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 3.
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 4.
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.
WALDENCAST
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 certificate of incorporation,
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.
WALDENCAST
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 June 30, 2021, the Company had cash in an
operating bank account, outside of the Trust Account, of $851,860 available for working capital needs. 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 or to redeem Class A ordinary shares. As of June 30, 2021, none of the amount in the Trust Account
was available to be withdrawn as described above.
Through June 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.
The Company anticipates that the $851,860 in its
operating bank account as of June 30, 2021 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 5) from the initial shareholders, the Company’s officers and directors, or their respective affiliates (which
is described in Note 5), 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.
WALDENCAST
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
2 — 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 six months ended June 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 June 30, 2021, the Company had $851,860
in cash in its operating bank account, outside of the Trust Account, and had no cash equivalents.
Investment
Held in Trust Account
At
June 30, 2021, the Trust Account had $345,014,376 held in marketable securities. As of June 30, 2021, the Company has not withdrawn any
of the interest income from the Trust Account to pay its tax obligations.
WALDENCAST
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 June 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, as of June 30, 2021, 29,688,318 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.
Net
Loss per Ordinary Shares
Net
loss per ordinary shares is computed by dividing net loss by the weighted average number of ordinary shares outstanding for the period.
The Company applies the two-class method in calculating earnings per share. Shares of Class A ordinary shares subject to possible redemption
at June 30, 2021, which are not currently redeemable and are not redeemable at fair value, have been excluded from the calculation of
basic net loss per ordinary shares since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings.
The Company has not considered the effect of warrants sold in the Initial Public Offering and the private placement to purchase an aggregate
17,433,333 ordinary shares in the calculation of diluted loss per share, since the exercise of the warrants into ordinary shares is contingent
upon the occurrence of future events. As a result, diluted net loss per ordinary share is the same as basic net loss per ordinary share
for the period presented.
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 June
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 does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates
all of its financial instruments, including issued stock 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 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.
WALDENCAST
ACQUISITION CORP.
NOTES
TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 June 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 six months ended June 30, 2021.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect
on the Company’s financial statements.
Note
3 — 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
4 — 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 6). 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
5 — 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.
Promissory
Note — Related Party
On January 12, 2021, the Company issued the Promissory
Note to the Sponsor, pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. As of June 30, 2021,
the Company had no borrowing outstanding under the Promissory Note.
WALDENCAST ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Due to Related Party
The balance of $35,000 represents the amount accrued
for the administrative support services provided by the Sponsor from date of the IPO (defined below) to June 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 six months ended June 30, 2021, the Company has recognized $5,000 and $35,000, 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 June 30, 2021, the Company had no outstanding borrowings under the Working Capital Loans.
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 an aggregate
of 13,000,000 Class A ordinary shares and 4,333,333 redeemable warrants, for an aggregate purchase price of $130,000,000, or $10.00 per
one Class A ordinary shares and one-third of one redeemable warrant, 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
Class A ordinary shares and up to 5,766,667 redeemable warrants, for an aggregate purchase price of up to $173,000,000 (subject to the
below), or $10.00 per one Class A ordinary share and one-third of one redeemable warrant, 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.
Note 6 — 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.
Note 7 — Shareholder’s Equity
Preference Shares — The Company
is authorized to issue a total of 5,000,000 preference shares at par value of $0.0001 each. At June 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 June 30, 2021, there
were 4,811,682 shares issued and outstanding (excluding 29,688,318 shares subject to possible redemption).
WALDENCAST ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 June 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 8 — 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.
|
WALDENCAST ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 9 — 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 June 30, 2021 and indicates the fair value hierarchy
of the valuation inputs the Company utilized to determine such fair value:
|
|
June 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
|
|
$
|
345,014,376
|
|
|
$
|
345,014,376
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward purchase agreement liabilities
|
|
|
(12,321,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(12,321,000
|
)
|
Warrant liabilities
|
|
|
(19,236,000
|
)
|
|
|
(19,236,000
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
$
|
313,457,376
|
|
|
$
|
325,778,376
|
|
|
$
|
-
|
|
|
$
|
(12,321,000
|
)
|
WALDENCAST ACQUISITION CORP.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 six-month period ended June 30, 2021.
The following table provides quantitative information regarding Level 3
fair value measurements:
|
|
At
March 18,
2021
(Initial
Measurement)
|
|
|
At
June 30,
2021
|
|
Share price
|
|
$
|
10.00
|
|
|
$
|
10.00
|
|
Strike price
|
|
$
|
11.50
|
|
|
$
|
11.50
|
|
Term (in years)
|
|
|
6.00
|
|
|
|
6.00
|
|
Volatility
|
|
|
12.5
|
%
|
|
|
15.0
|
%
|
Risk-free rate
|
|
|
1.11
|
%
|
|
|
1.04
|
%
|
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
|
|
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 stock-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility
of its common stock 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 June
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
|
|
Note 10 — 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, the Company
did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.