NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
1 — Organization and Business Operations
Organization
and General
Waldencast
Acquisition Corp. (the “Company”) was incorporated in the Cayman Islands on December 8, 2020. The Company was formed for
the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business
Combination with one or more businesses (a “Business Combination”). The Company is not limited to a particular industry or
geographic region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and,
as such, the Company is subject to all of the risks associated with early stage and emerging growth companies. The Company has selected
December 31 as its fiscal year end.
The
Company was formed on December 8, 2020 and remained dormant through December 31, 2020. For the period from December 8,
2020 (inception) through December 31, 2020, there had been no activity since the formation of the entity and no equity shares were
issued. The Company commenced operations on January 12, 2021 when the Founder Shares were issued. All activity since January 12,
2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”), as described
below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest.
The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived
from the Initial Public Offering.
Financing
On
March 18, 2021, the Company consummated the Initial Public Offering of 34,500,000 units (the “Units” and, with
respect to the Class A ordinary shares included in the Units being offered, the “public share”), at $10.00 per Unit,
generating gross proceeds of $345,000,000, which is discussed in Note 4.
Simultaneously
with the closing of the Initial Public Offering, the Company completed the private sale of 5,933,333 warrants (the “Private
Placement Warrants”), at a price of $1.50 per Private Placement Warrant, which is discussed in Note 5.
Transaction costs amounted to $20,169,599, consisting
of $6,900,000 of underwriting fee, $12,075,000 of deferred underwriting fee and $1,194,599 of other offering costs. Of
the total transaction costs, $719,201 was reclassified as non-operating expense in the condensed statement of operations with the
rest of the offering costs charged to shareholders’ equity. The transaction costs were allocated based on a relative fair value
basis, compared to the total offering proceeds, between the fair value of the public warrant liabilities and the Class A ordinary shares.
Trust
Account
Following
the closing of the Initial Public Offering on March 18, 2021, an amount of $345,000,000 from the net proceeds of the sale of the
Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”)
which is invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act,
with a maturity of 185 days or less or in any open-ended investment company that holds itself out as a money market fund meeting the
conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company. Except with respect to interest earned on the funds
held in the Trust Account that may be released to the Company to pay its taxes, if any, the funds held in the Trust Account will not
be released from the Trust Account until the earliest to occur of: (1) the completion of the Company’s initial Business Combination;
(2) the redemption of any public shares properly submitted in connection with a shareholder vote to amend the Company’s amended
and restated memorandum and articles of association (A) to modify the substance or timing of the Company’s obligation to allow
redemption in connection with its initial Business Combination or to redeem 100% of its public shares if the Company does not complete
its initial Business Combination within 24 months from the closing of the Initial Public Offering or (B) with respect to any other provision
relating to shareholders’ rights or pre-initial Business Combination activity; and (3) the redemption of the Company’s public
shares if the Company has not completed its initial Business Combination within 24 months from the closing of the Initial Public Offering,
subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors,
if any, which could have priority over the claims of the Company’s public shareholders.
Initial
Business Combination
The
Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering,
although substantially all of the net proceeds are intended to be generally applied toward consummating a Business Combination.
The
Company’s Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80%
of the balance in the Trust Account (as defined below) (net of taxes payable) at the time of the signing of an agreement to enter into
a Business Combination. However, the Company will only complete a Business Combination if the post-Business Combination company owns
or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target
sufficient for it not to be required to register as an investment company under the Investment Company Act. There is no assurance that
the Company will be able to successfully effect a Business Combination.
The
Company will provide its public shareholders with the opportunity to redeem all or a portion of their public shares upon the completion
of the initial Business Combination either (i) in connection with a shareholder meeting called to approve the initial Business Combination
or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a proposed initial Business
Combination or conduct a tender offer will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem
their shares for a pro rata portion of the amount then on deposit in the Trust Account (initially $10.00 per share, plus any pro
rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The
Class A ordinary shares subject to redemption is recorded at a redemption value and classified as temporary equity upon the completion
of the Initial Public Offering, in accordance with Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing
Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets
of at least $5,000,001 either immediately prior to or upon consummation of a Business Combination and, if the Company seeks shareholder
approval, a majority of the issued and outstanding shares voted are voted in favor of the Business Combination.
The
Company will have 24 months from the closing of the Initial Public Offering (with the ability to extend with shareholder approval) to
consummate a Business Combination (the “Combination Period”). However, if the Company is unable to complete a Business Combination
within the Combination Period, the Company will redeem 100% of the outstanding public shares for a pro rata portion of the funds
held in the Trust Account, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds
held in the Trust Account and not previously released to the Company, divided by the number of then outstanding public shares, subject
to applicable law and as further described in the registration statement, and then seek to dissolve and liquidate.
The Company’s Sponsor, officers and directors
have agreed to (i) waive their redemption rights with respect to their Founder Shares, private placement shares and public shares in connection
with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to their Founder Shares and public
shares in connection with a shareholder vote to approve an amendment to the Company’s amended and restated memorandum and articles
of association, and (iii) waive their rights to liquidating distributions from the Trust Account with respect to their Founder Shares
and private placement shares if the Company fails to complete the initial Business Combination within the Combination Period.
The
Company’s Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of
intent, confidentiality or similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below
the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of
the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable,
provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any
and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under
the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under
the Securities Act. However, the Company has not asked its Sponsor to reserve for such indemnification obligations, nor has the Company
independently verified whether its Sponsor has sufficient funds to satisfy its indemnity obligations and believe that the Company’s
Sponsor’s only assets are securities of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy
those obligations.
Liquidity
As of September 30, 2021, the Company had cash
in an operating bank account, outside of the Trust Account, of $335,058 available for working capital needs. As of September 30, 2021
the Company had working capital of $422,644. All remaining funds held in the Trust Account are generally unavailable for the Company’s
use, prior to an initial Business Combination, and are restricted for use either in a Business Combination, to redeem Class A ordinary
shares or with respect to the interest earned, to be withdrawn for the payment of taxes. As of September 30, 2021, none of the amount
in the Trust Account was withdrawn as described above.
Through
September 30, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the Founder Shares
and the remaining net proceeds from the Initial Public Offering and the sale of Private Placement Warrants.
On October 28, 2021, the Sponsor funded the $1,500,000
available under the Working Capital Loans to the Company (see Notes 6 and 12). The Company anticipates that the $335,058 in its operating
bank account as of September 30, 2021, in addition to the subsequent $1,500,000 draw down of the Working Capital Loans available, will
be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the financial statements, assuming
that a Business Combination is not consummated during that time. Until consummation of its Business Combination, the Company will be using
the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 6) from the initial shareholders,
the Company’s officers and directors, or their respective affiliates (which is described in Note 6), for identifying and evaluating
prospective acquisition candidates, performing business due diligence on prospective target businesses, traveling to and from the offices,
plants or similar locations of prospective target businesses, reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring, negotiating and consummating the Business Combination.
The Company does not believe It will need to raise
additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the
costs of undertaking in-depth due diligence and negotiating Business Combination is less than the actual amount necessary to
do so, the Company may have insufficient funds available to operate its business prior to the Business Combination. Moreover, the Company
will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers
or directors are under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional
capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to,
curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance
that new financing will be available to it on commercially acceptable terms, if at all.
Risks
and Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target
company, the specific impact is not readily determinable as of the date of these condensed financial statements. The condensed financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 — Restatement of Previously Issued
Financial Statements
In the Company’s previously issued financial
statements, a portion of the public shares were classified as permanent equity to maintain shareholders’ equity greater than $5,000,000
on the basis that the Company will consummate its initial business combination only if the Company has net tangible assets of at least
$5,000,001. Thus, the Company had historically classified a portion of the public shares in permanent
equity.
However,
in light of recent comment letters issued by the Securities & Exchange Commission (“SEC”) to several special purpose
acquisition companies, management re-evaluated the Company’s application of ASC 480-10-99 to its accounting classification of public
shares. Upon re-evaluation, management determined that the public shares include certain provisions that require classification of the
public shares as temporary equity, regardless of the minimum net tangible asset required by the Company to complete its initial business
combination.
In accordance
with SEC Staff Accounting Bulletin No. 99, “Materiality,” and SEC Staff Accounting Bulletin No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,” the Company evaluated
the changes and has determined that the related impacts were material to any previously presented financial statements. Therefore, the
Company, in consultation with its Audit Committee, concluded that its previously issued financial statements impacted should be restated
to report all public shares as temporary equity. As such, the Company is restating those periods in this Quarterly Report.
Impact of the Restatement
The impact to the balance sheet as of March 18,
2021, the balance sheet and income statement as of March 31, 2021 and the balance sheet and income statement as of June 30, 2021 is presented
below:
|
|
As
Previously Reported
|
|
|
Adjustment
|
|
|
As
Restated
|
|
Balance Sheet as of March 18, 2021
(as revised in Note 2 of Form 10-Q filed on July 19, 2021)
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption
|
|
$
|
328,727,970
|
|
|
$
|
16,272,030
|
|
|
$
|
345,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares, $0.0001 par value
|
|
|
163
|
|
|
|
(163
|
)
|
|
|
—
|
|
Class B ordinary shares, $0.0001 par value
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional Paid-in Capital
|
|
|
5,026,405
|
|
|
|
(5,026,405
|
)
|
|
|
—
|
|
Accumulated Deficit
|
|
|
(27,430
|
)
|
|
|
(11,245,462
|
)
|
|
|
(11,272,892
|
)
|
Total Shareholder’’ Equity (Deficit)
|
|
$
|
5,000,001
|
|
|
$
|
(16,272,030
|
)
|
|
$
|
(11,272,029
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemption
|
|
|
32,872,797
|
|
|
|
1,627,203
|
|
|
|
34,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as of March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption
|
|
$
|
298,434,690
|
|
|
$
|
46,565,310
|
|
|
$
|
345,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares, $0.0001 par value
|
|
|
466
|
|
|
|
(466
|
)
|
|
|
—
|
|
Class B ordinary shares, $0.0001 par value
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional Paid-in Capital
|
|
|
6,193,583
|
|
|
|
(6,193,583
|
)
|
|
|
—
|
|
Accumulated Deficit
|
|
|
(1,194,908
|
)
|
|
|
(40,371,261
|
)
|
|
|
(41,566,169
|
)
|
Total Shareholder’’ Equity (Deficit)
|
|
$
|
5,000,004
|
|
|
$
|
(46,565,310
|
)
|
|
$
|
(41,565,306
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemption
|
|
|
29,843,469
|
|
|
|
4,656,531
|
|
|
|
34,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement as of March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,183,957
|
)
|
|
$
|
—
|
|
|
$
|
(1,183,957
|
)
|
Weighted average Redeemable Class A ordinary shares
|
|
|
29,885,095
|
|
|
|
(24,845,769
|
)
|
|
|
5,039,326
|
|
Basic and diluted net loss per share, redeemable Class A ordinary shares
|
|
$
|
0.00
|
|
|
$
|
(0.10
|
)
|
|
$
|
(0.10
|
)
|
Weighted average non-redeemable Class B ordinary shares
|
|
|
9,342,874
|
|
|
|
(2,703,829
|
)
|
|
|
6,639,045
|
|
Basic and diluted net loss per share, non-redeemable Class B ordinary shares
|
|
$
|
(0.13
|
)
|
|
$
|
0.03
|
|
|
$
|
(0.10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet as of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares subject to possible redemption
|
|
$
|
296,883,180
|
|
|
$
|
48,116,820
|
|
|
$
|
345,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A ordinary shares, $0.0001 par value
|
|
|
482
|
|
|
|
(482
|
)
|
|
|
—
|
|
Class B ordinary shares, $0.0001 par value
|
|
|
863
|
|
|
|
—
|
|
|
|
863
|
|
Additional Paid-in Capital
|
|
|
7,745,077
|
|
|
|
(7,745,077
|
)
|
|
|
—
|
|
Accumulated Deficit
|
|
|
(2,746,416
|
)
|
|
|
(40,371,262
|
)
|
|
|
(43,117,678
|
)
|
Total Shareholder’’ Equity (Deficit)
|
|
$
|
5,000,006
|
|
|
$
|
(48,116,821
|
)
|
|
$
|
(43,116,815
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares subject to redemption
|
|
|
29,688,318
|
|
|
|
4,811,682
|
|
|
|
34,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Statement as of June 30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,551,508
|
)
|
|
$
|
—
|
|
|
$
|
(1,551,508
|
)
|
Weighted average Redeemable Class A ordinary shares
|
|
|
29,483,469
|
|
|
|
4,656,531
|
|
|
|
34,500,000
|
|
Basic and diluted net loss per share, redeemable Class A ordinary shares
|
|
$
|
0.00
|
|
|
|
(0.04
|
)
|
|
|
(0.04
|
)
|
Weighted average non-redeemable Class B ordinary shares
|
|
|
13,281,531
|
|
|
|
(4,656,531
|
)
|
|
|
8,625,000
|
|
Basic and diluted net loss per share, non-redeemable Class B ordinary shares
|
|
$
|
(0.12
|
)
|
|
|
0.08
|
|
|
|
(0.04
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,735,465
|
)
|
|
$
|
—
|
|
|
$
|
(2,735,465
|
)
|
Weighted average Redeemable Class A ordinary shares
|
|
|
29,849,073
|
|
|
|
(9,915,740
|
)
|
|
|
19,933,333
|
|
Basic and diluted net loss per share, redeemable Class A ordinary shares
|
|
$
|
0.00
|
|
|
|
(0.10
|
)
|
|
|
(0.10
|
)
|
Weighted average non-redeemable Class B ordinary shares
|
|
|
11,322,835
|
|
|
|
(3,679,779
|
)
|
|
|
7,643,056
|
|
Basic and diluted net loss per share, non-redeemable Class B ordinary shares
|
|
$
|
(0.24
|
)
|
|
|
0.14
|
|
|
|
(0.10
|
)
|
Note
3 — Significant Accounting Policies
Basis
of Presentation
The
accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q and Article 8 of Regulation S-X of the U.S. Securities and Exchange Commission (“SEC”). Certain information or footnote
disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the
rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes
necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the
accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary
for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The
accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial
Public Offering as filed with the SEC on March 17, 2021, as well as the Company’s Current Reports on Form 8-K. The interim results
for the three months and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year
ending December 31, 2021 or for any future interim periods.
Emerging
Growth Company Status
The
Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities
Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage
of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth
companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved.
Further,
Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting
standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do
not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting
standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements
that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of
such extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which
is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult
or impossible because of the potential differences in accounting standards used.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
As of September 30, 2021, the Company had $335,058 in cash in its operating bank account, outside of the Trust Account, and had
no cash equivalents.
Investment
Held in Trust Account
At
September 30, 2021, the Trust Account had $345,030,985 held in marketable securities. As of September 30, 2021, the Company has
not withdrawn any of the interest income from the Trust Account to pay its tax obligations.
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. At September 30, 2021, the Company has not
experienced losses on this account.
Class
A Ordinary Shares Subject to Possible Redemption
The Company accounts for its Class A ordinary shares subject to possible
redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.” Class A ordinary shares
subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that are either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity.
At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A ordinary shares feature
certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain
future events. Accordingly, all shares of Class A ordinary shares subject to possible redemption are presented at redemption value as
temporary equity, outside of the shareholders’ equity section of the Company’s balance sheet.
All of the Class A ordinary shares sold as part
of the Units in the IPO contain a redemption feature which allows for the redemption of such public shares in connection with the Company’s
liquidation, if there is a shareholder vote or tender offer in connection with the Business Combination and in connection with certain
amendments to the Company’s amended and restated memorandum and articles of association (except that in no event may we redeem our
public shares in an amount that would cause our net tangible assets to be less than $5,000,001 following such redemptions pursuant to
our amended and restated memorandum and articles of association). In accordance with the SEC and its staff guidance on redeemable equity
instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require ordinary
shares subject to redemption to be classified outside of permanent equity.
As of September 30, 2021, the Class A ordinary
shares reflected on the balance sheet are reconciled in the following table:
Gross proceeds
|
|
$
|
345,000,000
|
|
Less:
|
|
|
|
|
Proceeds allocated to public warrants
|
|
|
(11,960,000
|
)
|
Issuance costs related to Class A ordinary shares
|
|
|
(19,450,398
|
)
|
Plus:
|
|
|
|
|
Accretion of carrying value to redemption value
|
|
|
31,410,398
|
|
Contingently redeemable Class A ordinary shares
|
|
$
|
345,000,000
|
|
Net
Income per Ordinary Share
The Company applies the two-class method in calculating
earnings per share. The contractual formula utilized to calculate the redemption amount approximates fair value. The Class feature to
redeem at fair value means that there is effectively only one class of stock. Changes in fair value are not considered a dividend of the
purposes of the numerator in the earnings per share calculation. Net loss per ordinary share is computed by dividing the pro rata net
loss between the Class A ordinary shares and the Class B ordinary shares by the weighted average number of ordinary shares outstanding
for each of the periods. The calculation of diluted loss per ordinary share does not consider the effect of the warrants and rights issued
in connection with the IPO since the exercise of the warrants and rights are contingent upon the occurrence of future events and the inclusion
of such warrants would be anti-dilutive. The warrants and FPA units are exercisable for 61,833,333 shares of Class A ordinary shares
in the aggregate. Accretion of the carrying value of Class A ordinary shares to redemption value is excluded from net income per ordinary
share because the redemption value approximates fair value.
|
|
For the
Three Months ended
September 30,
2021
|
|
|
For the
Nine Months ended
September 30,
2021
|
|
Ordinary shares subject to possible redemption
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
Net income allocable to Class A ordinary shares subject to possible redemption
|
|
$
|
6,205,927
|
|
|
$
|
3,803,233
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted Average Redeemable Class A Ordinary shares, Basic and Diluted
|
|
|
34,500,000
|
|
|
|
24,895,604
|
|
Basic and Diluted net income per share, Redeemable Class A Ordinary shares
|
|
$
|
0.18
|
|
|
$
|
0.15
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Ordinary shares
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income allocable to Class B ordinary shares not subject to redemption
|
|
$
|
1,551,482
|
|
|
$
|
1,218,711
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted Average Non-Redeemable Ordinary shares, Basic and Diluted
|
|
|
8,625,000
|
|
|
|
7,977,564
|
|
Basic and diluted net income per share, ordinary shares
|
|
$
|
0.18
|
|
|
$
|
0.15
|
|
Offering Costs
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A–- “Expenses of Offering”. Offering
costs consist principally of professional and registration fees incurred through the balance sheet date that are related to the Initial
Public Offering and that were charged to shareholders’ equity upon the completion of the Initial Public Offering. Accordingly, on
September 30, 2021, offering costs totaling $20,169,599 have been charged to shareholders’ equity (consisting of $6,900,000 of
underwriting fee, $12,075,000 of deferred underwriting fee and $1,194,599 of other offering costs). Of the total transaction
costs, $719,201 was reclassified as a non-operating expense in the condensed statement of operations with the rest of the offering
cost charged to shareholders’ equity. The transaction costs were allocated based on a relative fair value basis, compared to the
total offering proceeds, between the fair value of the public warrant liabilities and the Class A ordinary shares.
Fair Value of Financial Instruments
The fair value of the Company’s assets and
liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair
Value Measurements and Disclosures,” approximates the carrying amounts represented in the condensed balance sheet.
Derivative Warrant Liabilities
The Company evaluates its financial instruments,
including issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has determined its public warrants,
private warrants and contingent forward purchase warrants are derivative instruments.
The Company accounts for its 17,433,333 ordinary
share warrants issued in connection with its Initial Public Offering (11,500,000) and Private Placement Warrants (5,933,333) as derivative
warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair
value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in the Company’s condensed statement of operations. The fair
value of warrants issued by the Company in connection with its Initial Public Offering and Private Placement Warrants has been estimated
using Monte-Carlo simulations at each measurement date.
FASB ASC 470-20, Debt with Conversion and Other
Options addresses the allocation of proceeds from the issuance of convertible debt into its equity and debt components. The Company applied
this guidance to allocate IPO proceeds from the Units between Class A ordinary shares and warrants, using the residual method by allocating
IPO proceeds first to fair value of the warrants and contingent forward purchase units and then the Class A ordinary shares.
Income Taxes
The Company accounts for income taxes under ASC
Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income
taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets
and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods
in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred
tax assets to the amount expected to be realized.
ASC Topic 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in
a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing
authorities. The Company’s management determined that the Cayman Islands is the Company’s major tax jurisdiction. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of September 30, 2021, there
were no unrecognized tax benefits and no amounts accrued for interest and penalties. The Company is currently not aware of any issues
under review that could result in significant payments, accruals or material deviation from its position.
The Company is considered to be an exempted Cayman
Islands company with no connection to any other taxable jurisdiction and is presently not subject to income taxes or income tax filing
requirements in the Cayman Islands or the United States. As such, the Company’s tax provision was immaterial for the nine months
ended September 30, 2021.
Recent Accounting Standards
In August 2020, the FASB issued ASU 2020-06, “Debt-Debt
with Conversion and Other Options” (Subtopic 470-20) and “Derivatives and Hedging-Contracts in an Entity’s Own Equity
(Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”),
which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also
removes certain settlement conditions that are required for equity-linked contracts to qualify for scope exception, and it simplifies
the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 on January 1, 2021. Adoption of the ASU did
not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
financial statements.
Note 4 — Initial Public Offering
Pursuant to the Initial Public Offering, the Company
sold 34,500,000 Units, (at a price of $10.00 per Unit. Each Unit consists of one share of Class A Ordinary shares,
par value $0.0001 per share one-third of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the
holder to purchase one share of Class A Ordinary shares at a price of $11.50 per share.
Note 5 — Private Placement Warrants
Simultaneously with the closing of the Initial
Public Offering, the Sponsor purchased an aggregate of 5,933,333 Private Placement Warrants at a price of $1.50 per Private
Placement Warrant, for an aggregate price of $8,900,000. Each Private Placement Warrant is exercisable for one Class A ordinary share
at a price of $11.50 per share, subject to adjustment (see Note 7). If the Company does not complete a Business Combination within
the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the
redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless.
The initial fair value of the private warrants was recorded as a liability of $6,230,000 with the excess of cash received over initial
fair value of the warrants of $2,670,000 recorded as additional paid-in capital.
Note 6 — Related Party Transactions
Founder Shares
On January 12, 2021, the Company issued 7,187,500 Class
B ordinary shares to the Sponsor for an aggregate purchase price of $25,000 (the “Founder Shares”). On March 15, 2021,
the Company effected a dividend of 0.2 of a share of Class B ordinary shares for each share of Class B ordinary shares,
resulting in 8,625,000 shares of Class B ordinary shares being issued and outstanding.
The Sponsor has agreed, subject to limited exceptions,
not to transfer, assign or sell any of its Class B ordinary shares or Class A ordinary shares received upon conversion thereof until the
earlier of: (A) one year after the completion of a Business Combination and (B) subsequent to a Business Combination, (x) if the last
reported sale price of the Class A ordinary shares equals or exceeds $12.00 per share (as adjusted for share sub-divisions, share dividends,
rights issuances, consolidations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day
period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger,
amalgamation, share exchange, reorganization or other similar transaction that results in all of the Company’s shareholders having
the right to exchange their ordinary shares for cash, securities or other property.
Related Party Loans
On January 12, 2021, the Sponsor agreed to loan the
Company up to $300,000 to be used for the payment of costs related to the Initial Public Offering pursuant to a promissory note (the “Promissory
Note”). The Promissory Note was non-interest bearing, unsecured and due upon the earlier of June 30, 2021 and the closing of the
Initial Public Offering. The Company had no borrowings under the Promissory Note at the closing of the Initial Public Offering.
In addition, in order to finance transaction costs
in connection with a Business Combination, the Sponsor may, but is not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the
Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust
Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans.
The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s
discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity
at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants.
Due to Related Party
The balance of $65,000 represents the amount
accrued for the administrative support services provided (defined below) by the Sponsor from date of the IPO to September 30, 2021.
Administrative Support Agreement
Commencing on the date of the Initial Public Offering,
the Company has agreed to pay the Sponsor a total of $10,000 per month for office space and administrative support services. Upon
completion of the Initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For
the three months and nine months ended September 30, 2021, the Company has recognized $30,000 and $65,000, respectively, of administrative
service fee, which is included in formation and operating costs on the condensed statements of operations.
Working Capital Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). Such Working Capital Loans
would be evidenced by promissory notes. The notes may be repaid upon completion of a Business Combination, without interest, or, at the
lender’s discretion, up to $1,500,000 of notes may be converted upon completion of a Business Combination into warrants at
a price of $1.50 per warrant. Such warrants would be identical to the Private Placement Warrants. In the event that a Business Combination
does not close, the Company may use a portion of proceeds held outside of the Trust Account to repay the Working Capital Loans, but no
proceeds held in the Trust Account would be used to repay the Working Capital Loans. As of September 30, 2021, the Company had no
outstanding borrowings under the Working Capital Loans. On October 28, 2021, the Company drew down the entire available balance of the
Working Capital Loans and the Sponsor deposited $1,500,000 in the Company’s operating bank account (see Note 12).
Forward Purchase Agreement
The Company entered into two separate forward purchase
agreements as follows. The Sponsor and Dynamo Master Fund (a member of the Sponsor) entered into a forward purchase agreement (the “Sponsor
Forward Purchase Agreement”), dated as of February 22, 2021, with the Company that will provide for the purchase of up to an aggregate
of 13,000,000 units, with each unit consisting of one Class A ordinary share and one-third of one redeemable warrant,
for an aggregate purchase price of $130,000,000, or $10.00 per unit, in a private placement to close substantially concurrently with
the closing of our initial Business Combination. The Sponsor Forward Purchase Agreement provides that the applicable forward purchase
investors may, in their sole discretion, increase the amount of capital committed under the Sponsor Forward Purchase Agreement up to an
amount not to exceed $160,000,000. Beauty Ventures LLC (“Beauty Ventures”) entered into a forward purchase agreement (the
“Beauty Forward Purchase Agreement”, and together with the Sponsor Forward Purchase Agreement, the “Forward Purchase
Agreements” or “FPA”), dated as of March 1, 2021, with the Company that provides for the purchase of an aggregate of
up to 17,300,000 units, with each unit consisting of one Class A ordinary share and one-third of one redeemable warrant,
for an aggregate purchase price of up to $173,000,000 (subject to the below), or $10.00 per unit, in a private placement to
close substantially concurrently with the closing of the initial Business Combination. To the extent that the amounts available from the
Trust Account and other financing (including the Sponsor Forward Purchase Agreement) are sufficient for the cash requirements in connection
with our initial Business Combination, the Sponsor may, in its sole discretion, as the managing member of Beauty Ventures, reduce its
purchase obligation, up to the full amount, under the Beauty Forward Purchase Agreement. Members of the Sponsor or their affiliates will
receive a performance fee allocation when the return on the securities underlying the Beauty Forward Purchase Agreement exceeds certain
benchmark returns. The obligations under the forward purchase agreements will not depend on whether any Class A ordinary shares are redeemed
by our public shareholders. The forward purchase shares and the forward purchase warrants included in the units being sold in this offering,
respectively, will be identical to the public shares and public warrants included in the units being sold in this offering, respectively,
except that the holders thereof will have certain registration rights, as described herein. On October 20, 2021, the Company received
(i) an allocation notice from the Sponsor and Dynamo Master Fund committing to purchase 16,000,000 units, with each unit consisting of
one Class A ordinary share and one-third of one redeemable warrant, for an aggregate purchase price of $160,000,000, or $10.00 per unit
and (ii) an allocation notice from Beauty Ventures committing to purchase to purchase 17,300,000 units, with each unit consisting of one
Class A ordinary share and one-third of one redeemable warrant, for an aggregate purchase price of $173,000,000, or $10.00 per unit.
Note 7 — Commitments & Contingencies
Registration Rights
The holders of the Founder Shares, Private Placement
Warrants and any warrants that may be issued upon conversion of Working Capital Loans (and any Class A ordinary shares issuable upon the
exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the
Founder Shares) will be entitled to registration rights pursuant to a registration rights agreement to be signed prior to or on the effective
date of the Initial Public Offering requiring the Company to register such securities for resale. The holders of these securities will
be entitled to make up to three demands, excluding short form demands, that the Company register such securities. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of
a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriters Agreement
On March 18, 2021, pursuant to the consummation
of the IPO, the Company paid a fixed underwriting discount of $0.20 per Unit, or $6,900,000 in the aggregate. Additionally,
a deferred underwriting discount of $0.35 per Unit, or $12,075,000 in the aggregate, will be payable to the underwriters from
the amounts held in the Trust Account solely in the event that the Company completes an initial Business Combination, subject to the terms
of the underwriting agreement.
Transaction Agreements
On November 15, 2021, the Company entered into the
Obagi Merger Agreement (as defined in Note 12) with Obagi (as defined in Note 12) and Merger Sub (as defined in Note 12). The transactions
contemplated by the Obagi Merger Agreement are described in more detail in Note 12.
On November 15, 2021, the Company entered into the
Milk Equity Purchase Agreement (as defined in Note 12) with the Purchasers (as defined in Note 12), Milk (as defined in Note 12), Milk
Members (as defined in Note 12) and Equityholder Representative (as defined in Note 12). The transactions contemplated by the Milk Equity
Purchase Agreement are described in more detail in Note 12.
Note 8 — Class A Ordinary Shares Subject
to Possible Redemption
The Company’s Class A ordinary shares feature
certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain
future events. Accordingly, as of September 30, 2021, 34,500,000 shares of Class A ordinary shares subject to possible redemption
are presented at redemption value as temporary equity, outside of the shareholders’ equity section of the Company’s balance
sheet. The value of these redeemable shares was calculated as the gross proceeds from the sale of the Public Units reduced by the proceeds
allocable to the Public Warrants, issuance costs related to the Public Units and the accretion of the carrying value to the redemption
value. Upon the consummation of the IPO, the Company recorded $31,410,398 in accretion.
Note 9 — Shareholder’s Deficit
Preference Shares — The
Company is authorized to issue a total of 5,000,000 preference shares at par value of $0.0001 each. At September 30, 2021,
there were no preference shares issued or outstanding.
Class A Ordinary Shares —
The Company is authorized to issue a total of 500,000,000 Class A ordinary shares at par value of $0.0001 each. At September
30, 2021, there were no shares issued and outstanding (excluding 34,500,000 shares subject to possible redemption).
Class B Ordinary Shares —
The Company is authorized to issue a total of 50,000,000 shares of Class B ordinary shares at par value of $0.0001 each.
At September 30, 2021, there were 8,625,000 Class B ordinary shares issued or outstanding.
Only holders of the Class B ordinary shares
will have the right to vote on the election of directors prior to the Business Combination. Holders of Class A ordinary shares and
holders of Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s
shareholders except as otherwise required by law.
The Class B ordinary shares will automatically
convert into Class A ordinary shares at the time of the completion of the Business Combination, or earlier at the option of the holder,
on a one-for-one basis, subject to adjustment. In the case that additional Class A ordinary shares, or equity-linked securities,
are issued or deemed issued in excess of the amounts issued in the Initial Public Offering and related to the closing of a Business Combination,
the ratio at which Founder Shares will convert into Class A ordinary shares will be adjusted (subject to waiver by holders of a majority
of the Class B ordinary shares) so that the number of Class A ordinary shares issuable upon conversion of all Founder Shares
will equal, in the aggregate, on an as-converted basis, 20% of the sum of the ordinary shares issued and outstanding upon completion
of the Initial Public Offering plus the number of Class A ordinary shares and equity-linked securities issued or deemed issued
in connection with a Business Combination, excluding any Class A ordinary shares or equity-linked securities issued, or to be
issued, to any seller in a Business Combination.
Note 10 — Warrants
Public Warrants may only be exercised for a whole
number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants
will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing
of the Initial Public Offering. The Public Warrants will expire five years after the completion of a Business Combination or
earlier upon redemption or liquidation.
The Company will not be obligated to deliver any
Class A ordinary shares pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise
unless a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the Public Warrants is
then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration.
No Public Warrant will be exercisable, and the Company will not be obligated to issue any shares to holders seeking to exercise their
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 is available.
The Company has agreed that as soon as practicable,
but in no event later than 15 business days, after the closing of the Company’s Business Combination, the Company will use its commercially
reasonable efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the Class A ordinary
shares issuable upon exercise of the warrants. The Company will use its commercially reasonable efforts to cause the same to become effective
and to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration or redemption
of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the Class A ordinary
shares issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business
Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company
will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with
Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A ordinary shares are at the time
of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security”
under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants
to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects,
the Company will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect,
it will use its commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption
is not available.
Once the warrants become exercisable, the Company may redeem the Public
Warrants for redemption:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at a price of $0.01 per Public Warrant;
|
|
|
|
|
●
|
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
|
|
|
|
|
●
|
if, and only if, the reported last sale price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted).
|
Once the Public Warrants become exercisable, the Company may redeem
the Public Warrants:
|
●
|
in whole and not in part;
|
|
|
|
|
●
|
at $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to the table below, based on the redemption date and the “fair market value” of the Class A ordinary shares;
|
|
|
|
|
●
|
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted); and
|
|
|
|
|
●
|
if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
|
If and when the warrants become redeemable by
the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale
under all applicable state securities laws.
The exercise price and number of ordinary shares
issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary
dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not
be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required
to net cash settle the Public Warrants. If the Company is unable to complete a Business Combination within the Combination Period and
the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect
to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with
respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
In addition, if (x) the Company issues additional
Class A ordinary shares or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination
at an issue price or effective issue price of less than $9.20 per Class A ordinary share (with such issue price or effective issue price
to be determined in good faith by the Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates,
without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest
thereon, available for the funding of a Business Combination, and (z) the volume weighted average trading price of the Class A ordinary
shares during the 20 trading day period starting on the trading day prior to the day on which the Company consummates a Business Combination
(such price, the “Market Value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the
nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $10.00 and $18.00 per share redemption
trigger prices will be adjusted (to the nearest cent) to be equal to 100% and 180% of the higher of the Market Value and the Newly Issued
Price, respectively.
The Private Placement Warrants will be identical
to the Public Warrants underlying the Units being sold in the Initial Public Offering, except that the Private Placement Warrants and
the Class A ordinary shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable
until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement
Warrants will be exercisable on a cashless basis and be non-redeemable, except as described above, so long as they are held by the initial
purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders
on the same basis as Public Warrants.
Note 11 — Fair Value Measurements
Fair value is defined as the price that would
be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement
date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives
the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the
lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
●
|
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
|
|
●
|
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
|
|
●
|
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
The following table presents information about
the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
|
|
September 30,
|
|
|
Quoted
Prices In
Active
Markets
|
|
|
Significant
Other
Observable
Inputs
|
|
|
Significant
Other
Unobservable
Inputs
|
|
|
|
2021
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
Description
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable Securities held in Trust Account
|
|
$
|
345,030,985
|
|
|
$
|
345,030,985
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward purchase agreement liabilities
|
|
|
(8,991,000
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,991,000
|
)
|
Warrant liabilities
|
|
|
(14,180,333
|
)
|
|
|
(9,315,000
|
)
|
|
|
—
|
|
|
|
(4,865,333
|
)
|
|
|
$
|
321,859,652
|
|
|
$
|
335,715,985
|
|
|
$
|
—
|
|
|
$
|
(13,856,333
|
)
|
The Company utilizes a Monte Carlo simulation
model to value the warrants at each reporting period, with changes in fair value recognized in the condensed statement of operations.
The estimated fair value of the warrant liabilities is determined using Level 3 inputs. Inherent in a binomial options pricing model
are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates
the volatility of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free
interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining
life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend
rate is based on the historical rate, which the Company anticipates to remain at zero.
The aforementioned warrant liabilities are not subject to qualified
hedge accounting.
The value of the warrant liabilities was transferred
from Level 3 to Level 1 during the period due to the fact that they are now listed on an active market. There were no other transfers
between Levels 1, 2 or 3 during the three and nine-month period ended September 30, 2021.
The following table provides quantitative information regarding Level 3
fair value measurements:
|
|
At
March 18,
2021
(Initial
Measurement)
|
|
|
At
September 30,
2021
|
|
Share price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
Strike price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Term (in years)
|
|
|
6.00
|
|
|
|
6.00
|
|
Volatility
|
|
|
12.5
|
%
|
|
|
12.3
|
%
|
Risk-free rate
|
|
|
1.11
|
%
|
|
|
1.15
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The following table presents the changes in the fair value of warrant
liabilities:
|
|
Public
|
|
|
Private
Placement
|
|
|
Warrant
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Fair value as of December 31, 2020
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Initial measurement on March 18, 2021
|
|
|
11,960,000
|
|
|
|
6,230,000
|
|
|
|
18,190,000
|
|
Change in fair value of warrant liabilities
|
|
|
230,000
|
|
|
|
118,666
|
|
|
|
348,666
|
|
Fair value as of March 31, 2021
|
|
$
|
12,190,000
|
|
|
$
|
6,348,666
|
|
|
$
|
18,538,666
|
|
Change in fair value of warrant liabilities
|
|
|
460,000
|
|
|
|
237,333
|
|
|
|
697,333
|
|
Fair value as of June 30, 2021
|
|
$
|
12,650,000
|
|
|
$
|
6,586,000
|
|
|
$
|
19,236,000
|
|
Change in fair value of warrant liabilities
|
|
|
(3,335,000
|
)
|
|
|
(1,720,667
|
)
|
|
|
(5,055,667
|
)
|
Fair value as of September 30, 2021
|
|
$
|
9,315,000
|
|
|
$
|
4,865,333
|
|
|
$
|
14,180,333
|
|
Prior to their transfer to Level 1 inputs, the
estimated fair value of warrant liabilities is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions
related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its ordinary shares based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest
rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of
the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is
based on the historical rate, which the Company anticipates to remain at zero.
The Company has initially classified the FPA as
a liability. This financial instrument is subject to re-measurement at each balance sheet date. With each such re-measurement,
the FPA asset or liability will be adjusted to fair value, with the change in fair value recognized in the Company’s condensed statement
of operations. As such, the Company recorded a $11,655,000 of derivative liabilities related to the FPA as of March 18, 2021. At
September 30, 2021, the re-measurement of the derivative associated with the FPA resulted in the following change in the derivative liabilities
– forward purchase agreement.
|
|
FPA Liabilities
|
|
|
|
|
|
Derivative liability – forward purchase agreement at March 18, 2021
|
|
$
|
11,655,000
|
|
Change in fair value of derivative liability – forward purchase agreement
|
|
|
-
|
|
Derivative liability – forward purchase agreement at March 31, 2021
|
|
$
|
11,655,000
|
|
Change in fair value of derivative liability – forward purchase agreement
|
|
|
666,000
|
|
Derivative liability – forward purchase agreement at June 30, 2021
|
|
$
|
12,321,000
|
|
Change in fair value of derivative liability – forward purchase agreement
|
|
|
(3,330,000
|
)
|
Derivative liability – forward purchase agreement at September 30, 2021
|
|
$
|
8,991,000
|
|
Note 12 — Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date through the date that the financial statements were issued. Based upon this review, other than
as noted below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial
statements.
On October 28, 2021, the Company drew down the
entire available balance of the Working Capital Loans and the Sponsor deposited $1,500,000 in the Company’s operating bank account
(see Note 6).
Obagi and Milk Business Combinations
Obagi Merger Agreement and Related Agreements
On November 15, 2021, the Company entered into an Agreement and Plan
of Merger (the “Obagi Merger Agreement”), by and among the Company, Obagi Merger Sub, Inc., a Cayman Islands exempted company
limited by shares and an indirect wholly owned subsidiary of the Company (“Merger Sub”), and Obagi Global Holdings Limited,
a Cayman Islands exempted company limited by shares (“Obagi”).
The Obagi Merger Agreement provides that, among other things and upon
the terms and subject to the conditions thereof, the following transactions will occur (together with the other agreements and transactions
contemplated by the Obagi Merger Agreement, the “Obagi Transaction”):
(i) at the closing of the transactions contemplated by the
Obagi Merger Agreement (the “Obagi Closing”), upon the terms and subject to the conditions of the Obagi Merger Agreement and
in accordance with the Companies Act (As Revised) of the Cayman Islands (“Cayman Act”), Merger Sub will merge with and into
Obagi, the separate corporate existence of Merger Sub will cease and Obagi will be the surviving company and an indirect wholly owned
subsidiary of the Company (the “Merger”);
(ii) as a result of the Merger, among other things, each
share of common stock of Obagi that is issued and outstanding immediately prior to the effective time of the Merger (other than in respect
of Excluded Shares (as defined in the Obagi Merger Agreement)) will be cancelled and converted into the right to receive (i) an amount
in cash equal to (A) the Obagi Cash Consideration (as defined in the Obagi Merger Agreement), subject to substitution for Obagi Stock
Consideration (as defined in the Obagi Merger Agreement) based on the amount of cash available to the Company at the Closing (as defined
below), taking into account, among other things, the level of shareholder redemptions, divided by (B) the number of Aggregate Fully Diluted
Company Common Shares (as defined in the Obagi Merger Agreement), and (ii) a number of shares of Company Common Stock equal to (A) the
Obagi Stock Consideration divided by (B) the number of Aggregate Fully Diluted Company Common Shares; and
(iii) upon the effective time of the Domestication (as defined
below), the Company will immediately be renamed “Waldencast plc”.
The Company’s board of directors has unanimously (i) approved
and declared advisable the Obagi Merger Agreement, the Obagi Transaction and the other transactions contemplated thereby and (ii) resolved
to recommend approval of the Obagi Merger Agreement and related matters by the shareholders of the Company.
Milk Equity Purchase Agreement
On November 15, 2021, the Company entered into an Equity Purchase Agreement
(the “Milk Equity Purchase Agreement” and together with the Obagi Merger Agreement, the “Transaction Agreements”),
by and among the Company, Obagi Holdco 1 Limited, a limited company incorporated under the laws of Jersey (“Holdco Purchaser”),
Waldencast Partners LP, a Cayman Islands exempted limited partnership (“Waldencast LP” and together with Holdco Purchaser,
the “Purchasers”), Milk Makeup LLC, a Delaware limited liability company (“Milk”), certain members of Milk (the
“Milk Members”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity
as representative of Milk’s equityholders (the “Equityholder Representative”).
The Milk Equity Purchase Agreement provides that,
among other things and upon the terms and subject to the conditions thereof, the following transactions will occur (together with the
other agreements and transactions contemplated by the Milk Equity Purchase Agreement, the “Milk Transaction” and, together
with the Obagi Transaction, the “Obagi and Milk Business Combinations”):
(i) at the closing of the transactions contemplated by the
Milk Equity Purchase Agreement (the “Milk Closing” and together with the Obagi Closing, the “Closing”), upon the
terms and subject to the conditions of the Milk Equity Purchase Agreement, the Purchasers will acquire from the Milk Members and the Milk
Members will sell to the Purchasers all of the issued and outstanding membership units of Milk in exchange for the Milk Cash Consideration
(as defined in the Milk Equity Purchase Agreement), and the Milk Equity Consideration (as defined in the Milk Equity Purchase Agreement),
which consist of partnership units of Waldencast LP exchangeable for Domesticated Acquiror Common Stock, and the Domesticated Acquiror
Non-Economic Common Stock (each as defined in the Milk Equity Purchase Agreement);
(ii) as a result of the Milk Transaction, among other things,
(i) Holdco Purchaser will purchase from the Milk Members a percentage of the outstanding membership units in exchange for the Milk Cash
Consideration and the Domesticated Acquiror Non-Economic Common Stock equal to the Milk Equity Consideration and (ii) Waldencast LP will
purchase from the Milk Members the remainder of the outstanding membership units in exchange for the Milk Equity Consideration;
(iii) upon the effective time of the Domestication, the Company
will immediately be renamed “Waldencast plc.”
Immediately following consummation of the Milk Transaction, (i) Holdco
Purchaser will contribute its equity interest in (a) Milk to Waldencast LP in exchange for limited partnership units in Waldencast LP
and (b) Holdco 2 in exchange for limited partnership units in Waldencast LP. The combined company will be organized in an “Up-C”
structure, in which the equity interests of Obagi and Milk will be held by Waldencast LP. The Company will in turn hold its interests
in Obagi and Milk through Waldencast LP and Holdco Purchaser.
The Board has unanimously (i) approved and declared advisable the Milk
Equity Purchase Agreement, the Milk Transaction and the other transactions contemplated thereby and (ii) resolved to recommend approval
of the Milk Equity Purchase Agreement and related matters by the shareholders of the Company.
Prior to the Closing, subject to the approval of the Company’s
shareholders, and in accordance with the Cayman Act, the Companies (Jersey) Law 1991, as amended (the “Jersey Companies Law”)
and the Company’s amended and restated memorandum and articles of association, the Company will effect a deregistration under the
Cayman Act and a domestication under Part 18C of the Jersey Companies Law (by means of filing a memorandum and articles of association
with the Registrar of Companies in Jersey), pursuant to which the Company’s jurisdiction of incorporation will be changed from the
Cayman Islands to Jersey (the “Domestication”).
In connection with the Domestication, (i) each of the then issued and
outstanding Class A ordinary shares, par value $0.0001 per share, of the Company, will convert automatically, on a one-for-one basis,
into an ordinary share of common stock, par value $0.0001 per share, of the Company (following its Domestication) (the “Waldencast
Common Stock”), (ii) each of the then issued and outstanding Class B ordinary shares, par value $0.0001 per share, of the Company,
will convert automatically, on a one-for-one basis, into a share of Waldencast Common Stock, (iii) each then issued and outstanding warrant
of the Company will convert automatically into a warrant to acquire one share of Waldencast Common Stock (“Domesticated Waldencast
Warrant”), pursuant to the Warrant Agreement, dated March 15, 2021, between the Company and Continental Stock Transfer & Trust
Company, as warrant agent, and (iv) each then issued and outstanding unit of the Company shall be cancelled and will entitle the holder
thereof to one share of Waldencast Common Stock and one-third of one Domesticated Waldencast Warrant.
On November 15, 2021, the Company entered into a Sponsor Support Agreement
(the “Obagi Sponsor Support Agreement”), by and among the Sponsor, Obagi, the Company and the persons set forth on Schedule
I attached thereto (the “Sponsor Persons”), pursuant to which the Sponsor and the Sponsor Persons agreed to, among other things,
vote in favor of the Obagi Merger Agreement and the transactions contemplated thereby, in each case, subject to the terms and conditions
contemplated by the Obagi Sponsor Support Agreement.
On November 15, 2021, the Company entered into a Sponsor Support Agreement
(the “Milk Sponsor Support Agreement”), by and among the Sponsor, the Equityholder Representative, the Company and the Sponsor
Persons, pursuant to which the Sponsor and the Sponsor Persons agreed to, among other things, vote in favor of the Milk Equity Purchase
Agreement and the transactions contemplated thereby, in each case, subject to the terms and conditions contemplated by the Milk Sponsor
Support Agreement.
On November 15, 2021, the Company also entered into
a Stockholder Support Agreement (the “Stockholder Support Agreement”), by and among the Company, Obagi and Cedarwalk. Pursuant
to the Stockholder Support Agreement, Cedarwalk agreed to, among other things, within two (2) business days after the proxy statement/prospectus
relating to the approval by the Company shareholders of the Obagi and Milk Business Combinations is declared effective by the SEC and
delivered or otherwise made available to the Company shareholders, execute and deliver a written consent with respect to the outstanding
ordinary shares of Obagi held by Cedarwalk adopting the Obagi Merger Agreement and related transactions and approving the Obagi and Milk
Business Combinations.
The consummation of the proposed Obagi and Milk Business
Combinations is subject to certain conditions as further described in the Obagi Merger Agreement and the Milk Equity Purchase Agreement.