of our Class A Common Stock (“Class A Stock”). The cash consideration will be an amount equal to the Company’s cash and cash equivalents as of the closing of the Business Combination (including proceeds in connection with the Private Placement and the funds in the Trust Account), minus HydraFacial’s outstanding indebtedness at the closing of the Business Combination, minus transaction expenses of HydraFacial and the Company, minus $100,000,000. However, cash consideration, together with certain contractual fees owed by HydraFacial to affiliates of its stockholders, will be subject to a maximum of 60% of the sum of the aggregate merger consideration plus these fees. The remainder of the merger consideration will be paid in a number of shares of our Class A Stock at a value of $10.00 per share. In connection with the Business Combination, the Company will pay off, or cause to be paid off, on behalf of HydraFacial, HydraFacial’s outstanding indebtedness under its existing credit facilities, and the merger consideration will be reduced by the amount of any such payment.

In addition to the consideration to be paid at the closing of the Business Combination, the stockholders of HydraFacial may be entitled to receive contingent consideration from the Company if certain acquisition targets identified by HydraFacial are acquired before or within one year after the closing of the Business Combination. This contingent consideration will be equal to 2.5 times the gross standalone revenue of each such acquisition target for the 12 months prior to such acquisition, up to a maximum of $75,000,000, and will payable in shares of Class A Stock.

At the Special Meeting, Company stockholders will be asked to consider and vote upon a proposal (the “Business Combination Proposal” or “Proposal No. 1”) to approve the transactions contemplated by the Merger Agreement, a copy of which is attached to the accompanying proxy statement as Annex A, including the


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Business Combination. In addition, you are being asked to consider and vote upon: (i) a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock in connection with the Business Combination and the Private Placement (the “Nasdaq Proposal” or “Proposal No. 2”); (ii) a proposal to adopt the Second Amended and Restated Certificate of Incorporation in the form attached hereto as Annex B (the “Charter Approval Proposal” or “Proposal No. 3”); (iii) a separate proposal with respect to certain governance provisions in the Second Amended and Restated Certificate of Incorporation, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (the “Governance Proposal” or “Proposal No. 4”); (iv) a proposal to elect seven directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (the “Director Election Proposal” or “Proposal No. 5”); (v) a proposal to consider and vote upon a proposal to approve The Beauty Health Company 2021 Incentive Award Plan (the “2021 Plan”), including the authorization of the initial share reserve under the 2021 Plan (the “Incentive Award Plan Proposal” or “Proposal No. 6”), (vi) a proposal to consider and vote upon The Beauty Health Company 2021 Employee Stock Purchase Plan (the “ESPP”) including the authorization of the initial share reserve under the ESPP (the “The Employee Stock Purchase Plan Proposal” or “Proposal No. 7”) and (vii) a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal (the “Adjournment Proposal” or “Proposal No. 8”).

Each of these proposals is more fully described in this proxy statement, which each stockholder is encouraged to read carefully.

Our publicly traded Class A Stock, public units and public warrants are currently listed on the Nasdaq Capital Market under the symbols “VSPR,” “VSPRU” and “VSPRW,” respectively. We intend to apply to continue the listing of our publicly traded Class A Stock and public warrants on Nasdaq under the symbols “SKIN” and “SKINW,” respectively, upon the closing of the Business Combination.

Pursuant to our current certificate of incorporation, we are providing our public stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of Class A Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the Business Combination) in the Trust Account that holds the proceeds of our IPO (including interest not previously released to the Company to pay its franchise and income taxes). The per share amount we will distribute to investors who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $16,100,000 that we will pay to the underwriters of our IPO or transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the balance of the Trust Account of $460,098,212 as of December 31, 2020, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares whether or not they vote at the Special Meeting, and regardless of how they may vote. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Class A Stock included in the public units sold in our IPO. We refer to this as the “15% threshold.” We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 15% threshold and the $5,000,001 minimum of net tangible assets described below. Each redemption of shares of Class A Stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that our obligation to consummate the Business Combination is conditioned on the sum of the amount in the Trust Account, the proceeds from the Private Placement and all other cash and cash equivalents of the Company equaling or exceeding $390,000,000. The conditions to closing in the Merger Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Stock by our public stockholders, these conditions are not met (or waived), then the Company or HydraFacial (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would result in the Company’s failure to


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have net tangible assets equaling or exceeding $5,000,001. Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Unless otherwise specified, the information in the accompanying proxy statement assumes that none of our public stockholders exercise their redemption rights with respect to their shares of Class A Stock.

Our Sponsor, as well as our officers and other current directors, have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of the Business Combination, and the Founder Shares (as defined below) will be excluded from the pro rata calculation used to determine the per share redemption price. Currently, our Sponsor owns 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares. Our Sponsor, directors and officers have agreed to vote any shares of the Company’s Common Stock owned by them in favor of the Business Combination. The Founder Shares are subject to transfer restrictions.

We are providing the accompanying proxy statement and accompanying proxy card to our stockholders in connection with the solicitation of proxies to be voted at the Special Meeting (including following any adjournments or postponements of the Special Meeting). Information about the Special Meeting, the Business Combination and other related business to be considered by the Company’s stockholders at the Special Meeting is included in this proxy statement. Whether or not you plan to attend the Special Meeting, we urge all Company stockholders to read this proxy statement, including the Annexes and the accompanying financial statements of the Company and HydraFacial, carefully and in their entirety. In particular, we urge you to read carefully the section entitled “Risk Factors” beginning on page 58 of this proxy statement.

After careful consideration, our Board has unanimously approved the Merger Agreement and the transactions contemplated therein, and unanimously recommends that our stockholders vote “FOR” adoption of the Merger Agreement and approval of the transactions contemplated thereby, including the Business Combination, and “FOR” all other proposals presented to our stockholders in the accompanying proxy statement. When you consider the Board’s recommendation of these proposals, you should keep in mind that our directors and officers have interests in the Business Combination that may conflict with your interests as a stockholder. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Interests of Certain Persons in the Business Combination” for additional information.

Approval of the Business Combination Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Approval of the Nasdaq Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Approval of the Governance Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Directors are elected by a plurality of the votes cast in the Director Election Proposal; this means that the seven individuals nominated for election to the Board who receive the most “FOR” votes (among the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting) will be elected. Approval of the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting.

Your vote is very important. Whether or not you plan to attend the Special Meeting, please vote as soon as possible by following the instructions in this proxy statement to make sure that your shares are represented at the Special Meeting. If you hold your shares in “street name” through a bank, broker or other nominee, you will need to follow the instructions provided to you by your bank, broker or other nominee to ensure that your shares are represented and voted at the Special Meeting. Unless waived by the parties to the Merger Agreement, the closing of the Business Combination is conditioned upon the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting. All of the


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proposals are conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting, other than the Adjournment Proposal, which is not conditioned on the approval of any other proposal.

If you sign, date and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” each of the proposals presented at the Special Meeting. If you fail to return your proxy card or fail to instruct your bank, broker or other nominee how to vote, and do not attend the Special Meeting in person, the effect will be that your shares will not be counted for purposes of determining whether a quorum is present at the Special Meeting, and will have the same effect as a vote “AGAINST” the Charter Approval Proposal. If you are a stockholder of record and you attend the Special Meeting and wish to vote in person, you may withdraw your proxy and vote in person.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST DEMAND THAT THE COMPANY REDEEM YOUR SHARES FOR A PRO RATA PORTION OF THE FUNDS HELD IN THE TRUST ACCOUNT AND TENDER YOUR SHARES TO THE COMPANY’S TRANSFER AGENT AT LEAST TWO BUSINESS DAYS PRIOR TO THE VOTE AT SUCH MEETING. YOU MAY TENDER YOUR SHARES BY EITHER DELIVERING YOUR SHARE CERTIFICATE TO THE TRANSFER AGENT OR BY DELIVERING YOUR SHARES ELECTRONICALLY USING DEPOSITORY TRUST COMPANY’S DWAC (DEPOSIT WITHDRAWAL AT CUSTODIAN) SYSTEM. IF THE BUSINESS COMBINATION IS NOT COMPLETED, THEN THESE SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS.

On behalf of our Board, I would like to thank you for your support of Vesper Healthcare Acquisition Corp. and look forward to a successful completion of the Business Combination.

 

      Sincerely,

April 7, 2021

     

LOGO

 

      Brenton L. Saunders
      Chairman of the Board of Directors

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THIS PROXY STATEMENT, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THIS PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

This proxy statement is dated April 7, 2021 and is expected to be first mailed to Company stockholders on or about April 7, 2021.


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NOTICE OF SPECIAL MEETING IN LIEU OF THE 2021 ANNUAL MEETING OF

STOCKHOLDERS OF VESPER HEALTHCARE ACQUISITION CORP.

TO BE HELD APRIL 29, 2021

To the Stockholders of Vesper Healthcare Acquisition Corp.:

NOTICE IS HEREBY GIVEN that a special meeting in lieu of the 2021 annual meeting of the stockholders of Vesper Healthcare Acquisition Corp., a Delaware corporation (the “Company”), will be held virtually on April 29, 2021 at 2 p.m. Eastern Time (the “Special Meeting”). The Special Meeting will be conducted virtually due to the public health concerns resulting from the COVID-19 pandemic and to support the health and well-being of our stockholders. You will be able to attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/VSPR2021. You are cordially invited to attend the Special Meeting to conduct the following items of business:

 

  1.

Business Combination Proposal—To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as December 8, 2020 (as it may be amended from time to time, the “Merger Agreement”), by and among the Company, Merger Sub I, Merger Sub II, HydraFacial and the Stockholders’ Representative (the “Business Combination”) (Proposal No. 1);

 

  2.

Nasdaq Proposal—To consider and vote upon a proposal to approve, for purposes of complying with applicable Nasdaq listing rules, the issuance of more than 20% of the Company’s issued and outstanding shares of Class A common stock, par value $0.0001 per share, of the Company (the “Class A Stock”) and Class B common stock, par value $0.0001 per share, of the Company (the “Class B Stock” and, together with the Class A Stock, the “Common Stock”) in connection with the Business Combination and the Private Placement (as defined below) (Proposal No. 2);

 

  3.

Charter Approval Proposal—To consider and act upon a proposal to adopt the proposed Second Amended and Restated Certificate of Incorporation of the Company (the “Second Amended and Restated Certificate of Incorporation”) in the form attached hereto as Annex B (Proposal No. 3);

 

  4.

Governance Proposal—To consider and act upon, on a non-binding advisory basis, a separate proposal with respect to certain governance provisions in the Second Amended and Restated Certificate of Incorporation in accordance with United States Securities and Exchange Commission (“SEC”) requirements (Proposal No. 4);

 

  5.

Director Election Proposal—To consider and vote upon a proposal to elect seven directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (Proposal No. 5);

 

  6.

Incentive Award Plan Proposal—To consider and vote upon a proposal to approve The Beauty Health Company 2021 Incentive Award Plan (the “2021 Plan”), including the authorization of the initial share reserve under the 2021 Plan (Proposal No. 6);

 

  7.

Employee Stock Purchase Plan Proposal—To consider and vote upon a proposal to approve The Beauty Health Company 2021 Employee Stock Purchase Plan (the “ESPP”), including the authorization of the initial share reserve under the ESPP (Proposal No. 7);

 

  8.

Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Plan Proposal (Proposal No. 8).

The above matters are more fully described in this proxy statement, which also includes, as Annex A, a copy of the Merger Agreement. We urge you to read carefully this proxy statement in its entirety, including the Annexes and accompanying financial statements of the Company and HydraFacial.

The record date for the Special Meeting is April 14, 2021. Only stockholders of record at the close of business on that date may vote at the Special Meeting or any adjournment thereof. A complete list of our


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stockholders of record entitled to vote at the Special Meeting will be available for ten days before the Special Meeting at our principal executive offices for inspection by stockholders during ordinary business hours for any purpose germane to the Special Meeting.

BLS Investor Group LLC, a Delaware limited liability company (our “Sponsor”), officers and other current directors have agreed to vote any of the shares of Class B Stock that are currently owned by our Sponsor (the “Founder Shares”) and any public shares purchased during or after our initial public offering (our “IPO”) in favor of our Business Combination. Currently, our Sponsor owns 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares.

Pursuant to our current certificate of incorporation, we will provide our public stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of the Company’s Class A Stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the Business Combination) in our trust account (the “Trust Account”) that holds the proceeds of our IPO (including interest not previously released to the Company to pay its franchise and income taxes). The per share amount we will distribute to our stockholders who properly redeem their shares will not be reduced by the deferred underwriting commission totaling $16,100,000 that we will pay to the underwriters of our IPO, as well as other transaction expenses incurred in connection with the Business Combination. For illustrative purposes, based on the balance of our Trust Account of $460,098,212 as of December 31, 2020, the estimated per share redemption price would have been approximately $10.00. Public stockholders may elect to redeem their shares whether or not they vote at the Special Meeting, and regardless of how they may vote. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Common Stock included in the public units sold in our IPO. We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 15% threshold and the $5,000,001 minimum of net tangible assets described below. Each redemption of shares of Class A Stock by our public stockholders will reduce the amount in the Trust Account. The Merger Agreement provides that the Company’s and HydraFacial’s respective obligations to consummate the Business Combination is conditioned on the amount in the Trust Account, the proceeds from the Private Placement and all other cash and cash equivalents of the Company equaling or exceeding $390,000,000. The conditions to closing in the Merger Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Stock by our public stockholders, these conditions are not met (or waived), then the Company or HydraFacial (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would result in the Company’s failure to have net tangible assets in equaling or exceeding $5,000,001. Based on the amount of $460,098,212 in our Trust Account as of December 31, 2020, and taking into account the anticipated gross proceeds of approximately $350,000,000 from the Private Placement and HydraFacial’s agreement to receive certain of its consideration in stock, approximately 42,336,329 shares of Class A Stock may be redeemed and still enable us to have sufficient cash to satisfy the cash closing conditions in the Merger Agreement. We refer to this as the maximum redemption scenario. Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination.

Our Sponsor, current officers and other current directors have agreed to waive their redemption rights with respect to their Founder Shares in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per share redemption price.

The Business Combination is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting. All of the proposals are conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting, other than the Adjournment Proposal, which is not conditioned on the approval of any other proposal.


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We have entered into Subscription Agreements with the Private Placement Investors pursuant to which we anticipate raising additional proceeds to fund the Business Combination and related transactions through a private placement pursuant to which certain investors have agreed to purchase an aggregate of 35,000,000 shares of Class A Stock (the “Private Placement”) for a price of $10.00 per share for an aggregate commitment of approximately $350,000,000. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination.

A majority of the issued and outstanding shares of the Company’s Common Stock entitled to vote as of the record date at the Special Meeting must be present, in person or represented by proxy, at the Special Meeting to constitute a quorum and in order to conduct business at the Special Meeting. The approval of the proposal to approve the transactions contemplated by the Merger Agreement, including the Business Combination, requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. The approval of the Nasdaq Proposal requires the majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. The approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. The approval of the Governance Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting.    Directors are elected by a plurality of votes cast in the Director Election Proposal; this means that the seven individuals nominated for election to the board of directors of the Company (the “Board”) who receive the most “FOR” votes (among the shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting) will be elected. The approval of the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. The Board unanimously recommends that you vote “FOR” each of these proposals.

 

By Order of the Board of Directors

LOGO

 

 

Brenton L. Saunders
Chairman of the Board of Directors

Miami Beach, Florida

April 7, 2021


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TABLE OF CONTENTS

 

     Page  

SUMMARY TERM SHEET

     1  

FREQUENTLY USED TERMS

     6  

QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

     10  

SUMMARY OF THE PROXY STATEMENT

     26  

SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

     45  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF
HYDRAFACIAL

     46  

SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     50  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     56  

RISK FACTORS

     58  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     112  

COMPARATIVE SHARE INFORMATION

     122  

SPECIAL MEETING OF COMPANY STOCKHOLDERS

     124  

PROPOSAL NO. 1—APPROVAL OF THE BUSINESS COMBINATION

     132  

PROPOSAL NO. 2—APPROVAL OF THE ISSUANCE OF MORE THAN 20% OF THE COMPANY’S ISSUED AND OUTSTANDING COMMON STOCK IN CONNECTION WITH THE BUSINESS COMBINATION AND THE PRIVATE PLACEMENT

     175  

PROPOSAL NO. 3—APPROVAL OF THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     177  

PROPOSAL NO. 4—APPROVAL OF CERTAIN GOVERNANCE PROVISIONS IN THE SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     181  

PROPOSAL NO. 5—ELECTION OF DIRECTORS TO THE BOARD OF DIRECTORS

     184  

PROPOSAL NO. 6—THE INCENTIVE AWARD PLAN PROPOSAL

     187  

PROPOSAL NO. 7—THE EMPLOYEE STOCK PURCHASE PLAN PROPOSAL

     192  

PROPOSAL NO. 8—THE ADJOURNMENT PROPOSAL

     197  

INFORMATION ABOUT THE COMPANY

     198  

THE COMPANY’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     208  

INFORMATION ABOUT HYDRAFACIAL

     213  

HYDRAFACIAL’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     223  

HYDRAFACIAL MANAGEMENT

     242  

EXECUTIVE COMPENSATION

     244  

MANAGEMENT AFTER THE BUSINESS COMBINATION

     250  

DESCRIPTION OF SECURITIES

     254  

SECURITIES ACT RESTRICTIONS ON RESALE OF SECURITIES

     267  

BENEFICIAL OWNERSHIP OF SECURITIES

     270  

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     273  

PRICE RANGE OF SECURITIES AND DIVIDENDS

     279  

APPRAISAL RIGHTS

     280  

HOUSEHOLDING INFORMATION

     281  

TRANSFER AGENT AND REGISTRAR

     282  

SUBMISSION OF STOCKHOLDER PROPOSALS

     283  

FUTURE STOCKHOLDER PROPOSALS

     284  

TRADEMARKS

     285  

WHERE YOU CAN FIND MORE INFORMATION

     286  

INDEX TO CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY

     FS-1  

INDEX TO CONSOLIDATED FINANCIAL INFORMATION OF HYDRAFACIAL

     FS-23  

 

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     Page  

ANNEX A—MERGER AGREEMENT

     A-1  

ANNEX B—FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     B-1  

ANNEX C—FORM OF AMENDED AND RESTATED BYLAWS

     C-1  

ANNEX D—FORM OF SUBSCRIPTION AGREEMENT

     D-1  

ANNEX E—FORM OF LOCK-UP AGREEMENT

     E-1  

ANNEX F—FORM OF AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

     F-1  

ANNEX G—FORM OF INVESTOR RIGHTS AGREEMENT

     G-1  

ANNEX H—FORM OF INVESTOR REPRESENTATION LETTER

     H-1  

ANNEX I—FORM OF ESCROW AGREEMENT

     I-1  

ANNEX J—2021 PLAN

     J-1  

ANNEX K—ESPP

     K-1  

 

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SUMMARY TERM SHEET

This summary term sheet, together with the sections entitled “Questions and Answers About the Proposals for Stockholders” and “Summary of the Proxy Statement,” summarizes certain information contained in this proxy statement, but does not contain all of the information that is important to you. You should read carefully this entire proxy statement, including the attached Annexes, for a more complete understanding of the matters to be considered at the Special Meeting. In addition, for definitions used commonly throughout this proxy statement, including this summary term sheet, please see the section entitled “Frequently Used Terms.”

 

   

Vesper Healthcare Acquisition Corp., a Delaware corporation, which we refer to as “we,” “us,” “our,” or the “Company,” is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

 

   

There are currently 57,500,000 shares of Common Stock, par value $0.0001 per share, of the Company, issued and outstanding, consisting of (i) 46,000,000 shares of Class A Stock originally sold as part of the IPO, and (ii) 11,500,000 shares of Class B Stock that were initially issued to our Sponsor, prior to our IPO. There are currently no shares of Company preferred stock issued and outstanding. In addition, we issued 15,333,333 public warrants to purchase Class A Stock (originally sold as part of the public units issued in our IPO) as part of our IPO along with 9,333,333 Private Placement Warrants issued to our Sponsor in a private placement on October 2, 2020 (the “IPO Closing Date”). Each public warrant entitles its holder to purchase one share of our Class A Stock at an exercise price of $11.50 per share, to be exercised only for a whole number of shares of our Class A Stock. The public warrants will become exercisable 30 days after the completion of our initial business combination, and they expire five years after the completion of our initial business combination or earlier upon redemption or liquidation. Once the public warrants become exercisable, the Company may redeem the outstanding public warrants at a price of $0.01 per warrant, if the last sale price of the Company’s Common Stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading-day period ending on the third business day before the Company sends the notice of redemption to the warrant holders. The Private Placement Warrants, however, are non-redeemable so long as they are held by our Sponsor or its permitted transferees. For more information regarding the public warrants, please see the section entitled “Description of Securities.”

 

   

HydraFacial is a category-creating beauty health company. Its offerings in skin care and scalp health occupy a position at the intersection of medical aesthetics and traditional skin and personal care products. HydraFacial treatments are convenient, affordable, personalized and have demonstrated effectiveness. HydraFacial distributes its products in 87 countries through multiple channels including day spas, hotels, dermatologists, plastic surgeons and beauty retail. For more information about HydraFacial, please see the sections entitled “Information About HydraFacial,” “HydraFacial’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Management after the Business Combination.”

 

   

Subject to the terms of the Merger Agreement and customary adjustments set forth therein, the aggregate merger consideration to be paid to HydraFacial’s stockholders is expected to be approximately $975,000,000 less HydraFacial’s net indebtedness as of the closing of the Business Combination, and subject to further adjustments for transaction expenses, and net working capital relative to a target. This merger consideration will include both cash consideration and consideration in the form of newly issued shares of our Class A Stock. The cash consideration will be an amount equal to the Company’s cash and cash equivalents as of the closing of the Business Combination (including proceeds in connection with the Private Placement and the funds in the Trust Account), minus HydraFacial’s outstanding indebtedness at the closing of the Business Combination, minus transaction expenses of HydraFacial and the Company, minus $100,000,000. However, cash consideration, together with certain contractual fees owed by HydraFacial to affiliates of its stockholders, will be subject to a maximum of 60% of the sum of the aggregate merger

 

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consideration plus these fees. The remainder of the merger consideration will be paid in a number of shares of our Class A Stock at a value of $10.00 per share. In connection with the Business Combination, the Company will pay off, or cause to be paid off, on behalf of HydraFacial, HydraFacial’s outstanding indebtedness under its existing credit facilities, and the merger consideration will be reduced by the amount of any such payment. In addition to the consideration to be paid at the closing of the Business Combination, the stockholders of HydraFacial may be entitled to receive contingent consideration from the Company if certain acquisition targets identified by HydraFacial are acquired before or within one year after the closing of the Business Combination. This contingent consideration will be equal to 2.5 times the gross standalone revenue of each such acquisition target for the 12 months prior to such acquisition, up to a maximum of $75,000,000, and will payable in shares of Class A Stock.

 

   

As of December 31, 2020, HydraFacial had approximately $216.5 million of net indebtedness under its existing credit facilities and other debt and HydraFacial had $9.4 million of cash and cash equivalents. After accounting for an estimated $50 million in transaction expenses and assuming no redemptions, the HydraFacial Stockholders will receive $444.1 million in cash consideration and 31,163,671 shares of Class A Stock.

 

   

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 37.2% in the post-combination company; (ii) the Private Placement Investors will own approximately 28.3% of the post-combination company (such that public stockholders, including Private Placement Investors, will own approximately 65.5% of the post-combination company); (iii) our Sponsor will own approximately 9.3% of the post-combination company; and (iv) the HydraFacial Stockholders will own approximately 25.2% of the post-combination company. Additionally, following the date of closing of the Business Combination, and subject to the approval of the 2021 Plan by the Company’s public stockholders and the approval of the applicable award agreements by the post-combination Board, pursuant to the 2021 Plan the Company expects to grant awards under the 2021 Plan. The awards (or associated benefits or amounts) that will be made to particular individuals or groups of individuals are not currently determinable.

 

   

The Private Placement Investors have agreed to purchase approximately 35,000,000 shares of Class A Stock in the aggregate in the Private Placement at a price of $10.00 per share (subject to customary terms and conditions, including the closing of the Business Combination) for gross proceeds to the Company of approximately $350,000,000 pursuant to Subscription Agreements entered into at the signing of the Merger Agreement. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information” and “Proposal No. 6—The Incentive Award Plan Proposal.”

 

   

Our management and Board considered various factors in determining whether to approve the Merger Agreement and the transactions contemplated thereby, including the Business Combination, including HydraFacial’s growth prospects, the knowledge of the Company’s Board and management about HydraFacial’s industry, that HydraFacial’s platform supports further growth initiatives, that the aggregate consideration payable represents an attractive valuation of HydraFacial relative to publicly listed companies with certain characteristics comparable to HydraFacial, the Company’s due diligence investigation of HydraFacial and the reasonableness and fairness of the terms of the Merger Agreement and the transactions contemplated thereby to the Company’s stockholders. For more information about our decision-making process, see the section entitled “Proposal No. 1— Approval of the Business Combination—The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”

 

   

Pursuant to our current certificate of incorporation, in connection with the Business Combination, holders of our public shares may elect to have their Class A Stock redeemed for cash at the applicable redemption price per share calculated in accordance with our current certificate of incorporation. As of December 8, 2020, the redemption price would have been approximately $10.00 per share. If a holder

 

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exercises its redemption rights, then such holder will be exchanging its shares of our Class A Stock for cash and will no longer own shares of the post-combination company and will not participate in the future growth of the post-combination company, if any. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent, Continental Stock Transfer & Trust Company, at least two business days prior to the Special Meeting. Please see the section entitled “Special Meeting of Company Stockholders—Redemption Rights.”

 

   

In addition to voting on the proposal to approve the transactions contemplated by the Merger Agreement, including the Business Combination, at the Special Meeting, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock in connection with the Business Combination and the Private Placement (the “Nasdaq Proposal” or “Proposal No. 2”);

 

   

a proposal to adopt the Second Amended and Restated Certificate of Incorporation in the form attached hereto as Annex B (the “Charter Approval Proposal” or “Proposal No. 3”);

 

   

a separate proposal with respect to certain governance provisions in the Second Amended and Restated Certificate of Incorporation, which are being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (the “Governance Proposal” or “Proposal No. 4”);

 

   

a proposal to elect seven directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (the “Director Election Proposal” or “Proposal No. 5”);

 

   

a proposal to consider and vote upon a proposal to approve the 2021 Plan, including the authorization of the initial share reserve under the 2021 Plan (the “Incentive Award Plan Proposal” or “Proposal No. 6”);

 

   

a proposal to consider and vote upon a proposal to approve the ESPP, including the authorization of the initial share reserve under the ESPP (the “Employee Stock Purchase Plan Proposal” or “Proposal No. 7”); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal (the “Adjournment Proposal” or “Proposal No. 8”).

Please see the sections entitled “Proposal No. 1—Approval of the Business Combination,” “Proposal No. 2—Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination and the Private Placement,” “Proposal No. 3—Approval of the Second Amended and Restated Certificate of Incorporation,” “Proposal No. 4—Approval of Certain Governance Provisions in the Second Amended and Restated Certificate of Incorporation,” “Proposal No. 5—Election of Directors to the Board of Directors,” “Proposal No. 6—The Incentive Award Plan Proposal,” “Proposal No. 7—The Employee Stock Purchase Plan Proposal” and “Proposal No. 8—The Adjournment Proposal.” The Business Combination is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting. All of the proposals are conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting, other than the Adjournment Proposal, which is not conditioned on the approval of any other proposal.

 

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Upon consummation of the Business Combination, our Board anticipates increasing its initial size from five directors to seven directors, with each Class I director having a term that expires at the post-combination company’s annual meeting of stockholders in 2022, each Class II director having a term that expires at the post-combination company’s annual meeting of stockholders in 2023 and each Class III director having a term that expires at the post-combination company’s annual meeting of stockholders in 2024, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. Please see the sections entitled “Proposal No. 5—Election of Directors to the Board of Directors” and “Management after the Business Combination” for additional information.

 

   

Unless waived by the parties to the Merger Agreement, and subject to applicable law, the closing of the Business Combination is subject to a number of conditions set forth in the Merger Agreement including, among others, expiration of the waiting period under the HSR Act, receipt of certain stockholder approvals contemplated by this proxy statement and the availability of minimum cash amounts at closing. For more information about the closing conditions to the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement—Conditions to Closing of the Business Combination.”

 

   

The Merger Agreement may be terminated at any time prior to the consummation of the Business Combination upon agreement of the parties thereto, or by the Company or HydraFacial in specified circumstances. For more information about the termination rights under the Merger Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement—Termination.”

 

   

The proposed Business Combination involves numerous risks. For more information about these risks, please see the section entitled “Risk Factors.”

 

   

In considering the recommendation of our Board to vote for the proposals presented at the Special Meeting, including the Business Combination Proposal, you should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, the interests of our stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination and transaction agreements and in recommending to our stockholders that they vote in favor of the proposals presented at the Special Meeting, including the Business Combination Proposal. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. These interests include, among other things:

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares which will have a significantly higher value at the time of the Business Combination;

 

   

the fact that our Sponsor has agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to its Founder Shares if we fail to complete an initial business combination by October 2, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $14,000,000 for its 9,333,333 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by October 2, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

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the fact that if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by October 2, 2022;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation excludes equityholders of the Sponsor and their respective successors and affiliates as “interested parties” from the list of prohibited business combinations not in compliance with Section 203 of the DGCL;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation provides that certain transactions are not “corporate opportunities” and that our Sponsor its successors and affiliates (other than the post-combination company and its subsidiaries) and certain other persons are not subject to the doctrine of corporate opportunity; and

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Sponsor and the HydraFacial Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees.

 

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FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” the “Company” and “Vesper” refer to Vesper Healthcare Acquisition Corp., and the term “post-combination company” refers to the Company following the consummation of the Business Combination. In this proxy statement:

2021 Plan” means The Beauty Health Company 2021 Incentive Award Plan, a copy of which is attached hereto as Annex J.

Amended and Restated Bylaws” means the proposed amended and restated bylaws of the Company, a form of which is attached to the Merger Agreement as Exhibit B, which will become the post-combination company’s bylaws, assuming the consummation of the Business Combination.

Board” or “Board of Directors” means the board of directors of the Company.

Business Combination” means the transactions contemplated by the Merger Agreement, including, among other things, the Mergers.

Class A Stock” means the shares of Class A common stock, par value $0.0001 per share, of the Company.

Class B Stock” means the shares of Class B common stock, par value $0.0001 per share, of the Company.

Code” means the Internal Revenue Code of 1986, as amended.

Common Stock” means the shares of common stock, par value $0.0001 per share, of the Company, consisting of Class A Stock and Class B Stock.

Company” means Vesper Healthcare Acquisition Corp., a Delaware corporation.

current certificate of incorporation” means our amended and restated certificate of incorporation, dated September 28, 2020.

current bylaws” means our amended and restated bylaws, in effect as of the date hereof.

Deferred Discount” means any deferred underwriting commissions payable to Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC in connection with the IPO, which amount will be payable upon consummation of an the Business Combination.

DGCL” means the General Corporation Law of the State of Delaware.

DLLCA” means the General Limited Liability Company Act of the State of Delaware.

DWHP” means DW Healthcare Partners IV (B), L.P., a Delaware limited partnership.

Escrow Agent” means Wilmington Trust, N.A. a national banking association.

Escrow Agreement” means the Escrow Agreement, substantially in the form attached to this proxy statement as Annex I, which the Company, LCP, and the Escrow Agent will enter into at the closing of the Business Combination.

ESPP” means The Beauty Health Company 2021 Employee Stock Purchase Plan, a copy of which is attached hereto as Annex K.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

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First Merger” means the merger of Merger Sub I with and into HydraFacial, with HydraFacial continuing as the surviving corporation.

Founder Shares” means the 11,500,000 shares of Class B Stock that are currently owned by our Sponsor.

HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

HSR Approval” means the expiration or termination of the waiting period under the HSR Act.

HydraFacial” means prior to the Business Combination, LCP Edge Intermediate, Inc., a Delaware corporation and indirect parent of Edge Systems LLC d/b/a The HydraFacial Company, and, unless the context otherwise requires, together with its subsidiaries, and after the Business Combination, the Surviving Company and its subsidiaries.

HydraFacial Stockholder” means the holders of common stock and preferred stock of HydraFacial that is issued and outstanding immediately prior to the effective time of the Mergers, DWHP and LCP.

Innisfree” means Innisfree M&A Incorporated, proxy solicitor to the Company.

Investment Company Act” means the Investment Company Act of 1940, as amended.

Investor Representation Letters” means the investor representation letters, by and between the Company and each HydraFacial Stockholder, to be entered into at the closing of the Business Combination, pursuant to which each HydraFacial Stockholder will make certain representations, warranties and agreements regarding the issuance of Stock Consideration to such HydraFacial Stockholder, and substantially in the form attached as Annex H to this proxy statement.

Investor Rights Agreement” means the investor rights agreement to be entered into at the closing of the Business Combination, by and between LCP and the Company, and substantially in the form attached hereto as Annex G.

IPO” means the Company’s initial public offering, consummated on October 2, 2020, through the sale of 46,000,000 public units (including 6,000,000 units sold pursuant to the underwriters’ partial exercise of their over-allotment option) at $10.00 per unit.

IPO Closing Date” means October 2, 2020.

JOBS Act” means the Jumpstart Our Business Startups Act of 2012.

LCP” means LCP Edge Holdco, LLC, a Delaware limited liability company.

Lock-Up Agreement” means the lock-up agreement to be entered into at the closing of the Business Combination, by and among the Company, our Sponsor and the HydraFacial Stockholders, and substantially in the form attached hereto as Annex E.

Marcum means Marcum LLP, independent registered public accounting firm to Vesper.

Merger Agreement” means that certain Agreement and Plan of Merger, dated as of December 8, 2020, by and among the Company, Merger Sub I, Merge Sub II, HydraFacial, and LCP.

Merger Sub I” means Hydrate Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of the Company.

Merger Sub II” means Hydrate Merger Sub II, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Company.

 

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Mergers” means the First Merger and the Second Merger.

Nasdaq” means The Nasdaq Capital Market.

Private Placement” means the private placement of 35,000,000 shares of Class A Stock with a limited number of qualified institutional buyers and accredited investors (as defined by Rule 501 of Regulation D) pursuant to Section 4(a)(2) of the Securities Act, for gross proceeds to the Company in an aggregate amount of approximately $350,000,000.

Private Placement Investors” means those certain investors who have entered into the Subscription Agreements to purchase 35,000,000 shares of Class A Stock in the Private Placement.

Private Placement Warrants” means the warrants held by our Sponsor that were issued to our Sponsor on the IPO Closing Date, each of which is exercisable for one share of Class A Stock, in accordance with its terms.

public shares” means shares of Class A Stock included in the public units issued in the Company’s IPO, whether they were purchases in the IPO or thereafter in the open market.

public stockholders” means the holders of our public shares.

public units” means one share of Class A Stock and one-third of one public warrant of the Company, whereby each whole public warrant entitles the holder thereof to purchase one share of Class A Stock at an exercise price of $11.50 per share of Class A Stock, sold in the IPO.

public warrants” means the warrants included in the public units issued in the Company’s IPO, each of which is exercisable for one share of Class A Stock, in accordance with its terms.

Registration Rights Agreement” means that certain amended and restated registration rights agreement to be entered into at the closing of the Business Combination, by and among the Company, our Sponsor and the HydraFacial Stockholders, and substantially in the form attached hereto as Annex F.

Related Agreements” means, collectively, the Registration Rights Agreement, the Lock-Up Agreement, the Investor Rights Agreement, the Investor Representation Letter, the Escrow Agreement and the Subscription Agreements.

Restricted Stockholders” means our Sponsor and the HydraFacial Stockholders.

SEC” means the United States Securities and Exchange Commission.

Second Amended and Restated Certificate of Incorporation” means the proposed second amended and restated certificate of incorporation of the Company, a form of which is attached hereto as Annex B, which will become the post-combination company’s certificate of incorporation upon the approval of the Charter Approval Proposal, assuming the consummation of the Business Combination.

Second Merger” means the merger of HydraFacial with and into Merger Sub II, with Merger Sub II continuing as the surviving company.

Securities Act” means the Securities Act of 1933, as amended.

SOX” means the Sarbanes-Oxley Act of 2002.

Special Meeting” means the special meeting in lieu of the 2021 annual meeting of the stockholders of the Company that is the subject of this proxy statement.

 

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Sponsor” means BLS Investor Group LLC, a Delaware limited liability company.

Sponsor Support Agreement” means that certain sponsor support agreement entered into on December 8, 2020 by and among the Company, HydraFacial and our Sponsor.

Stock Consideration” means the Class A Stock to be issued to the HydraFacial Stockholders pursuant to the transactions contemplated by the Merger Agreement.

Stockholders’ Representative” means LCP, in its capacity as a representative of the HydraFacial Stockholder with respect to the Merger Agreement.

Subscription Agreements” means, collectively, those certain subscription agreements entered into on December 8, 2020, between the Company and certain investors, pursuant to which such investors have agreed to purchase an aggregate of 35,000,000 shares of Class A Stock in the Private Placement, and substantially in the form attached hereto as Annex D.

Surviving Company” means the surviving company of the Second Merger.

Transfer Agent” means Continental Stock Transfer & Trust Company.

Trust Account” means the trust account of the Company that holds the proceeds from the Company’s IPO.

Trustee” means Continental Stock Transfer & Trust Company.

 

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QUESTIONS AND ANSWERS ABOUT THE PROPOSALS FOR STOCKHOLDERS

The questions and answers below highlight only selected information from this document and only briefly address some commonly asked questions about the proposals to be presented at the Special Meeting, including with respect to the proposed Business Combination. The following questions and answers do not include all the information that is important to our stockholders. We urge stockholders to read carefully this entire proxy statement, including the Annexes and the other documents referred to herein, to fully understand the proposed Business Combination and the voting procedures for the Special Meeting, which will be held virtually on April 29, 2021 at 2 p.m. Eastern Time at www.virtualshareholdermeeting.com/VSPR2021.

 

Q:

Why am I receiving this proxy statement?

 

A:

Our stockholders are being asked to consider and vote upon a proposal to approve the transactions contemplated by the Merger Agreement, a copy of which is attached to the accompanying proxy statement as Annex A, including the Business Combination, among other proposals. We have entered into the Merger Agreement providing for, among other things, the merger of Merger Sub with and into HydraFacial, with HydraFacial continuing as the surviving corporation in the First Merger, and, 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 in the Second Merger (the First Merger and the Second Merger, together, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). You are being asked to vote on the Business Combination and related matters. Subject to the terms of the Merger Agreement (including the adjustment of the final merger consideration thereunder), the aggregate merger consideration to be paid in connection with the Business Combination is expected to be approximately $975,000,000 less HydraFacial’s net indebtedness as of the closing of the Business Combination, and subject to further adjustments for transaction expenses, and net working capital relative to a target, and potential contingent consideration of up to $75,000,000. A copy of the Merger Agreement is attached to this proxy statement as Annex A.

This proxy statement and its Annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Special Meeting. You should read this proxy statement and its Annexes carefully and in their entirety.

Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy statement and its Annexes.

 

Q:

When and where is the Special Meeting?

 

A:

The Special Meeting will be held virtually on April 29, 2021 at 2 p.m. Eastern Time at www.virtualshareholdermeeting.com/VSPR2021.

 

Q:

What are the specific proposals on which I am being asked to vote at the Special Meeting?

 

A:

The Company’s stockholders are being asked to approve the following proposals:

 

  1.

Business Combination Proposal—To approve the transactions contemplated by the Merger Agreement, including the Business Combination (Proposal No. 1);

 

  2.

Nasdaq Proposal—To approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock in connection with the Business Combination and the Private Placement (Proposal No. 2);

 

  3.

Charter Approval Proposal—To consider and act upon a proposal to adopt the Second Amended and Restated Certificate of Incorporation in the form attached hereto as Annex B (Proposal No. 3);

 

  4.

Governance Proposal—To consider and act upon a separate proposal with respect to certain governance provisions in the Second Amended and Restated Certificate of Incorporation, which are

 

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  being separately presented in accordance with SEC requirements and which will be voted upon on a non-binding advisory basis (Proposal No. 4);

 

  5.

Director Election Proposal—To elect seven directors to serve staggered terms on our Board until the 2022, 2023 and 2024 annual meetings of stockholders, as applicable, and until their respective successors are duly elected and qualified (Proposal No. 5);

 

  6.

Incentive Award Plan Proposal—To consider and vote upon a proposal to approve the 2021 Plan, including the authorization of the initial share reserve under the 2021 Plan (Proposal No. 6);

 

  7.

Employee Stock Purchase Plan Proposal—To consider and vote upon a proposal to approve the ESPP, including the authorization of the initial share reserve under the ESPP (Proposal No. 7); and

 

  8.

Adjournment Proposal—To consider and vote upon a proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal. This proposal will only be presented at the Special Meeting if there are not sufficient votes to approve the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal (Proposal No. 8).

 

Q:

Are the proposals conditioned on one another?

 

A:

Yes. The Business Combination is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting. All of the proposals are conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting, other than the Adjournment Proposal, which is not conditioned on the approval of any other proposal. It is important for you to note that in the event that the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by October 2, 2022, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to the public stockholders.

 

Q:

Why is the Company providing stockholders with the opportunity to vote on the Business Combination?

 

A:

Under our current certificate of incorporation, we must provide all holders of public shares with the opportunity to have their public shares redeemed upon the consummation of our initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, we have elected to provide our stockholders with the opportunity to have their public shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, we are seeking to obtain the approval of our stockholders of the Business Combination Proposal in order to allow our public stockholders to effectuate redemptions of their public shares in connection with the closing of our Business Combination. The adoption of the Merger Agreement is required under Delaware law and the approval of the Business Combination is required under our current certificate of incorporation. In addition, such approval is also a condition to the closing of the Business Combination under the Merger Agreement.

 

Q:

What will happen in the Business Combination?

 

A:

Pursuant to the Merger Agreement, and upon the terms and subject to the conditions set forth therein, the Company will acquire HydraFacial in a series of transactions we collectively refer to as the “Business Combination.” At the closing of the Business Combination contemplated by the Merger Agreement, among other things, Merger Sub I will merge with and into HydraFacial, with HydraFacial continuing as the

 

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  surviving corporation. HydraFacial will then merge into Merger Sub II with Merger Sub II as the Surviving Company. As a result of the Mergers, at the closing of the Business Combination, the Company will own 100% of the outstanding common stock of the successor company to HydraFacial, and each share of common stock of HydraFacial will be cancelled and converted into the right to receive a portion of the merger consideration.

 

Q:

Following the Business Combination, will the Company’s securities continue to trade on a stock exchange?

 

A:

Yes. We intend to apply to continue the listing of the post-combination company’s Class A Stock and public warrants on Nasdaq under the symbols “SKIN” and “SKINW,” respectively, upon the closing of the Business Combination.

 

Q:

How has the announcement of the Business Combination affected the trading price of the Company’s Class A Stock?

 

A:

On December 8, 2020, the trading date before the public announcement of the Business Combination, the Company’s public units, Class A Stock and public warrants closed at $10.75, $10.40 and $1.99, respectively. On April 6, 2021, the trading date immediately prior to the date of this proxy statement, the Company’s public units, Class A Stock and public warrants closed at $11.54, $10.78 and $2.60, respectively.

 

Q:

How will the Business Combination impact the shares of the Company outstanding after the Business Combination?

 

A:

As a result of the Business Combination and the consummation of the transactions contemplated thereby, including the Private Placement, the amount of Common Stock outstanding will increase by approximately 115.1% to approximately 123,663,671 shares of Common Stock (assuming that no shares of Class A Stock are redeemed). Additional shares of Common Stock may be issuable in the future as a result of the issuance of additional shares that are not currently outstanding, including (i) issuance of shares of Class A Stock as Earn-Out Shares (as defined below) for achievement of specified thresholds in the Merger Agreement, and (ii) issuance of shares of Class A Stock upon exercise of the public warrants and Private Placement Warrants after the Business Combination. The issuance and sale of such shares in the public market could adversely impact the market price of our Common Stock, even if our business is doing well. Pursuant to the 2021 Plan, a copy of which is attached to this proxy statement as Annex J, following the closing of the Business Combination and subject to the approval of the applicable award agreements by the post-combination Board, the Company expects to grant awards under the 2021 Plan. The awards (or associated benefits or amounts) that will be made to particular individuals or groups of individuals are not currently determinable.

 

Q:

Will the management of HydraFacial change in the Business Combination?

 

A:

We anticipate that all of the executive officers of HydraFacial will remain with the post-combination company. In addition, Clint Carnell, Michelle Kerrick, Brian Miller and Doug Schillinger have each been nominated to serve as directors of the post-combination company upon completion of the Business Combination. Please see the sections entitled “Proposal No. 5—Election of Directors to the Board of Directors” and “Management after the Business Combination” for additional information.

 

Q:

What equity stake will current stockholders of the Company, Private Placement Investors and the HydraFacial Stockholders hold in the post-combination company after the closing?

 

A:

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 37.2% in the post-combination company; (ii) the Private Placement Investors will own approximately 28.3% of the post-combination company (such that public stockholders, including Private Placement Investors, will own

 

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  approximately 65.5% of the post-combination company); (iii) our Sponsor will own approximately 9.3% of the post-combination company; and (iv) the HydraFacial Stockholders will own approximately 25.2% of the post-combination company. Additionally, following the date of closing of the Business Combination, and subject to the approval of the 2021 Plan by the Company’s public stockholders and the approval of the applicable award agreements by the post-combination Board, pursuant to the 2021 Plan the Company expects to grant awards under the 2021 Plan. The awards (or associated benefits or amounts) that will be made to particular individuals or groups of individuals are not currently determinable.

The Private Placement Investors have agreed to purchase in the aggregate approximately 35,000,000 shares of Class A stock. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float,” “Unaudited Pro Forma Condensed Combined Financial Information,” and Proposal No. 6—The Incentive Award Plan Proposal.”

 

Q:

Will the Company obtain new debt financing in connection with the Business Combination?

 

A:

No. The Company will use the proceeds from the Private Placement, together with the funds in the Trust Account, to fund the cash consideration payable to the HydraFacial Stockholders in the Business Combination, to repay approximately $245,000,000 (such amount determined assuming the Business Combination closes on March 31, 2021) of the existing indebtedness of HydraFacial and to pay certain transaction expenses. The Private Placement is contingent upon, among other things, stockholder approval of the Business Combination Proposal and the closing of the Business Combination. The Company does not anticipate obtaining any new debt financing to fund the Business Combination.

 

Q:

What conditions must be satisfied to complete the Business Combination?

 

A:

There are a number of closing conditions in the Merger Agreement, including the expiration of the applicable waiting period under the HSR Act and the approval by the stockholders of the Company of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal. For a summary of the conditions that must be satisfied or waived prior to completion of the Business Combination, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement.”

 

Q:

Are there any arrangements to help ensure that the Company will have sufficient funds, together with the proceeds in its Trust Account and from the Private Placement, to fund the aggregate purchase price?

 

A:

The amount of cash consideration to be paid in the Business Combination is calculated based on the available cash of the Company. If the Company has less cash, then the amount of cash consideration will decrease and the amount of stock consideration will increase accordingly. In addition, unless waived by each of the Company and HydraFacial, the Merger Agreement provides that the respective obligations of the Company and HydraFacial to consummate the Business Combination are conditioned on the amount in the Trust Account, the proceeds from the Private Placement and all other cash and cash equivalents of the Company equaling or exceeding $390,000,000.

The Private Placement Investors have agreed to purchase approximately 35,000,000 shares of Class A Stock in the aggregate in the Private Placement at a price of $10.00 per share (subject to customary terms and conditions, including the closing of the Business Combination) for gross proceeds to the Company of approximately $350,000,000 pursuant to Subscription Agreements entered into at the signing of the Merger Agreement.

The Company will use the proceeds of the Private Placement, together with the funds in the Trust Account, to fund the cash consideration in the Business Combination and to pay certain transaction expenses.

 

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Q:

Why is the Company proposing the Nasdaq Proposal?

 

A:

We are proposing the Nasdaq Proposal in order to comply with Nasdaq Listing Rules 5635(a) and (d), which require stockholder approval of certain transactions that result in the issuance of 20% or more of the outstanding voting power or shares of Common Stock outstanding before the issuance of stock or securities.

In connection with the Business Combination, we expect to issue (i) approximately 31,163,671 shares of Class A Stock in the Business Combination (not including any Earn-Out Shares), and (ii) approximately 35,000,000 shares of Class A Stock in the Private Placement. Because we may issue 20% or more of our outstanding Common Stock when considering together the Stock Consideration and the Private Placement, we are required to obtain stockholder approval of such issuance pursuant to Nasdaq Listing Rules 5635(a) and (d). These share amounts assume that no shares are elected to be redeemed. For more information, please see the section entitled “Proposal No. 2—Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination and the Private Placement.”

 

Q:

Why is the Company proposing the Charter Approval Proposal?

 

A:

The Second Amended and Restated Certificate of Incorporation that we are asking our stockholders to adopt in connection with the Business Combination (the “Charter Approval Proposal” or “Proposal No. 3”) provides for certain amendments to our existing certificate of incorporation. Pursuant to Delaware law and the Merger Agreement, we are required to submit the Charter Approval Proposal to the Company’s stockholders for adoption. For additional information please see the section entitled “Proposal No. 3—Approval of the Second Amended and Restated Certificate of Incorporation.”

 

Q:

Why is the Company proposing the Governance Proposal?

 

A:

As required by applicable SEC guidance, the Company is requesting that its stockholders vote upon, on a non-binding advisory basis, a proposal to approve certain governance provisions contained in the Second Amended and Restated Certificate of Incorporation that materially affect stockholder rights. This separate vote is not otherwise required by Delaware law separate and apart from Proposal No. 3, but pursuant to SEC guidance, the Company is required to submit these provisions to its stockholders separately for approval. However, the stockholder vote regarding this proposal is an advisory vote, and is not binding on the Company or its Board (separate and apart from the approval of Proposal No. 3). Furthermore, the Business Combination is not conditioned on the separate approval of the Governance Proposal (separate and apart from approval of Proposal No. 3). For additional information, please see the section entitled “Proposal No. 4—Approval of Certain Governance Provisions in the Second Amended and Restated Certificate of Incorporation.”

 

Q:

Why is the Company proposing the Director Election Proposal?

 

A:

Upon consummation of the Business Combination, our Board anticipates increasing its initial size from five directors to seven directors, with each Class I director having a term that expires at the post-combination company’s annual meeting of stockholders in 2022, each Class II director having a term that expires at the post-combination company’s annual meeting of stockholders in 2023 and each Class III director having a term that expires at the post-combination company’s annual meeting of stockholders in 2024, or in each case until their respective successors are duly elected and qualified, or until their earlier resignation, removal or death. The Company believes it is in the best interests of stockholders to allow stockholders to vote upon the election of newly appointed directors. Please see the section entitled “Proposal No. 5—Election of Directors to the Board of Directors” for additional information.

 

Q:

Why is the Company proposing the Incentive Award Plan Proposal?

 

A:

The purpose of the Incentive Award Plan Proposal is to further align the interests of the eligible participants with those of stockholders by providing long-term incentive compensation opportunities tied to the

 

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  performance of the Company. Please see the section entitled “Proposal No. 6—The Incentive Award Plan Proposal” for additional information.

 

Q:

Why is the Company proposing the Employee Stock Purchase Plan Proposal?

 

A:

Our Board believes that it would be in the best interests of the post-combination company to adopt the ESPP to assist us in promoting our interests by (a) enabling eligible employees of the post-combination company and certain of our subsidiaries to purchase shares of Class A Stock and thereby acquire an ownership interest in the post-combination company, and (b) attracting, retaining and motivating key personnel upon whose judgment, initiative and effort the successful conduct of our business is largely dependent. The ESPP will be adopted following the consummation of the Business Combination. Please see the section entitled “Proposal No. 7—The Employee Stock Purchase Plan Proposal” for additional information.

 

Q:

Why is the Company proposing the Adjournment Proposal?

 

A:

We are proposing the Adjournment Proposal to allow our Board to adjourn the Special Meeting to a later date or dates to permit further solicitation of proxies in the event that there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal, but no other proposal if the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal are approved. Please see the section entitled “Proposal No. 8—The Adjournment Proposal” for additional information.

 

Q:

What happens if I sell my shares of Class A Stock before the Special Meeting?

 

A:

The record date for the Special Meeting is earlier than the date that the Business Combination is expected to be completed. If you transfer your shares of Class A Stock after the record date, but before the Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Special Meeting. However, you will not be able to seek redemption of your shares of Class A Stock because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination. If you transfer your shares of Class A Stock prior to the record date, you will have no right to vote those shares at the Special Meeting or redeem those shares for a pro rata portion of the proceeds held in our Trust Account.

 

Q:

What constitutes a quorum at the Special Meeting?

 

A:

A majority of the issued and outstanding shares of the Company’s Common Stock entitled to vote as of the record date at the Special Meeting must be present, in person or represented by proxy, at the Special Meeting to constitute a quorum and in order to conduct business at the Special Meeting. Abstentions will be counted as present for the purpose of determining a quorum. Our Sponsor, which currently owns 20% of our issued and outstanding shares of Common Stock, will count towards this quorum. In the absence of a quorum, the chairman of the Special Meeting has power to adjourn the Special Meeting. As of April 6, 2021, 28,750,001 shares of our Common Stock would be required to achieve a quorum.

 

Q:

What vote is required to approve the proposals presented at the Special Meeting?

 

A:

The approval of the Business Combination Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote, with regard to the Business Combination Proposal will have no effect on the Business Combination Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Business Combination Proposal. Our Sponsor has agreed to vote its shares of Common Stock in favor of the Business Combination Proposal.

 

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The approval of the Nasdaq Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Nasdaq Proposal will have no effect on the Business Combination Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Nasdaq Proposal.

The approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Charter Approval Proposal will have the same effect as a vote “AGAINST” such Charter Approval Proposal.

The approval of the Governance Proposal, which is a non-binding advisory vote, requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Governance Proposal will have no effect on the Governance Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Governance Proposal.

Directors are elected by a plurality of all of the votes cast by holders of shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. This means that the seven director nominees who receive the most affirmative votes will be elected. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions and broker non-votes will have no effect on the election of directors.

The approval of the Incentive Award Plan Proposal, the Employee Stock Purchase Program Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote will have no effect on the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Adjournment Proposal. Abstentions will be counted in connection with the determination of whether a valid quorum is established but will have no effect on the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Adjournment Proposal.

 

Q:

May the Company, its Sponsor or the Company’s directors or officers or their affiliates purchase shares in connection with the Business Combination?

 

A:

In connection with the stockholder vote to approve the proposed Business Combination, our Sponsor, directors or officers or their respective affiliates may privately negotiate transactions to purchase shares from stockholders who would have otherwise elected to have their shares redeemed in conjunction with a proxy solicitation pursuant to the proxy rules for a per share pro rata portion of the Trust Account. None of our directors or officers or their respective affiliates will make any such purchases when they are in possession of any material non-public information not disclosed to the seller or during a restricted period under Regulation M under the Exchange Act. Such a purchase may include a contractual acknowledgement that such selling stockholder, although still the record holder of our shares, is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights, and could include a contractual provision that directs such selling stockholder to vote such shares in a manner directed by the purchaser. In the event that our Sponsor, directors or officers or their affiliates purchase shares in privately negotiated transactions

 

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  from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. Any such privately negotiated purchases may be effected at purchase prices that are below or in excess of the per share pro rata portion of the Trust Account.

 

Q:

How many votes do I have at the Special Meeting?

 

A:

Our stockholders are entitled to one vote on each proposal presented at the Special Meeting for each share of Common Stock held of record as of April 14, 2021, the record date for the Special Meeting. As of April 6, 2021, there were 57,500,000 outstanding shares of our Common Stock.

 

Q:

How do I vote?

 

A:

If you were a holder of record of our Common Stock on April 14, 2021, the record date for the Special Meeting, you may vote with respect to the proposals in person at the Special Meeting, or by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

Voting by Mail. By signing the proxy card and returning it in the enclosed prepaid and addressed envelope, you are authorizing the individuals named on the proxy card to vote your shares at the Special Meeting in the manner you indicate. We encourage you to sign and return the proxy card even if you plan to attend the Special Meeting so that your shares will be voted if you are unable to attend the Special Meeting. If you receive more than one proxy card, it is an indication that your shares are held in multiple accounts. Please sign and return all proxy cards to ensure that all of your shares are voted. Votes submitted by mail must be received by 2 p.m. Eastern Time on April 29, 2021.

Voting in Person at the Meeting. If you attend the Special Meeting and plan to vote in person, we will provide you with a ballot at the Special Meeting. If your shares are registered directly in your name, you are considered the stockholder of record and you have the right to vote in person at the Special Meeting. If you hold your shares in “street name,” which means your shares are held of record by a broker, bank or other nominee, you should follow the instructions provided by your broker, bank or nominee to ensure that votes related to the shares you beneficially own are properly counted. In this regard, you must provide the record holder of your shares with instructions on how to vote your shares or, if you wish to attend the Special Meeting and vote in person, you will need to bring to the Special Meeting a legal proxy from your broker, bank or nominee authorizing you to vote these shares. For additional information, please see the section entitled “Special Meeting of Company Stockholders.”

 

Q:

What will happen if I abstain from voting or fail to vote at the Special Meeting?

 

A:

At the Special Meeting, we will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, a failure to vote or an abstention will have no effect on the Business Combination Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal and the Adjournment Proposal, a failure to vote or abstention will have the same effect as a vote “AGAINST” the Charter Approval Proposal, while only an abstention (and not a failure to vote) will have the same effect as a vote “AGAINST” the Nasdaq Proposal.

 

Q:

What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A:

Signed and dated proxies received by us without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Special Meeting.

 

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Q:

If I am not going to attend the Special Meeting in person, should I return my proxy card instead?

 

A:

Yes. Whether you plan to attend the Special Meeting or not, please read the enclosed proxy statement carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. Under the rules of various national and regional securities exchanges, your broker, bank, or nominee cannot vote your shares with respect to non-routine matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank, or nominee. We believe the proposals presented to the stockholders at this Special Meeting will be considered non-routine and, therefore, your broker, bank, or nominee cannot vote your shares without your instruction on any of the proposals presented at the Special Meeting. If you do not provide instructions with your proxy, your broker, bank, or other nominee may deliver a proxy card expressly indicating that it is NOT voting your shares; this indication that a broker, bank, or nominee is not voting your shares is referred to as a “broker non-vote.” Broker non-votes will not be counted for the purposes of determining the existence of a quorum or for purposes of determining the number of votes cast at the Special Meeting. Your bank, broker, or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q:

How will a broker non-vote impact the results of each proposal?

 

A:

Broker non-votes will count as a vote “AGAINST” the Charter Approval Proposal but will not have any effect on the outcome of any other proposals.

 

Q:

May I change my vote after I have mailed my signed proxy card?

 

A:

Yes. You may change your vote by sending a later-dated, signed proxy card to our Secretary at the address listed below so that it is received by our Secretary prior to the Special Meeting or attend the Special Meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to our Secretary, which must be received by our Secretary prior to the Special Meeting.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q:

How will the Company’s Sponsor, directors and officers vote?

 

A:

Prior to our IPO, we entered into agreements with our Sponsor and each of our directors and officers, pursuant to which each agreed to vote any shares of Common Stock owned by them in favor of the Business Combination Proposal. None of our Sponsor, directors or officers has purchased any shares of our Common Stock during or after our IPO and, as of the date of this proxy statement, neither we nor our Sponsor, directors or officers have entered into agreements, and are not currently in negotiations, to purchase shares prior to the consummation of the Business Combination. Currently, our Sponsor owns 20% of our issued and outstanding shares of Common Stock, including all of the Founder Shares, and will be able to vote all such shares at the Special Meeting.

 

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Q:

What interests do the Sponsor and the Company’s current officers and directors have in the Business Combination?

 

A:

Our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (and which may conflict with) your interests. You should take these interests into account in deciding whether to approve the Business Combination. These interests include:

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares, which will have a significantly higher value at the time of the Business Combination, and which, if unrestricted and freely tradable, would be valued at approximately $115,000,000 assuming a per share value of $10.00, but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Sponsor has agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor has agreed to waive their rights to liquidating distributions from the Trust Account with respect to its Founder Shares if we fail to complete an initial business combination by October 2, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $14,000,000 for its 9,333,333 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by October 2, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by October 2, 2022;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation excludes the equity holders of our Sponsor and their respective successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation provides that certain transactions are not “corporate opportunities” and that our Sponsor its successors and affiliates (other than the post-combination company and its subsidiaries) and certain other persons are not subject to the doctrine of corporate opportunity; and

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees.

 

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These interests may influence our directors in making their recommendation that you vote in favor of the approval of the Business Combination.

 

Q:

Did the Company’s Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:

No. The Board did not obtain a third-party valuation or fairness opinion in connection with its determination to approve the Business Combination. The Company’s officers and directors have substantial experience in evaluating the operating and financial merits of companies from the relevant industries and concluded that their experience and backgrounds, together with the experience and expertise of the Company’s advisors and the Company’s due diligence investigation of HydraFacial, enabled them to make the necessary analyses and determinations regarding the Business Combination.

 

Q:

What happens if I vote against the Business Combination Proposal?

 

A:

If you vote against the Business Combination Proposal but the Business Combination Proposal still obtains the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Business Combination Proposal will be approved and, assuming the approval of the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal and the satisfaction or waiver of the other conditions to closing, the Business Combination will be consummated in accordance with the terms of the Merger Agreement.

If you vote against the Business Combination Proposal and the Business Combination Proposal does not obtain the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting, then the Business Combination Proposal will fail and we will not consummate the Business Combination. If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until October 2, 2022. If we fail to complete an initial business combination by October 2, 2022, then we will be required to dissolve and liquidate the Trust Account by returning the then-remaining funds in such account to our public stockholders.

 

Q:

Do I have redemption rights?

 

A:

If you are a holder of public shares, you may redeem your public shares for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to the Company to pay its franchise and income taxes, by (ii) the total number of then-outstanding shares of Class A Stock; provided that the Company will not redeem any shares of Class A Stock issued in the IPO to the extent that such redemption would result in the Company’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of at least $5,000,001. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, in excess of 15% of the shares of Class A Stock included in the public units sold in our IPO. Holders of our outstanding public warrants do not have redemption rights in connection with the Business Combination. Our Sponsor, directors and officers have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of the Business Combination, and the Founder Shares will be excluded from the pro rata calculation used to determine the per share redemption price. For illustrative purposes, based on the balance of our Trust Account of $460,098,212 as of December 31, 2020, the estimated per share redemption price would have been approximately $10.00. Additionally, shares properly tendered for redemption will only be redeemed if the Business Combination is consummated; otherwise holders of such shares will only be entitled to a pro rata portion of the Trust

 

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  Account (including interest not previously released to the Company to pay its franchise and income taxes) in connection with the liquidation of the Trust Account, unless we complete an alternative business combination prior to October 2, 2022.

 

Q:

Can the Sponsor redeem its Founder Shares or other Common Stock in connection with consummation of the Business Combination?

 

A:

No. Our Sponsor, officers and directors have agreed to waive their redemption rights with respect to their shares of Common Stock in connection with the consummation of our Business Combination.

 

Q:

Is there a limit on the number of shares I may redeem?

 

A:

Yes. A public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), is restricted from exercising redemption rights with respect to more than an aggregate of 15% of the shares sold in our IPO. Accordingly, all shares in excess of 15% owned by a holder or “group” of holders will not be redeemed for cash. On the other hand, a public stockholder who holds less than 15% of the public shares of Class A Stock and is not a member of a “group” may redeem all of the public shares held by such stockholder for cash.

In no event is your ability to vote all of your shares (including those shares held by you or by a “group” in excess of 15% of the shares sold in our IPO) for or against our Business Combination restricted.

We have no specified maximum redemption threshold under our current certificate of incorporation, other than the aforementioned 15% threshold. Each redemption of shares of Class A Stock by our public stockholders will reduce the amount in our Trust Account, which held cash and investment securities with a fair value of $460,098,212 as of December 31, 2020. The Merger Agreement provides that the Company’s and HydraFacial’s respective obligations to consummate the Business Combination are conditioned on the amount in the Trust Account, the proceeds from the Private Placement and all other cash and cash equivalents of the Company equaling or exceeding $390,000,000. The conditions to closing in the Merger Agreement are for the sole benefit of the parties thereto and may be waived by such parties. If, as a result of redemptions of Class A Stock by our public stockholders, these conditions are not met (or waived), then the Company or HydraFacial (as applicable) may elect not to consummate the Business Combination. In addition, in no event will we redeem shares of our Class A Stock in an amount that would result in the Company’s failure to have net tangible assets equaling or exceeding $5,000,001.

 

Q:

Is there a limit on the total number of shares that may be redeemed?

 

A:

Yes. Our current certificate of incorporation provides that we may not redeem our public shares in an amount that would result in the Company’s failure to have net tangible assets of at least $5,000,001 (such that we are not subject to the SEC’s “penny stock” rules) or any greater net tangible asset or cash requirement which may be contained in the Merger Agreement. Other than this limitation, our current certificate of incorporation does not provide a specified maximum redemption threshold. In addition, the Merger Agreement provides that the Company’s and HydraFacial’s respective obligations to consummate the Business Combination are conditioned on the amount in the Trust Account, the proceeds from the Private Placement and all other cash and cash equivalents of the Company equaling or exceeding $390,000,000. In the event the aggregate cash consideration we would be required to pay for all shares of Class A Stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Merger Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of Class A Stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

Based on the amount of $460,098,212 in our Trust Account as of December 31, 2020, and taking into account the anticipated gross proceeds of approximately $350,000,000 from the Private Placement and

 

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HydraFacial’s agreement to receive certain of its consideration in stock, approximately 42,336,329 shares of Class A Stock may be redeemed and still enable us to have sufficient cash to satisfy the cash closing conditions in the Merger Agreement. We refer to this as the maximum redemption scenario.

 

Q:

How will the absence of a maximum redemption threshold affect the Business Combination?

 

A:

The Merger Agreement provides that the Company’s and HydraFacial’s respective obligations to consummate the Business Combination are conditioned on the amount in the Trust Account, the proceeds from the Private Placement and all other cash and cash equivalents of the Company equaling or exceeding $390,000,000. As a result, we may be able to complete our Business Combination even though a substantial portion of our public stockholders have redeemed their shares. As of the date of this proxy statement, no agreements with respect to the private purchase of public shares by the Company or the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement) at the Special Meeting.

 

Q:

Will how I vote affect my ability to exercise redemption rights?

 

A:

No. You may exercise your redemption rights whether you vote your shares of Common Stock for or against, or whether you abstain from voting on the Business Combination Proposal or any other proposal described by this proxy statement. As a result, the Merger Agreement can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less-liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.

 

Q:

How do I exercise my redemption rights?

 

A:

In order to exercise your redemption rights, you must (i) if you hold public units, separate the underlying public shares and public warrants, and (ii) prior to 5:00 p.m. Eastern Time on April 27, 2021 (two business days before the Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your public shares for cash to Continental Stock Transfer & Trust Company, our Transfer Agent, at the following address:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Francis Wolf & Celeste Gonzalez

Email: fwolf@continentalstock.com

Email: cgonzalez@continentalstock.com

Please check the box on the enclosed proxy card marked “Stockholder Certification” if you are not acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) with any other stockholder with respect to shares of Common Stock. Notwithstanding the foregoing, a holder of the public shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13d-3 of the Exchange Act) will be restricted from exercising redemption rights with respect to more than an aggregate of 15% of the shares of Class A Stock included in the public units sold in our IPO. Accordingly, all public shares in excess of the 15% threshold beneficially owned by a public stockholder or group will not be redeemed for cash.

Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the Transfer Agent and time to effect delivery. It is our understanding that stockholders should generally allot at least two weeks to obtain physical certificates

 

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from the Transfer Agent. However, we do not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in “street name” will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name” are required to either tender their certificates to our Transfer Agent prior to the date set forth in these proxy materials, or up to two business days prior to the vote on the proposal to approve the Business Combination at the Special Meeting, or to deliver their shares to the Transfer Agent electronically using The Depository Trust Company’s (“DTC”) Deposit/Withdrawal At Custodian (“DWAC”) system, at such stockholder’s option. The requirement for physical or electronic delivery prior to the Special Meeting ensures that a redeeming stockholder’s election to redeem is irrevocable once the Business Combination is approved.

There is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The Transfer Agent will typically charge a tendering broker a fee and it is in the broker’s discretion whether or not to pass this cost on to the redeeming stockholder. However, this fee would be incurred regardless of whether or not we require stockholders seeking to exercise redemption rights to tender their shares, as the need to deliver shares is a requirement to exercising redemption rights, regardless of the timing of when such delivery must be effectuated.

 

Q:

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

The U.S. federal income tax consequences of the redemption depend on your particular facts and circumstances. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—Material United States Federal Income Tax Considerations for Stockholders Exercising Redemption Rights.” We urge you to consult your tax advisors regarding the tax consequences of exercising your redemption rights.

 

Q:

If I am a Company warrant holder, can I exercise redemption rights with respect to my public warrants?

 

A:

No. The holders of our public warrants have no redemption rights with respect to our public warrants.

 

Q:

Do I have appraisal rights if I object to the proposed Business Combination?

 

A:

No. Appraisal rights are not available to holders of our Common Stock in connection with the Business Combination.

 

Q:

What happens to the funds held in the Trust Account upon consummation of the Business Combination?

 

A:

The funds held in the Trust Account (together with the proceeds from the Private Placement) will be used to: (i) pay the cash consideration payable to the HydraFacial Stockholders pursuant to the Merger Agreement; (ii) pay Company stockholders who properly exercise their redemption rights; (iii) pay $16,100,000 in deferred underwriting commissions to the underwriters of our IPO, in connection with the Business Combination; (iv) pay certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees and other professional fees) that were incurred by the Company and other parties to the Merger Agreement in connection with the transactions contemplated by the Merger Agreement, including the Business Combination, and pursuant to the terms of the Merger Agreement; and (v) repay approximately $245,000,000 (such amount determined assuming the Business Combination closes on March 31, 2021) of HydraFacial’s existing indebtedness.

 

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Q:

What happens if the Business Combination is not consummated?

 

A:

There are certain circumstances under which the Merger Agreement may be terminated. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement” for information regarding the parties’ specific termination rights.

If we do not consummate the Business Combination, we may continue to try to complete a business combination with a different target business until October 2, 2022. Unless we amend our current certificate of incorporation (which requires the affirmative vote of 65% of all then outstanding shares of Class A Stock) and amend certain other agreements into which we have entered to extend the life of the Company, if we fail to complete an initial business combination by October 2, 2022, then we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem our public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then-outstanding shares of Class A Stock, which redemption will completely extinguish our public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per-share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per unit in the IPO. Please see the section entitled “Risk Factors—Risks Related to the Company and the Business Combination.”

Holders of our Founder Shares have waived any right to any liquidation distribution with respect to such shares. In addition, if we fail to complete a business combination by October 2, 2022, there will be no redemption rights or liquidating distributions with respect to our outstanding warrants, which will expire worthless.

 

Q:

When is the Business Combination expected to be completed?

 

A:

The closing of the Business Combination is expected to take place on or prior to the third business day following the satisfaction or waiver of the conditions described below in the subsection entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement—Conditions to Closing of the Business Combination.” The closing is expected to occur in the first half of 2021. The Merger Agreement may be terminated by the Company or the Stockholder Representative if the closing of the Business Combination has not occurred by June 8, 2021, which may be extended by mutual written consent of the Company and HydraFacial, and may be extended to a date no later than August 8, 2021 by the Company if HydraFacial has not delivered its audited financial statements as of December 31, 2020 by March 1, 2021.

For a description of the conditions to the completion of the Business Combination, see the section entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement—Conditions to Closing of the Business Combination.”

 

Q:

What do I need to do now?

 

A:

You are urged to read carefully and consider the information contained in this proxy statement, including the Annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

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Q:

Who will solicit and pay the cost of soliciting proxies for the Special Meeting?

 

A:

The Company is soliciting proxies on behalf of its Board. The Company will pay the cost of soliciting proxies for the Special Meeting. The Company has engaged Innisfree to assist in the solicitation of proxies for the Special Meeting. The Company has agreed to pay Innisfree a fee of $20,000, plus disbursements, and will reimburse Innisfree for its reasonable out-of-pocket expenses and indemnify Innisfree and its affiliates against certain claims, liabilities, losses, damages and expenses. The Company will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of the Company’s Common Stock for their expenses in forwarding soliciting materials to beneficial owners of the Company’s Common Stock and in obtaining voting instructions from those owners. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the proposals or if you need additional copies of this proxy statement or the enclosed proxy card you should contact:

Vesper Healthcare Acquisition Corp.

1819 West Avenue

Bay 2

Miami Beach, FL 33139

(786) 216-7037

Attention: Dr. Manisha Narasimhan

Email: Manisha.Narasimhan@vesperhealth.com

You may also contact our proxy solicitor at:

Innisfree M&A Incorporated

501 Madison Avenue

New York, NY 10022

Stockholders may call toll free: (888) 750-5834

Banks and Brokers may call collect: (212) 750-5833

To obtain timely delivery, our stockholders must request the materials no later than five business days prior to the Special Meeting.

You may also obtain additional information about us from documents filed with the SEC by following the instructions in the section entitled “Where You Can Find More Information.”

If you intend to seek redemption of your public shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to our Transfer Agent prior to the Special Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact our Transfer Agent:

Continental Stock Transfer & Trust Company

1 State Street 30th Floor

New York, New York 10004

Attention: Francis Wolf & Celeste Gonzalez

Email: fwolf@continentalstock.com

Email: cgonzalez@continentalstock.com

 

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SUMMARY OF THE PROXY STATEMENT

This summary highlights selected information contained in this proxy statement and does not contain all of the information that may be important to you. You should read carefully this entire proxy statement, including the Annexes and accompanying financial statements of the Company and HydraFacial, to fully understand the proposed Business Combination (as described below) before voting on the proposals to be considered at the Special Meeting (as described below). Please see the section entitled “Where You Can Find More Information” beginning on page 286 of this proxy statement.

Unless otherwise specified, all share calculations assume: (i) no exercise of redemption rights by the Company’s public stockholders; (ii) no inclusion of any shares of Class A Stock issuable upon the exercise of the Company’s warrants or any shares to be issued pursuant to the 2021 Plan at or following the closing of the Business Combination; and (iii) an equity raise of approximately $350,000,000 of gross proceeds from the Private Placement of 35,000,000 shares of Class A Stock at $10.00 per share.

Parties to the Business Combination

The Company

The Company is a blank check company incorporated on July 8, 2020 as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.

The Company’s securities are traded on Nasdaq under the ticker symbols “VSPR,” “VSPRU” and “VSPRW.” The Company intends to apply to continue the listing of its Class A Stock and public warrants on Nasdaq under the symbols “SKIN” and “SKINW,” respectively, upon the closing of the Business Combination.

The mailing address of the Company’s principal executive office is 1819 West Avenue, Bay 2, Miami Beach, FL 33139.

Merger Sub I

Merger Sub I, a Delaware corporation, is a wholly owned subsidiary of the Company, formed by the Company on December 7, 2020, to consummate the Business Combination. In the Business Combination, Merger Sub I will merge with and into HydraFacial, with HydraFacial continuing as the surviving corporation in the First Merger.

The mailing address of Merger Sub I’s principal executive office is c/o Vesper Healthcare Acquisition Corp., 1819 West Avenue, Bay 2, Miami Beach, FL 33139.

Merger Sub II

Merger Sub II, a Delaware limited liability company, is a wholly owned subsidiary of the Company, formed by the Company on December 7, 2020, to consummate the Business Combination. In the Business Combination, HydraFacial, as the surviving corporation in the First Merger, will merge with and into Merger Sub II, with Merger Sub II continuing as the Surviving Company in the Second Merger.

The mailing address of Merger Sub II’s principal executive office is c/o Vesper Healthcare Acquisition Corp., 1819 West Avenue, Bay 2, Miami Beach, FL 33139.



 

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HydraFacial

LCP Edge Intermediate, Inc., a Delaware corporation and indirect parent of Edge Systems LLC d/b/a The HydraFacial Company, a California limited liability company, is a wholly owned subsidiary of LCP, formed by LCP on October 20, 2016. In the Business Combination, Merger Sub I will merge with and into HydraFacial, with HydraFacial continuing as the surviving corporation in the First Merger.

HydraFacial is a category-creating beauty health company. Its offerings in skin care and scalp health occupy a position at the intersection of medical aesthetics and traditional skin and personal care products. HydraFacial treatments are convenient, affordable, personalized and have demonstrated effectiveness. HydraFacial distributes its products in 87 countries through multiple channels including day spas, hotels, dermatologists, plastic surgeons and beauty retail.

For more information about HydraFacial, please see the sections entitled “HydraFacial’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Information About HydraFacial” and “Management after the Business Combination.”

LCP

LCP Edge Holdco, LLC, a Delaware limited liability company, and prior to the Business Combination, the majority stockholder of HydraFacial, was formed on November 1, 2016.

The Business Combination Proposal

On December 8, 2020, the Company, Merger Sub I, Merger Sub II, HydraFacial and LCP entered into the Merger Agreement. The Merger Agreement provides that, in connection with the closing of the Business Combination contemplated by the Merger Agreement, among other things, Merger Sub I will merge with and into HydraFacial, with HydraFacial continuing as the surviving corporation in the First Merger, and, 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 in the Second Merger. For more information about the transactions contemplated by the Merger Agreement, please see the section entitled “Proposal No. 1—Approval of the Business Combination.” A copy of the Merger Agreement is attached to this proxy statement as Annex A.

Consideration to the HydraFacial Stockholders in the Business Combination

Subject to the terms of the Merger Agreement and customary adjustments set forth therein, the aggregate merger consideration to be paid to HydraFacial’s stockholders in connection with the Business Combination is expected to be approximately $975,000,000 less HydraFacial’s net indebtedness as of the closing of the Business Combination, and subject to further adjustments for cash transaction expenses, and net working capital relative to a target. The merger consideration will include both cash consideration and consideration in the form of newly issued shares of Class A Stock. The cash consideration will be an amount equal to the Company’s cash and cash equivalents as of the closing of the Business Combination (including proceeds in connection with the Private Placement and the funds in the Trust Account), minus HydraFacial’s outstanding indebtedness at the closing, minus transaction expenses of HydraFacial and the Company, minus $100,000,000. However, cash consideration, together with certain contractual fees owed by HydraFacial to affiliates of its stockholders, will be subject to a maximum of 60% of the sum of the aggregate merger consideration plus these fees. The remainder of the merger consideration will be paid in a number of shares our Class A Stock at a value of $10.00 per share. In connection with the Business Combination, the Company will pay off, or cause to be paid off, on behalf of HydraFacial, HydraFacial’s outstanding indebtedness under its existing credit facilities, and the merger consideration will be reduced by the amount of any such payment.



 

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In addition to the consideration to be paid at the closing of the Business Combination, the stockholders of HydraFacial may be entitled to receive contingent consideration from the Company if certain acquisition targets identified by HydraFacial are acquired before or within one year after the closing of the Business Combination. This contingent consideration will be equal to 2.5 times the gross standalone revenue of each such acquisition target for the 12 months prior to such acquisition, up to a maximum of $75,000,000, and will payable in shares of Class A Stock.

The number of shares of Class A Stock issued to the HydraFacial Stockholders as Stock Consideration is subject to adjustment, depending on, among other things, the level of redemptions of shares of Class A Stock by our public stockholders. At the closing of the Business Combination, each HydraFacial Stockholder will receive a mix of shares of Class A Stock and cash consideration.

The following table sets forth ranges of potential cash, stock and aggregate consideration taking into account the various adjustments discussed above. Capitalized terms used in the following table and the accompanying footnotes have the meanings assigned to them in the Merger Agreement.

 

($ in millions)    No
Redemption
     Maximum
Redemption
 

Sources

     

Vesper Funds in Trust

   $ 460.1      $ 36.7  

Vesper Balance Sheet Cash

     3.3        3.3  

Private Placement

     350.0        350.0  

HydraFacial Stockholders Rollover Equity

     311.6        735.0  
  

 

 

    

 

 

 

Total

   $ 1,125.0      $ 1,125.0  

Uses

     

Cash to HydraFacial Balance Sheet

   $ 100.0      $ 100.0  

Debt Repayment

     219.3        219.3  

HydraFacial Stockholders Rollover Equity

     311.6        735.0  

Cash Consideration

     444.1        20.7  

Estimated Expenses

     50.0        50.0  
  

 

 

    

 

 

 

Total

   $ 1,125.0      $ 1,125.0  

Related Agreements

This section describes the material provisions of certain additional agreements to be entered into pursuant to the Merger Agreement, which we refer to as the “Related Agreements,” but does not purport to describe all of the terms thereof. The following summary is qualified in its entirety by reference to the complete text of each of the Related Agreements. Forms of the Subscription Agreements, Lock-Up Agreement, Registration Rights Agreement, Investor Rights Agreement, Investor Representation Letter and Escrow Agreement are attached hereto as Annexes D, E, F, G, H and I, respectively. Stockholders and other interested parties are urged to read such Related Agreements in their entirety prior to voting on the proposals presented at the Special Meeting.

Lock-Up Agreement

At the closing of the Business Combination, the Company, the Sponsor and the HydraFacial Stockholders will enter into a Lock-Up Agreement, pursuant to which the HydraFacial Stockholders will agree, 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



 

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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.

The foregoing summary of the Lock-Up Agreement is not complete and is qualified in its entirety by reference to the complete text of the Lock-Up Agreement as set forth in Annex E.

Registration Rights Agreement

At the closing of the Business Combination, the Company will enter into the Registration Rights Agreement, substantially in the form attached as Annex F to this proxy statement, with the Sponsor and the HydraFacial Stockholders. Pursuant to the terms of the Registration Rights Agreement, the following securities of the Company will be entitled to registration rights: (i) the Founder Shares and the shares of Class A Stock issued or issuable upon the conversion of the Founder Shares, (ii) the Private Placement Warrants (including any shares of Class A Stock issued or issuable upon the exercise of the Private Placement Warrants), (iii) any issued and outstanding shares of Class A Stock or any other equity security (including the shares of Class A Stock issued or issuable upon the exercise of any other equity security) of the Company held by the Sponsor, the HydraFacial Stockholders or their permitted transferees (which we refer to as the “Restricted Stockholders”) has of the date of this Agreement, (iv) any equity securities (including the shares of Class A Stock issued or issuable upon the exercise of any such equity security) of the Company issuable upon conversion of any working capital loans in an amount up to $1,500,000 made to the Company by a Restricted Stockholder, (v) any outstanding shares of Class A Stock or any other equity security of the Company held by the HydraFacial Stockholders or their permitted transferees issued in connection with the transactions contemplated by the Merger Agreement (including any earnout shares), (vi) any other equity securities (including shares of Class A Stock) of the Company acquired by the HydraFacial Stockholders or their permitted transferees at a time that they otherwise hold securities entitled to registration rights and (vii) any other equity security of the Company issued or issuable with respect to any such share of Class A Stock by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or reorganization, subject in each case to the expiration of any applicable lock-up periods.

The Registration Rights Agreement provides that the Company will, within 60 days after the consummation of the transactions contemplated by the Merger Agreement, 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 commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof, but in no event later than 90 days following the filing deadline. The HydraFacial Stockholders are entitled to make up to five demands for registration in the aggregate that the Company register shares of Common Stock held by these parties, and our Sponsor has the right to make two demands for registration. In addition, the Restricted Stockholders have certain “piggy-back” registration rights. The Company will bear the expenses incurred in connection with the filing of any registration statements filed pursuant to the terms of the Registration Rights Agreement. The Company and the Restricted Stockholders agree in the Registration Rights Agreement to provide customary indemnification in connection with any offerings of Common Stock effected pursuant to the terms of the Registration Rights Agreement.

Pursuant to the Registration Rights Agreement, our Sponsor it agreed to restrictions on the transfer of its securities issued in the Company’s IPO, which (i) in the case of the Class B Stock is one year after the completion of the Business Combination unless (A) the closing price of the Common Stock equals or exceeds $12.00 per share for 20 days out of any 30-trading-day period commencing at least 150 days following the Closing or (B) the Company completes a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Common Stock for cash, securities or other property, and (ii) in the case of the Private Placement Warrants and the respective Class A Stock underlying the Private Placement Warrants is 30 days after the completion of the



 

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Business Combination. Our 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. If our Sponsor distributes such shares to its equityholders, Brenton L. Saunders and Dr. Manisha Narasimhan will remain subject to the lock-up until the first anniversary of the Closing.

The foregoing summary of the Registration Rights Agreement is not complete and is qualified in its entirety by reference to the complete text of the Registration Rights Agreement as set forth in Annex F.

Investor Rights Agreement

At the closing of the Business Combination, the Company will enter into the Investor Rights Agreement, substantially in the form attached as Annex G to this proxy statement, with LCP, pursuant to which LCP will have the right to designate a number of directors for appointment or election to the Board as follows: (i) one director for so long as LCP holds at least 10% of the outstanding Common Stock, (ii) two directors for so long as LCP holds at least 15% of the outstanding Common Stock, and (iii) three directors for so long as LCP holds at least 40% of the outstanding Common Stock. Pursuant to the Investor Rights Agreement, for so long as LCP holds at least 10% of the outstanding Common Stock, LCP will be entitled to have at least one of its designees represented on the Board’s Compensation Committee and Nominating and Corporate Governance Committee. LCP’s director nominees are to be designated as either Class lII and/or Class II directors.

The foregoing summary of the Investor Rights Agreement is not complete and is qualified in its entirety by reference to the complete text of the Investor Rights Agreement as set forth in Annex G.

Investor Representation Letters

At the closing of the Business Combination, each of the HydraFacial Stockholders will enter into an Investor Representation Letter with the Company pursuant to which such HydraFacial Stockholder will make certain representations, warranties and agreements regarding the issuance of Stock Consideration.

The foregoing summary of the Investor Representation Letters is not complete and is qualified in its entirety by reference to the complete text of the Investor Representation Letters set forth in Annex H.

Escrow Agreement

At the closing of the Business Combination, the Company, the Stockholders’ Representative and Wilmington Trust, N.A., a national banking association, as escrow agent (the “Escrow Agent”) will enter into the Escrow Agreement, substantially in the form attached as Annex I to this proxy statement. Pursuant to the Escrow Agreement, at closing the Company will deposit $5,000,000 into an account held by the Escrow Agent as the sole security for the obligations of the HydraFacial Stockholders in connection with the post-combination adjustment to the merger consideration (as described in more detail in the Merger Agreement). The Escrow Agent will hold such amount until the final merger consideration is finally agreed upon in accordance with the Merger Agreement, at which point it will release the funds in accordance with joint written instructions duly executed and delivered by the Company and the Stockholders’ Representative to the Escrow Agent.

Subscription Agreements

On December 8, 2020, the Company entered into the Subscription Agreements, substantially in the form attached hereto as Annex D to this proxy statement, with the Private Placement Investors, pursuant to which the Private Placement Investors have agreed to purchase an aggregate of 35,000,000 shares of Class A Stock in the



 

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Private Placement for an aggregate commitment of approximately $350,000,000. The Subscription Agreements are subject to certain conditions, including the closing of the Business Combination, that the transactions contemplated are not illegal or otherwise prohibited, the accuracy of the representations and warranties in the Subscription Agreement, the Company’s performance, satisfaction and compliance with the covenants, agreements and conditions of the Subscription Agreements, no amendment to the Merger Agreement occurring that materially and adversely affect the economic benefits of the Private Placement Investors and no amendment, waiver or modification to any Subscription Agreement that materially economically benefits any Private Placement Investor over any other Private Placement Investor without such modification being offered to all Private Placement Investors.

The shares of Class A Stock to be issued in connection with the Subscription Agreements have not been registered under the Securities Act, and will be issued in reliance on the exemption from registration requirements thereof provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. The Subscription Agreements provide that the Company will, within 30 days after the consummation of the transactions contemplated by the Merger Agreement, file with the SEC a registration statement registering the resale of such shares of Class A Stock and will use its commercially reasonable efforts to have such registration statement declared effective as soon as practicable after the filing thereof but no later than the earlier of (i) 60 calendar days following the filing deadline (or 90 calendar days after the filing deadline if the registration statement is reviewed by and receives comments from the SEC) and (ii) the 10th business day after the date the Company is notified (orally or in writing, whichever is earlier) by the SEC that the registration statement will not be “reviewed” or will not be subject to further comments from the SEC.

Each Subscription Agreement will terminate with no further force and effect (i) upon mutual written agreement of the parties; (ii) upon the termination of the Merger Agreement; or (iii) if the Mergers have not been consummated by the Termination Date (as defined below).

2021 Plan

Our Board expects to approve and adopt the 2021 Plan, subject to stockholder approval. The purpose of the 2021 Plan is to enhance the post-combination company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the post-combination company by providing these individuals with equity ownership opportunities. These incentives are provided through the grant of stock options, including incentive stock options, and nonqualified stock options, stock appreciation rights, restricted stock, dividend equivalents, restricted stock units, and other stock or cash based awards. For more information about the 2021 Plan, please see the section entitled “Proposal No. 6—The Incentive Award Plan Proposal.”

ESPP

Our Board expects to approve and adopt the ESPP, subject to stockholder approval. The purpose of the ESPP is to assist our eligible employees in acquiring a stock ownership interest in the Company and to help our eligible employees provide for their future security and to encourage them to remain in our employment. For more information about the ESPP, please see the section entitled “Proposal No. 7—The Employee Stock Purchase Plan Proposal.”



 

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Organizational Structure

The following diagram depicts the current ownership structure of HydraFacial:

LOGO

The following table, which assumes that there are no redemptions by the Company’s current public stockholders in connection with the Business Combination, illustrates the ownership structure of the post-combination company immediately following the Business Combination:

 

     Share Counts      Ownership  

Public Stockholders

     46,000,000        37.2

Sponsor

     11,500,000        9.3

Private Placement Investors

     35,000,000        28.3

HydraFacial Stockholders

     31,163,671        25.2
  

 

 

    

 

 

 

Total Shares Outstanding

     123,663,671        100.0
  

 

 

    

 

 

 

Redemption Rights

Pursuant to our current certificate of incorporation, holders of public shares may elect to have their shares redeemed for cash at the applicable redemption price per share equal to the quotient obtained by dividing (i) the



 

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aggregate amount on deposit in the Trust Account as of two business days prior to the consummation of the Business Combination, including interest not previously released to the Company to pay its franchise and income taxes, by (ii) the total number of then-outstanding public shares; provided that the Company will not redeem any shares of Class A Stock issued in the IPO to the extent that such redemption would result in the Company’s failure to have net tangible assets (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act) of at least $5,000,001. As of December 8, 2020, the redemption price would have been approximately $10.00 per share. Notwithstanding the foregoing, a holder of the public shares, together with any affiliate of his or her or any other person with whom he or she is acting in concert or as a “group” (as defined in Section 13(d)-(3) of the Exchange Act) will be restricted from exercising redemption rights with respect to more than an aggregate of 15% of the shares of Class A Stock included in the units sold in our IPO.

If a holder exercises its redemption rights, then such holder will be exchanging its shares of our Class A Stock for cash and will no longer own shares of the post-combination company. Such a holder will be entitled to receive cash for its public shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our Transfer Agent in accordance with the procedures described herein. Please see the section entitled “Special Meeting of Company Stockholders—Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

Impact of the Business Combination on the Company’s Public Float

The Private Placement Investors have agreed to purchase in the aggregate approximately 35,000,000 shares of Class A Stock, for approximately $350,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $350,000,000 of the gross proceeds from the Private Placement, in addition to funds from the Trust Account (plus any interest accrued thereon), will be used to fund the cash consideration payable pursuant to the Merger Agreement, the repayment of approximately $245,000,000 (such amount determined assuming the Business Combination closes on March 31, 2021) of HydraFacial’s existing indebtedness and the payment of certain transaction expenses.

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 37.2% in the post-combination company; (ii) the Private Placement Investors will own approximately 28.3% of the post-combination company (such that public stockholders, including Private Placement Investors, will own approximately 65.5% of the post-combination company); (iii) our Sponsor will own approximately 9.3% of the post-combination company; and (iv) the HydraFacial Stockholders will own approximately 25.2% of the post-combination company. Additionally, following the completion of the Business Combination, and subject to the approval of the 2021 Plan by the Company’s public stockholders and the approval of the applicable award agreements by the post-combination Board, pursuant to the 2021 Plan the Company expects to grant awards under the 2021 Plan. The awards (or associated benefits or amounts) that will be made to particular individuals or groups of individuals are not currently determinable.

These levels of ownership interest assume that no shares are elected to be redeemed. The ownership percentage with respect to the post-combination company following the Business Combination (i) does not take into account (a) 24,666,666 warrants to purchase Class A Stock (consisting of 15,333,333 public warrants and 9,333,333 Private Placement Warrants issued to our Sponsor) that will remain outstanding immediately following the Business Combination, (b) the issuance of any shares upon completion of the Business Combination under the 2021 Plan, a copy of which is attached to this proxy statement as Annex J and is further described in the Incentive Award Plan Proposal within this proxy statement or (c) the issuance of 7,500,000 shares of Class A Stock in connection with the earnout provision of the merger agreement, assuming a share price of $10.00 per share of Common Stock, but (ii) does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis (even though such



 

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shares of Class A Stock will be subject to transfer restrictions). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

The following table illustrates varying ownership levels in the Company, assuming no redemptions by the Company’s public stockholders and the maximum redemptions by the Company’s stockholders:(1)

 

     No
Redemptions
    Approximately
42.3 Million
Shares of
Class A Stock
Redeemed
 

The Company’s public stockholders

     37.20     2.96

The Private Placement Investors

     28.30     28.30

Sponsor

     9.30     9.30

HydraFacial Stockholders

     25.20     59.44
  

 

 

   

 

 

 
     100     100
  

 

 

   

 

 

 

 

(1)

This table, other than the maximum redemption scenario wherein approximately 42.3 million shares of Class A Stock are redeemed, reflects the assumptions as set forth in the preceding paragraph.

Board of Directors of the Company Following the Business Combination

Brenton L. Saunders, Client Carnell, Michael D. Capellas, Dr. Julius Few, Michelle Kerrick, Brian Miller and Doug Schillinger have each been nominated to serve as directors of the post-combination company upon completion of the Business Combination. Please see the sections entitled “Proposal No. 5—Election of Directors to the Board of Directors” and “Management after the Business Combination” for additional information.

The Charter Approval Proposal

Upon the closing of the Business Combination, our current certificate of incorporation will be amended promptly to reflect the Charter Approval Proposal to:

 

   

change the post-combination company’s name to The Beauty Health Company;

 

   

increase our total number of authorized shares of all classes of Common Stock from 220,000,000 shares to 320,000,000 shares, which would consist of (i) increasing the post-combination company’s authorized Class A Stock from 200,000,000 shares to 300,000,000 shares and (ii) decreasing the post-combination company’s authorized Class B Stock from 20,000,000 shares to zero shares (after giving effect to the conversion of each outstanding share of Class B Stock immediately prior to the closing of the Business Combination into one share of Class A Stock);

 

   

cause the conversion of our outstanding shares of Class B Stock into Class A Stock and make certain conforming changes;

 

   

provide that the number of directors will be determined exclusively by the Board pursuant to a resolution adopted by a majority of the Board;

 

   

delete the prior provisions under the current certificate of incorporation relating to our status as a blank check company;

 

   

provide that certain transactions are not “corporate opportunities” and that each of our Sponsor, Linden Manager III LP, DW Management Services, L.L.C. and the investment funds affiliated with the foregoing and their respective successors and affiliates (other than the post-combination company and



 

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its subsidiaries) and all of their respective partners, principals, directors, officers, members, managers, equity holders and/or employees, including any of the foregoing who serve as officers or directors of the post-combination company (each, an “Exempted Person”) are not subject to the doctrine of corporate opportunity;

 

   

require the approval by affirmative vote of the holders of at least two-thirds of the voting power of the outstanding shares of capital stock of the post-combination company entitled to vote generally in the election of directors, voting together as a single class, to make any amendment to certain provisions of the Second Amended and Restated Certificate of Incorporation or Amended and Restated Bylaws, including any amendments to Article V (Board of Directors), Section 7.1 (Meetings), Section 7.3 (Action by Written Consent), Article VIII (Limited Liability; Indemnification), Article IX (Corporate Opportunity), Article X (Business Combinations) and Article XI (Amendment of Amended and Restated Certificate of Incorporation); and

 

   

provide that the post-combination company will not be governed by Section 203 of the DGCL and, instead, include a provision in the Second Amended and Restated Certificate of Incorporation that is substantially similar to Section 203 of the DGCL, but excludes the equityholders of our Sponsor and their respective successors and affiliates or their transferees or any person whose ownership of shares in excess of the 15% limitation set forth therein is the result of any action taken solely by the post-combination company (the “Excluded Parties”) from the definition of “interested stockholder,” and to make certain related changes. Upon consummation of the Business Combination, the Excluded Parties will become “interested stockholders” within the meaning of Section 203 of the DGCL, but will not be subject to the restrictions on business combinations set forth in Section 203, as our Board approved the Business Combination in which the Excluded Parties became interested stockholders prior to such time they became interested stockholders.

Please see the section entitled “Proposal No. 3—Approval of the Second Amended and Restated Certificate of Incorporation” for more information.

Other Proposals

In addition, the stockholders of the Company will be asked to vote on:

 

   

a proposal to approve, for purposes of complying with applicable Nasdaq Listing Rules, the issuance of more than 20% of the Company’s issued and outstanding Common Stock pursuant to the Business Combination and the Private Placement (Proposal No. 2);

 

   

a separate proposal to approve, on a non-binding advisory basis, certain governance provisions in the Second Amended and Restated Certificate of Incorporation in accordance with SEC requirements (Proposal No. 4);

 

   

a proposal to approve and adopt the 2021 Plan, a copy of which is attached to this proxy statement as Annex J, including the authorization of the initial share reserve under the 2021 Plan (Proposal No. 6);

 

   

a proposal to approve and adopt the ESPP, a copy of which is attached to this proxy statement as Annex K, including the authorization of the initial share reserve under the ESPP (Proposal No. 7); and

 

   

a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if there are insufficient votes for, or otherwise in connection with, the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal or the Director Election Proposal (Proposal No. 8).

Please see the section entitled “Proposal No. 2—Approval of the Issuance of More than 20% of the Company’s Issued and Outstanding Common Stock in Connection with the Business Combination and the Private



 

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Placement,” “Proposal No. 4—Approval of Certain Governance Provisions in the Second Amended and Restated Certificate of Incorporation,” “Proposal No. 6—The Incentive Award Plan Proposal,” “Proposal No. 7—The Employee Stock Purchase Plan Proposal” and “Proposal No. 8—The Adjournment Proposal for more information.

Date, Time and Place of Special Meeting

The Special Meeting will be held virtually on April 29, 2021 at 2 p.m. Eastern Time at www.virtualshareholdermeeting.com/VSPR2021, or at such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

Voting Power; Record Date

Only Company stockholders of record at the close of business on April 14, 2021, the record date for the Special Meeting, will be entitled to vote at the Special Meeting. You are entitled to one vote for each share of Common Stock that you owned as of the close of business on the record date. If your shares are held in “street name” or are in a margin or similar account, you should contact your broker, bank or other nominee to ensure that votes related to the shares you beneficially own are properly counted. On April 6, 2021, there were 57,500,000 shares of Common Stock outstanding and entitled to vote, of which 46,000,000 are shares of Class A Stock and 11,500,000 are Founder Shares held by our Sponsor.

Accounting Treatment

The Business Combination is made up of the series of transactions within the Merger Agreement as defined elsewhere within this proxy statement. For accounting purposes, this series of transactions will be accounted for as a reverse recapitalization in accordance with GAAP and HydraFacial will be treated as the acquirer for accounting purposes, notwithstanding the legal form of the Business Combination. No step-up in basis of intangible assets or goodwill will be recorded in this transaction. The determination of HydraFacial as the accounting acquirer considered various factors, including that HydraFacial will comprise the ongoing operations of the post-combination company, HydraFacial Stockholders will hold the largest minority interest, the planned initial composition of the Board will include the CEO of HydraFacial, as well as designees of the HydraFacial Stockholders, and ongoing senior management of the post-combination company will be substantially composed of HydraFacial employees. Subsequent to the completion of these series of transactions, HydraFacial will be the reporting entity with its historical and future financial information being the financial information of the public registrant.

Litigation Relating to the Business Combination

A lawsuit was filed in the Supreme Court of the State of New York on January 18, 2021, and amended on March 24, 2021, by a purported Company stockholder in connection with the Business Combination: Ciccotelli v. Vesper Healthcare Acquisition Corp., et al., Index No. 650346/2021 (N.Y. Sup. Ct.). An additional lawsuit was filed by a different purported Company stockholder on January 19, 2021, and amended on March 22, 2021, in the Supreme Court of the State of New York in connection with the Business Combination: Purvance v. Vesper Healthcare Acquisition Corp., et al., Index No. 650365/2021 (N.Y. Sup. Ct.). On January 26, 2021, a lawsuit was filed in the United States District Court, Southern District of New York by a different purported Company stockholder in connection with the Business Combination: Watkins v. Vesper Healthcare Acquisition Corp., et al., No. 1:21-cv-00713 (S.D.N.Y.). On February 8, 2021, a lawsuit was filed in the Eleventh Judicial Circuit, in and for Miami-Dade County, Florida, by a different purported Company stockholder in connection with the Business Combination: Elstein v. Saunders et al., No. 21-3028CA01 (Fla. 11th Cir. Ct.). The complaints name the Company and some or all of the current members of the Company’s board as defendants. The complaints



 

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allege, among other things, breach of fiduciary duty claims against the Company’s Board in connection with the Business Combination. The complaints also allege that this proxy statement is misleading and/or omits material information concerning the Business Combination. The complaints generally seek, among other things, injunctive relief, damages, and an award of attorneys’ fees. On March 2, 2021, counsel for Jordan Rosenblatt, a purported Vesper shareholder, sent a demand letter alleging that Vesper and its board had breached their fiduciary duties and violated federal securities laws in connection with the Preliminary Proxy Statement. Also on March 2, 2021, counsel for Patrick Plumley, a purported Vesper shareholder, sent a demand letter alleging that Vesper and its board had breached their fiduciary duties and/or violated federal securities laws in connection with the Preliminary Proxy Statement. Both letters sought additional disclosures.

The Company believes these allegations are without merit and intends to defend against them; however, the Company cannot predict with certainty the ultimate resolution of any proceedings that may be brought in connection with these allegations.

Appraisal Rights

Appraisal rights are not available to our stockholders in connection with the Business Combination.

Proxy Solicitation

The Company is soliciting proxies on behalf of its Board. Proxies may be solicited by mail. The Company has engaged Innisfree to assist in the solicitation of proxies.

If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section entitled “Special Meeting of Company Stockholders—Revoking Your Proxy.”

Interests of Certain Persons in the Business Combination

In considering the recommendation of our Board to vote in favor of the Business Combination, stockholders should be aware that aside from their interests as stockholders, our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from, or in addition to, those of other stockholders generally. Our Board was aware of and considered these interests, among other matters, in evaluating and negotiating the Business Combination, and in recommending to stockholders that they approve the Business Combination. Stockholders should take these interests into account in deciding whether to approve the Business Combination.

These interests include, among other things:

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares, which will have a significantly higher value at the time of the Business Combination, and which, if unrestricted and freely tradable, would be valued at approximately $115,000,000 assuming a per share value of $10.00, but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Sponsor has agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor has agreed to waive their rights to liquidating distributions from the Trust Account with respect to its Founder Shares if we fail to complete an initial business combination by October 2, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $14,000,000 for its 9,333,333 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by October 2, 2022;



 

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the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by October 2, 2022;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation excludes the equity holders of our Sponsor and their respective successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation provides that certain transactions are not “corporate opportunities” and that our Sponsor its successors and affiliates (other than the post-combination company and its subsidiaries) and certain other persons are not subject to the doctrine of corporate opportunity; and

 

   

that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees.

Reasons for the Approval of the Business Combination

We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. We sought to do this by utilizing the networks and industry experience of both our Sponsor and our Board to identify, acquire and operate one or more businesses in the healthcare sector, although we were not limited to a particular industry or sector.

In particular, our Board considered the following positive factors, although not weighted or in any order of significance:

 

   

Growth Prospects. HydraFacial is a category-creating beauty health company with strong growth prospects within its core industry and adjacent markets. From 2016 to 2019, HydraFacial revenues grew at a compound annual growth rate (“CAGR”) of 52%, driven by delivery system growth in the U.S. and international markets and increasing revenue from consumables. The combination of relatively low penetration levels and attractive addressable market growth provide ample room for additional growth after recovery from COVID-19. During the pandemic, HydraFacial has continued to expand its install base of delivery systems that we believe will provide a larger base for consumables revenue growth once pandemic-related regulatory restrictions on its providers are lifted from 2020



 

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levels. In addition, HydraFacial has continued to focus on innovation, has expanded into new channels such as retail, has augmented its variety of serums with partnerships with other leading skincare providers, and has launched new solutions in the emerging area of scalp health, all which we believe will continue to drive its growth.

 

   

Target Industry. The Company’s Board and management possess deep knowledge of the healthcare and medical aesthetics industry, and the fact that HydraFacial’s business falls squarely within this particular area of expertise provides the Company with an opportunity to leverage such expertise in order to realize the investment potential from the Business Combination.

 

   

Platform Supports Further Growth Initiatives. HydraFacial’s existing platform supports the further penetration within its existing markets and customers, the addition of new customers and the entry into adjacent markets, both in the United States and internationally.

 

   

Valuation. The Board concluded that the aggregate Merger Consideration payable in the Mergers reflects an attractive valuation relative to publicly listed companies with certain characteristics comparable to HydraFacial such as similar industry, end markets, and growth profiles. Taken together with HydraFacial’s history of strong financial performance, projected revenue growth rate, high gross margins, and projected profitability, along with the caliber of investors involved in the PIPE financing, the Company believes the Business Combination presented a compelling acquisition opportunity for the Company and its stockholders. In evaluating the financial aspects of the Business Combination, the Board reviewed a number of materials, including the transaction documents, historical financial results of the business, and projections prepared by HydraFacial’s management.

 

   

Due Diligence. The Company conducted a due diligence review of HydraFacial and its business, including review of relevant documentation and discussions with HydraFacial’s management and the Company’s financial, legal and other advisors. Through the Company’s detailed due diligence investigation, the Company’s Board and management had knowledge of, and were familiar with, HydraFacial’s business and financial condition, including its historical financial results, financial plan, outstanding indebtedness and growth prospects. As part of its evaluation of HydraFacial, the Company’s Board and management also considered the financial profiles of publicly traded companies in the same and adjacent sectors.

 

   

Other Alternatives. Having thoroughly reviewed the other potential business combination opportunities available to the Company, the Board believes that the Business Combination presents the most attractive business combination opportunity based on the process it utilized to evaluate such other potential business combination opportunities and the belief that such process has not yielded more attractive alternatives, taking into account the potential risks, rewards and uncertainties associated with potential alternatives.

 

   

Negotiated Transaction. The financial and other terms and conditions of the Merger Agreement and the transactions contemplated thereby, including each party’s representations, warranties and covenants, the conditions to each party’s obligations and the termination provisions, were the product of arm’s length negotiations between the Company and HydraFacial, and the Board believes that such terms are reasonable and fair to the Company’s stockholders.

For more information about our decision-making process, please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Company’s Board of Directors’ Reasons for the Approval of the Business Combination.”



 

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Conditions to Closing of the Business Combination

Conditions to Each Party’s Obligations

The respective obligations of the Company and HydraFacial to consummate and effect the Mergers and the other transactions contemplated by the Merger Agreement are subject to the satisfaction, at or prior to the closing of the Business Combination, of each of the following conditions:

 

   

The respective obligations of the Company and HydraFacial to consummate and effect the Mergers and the other transactions contemplated by the Merger Agreement are subject to the satisfaction, at or prior to the closing of the Business Combination, of each of the following conditions:

 

   

the waiting period applicable to the transactions contemplated by the Merger Agreement under the HSR Act (including any extensions) must have expired or early termination must have been granted;

 

   

there must not be in effect any law or governmental order or injunction prohibiting the consummation of the Business Combination and there must not be any pending legal proceeding by any governmental authority which would reasonably be expected to result in the issuance of any such order;

 

   

the required vote of the Company’s stockholders to approve the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal has been duly obtained in accordance with the DGCL, the Company’s current certificate of incorporation and bylaws and the rules and regulations of Nasdaq;

 

   

the shares of Class A Stock to be issued in connection with the closing of the Business Combination will be approved for listing upon the closing of the Business Combination on Nasdaq, subject to official notice of the issuance thereof;

 

   

the Company will have at least $5,000,001 of net tangible assets following the exercise of any redemption rights by the Company’s holders of Class A Stock in accordance with the Company’s current certificate of incorporation; and

 

   

the Company must have available at the closing of the Business Combination an amount of cash of at least $390 million in the aggregate, including funds from the Trust Account and proceeds from the Private Placement.

Conditions to HydraFacial’s Obligations

The obligation of HydraFacial to consummate and effect the Mergers and the other transactions contemplated by the Merger Agreement are subject to the satisfaction, at or prior to the closing of the Business Combination, of each of the following conditions, any of which may be waived, in writing, exclusively by HydraFacial:

 

   

the representations and warranties of the Company, First Merger Sub and Second Merger Sub (other than the certain fundamental representations) must be true and correct in all respects (without giving effect to materiality, Vesper Material Adverse Effect (as defined below) or similar phrases in such representations and warranties), on and as of the date of the Merger Agreement and on and as of the closing date as though made on and as of the closing date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a Vesper Material Adverse Effect; and the Company’s fundamental representations (relating to organization, authorization and capitalization) must be true and correct in all respects on and as of the date of the Merger Agreement and on and as of the closing date as though made on and as of the closing date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date);



 

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the Company, First Merger Sub and Second Merger Sub must have performed or complied with all agreements and covenants required by the Merger Agreement to be performed or complied with by it at or prior to the closing date, in each case in all material respects; and

 

   

the Company must have delivered to HydraFacial a certificate executed by an executive officer of the Company and dated as of the closing date, confirming that the conditions set forth in the two immediately preceding bullet points have been satisfied.

Conditions to the Company’s Obligations

The obligations of the Company, First Merger Sub and Second Merger Sub to consummate and effect the Mergers and the other transactions contemplated by the Merger Agreement are subject to the satisfaction, at or prior to the closing of the Business Combination, of each of the following conditions, any of which may be waived, in writing, exclusively by the Company:

 

   

the representations and warranties of HydraFacial (other than certain fundamental representations) must be true and correct in all respects (without giving effect to materiality, Material Adverse Effect or similar phrases in such representations and warranties), on and as of the date of the Merger Agreement and on and as of the closing date as though made on and as of the closing date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date), except where the failure of such representations and warranties to be so true and correct, individually or in the aggregate, has not had and is not reasonably likely to have a Material Adverse Effect; HydraFacial’s fundamental representations (relating to organization, authorization and brokers) will be true and correct in all respects on and as of the date of the Merger Agreement and on and as of the closing date as though made on and as of the closing date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date); and the representations and warranties of HydraFacial with respect to capitalization must be true and correct in all but de minimis respects on and as of the date of the Merger Agreement and on and as of the closing date as though made on and as of the closing date;

 

   

HydraFacial must have performed or complied with all agreements and covenants required by the Merger Agreement to be performed or complied with by it at or prior to the closing date, in each case in all material respects;

 

   

no HydraFacial Material Adverse Effect (as defined below) shall have occurred since the date of the Merger Agreement;

 

   

HydraFacial must have delivered to the Company a certificate executed by an executive officer of HydraFacial and dated as of the closing date, confirming that the conditions set forth in the three immediately preceding bullet points have been satisfied;

 

   

the representations and warranties of the Stockholders’ Representative and the HydraFacial Stockholders must be true and correct in all respects, on and as of the date of the Merger Agreement and on and as of the closing date as though made on and as of the closing date (except to the extent that any such representation and warranty expressly speaks as of an earlier date, in which case such representation and warranty must be true and correct as of such earlier date);

 

   

the Company must have received HydraFacial’s audited financial statements for 2019 and 2018 and Hydrate’s interim financial statements must have been reviewed in accordance with SAS 100 procedures by January 15, 2021; and

 

   

the Company must have received customary payoff and termination documentation with respect to the repayment of outstanding amounts owed under HydraFacial’s existing credit facilities and customary release documentation with respect to the discharge of all liens in respect to such indebtedness, in each case in form and substance reasonably satisfactory to the Company.



 

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Regulatory Matters

Under the HSR Act and the rules that have been promulgated thereunder by the U.S. Federal Trade Commission (“FTC”), certain transactions may not be consummated unless information has been furnished to the Antitrust Division of the Department of Justice (the “Antitrust Division”) and the FTC and certain waiting period requirements have been satisfied. The Business Combination is subject to these requirements and may not be completed until the expiration of a 30-day waiting period following the filing of the required Notification and Report Forms with the Antitrust Division and the FTC or until early termination is granted. On January 13, 2021, the FTC granted the parties’ request for early termination of the waiting period.

At any time before or after consummation of the Business Combination, notwithstanding termination of the waiting period under the HSR Act, the applicable competition authorities could take such action under applicable antitrust laws as each deems necessary or desirable in the public interest, including seeking to enjoin the consummation of the Business Combination. Private parties may also seek to take legal action under the antitrust laws under certain circumstances. We cannot assure you that the Antitrust Division, the FTC, any state attorney general, or any other government authority will not attempt to challenge the Business Combination on antitrust grounds, and, if such a challenge is made, we cannot assure you as to its result. Neither the Company nor HydraFacial is aware of any material regulatory approvals or actions that are required for completion of the Business Combination other than the expiration or early termination of the waiting period under the HSR Act. It is presently contemplated that if any such additional regulatory approvals or actions are required, those approvals or actions will be sought. There can be no assurance, however, that any additional approvals or actions will be obtained.

Quorum and Required Vote for Proposals for the Special Meeting

A quorum of Company stockholders is necessary to hold a valid meeting. A quorum will be present at the Special Meeting if a majority of the Company’s Common Stock outstanding on the record date and entitled to vote at the Special Meeting is represented in person or by proxy. Abstentions will count as present for the purposes of establishing a quorum.

The approval of the Business Combination Proposal, the Nasdaq Proposal, the Governance Proposal, which is a non-binding advisory vote, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the votes cast by holders of our outstanding shares of Common Stock represented in person or by proxy and entitled to vote at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote will have no effect on the Business Combination Proposal, the Nasdaq Proposal, the Governance Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal or the Adjournment Proposal. Our Sponsor has agreed to vote its shares of Common Stock in favor of the Business Combination Proposal.

The approval of the Charter Approval Proposal requires the affirmative vote of holders of a majority of our outstanding shares of Common Stock entitled to vote thereon at the Special Meeting. Accordingly, a Company stockholder’s failure to vote by proxy or to vote in person at the Special Meeting, as well as an abstention from voting and a broker non-vote with regard to the Charter Approval Proposal will have the same effect as a vote “AGAINST” such Charter Approval Proposal.

Directors are elected by a plurality of all of the votes cast by holders of shares of our Common Stock represented in person or by proxy and entitled to vote thereon at the Special Meeting. This means that the seven director nominees who receive the most affirmative votes will be elected. Stockholders may not cumulate their votes with respect to the election of directors. Assuming a valid quorum is established, abstentions and broker non-votes will have no effect on the election of directors.



 

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The Business Combination is conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting. All of the proposals are conditioned on the approval of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal at the Special Meeting, other than the Adjournment Proposal, which is not conditioned on the approval of any other proposal.

It is important for you to note that in the event that the Business Combination Proposal, the Nasdaq Proposal or the Charter Approval Proposal do not receive the requisite vote for approval, we will not consummate the Business Combination. If we do not consummate the Business Combination and fail to complete an initial business combination by October 2, 2022, we will be required to dissolve and liquidate our Trust Account by returning the then remaining funds in such account to our public stockholders.

Independent Director Oversight

Our Board is composed of a majority of independent directors who are not affiliated with our Sponsor and its affiliates. In connection with the Business Combination, our independent directors, Messrs. Capellas, Few and Sternlicht, took an active role in evaluating the proposed terms of the Business Combination, including the Merger Agreement, the Related Agreements and the amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination. As part of their evaluation of the Business Combination, our independent directors were aware of the potential conflicts of interest with our Sponsor and its affiliates, that could arise with regard to the proposed terms of the: (i) Merger Agreement; (ii) Private Placement; and (iii) amendments to our current certificate of incorporation to take effect upon the completion of the Business Combination. Our independent directors also own shares of Common Stock, the value of which may be affected by the Business Combination. Our independent directors reviewed and considered these interests during the negotiation of the Business Combination and in evaluating and unanimously approving, as members of the Board, the Merger Agreement and the transactions contemplated therein, including the Business Combination. Please see the sections entitled “Proposal No. 1—Approval of the Business Combination—Independent Director Oversight ” and “Beneficial Ownership of Securities.”

Recommendation to Company Stockholders

Our Board believes that each of the Business Combination Proposal, the Nasdaq Proposal, the Charter Approval Proposal, the Governance Proposal, the Director Election Proposal, the Incentive Award Plan Proposal, the Employee Stock Purchase Plan Proposal and the Adjournment Proposal to be presented at the Special Meeting is in the best interests of the Company and our stockholders and unanimously recommends that its stockholders vote “FOR” each of the proposals.

When you consider the recommendation of our Board in favor of approval of the Business Combination Proposal, you should keep in mind that our Sponsor and certain members of our Board and officers have interests in the Business Combination that are different from or in addition to (or which may conflict with) your interests as a stockholder. Stockholders should take these interests into account in deciding whether to approve the proposals presented at the Special Meeting, including the Business Combination Proposal. Please see “Special Meeting of Company Stockholders—Recommendation to Company Stockholders.”

Risk Factors

In evaluating the Business Combination and the proposals to be considered and voted on at the Special Meeting, you should carefully review and consider the risk factors set forth under the section entitled “Risk Factors” beginning on page 58 of this proxy statement. The occurrence of one or more of the events or circumstances described in that section, alone or in combination with other events or circumstances, may have a material adverse effect on (i) the ability of the Company and HydraFacial to complete the Business Combination, and (ii) the business, cash flows, financial condition and results of operations of HydraFacial prior to the consummation of the Business Combination and the post-combination company following consummation of the Business Combination.



 

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Below is a summary of some of the principal risks HydraFacial faces:

 

   

The beauty health industry is highly competitive, and if HydraFacial is unable to compete effectively its results will suffer.

 

   

HydraFacial’s new product introductions may not be as successful as it anticipates.

 

   

Any damage to HydraFacial’s reputation or brand may materially and adversely affect its business, financial condition and results of operations.

 

   

HydraFacial’s success depends, in part, on the quality, performance and safety of its products.

 

   

HydraFacial may not be able to successfully implement its growth strategy.

 

   

HydraFacial’s growth and profitability are dependent on a number of factors, and its historical growth may not be indicative of its future growth.

 

   

HydraFacial may be unable to manage its growth effectively.

 

   

HydraFacial has a history of net losses and may experience future losses.

 

   

A disruption in HydraFacial’s operations could materially and adversely affect its business.

 

   

HydraFacial relies on a number of third-party suppliers, distributors and other vendors.

 

   

If HydraFacial is unable to protect its intellectual property the value of our brand and other intangible assets may be diminished through counterfeit versions of some of its products.

 

   

HydraFacial’s success depends on its ability to operate its business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties.

 

   

HydraFacial requires United States Food and Drug Administration (“FDA”) approval for its products and other regulatory approval internationally, and it may encounter difficulty in obtaining that approval.

Below is a summary of some of the principal risks related to the Company and the Business Combination:

 

   

The ability to complete the Business Combination or any delay in the closing of the Business Combination.

 

   

The occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement or the termination of any Subscription Agreement.

 

   

The ability to maintain the listing of the Company’s securities on a national securities exchange following the Business Combination.

 

   

The potential liquidity and trading of the Company’s public securities.

 

   

The inability to recognize the anticipated benefits of the proposed Business Combination, which may be affected by, among other things, the amount of cash available following any redemption of public shares by the Company’s stockholders.

 

   

The impact of the COVID-19 pandemic.

 

   

Any potential litigation involving the Company or HydraFacial.

 

   

Costs related to the Business Combination.

 

   

Expectations regarding the time during which the Company will be an “emerging growth company” under the JOBS Act.

 

   

Other risks and uncertainties indicated in this proxy statement/consent solicitation statement/prospectus, including those set forth under the section entitled “Risk Factors.”



 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF THE COMPANY

The following table contains summary historical financial data for the Company as of and for the period from July 8, 2020 (inception) through December 31, 2020. Such data have been derived from the unaudited financial statements of the Company included elsewhere in this proxy statement. Results from interim periods are not necessarily indicative of results that may be expected for the entire year. The information below is only a summary and should be read in conjunction with the sections entitled “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Information about the Company” and in our condensed financial statements, and the notes and schedules related thereto, which are included elsewhere in this proxy statement.

Statement of Operations Data:

 

Formation and operating costs

   $ 1,209,550  
  

 

 

 

Loss from operations

     (1,209,550 ) 

Other income:

  

Interest earned on marketable securities held in Trust Account

     90,128  

Unrealized gain on marketable securities held in Trust Account

     8,084  
  

 

 

 

Other income

     98,212  
  

 

 

 

Net loss

   $ (1,111,338 ) 
  

 

 

 

Basic and diluted weighted average shares outstanding, Common stock subject to possible redemption

     44,324,497  
  

 

 

 

Basic and diluted net income per share, Common stock subject to possible redemption

   $ 0.00  
  

 

 

 

Weighted average shares outstanding, basic and diluted

     11,775,126  
  

 

 

 

Basic and diluted net loss per common share

   $ (0.09 ) 
  

 

 

 

Balance Sheet Data:

 

ASSETS

  

Current Assets

  

Cash

   $ 3,265,075  

Prepaid expenses

     638,013  
  

 

 

 

Total Current Assets

     3,903,088  

Marketable securities held in Trust Account

     460,098,212  
  

 

 

 

TOTAL ASSETS

   $ 464,001,300  
  

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

  

Current Liabilities

  

Accrued expenses

   $ 753,547  

Accrued offering costs

     11,950  
  

 

 

 

Total Current Liabilities

     765,497  

Deferred underwriting payable

     16,100,000  
  

 

 

 

Total Liabilities

     16,865,497  
  

 

 

 

Commitments

  

Class A common stock subject to possible redemption 44,213,441 shares at redemption value

     442,135,795  

Stockholders’ Equity

  

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; no shares issued and outstanding

     —    

Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 1,786,559 issued and outstanding (excluding 44,213,441 shares subject to possible redemption)

     179  

Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 11,500,000 shares issued and outstanding

     1,150  

Additional paid-in capital

     6,110,017  

Accumulated deficit

     (1,111,338
  

 

 

 

Total Stockholders’ Equity

     5,000,008  
  

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 464,001,300  
  

 

 

 

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF HYDRAFACIAL

The following table shows selected historical financial information of HydraFacial for the periods and as of the dates indicated.

The selected historical financial information of HydraFacial for the years ended December 31, 2020, 2019 and 2018, and the selected historical financial information as of December 31, 2020 and 2019 was derived from the audited historical consolidated financial statements of HydraFacial included elsewhere in this proxy statement. The selected historical financial information of HydraFacial as of December 31, 2018 was derived from the audited historical financial statements not included in this proxy statement.

The following selected historical financial information should be read together with the consolidated financial statements and accompanying notes and “HydraFacial’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this proxy statement. The selected historical financial information in this section is not intended to replace HydraFacial’s consolidated financial statements and the related notes appearing elsewhere in this proxy statement.

As explained elsewhere in this proxy statement, the financial information contained in this section relates to HydraFacial, prior to and without giving pro-forma effect to the impact of the Business Combination and, as a result, the results reflected in this section may not be indicative of the results of the post-combination company going forward. See the sections entitled “Summary of the Proxy Statement” and “Unaudited Pro Forma Condensed Combined Financial Information” included elsewhere in this proxy statement.

 

     Fiscal year ended December 31,  

Statement of Operations Data:

   2020     2019     2018  
(in thousands except share and per share data)                   

Total net sales

   $ 119,092     $ 166,623     $ 112,310  

Total cost of sales

     51,893       60,111       39,335  
  

 

 

   

 

 

   

 

 

 

Gross profit

     67,199       106,512       72,975  

Total operating expenses

     84,381       93,050       62,915  
  

 

 

   

 

 

   

 

 

 

(Loss) income from operations

     (17,182     13,462       10,060  

Interest expense, net

     21,275       17,092       10,049  

Other (income) expense

     47       (535     9  

Foreign currency gain, net

     (21     (160     (8
  

 

 

   

 

 

   

 

 

 

(Loss) income before provision for income taxes

     (38,483     (2,935     10  

Income tax (benefit) provision

     (9,308     (1,297     327  
  

 

 

   

 

 

   

 

 

 

Net loss

   $ (29,175   $ (1,638   $ (317
  

 

 

   

 

 

   

 

 

 

Net loss per share available to common stockholders - basic and diluted

   $ (569.87   $ (47.94   $ (1,849.99
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - basic and diluted

     52,494       49,205       49,151  
  

 

 

   

 

 

   

 

 

 

 

     Fiscal year ended December 31,  

Statement of Cash Flow Data:

   2020     2019     2018  
(in thousands)                   

Net cash from (used in):

      

Operating activities

   $ (12,436   $ 1,728     $ (895

Investing activities

   $ (3,817   $ (12,480   $ (8,443

Financing activities

   $ 18,273     $ 14,578     $ 11,164  
     As of December 31,  

Balance Sheet Data:

   2020     2019     2018  
(in thousands)                   

Cash and cash equivalents

   $ 9,486     $ 7,307     $ 3,575  

Total assets

   $ 222,835     $ 226,351     $ 204,976  

Total liabilities

   $ 252,795     $ 227,559     $ 204,682  

Total stockholders’ equity (deficit)

   $ (29,960   $ (1,208   $ 294  

 

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Key Performance Indicators

The following table presents HydraFacial’s key performance indicators for the periods indicated:

 

     Fiscal year ended December 31,  

Other Financial Data:

   2020     2019     2018  
(in thousands)                   

Net loss

   $ (29,175   $ (1,638   $ (317

Adjusted EBITDA

   $ 7,721     $ 36,725     $ 26,204  

Adjusted EBITDA margin

     6.5     22.0     23.3

Gross profit

   $   67,199     $ 106,512     $ 72,975  

Adjusted Gross Profit

   $ 77,957     $   117,836     $   82,939  

Adjusted Gross Margin

     65.5     70.7     73.8

See the section titled “—Non-GAAP Financial Measures—Adjusted EBITDA and Adjusted EBITDA Margin” and the section titled “—Non-GAAP Financial Measures—Adjusted Gross Profit and Adjusted Gross Margin” regarding our use of Adjusted EBITDA and Adjusted Gross Profit, and a reconciliation of these measures to the nearest GAAP Measure.

Non-GAAP Financial Measures

In addition to HydraFacial’s results determined in accordance with accounting principles generally accepted in the United States of America (GAAP), management utilizes certain non-GAAP performance measures, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Gross Profit, and Adjusted Gross Margin, for purposes of evaluating HydraFacial’s ongoing operations and for internal planning and forecasting purposes. HydraFacial believes that these non-GAAP operating measures, when reviewed collectively with HydraFacial’s GAAP financial information, provide useful supplemental information to investors in assessing HydraFacial’s operating performance.

Adjusted EBITDA and Adjusted EBITDA Margin

Adjusted EBITDA and Adjusted EBITDA Margin are key performance measures that HydraFacial’s management uses to assess its operating performance. Because Adjusted EBITDA and Adjusted EBITDA Margin facilitates internal comparisons of HydraFacial’s historical operating performance on a more consistent basis, HydraFacial uses these measures for business planning purposes.

HydraFacial also believes this information will be useful for investors to facilitate comparisons of its operating performance and better identify trends in its business. HydraFacial expects Adjusted EBITDA Margin to increase over the long-term as it continues to scale its business and achieve greater leverage in its operating expenses.

HydraFacial calculates Adjusted EBITDA as net income (loss) adjusted to exclude: other (income), net; interest expense; provision for income taxes; depreciation and amortization expense; stock-based compensation expense; and one-time or non-recurring items such as transaction costs, non-recurring legal fees associated with certain actions to defend its intellectual property, manufacturing and freight costs related to inefficiencies due to capacity constraints prior to moving into its new warehouse and assembly facility in December 2019, restructuring costs associated with COVID-19, Management Fees incurred from its private equity owners; and Foreign Currency gain.

 

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The following table reconciles HydraFacial’s net income (loss) to Adjusted EBITDA the years ended December 31, 2020, 2019 and 2018:

 

     Fiscal year ended December 31,  

Unaudited (in thousands)

   2020     2019     2018  

Net loss

   $ (29,175   $ (1,638   $ (317

Adjusted to exclude the following:

      

Depreciation and amortization expense

     14,533       13,944       11,496  

Stock-based compensation expense

     363       103       61  

Interest expense

     21,275       17,092       10,049  

Income tax expense (benefit)

     (9,308     (1,297     327  

Other expense (income)

     47       (535     9  

Foreign currency gain, net

     (21     (160     (8

Management fees (1)

     1,486       1,809       3,239  

Facility relocation costs (2)

     —         3,974       —    

COVID-19 related costs (3)

     3,147       —         —    

Transaction related costs (4)

     4,223       1,689       380  

One-time patent lawsuit cost (5)

     —         1,350       —    

Other non-recurring and one-time fees (6)

     1,151       394       968  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ 7,721     $ 36,725     $ 26,204  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA Margin

     6.5     22.0     23.3
  

 

 

   

 

 

   

 

 

 

 

(1)

Represents quarterly management fees paid to the majority shareholder of the Company based on a pre-determined formula (including a recapitalization fee of $2.0 million incurred during 2018). Upon consummation of Business Combination, these fees will no longer be paid. Because these fees will not have an ongoing impact, they have been excluded from the calculation of Adjusted EBITDA.

(2)

Such amount represent costs associated with the 2019 relocation to a new assembly and warehouse facility that was completed during December 2019. These costs are non-recurring and are directly attributable to the relocation that was finalized in December 2019 and include duplicate rental expense, and the write-off of certain capitalized costs associated with our previous facility.

(3)

Such costs represent COVID-19 related restructuring cost including write-off of expired consumables, discontinued product lines, human capital and cash management consultant fees in relation to COVID-19 restructuring.

(4)

Such amounts represent direct costs incurred with the proposed business combination and to prepare the Company to be marketed for sale by the Company’s shareholders in previous periods. These costs do not have a continuing impact.

(5)

During 2019, the Company incurred approximately $1.4 million to defend certain patents that were being infringed upon.

(6)

Such costs primarily represent personnel costs associated with restructuring of HydraFacial’s salesforce and costs associated with former warehouse and assembly facility during the transition period offset by a legal settlement received in favor of HydraFacial.

Adjusted Gross Profit and Adjusted Gross Margin

HydraFacial uses Adjusted Gross Profit and Adjusted Gross Margin to measure its profitability and ability to scale and leverage the costs of its Delivery Systems (as defined below) and Consumables sales (as defined below). The continued growth of HydraFacial’s Delivery System Install Base will allow it to improve its Adjusted Gross Margin, as additional Delivery System units sold will increase our recurring Consumables revenue, which has higher margins.

HydraFacial uses Gross Profit and Gross Margin to measure its profitability and ability to scale and leverage the costs of its Delivery Systems and Consumables sales. HydraFacial believes Adjusted Gross Profit and Adjusted Gross Margin are useful measures to HydraFacial and to its investors to assist in evaluating its operating performance

 

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because it provides consistency and direct comparability with HydraFacial’s past financial performance and between fiscal periods, as the metric eliminates the effects of amortization and depreciation, which are non-cash expenses that may fluctuate for reasons unrelated to overall continuing operating performance. Adjusted Gross margin has been and will continue to be affected by a variety of factors, including the product mix, geographic mix, direct vs. indirect mix, the average selling price on Delivery Systems, and new product launches. HydraFacial expects its Adjusted Gross Margin to fluctuate over time depending on the factors described above. See the section titled “—Non-GAAP Financial Measures—Adjusted Gross Profit and Adjusted Gross Margin” for information regarding our use of Adjusted Gross Profit and a reconciliation of Adjusted Gross Profit to gross profit.

The following table reconciles gross profit to Adjusted Gross Profit for the years ended December 31, 2020, 2019 and 2018:

 

     Fiscal year ended December 31,  

(in millions)

   2020     2019     2018  

Net sales

   $         119,092     $         166,623     $         112,310  

Cost of sales

     51,893       60,111       39,335  
  

 

 

   

 

 

   

 

 

 

Gross profit

   $ 67,199     $ 106,512     $ 72,975  
  

 

 

   

 

 

   

 

 

 

Gross margin

     56.4     63.9     65.0
  

 

 

   

 

 

   

 

 

 

Adjusted to exclude the following:

      

Depreciation and amortization expense

   $ 10,758     $ 11,324     $ 9,964  
  

 

 

   

 

 

   

 

 

 

Adjusted gross profit

   $ 77,957     $ 117,836     $ 82,939  
  

 

 

   

 

 

   

 

 

 

Adjusted gross margin

     65.5     70.7     73.8
  

 

 

   

 

 

   

 

 

 

 

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SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The Company is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the Business Combination. The following unaudited pro forma condensed combined financial information presents the combination of the financial information of the Company and HydraFacial adjusted to give effect to the Business Combination and related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.”

The unaudited pro forma condensed combined balance sheet as of December 31, 2020 combines the unaudited condensed balance sheet of the Company as of December 31, 2020 with the unaudited condensed consolidated balance sheet of HydraFacial on a pro forma basis as of December 31, 2020, giving effect to the Business Combination and related transactions, summarized below, as if they had been consummated on that date. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020 combines the unaudited condensed statement of operations of the Company for the period from July 8, 2020 (inception) through December 31, 2020 with the consolidated statement of operations of HydraFacial for the year ended December 31, 2020. The unaudited pro forma combined statement of operations for the year ended December 31, 2020 is based on the audited consolidated statement of comprehensive income (loss) of HydraFacial for the year ended December 31, 2020. The unaudited pro forma condensed combined statements of operations presented gives effect to the Business Combination and related transactions, summarized below, as if they had been consummated on January 1, 2020, the earliest period presented:

 

   

the merger of Merger Sub I, a wholly owned subsidiary of Merger Sub II, with and into HydraFacial, followed by a subsequent merger of HydraFacial into Merger Sub II, a wholly owned subsidiary of the Company, with Merger Sub II being the surviving company;

 

   

the payment of cash consideration to HydraFacial Stockholders and repayment of HydraFacial indebtedness in connection with the Business Combination;

 

   

the consummation of the Private Placement;

 

   

the acceleration and vesting of HydraFacial incentive units in connection with the Business Combination;

 

   

issuance of 66,163,671 shares of Class A Stock;

 

   

the conversion of each outstanding share of Class B Stock immediately prior to the closing of the Business Combination into one share of Class A Stock;

 

   

the settlement of the note receivable due from HydraFacial Stockholder;

 

   

the payment of transaction costs incurred by both the Company and HydraFacial; and

 

   

the payment of deferred legal fees, underwriting commissions and other costs incurred in connection with the Business Combination.

The unaudited condensed combined pro forma financial information was derived from and should be read in conjunction with the following historical financial statements and the accompanying notes, prepared in accordance with GAAP, which are included elsewhere in this proxy statement/prospectus:

 

   

the historical audited condensed financial statements as of and for the period from July 8, 2020 (inception) through December 31, 2020 of the Company; and

 

   

the historical audited consolidated financial statements of HydraFacial as of and for the year ended December 31, 2020.

 

 

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The Business Combination will be accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, the Company is treated as the “acquired” company for financial reporting purposes. This determination was primarily based on the following:

 

   

the HydraFacial Stockholders considered in the aggregate are expected to have the largest minority interest of the voting power in the combined entity under the minimum and maximum redemption scenarios;

 

   

the operations of HydraFacial prior to the acquisition comprise the only ongoing operations of the post-combination company;

 

   

senior management of HydraFacial composes the senior management of the post-combination company;

 

   

the relative size and valuation of HydraFacial compared to the Company; and

 

   

pursuant to the Investor Rights Agreement, HydraFacial has the right to designate certain initial members of the board of directors of the post-combination company immediately after giving effect to the transactions.

Consideration was given to the fact that the Company will pay a purchase price consisting of a combination of cash and equity consideration and its shareholders may have the largest voting bloc, should the Company’s public shareholders be considered in the aggregate. However, based on the aforementioned factors of management, board representation, largest minority shareholder as noted above, and the continuation of the HydraFacial business as well as size, it was determined that accounting for the Business Combination as a reverse recapitalization was appropriate.

Accordingly, for accounting purposes, the financial statements of the combined entity will represent a continuation of the financial statements of HydraFacial with the acquisition being treated as the equivalent of HydraFacial issuing stock for the net assets of the Company, accompanied by a recapitalization. The net assets of the Company will be stated at historical cost, with no goodwill or other intangible assets recorded.

The combined financial information has been prepared assuming two alternative levels of redemption of Class A Stock into cash:

 

   

Assuming No Redemptions. This presentation assumes:

 

   

No existing holders of Class A Stock of the Company exercise their redemption rights with respect to their redeemable Class A Stock upon consummation of the Business Combination.

 

   

Assuming Maximum Redemptions. This presentation assumes:

 

   

All of the Company’s public shareholders exercise redemptions in connection with their Class A Stock. This scenario results in the redemption of 42,336,329 Class A Stock of the Company, which is derived from the number of shares that could be redeemed in connection with the Business Combination at an approximate redemption price of $10.00 per share based on the Company’s as adjusted trust account balance as of December 31, 2020. This maximum redemption scenario is based on the maximum number of redemptions that may occur but which would still provide the minimum aggregate Business Combination and Private Placement proceeds.

The existing HydraFacial Stockholders will hold 31,163,671 shares of the public shares immediately after the Business Combination, which approximates a 25.20% ownership level assuming no redemptions, and, assuming maximum redemptions, the existing HydraFacial Stockholders will hold 73,500,000 shares, which approximates to a 59.44% ownership level. The following table summarizes the number of public shares

 

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outstanding following the consummation of the Business Combination and the Private Placement under the two scenarios. Additionally, the table excludes the potential dilutive effect of the warrants and excludes the sellers earn out shares:

 

     No Redemptions     Maximum Redemptions  
Shareholder    No. of Shares      % Ownership     No. of Shares      % Ownership  

The Company’s public stockholders

     46,000,000        37.20     3,663,671        2.96

Founder Shares

     11,500,000        9.30     11,500,000        9.30

HydraFacial Stockholders

     31,163,671        25.20     73,500,000        59.44

Private Placement investors

     35,000,000        28.30     35,000,000        28.30
  

 

 

    

 

 

   

 

 

    

 

 

 

Pro Forma weighted average shares
outstanding – basic and diluted

     123,663,671          123,663,671     
  

 

 

      

 

 

    

The terms of the Business Combination also include an earnout provision pursuant to which certain additional contingent consideration would be payable to the HydraFacial stockholders if certain add-on acquisitions were completed before the first anniversary consummation of the transaction. The unaudited pro forma condensed combined financial information does not reflect earnout consideration effects, as the achievement of the earnout is uncertain. Accordingly, no effect has been given for the potential earnout shares.

The unaudited pro forma condensed combined financial information is for illustrative purposes only. The unaudited condensed combined pro forma adjustments reflecting the consummation of the Business Combination and related transactions are based on certain estimates and assumptions. These estimates and assumptions are based on information available as of the dates of these unaudited pro forma condensed combined financial statements and may be revised as additional information becomes available. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined entity will experience. The Company and HydraFacial have not had any historical relationship prior to the transactions. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

The unaudited pro forma condensed combined information contained herein assumes that the Company shareholders approve the Business Combination. The Company’s public shareholders may elect to redeem their public shares for cash even if they approve the Business Combination. The Company cannot predict how many of its public shareholders will exercise their right to have their Class A Stock redeemed for cash. As a result, HydraFacial has elected to provide the unaudited pro forma condensed combined financial information under two different redemption scenarios, which produce different allocations of total HydraFacial equity between holders of the ordinary shares. As described in greater detail in Note 2, Basis of Presentation, of the unaudited pro forma condensed combined financial information, the first scenario, or “no redemption scenario,” assumes that none of the Company’s public shareholders will exercise their right to have their Company public shares redeemed for cash, and the second scenario, or “maximum redemption scenario,” assumes that holders of the maximum number of public shares that could be redeemed for cash while still leaving sufficient cash available to consummate the Business Combination will exercise their right to have their public shares redeemed for cash. The actual results will be within the parameters described by the two scenarios. However, there can be no assurance regarding which scenario will be closest to the actual results. Under both scenarios, HydraFacial is considered the accounting acquirer, as further discussed in Note 2, Basis of Presentation, of the unaudited pro forma condensed combined financial information.

The unaudited condensed combined pro forma financial information should also be read together with “The Company’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “HydraFacial’s Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other financial information included elsewhere in this proxy statement/prospectus.

 

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Description of the Transactions

On December 8, 2020, the Company entered into the Merger Agreement with Merger Sub I, Merger Sub II HydraFacial and LCP in its capacity as Stockholders’ Representative, which provides for, among other things, the Mergers. As a result of the Mergers, HydraFacial will be combined with Merger Sub II, which will be a wholly owned subsidiary of the Company. This merger consideration will include both cash consideration and consideration in the form of newly issued shares of Class A Stock. The cash consideration will be an amount equal to the Company’s cash and cash equivalents as of the closing of the Business Combination (including proceeds in connection with the Private Placement and the funds in the Trust Account), minus HydraFacial’s outstanding indebtedness at the closing of the Business Combination, minus transaction expenses of HydraFacial and the Company, minus $100,000,000. However, cash consideration, together with certain contractual fees owed by HydraFacial to affiliates of its stockholders, will be subject to a maximum of 60% of the sum of the aggregate merger consideration plus these fees. The remainder of the merger consideration will be paid in a number of shares of our Class A Stock at a value of $10.00 per share (“Rollover Equity”). In connection with the Business Combination, the Company will pay off, or cause to be paid off, on behalf of HydraFacial, HydraFacial’s outstanding indebtedness under its existing credit facilities, and the merger consideration will be reduced by the amount of any such payment. The aggregate merger consideration payable by the Company to the HydraFacial Stockholders under the Merger Agreement will be an aggregate base merger consideration of $1,050.0 million. Under the terms of the transaction, HydraFacial will retain $100.0 million of cash towards its balance sheet, and the Company and HydraFacial will incur approximately $50.0 million of transaction expenses in the aggregate, inclusive of $16.1 million of deferred offering costs incurred by the Company in connection with the IPO. In addition to the consideration to be paid at the closing of the Business Combination, the stockholders of HydraFacial may be entitled to receive contingent consideration from the Company if certain acquisition targets identified by HydraFacial are acquired before or within one year after the closing of the Business Combination. This contingent consideration will be equal to 2.5 times the gross standalone revenue of each such acquisition target for the 12 months prior to such acquisition, up to a maximum of $75,000,000, and will payable in shares of Class A Stock. In addition, the Company has entered into Subscription Agreements with the Private Placement Investors pursuant to which the Company anticipates raising additional proceeds to fund the Business Combination and related transactions through the Private Placement, whereby certain investors have agreed to purchase an aggregate of 35,000,000 shares of Class A Stock for a price of $10.00 per share for an aggregate commitment of approximately $350,000,000. The Private Placement is conditioned on, among other things, the closing of the Business Combination.

Basis of Pro Forma Presentation

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses.” The pro forma adjustments to the combined historical financial information of HydraFacial and the Company depict the accounting for the Business Combination.

The adjustments in the unaudited pro forma condensed combined financial information have been identified and presented to provide relevant information necessary for an accurate understanding of the combined entity upon consummation of the Business Combination.

The pro forma adjustments have been prepared as if the Business Combination had been consummated on December 31, 2020 in the case of the unaudited pro forma condensed combined balance sheet and on January 1, 2020, the beginning of the earliest period presented in the unaudited pro forma condensed combined statement of operations.

 

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The pro forma adjustments represent management’s estimates based on information available as of the date of this proxy statement/prospectus and are subject to change as additional information becomes available and additional analyses are performed. Management considers this basis of presentation to be reasonable under the circumstances.

The post-combination company expects to enter into new equity awards with its employees upon the consummation of the Business Combination. The terms of these new equity awards have not been finalized and remain subject to change. Accordingly, no effect has been given to the unaudited pro forma condensed combined financial information for the new or current awards. No pro forma adjustments were recorded for historical stock-based compensation expense associated with the units that vested upon closing of the Business Combination as the amounts were immaterial.

The terms of the Business Combination also include an earnout provision pursuant to which certain additional contingent consideration would be payable to the HydraFacial stockholders if certain add-on acquisitions were completed before the first anniversary consummation of the transaction. The unaudited pro forma condensed combined financial information does not reflect earnout consideration effects, as the achievement of the earnout is uncertain . Accordingly, no effect has been given for the potential earnout shares.

The unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of redemption of Class A Stock into cash:

 

   

Assuming No Redemptions. This presentation assumes:

 

   

No existing holders of Class A Stock of the Company exercise their redemption rights with respect to their redeemable Class A Stock upon consummation of the Business Combination.

 

   

Assuming Maximum Redemptions. This presentation assumes:

 

   

All of the Company’s public shareholders exercise redemptions in connection with their Class A Stock. This scenario results in the redemption of 42,336,329 Class A Stock of the Company, which is derived from the number of shares that could be redeemed in connection with the Business Combination at an approximate redemption price of $10.00 per share based on trust account balance as of December 31, 2020. This maximum redemption scenario is based on the maximum number of redemptions that may occur, but which would still provide the minimum aggregate Business Combination and Private Placement cash proceeds.

The two alternative levels of redemption assumed in the unaudited pro forma condensed combined balance sheet and statement of operations are based on the assumption that there are no adjustments for the outstanding public or private placement warrants issued by the Company as such securities are not exercisable until 30 days after the closing of the Business Combination.

If the actual facts are different than these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different.

 

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HydraFacial’s Unaudited Pro Forma Financial Information

 

Statement of Operations Data - Year Ended
December 31, 2020
   Vesper
(Historical)
    HydraFacial
(Historical)
    Pro Forma
Combined
Assuming No
Redemptions
    Pro Forma
Combined
Assuming
Maximum
Redemptions
 
(in thousands except share and per share data)                         

Total sales

   $ —     $ 119,092     $ 119,092     $ 119,092  

Total cost of sales

   $ —     $ 51,893     $ 52,161     $ 52,161  

Total operating expenses

   $ 1,210     $ 84,381     $ 89,485     $ 89,485  

Loss from operations

   $ (1,210   $ (17,182   $ (22,554   $ (22,554

Net loss

   $ (1,112   $ (29,175   $ (19,550   $ (19,550

Weighted average shares outstanding, basic and diluted

         11,775,126       52,494           123,663,671           123,663,671  

Net loss per common share - basic and diluted

   $ (0.09   $ (569.87   $ (0.16   $ (0.16
Balance Sheet Data - As of December 31, 2020                         

(in thousands)

        

Total current assets

   $ 3,903     $ 59,095     $ 160,609     $ 160,609  

Total assets

   $ 464,001     $ 222,835     $ 324,349     $ 324,349  

Total current liabilities

   $ 765     $ 30,930     $ 31,183     $ 31,183  

Total liabilities

   $ 16,865     $     252,795     $ 37,024     $ 37,024  

Total stockholders’ equity (deficit)

   $ 5,000     $ (29,960   $ 287,325     $ 287,325  

 

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The statements contained in this proxy statement and in any document incorporated by reference herein that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. The information included in this proxy statement in relation to HydraFacial and the Company has been provided by HydraFacial and the Company and their respective management teams. Forward-looking statements include statements relating to HydraFacial and the Company’s management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that are or refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this proxy statement and in any document incorporated by reference herein may include, for example, statements about:

 

   

our ability to complete the Business Combination, or, if we do not consummate the Business Combination, any other initial business combination;

 

   

the benefits of the Business Combination;

 

   

satisfaction or waiver of certain customary closing conditions to the Business Combination, including, among others, (i) approval of the Business Combination, the Nasdaq Proposal, the Charter Approval Proposal and the Director Election Proposal by the stockholders of the Company, (ii) the expiration of the applicable waiting period under the HSR Act and (iii) that the Company have available at the closing of the Business Combination an amount of cash of at least $390 million in the aggregate, including funds from the Trust Account and proceeds from the Private Placement;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Business Combination;

 

   

the ability to obtain and/or maintain the listing of our common stock on Nasdaq following the Business Combination;

 

   

post-combination company’s ability to raise financing in the future;

 

   

post-combination company’s success in retaining or recruiting, or changes required in, our officers, key employees or directors following the Business Combination;

 

   

our directors and officers potentially having conflicts of interest with our business or in approving the Business Combination;

 

   

intense competition and competitive pressures from other companies in the industry in which the post-combination company will operate;

 

   

the business, operations and financial performance of HydraFacial, including market conditions and global and economic factors beyond HydraFacial’s control;

 

   

the impact of COVID-19 and related changes in base interest rates and significant market volatility on our business, our industry and the global economy;

 

   

the effect of legal, tax and regulatory changes; and

 

   

other factors detailed under the section entitled “Risk Factors.

Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under “Risk Factors” and elsewhere in this proxy statement. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements. These forward-looking statements

 

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speak only as of the date of this proxy statement. We undertake no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future, except as may be required under applicable securities laws.

You should not place undue reliance on these forward-looking statements in deciding how to grant your proxy or instruct how your vote should be cast or vote your shares on the proposals set forth in this proxy statement. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement and the proposed transactions contemplated thereby;

 

   

the outcome of any legal proceedings that may be instituted against the parties following announcement of the Merger Agreement and the proposed transactions contemplated thereby;

 

   

the inability to complete the transactions contemplated by the Merger Agreement, including due to failure to obtain approval of the stockholders of the Company or other conditions to closing in the Merger Agreement;

 

   

the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement or could otherwise cause the transaction to fail to close;

 

   

the receipt of an unsolicited offer from another party for an alternative business transaction that could interfere with the proposed Business Combination;

 

   

the inability to obtain or maintain the listing of the post-acquisition company’s Class A Stock on Nasdaq following the Business Combination;

 

   

the risk that the proposed Business Combination disrupts current plans and operations of the Company as a result of the announcement and consummation of the transactions described herein;

 

   

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, competition, the ability of the post-combination company to grow and manage growth profitably, maintain relationships with customers and suppliers and retain its management and key employees;

 

   

costs related to the Business Combination;

 

   

changes in applicable laws or regulations;

 

   

the possibility that HydraFacial may be adversely affected by other economic, business, and/or competitive factors;

 

   

the impact of the continuing COVID-19 pandemic on HydraFacial’s business; and

 

   

other risks and uncertainties indicated from time to time in the final prospectus of HydraFacial, including those under “Risk Factors” therein, and other documents filed or to be filed with the SEC or the Company.

 

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RISK FACTORS

You should carefully review and consider the following risk factors and the other information contained in this proxy statement, including the financial statements and notes to the financial statements included herein, in evaluating the Business Combination and the proposals to be voted on at the Special Meeting. The following risk factors apply to the business and operations of HydraFacial and will also apply to the business and operations of the post-combination company following the completion of the Business Combination. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete or realize the anticipated benefits of the Business Combination, and may have an adverse effect on the business, cash flows, financial condition and results of operations of the post-combination company. You should also carefully consider the following risk factors in addition to the other information included in this proxy statement, including matters addressed in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” We or HydraFacial may face additional risks and uncertainties that are not presently known to us or HydraFacial, or that we or HydraFacial currently deem immaterial, which may also impair our or HydraFacial’s business or financial condition. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

Risks Related to HydraFacial’s Business

Certain risks may have a material adverse effect on HydraFacial’s business, financial condition and results of operations. These risks include those described below and may include additional risks and uncertainties not presently known to HydraFacial or that HydraFacial currently deems immaterial. These risks should be read in conjunction with the other information in this proxy statement, including HydraFacial’s condensed consolidated financial statements and related notes thereto and “HydraFacial’s Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this proxy statement.

Risks factors related to the beauty health industry

The beauty health industry is highly competitive, and if HydraFacial is unable to compete effectively its results will suffer.

HydraFacial faces vigorous competition from companies throughout the world, including large multinational consumer products companies that have many beauty health brands under ownership and standalone beauty and skincare brands, including those that may target the latest trends or specific distribution channels. Competition in the beauty and skincare industry is based on the introduction of new products, pricing of products, quality of products and packaging, brand awareness, perceived value and quality, innovation, in-store presence and visibility, promotional activities, advertising, editorials, e-commerce and mobile-commerce initiatives and other activities. HydraFacial must compete with a high volume of new product introductions and existing products by diverse companies across several different distribution channels.

Many multinational consumer companies have greater financial, technical or marketing resources, longer operating histories, greater brand recognition or larger customer bases than HydraFacial does and may be able to respond more effectively to changing business and economic conditions than it can. HydraFacial’s competitors may attempt to gain market share by offering products at prices at or below the prices at which its products are typically offered, including through the use of large percentage discounts. Competitive pricing may require HydraFacial to reduce its prices, which would decrease its profitability or result in lost sales. HydraFacial’s competitors, many of whom have greater resources than HydraFacial does, may be better able to withstand these price reductions and lost sales.

It is difficult for HydraFacial to predict the timing and scale of its competitors’ activities in these areas or whether new competitors will emerge in the beauty health industry. In recent years, numerous online, “indie” and

 

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influencer-backed beauty health companies have emerged and garnered significant followings. In addition, further technological breakthroughs, including new and enhanced technologies that increase competition in the online retail market, new product offerings by competitors and the strength and success of HydraFacial’s competitors’ marketing programs may impede its growth and the implementation of its business strategy.

HydraFacial’s ability to compete also depends on the continued strength of its brand and products, the success of its marketing, innovation and execution strategies, the continued diversity of its product offerings, the successful management of new product introductions and innovations, strong operational execution, including in order fulfillment, and its success in entering new markets and expanding its business in existing geographies. If HydraFacial is unable to continue to compete effectively, it could have a material adverse effect on its business, financial condition and results of operations.

HydraFacial’s new product introductions may not be as successful as it anticipates.

The beauty health industry is driven in part by beauty and skincare trends, which may shift quickly. HydraFacial’s continued success depends on its ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer preferences for beauty health products, consumer attitudes toward its industry and brand and where and how consumers shop for and use these products. HydraFacial must continually work to develop, produce and market new products, maintain and enhance the recognition of its brand, maintain a favorable mix of products and develop its approach as to how and where it markets and sells its products.

HydraFacial has an established process for the development, evaluation and validation of its new product concepts. Nonetheless, each new product launch involves risks, as well as the possibility of unexpected consequences. For example, the acceptance of new product launches and sales to its providers may not be as high as it anticipates, due to lack of acceptance of the products themselves or their price, or limited effectiveness of HydraFacial’s marketing strategies. In addition, HydraFacial’s ability to launch new products may be limited by delays or difficulties affecting the ability of its suppliers or manufacturers to timely manufacture, distribute and ship new products. HydraFacial may also experience a decrease in sales of certain existing products as a result of newly launched products Any of these occurrences could delay or impede HydraFacial’s ability to achieve its sales objectives, which could have a material adverse effect on HydraFacial’s business, financial condition and results of operations.

Any damage to HydraFacial’s reputation or brand may materially and adversely affect its business, financial condition and results of operations.

HydraFacial believes that developing and maintaining its brand is critical and that its financial success is directly dependent on consumer perception of its brand. Furthermore, the importance of brand recognition may become even greater as competitors offer more products similar to HydraFacial’s products.

HydraFacial has relatively low brand awareness among consumers when compared to other beauty health brands and maintaining and enhancing the recognition and reputation of its brand is critical to its business and future growth. Many factors, some of which are beyond HydraFacial’s control, are important to maintaining its reputation and brand. These factors include HydraFacial’s ability to comply with ethical, social, product, labor and environmental standards. Any actual or perceived failure in compliance with such standards could damage HydraFacial’s reputation and brand.

The growth of HydraFacial’s brand depends largely on its ability to provide a high-quality consumer experience, which in turn depends on its ability to bring innovative products to the market at competitive prices that respond to consumer demands and preferences. Additional factors affecting HydraFacial’s consumer experience include a reliable and user-friendly website interface and mobile applications for its consumers to

 

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browse and purchase products on its e-commerce websites. If HydraFacial is unable to preserve its reputation, enhance its brand recognition or increase positive awareness of its products and Internet platforms, it may be difficult for HydraFacial to maintain and grow its consumer base, and its business, financial condition and results of operations may be materially and adversely affected.

The success of HydraFacial’s brand may also suffer if its marketing plans or product initiatives do not have the desired impact on its brand’s image or its ability to attract consumers. Further, HydraFacial’s brand value could diminish significantly due to a number of factors, including consumer perception that it has acted in an irresponsible manner, adverse publicity about its products, its failure to maintain the quality of its products, product contamination, the failure of its products to deliver consistently positive consumer experiences, or its products becoming unavailable to consumers.

HydraFacial’s success depends, in part, on the quality, efficacy and safety of its products.

Any loss of confidence on the part of consumers in the ingredients used in HydraFacial’s products, whether related to product contamination or product safety or quality failures, actual or perceived, or inclusion of prohibited ingredients, could tarnish the image of its brand and could cause consumers to choose other products. Allegations of contamination or other adverse effects on product safety or suitability for use by a particular consumer, even if untrue, may require HydraFacial to expend significant time and resources responding to such allegations and could, from time to time, result in a recall of a product from any or all of the markets in which the affected product was distributed. Any such issues or recalls could negatively affect HydraFacial’s profitability and brand image.

If HydraFacial’s products are found to be, or perceived to be, defective or unsafe, or if they otherwise fail to meet its consumers’ expectations, its relationships with consumers could suffer, the appeal of its brand could be diminished, HydraFacial may need to recall some of its products and/or become subject to regulatory action, and it could lose sales or market share or become subject to boycotts or liability claims. In addition, third parties may sell counterfeit versions of some of its products. These counterfeit products may pose safety risks, may fail to meet consumers’ expectations, and may have a negative impact on its business. Any of these outcomes could result in a material adverse effect on its business, financial condition and results of operations.

Demand for HydraFacial’s products may not increase as rapidly as it anticipates due to a variety of factors including a weakness in general economic conditions and resistance to non-traditional treatment methods.

Consumer spending habits are affected by, among other things, prevailing economic conditions, levels of employment, salaries and wage rates, consumer confidence and consumer perception of economic conditions. A general slowdown in the U.S. economy and certain international economies or an uncertain economic outlook would adversely affect consumer spending habits which may, among other things, result in reduced patient traffic in dermatology or internal medicine offices, and in medical spa facilities and spa facilities, reduction in consumer spending on elective, non-urgent, or higher value treatments such as those offered by HydraFacial’s providers or a reduction in the demand for aesthetic services generally, each of which would have a material adverse effect on HydraFacial’s sales and operating results. Weakness in the global economy results in a challenging environment for selling aesthetic technologies and doctors and/or aestheticians may postpone investments in capital equipment, such as HydraFacial’s delivery systems. Increased market acceptance of all of HydraFacial’s products and treatments will depend in part upon the recommendations of medical and aesthetics professionals, as well as other factors including effectiveness, safety, ease of use, reliability, aesthetics, and price compared to competing products and treatment methods.

HydraFacial may experience declines in average selling prices of its products which may decrease its net revenues.

HydraFacial provides volume-based discount programs to its customers and may offer additional products purchased at a discounted price. In addition, HydraFacial sells a number of products at different list prices which

 

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also differ based on regions and or country. If HydraFacial changes volume-based discount programs affecting its average selling prices; if it introduces any price reductions or consumer rebate programs; if it expands its discount programs or participation in these programs increases; if its critical accounting estimates materially differ from actual behavior or results; or if its geographic, channel, or product mix shifts to lower priced products or to products that have a higher percentage of deferred revenue, its average selling prices would be adversely affected. Additionally, in response to the COVID-19 pandemic, HydraFacial may find it needs to discount the price for its products to facilitate sales in uncertain times. Were any of the foregoing to occur, HydraFacial’s net revenues, gross profit, gross margin and net income may be reduced.

Risks factors related to HydraFacial’s growth and profitability

HydraFacial may not be able to successfully implement its growth strategy.

HydraFacial’s future growth, profitability and cash flows depend upon its ability to successfully implement its business strategy, which, in turn, is dependent upon a number of key initiatives, including its ability to:

 

   

drive demand in the brand;

 

   

invest in digital capabilities;

 

   

improve productivity in its retailers, U.S. medical spa facilities and U.S. spa facilities;

 

   

implement the necessary cost savings to help fund its marketing and digital investments; and

 

   

pursue strategic extensions that can leverage its strengths and bring new capabilities.

There can be no assurance that HydraFacial can successfully achieve any or all of the above initiatives in the manner or time period that it expects. Further, achieving these objectives will require investments which may result in short-term cost increases with net sales materializing on a longer-term horizon and therefore may be dilutive to HydraFacial’s earnings. HydraFacial cannot provide any assurance that it will realize, in full or in part, the anticipated benefits it expects its strategy will achieve. The failure to realize those benefits could have a material adverse effect on its business, financial condition and results of operations.

HydraFacial’s growth and profitability are dependent on a number of factors, and its historical growth may not be indicative of its future growth.

HydraFacial’s historical growth should not be considered as indicative of its future performance. HydraFacial may not be successful in executing its growth strategy, and even if it achieves its strategic plan, it may not be able to sustain profitability. In future periods, HydraFacial’s revenue could decline, or grow more slowly than it expects. HydraFacial also may incur significant losses in the future for a number of reasons, including the following risks and the other risks described in this report, and it may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors:

 

   

it may lose one or more significant providers, or sales of its products through these providers may decrease;

 

   

the ability of its third-party suppliers to produce its products and of its distributors to distribute its products could be disrupted;

 

   

its products may be the subject of regulatory actions, including but not limited to actions by the FDA, the FTC and the Consumer Product Safety Commission (“CPSC”) in the United States;

 

   

it may be unable to introduce new products that appeal to consumers or otherwise successfully compete with its competitors in the beauty health industry;

 

   

it may be unsuccessful in enhancing the recognition and reputation of its brand, and its brand may be damaged as a result of, among other reasons, its failure, or alleged failure, to comply with applicable ethical, social, product, labor or environmental standards;

 

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it may experience service interruptions, data corruption, cyber-based attacks or network security breaches which result in the disruption of its operating systems or the loss of confidential information of its consumers;

 

   

it may be unable to retain key members of its senior management team or attract and retain other qualified personnel; and

 

   

it may be affected by any adverse economic conditions in the United States or internationally.

HydraFacial may be unable to grow its business effectively or efficiently, which would harm its business, financial condition and results of operations.

Growing HydraFacial’s business will place a strain on its management team, financial and information systems, supply chain and distribution capacity and other resources. To manage growth effectively, HydraFacial must continue to enhance its operational, financial and management systems, including its warehouse management and inventory control; maintain and improve its internal controls and disclosure controls and procedures; maintain and improve its information technology systems and procedures; and expand, train and manage its employee base.

HydraFacial may not be able to effectively manage this expansion in any one or more of these areas, and any failure to do so could significantly harm its business, financial condition and results of operations. Growing HydraFacial’s business may make it difficult for it to adequately predict the expenditures it will need to make in the future. If HydraFacial does not make the necessary overhead expenditures to accommodate its future growth, HydraFacial may not be successful in executing its growth strategy, and its results of operations would suffer.

Acquisitions or investments could disrupt HydraFacial’s business and harm its financial condition.

HydraFacial frequently reviews acquisition and strategic investment opportunities that would expand its current product offerings, its distribution channels, increase the size and geographic scope of its operations or otherwise offer growth and operating efficiency opportunities. There can be no assurance that HydraFacial will be able to identify suitable candidates or consummate these transactions on favorable terms. The process of integrating an acquired business, product or technology can create unforeseen operating difficulties, expenditures and other challenges such as:

 

   

potentially increased regulatory and compliance requirements;

 

   

implementation or remediation of controls, procedures and policies at the acquired company;

 

   

diversion of management time and focus from operation of its then-existing business to acquisition integration challenges;

 

   

coordination of product, sales, marketing and program and systems management functions;

 

   

transition of the acquired company’s users and providers onto its systems;

 

   

retention of employees from the acquired company;

 

   

integration of employees from the acquired company into HydraFacial’s organization;

 

   

integration of the acquired company’s accounting, information management, human resources and other administrative systems and operations into HydraFacial’s systems and operations;

 

   

liability for activities of the acquired company prior to the acquisition, including violations of law, commercial disputes and tax and other known and unknown liabilities; and

 

   

litigation or other claims in connection with the acquired company, including claims brought by terminated employees, providers, former stockholders or other third parties.

 

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If HydraFacial is unable to address these difficulties and challenges or other problems encountered in connection with any acquisition or investment, it might not realize the anticipated benefits of that acquisition or investment and it might incur unanticipated liabilities or otherwise suffer harm to its business generally.

To the extent that HydraFacial pays the consideration for any acquisitions or investments in cash, it would reduce the amount of cash available to HydraFacial for other purposes. Acquisitions or investments could also result in dilutive issuances of HydraFacial’s equity securities or the incurrence of debt, contingent liabilities, amortization expenses, increased interest expenses or impairment charges against goodwill on its consolidated balance sheet, any of which could have a material adverse effect on its business, financial condition and results of operations. There can be no assurance that any contemplated or future acquisition will occur.

HydraFacial’s operating results have fluctuated in the past and HydraFacial expects its future quarterly and annual operating results to fluctuate for a variety of reasons, particularly as it focuses on increasing provider and consumer demand for its products. Some of the factors that could cause HydraFacial’s operating results to fluctuate include:

 

   

limited visibility into, and difficulty predicting from quarter to quarter, the level of activity in its customers’ practices;

 

   

changes in geographic, channel, or product mix;

 

   

weakness in consumer spending as a result of a slowdown in the global, U.S. or other economies;

 

   

higher manufacturing costs;

 

   

competition in general and competitive developments in the market;

 

   

changes in relationships with its customers and distributors, including timing of orders;

 

   

changes in the timing of when revenues are recognized, including as a result of the timing of receipt of product orders and shipments, the introduction of new products and software releases, product offerings or promotions, modifications to its terms and conditions or as a result of new accounting pronouncements or changes to critical accounting estimates;

 

   

fluctuations in currency exchange rates against the U.S. dollar;

 

   

its inability to scale, suspend or reduce production based on variations in product demand;

 

   

increased participation in its customer rebate or discount programs could adversely affect its average selling prices;

 

   

seasonal fluctuations in demand;

 

   

success of or changes to its marketing programs from quarter to quarter;

 

   

increased advertising or marketing efforts or aggressive price competition from competitors;

 

   

changes to its effective tax rate;

 

   

unanticipated delays and disruptions in the manufacturing process caused by insufficient capacity or availability of raw materials, turnover in the labor force or the introduction of new production processes, power outages or natural or other disasters beyond its control;

 

   

underutilization of manufacturing facilities;

 

   

major changes in available technology or the preferences of customers may cause its current product offerings to become less competitive or obsolete;

 

   

costs and expenditures in connection with litigation;

 

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costs and expenditures in connection with the establishment of treatment planning and fabrication facilities in international locations;

 

   

costs and expenditures in connection with hiring and deployment of direct sales force personnel;

 

   

unanticipated delays in its receipt of patient records for any reason;

 

   

disruptions to its business due to political, economic or other social instability or any governmental regulatory or similar actions, including the impact of a pandemic such as the COVID-19 pandemic, any of which results in changes in consumer spending habits, consumers unable or unwilling to visit spas, as well as any impact on workforce absenteeism;

 

   

inaccurate forecasting of net revenues, production and other operating costs;

 

   

investments in research and development to develop new products and enhancements;

 

   

material impairments in the value of its privately held companies; and

 

   

timing of industry tradeshows.

To respond to these and other factors, HydraFacial may make business decisions that adversely affect its operating results such as modifications to its pricing policy, promotions, development efforts, product releases, business structure or operations. Most of its expenses, such as employee compensation and lease payment obligations, are relatively fixed in the short term. Moreover, its expense levels are based, in part, on its expectations regarding future revenue levels. As a result, if its net revenues for a particular period fall below expectations, HydraFacial may be unable to adjust spending quickly enough to offset any shortfall in net revenues. Due to these and other factors, HydraFacial believes that quarter-to-quarter comparisons of its operating results may not be meaningful. You should not rely on HydraFacial’s results for any one quarter as an indication of its future performance.

HydraFacial has a history of net losses and may experience future losses.

HydraFacial has yet to establish any history of profitable operations. HydraFacial reported a net loss of $29.2 million during the fiscal year ended December 31, 2020. HydraFacial expects to incur additional operating losses for the foreseeable future. Furthermore, HydraFacial’s strategic plan will require a significant investment in product development, sales, marketing and administrative programs, which may not result in the accelerated revenue growth that it anticipates. As a result, there can be no assurance that HydraFacial will ever generate substantial revenues or achieve or sustain profitability.

Risk factors related to HydraFacial’s business operations

A disruption in HydraFacial’s operations could materially and adversely affect its business.

As a company engaged in distribution on a global scale, HydraFacial’s operations, including those of its third-party suppliers, brokers and delivery service providers, are subject to the risks inherent in such activities, including industrial accidents, environmental events, strikes and other labor disputes, disruptions in information systems, product quality control, safety, licensing requirements and other regulatory issues, as well as natural disasters, pandemics (such as the COVID-19 pandemic), border disputes, acts of terrorism and other external factors over which HydraFacial and its third-party suppliers, brokers and delivery service providers have no control. The loss of, or damage to, the manufacturing facilities or distribution centers of HydraFacial’s third-party suppliers, brokers and delivery service providers could materially and adversely affect its business, financial condition and results of operations.

HydraFacial depends heavily on contracted third-party delivery service providers to deliver its products to its distribution facilities and logistics providers, and from there to its providers. HydraFacial also depends on

 

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contracted third-party delivery service providers to deliver its products directly to providers as part of a direct sale to those providers. Interruptions to or failures in these delivery services could prevent the timely or successful delivery of its products.

These interruptions or failures may be due to unforeseen events that are beyond HydraFacial’s control or the control of its third-party delivery service providers, such as inclement weather, natural disasters or labor unrest. If its products are not delivered on time or are delivered in a damaged state, providers and customers may refuse to accept HydraFacial’s products and have less confidence in its services.

HydraFacial’s ability to meet the needs of its consumers depends on the proper operation of its distribution facilities, where most of its inventory that is not in transit is housed. HydraFacial’s insurance coverage may not be sufficient to cover the full extent of any loss or damage to its inventory or distribution facilities, and any loss, damage or disruption of the facilities, or loss or damage of the inventory stored there, could materially and adversely affect its business, financial condition and results of operations.

The recent outbreak of the COVID-19 global pandemic and related government, private sector and individual consumer responsive actions have adversely affected, and will continue adversely affect, HydraFacial’s business, financial condition and results of operations.

The outbreak of the COVID-19 virus has been declared a pandemic by the World Health Organization and continues to spread in the United States and around the world. Related government and private sector responsive actions, as well as changes in consumer spending behaviors, have adversely affected, and will continue to adversely affect HydraFacial’s business, financial condition and results of operations. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic, as the situation is rapidly evolving.

In response to the spread of the COVID-19 virus, international, federal, state and local governments have ordered the shutdown of non-essential businesses and have recommended precautions to mitigate the spread of the COVID-19 virus, including warning against congregating in heavily populated areas, such as malls, shopping centers, and other retailers. The outbreak and global spread of COVID-19 virus has significantly disrupted HydraFacial’s operating environment, including manufacturing, distribution, and the ability of many of its providers to operate. HydraFacial has also seen shifts in consumer preferences and practices. There is significant uncertainty around the breadth and duration of business disruptions related to the COVID-19 virus, as well as its impact on the U.S. and global economy and HydraFacial’s consumers’ spending habits.

While HydraFacial’s suppliers and distribution centers currently remain open, there is a risk that any of these facilities (i) may become less productive or encounter disruptions due to employees at the facilities becoming infected with the COVID-19 virus and/or (ii) are no longer allowed to operate based on directives from public health officials or government authorities. Additionally, there is a risk of decreased, or further decreased, demand if HydraFacial’s provider facilities are no longer allowed to operate based on directives from public health officials or government authorities.

As a result of the COVID-19 pandemic, HydraFacial may be required to have many of HydraFacial’s personnel work remotely in the future and it is possible that this could have a negative impact on the execution of its business plans and operations. If a natural disaster, power outage, connectivity issue, or other event occurs that impacts HydraFacial’s employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for HydraFacial to continue its business for a substantial period of time. The increase in remote working may also result in consumer privacy, IT security and fraud concerns as well as increase HydraFacial’s exposure to potential wage and hour issues.

The uncertainty around the duration of business disruptions and the extent of the spread of the COVID-19 virus in the United States and to other areas of the world will likely continue to adversely impact the national or global economy and negatively impact consumer spending and shopping behaviors. If the pandemic worsens,

 

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HydraFacial may see a further drop in the ability of HydraFacial’s providers to operate or in the willingness of consumers to purchase optional beauty health treatments. Any of these outcomes could have an adverse impact on HydraFacial’s business, financial condition and results of operations. The extent to which the COVID-19 pandemic impacts HydraFacial’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the COVID-19 pandemic and the actions taken to contain it or treat its impact.

HydraFacial’s success depends, in part, on its retention of key members of its senior management team and ability to attract and retain qualified personnel.

HydraFacial’s success depends, in part, on its ability to retain its key employees, including its executive officers, senior management team and development, operations, finance, sales and marketing personnel. HydraFacial is a small company that relies on a few key employees, any one of whom would be difficult to replace and, because it is a small company, it believes that the loss of key employees may be more disruptive to HydraFacial than it would be to a larger company. HydraFacial’s success also depends, in part, on its continuing ability to identify, hire, train and retain other highly qualified personnel. In addition, HydraFacial may be unable to effectively plan for the succession of senior management, including its chief executive officer. The loss of key personnel or the failure to attract and retain qualified personnel may have a material adverse effect on its business, financial condition and results of operations.

HydraFacial relies on a number of third-party suppliers, distributors and other vendors, and they may not continue to produce products or provide services that are consistent with HydraFacial’s standards or applicable regulatory requirements, which could harm its brand, cause consumer dissatisfaction, and require HydraFacial to find alternative suppliers of its products or services.

HydraFacial uses multiple third-party suppliers based in the United States and overseas to source substantially all of its products. HydraFacial engages its third-party suppliers on a purchase order basis and is not party to long-term contracts with any of them. The ability of these third parties to supply HydraFacial’s products may be affected by competing orders placed by other persons and the demands of those persons. If HydraFacial experiences significant increases in demand or need to replace a significant number of existing suppliers, there can be no assurance that additional supply capacity will be available when required on terms that are acceptable to HydraFacial, or at all, or that any supplier will allocate sufficient capacity to HydraFacial in order to meet its requirements.

In addition, quality control problems, such as the use of ingredients and delivery of products that do not meet its quality control standards and specifications or comply with applicable laws or regulations, could harm its business. These quality control problems could result in regulatory action, such as restrictions on importation, products of inferior quality or product stock outages or shortages, harming its sales and creating inventory write-downs for unusable products.

HydraFacial has also outsourced significant portions of its distribution process overseas, as well as certain technology-related functions, to third-party service providers. Specifically, HydraFacial relies on third-party distributors to sell its products in a number of foreign countries, and its international warehouses and distribution facilities are managed and staffed by its third-party distributors, and HydraFacial utilizes a third-party hosting and networking provider to host its e-commerce websites. The failure of one or more of these entities to provide the expected services on a timely basis, or at all, or at the prices HydraFacial expects, or the costs and disruption incurred in changing these outsourced functions to being performed under its management and direct control or that of a third-party, may have a material adverse effect on its business, financial condition and results of operations. HydraFacial is not party to long-term contracts with some of its distributors, and upon expiration of these existing agreements, HydraFacial may not be able to renegotiate the terms on a commercially reasonable basis, or at all.

 

 

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HydraFacial also relies on providers and estheticians to promote our treatments, which they are not under any contractual obligation to do or continue to do.

Further, HydraFacial’s third-party suppliers and distributors may:

 

   

have economic or business interests or goals that are inconsistent with HydraFacial’s;

 

   

take actions contrary to its instructions, requests, policies or objectives;

 

   

be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet its production deadlines, quality standards, pricing guidelines and product specifications, or to comply with applicable regulations, including those regarding the safety and quality of products and ingredients and good manufacturing practices;

 

   

have financial difficulties;

 

   

encounter raw material or labor shortages;

 

   

encounter increases in raw material or labor costs which may affect its procurement costs;

 

   

disclose its confidential information or intellectual property to competitors or third parties;

 

   

engage in activities or employ practices that may harm its reputation; and

 

   

work with, be acquired by, or come under control of, its competitors.

The occurrence of any of these events, alone or together, could have a material adverse effect on HydraFacial’s business, financial condition and results of operations. In addition, such problems may require HydraFacial to find new third-party suppliers or distributors, and there can be no assurance that HydraFacial would be successful in finding third-party suppliers or distributors meeting its standards of innovation and quality.

The management and oversight of the engagement and activities of HydraFacial’s third-party suppliers and distributors requires substantial time, effort and expense of its employees, and HydraFacial may be unable to successfully manage and oversee the activities of its third-party suppliers and distributors. If HydraFacial experiences any supply chain disruptions caused by its inability to locate suitable third-party suppliers, or if its raw material suppliers experience problems with product quality or disruptions or delivery of the raw materials or components used to make such products, its business, financial condition and results of operations could be materially and adversely affected.

HydraFacial maintains single supply relationships for certain key components, and its business and operating results could be harmed if supply is restricted or ends or the price of raw materials used in its manufacturing process increases.

HydraFacial is dependent on sole suppliers or a limited number of suppliers for certain components that are integral to its finished products. If these or other suppliers encounter financial, operating or other difficulties or if HydraFacial’s relationship with them changes, it may be unable to quickly establish or qualify replacement sources of supply and could face production interruptions, delays and inefficiencies. In addition, technology changes by HydraFacial’s vendors could disrupt access to required manufacturing capacity or require expensive, time consuming development efforts to adapt and integrate new equipment or processes. HydraFacial’s growth may exceed the capacity of one or more of these suppliers to produce the needed equipment and materials in sufficient quantities to support its growth. Any one of these factors could harm HydraFacial’s business and growth prospects.

 

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The design, development, manufacture and sale of HydraFacial’s products involves the risk of product liability and other claims by consumers and other third parties, and insurance against such potential claims is expensive and may be difficult to obtain.

The design, development, manufacture and sale of HydraFacial’s products involves an inherent risk of product liability claims and the associated adverse publicity. HydraFacial regularly monitors the use of its products for trends or increases in reports of adverse events or product complaints. In some, but not all, cases, an increase in adverse event reports may be an indication that there has been a change in a product’s specifications or efficacy. Such changes could lead to a recall of the product in question or, in some cases, increases in product liability claims related to the product in question. If the coverage limits for product liability insurance policies are not adequate or if certain of HydraFacial’s products are excluded from coverage, a claim brought against it, whether covered by insurance or not, could have a material adverse effect on HydraFacial’s business, results of operations, financial condition and cash flows.

HydraFacial’s could also be subject to a variety of other types of claims, proceedings, investigations and litigation initiated by government agencies or third parties. These include compliance matters, product regulation or safety, taxes, employee benefit plans, employment discrimination, health and safety, environmental, antitrust, customs, import/export, government contract compliance, financial controls or reporting, intellectual property, allegations of misrepresentation, false claims or false statements, commercial claims, claims regarding promotion of its products and services, shareholder derivative suits or other similar matters. Negative publicity, whether accurate or inaccurate, about the efficacy, safety or side effects of HydraFacial’s products or product categories, whether involving HydraFacial or a competitor, could materially reduce market acceptance to its products, cause consumers to seek alternatives to its products, result in product withdrawals and cause its stock price to decline. Negative publicity could also result in an increased number of product liability claims, whether or not these claims have a basis in scientific fact. Any such claims, proceedings, investigations or litigation, regardless of the merits, might result in substantial costs, restrictions on product use or sales, or otherwise injure HydraFacial’s business.

If HydraFacial fails to manage its inventory effectively, its results of operations, financial condition and liquidity may be materially and adversely affected.

HydraFacial’s business requires it to manage a large volume of inventory effectively. HydraFacial depends on its forecasts of demand for, and popularity of, various products to make purchase decisions and to manage its inventory of stock-keeping units. Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale. Demand may be affected by seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to HydraFacial’s products and other factors, and its consumers may not purchase products in the quantities that HydraFacial expects. It may be difficult to accurately forecast demand and determine appropriate levels of product or componentry. If HydraFacial fails to manage its inventory effectively or negotiate favorable credit terms with third-party suppliers, it may be subject to a heightened risk of inventory obsolescence, a decline in inventory values, and significant inventory write-downs or write-offs. In addition, if HydraFacial is required to lower sale prices in order to reduce inventory level or to pay higher prices to its suppliers, its profit margins might be negatively affected. Any of the above may materially and adversely affect HydraFacial’s business, financial condition and results of operations.

A disruption in the operations of HydraFacial’s primary freight carrier or higher shipping costs could cause a decline in its net revenues or a reduction in its earnings.

HydraFacial is dependent on commercial freight carriers to deliver its products both within the United States and internationally. If the operations of these carriers are disrupted for any reason, HydraFacial may be unable to timely deliver its products to its customers. If HydraFacial cannot deliver its products on time and cost

 

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effectively, its customers may choose competitive offerings causing its net revenues and gross margins to decline, possibly materially. In a rising fuel cost environment, its freight costs will increase. In addition, HydraFacial earns an increasingly larger portion of its total revenues from international sales. International sales carry higher shipping costs which could negatively impact its gross margin and results of operations. If freight costs materially increase and HydraFacial is unable to pass that increase along to its customers for any reason or otherwise offset such increases in its cost of net revenues, its gross margin and financial results could be adversely affected.

In order to deepen HydraFacial’s market penetration and raise awareness of its brand and products, it has increased the amount it spends on marketing activities, which may not ultimately prove successful or an effective use of its resources.

To increase awareness of HydraFacial’s products and services domestically and internationally, HydraFacial has increased the amount it spends, and anticipates spending in the future on marketing activities. HydraFacial’s marketing efforts and costs are significant and include national and regional campaigns involving print media, social media, additional placements and alliances with strategic partners. HydraFacial attempts to structure its advertising/marketing campaigns in ways it believes most likely to increase brand awareness and adoption; however, there is no assurance its campaigns will achieve the returns on advertising spend desired or successfully increase brand or product awareness sufficiently to sustain or increase its growth goals, which could have an adverse effect on its gross margin and business overall.

HydraFacial manufactures and assembles the majority of its delivery systems at one site in California and if that site were to become compromised or damaged, its ability to continue to manufacture and assemble its product would be negatively affected.

One of HydraFacial’s sites in California manufactures and assembles the vast majority of its delivery systems. Another site in California fills the majority of HydraFacial’s consumable products and these items are kitted at the first site. If either of these sites were shut down or damaged by natural disaster, fire, social unrest, government regulation or other cause, HydraFacial’s operations would be negatively impacted. In that situation, HydraFacial’s ability to manufacture its products would be impaired and its ability to distribute to and service its customers would be impaired. This could materially and adversely affect HydraFacial’s business, financial condition and results of operations and possibly its reputation.

HydraFacial relies heavily on its direct sales force to sell its products in the United States, and any failure to train and maintain its direct sales force could harm its business.

HydraFacial’s ability to sell its products and generate revenues primarily depends upon its direct sales force within the United States. HydraFacial does not have any long-term employment contracts with its direct sales force and the loss of the services provided by these key personnel may harm its business. In order to provide more comprehensive sales and service coverage, HydraFacial continues to increase the size of its sales force to pursue growth opportunities within and outside of its existing geographic markets. To adequately train new representatives to successfully market and sell its products and for them to establish strong customer relationships takes time. As a result, if HydraFacial is unable to retain its direct sales personnel or quickly replace them with individuals of equivalent technical expertise and qualifications, if HydraFacial is unable to successfully instill technical expertise in new and existing sales representatives, if HydraFacial fails to establish and maintain strong relationships with its customers, or if HydraFacial’s efforts at specializing its selling techniques do not prove successful and cost-effective, its net revenues and its ability to maintain market share could be materially harmed.

 

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As compliance with healthcare regulations becomes more costly and difficult for HydraFacial or its customers, HydraFacial may be unable to grow its business.

Participants in the healthcare industry are subject to extensive and frequently changing regulations under numerous laws administered by governmental entities at the federal, state and local levels, some of which are, and others of which may be, applicable to HydraFacial’s business. Furthermore, HydraFacial’s healthcare provider customers are also subject to a wide variety of laws and regulations that could affect the nature and scope of their relationships with HydraFacial. The healthcare market itself is highly regulated and subject to changing political, economic and regulatory influences. Regulations implemented pursuant to the Health Insurance Portability and Accountability Act (“HIPAA”), including regulations affecting the security and privacy of patient healthcare information held by healthcare providers and their business associates may require HydraFacial to make significant and unplanned enhancements of software applications or services, result in delays or cancellations of orders, or result in the revocation of endorsement of its products and services by healthcare participants. The effect of HIPAA and newly enforced regulations on HydraFacial’s business is difficult to predict, and there can be no assurance that HydraFacial will adequately address the business risks created by HIPAA and its implementation or that it will be able to take advantage of any resulting business opportunities.

Extensive and changing government regulation of the healthcare industry may be expensive to comply with and exposes HydraFacial to the risk of substantial government penalties.

In addition to medical device laws and regulations, numerous state and federal healthcare-related laws regulate HydraFacial’s business, covering areas such as:

 

   

storage, transmission and disclosure of medical information and healthcare records;

 

   

prohibitions against the offer, payment or receipt of remuneration to induce referrals to entities providing beauty healthcare services or goods or to induce the order, purchase or recommendation of its products; and

 

   

the marketing and advertising of its products.

Complying with these laws and regulations could be expensive and time-consuming and could increase HydraFacial’s operating costs or reduce or eliminate certain of its sales and marketing activities or its revenues.

Risk factors related to variability of demand for HydraFacial’s products

HydraFacial’s providers generally are not under any obligation to purchase product, and business challenges at one or more of these providers, could adversely affect its results of operations.

As is typical in HydraFacial’s industry, its business with providers is based primarily upon discrete sales orders, and it does not have contracts requiring providers to make firm purchases from HydraFacial. Accordingly, providers could reduce their purchasing levels or cease buying products from HydraFacial at any time and for any reason. If HydraFacial loses a significant provider or if sales of its products to a significant provider materially decrease, it could have a material adverse effect on its business, financial condition and results of operations.

Because a high percentage of HydraFacial’s sales are made through its providers, its results are subject to risks relating to the general business performance of its providers. Factors that adversely affect HydraFacial’s providers’ businesses may also have a material adverse effect on its business, financial condition and results of operations. These factors may include:

 

   

any reduction in consumer traffic and demand at its providers as a result of economic downturns, pandemics or other health crises, changes in consumer preferences or reputational damage as a result of, among other developments, data privacy breaches, regulatory investigations or employee misconduct;

 

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any credit risks associated with the financial condition of its providers; and

 

   

the effect of consolidation or weakness in the retail industry or at certain providers, including store and spa closures and the resulting uncertainty.

Risk factors related to HydraFacial’s financial condition

HydraFacial’s substantial indebtedness may have a material adverse effect on its business, financial condition and results of operations.

As of December 31, 2020, HydraFacial had approximately $219.3 million of gross indebtedness under its existing credit facilities and other debt. HydraFacial’s indebtedness could have significant consequences, including:

 

   

requiring a substantial portion of its cash flows to be dedicated to debt service payments instead of funding growth, working capital, capital expenditures, investments or other cash requirements;

 

   

reducing its flexibility to adjust to changing business conditions or obtain additional financing;

 

   

exposing HydraFacial to the risk of increased interest rates as its borrowings are at variable rates;

 

   

making it more difficult for HydraFacial to make payments on its indebtedness;

 

   

subjecting HydraFacial to restrictive covenants that may limit its flexibility in operating its business, including its ability to take certain actions with respect to indebtedness, liens, sales of assets, consolidations and mergers, affiliate transactions, dividends and other distributions and changes of control;

 

   

subjecting HydraFacial to maintenance covenants which require it to maintain specific financial ratios; and

 

   

limiting HydraFacial’s ability to obtain additional financing for working capital, capital expenditures, debt service requirements and general corporate or other purposes.

If HydraFacial’s cash from operations is not sufficient to meet its current or future operating needs, expenditures and debt service obligations, its business, financial condition and results of operations may be materially and adversely affected.

HydraFacial may require additional cash resources due to changed business conditions or other future developments, including any marketing initiatives, investments or acquisitions it may decide to pursue. To the extent HydraFacial is unable to generate sufficient cash flow, it may be forced to cancel, reduce or delay these activities. Alternatively, if HydraFacial sources of funding are insufficient to satisfy its cash requirements, HydraFacial may seek to obtain an additional credit facility or sell equity or debt securities. The sale of equity securities would result in dilution of HydraFacial’s existing stockholders. The incurrence of additional indebtedness would result in increased debt service obligations and operating and financing covenants that could restrict HydraFacial’s operations.

HydraFacial’s ability to generate cash to meet its operating needs, expenditures and debt service obligations will depend on its future performance and financial condition, which will be affected by financial, business, economic, legislative, regulatory and other factors, including potential changes in costs, pricing, the success of product innovation and marketing, competitive pressure and consumer preferences. If HydraFacial’s cash flows and capital resources are insufficient to fund its debt service obligations and other cash needs, HydraFacial could face substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. HydraFacial’s credit facilities may restrict its ability to take these actions, and HydraFacial may not be able to affect any such alternative measures on commercially reasonable terms, or at all. If HydraFacial cannot make scheduled payments on its debt, the

 

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lenders under HydraFacial’s Credit Agreement can terminate their commitments to loan money under its revolving credit facility, and its lenders under its Credit Agreement can declare all outstanding principal and interest to be due and payable and foreclose against the assets securing their borrowings, and HydraFacial could be forced into bankruptcy or liquidation.

Furthermore, it is uncertain whether financing will be available in amounts or on terms acceptable to HydraFacial, if at all, which could materially and adversely affect HydraFacial’s business, financial condition and results of operations.

HydraFacial’s ability to use any net operating loss carryforwards and certain other tax attributes may be limited.

Federal and state net operating loss carryforwards and certain tax credits, if any, may be subject to significant limitations under Section 382 and Section 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), respectively, and similar provisions of state law. Under those sections of the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change attributes to offset its post-change income or tax may be limited. In general, an “ownership change” will occur if there is a cumulative change in a corporation’s ownership by ”5-percent shareholders” that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. HydraFacial anticipates that the transactions contemplated hereby constitute an “ownership change” for purposes of Section 382 and Section 383 of the Code.

Changes in tax law, in HydraFacial’s tax rates or in exposure to additional income tax liabilities or assessments could materially and adversely affect HydraFacial’s business, financial condition and results of operations.

Changes in law and policy relating to taxes could materially and adversely affect HydraFacial’s business, financial condition and results of operations. For example, the Tax Cuts and Jobs Act (“2017 Tax Act”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) remain unclear in many respects. As such, the 2017 Tax Act and the CARES ACT could be subject to potential amendments and technical corrections or be subject to interpretation and implementing regulations by the Treasury and U.S. Internal Revenue Service, any of which could mitigate or increase certain adverse tax effects of the 2017 Tax Act or the CARES Act. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation.

In addition, as HydraFacial continues to expand its business internationally, the application and implementation of existing, new or future international laws regarding taxes, including indirect taxes (such as a Value Added Tax), could materially and adversely affect HydraFacial’s business, financial condition and results of operations.

Fluctuations in currency exchange rates may negatively affect its financial condition and results of operations.

Exchange rate fluctuations may affect the costs that HydraFacial incurs in its operations. The main currencies to which HydraFacial is exposed are the British pound, the Canadian dollar and the European Union euro. The exchange rates between these currencies and the U.S. dollar in recent years have fluctuated significantly and may continue to do so in the future. A depreciation of these currencies against the U.S. dollar will decrease the U.S. dollar equivalent of the amounts derived from foreign operations reported in its consolidated financial statements, and an appreciation of these currencies will result in a corresponding increase in such amounts. The cost of certain items, such as raw materials, manufacturing, employee salaries and transportation and freight, required by HydraFacial’s operations may be affected by changes in the value of the relevant currencies. To the extent that HydraFacial is required to pay for goods or services in foreign

 

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currencies, the appreciation of such currencies against the U.S. dollar will tend to negatively affect its business. There can be no assurance that foreign currency fluctuations will not have a material adverse effect on HydraFacial’s business, financial condition and results of operations.

If HydraFacial’s goodwill or long-lived assets become impaired, it may be required to record a significant charge to earnings.

Under GAAP, HydraFacial reviews its goodwill and long-lived asset group for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Additionally, goodwill is required to be tested for impairment at least annually. The qualitative and quantitative analysis used to test goodwill are dependent upon various assumptions and reflect management’s best estimates. Changes in certain assumptions including revenue growth rates, discount rates, earnings multiples and future cash flows may cause a change in circumstances indicating that the carrying value of goodwill or the asset group may be impaired. HydraFacial may be required to record a significant charge to earnings in the financial statements during the period in which any impairment of goodwill or asset group is determined.

HydraFacial’s effective tax rate may vary significantly from period to period.

Various internal and external factors may have favorable or unfavorable effects on HydraFacial’s future effective tax rate. These factors include, but are not limited to, changes in legal entity structure and/or activities performed within HydraFacial’s entities, changes in tax laws, regulations and/or rates, new or changes to accounting pronouncements, changing interpretations of existing tax laws or regulations, changes in the relative proportions of revenues and income before taxes in the various jurisdictions in which HydraFacial operates that have differing statutory tax rates, changes in overall levels of pretax earnings, the future levels of tax benefits of stock-based compensation, settlement of income tax audits and non-deductible goodwill impairments.

Changes in tax laws or tax rulings could negatively impact HydraFacial’s income tax provision and net income.

HydraFacial is subject to changing tax laws both within and outside of the United States. Changes in tax laws or tax rulings, or changes in interpretations of existing tax laws, could affect HydraFacial’s income tax provision and net income or require HydraFacial to change the manner in which HydraFacial operates its business. In addition, governmental tax authorities are increasingly scrutinizing the tax positions of companies. Many countries in Europe, as well as a number of other countries and organizations, have recently proposed or recommended changes to existing tax laws or have enacted new laws. Such changes could affect HydraFacial’s tax rate and thus affect its profitability.

Risk factors related to information technology and cybersecurity

HydraFacial is increasingly dependent on information technology, and if it is unable to protect against service interruptions, data corruption, cyber-based attacks or network security breaches, its operations could be disrupted.

HydraFacial relies on information technology networks and systems to market and sell its products, to process electronic and financial information, to assist with sales tracking and reporting, to manage a variety of business processes and activities and to comply with regulatory, legal and tax requirements. HydraFacial is increasingly dependent on a variety of information systems to effectively process consumer orders from its e-commerce business. HydraFacial depends on its information technology infrastructure for digital marketing activities and for electronic communications among its personnel, providers, customers, consumers, distributors and suppliers around the world. These information technology systems, some of which are managed by third parties, may be susceptible to damage, disruptions or shutdowns due to failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures,

 

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computer viruses, attacks by computer hackers, telecommunication failures, user errors or catastrophic events. Any material disruption of HydraFacial’s systems, or the systems of its third-party service providers, could disrupt its ability to track, record and analyze the products that HydraFacial sells and could negatively impact its operations, shipment of goods, ability to process financial information and transactions and its ability to receive and process provider and e-commerce orders or engage in normal business activities. If HydraFacial’s information technology systems suffer damage, disruption or shutdown, it may incur substantial cost in repairing or replacing these systems, and if HydraFacial does not effectively resolve the issues in a timely manner, its business, financial condition and results of operations may be materially and adversely affected, and it could experience delays in reporting its financial results.

HydraFacial’s e-commerce operations are important to its business. Its e-commerce websites serve as an effective extension of its marketing strategies by introducing potential new consumers to its brand, product offerings, providers and enhanced content. Due to the importance of HydraFacial’s e-commerce operations, it is vulnerable to website downtime and other technical failures. HydraFacial’s failure to successfully respond to these risks in a timely manner could reduce e-commerce sales and damage its brand’s reputation.

HydraFacial must successfully maintain and upgrade its information technology systems, and its failure to do so could have a material adverse effect on its business, financial condition and results of operations.

HydraFacial has identified the need to expand and improve its information technology systems and personnel to support historical and expected future growth. As such, HydraFacial is in the process of implementing, and will continue to invest in and implement, significant modifications and upgrades to its information technology systems and procedures, including replacing legacy systems with successor systems, making changes to legacy systems or acquiring new systems with new functionality, hiring employees with information technology expertise and building new policies, procedures, training programs and monitoring tools. These types of activities subject HydraFacial to inherent costs and risks associated with replacing and changing these systems, including impairment of its ability to leverage its e-commerce channels, fulfill provider and customer orders, potential disruption of its internal control structure, substantial capital expenditures, additional administration and operating expenses, acquisition and retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to or integrating new systems into its current systems. These implementations, modifications and upgrades may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. In addition, difficulties with implementing new technology systems, delays in HydraFacial’s timeline for planned improvements, significant system failures, or its inability to successfully modify its information systems to respond to changes in its business needs may cause disruptions in its business operations and have a material adverse effect on its business, financial condition and results of operations.

If HydraFacial fails to adopt new technologies or adapt its e-commerce websites and systems to changing consumer requirements or emerging industry standards, its business may be materially and adversely affected.

To remain competitive, HydraFacial must continue to enhance and improve the responsiveness, functionality and features of its information technology, including its e-commerce websites and mobile applications. HydraFacial’s competitors are continually innovating and introducing new products to increase their consumer base and enhance user experience. As a result, in order to attract and retain consumers and compete against HydraFacial’s competitors, must continue to invest resources to enhance its information technology and improve its existing products and services for its consumers. The Internet and the online retail industry are characterized by rapid technological evolution, changes in consumer requirements and preferences, frequent introductions of new products and services embodying new technologies and the emergence of new industry standards and practices, any of which could render HydraFacial’s existing technologies and systems obsolete. HydraFacial’s success will depend, in part, on its ability to identify, develop, acquire or license leading technologies useful in its business, and respond to technological advances and emerging industry standards and practices in a cost-effective and timely way. The development of HydraFacial’s e-commerce websites and other

 

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proprietary technology entails significant technical and business risks. There can be no assurance that HydraFacial will be able to properly implement or use new technologies effectively or adapt HydraFacial’s e-commerce websites and systems to meet consumer requirements or emerging industry standards. If HydraFacial is unable to adapt in a cost-effective and timely manner in response to changing market conditions or consumer requirements, whether for technical, legal, financial or other reasons, its business, financial condition and results of operations may be materially and adversely affected.

Failure to protect sensitive information of HydraFacial’s consumers and information technology systems against security breaches could damage its reputation and brand and substantially harm its business, financial condition and results of operations.

HydraFacial collects, maintains, transmits and stores data about its consumers, suppliers and others, including personal data, financial information, including consumer payment information, as well as other confidential and proprietary information important to its business. HydraFacial also employs third-party service providers that collect, store, process and transmit personal data, and confidential, proprietary and financial information on its behalf.

HydraFacial has in place technical and organizational measures to maintain the security and safety of critical proprietary, personal, employee, provider and financial data which HydraFacial continues to maintain and upgrade to industry standards. However, advances in technology, the pernicious ingenuity of criminals, new exposures via cryptography, acts or omissions by its employees, contractors or service providers or other events or developments could result in a compromise or breach in the security of confidential or personal data. HydraFacial and its service providers may not be able to prevent third parties, including criminals, competitors or others, from breaking into or altering its systems, disrupting business operations or communications infrastructure through denial-of-service attacks, attempting to gain access to its systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software on its e-commerce websites or devices used by its employees or contractors, or carrying out other activity intended to disrupt its systems or gain access to confidential or sensitive information in its or its service providers’ systems. HydraFacial is not aware of any breach or compromise of the personal data of consumers, but has been subject to attacks (, phishing, denial of service, etc.) and cannot guarantee that its security measures will be sufficient to prevent a material breach or compromise in the future.

Furthermore, such third parties may engage in various other illegal activities using such information, including credit card fraud or identity theft, which may cause additional harm to HydraFacial, its consumers and its brand. HydraFacial may also be vulnerable to error or malfeasance by its own employees or other insiders. Third parties may attempt to fraudulently induce HydraFacial’s or its service providers’ employees to misdirect funds or to disclose information in order to gain access to personal data HydraFacial maintains about its consumers or website users. In addition, HydraFacial has limited control or influence over the security policies or measures adopted by third-party providers of online payment services through which some of its consumers may elect to make payment for purchases at its e-commerce websites. Contracted third-party delivery service providers may also violate their confidentiality or data processing obligations and disclose or use information about HydraFacial’s consumers inadvertently or illegally.

If a material security breach were to occur, HydraFacial’s reputation and brand could be damaged, and it could be required to expend significant capital and other resources to alleviate problems caused by such breaches including exposure of litigation or regulatory action and a risk of loss and possible liability. Actual or anticipated attacks may cause HydraFacial to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. In addition, any party who is able to illicitly obtain a subscriber’s password could access the subscriber’s financial, transaction or personal information. Any compromise or breach of HydraFacial’s security measures, or those of its third-party service providers, may violate applicable privacy, data security, financial, cyber and

 

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other laws and cause significant legal and financial exposure, adverse publicity, and a loss of confidence in HydraFacial’s security measures, all of which could have a material adverse effect on its business, financial condition and results of operations. HydraFacial may be subject to post-breach review of the adequacy of its privacy and security controls by regulators and other third parties, which could result in post-breach regulatory investigation, fines and consumer litigation as well as regulatory oversight, at significant expense and risking reputational harm.

Furthermore, HydraFacial is subject to diverse laws and regulations in the United States, the European Union, and other international jurisdictions that require notification to affected individuals in the event of a breach involving personal information. These required notifications can be time-consuming and costly. Furthermore, failure to comply with these laws and regulations could subject HydraFacial to regulatory scrutiny and additional liability. Although HydraFacial maintains relevant insurance, it cannot be certain that its insurance coverage will be adequate for all breach-related liabilities or that insurance will continue to be available to HydraFacial on economically reasonable terms, or at all. HydraFacial may need to devote significant resources to protect against security breaches or to address problems caused by breaches, diverting resources from the growth and expansion of its business.

Payment methods used on HydraFacial’s e-commerce websites subject it to third-party payment processing-related risks.

HydraFacial accepts payments from its consumers using a variety of methods, including online payments with credit cards and debit cards issued by major banks, payments made with gift cards processed by third-party providers and payments through third-party online payment platforms such as PayPal, Afterpay and Apple Pay. HydraFacial also relies on third parties to provide payment processing services. For certain payment methods, including credit and debit cards, HydraFacial pays interchange and other fees, which may increase over time and raise its operating costs and lower its profit margins. HydraFacial may also be subject to fraud and other illegal activities in connection with the various payment methods HydraFacial offers, including online payment options and gift cards. Transactions on HydraFacial’s e-commerce websites are card-not-present transactions, so they present a greater risk of fraud. Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information. Requirements relating to consumer authentication and fraud detection with respect to online sales are complex. HydraFacial may ultimately be held liable for the unauthorized use of a cardholder’s card number in an illegal activity and be required by card issuers to pay charge-back fees. Charge-backs result not only in its loss of fees earned with respect to the payment, but also leave HydraFacial liable for the underlying money transfer amount. If HydraFacial’s charge-back rate becomes excessive, card associations also may require HydraFacial to pay fines or refuse to process its transactions. In addition, HydraFacial may be subject to additional fraud risk if third-party service providers or its employees fraudulently use consumer information for their own gain or facilitate the fraudulent use of such information. Overall, HydraFacial may have little recourse if it processes a criminally fraudulent transaction.

HydraFacial is subject to payment card association operating rules, certification requirements and various rules, regulations and requirements governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for it to comply. As its business changes, HydraFacial may also be subject to different rules under existing standards, which may require new assessments that involve costs above what it currently pays for compliance. If HydraFacial fails to comply with the rules or requirements of any provider of a payment method HydraFacial accepts, or if the volume of fraud in its transactions limits or terminates its rights to use payment methods HydraFacial currently accepts, or if a data breach occurs relating to its payment systems, among other things, it may be subject to fines and higher transaction fees and lose its ability to accept credit and debit card payments from its consumers, process electronic funds transfers or facilitate other types of online payments, and its reputation and its business, financial condition and results of operations could be materially and adversely affected.

 

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Risk factors related to conducting business internationally

International sales and operations comprise a significant portion of HydraFacial’s business, which exposes it to foreign operational, political and other risks that may harm its business.

HydraFacial generates an increasing share of its revenue from international sales and maintains international operations, including supply and distribution chains that are, and will continue to be, a significant part of its business. Since HydraFacial’s growth strategy depends in part on its ability to penetrate international markets and increase the localization of HydraFacial’s products and services, it expects to continue to increase its sales and presence outside the United States, particularly in markets it believes to have high-growth potential. The substantial up-front investment required, the lack of consumer awareness of HydraFacial’s products in certain jurisdictions outside of the United States, differences in consumer preferences and trends between the United States and other jurisdictions, the risk of inadequate intellectual property protections and differences in packaging, labeling and related laws, rules and regulations are all substantial matters that need to be evaluated prior to doing business in new jurisdictions, and which make the success of HydraFacial’s international efforts uncertain.

Moreover, HydraFacial’s reliance on international operations exposes it to other risks and uncertainties that are customarily encountered in non-U.S. operations and that may have a material effect on its results of operations and business as a whole, including:

 

   

local political and economic instability;

 

   

increased expense of developing, testing and making localized versions of HydraFacial’s products;

 

   

difficulties in hiring and retaining employees;

 

   

differing employment practices and laws and labor disruptions;

 

   

pandemics, such as the COVID-19 pandemic, and natural disasters;

 

   

difficulties in managing international operations, including any travel restrictions imposed on HydraFacial or HydraFacial’s customers, such as those imposed in response to the COVID-19 pandemic;

 

   

fluctuations in currency exchange rates;

 

   

foreign exchange controls that could make it difficult to repatriate earnings and cash;

 

   

import and export controls, license requirements and restrictions;

 

   

controlling production volume and quality of the manufacturing process;

 

   

acts of terrorism and acts of war;

 

   

general geopolitical instability and the responses to it, such as the possibility of economic sanctions, trade restrictions and changes in tariffs, such as recent economic sanctions implemented by the United States against China and Russia and tariffs imposed by the United States and China;

 

   

interruptions and limitations in telecommunication services;

 

   

product or material transportation delays or disruption, including as a result of customs clearance, violence, protests, police and military actions, or natural disasters;

 

   

risks of non-compliance by HydraFacial’s employees, contractors, or partners or agents with, and burdens of complying with, a wide variety of extraterritorial, regional and local laws, including competition laws and anti-bribery laws such as the U.S. Foreign Corrupt Practices Act (“FCPA”) and the UK Bribery Act 2010 (the “UKBA”), in spite of HydraFacial’s policies and procedures designed to promote compliance with these laws;

 

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the impact of government-led initiatives to encourage the purchase or support of domestic vendors, which can affect the willingness of customers to purchase products from, or collaborate to promote interoperability of products with, companies whose headquarters or primary operations are not domestic;

 

   

an inability to obtain or maintain adequate intellectual property protection for HydraFacial’s brand and products;

 

   

longer payment cycles and greater difficulty in accounts receivable collection;

 

   

a legal system subject to undue influence or corruption;

 

   

a business culture in which illegal sales practices may be prevalent; and

 

   

potential adverse tax consequences.

If any of the risks outlined above materialize in the future, HydraFacial could experience production delays and lost or delayed revenues, among other potential negative consequences that could materially impact HydraFacial’s international operations and adversely affect HydraFacial’s business as a whole.

Adverse economic conditions in the United States, Europe or any of the other countries in which HydraFacial may conduct business could negatively affect its business, financial condition and results of operations.

Consumer spending on beauty health products and services is influenced by general economic conditions and the availability of discretionary income. Adverse economic conditions in the United States, Europe or any of the other jurisdictions in which HydraFacial does significant business, or periods of inflation or high energy prices may contribute to higher unemployment levels, decreased consumer spending, reduced credit availability and declining consumer confidence and demand, each of which poses a risk to HydraFacial’s business. A decrease in consumer spending or in consumer confidence and demand for HydraFacial’s products could have a significant negative impact on its net sales and profitability, including its operating margins and return on invested capital. These economic conditions could cause some of HydraFacial’s providers or suppliers to experience cash flow or credit problems and impair their financial condition, which could disrupt its business and adversely affect product orders, payment patterns and default rates and increase its bad debt expense.

Legal, political, and economic uncertainty surrounding the planned exit of the United Kingdom from the European Union are a source of instability and uncertainty.

On January 31, 2020, the United Kingdom formally withdrew from the European Union. Uncertainties regarding trade arrangements between the United Kingdom and the European Union resulting from such withdrawal could result in increased costs or otherwise adversely impact HydraFacial’s operations in the European Union and the United Kingdom. HydraFacial distributes its products to its European Union based providers and distributors from the United Kingdom. Depending on tariffs and trade regulation negotiations, HydraFacial may be forced to acquire duplicate arrangements in the European Union either temporarily or permanently, which may increase its costs in the European Union and the United Kingdom.

Further, since the United Kingdom will no longer be part of the European Union, its data protection regulatory regime will be independent of the European Union. It is expected that the United Kingdom will have its own data protection laws and regulations, mirroring that of the General Data Protection Regulation (the “GDPR”), including similar fines for non-compliance. Thus, if a regulatory issue arose in both the European Union and the United Kingdom (e.g., a breach that affected both the European Union and the United Kingdom residents), then HydraFacial would be subject to receiving fines for any material non-compliance from both the European Union and the United Kingdom.

 

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In addition, the process for the United Kingdom to withdraw from the European Union, and the longer term economic, legal, political, regulatory and social framework to be put in place between the United Kingdom and the European Union remain unclear and have had and may continue to have a material and adverse effect on global economic conditions and the stability of global financial markets and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets. Any of these factors could depress economic activity and restrict HydraFacial’s access to capital, which could materially and adversely affect its business, financial condition and results of operations.

HydraFacial has growing operations in China, which exposes it to risks inherent in doing business in that country.

HydraFacial currently source components in China and does not have substantial alternatives to those suppliers. HydraFacial also utilizes warehouse services provided by its third-party distributors. With the rapid development of the Chinese economy, the cost of labor has increased and may continue to increase in the future. HydraFacial’s results of operations will be materially and adversely affected if its labor costs, or the labor costs of its suppliers, increase significantly. In addition, HydraFacial and its suppliers may not be able to find a sufficient number of qualified workers due to the intensely competitive and fluid market for skilled labor in China. Furthermore, pursuant to Chinese labor laws, employers in China are subject to various requirements when signing labor contracts, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. These labor laws and related regulations impose liabilities on employers and may significantly increase the costs of workforce reductions. If HydraFacial decides to change or reduce its workforce, these labor laws could limit or restrict its ability to make such changes in a timely, favorable and effective manner. Additionally, the Chinese government may impose additional regulations regarding ingredients and composition and these regulations may affect HydraFacial’s products. Any of these events may materially and adversely affect its business, financial condition and results of operations.

Operating in China exposes HydraFacial to political, legal and economic risks. In particular, the political, legal and economic climate in China, both nationally and regionally, is fluid and unpredictable. HydraFacial’s ability to operate in China may be adversely affected by changes in U.S. and Chinese laws and regulations such as those related to, among other things, taxation, import and export tariffs, environmental regulations, land use rights, intellectual property, currency controls, network security, employee benefits, hygiene supervision and other matters. In addition, HydraFacial or its suppliers may not obtain or retain the requisite legal permits to continue to operate in China, and costs or operational limitations may be imposed in connection with obtaining and complying with such permits. In addition, Chinese trade regulations are in a state of flux, and HydraFacial may become subject to other forms of taxation, tariffs and duties in China. Furthermore, the third parties HydraFacial relies on in China may disclose its confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of its products. If any of these events occur, its business, financial condition and results of operations could be materially and adversely affected. See also “Recent and potential additional tariffs imposed by the United States government or a global trade war could increase the cost of HydraFacial’s products, which could materially and adversely affect its business, financial condition and results of operations.

Recent and potential additional tariffs imposed by the United States government or a global trade war could increase the cost of HydraFacial’s products, which could materially and adversely affect its business, financial condition and results of operations.

The U.S. government has imposed increased tariffs on certain imports from China, some of which cover products that HydraFacial imports from that country. HydraFacial currently sources important components for its products from third-party suppliers in China, and, as such, current tariffs may increase its cost of goods, which may result in lower gross margin on certain of its products. In any case, increased tariffs on imports from China could materially and adversely affect its business, financial condition and results of operations. In retaliation for the current U.S. tariffs, China has implemented tariffs on a wide range of American products. There is also a

 

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concern that the imposition of additional tariffs by the United States could result in the adoption of tariffs by other countries as well, leading to a global trade war. Trade restrictions implemented by the United States or other countries in connection with a global trade war could materially and adversely affect HydraFacial’s business, financial condition and results of operations.

Risk factors related to evolving laws and regulations and compliance with laws and regulations

New laws, regulations, enforcement trends or changes in existing regulations governing the introduction, marketing and sale of HydraFacial’s products to consumers could harm its business.

There has been an increase in regulatory activity and activism in the United States and abroad, and the regulatory landscape is becoming more complex with increasingly strict requirements. If this trend continues, HydraFacial may find it necessary to alter some of the ways it has traditionally manufactured and marketed its products in order to stay in compliance with a changing regulatory landscape, and this could add to the costs of its operations and have an adverse impact on its business. To the extent federal, state, local or foreign regulatory changes regarding consumer protection, or the ingredients, claims or safety of HydraFacial’s products occurs in the future, they could require HydraFacial to reformulate or discontinue certain of its products, revise the product packaging or labeling, or adjust operations and systems, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on its business, financial condition and results of operations. Noncompliance with applicable regulations could result in enforcement action by the FDA or other regulatory authorities within or outside the United States, including but not limited to product seizures, injunctions, product recalls and criminal or civil monetary penalties, all of which could have a material adverse effect on HydraFacial’s business, financial condition and results of operations.

In the United States, the FDA does not currently require pre-market approval for products intended to be sold as cosmetics. However, the FDA may in the future require pre-market approval, clearance or registration/notification of cosmetic products, establishments or manufacturing facilities. Moreover, such products could also be regulated as both drugs and cosmetics simultaneously, as the categories are not mutually exclusive. The statutory and regulatory requirements applicable to drugs are extensive and require significant resources and time to ensure compliance. For example, if any of HydraFacial’s products intended to be sold as cosmetics were to be regulated as drugs, HydraFacial might be required to conduct, among other things, clinical trials to demonstrate the safety and efficacy of these products. HydraFacial may not have sufficient resources to conduct any required clinical trials or to ensure compliance with the manufacturing requirements applicable to drugs. If the FDA determines that any of HydraFacial’s products intended to be sold as cosmetics should be classified and regulated as drug products and it is unable to comply with applicable drug requirements, HydraFacial may be unable to continue to market those products. Any inquiry into the regulatory status of HydraFacial’s cosmetics and any related interruption in the marketing and sale of these products could damage its reputation and image in the marketplace.

In recent years, the FDA has issued warning letters to several cosmetic companies alleging improper claims regarding their cosmetic products. If the FDA determines that HydraFacial has disseminated inappropriate drug claims for its products intended to be sold as cosmetics, it could receive a warning or untitled letter, be required to modify its product claims or take other actions to satisfy the FDA. In addition, plaintiffs’ lawyers have filed class action lawsuits against cosmetic companies after receipt of these types of FDA warning letters. There can be no assurance that HydraFacial will not be subject to state and federal government actions or class action lawsuits, which could harm its business, financial condition and results of operations.

Additional state and federal requirements may be imposed on consumer products as well as cosmetics, cosmetic ingredients, or the labeling and packaging of products intended for use as cosmetics. For example, several lawmakers are currently focused on giving the FDA additional authority to regulate cosmetics and

 

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their ingredients. This increased authority could require the FDA to impose increased testing and manufacturing requirements on cosmetic manufacturers or cosmetics or their ingredients before they may be marketed. HydraFacial is unable to ascertain what, if any, impact any increased statutory or regulatory requirements may have on its business.

HydraFacial also may begin to sell consumer products, which are subject to regulation by the CPSC in the United States under the provisions of the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008. These statutes and the related regulations ban from the market consumer products that fail to comply with applicable product safety laws, regulations and standards. The CPSC has the authority to require the recall, repair, replacement or refund of any such banned products or products that otherwise create a substantial risk of injury and may seek penalties for regulatory noncompliance under certain circumstances. The CPSC also requires manufacturers of consumer products to report certain types of information to the CPSC regarding products that fail to comply with applicable regulations. Certain state laws also address the safety of consumer products, and mandate reporting requirements, and noncompliance may result in penalties or other regulatory action.

HydraFacial’s facilities are subject to regulation under the Federal Food, Drug and Cosmetic Act (the “FDCA”) and FDA implementing regulations.

HydraFacial’s facilities are subject to regulation under the FDCA and FDA implementing regulations. The FDA may inspect all of its facilities periodically to determine if it is complying with provisions of the FDCA and FDA regulations. In addition, HydraFacial’s facilities for manufacturing OTC drug products must comply with the FDA’s current drug good manufacturing practices (“GMP”) requirements that require it to maintain, among other things, good manufacturing processes, including stringent vendor qualifications, ingredient identification, manufacturing controls and record keeping.

HydraFacial’s operations could be harmed if regulatory authorities make determinations that it, or its vendors, are not in compliance with these regulations. If the FDA finds a violation of GMPs, it may enjoin HydraFacial’s manufacturing operations, seize product, restrict importation of goods, and impose administrative, civil or criminal penalties. If HydraFacial fails to comply with applicable regulatory requirements, it could be required to take costly corrective actions, including suspending manufacturing operations, changing product formulations, suspending sales, or initiating product recalls. In addition, compliance with these regulations has increased and may further increase the cost of manufacturing certain of HydraFacial’s products to ensure and maintain compliance. Any of these outcomes could have a material adverse effect on its business, financial condition and results of operations.

Government regulations and private party actions relating to the marketing and advertising of HydraFacial’s products and services may restrict, inhibit or delay its ability to sell its products and harm its business, financial condition and results of operations.

Government authorities regulate advertising and product claims regarding the performance and benefits of HydraFacial’s products. These regulatory authorities typically require a reasonable basis to support any marketing claims. What constitutes a reasonable basis for substantiation can vary widely from market to market, and there is no assurance that the efforts that HydraFacial undertakes to support its claims will be deemed adequate for any particular product or claim. A significant area of risk for such activities relates to improper or unsubstantiated claims about HydraFacial’s products and their use or safety. If HydraFacial is unable to show adequate substantiation for its product claims, or its promotional materials make claims that exceed the scope of allowed claims for the classification of the specific product, the FDA, the FTC or other regulatory authorities could take enforcement action or impose penalties, such as monetary consumer redress, requiring HydraFacial to revise its marketing materials, amend its claims or stop selling certain products, all of which could harm its business, financial condition and results of operations. Any regulatory action or penalty could lead to private party actions, or private parties could seek to challenge HydraFacial’s claims even in the absence of formal regulatory actions, which could harm its business, financial condition and results of operations.

 

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HydraFacial’s business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to its business practices, monetary penalties, increased costs of operations or otherwise harm its business, financial condition and results of operations.

HydraFacial is subject to a variety of laws and regulations in the United States and abroad regarding privacy and data protection, some of which can be enforced by private parties or government entities and some of which provide for significant penalties for non-compliance. For example, the GDPR allows for a private right of action, imposes stringent data protection requirements on companies established in the European Union or companies that offer goods or services to, or monitor the behavior of, individuals in the European Union. The GDPR establishes a robust framework of data subjects’ rights and imposes onerous accountability obligations on companies, with penalties for noncompliance of up to the greater of 20 million euros or four percent of annual global revenue. Furthermore, the California Consumer Privacy Act (the “CCPA”) requires new disclosures to California consumers, imposes new rules for collecting or using information about minors, affords California consumers new abilities to opt out of certain disclosures of personal information and also establishes significant penalties for noncompliance. In response to the GDPR and CCPA, HydraFacial has reviewed and amended its information practices involving European-resident consumers and California-resident consumers, as well as its use of service providers or interactions with other parties to whom HydraFacial discloses personal information. HydraFacial cannot yet predict the full impact of the CCPA and its respective implementing regulations on its business or operations, but these laws may require HydraFacial to further modify its information practices and policies, and to incur substantial costs and expenses in an effort to comply. It also remains unclear what, if any, further modifications will be made to the CCPA and its implementing regulations, or how the statute or rules will be interpreted.

Data privacy continues to remain a matter of interest to lawmakers and regulators. A number of proposals are pending before federal, state and foreign legislative and regulatory bodies, and additional laws and regulations have been passed but are not yet effective, all of which could significantly affect HydraFacial’s business. For example, some U.S. states are considering enacting stricter data privacy laws, some modeled on the GDPR, some modeled on the CCPA, and others potentially imposing completely distinct requirements. The U.S. is considering comprehensive federal privacy legislation, such as the Consumer Online Privacy Rights Act, which would significantly expand elements of the data protection rights and obligations existing within the GDPR and the CCPA to all U.S. consumers. In addition, the European Union’s institutions are debating the ePrivacy Regulation, which would repeal and replace the current ePrivacy Directive that regulates electronic marketing and use of cookies and tracking technologies. The new guidance and the ePrivacy Regulation would together require extensive disclosure and consent, regulate web beacons and similar technology affecting HydraFacial’s ability to use a users’ location and other data for personalized advertising, and alter the ability of advertisers to place ads across social media and the web. The current European Union member states’ local guidance in line with GDPR has significantly increased the risk of penalties for breach of the GDPR and law implementing the ePrivacy Directive. Increased regulation of privacy and data protection may lead to broader restrictions on the way HydraFacial markets its products on a global basis and increase its risk of regulatory oversight, its ability to reach its consumers, and its capability to provide its consumers with personalized services and experiences.

Several countries in Europe have also recently issued guidance on the use of cookies and similar tracking technologies which require an additional layer of consent from, and disclosure to, website users for third-party advertising, social media advertising and analytics.

Regulation of cookies and similar technologies may lead to broader restrictions on HydraFacial’s marketing and personalization activities and may negatively impact its efforts to understand users’ Internet usage, online shopping and other relevant online behaviors, as well as the effectiveness of its marketing and its business generally. Such regulations, including uncertainties about how well the advertising technology ecosystem can adapt to legal changes around the use of tracking technologies, may have a negative effect on businesses, including HydraFacial’s, that collect and use online usage information for consumer acquisition and marketing.

 

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The decline of cookies or other online tracking technologies as a means to identify and target potential purchasers may increase the cost of operating HydraFacial’s business and lead to a decline in revenues. In addition, legal uncertainties about the legality of cookies and other tracking technologies may increase regulatory scrutiny and increase potential civil liability under data protection or consumer protection laws.

Compliance with existing, not yet effective, and proposed privacy and data protection laws and regulations can be costly and can delay or impede HydraFacial’s ability to market and sell its products, impede its ability to conduct business through websites HydraFacial and its partners may operate, change and limit the way HydraFacial uses consumer information in operating its business, cause HydraFacial to have difficulty maintaining a single operating model, result in negative publicity, increase its operating costs, require significant management time and attention, or subject HydraFacial to inquiries or investigations, claims or other remedies, including significant fines and penalties or demands that HydraFacial modify or cease existing business practices. In addition, if HydraFacial’s privacy or data security measures fail to comply with applicable current or future laws and regulations, it may be subject to litigation, regulatory investigations, enforcement notices requiring HydraFacial to change the way it uses personal data or its marketing practices, fines or other liabilities, as well as negative publicity and a potential loss of business.

Failure to comply with the U.S. Foreign Corrupt Practices Act, other applicable anti-corruption and anti-bribery laws, and applicable trade control laws could subject HydraFacial to penalties and other adverse consequences.

HydraFacial sells its products in several countries outside of the United States, primarily through distributors. HydraFacial’s operations are subject to FCPA, as well as the anti-corruption and anti-bribery laws in the countries where HydraFacial does business. The FCPA prohibits covered parties from offering, promising, authorizing or giving anything of value, directly or indirectly, to a “foreign government official” with the intent of improperly influencing the official’s act or decision, inducing the official to act or refrain from acting in violation of lawful duty, or obtaining or retaining an improper business advantage. The FCPA also requires publicly traded companies to maintain records that accurately and fairly represent their transactions, and to have an adequate system of internal accounting controls. In addition, other applicable anti-corruption laws prohibit bribery of domestic government officials, and some laws that may apply to HydraFacial’s operations prohibit commercial bribery, including giving or receiving improper payments to or from non-government parties, as well as so-called “facilitation” payments. In addition, HydraFacial is subject to U.S. and other applicable trade control regulations that restrict with whom it may transact business, including the trade sanctions enforced by the U.S. Treasury, Office of Foreign Assets Control (“OFAC”).

While HydraFacial has implemented policies, internal controls and other measures reasonably designed to promote compliance with applicable anti- corruption and anti-bribery laws and regulations, and certain safeguards designed to ensure compliance with U.S. trade control laws, its employees or agents may engage in improper conduct for which HydraFacial might be held responsible. Any violations of these anti-corruption or trade control laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt its operations, involve significant management distraction, and lead to significant costs and expenses, including legal fees. If HydraFacial, or its employees or agents acting on its behalf, are found to have engaged in practices that violate these laws and regulations, it could suffer severe fines and penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business, delisting from securities exchanges and other consequences that may have a material adverse effect on its business, financial condition and results of operations. In addition, HydraFacial’s brand and reputation, its sales activities or its stock price could be adversely affected if HydraFacial becomes the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or trade control laws and regulations.

 

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Government regulation of the Internet and e-commerce is evolving, and unfavorable changes or failure by HydraFacial to comply with these regulations could substantially harm its business, financial condition and results of operations.

HydraFacial is subject to general business regulations and laws as well as regulations and laws specifically governing the Internet and e-commerce. Existing and future regulations and laws could impede the growth of the Internet, e-commerce or mobile commerce. These regulations and laws may involve taxes, tariffs, privacy and data security, anti-spam, content protection, electronic contracts and communications, consumer protection, social media marketing, third-party cookies, web beacons and similar technology for online behavioral advertising and gift cards. It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the Internet as the vast majority of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or e-commerce. It is possible that general business regulations and laws, or those specifically governing the Internet or e-commerce, may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or HydraFacial’s practices. HydraFacial cannot be sure that its practices have complied, comply or will comply fully with all such laws and regulations. Any failure, or perceived failure, by Hydrafacial to comply with any of these laws or regulations could result in damage to HydraFacial’s reputation, a loss in business and proceedings or actions against it by governmental entities or others. Any such proceeding or action could hurt HydraFacial’s reputation, force it to spend significant amounts in defense of these proceedings, distract its management, increase its costs of doing business, decrease the use of its sites by consumers and suppliers and may result in the imposition of monetary liability. HydraFacial may also be contractually liable to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any such laws or regulations. In addition, it is possible that governments of one or more countries may seek to censor content available on its sites or may even attempt to completely block access to its sites. Adverse legal or regulatory developments could substantially harm its business. In particular, in the event that HydraFacial is restricted, in whole or in part, from operating in one or more countries, its ability to retain or increase its consumer base may be adversely affected, and it may not be able to maintain or grow its net sales and expand its business as anticipated.

HydraFacial has identified material weaknesses in its internal control over financial reporting which, if not corrected, could affect the reliability of its consolidated financial statements and have other adverse consequences.

HydraFacial has identified material weaknesses in its internal control over financial reporting that HydraFacial is currently working to remediate, which relate to: (a) HydraFacial’s general segregation of duties, including the review and approval of journal entries; (b) a lack of sufficient accounting resources; and (c) the lack of a formalized risk assessment process.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of HydraFacial’s financial statements would not be prevented or detected on a timely basis. These deficiencies could result in additional material misstatements to HydraFacial’s consolidated financial statements that could not be prevented or detected on a timely basis.

HydraFacial’s management has concluded that these material weaknesses in HydraFacial’s internal control over financial reporting are due to the fact that Hydrafacial is a private company with limited resources and does not have the necessary business processes and related internal controls formally designed and implemented coupled with the appropriate resources with the appropriate level of experience and technical expertise to oversee HydraFacial’s business processes and controls.

 

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HydraFacial’s management is in the process of developing a remediation plan. The material weaknesses will be considered remediated when HydraFacial’s management designs and implements effective controls that operate for a sufficient period of time and management has concluded, through testing, that these controls are effective. HydraFacial’s management will monitor the effectiveness of its remediation plans and will make changes management determines to be appropriate.

If not remediated, these material weaknesses could result in further material misstatements to HydraFacial’s annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If HydraFacial is unable to assert that its internal control over financial reporting is effective, or when required in the future after the consummation of the Business Combination, if our Independent Registered Public Accounting Firm is unable to express an unqualified opinion as to the effectiveness of the internal control over financial reporting, investors may lose confidence in the accuracy and completeness of the Company’s financial reports, the market price of the Class A Stock could be adversely affected and the Company could become subject to litigation or investigations by the NYSE, the SEC, or other regulatory authorities, which could require additional financial and management resources.

Risk factors related to legal and regulatory proceedings

HydraFacial is involved, and may become involved in the future, in disputes and other legal or regulatory proceedings that, if adversely decided or settled, could materially and adversely affect its business, financial condition and results of operations.

HydraFacial is, and may in the future become, party to litigation, regulatory proceedings or other disputes. In general, claims made by or against HydraFacial in disputes and other legal or regulatory proceedings can be expensive and time-consuming to bring or defend against, requiring HydraFacial to expend significant resources and divert the efforts and attention of its management and other personnel from its business operations. These potential claims include, but are not limited to, personal injury claims, class action lawsuits, intellectual property claims, employment litigation and regulatory investigations and causes of action relating to the advertising and promotional claims about its products. Any adverse determination against HydraFacial in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on HydraFacial’s business, financial condition and results of operations.

HydraFacial may be required to recall products and may face product liability claims, either of which could result in unexpected costs and damage its reputation.

HydraFacial sells products for human use. HydraFacial’s products intended for use as skin care are not generally subject to pre-market approval or registration processes, so HydraFacial cannot rely upon a government safety panel to qualify or approve its products for use. A product may be safe for the general population when used as directed but could cause an adverse reaction for a person who has a health condition or allergies, or who is taking a prescription medication. If HydraFacial discovers that any of its products are causing adverse reactions, it could suffer adverse publicity or regulatory/government sanctions.

Potential product liability risks may arise from the testing, manufacture and sale of HydraFacial’s products, including that the products fail to meet quality or manufacturing specifications, contain contaminants, include inadequate instructions as to their proper use, include inadequate warnings concerning side effects and interactions with other substances or for persons with health conditions or allergies, or cause adverse reactions or side effects. Product liability claims could increase HydraFacial’s costs, and adversely affect its business, financial condition and results of operations. As HydraFacial continues to offer an increasing number of new products, its product liability risk may increase. It may be necessary for HydraFacial to recall products that do not meet approved specifications or because of the side effects resulting from the use of its products, which would result in adverse publicity, potentially significant costs in connection with the recall and could have a material adverse effect on its business, financial condition and results of operations.

 

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In addition, plaintiffs in the past have received substantial damage awards from other cosmetic and drug companies based upon claims for injuries allegedly caused by the use of their products. Although HydraFacial currently maintains general liability insurance, any claims brought against HydraFacial may exceed its existing or future insurance policy coverage or limits. Any judgment against HydraFacial that is in excess of HydraFacial’s policy coverage or limits would have to be paid from its cash reserves, which would reduce its capital resources. In addition, HydraFacial may be required to pay higher premiums and accept higher deductibles in order to secure adequate insurance coverage in the future. Further, HydraFacial may not have sufficient capital resources to pay a judgment, in which case its creditors could levy against its assets. Any product liability claim or series of claims brought against HydraFacial could harm its business significantly, particularly if a claim were to result in adverse publicity or damage awards outside or in excess of its insurance policy limits.

Risk factors related to intellectual property

If HydraFacial is unable to protect its intellectual property, the value of its brand and other intangible assets may be diminished, and its business may be adversely affected.

HydraFacial relies on trademark, copyright, trade secret, trade dress, patent and other laws protecting proprietary rights, nondisclosure and confidentiality agreements and other practices to protect its brand and proprietary information, technologies and processes. HydraFacial’s trademarks are valuable assets that support its brand and consumers’ perception of its products. Although HydraFacial has existing and pending trademark registrations for its brand in the United States and in many of the foreign countries in which it operates, it may not be successful in asserting trademark or trade name protection in all jurisdictions. HydraFacial also has not applied for trademark protection in all relevant foreign jurisdictions and cannot assure you that its pending trademark applications will be approved. Third parties may also attempt to register its trademarks abroad in jurisdictions where it has not yet applied for trademark protection, oppose its trademark applications domestically or abroad, or otherwise challenge its use of the trademarks. In the event that HydraFacial’s trademarks are successfully challenged, it could be forced to rebrand its products in some parts of the world, which could result in the loss of brand recognition and could require HydraFacial to devote resources to advertising and marketing new brands.

Some of HydraFacial’s earliest filed patents have expired. While HydraFacial has other patents and pending patent applications directed to its technologies, it cannot provide any assurances that any of its remaining patents has, or that any of its pending patent applications that mature into issued patents will include claims with a scope sufficient to protect its products and technologies, including any additional features HydraFacial develops for its products or any new products. Other parties may have developed technologies that may be related or competitive to HydraFacial’s platform, may have filed or may file patent applications and may have received or may receive patents that overlap or conflict with its patents or patent applications, either by claiming the same methods or devices or by claiming subject matter that could dominate its patent position. Patents, if issued, may be challenged, narrowed in scope, deemed unenforceable, invalidated or circumvented. Proceedings challenging its patents could result in either loss of the patent or denial of the patent application or loss or reduction in the scope of one or more of the claims of the patent or patent application. In addition, such proceedings may be costly. Thus, any patents that HydraFacial may own may not provide any protection against competitors. Furthermore, an adverse decision in a derivation proceeding can result in a third party receiving the patent right sought by HydraFacial, which in turn could affect its ability to commercialize its products. Further, the U.S. Patent and Trademark Office (“USPTO”), international trademark offices or judicial bodies may deny HydraFacial’s trademark applications, and, even if published or registered, these trademarks may not effectively protect its brand and goodwill. Like patents, trademarks also may be opposed, cancelled, or challenged by third parties.

Additionally, HydraFacial may not be able to protect its intellectual property rights throughout the world. Filing, prosecuting and defending patents in all countries throughout the world would be prohibitively expensive, and its intellectual property rights in some countries outside the United States can be less extensive than those in

 

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the U.S. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, HydraFacial may not be able to prevent third parties from practicing its inventions in all countries outside the U.S., or from selling or importing products made using its inventions in and into the U.S. or other jurisdictions. Competitors may use HydraFacial’s technologies in jurisdictions where it has not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where it has patent protection, but enforcement is not as strong as that in the U.S. These products may compete with HydraFacial’s products, and its patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

In addition, while it is HydraFacial’s policy to require its employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to HydraFacial, it may be unsuccessful in executing such an agreement with each party who in fact conceives or develops intellectual property that HydraFacial regards as its own. HydraFacial’s assignment agreements may not be self-executing or may be breached, and it may be forced to bring claims against third parties, or defend claims they may bring against HydraFacial, to determine the ownership of what it regards as its intellectual property. HydraFacial may be subject to claims challenging the inventorship or ownership of its intellectual property. HydraFacial also may be subject to claims that former employees, collaborators or other third parties have an ownership interest in its patents or other intellectual property. Litigation may be necessary to defend against these and other claims challenging inventorship or ownership. If HydraFacial fails in defending any such claims, in addition to paying monetary damages, it may lose valuable intellectual property rights. Such an outcome could have a material adverse effect on its business. Even if HydraFacial is successful in defending against such claims, litigation could result in substantial costs and distraction to management and other employees.

HydraFacial’s ability to enforce its patent rights depends on its ability to detect infringement. It may be difficult to detect infringers that do not advertise the components that are used in their products. Moreover, it may be difficult or impossible to obtain evidence of infringement in a competitor’s or potential competitor’s product. HydraFacial may not prevail in any lawsuits that it initiates and the damages or other remedies awarded if HydraFacial were to prevail may not be commercially meaningful. Adverse proceedings can be expensive and time-consuming and may divert the efforts of its technical and managerial personnel, which could in turn harm its business, whether or not HydraFacial receives a determination favorable to it. In addition, a court or other judicial body may decide that the patent HydraFacial seeks to enforce is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that the patent in question does not cover the technology in question. An adverse result in any proceeding could put one or more of HydraFacial’s patents at risk of being invalidated or interpreted narrowly. Some of HydraFacial’s competitors may be able to devote significantly more resources to intellectual property proceedings, and may have significantly broader intellectual property portfolios to assert against HydraFacial if HydraFacial asserts its rights against them. Further, because of the substantial discovery required in connection with intellectual property litigation, there is a risk that some of its confidential information could be disclosed or otherwise compromised. In addition, proceedings to enforce or defend HydraFacial’s patents could put its patents at risk of being invalidated, held unenforceable or interpreted narrowly. Such proceedings could also provoke third parties to assert claims.

HydraFacial also relies upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain its competitive position, which HydraFacial seeks to protect, in part, through confidentiality agreements with its employees and its collaborators and consultants. It is possible that technology relevant to HydraFacial’s business will be developed independently by a person that is not a party to such an agreement, and that person could be an employee of or otherwise associated with one of its competitors. Furthermore, if the employees and consultants who are parties to these agreements breach or violate the terms of these agreements, HydraFacial may not have adequate remedies for or sufficient resources to litigate any such breach or violation, and HydraFacial could lose its trade secrets through such breaches or violations. Further, HydraFacial’s trade secrets could otherwise become known or independently discovered by its competitors. If HydraFacial is unable to obtain, maintain and enforce intellectual property protection directed to its technology

 

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and any future technologies that HydraFacial develops, others may be able to make, use, import or sell products that are the same or substantially the same as HydraFacial’s, which could adversely affect its ability to compete in the market.

HydraFacial may not be able to correctly estimate or control its future operating expenses in relation to obtaining intellectual property, enforcing intellectual property and/or defending intellectual property, which could affect operating expenses. HydraFacial’s operating expenses may fluctuate significantly in the future as a result of a variety of factors, including the costs of preparing, filing, prosecuting, defending, and enforcing patent and trademark claims and other intellectual property-related costs, including adverse proceedings (such as litigation) costs.

If HydraFacial fails to protect its intellectual property or other proprietary rights, its business, financial condition and results of operations may be materially and adversely affected.

HydraFacial’s success depends on its ability to operate its business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and other proprietary rights of third parties.

HydraFacial’s commercial success depends in part on its ability to operate without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights, trade secrets and other proprietary rights of others. HydraFacial cannot be certain that the conduct of its business does not and will not infringe, misappropriate or otherwise violate such rights. From time to time HydraFacial receives allegations of trademark or patent infringement and third parties have filed claims against HydraFacial with allegations of intellectual property infringement. In addition, third parties may involve HydraFacial in intellectual property disputes as part of a business model or strategy to gain competitive advantage.

To the extent HydraFacial gains greater visibility and market exposure as a public company or otherwise, it may also face a greater risk of being the subject of such claims and litigation. For these and other reasons, third parties may allege that HydraFacial’s products or activities infringe, misappropriate, dilute or otherwise violate their trademark, patent, copyright or other proprietary rights. Defending against allegations and litigation could be expensive, occupy significant amounts of time, divert management’s attention from other business concerns and have an adverse impact on its ability to bring products to market. In addition, if HydraFacial is found to infringe, misappropriate, dilute or otherwise violate third-party trademark, patent, copyright or other proprietary rights, its ability to use brands to the fullest extent may be limited, HydraFacial may need to obtain a license, which may not be available on commercially reasonable terms, or at all, or it may need to redesign or rebrand its marketing strategies or products, which may not be possible.

HydraFacial may also be required to pay substantial damages or be subject to an order prohibiting HydraFacial and its providers from importing or selling certain products or engaging in certain activities. HydraFacial’s inability to operate its business without infringing, misappropriating or otherwise violating the trademarks, patents, copyrights and proprietary rights of others could have a material adverse effect on its business, financial condition and results of operations.

Risk factors related to marketing activities

Use of social media may materially and adversely affect HydraFacial’s reputation or subject HydraFacial to fines or other penalties.

HydraFacial relies to a large extent on its online presence to reach consumers, and it offers consumers the opportunity to rate and comment on its products on its e-commerce websites. Negative commentary or false statements regarding HydraFacial or HydraFacial’s products may be posted on HydraFacial’s e-commerce websites or social media platforms and may be adverse to its reputation or business. HydraFacial’s target consumers often value readily available information and often act on such information without further investigation and without regard to its accuracy. The harm may be immediate without affording HydraFacial an

 

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opportunity for redress or correction. In addition, HydraFacial may face claims relating to information that is published or made available through the interactive features of its e-commerce websites. For example, HydraFacial may receive third-party complaints that the comments or other content posted by users on its platforms infringe third-party intellectual property rights or otherwise infringe the legal rights of others. While the Communications Decency Act and Digital Millennium Copyright Act generally protect online service providers from claims of copyright infringement or other legal liability for the self-directed activities of its users, if it were determined that HydraFacial did not meet the relevant safe harbor requirements under either law, HydraFacial could be exposed to claims related to advertising practices, defamation, intellectual property rights, rights of publicity and privacy, and personal injury torts. HydraFacial could incur significant costs investigating and defending such claims and, if HydraFacial is found liable, significant damages. If any of these events occur, its business, financial condition and results of operations could be materially and adversely affected.

HydraFacial also uses third-party social media platforms as marketing tools. For example, HydraFacial maintains Snapchat, Facebook, TikTok, Instagram and YouTube accounts. As e-commerce and social media platforms continue to rapidly evolve, HydraFacial must continue to maintain a presence on these platforms and establish presences on new or emerging popular social media platforms. If HydraFacial is unable to cost-effectively use social media platforms as marketing tools, its ability to acquire new consumers and its financial condition may suffer. Furthermore, as laws and regulations rapidly evolve to govern the use of these platforms and devices, the failure by HydraFacial, its employees or third parties acting at its direction to abide by applicable laws and regulations in the use of these platforms and devices could subject HydraFacial to regulatory investigations, class action lawsuits, liability, fines or other penalties and have a material adverse effect on HydraFacial’s business, financial condition and result of operations.

In addition, an increase in the use of social media for product promotion and marketing may cause an increase in the burden on HydraFacial to monitor compliance of such materials and increase the risk that such materials could contain problematic product or marketing claims in violation of applicable regulations.

HydraFacial’s business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or an inability to timely deliver such communications could materially adversely affect its net revenue and business.

HydraFacial’s business is highly dependent upon email and other messaging services for promoting its brand, products and e-commerce platforms. HydraFacial provides emails and “push” communications to inform consumers of new products, shipping specials and other promotions. HydraFacial believes these messages are an important part of its consumer experience. If HydraFacial is unable to successfully deliver emails or other messages to its subscribers, or if subscribers decline to open or read its messages, its business, financial condition and results of operations may be materially adversely affected. Changes in how web and mail services block, organize and prioritize email may reduce the number of subscribers who receive or open its emails. For example, Google’s Gmail service has a feature that organizes incoming emails into categories (for example, primary, social and promotions). Such categorization or similar inbox organizational features may result in HydraFacial’s emails being delivered in a less prominent location in a subscriber’s inbox or viewed as “spam” by its subscribers and may reduce the likelihood of that subscriber reading its emails. Actions by third parties to block, impose restrictions on or charge for the delivery of emails or other messages could also adversely impact HydraFacial’s business. From time to time, Internet service providers or other third parties may block bulk email transmissions or otherwise experience technical difficulties that result in HydraFacial’s inability to successfully deliver emails or other messages to consumers.

Changes in the laws or regulations that limit HydraFacial’s ability to send such communications or impose additional requirements upon HydraFacial in connection with sending such communications would also materially adversely impact its business. For example, electronic marketing and privacy requirements in the European Union are highly restrictive and differ greatly from those in the U.S., which could cause fewer

 

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individuals in the European Union to subscribe to HydraFacial’s marketing messages and drive up its costs and risk of regulatory oversight and fines if HydraFacial is found to be non-compliant.

HydraFacial’s use of email and other messaging services to send communications to consumers may also result in legal claims against HydraFacial, which may cause HydraFacial increased expenses, and if successful might result in fines and orders with costly reporting and compliance obligations or might limit or prohibit its ability to send emails or other messages. HydraFacial also relies on social networking messaging services to send communications and to encourage consumers to send communications. Changes to the terms of these social networking services to limit promotional communications, any restrictions that would limit HydraFacial’s ability or its consumers’ ability to send communications through their services, disruptions or downtime experienced by these social networking services or decline in the use of or engagement with social networking services by consumers could materially and adversely affect its business, financial condition and results of operations.

HydraFacial’s business could be negatively impacted by corporate citizenship and sustainability matters.

There is an increased focus from certain investors, providers, consumers, employees, and other stakeholders concerning corporate citizenship and sustainability matters. From time to time, HydraFacial may announce certain initiatives, including goals, regarding HydraFacial’s focus areas, which include environmental matters, packaging, responsible sourcing and social investments. HydraFacial could fail, or be perceived to fail, in its achievement of such initiatives or goals, or HydraFacial could fail in accurately reporting its progress on such initiatives and goals. In addition, HydraFacial could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on HydraFacial’s business, financial condition and results of operations.

Volatility in the financial markets could have a material adverse effect on HydraFacial’s business.

While HydraFacial currently generates cash flows from its ongoing operations and have had access to credit markets through its various financing activities, credit markets may experience significant disruptions. Deterioration in global financial markets could make future financing difficult or more expensive. If any financial institution party to HydraFacial’s credit facilities or other financing arrangements were to declare bankruptcy or become insolvent, they may be unable to perform under their agreements with HydraFacial. This could leave HydraFacial with reduced borrowing capacity, which could have a material adverse effect on its business, financial condition and results of operations.

Risk factors related to the Company and the Business Combination

Our Sponsor has agreed to vote in favor of the Business Combination and the other proposals described in this proxy statement, regardless of how our public stockholders vote.

Unlike many other blank check companies in which the founders agree to vote their founder shares in accordance with the majority of the votes cast by the holders of public stock in connection with an initial business combination, our Sponsor has agreed to vote any shares of Common Stock owned by it in favor of the Business Combination Proposal and the other proposals described in this proxy statement. As of the date hereof, our Sponsor owns shares equal to 20% of our issued and outstanding shares of Common Stock. Accordingly, it is more likely that the necessary stockholder approval will be received for the Business Combination than would be the case if our Sponsor agreed to vote any shares of Common Stock owned by it in accordance with the majority of the votes cast by our public stockholders.

 

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Our Sponsor, certain members of our Board and our officers have interests in the Business Combination that are different from or are in addition to other stockholders in recommending that stockholders vote in favor of approval of the Business Combination Proposal and approval of the other proposals described in this proxy statement.

When considering our Board’s recommendation that our stockholders vote in favor of the approval of the Business Combination Proposal, our stockholders should be aware that the directors and officers of the Company, some of whom are members of our Sponsor, have interests in the Business Combination that may be different from, or in addition to, the interests of our stockholders. These interests include:

 

   

the fact that our Sponsor paid an aggregate of $25,000 for 11,500,000 Founder Shares, which will have a significantly higher value at the time of the Business Combination, and which, if unrestricted and freely tradable, would be valued at approximately $115,000,000 assuming a per share value of $10.00, but, given the restrictions on such shares, we believe such shares have less value;

 

   

the fact that our Sponsor has agreed not to redeem any of the Founder Shares in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the fact that our Sponsor has agreed to waive its rights to liquidating distributions from the Trust Account with respect to its Founder Shares if we fail to complete an initial business combination by October 2, 2022;

 

   

the fact that our Sponsor paid an aggregate of approximately $14,000,000 for its 9,333,333 Private Placement Warrants to purchase shares of Class A Stock and that such Private Placement Warrants will expire worthless if a business combination is not consummated by October 2, 2022;

 

   

the continued right of our Sponsor to hold our Class A Stock and the shares of Class A Stock to be issued to our Sponsor upon exercise of its Private Placement Warrants following the Business Combination, subject to certain lock-up periods;

 

   

if the Trust Account is liquidated, including in the event we are unable to complete an initial business combination within the required time period, our Sponsor has agreed to indemnify us to ensure that the proceeds in the Trust Account are not reduced below $10.00 per public share, or such lesser per public share amount as is in the Trust Account on the liquidation date, by the claims of prospective target businesses with which we have entered into an acquisition agreement or claims of any third party (other than our independent public accountants) for services rendered or products sold to us, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account;

 

   

the continued indemnification of our existing directors and officers and the continuation of our directors’ and officers’ liability insurance after the Business Combination;

 

   

the fact that our Sponsor, officers and directors will lose their entire investment in us and will not be reimbursed for any out-of-pocket expenses if an initial business combination is not consummated by October 2, 2022;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation excludes the equity holders of our Sponsor and their respective successors, certain affiliates and each of their respective transferees as “interested parties” from the list of prohibited business combinations;

 

   

that, as described in the Charter Approval Proposal and reflected in Annex B, our proposed Second Amended and Restated Certificate of Incorporation provides that certain transactions are not “corporate opportunities” and that our Sponsor its successors and affiliates (other than the post-combination company and its subsidiaries) and certain other persons are not subject to the doctrine of corporate opportunity; and

 

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that, at the closing of the Business Combination we will enter into the Registration Rights Agreement with the Restricted Stockholders, which provides for registration rights to Restricted Stockholders and their permitted transferees.

Our Sponsor holds a significant number of shares of our common stock, including Founder Shares. It will lose its entire investment in us if a business combination is not completed.

Our Sponsor holds in the aggregate 11,500,000 Founder Shares, representing 20% of the total outstanding shares upon completion of our IPO. The Founder Shares will be worthless if we do not complete a business combination by October 2, 2022. In addition, our Sponsor holds an aggregate of 9,333,333 Private Placement Warrants that will also be worthless if we do not complete a business combination by October 2, 2022.

The Founder’s Shares are identical to the shares of Class A Stock included in the public units, except that: (i) the Founder Shares are subject to certain transfer restrictions; (ii) our Sponsor has entered into a letter agreement with us, pursuant to which it has agreed: (a) to waive its redemption rights with respect to its shares of common stock of the Company in connection with the completion of our Business Combination; and (b) to waive its rights to liquidating distributions from the Trust Account with respect to its Founder Shares if we fail to complete our initial business combination by October 2, 2022 (although it will be entitled to liquidating distributions from the Trust Account with respect to any public shares it holds if we fail to complete our initial business combination by October 2, 2022); and (iii) the Founder Shares are automatically convertible into shares of our Class A Stock at the time of our initial business combination, as described herein.

The personal and financial interests of our officers and directors may have influenced their motivation in identifying and selecting HydraFacial and completing a business combination with HydraFacial, and may influence their operation of the post-combination company following the Business Combination. This risk may become more acute as the deadline of October 2, 2022, for completing an initial business combination nears.

Our Sponsor, directors or officers or their affiliates may elect to purchase shares or public warrants from public stockholders, which may influence a vote on a proposed Business Combination and the other proposals described in this proxy statement and reduce the public “float” of our Class A Stock.

Our Sponsor, directors or officers or their affiliates may purchase shares of Class A Stock or public warrants in privately negotiated transactions or in the open market either prior to or following the completion of our Business Combination, although they are under no obligation to do so. However, other than as expressly stated herein, they have no current commitments, plans or intentions to engage in such transactions and have not formulated any terms or conditions for any such transactions. None of the funds in the trust account will be used to purchase shares or public warrants in such transactions. Such a purchase of Class A Stock may include a contractual acknowledgment that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our Sponsor, directors, officers or their affiliates purchase shares of Class A Stock in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights, such selling stockholders would be required to revoke their prior elections to redeem their shares. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy closing conditions in the Merger Agreement regarding required amounts in the Trust Account and the proceeds from the Private Placement equaling or exceeding certain thresholds where it appears that such requirements would otherwise not be met. This may result in the completion of our Business Combination that may not otherwise have been possible. Any such purchases of shares of Class A Stock or public warrants will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

 

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In addition, if such purchases are made, the public “float” of our Class A Stock or public warrants and the number of beneficial holders of our securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of our securities on the Nasdaq or another national securities exchange or reducing the liquidity of the trading market for our Class A Stock or public warrants.

Our public stockholders will experience dilution as a consequence of, among other transactions, the issuance of Class A Stock as consideration in the Business Combination and the Private Placement. Having a minority share position may reduce the influence that our current stockholders have on the management of the post-combination company.

The issuance of the Class A Stock in the Business Combination and in the Private Placement will dilute the equity interest of our existing stockholders and may adversely affect prevailing market prices for our public shares and/or public warrants.

It is anticipated that, upon completion of the Business Combination: (i) the Company’s public stockholders (other than the Private Placement Investors) will retain an ownership interest of approximately 37.2% in the post-combination company; (ii) the Private Placement Investors will own approximately 28.3% of the post-combination company (such that public stockholders, including Private Placement Investors, will own approximately 65.5% of the post-combination company); (iii) our Sponsor will own approximately 9.3% of the post-combination company; and (iv) the HydraFacial Stockholders will own approximately 25.2% of the post-combination company. These levels of ownership interest assume that no shares are elected to be redeemed.

The Private Placement Investors have agreed to purchase in the aggregate approximately 35,000,000 shares of Class A Stock, for approximately $350,000,000 of gross proceeds, in the Private Placement. In this proxy statement, we assume that approximately $350,000,000 of the gross proceeds from the Private Placement, in addition to funds from the Trust Account (plus any interest accrued thereon), will be used to fund the cash consideration payable pursuant to the Merger Agreement, the repayment of approximately $245,000,000 (such amount determined assuming the Business Combination closes on March 31, 2021) of HydraFacial’s existing indebtedness and the payment of certain transaction expenses. The ownership percentage with respect to the post-combination company following the Business Combination (i) does not take into account warrants to purchase Class A Stock that will remain outstanding immediately following the Business Combination, but (ii) does include Founder Shares, which will be converted into shares of Class A Stock at the closing of the Business Combination on a one-for-one basis (even though such shares of Class A Stock will be subject to transfer restrictions). If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Company’s existing stockholders in the post-combination company will be different. For more information, please see the sections entitled “Summary of the Proxy Statement—Impact of the Business Combination on the Company’s Public Float,” and “Unaudited Pro Forma Condensed Combined Financial Information.

There can be no assurance that our Class A Stock that will be issued in connection with the Business Combination will be approved for listing on Nasdaq or, if approved, will continue to be so listed following the closing of the Business Combination, or that we will be able to comply with the continued listing standards of Nasdaq.

Our Class A Stock, public units and public warrants are currently listed on Nasdaq. Our continued eligibility for listing may depend on, among other things, the number of our shares that are redeemed. We intend to apply to continue the listing of our publicly traded common stock and warrants on Nasdaq. In order to continue listing our securities on Nasdaq prior to the completion of the Business Combination, we must maintain certain financial, distribution and stock price levels. Generally, we must maintain a minimum amount in stockholders’ equity (generally $2,500,000) and a minimum number of holders of our securities (generally 300 public holders). Additionally, in connection with the Business Combination, we will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in

 

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order to continue to maintain the listing of our securities on Nasdaq. For instance, our stock price would generally be required to be at least $4.00 per share, our stockholders’ equity would generally be required to be at least $5 million, and we would be required to have a minimum of 300 round lot holders (with at least 50% of such round lot holders holding securities with a market value of at least $2,500) of our securities. We cannot assure you that we will be able to meet those initial listing requirements at that time.

If, after the Business Combination, Nasdaq delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for our securities;

 

   

reduced liquidity for our securities;

 

   

a determination that our Class A Stock is a “penny stock,” which will require brokers trading in our Class A Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our Class A Stock, public units and public warrants are listed on Nasdaq, they are covered securities. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state, other than the State of Idaho, having used these powers to prohibit or restrict the sale of securities issued by blank check companies, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed on Nasdaq, our securities would not be covered securities and we would be subject to regulation in each state in which we offer our securities.

Resales of the shares of Class A Stock included in the Stock Consideration could depress the market price of our Class A Stock.

We will have approximately 123,663,671 shares of Class A Stock outstanding immediately following the Business Combination, and there may be a large number of shares of Class A Stock sold in the market following the completion of the Business Combination or shortly thereafter. The shares held by the Company’s public stockholders are freely tradable, and the shares of Class A Stock held by the Private Placement Investors will be freely tradable following effectiveness of the registration statement that we have agreed to file within 30 days after the completion of the Business Combination covering the resales of such shares. In addition, the Restricted Stockholders will be able to sell shares of Class A Stock following the effectiveness of the registration statement that we have agreed to file within 60 days after the completion of the Business Combination covering the resales of such shares, subject to the lock-up periods applicable to the such Restricted Stockholders. Also, at any time following the closing of the Business Combination, the Restricted Stockholders will also be able to make a demand request, subject to certain conditions, that a registration statement be filed covering the resales of shares of Class A Stock held by such restricted Stockholders. We also expect that the Restricted Stockholders and Private Placement Investors will also be able to resell shares of Class A Stock held by them under Rule 144 once one year has elapsed from the date that we file the Current Report on Form 8-K following the closing of the Business Combination that includes the required Form 10 information that reflects we are no longer a shell company. Such sales of shares of Class A Stock or the perception of such sales may depress the market price of our Class A Stock.

 

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We have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement. As such, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by October 2, 2022. If we are unable to effect an initial business combination by October 2, 2022, we will be forced to liquidate and our warrants will expire worthless.

We are a blank check company, and as we have no operating history and are subject to a mandatory liquidation and subsequent dissolution requirement, there is a risk that we will be unable to continue as a going concern if we do not consummate an initial business combination by October 2, 2022. Unless we amend our current certificate of incorporation to extend the life of the Company and certain other agreements into which we have entered, if we do not complete an initial business combination by October 2, 2022, we will: (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than 10 business days thereafter, redeem the public shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest not previously released to the Company to pay its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses) divided by the number of then-outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law; and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our Board, dissolve and liquidate, subject in each case to our obligations under the DGCL to provide for claims of creditors and the requirements of other applicable law. In the event of such distribution, it is possible that the per-share value of the residual assets remaining available for distribution (including Trust Account assets) will be less than the initial public offering price per public unit in the IPO. In addition, if we fail to complete an initial business combination by October 2, 2022, there will be no redemption rights or liquidating distributions with respect to our public warrants or the Private Placement Warrants, which will expire worthless. We expect to consummate the Business Combination and do not intend to take any action to extend the life of the Company beyond October 2, 2022 if we are unable to effect an initial business combination by that date.

Even if we consummate the Business Combination, there is no guarantee that the public warrants will ever be in the money, and they may expire worthless and the terms of our public warrants may be amended.

The exercise price for the public warrants is $11.50 per share of Class A Stock. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the public warrants may expire worthless.

Our ability to successfully effect the Business Combination and to be successful thereafter will be dependent upon the efforts of our key personnel, including the key personnel of HydraFacial whom we expect to stay with the post-combination business following the Business Combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business, and its financial condition could suffer as a result.

Our ability to successfully effect our Business Combination is dependent upon the efforts of our key personnel, including the key personnel of HydraFacial. Although some of our key personnel may remain with the post-combination business in senior management or advisory positions following our Business Combination, it is possible that we will lose some key personnel, the loss of whom could negatively impact the operations and profitability of our post-combination business. We anticipate that some or all of the management of HydraFacial will remain in place.

HydraFacial’s success depends to a significant degree upon the continued contributions of senior management, certain of whom would be difficult to replace. Departure by certain of HydraFacial’s officers could have a material adverse effect on HydraFacial’s business, financial condition, or operating results. HydraFacial does not maintain key-man life insurance on any of its officers. The services of such personnel may not continue to be available to the post-combination business.

 

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The Company and HydraFacial will be subject to business uncertainties and contractual restrictions while the Business Combination is pending.

Uncertainty about the effect of the Business Combination on employees and third parties may have an adverse effect on the Company and HydraFacial. These uncertainties may impair our or HydraFacial’s ability to retain and motivate key personnel and could cause third parties that deal with any of us or them to defer entering into contracts or making other decisions or seek to change existing business relationships. If key employees depart because of uncertainty about their future roles and the potential complexities of the Business Combination, our or HydraFacial’s business could be harmed.

We may waive one or more of the conditions to the Business Combination.

We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the Business Combination, to the extent permitted by our current certificate of incorporation and bylaws and applicable laws. For example, it is a condition to our obligations to close the Business Combination that the Company have at least $5,000,001 of net tangible assets (determined in accordance with the Exchange Act) remaining after the consummation of the Business Combination. However, if our Board and the board of directors of HydraFacial determine that a failure to satisfy the condition is not material, then the parties may elect to waive that condition and close the Business Combination. We may not waive the condition that our stockholders approve the Business Combination. Please see the section entitled “Proposal No. 1—Approval of the Business Combination—The Merger Agreement—Conditions to Closing of the Business Combination” for additional information.

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Merger Agreement may result in a conflict of interest when determining whether such changes to the terms of the Merger Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.

In the period leading up to the closing of the Business Combination, other events may occur that, pursuant to the Merger Agreement, would require the Company to agree to amend the Merger Agreement, to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of HydraFacial’s business, a request by HydraFacial to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on HydraFacial’s business and would entitle the Company to terminate the Merger Agreement. In any of such circumstances, it would be in the discretion of the Company, acting through the Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for the Company and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the Business Combination has been obtained. While certain changes could be made without further stockholder approval, if there is a change to the terms of the Business Combination that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement or supplement thereto and resolicit the vote of our stockholders with respect to the Business Combination Proposal.

 

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We and HydraFacial will incur significant transaction and transition costs in connection with the Business Combination.

We and HydraFacial have both incurred and expect to incur significant, non-recurring costs in connection with consummating the Business Combination and operating as a public company following the consummation of the Business Combination. We and HydraFacial may also incur additional costs to retain key employees. All expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby (including the Business Combination), including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be for the account of the party incurring such fees, expenses and costs or paid by the Company following the closing of the Business Combination.

The Company’s transaction expenses as a result of the Business Combination are currently estimated at approximately $50,000,000, including $16,100,000 in deferred underwriting commissions to the underwriters of our IPO. The amount of the deferred underwriting commissions will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commissions, and after such redemptions, the per-share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.

If we are unable to complete an initial business combination, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify), and our warrants will expire worthless.

If we are unable to complete an initial business combination by October 2, 2022, our public stockholders may receive only approximately $10.00 per share on the liquidation of the Trust Account (or less than $10.00 per share in certain circumstances where a third party brings a claim against us that our Sponsor is unable to indemnify (as described herein)), and our warrants will expire worthless.

If third parties bring claims against us, the proceeds held in the Trust Account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.

Our placing of funds in the Trust Account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent auditors), prospective target businesses or other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any funds held in the Trust Account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the Trust Account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain advantage with respect to a claim against our assets, including the funds held in the Trust Account. If any third party refuses to execute an agreement waiving such claims to the funds held in the Trust Account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative.

Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third-party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where management is unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the Trust Account for any reason.

 

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Upon redemption of our public shares, if we are unable to complete our initial business combination within the prescribed timeframe, or upon the exercise of a redemption right in connection with our initial business combination, we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received by public stockholders could be less than the $10.00 per public share initially held in the Trust Account, due to claims of such creditors.

Our Sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent public accountants) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (i) $10.00 per public share or (ii) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, if any, provided that such liability will not apply to any claims by a third party that executed a waiver of any and all rights to seek access to the Trust Account, nor will it apply to any claims under indemnity of the underwriter of our IPO against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our Sponsor will not be responsible to the extent of any liability for such third-party claims. We have not independently verified whether our Sponsor has sufficient funds to satisfy its indemnity obligations and believe that our Sponsor’s only assets are securities of our Company. We have not asked our Sponsor to reserve for such indemnification obligations. Therefore, we cannot assure you that our Sponsor would be able to satisfy those obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available for our business combination and redemptions could be reduced to less than $10.00 per public share. In such event, we may not be able to complete our business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.00 per public share or (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, if any, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in our Trust Account available for distribution to our public stockholders may be reduced below $10.00 per share.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy or insolvency law,

 

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and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

Upon consummation of the Business Combination, our only significant asset will be our ownership interest in HydraFacial, and such ownership may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations.

Following the consummation of the Business Combination, we will have no direct operations and no significant assets other than our ownership of HydraFacial. We will depend on HydraFacial for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company and to pay any dividends with respect to our Common Stock. The financial condition and operating requirements of HydraFacial may limit our ability to obtain cash from HydraFacial. The earnings from, or other available assets of, HydraFacial may not be sufficient to pay dividends or make distributions or loans to enable us to pay any dividends on our Common Stock or satisfy our other financial obligations.

Subsequent to our completion of our Business Combination, we may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and our stock price, which could cause you to lose some or all of your investment.

Although we have conducted due diligence on HydraFacial, we cannot assure you that this diligence will surface all material issues that may be present in HydraFacial’s business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of HydraFacial’s business and outside of our and HydraFacial’s control will not later arise. As a result of these factors, we may be forced to later write down or write off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about the post-combination company or its securities. Accordingly, any of our stockholders who choose to remain stockholders following our Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value.

We have no operating or financial history, and our results of operations and those of the post-combination company may differ significantly from the unaudited pro forma financial data included in this proxy statement.

We are a blank check company, and we have no operating history and no revenues. This proxy statement includes unaudited pro forma condensed combined financial statements for the post-combination company. The unaudited pro forma condensed combined statement of operations of the post-combination company combines the historical audited results of operations of the Company as of and for the period from July 8, 2020 (inception) through December 31, 2020, with the historical audited results of operations of HydraFacial as of and for the year ended December 31, 2020 and gives pro forma effect to the Business Combination as if it had been consummated on January 1, 2020. The unaudited pro forma condensed combined balance sheet of the post-combination company combines the historical balance sheets of the Company as of December 31, 2020 and of HydraFacial as of December 31, 2020 and gives pro forma effect to the Business Combination as if it had been consummated on that date.

 

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The unaudited pro forma condensed combined financial statements are presented for illustrative purposes only, are based on certain assumptions, address a hypothetical situation and reflect limited historical financial data. Therefore, the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of operations and financial position that would have been achieved had the Business Combination and the acquisitions by HydraFacial been consummated on the dates indicated above, or the future consolidated results of operations or financial position of the post-combination company. Accordingly, the post-combination company’s business, assets, cash flows, results of operations and financial condition may differ significantly from those indicated by the unaudited pro forma condensed combined financial statements included in this document. For more information, please see the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.”

Unanticipated changes in effective tax rates or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

We will be subject to income taxes in the United States and other jurisdictions, and our tax liabilities will be subject to the allocation of expenses in differing jurisdictions. Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:

 

   

changes in the valuation of our deferred tax assets and liabilities;

 

   

expected timing and amount of the release of any tax valuation allowances;

 

   

tax effects of stock-based compensation;

 

   

costs related to intercompany restructurings;

 

   

changes in tax laws, regulations or interpretations thereof; or

 

   

lower-than-anticipated future earnings in jurisdictions where we have lower statutory tax rates and higher-than-anticipated future earnings in jurisdictions where we have higher statutory tax rates.

In addition, we may be subject to audits of our income, sales and other transaction taxes by taxing authorities. Outcomes from these audits could have an adverse effect on our financial condition and results of operations.

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

Following the Business Combination, the price of our securities may fluctuate significantly due to the market’s reaction to the Business Combination and general market and economic conditions. An active trading market for our securities following the Business Combination may never develop, or, if developed, it may not be sustained. In addition, the price of our securities after the Business Combination can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports. You may be unable to sell your securities unless a market can be established or sustained.

If the Business Combination’s benefits do not meet the expectations of investors, stockholders or financial analysts, the market price of our securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities prior to the closing of the Business Combination may decline. The market values of our securities at the time of the Business Combination may vary significantly from their prices on the date the Merger Agreement was executed, the date of this proxy statement, or the date on which our stockholders vote on the Business Combination.

 

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In addition, following the Business Combination, fluctuations in the price of our securities could contribute to the loss of all or part of your investment. Immediately prior to the Business Combination, there has not been a public market for HydraFacial’s stock and trading in the shares of our Class A Stock has not been consistently active. Accordingly, the valuation ascribed to HydraFacial and our Class A Stock in the Business Combination may not be indicative of the price of the post-combination company that will prevail in the trading market following the Business Combination. If an active market for our securities develops and continues, the trading price of our securities following the Business Combination could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our securities, and our securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of our securities may not recover and may experience a further decline.

Factors affecting the trading price of the post-combination company’s securities following the Business Combination may include:

 

   

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

 

   

changes in the market’s expectations about our operating results;

 

   

the public’s reaction to our press releases, our other public announcements and our filings with the SEC;

 

   

speculation in the press or investment community;

 

   

success of competitors;

 

   

our operating results failing to meet the expectation of securities analysts or investors in a particular period;

 

   

changes in financial estimates and recommendations by securities analysts concerning the post-combination company or the market in general;

 

   

operating and stock price performance of other companies that investors deem comparable to the post-combination company;

 

   

our ability to market new and enhanced products on a timely basis;

 

   

changes in laws and regulations affecting our business;

 

   

commencement of, or involvement in, litigation involving the post-combination company;

 

   

changes in the post-combination company’s capital structure, such as future issuances of securities or the incurrence of additional debt;

 

   

the volume of shares of our Class A Stock available for public sale;

 

   

any major change in our Board or management;

 

   

sales of substantial amounts of Common Stock by our directors, officers or significant stockholders or the perception that such sales could occur;

 

   

the realization of any of the risk factors presented in this proxy statement;

 

   

additions or departures of key personnel;

 

   

failure to comply with the requirements of Nasdaq;

 

   

failure to comply with SOX or other laws or regulations;

 

   

actual, potential or perceived control, accounting or reporting problems;

 

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changes in accounting principles, policies and guidelines; and

 

   

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and Nasdaq have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to the post-combination company could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

In the past, securities class action litigation has often been initiated against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources, and could also require us to make substantial payments to satisfy judgments or to settle litigation.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A Stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of Class A Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A Stock. After the Business Combination, our Sponsor will hold approximately 9.3% of our Class A Stock. In addition, at the closing of the Business Combination, the Company will enter into the Registration Rights Agreement, substantially in the form attached as Annex F to this proxy statement, with the Restricted Stockholders. Pursuant to the terms of the Registration Rights Agreement, (i) any outstanding share of Class A Stock or any other equity security (including the Private Placement Warrants and including shares of Class A Stock issued or issuable upon the exercise of any other equity security) of the Company held by a Restricted Stockholder as of the date of the Registration Rights Agreement or thereafter acquired by a Restricted Stockholder (including the shares of Class A Stock issued upon conversion of the Class B Stock and upon exercise of any Private Placement Warrants) and shares of Class A Stock issued or issuable 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. In addition, our Sponsor entered into a letter agreement pursuant to which it agreed that, with certain limited exceptions, the Founder Shares (which will be converted into shares of Class A Stock at the closing of the Business Combination), Private Placement Warrants and the shares of Class A Stock issuable upon conversion of such warrants may not be transferred until one year after the closing of the Business Combination. In addition, given that such lock-up period is potentially shorter than that of most other blank check companies, these securities may become registered and available for sale sooner than shares held by sponsors in such other companies.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

Our quarterly operating results may fluctuate significantly because of several factors, including:

 

   

labor availability and costs for hourly and management personnel;

 

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profitability of our products, especially in new markets and due to seasonal fluctuations;

 

   

changes in interest rates;

 

   

impairment of long-lived assets;

 

   

macroeconomic conditions, both nationally and locally;

 

   

negative publicity relating to products we serve;

 

   

changes in consumer preferences and competitive conditions;

 

   

expansion to new markets; and

 

   

fluctuations in commodity prices.

If, following the Business Combination, securities or industry analysts do not publish or cease publishing research or reports about the post-combination company, its business, or its market, or if they change their recommendations regarding our Class A Stock adversely, then the price and trading volume of our Class A Stock could decline.

The trading market for our Class A Stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market, or our competitors. Securities and industry analysts do not currently, and may never, publish research on the Company or the post-combination company. If no securities or industry analysts commence coverage of the post-combination company, our stock price and trading volume would likely be negatively impacted. If any of the analysts who may cover the post-combination company change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, the price of our Class A Stock would likely decline. If any analyst who may cover the Company were to cease coverage of the post-combination company or fail to regularly publish reports on it, we could lose visibility in the financial markets, which could cause our stock price or trading volume to decline.

We may be unable to obtain additional financing to fund the operations and growth of the post-combination company.

We may require additional financing to fund the operations or growth of the post-combination company. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the post-combination company. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our Business Combination.

Changes in laws, regulations or rules, or a failure to comply with any laws, regulations or rules, may adversely affect our business, investments and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time-consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, and those changes could have a material adverse effect on our business, investments and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on our business and results of operations.

 

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We have not registered the shares of Class A Stock issuable upon exercise of the public warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise public warrants, thus precluding such investor from being able to exercise its public warrants except on a cashless basis and potentially causing such public warrants to expire worthless.

We have not registered the shares of Class A Stock issuable upon exercise of the public warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed to use commercially reasonable efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the Class A Stock issuable upon exercise of the public warrants, until the expiration of the public warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in such registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order.

If the shares of Class A Stock issuable upon exercise of the public warrants are not registered under the Securities Act, we will be required to permit holders to exercise their public warrants on a cashless basis, in which case the number of shares of our Class A Stock that a holder will receive upon cashless exercise will be based on a formula subject to a maximum number of shares equal to 0.361 shares of our Class A Stock per warrant (subject to adjustment).

However, no public warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their public warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available.

Notwithstanding the above, if our Class A Stock is at the time of any exercise of a public warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their public warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act, and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will be required to use commercially reasonable efforts to register the shares under applicable blue sky laws to the extent an exemption is not available.

In no event will we be required to net cash settle any public warrant, or issue securities or other compensation in exchange for the public warrants in the event that we are unable to register or qualify the shares underlying the public warrants under the Securities Act or applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the public warrants is not so registered or qualified or exempt from registration or qualification, the holder of such public warrant shall not be entitled to exercise such public warrant, and such public warrant may have no value and expire worthless. In such event, holders who acquired their public warrants as part of a purchase of public units will have paid the full unit purchase price solely for the shares of Class A Stock included in the public units. There may be a circumstance where an exemption from registration exists for holders of our Private Placement Warrants to exercise their warrants while a corresponding exemption does not exist for holders of the public warrants. In such an instance, our Sponsor and its transferees (which may include our directors and executive officers) would be able to sell the shares of our Common Stock underlying their warrants while holders of our public warrants would not be able to exercise their warrants and sell the underlying Common Stock.

If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A Stock for sale under all applicable state securities laws.

 

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We may amend the terms of the public warrants in a manner that may be adverse to holders with the approval by the holders of at least 50% of the then-outstanding public warrants. As a result, the exercise price of a holder’s public warrants could be increased, the exercise period could be shortened, and the number of shares of our Common Stock purchasable upon exercise of a public warrant could be decreased, all without the approval of that warrant holder.

Our public warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the public warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least a majority of the then-outstanding public warrants to make any change that adversely affects the interests of the registered holders. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least a majority of the then-outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least a majority of the then-outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the public warrants, shorten the exercise period or decrease the number of shares of Class A Stock purchasable upon exercise of a public warrant.

We may redeem unexpired public warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their public warrants worthless.

We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per public warrant; provided that the last reported sales price of our Class A Stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period ending three business days before we send the notice of redemption to the warrant holders and provided certain other conditions are met. If and when the public warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding public warrants could force the warrant holders: (i) to exercise their public warrants and pay the exercise price therefor at a time when it may be disadvantageous for them to do so; (ii) to sell their public warrants at the then-current market price when they might otherwise wish to hold their public warrants; or (iii) to accept the nominal redemption price which, at the time the outstanding public warrants are called for redemption, we expect would be substantially less than the market value of their public warrants. None of the Private Placement Warrants will be redeemable by us so long as they are held by our Sponsor or its permitted transferees.

In addition, we have the ability to redeem the outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.10 per warrant if, among other things, the last reported sale price of the shares of our Class A Stock for any 20 trading days within a 30-trading-day period ending three business days before we send the notice of redemption to the warrant holders equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like). In such a case, the holders will be able to exercise their public warrants prior to redemption for a number of shares of our Class A Stock determined based on the redemption date and the fair market value of our Class A Stock. The value received upon exercise of the public warrants (i) may be less than the value the holders would have received if they had exercised their public warrants at a later time where the underlying share price is higher and (ii) may not compensate the holders for the value of the public warrants, including because the number of Common Stock received is capped at 0.361 shares of our Class A Stock per public warrant (subject to adjustment) irrespective of the remaining life of the public warrants.

Because each public unit contains one-third of one public warrant and only a whole public warrant may be exercised, the public units may be worth less than public units of other blank check companies.

Each unit contains one-third of one warrant. Pursuant to the warrant agreement, if, upon exercise of the public warrants, a holder would be entitled to receive a fractional interest in a public share, we will, upon

 

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exercise, round down to the nearest whole number the number of shares of our Class A Stock to be issued to the warrant holder. This is different from other blank check companies similar to ours whose public units include one public share and one public warrant to purchase one whole common share. We have established the components of the public units in this way in order to reduce the dilutive effect of the public warrants upon completion of a business combination since the public warrants will be exercisable in the aggregate for one-third of the number of public shares compared to public units that each contain a whole warrant to purchase one public share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this public unit structure may cause our public units to be worth less than if such units included a public warrant to purchase one whole public share.

Warrants will become exercisable for our Class A Stock, which would increase the number of shares eligible for future resale in the public market and result in dilution to our stockholders.

We issued public warrants to purchase 15,333,333 shares of Class A Stock as part of our IPO, and, on the IPO closing date, we issued Private Placement Warrants to our Sponsor to purchase 9,333,333 shares of our Class A Stock, in each case at $11.50 per share. In addition, prior to consummating an initial business combination, nothing prevents us from issuing additional securities in a private placement so long as they do not participate in any manner in the Trust Account or vote as a class with the Common Stock on an initial business combination. We expect to issue approximately 35,000,000 shares of our Class A Stock to the Private Placement Investors in the Private Placement upon consummation of the Business Combination. The shares of Class A Stock issued in the Private Placement and additional shares of our Class A Stock issued upon exercise of our warrants will result in dilution to the then-existing holders of Class A Stock of the Company and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market could adversely affect the market price of our Class A Stock.

The Private Placement Warrants are identical to the public warrants sold as part of the public units issued in our IPO except that, so long as they are held by our Sponsor or its permitted transferees: (i) they will not be redeemable by us; (ii) they (including the Class A Stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our Sponsor until 30 days after the completion of an initial business combination; (iii) they may be exercised by the holders on a cashless basis; and (iv) are subject to registration rights.

Our stockholders may be held liable for claims by third parties against us to the extent of distributions received by them upon redemption of their shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporation to the extent of distributions received by them in a dissolution. The pro rata portion of the Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by October 2, 2022 may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following October 2, 2022 in the event we do not complete an initial business combination, and, therefore, we do not intend to comply with the foregoing procedures.

Because we will not be complying with Section 280 of the DGCL, Section 281(b) of the DGCL requires us to adopt a plan, based on facts known to us at such time that will provide for our payment of all existing and pending claims or claims that may be potentially brought against us within the 10 years following our

 

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dissolution. However, because we are a blank check company, rather than an operating company, and our operations are limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more), and any liability of our stockholders may extend beyond the third anniversary of such date. Furthermore, if the pro rata portion of our Trust Account distributed to our public stockholders upon the redemption of our public shares in the event we do not complete an initial business combination by October 2, 2022 is not considered a liquidating distribution under Delaware law and such redemption distribution is deemed to be unlawful (potentially due to the imposition of legal proceedings that a party may bring or due to other circumstances that are currently unknown), then pursuant to Section 174 of the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, a bankruptcy or insolvency court may seek to recover such proceeds, and the members of our Board may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our Board and us to claims of punitive damages.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy or winding-up petition or an involuntary bankruptcy or winding-up petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy or insolvency laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy or insolvency court could seek to recover some or all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.

Anti-takeover provisions contained in our Second Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Assuming the passage of Proposal Nos. 1 through 3 of this proxy statement, the post-combination company’s Second Amended and Restated Certificate of Incorporation and the Amended and Restated Bylaws will contain provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together, these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities. These provisions will include:

 

   

no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

   

a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of the Board;

 

   

the requirement that directors may only be removed from the Board for cause;

 

   

the right of our Board to elect a director to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director in certain circumstances, which prevents stockholders from being able to fill vacancies on our Board;

 

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a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

   

a prohibition on stockholders calling a special meeting and the requirement that a meeting of stockholders may only be called by members of our Board, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

   

the requirement that changes or amendments to certain provisions of our certificate of incorporation or bylaws must be approved by holders of at least two-thirds of the Common Stock of the post-combination company; and