Big impairments and control risks at Waldencast (Nasdaq: WALD) in 2025 filing
Filing Impact
Filing Sentiment
Form Type
20-F
Waldencast plc, a Jersey-incorporated beauty company owning the Obagi Medical and Milk Makeup brands, files its annual report detailing a complex risk profile. The business is organized into two reporting units and prepares U.S. dollar financials under U.S. GAAP.
The company is conducting a broad strategic review announced in August 2025, with no assurance that any transaction will occur or create shareholder value. It records substantial non-cash impairment charges of
Liquidity and leverage are key concerns, including covenant and warrant obligations under the Lumina Credit Agreement that could lead to dilution or forced asset sales. Waldencast discloses ongoing material weaknesses in internal control over financial reporting, an SEC investigation related to prior restatements, and upcoming Sarbanes-Oxley Section 404 auditor attestation requirements, all of which add regulatory and execution risk.
Positive
- None.
Negative
- Large non-cash impairments and fragile intangibles base – Waldencast recorded impairment charges of
$132.1 million for Obagi Medical and$20.0 million for Milk Makeup, with goodwill and other intangibles around81% of total assets, leaving both reporting units highly sensitive to further write-downs. - Heightened financial, covenant and dilution risk – The Lumina Credit Agreement adds leverage constraints, potential forced liquidity events, significant prepayment premiums and warrants (up to 1,000 ordinary shares per
$1,000 of certain loans), which could pressure liquidity and dilute shareholders if performance or compliance falters. - Persistent control weaknesses and SEC investigation – Material weaknesses in internal control over financial reporting remain unremediated as of
December 31, 2025 , and an SEC investigation related to prior restatements continues, raising regulatory, cost and reputation risks as Sarbanes-Oxley Section 404 auditor attestation approaches.
Insights
Heavy impairments, control issues and covenant risk raise Waldencast’s risk profile.
Waldencast highlights a challenging backdrop: it is running a strategic review while recording large non-cash impairments of
Cash flow and liquidity are central risks. The Lumina Credit Agreement imposes financial covenants, potential prepayment premiums and warrants that could be dilutive if exercised. Failure to comply could trigger defaults or require unfavorable amendments, especially because certain repayments carry significant guaranteed-return prepayment premiums.
Governance and reporting add another layer of risk. The company has unresolved material weaknesses in internal control over financial reporting, faces an ongoing SEC investigation tied to prior restatements, and must achieve full Section 404 auditor attestation by its
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 20-F
(Mark One)
| REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
OR
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934: | |||||
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
OR
| SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
Commission File Number: 001-40207
(Exact name of Registrant as specified in its charter)
| Not applicable | Jersey | ||||
| (Translation of Registrant’s name into English) | (Jurisdiction of incorporation or organization) | ||||
(Address of principal executive offices)
Chief Executive Officer
+44 (0)20 3196 0264
Legal@Waldencast.com
(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of exchange on which registered | ||||||||||||
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the report:
On December 31, 2025, the issuer had 128,237,613 ordinary shares outstanding, consisting of 118,217,630 Waldencast plc Class A ordinary shares, par value $0.0001 per share, and 10,019,983 Waldencast plc Class B ordinary shares, par value $0.0001 per share.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No x
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | o | Accelerated filer | o | x | |||||||||||||||||||
| Emerging growth company | |||||||||||||||||||||||
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. o
†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting over Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. o
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
| x | International Financial Reporting Standards as issued by the International Accounting Standards Board | o | Other | o | |||||||||||||||||||
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
TABLE OF CONTENTS
INTRODUCTION AND USE OF CERTAIN TERMS | 1 | ||||
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS | 3 | ||||
PART I | 4 | ||||
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 4 | ||||
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE | 4 | ||||
ITEM 3. KEY INFORMATION | 4 | ||||
ITEM 4. INFORMATION ON THE COMPANY | 45 | ||||
ITEM 4A. UNRESOLVED STAFF COMMENTS | 57 | ||||
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS | 57 | ||||
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES | 76 | ||||
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS | 86 | ||||
ITEM 8. FINANCIAL INFORMATION | F-1 | ||||
ITEM 9. THE OFFER AND LISTING | 93 | ||||
ITEM 10. ADDITIONAL INFORMATION | 93 | ||||
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 104 | ||||
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | 104 | ||||
PART II | 104 | ||||
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES | 104 | ||||
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | 104 | ||||
ITEM 15. CONTROLS AND PROCEDURES | 104 | ||||
ITEM 16. [RESERVED] | 106 | ||||
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT | 106 | ||||
ITEM 16B. CODE OF ETHICS | 106 | ||||
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES | 106 | ||||
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | 107 | ||||
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | 107 | ||||
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT | 107 | ||||
ITEM 16G. CORPORATE GOVERNANCE | 107 | ||||
ITEM 16H. MINE SAFETY DISCLOSURE | 108 | ||||
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS | 108 | ||||
ITEM 16J. INSIDER TRADING POLICY | 108 | ||||
ITEM 16K. CYBERSECURITY | 108 | ||||
PART III | 109 | ||||
ITEM 17. FINANCIAL STATEMENTS | 109 | ||||
ITEM 18. FINANCIAL STATEMENTS | 109 | ||||
ITEM 19. EXHIBITS | 109 | ||||
EXHIBIT INDEX | 109 | ||||
SIGNATURES | 113 | ||||
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INTRODUCTION AND USE OF CERTAIN TERMS
Waldencast plc (“Waldencast”) publishes consolidated financial statements expressed in U.S. dollars. Our consolidated financial statements responsive to Item 18 of this Annual Report filed on Form 20-F (including information incorporated by reference herein, this “Report”) with the U.S. Securities and Exchange Commission (“SEC”) are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).
Unless the context requires otherwise, the words “we,” “our,” “us,” “Company,” “Waldencast” and similar words or phrases in this Report refer to Waldencast plc (formerly known as Waldencast Acquisition Corp.), a public limited company incorporated under the laws of the Bailiwick of Jersey (“Jersey”), and its consolidated subsidiaries, including, but not limited to, Obagi Global Holdings Limited, a Cayman Islands exempted company, and its subsidiaries (collectively, “Obagi” or “Obagi Medical”) and Milk Makeup LLC, a Delaware limited liability company, and its subsidiaries (collectively, “Milk Makeup” or “Milk”), which Waldencast acquired on July 27, 2022 (the “Closing Date”), as more fully described in “Item 4. Information on the Company” in this Report (the “Business Combination”). We have organized our business into two reporting units - the business of Obagi, which we refer to as our “Obagi® Medical” reporting unit and the business of Milk, which we refer to as our “Milk Makeup™” reporting unit.
In this Report, in addition to the terms already defined above, unless stated or the context suggests otherwise, all references to:
•“2023 PIPE Investment” means the subscription agreements with certain investors for the issuance and sale of 14,000,000 Class A ordinary shares in a private placement to (i) a large stakeholder of Beauty Ventures LLC (ii) certain other existing equity holders, who qualified as accredited investors, including certain members of the Sponsor, and (iii) Michel Brousset, Waldencast’s founder and Chief Executive Officer, and Hind Sebti, founder and Chief Growth Officer, at a purchase price of $5.00 each per share, for aggregate gross proceeds of $70 million;
•“2025 Registration Statement” means the Company’s Registration Statement on Form F-3 (File No. 333-291938) filed on December 4, 2025, with the SEC under the Securities Act of 1933, which was declared effective on December 18, 2025;
•“affiliate” means, with respect to any specified Person, any Person that, directly or indirectly, controls, is controlled by, or is under common control with, such specified Person, whether through one or more intermediaries or otherwise. The term “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise;
•“Board” means the board of directors of Waldencast;
•“CARES Act” means Coronavirus Aid, Relief, and Economic Security Act;
•“Cedarwalk” means Cedarwalk Skincare Ltd.;
•“cGMP” means current Good Manufacturing Practice regulations enforced by the FDA;
•“China Region” means the countries within scope of the agreements entered into with Obagi Hong Kong, which include, the People’s Republic of China (the “PRC”), the Hong Kong Special Administrative Region, the Macau Special Administrative Region and Taiwan;
•“Class A ordinary shares” means our Class A ordinary shares, par value $0.0001 per share;
•“Class B ordinary shares” means our Class B ordinary shares, par value $0.0001 per share;
•“Code” means the U.S. Internal Revenue Code of 1986, as amended;
•“COVID-19” means SARS-CoV-2 or COVID-19, and any evolutions or mutations thereof or related or associated epidemics, pandemics or disease outbreaks;
•“CPSC” means the Consumer Product Safety Commission;
•“Exchange Act” means the Securities Exchange Act of 1934, as amended;
•“FDA” means the U.S. Food and Drug Administration;
•“FDCA” means the Federal Food, Drug, and Cosmetic Act;
•“FTC” means the Federal Trade Commission;
•“Holdco 1” means Obagi Holdco 1 Limited, a private limited company incorporated under the laws of Jersey and a wholly-owned subsidiary of Waldencast;
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•“International” means the entire world except the U.S.;
•“IRS” means the U.S. Internal Revenue Service;
•“Jersey” means the Bailiwick of Jersey, Channel Islands, a British crown dependency;
•“Jersey Companies Law” means the Companies (Jersey) Law 1991, as amended;
•“JPM 2022 Credit Agreement” means the Credit Agreement, dated as of June 24, 2022, by and among Waldencast LP, as parent guarantor, Waldencast Finco Limited, a wholly-owned subsidiary of Waldencast incorporated under the laws of Jersey, as borrower, the lenders from time to time party thereto and JPMorgan Chase Bank, N.A., as administrative agent, as amended, restated or otherwise modified from time to time;
•“Lumina Administrative Agent” means LSSF II Offshore Investments, LP, an Ontario limited partnership acting by its general partner, Lumina Fund II GP Ltd., in its capacity as the administrative agent under the Lumina Credit Agreement;
•“Lumina Borrowers” means Milk Makeup LLC and Obagi Cosmeceuticals LLC;
•“Lumina Credit Agreement” means the Credit Agreement, dated as of November 14, 2025, by and among the Lumina Borrowers, the Lumina Parent Guarantor, the Lumina Administrative Agent and the Lenders, as amended, restated or otherwise modified from time to time;
•“Lumina Lenders” means the lenders party to the Lumina Credit Agreement;
•“Lumina Parent Guarantor” means Waldencast in its capacity as parent guarantor under the Lumina Credit Agreement
•“Merger Sub” means Obagi Merger Sub, Inc., a Cayman Islands exempted company;
•“Milk Members” means the holders of the common and preferred membership units of Milk Makeup prior to the Business Combination;
•“Milk Purchase Agreement” means the Equity Purchase Agreement, dated as of November 15, 2021, by and among Waldencast, Waldencast LP, Holdco 1, Milk Makeup, the Milk Members and the Equityholder Representative;
•“MoCRA” means the Modernization of Cosmetics Regulation Act of 2022;
•“Nasdaq” means The Nasdaq Stock Market LLC;
•“Nasdaq Listing Rules” means the corporate governance standards, continued listing requirements, and other applicable regulations enacted by Nasdaq;
•“Obagi China Business” means the business carried out by Cedarwalk that was not acquired by Waldencast in the Business Combination, and is responsible for conducting the sales of all Obagi Medical products in People’s Republic of China, inclusive of the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan;
•“Obagi Cosmeceuticals” means Obagi Cosmeceuticals LLC, a Delaware limited liability company and an indirect wholly-owned subsidiary of Waldencast;
•“Obagi Merger Agreement” means the Agreement and Plan of Merger, dated as of November 15, 2021, by and among Waldencast, Merger Sub and Obagi Global Holdings Limited;
•“Obagi Vietnam” means Obagi Vietnam Import Export Trading MTV Company Limited;
•“Ordinary Shares” means our Class A ordinary shares and Class B ordinary shares, collectively;
•“Person” means any individual, firm, corporation, partnership, exempted limited partnership, limited liability company, exempted company, incorporated or unincorporated association, joint venture, joint stock company, governmental authority or instrumentality or other entity of any kind;
•“SA Distributor” means Southeast Asia Distributor, a former distributor of Obagi, then responsible for distribution within Vietnam, South Korea, and other regions of Southeast Asia;
•“Securities Act” means the Securities Act of 1933, as amended;
•“Sponsor” means Waldencast Long-Term Capital LLC, a Cayman Islands limited liability company;
•“TCW Credit Agreement” means the Credit Agreement, dated as of March 18, 2025, by and among Milk Makeup, and Obagi Cosmeceuticals, as borrowers, Waldencast, as parent guarantor, the TCW Credit Agreement Lenders, and TCW Asset Management Company, LLC, as administrative agent, as amended, restated or otherwise modified from time to time;
•“TCW Credit Agreement Lenders” means the lenders from time to time party to the TCW Credit Agreement;
•“United States dollars,” “U.S. dollars,” “USD” or “$” are to the lawful currency of the U.S.;
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•“Waldencast LP” means Waldencast Partners LP, a Cayman Islands exempted limited partnership and indirect subsidiary of Waldencast; and
•“Waldencast Purchasers” means Holdco 1 and Waldencast LP.
All product and/or brand names, whether designated by notice (®/™) or not, are trademarks of Waldencast and/or its affiliates. This Report also contains references to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Report may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
Any reference in this Report to the websites maintained by Waldencast, Obagi Medical, Milk Makeup or any other company is not deemed to incorporate by reference any information available on such websites into this Report and such information does not form part of this Report.
In addition, industry surveys and industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed and that any projections they contain are based on a number of significant assumptions. Forecasts, projections and other forward-looking information obtained from these sources involve risks and uncertainties and are subject to change based on various factors, including those discussed in the section “Cautionary Note Regarding Forward-Looking Statements” below. You should not place undue reliance on these statements.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Report, as well as our other public filings or public statements, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are often identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and variations of such words and similar expressions but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements include assumptions and relate to our future prospects, developments and business strategies. Factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to:
•our ability to successfully implement our management’s plans and strategies;
•our ability to achieve the anticipated benefits from any acquired business, including the Obagi Medical and Milk Makeup acquisitions;
•our ability to manage expenses, our liquidity and our investments in working capital;
•our ability to identify, evaluate, and complete any transactions as part of the ongoing strategic review, the timing and costs associated therewith, and the risk that any such process or transaction may not result in the intended benefits or increased shareholder value, affect the market price of our securities and may lead to significant business disruptions;
•the impact of the material weaknesses in our internal control over financial reporting, including associated investigations, our efforts to remediate such material weakness and the timing of remediation and resolution of associated investigations;
•our ability to comply with the financial covenant imposed by the Lumina Credit Agreement and the impact of debt service obligations and restrictive debt covenants;
•the overall economic and market conditions, sales forecasts and other information about our possible or assumed future results of operations or our performance;
•the general impact of geopolitical events, including the impact of current wars, conflicts and other hostilities;
•the impact of any legal proceedings or investigations, including the outcome of any litigation or investigation related to or arising out of the restatement of our financial results or material weakness in internal control over financial reporting;
•the impact of adverse economic conditions in the United States or other key markets, which could negatively affect our business, financial condition, and results of operations;
•any failure to obtain governmental and regulatory approvals related to our business and products;
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•risks related to our Class A ordinary shares and warrants, including continued price volatility;
•the impact of any international trade and related uncertainties or foreign exchange restrictions, the imposition and enforceability of tariffs, foreign currency exchange fluctuations;
•the impact of any disruptions in our operations, including supply chain interruptions, as a result of trade disputes, inflation or increases in interest rates;
•our ability to raise additional capital or complete desired acquisitions or divestments;
•the impact of any unfavorable publicity on our business or products;
•our ability to implement our strategic initiatives and continue to innovate Obagi Medical’s and Milk Makeup’s existing products and anticipate and respond to market trends and changes in consumer preferences;
•our dependence on a limited number of retailers for a significant portion of our net sales, with the loss of or challenges faced by these retailers potentially adversely affecting our results of operations;
•changes in future exchange or interest rates or credit ratings, changes in tax laws, regulations, rates and policies;
•our ability to retain the listing of our securities on Nasdaq and our ability to meet Nasdaq’s continued listing standards, including the Periodic Filing Rule (as defined in “Item 3. Key Information—D. Risk Factors”) during the one-year panel monitor period; and
•other risks and uncertainties described from time to time in our filings with the SEC.
We undertake no obligation to update or revise the forward-looking statements included in this Report, whether as a result of new information, future events or otherwise, after the date of this Report. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors that could cause or contribute to such differences are discussed in “Item 5. Waldencast’s Operating and Financial Review and Prospects” as well as in “Item 3. Key Information—D. Risk Factors” included herein.
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
A.Directors and Senior Management
Not applicable.
B.Advisers
Not applicable.
C.Auditors
Not applicable.
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
ITEM 3. KEY INFORMATION
A.[Reserved]
B.Capitalization and Indebtedness
Not applicable.
C.Reasons for the Offer and Use of Proceeds
Not applicable.
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D.Risk Factors
RISK FACTORS
In evaluating our business, you should carefully consider the following discussion of material risks, events and uncertainties that make an investment in us speculative or risky, in addition to the other information in this Report. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may not be able to accurately predict, materially and adversely affect our business and operations, growth, reputation (including the commercial reputation of our products), prospects, product pipeline and sales, operating and financial results, financial condition, cashflows, liquidity and share price. We note these factors for investors as permitted by the Private Securities Litigation Reform Act of 1995. It is not possible to predict or identify all such factors; our operations could also be affected by factors, events or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations. Therefore, you should not consider the following risks to be a complete statement of all the potential risks or uncertainties that we face.
SUMMARY OF KEY RISKS
1.Risks Related to our Strategic Review, Growth Strategy and Investment Decisions
Our ongoing strategic review and growth initiatives may be costly, cause management distraction, cause dilution and fail to yield expected benefits or maximize shareholder value. Challenges such as unmet consumer preferences, regulatory hurdles, operational strain, and unsuccessful expansions or partnerships could negatively impact our financial performance and growth.
2.Risks Related to Cash Flow and Liquidity
Maintaining adequate cash flow and profitability is crucial for operations and growth, but challenges such as declining sales or rising costs could weaken financial stability and limit strategic investments. Failure to manage cash flow or comply with debt covenants may lead to defaults, reduced market competitiveness, and adverse impacts on financial performance, investor confidence, and long-term business prospects.
3.Risks Related to Internal Controls and Financial Reporting
An ongoing SEC investigation regarding our financial restatement may result in litigation, regulatory penalties, and reputational harm. Our material weaknesses threaten the accuracy of our financial disclosures, and failing to remediate them or achieve the full Sarbanes-Oxley Section 404 compliance by our deadline could severely impact investor confidence, invite further scrutiny, and harm our business.
4.Risks of Conducting International Business
Operating in international markets exposes us to economic instability, currency fluctuations, varying regulatory environments, and geopolitical tensions, which can increase costs and impact market access. Failure to navigate these challenges, could disrupt operations, reduce profitability, and hinder our ability to grow internationally.
5.Regulatory and Legal Risks and Risks Related to Litigation
We face litigation risks, including product liability claims, intellectual property disputes, and regulatory challenges, which could lead to financial losses, operational disruptions, and reputational harm. Even unfounded claims or successfully defended cases can result in costly legal proceedings, product recalls, or fines, ultimately impacting our profitability and ability to achieve strategic goals.
6.Risks Related to SEC and Nasdaq Compliance, Securities Issuances, Share Price Volatility and Limitations on Investor Rights
Compliance with SEC and Nasdaq requirements, securities issuances, and broader market conditions can cause heightened volatility or a decline in our share value, and bring risks of regulatory penalties, reputational harm or delisting. As an emerging growth company and foreign private issuer incorporated in Jersey, our investors face limitations including reduced disclosures and differing shareholder rights compared to other U.S. companies, and the need to resolve legal
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disputes under Jersey law. These factors may reduce transparency, complicate the exercise of investor rights, and affect the attractiveness of our securities.
7.Risks Related to Dependence on Third Parties for Manufacturing, Distribution, E-Commerce, and Other Vendors
We depend on third-party partners for manufacturing, distribution, e-commerce, and other critical services, making us vulnerable to disruptions, quality issues, or regulatory non-compliance. Failures or changes in these partnerships could increase costs, disrupt customer experiences, and negatively impact our business and growth prospects.
8.Risks Related to Intense Competition in Our Industry
The industry in which we operate is highly competitive, with established brands and niche players vying for market share through innovation, marketing, and competitive pricing. Failure to adapt to shifting consumer trends or compete effectively could result in reduced sales, profitability, and brand relevance, ultimately impacting growth and shareholder value.
9.Risks Related to Supply Chain and Operational Disruption
Our business relies on a complex global supply chain and operations. Disruptions from natural disasters, geopolitical events, or labor challenges could harm our financial performance and reputation. Reliance on third-party suppliers, rising costs, or manufacturing issues may lead to shortages, delays, increased expenses, damages to customer relationships.
10.Regulatory Risks That Could Adversely Impact our Business
Our business operates under extensive and evolving regulations across federal, state, and international levels, and non-compliance could lead to fines, recalls, or reputational harm. Changes in laws or regulatory scrutiny may result in higher compliance costs, delays, product reformulation, or market withdrawals, especially as we expand into new markets and regions with unfamiliar regulations.
11.Risks Related to Our Reputation and Threats to Our Good Standing
Our reputation is a critical asset. Negative publicity regarding product quality, ethics, or sustainability could lead to customer loss and operational disruptions. The rapid spread of information via social media amplifies the risk of reputational harm, which could adversely affect stakeholder relationships, financial performance and attract regulatory scrutiny.
12.Risks Related to Technology, E-Commerce, and Cybersecurity
Our reliance on technology, including e-commerce platforms and digital marketing, is critical, and disruptions or cybersecurity threats could compromise operations, data security, and customer trust. Failure to adapt to evolving e-commerce trends, enhance digital capabilities and security, or integrate emerging technologies effectively could weaken our competitive position and hinder revenue growth.
13.Risks Related to Taxation in an International Environment
Operating across multiple jurisdictions subjects us to complex and evolving tax laws, creating compliance challenges, potential disputes, and increased tax liabilities. Changes in global tax regulations, foreign exchange fluctuations, and differing treatments of foreign earnings may further affect our profitability, cash flow, and shareholder value.
1.Risks Related to our Strategic Review, Growth Strategy and Investment Decisions
We are evaluating strategic alternatives and there can be no assurance that we will be successful in identifying or completing any strategic alternative transactions, that any such strategic alternative transactions will result in additional value for our shareholders or that the process will not have an adverse impact on our business.
As announced in August 2025, the Board is undertaking a review of a broad range of potential strategic alternatives available to the Company focused on maximizing shareholder value. Despite our continuing efforts to identify and evaluate potential alternatives, there can be no assurance that this strategic review process will result in the pursuit of any particular
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transaction or course of action, or that any transaction, if pursued, will be completed within any specific time period, on attractive terms, or at all. We have not set a timetable for completion of the review and do not intend to comment further on the status or timing of this process, unless or until the Board has approved a definitive course of action or if it is determined that other disclosure is appropriate.
Additionally, there can be no assurance that any particular course of action, business arrangement, transaction, or series of transactions will be pursued, successfully consummated, or lead to increased shareholder value. The process of reviewing strategic alternatives may be time‑consuming, costly, and disruptive to our business operations. It may divert the attention of the Board, management, and employees from day‑to‑day operations; require substantial management time and attention; and result in significant legal, financial advisory, accounting, severance, retention, and other expenses.
We may not be able to successfully implement our growth strategy, and the historical growth of our Obagi Medical and Milk Makeup Businesses may not be indicative of our future performance.
The future growth, profitability, and cash flows of our Obagi Medical and Milk Makeup businesses depend upon our ability to successfully implement our growth strategy, which, in turn, is dependent upon a number of key initiatives, including our ability to:
a.grow the awareness and relevance of the Obagi Medical and Milk Makeup brands and products;
b.maintain a regular supply of core existing products and execute effective go-to-market strategies to grow them;
c.maintain and further strengthen our relationships with our physician customers, international distributors and retail partners in each geographic market where we sell Obagi Medical products;
d.maintain and enhance our reputation as a provider of high-quality products; secure new points of distribution in new markets;
e.maintain the ability to sell our products within our existing retail partners for Milk Makeup products and operate and ship from our own e-commerce platforms without interruption;
f.enhance the productivity of our brands within our points of distribution; maintain and enhance our digital platforms and capabilities;
g.execute our go-to-market strategies effectively; protect our key talent from leaving;
h.ensure that we are able to sell our products with attractive margins that deliver profit; and
i.achieve our growth targets with the financial investments outlined in our plans for each business; and predict our growth and manage our financial investments appropriately to reach our targets.
We cannot assure you that we will successfully achieve any or all of the above initiatives in the manner or time period that we expect. Further, achieving these objectives will require investments that may result in short-term cost increases with net sales materializing on a longer-term horizon and therefore may be dilutive to our earnings. We cannot assure you that we will realize, in full or in part, the anticipated benefits we expect our growth strategy will achieve. The failure to realize those benefits could have a material adverse effect on our business, financial condition and results of operations.
We may not be successful in executing our growth strategy, and even if we achieve our strategic plan, we may not be able to achieve or sustain profitability in our business. You should not regard the historical growth rates of our Obagi Medical and Milk Makeup businesses as indicative of future performance. In the future our revenue from our Obagi Medical and/or Milk Makeup businesses could be reduced or grow more slowly than we expect. We also may incur significant losses in the future for a number of reasons, including the following risks and the other risks described in this Report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors:
a.we may lose one or more significant customers or key retailers, or sales of our products through these customers or retailers may decrease;
b.our products may be the subject of regulatory actions, including, but not limited to, actions by the FDA, the FTC and the CPSC in the U.S. and comparable foreign authorities outside the U.S.;
c.the ability of our third-party suppliers to produce our products and of our distributors to distribute our products could be disrupted, particularly if they are not able to comply with the new regulations promulgated by the FDA under MoCRA;
d.the integration of the companies may be more costly or take longer than anticipated;
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e.we may be unable to introduce new products that appeal to consumers or otherwise successfully compete with our competitors in the skincare or cosmetics industries; and
f.we may be unsuccessful in enhancing the recognition and reputation of the Obagi Medical and Milk Makeup brands, and our brands may be damaged as a result of, among other reasons, our failure, or alleged failure, to comply with applicable ethical, social, product, labor or environmental standards.
The extent of any expansion we may experience will be driven largely by the success of our new products and expanded distribution channels. As a result, management’s ability to project the size of any such expansion and its cost to Waldencast is limited by the following uncertainties: (a) we will not have previously sold any of the new products and the ultimate success of these new products is unknown; (b) we may be entering new geographic markets and/or distribution channels; and (c) the costs associated with any expansion will be partially driven by factors that may not be fully in our control (e.g., timing of hire, market salary rates). Due to the uncertainty surrounding the timing of our strategic initiatives, new product lines or the stabilization of the global markets, our costs to hire significant numbers of new employees could be higher than anticipated. Our success will also depend on the ability of our executive officers and senior management team to continue to implement and improve our operational, information management and financial control systems, and to expand, train and manage our employee base. Our inability to manage growth effectively could cause our operating costs to grow even faster than we currently anticipate and adversely affect our results of operations.
We recently acquired the business owning the exclusive distribution rights in the U.S. to the Saypha® line of hyaluronic acid (“HA”) injectable gels which are being integrated within the Obagi Medical business and product offering. This acquisition brings additional regulatory and operational complexity to the business, may result in further dilution of our shareholders as a result of contingent consideration earn outs and we may not realize the anticipated benefits of this acquisition, all of which could have an adverse effect on our business, financial condition and results of operations.
On July 23, 2025 we announced the acquisition of Novaestiq Corp. (“Novaestiq”), a growth-oriented aesthetic and medical dermatological innovations company, as well as the U.S. rights to the Saypha® line of hyaluronic acid (“HA”) injectable gels. The strategic acquisition is intended to expand Obagi Medical’s offerings beyond U.S. medical-grade skincare, and marks a pivotal step in positioning Obagi Medical as an industry leader in integrated skincare and aesthetic solutions.
As we expand our business operations into the medical devices segment, we will be required to upgrade and expand our sales force and operational and regulatory compliance functions. The medical devices industry is highly regulated, with complex and evolving requirements imposed by various governmental authorities, including the FDA. Successfully marketing and selling medical devices requires specialized knowledge, experience, and relationships within the healthcare sector, as well as a deep understanding of the applicable regulatory frameworks.
To compete effectively in this segment, we must recruit, train, and retain personnel with expertise in medical device sales and regulatory affairs. This may require substantial investments in hiring experienced professionals, developing new training programs, and implementing robust compliance systems and processes. There is no assurance that we will be able to attract or retain the necessary talent or that our current personnel will be able to adapt to the new requirements. Failure to adequately upgrade and expand our sales force and regulatory functions could result in delays in product launches, inability to achieve sales targets, increased risk of non-compliance with regulatory requirements, and potential enforcement actions, including fines, product recalls, or withdrawal of product approvals. Additionally, the costs associated with these upgrades and expansions may be significant and could adversely affect our operating results. If we are unable to effectively scale our sales and regulatory capabilities to meet the demands of the medical devices segment, our ability to successfully enter and compete in this market could be materially and adversely affected.
The Saypha® fillers are classified as medical devices and are subject to regulation by the FDA and comparable regulatory authorities in other jurisdictions. The regulatory framework governing medical devices is complex, evolving, and subject to significant change. Compliance with these requirements imposes substantial costs and operational burdens, including the need for rigorous premarket approval or clearance processes, ongoing reporting and recordkeeping obligations, and adherence to quality system regulations. Any failure to obtain, maintain, or comply with the necessary regulatory approvals or clearances for our filler products could result in enforcement actions, including warning letters, fines, product seizures, injunctions, or civil or criminal penalties. Additionally, changes in regulatory requirements, the introduction of new or more stringent standards, or increased scrutiny by regulatory authorities could delay or prevent the development, approval, or commercialization of our products, or require us to incur significant additional costs to comply with such requirements.
The Company’s decision to enter the filler business may divert the attention of its management team from its core operations. The process of evaluating, planning, and executing a new business line requires significant time, resources, and
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focus from senior management and other key personnel. This diversion could result in reduced oversight and effectiveness in managing the Company’s existing businesses, potentially leading to operational inefficiencies, missed opportunities, or a decline in the performance of the Company’s core operations. Furthermore, if the filler business does not perform as expected, the resources and attention allocated to it may not yield the anticipated returns, further exacerbating the negative impact on the Company’s overall performance. There can be no assurance that management will be able to successfully balance the demands of the new business with those of the Company’s existing operations, and any failure to do so could have a material adverse effect on the Company’s business, financial condition, and results of operations.
We may make investments into or acquire other companies, which could divert our management’s attention, result in dilution to our shareholders and otherwise disrupt our operations, and we may have difficulty integrating any such acquisitions successfully or realizing the anticipated benefits therefrom, any of which could have an adverse effect on our business, financial condition, and results of operations.
As part of our business strategy, we may seek to acquire or invest in additional businesses that we believe could complement or expand our existing and future offerings or otherwise offer growth opportunities. The success of any attempts to grow our business through acquisitions to complement our business depends in part on the availability of, our ability to identify, and our ability to engage and pursue suitable acquisition candidates. We may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on favorable terms, if at all. If we are able to complete future acquisitions, we cannot assure you that they will ultimately strengthen our competitive position or that they will be viewed positively by customers, financial markets or investors.
The pursuit of potential acquisitions may divert the attention of management and cause us to incur various expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated, and the costs incurred likely would not be recoverable. In addition, we have limited experience in acquiring other businesses and may have difficulty integrating acquired businesses or assets, or otherwise realizing any of the anticipated benefits of acquisitions. If we acquire additional businesses, we may not be able to integrate the acquired operations and technologies successfully, or effectively manage the combined business following the acquisition. Integration may prove to be difficult due to the necessity of integrating personnel with disparate business backgrounds, different geographical locations and who may be accustomed to different corporate cultures. Additionally, with multiple business combinations, we could face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of multiple acquired companies with different businesses in a single operating business.
We also may not achieve the anticipated benefits from any acquired business due to a number of factors, including:
a.inability to integrate or benefit from acquired products or technologies in a profitable manner;
b.unanticipated costs or liabilities, including legal liabilities, associated with any such acquisition, or other accounting consequences; diversion of management’s attention or resources from other business concerns;
c.adverse effects on our business relationships with existing customers, members or strategic partners as a result of the acquisition; potential loss of the acquired company’s customers;
d.failure to develop further the acquired company’s technology;
e.complexities associated with managing the geographic separation of acquired businesses and consolidating multiple physical locations;
f.becoming subject to new regulations as a result of an acquisition, including if we acquire a business serving customers in a regulated industry or acquire a business with customers or operations in a country in which we do not already operate;
g.coordination of product development and sales and marketing functions; the potential loss of key employees;
h.acquisition targets not having as robust internal controls over financial reporting as would be expected of a public company;
i.possible cash flow interruption or loss of revenue as a result of transitional matters; and
j.use of substantial portions of our available cash or issuance of dilutive equity to consummate an acquisition.
We may issue equity securities or incur indebtedness to pay for any such acquisition or investment, which could adversely affect our business, financial condition or results of operations. Any such issuances of additional capital stock may cause shareholders to experience significant dilution of their ownership interests.
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In addition, we may not realize benefits from any business combination that we undertake. If we fail to successfully integrate such businesses, or the technologies associated with such business combinations into our Company, the revenue and operating results of the combined company could be adversely affected. If our customers are uncertain about our ability to operate on a combined basis, they could delay or cancel orders for our products. We may not successfully evaluate or utilize the acquired technology or accurately forecast the financial impact of a combination, including accounting charges or volatility in the stock price of the combined entity.
We may face impairment of intangible assets, unknown or contingent liabilities and other charges or write-downs that could negatively impact our financial condition, profitability, and the value of our securities.
We face potential exposure to unknown or contingent liabilities, which could negatively impact our financial condition and the value of our securities. Despite thorough due diligence during the acquisitions of Obagi Medical and Milk Makeup, we cannot guarantee that all material risks have been identified. Furthermore, unforeseen factors outside our control may emerge, potentially requiring us to write down or write off assets, restructure operations, or incur impairment charges. For example, after reassessing the Obagi Medical and Milk Makeup businesses, we recorded a $132.1 million and a $20.0 million non-cash impairment charge respectively during the year ended December 31, 2025 due to discrepancies between projected and actual performance post-acquisition. These risks, compounded by the lack of indemnification rights in the acquisition agreements, could significantly reduce the value of equity holder investments and contribute to negative market perceptions of our securities.
The impairment of intangible assets, which form a substantial portion of our total assets, poses another challenge to profitability. Our intangible assets, including goodwill and trademarks, rely on fair value estimates based on management’s assumptions and judgments, which may prove inaccurate. As of December 31, 2025, intangible assets and goodwill constituted approximately 81.0% of our total assets. A further reduction in the fair value of our intangible assets could materially impact our financial performance.
Both the Obagi Medical and Milk Makeup reporting units remain highly sensitive to impairment risks following the impairment charges recorded in 2025. Consequently, both units maintain only a narrow margin between their carrying values and fair values. As of December 31, 2025, goodwill balances stood at $62.5 million for Obagi Medical and $115.1 for Milk Makeup. Future impairments may be triggered by macroeconomic volatility—such as inflation or market downturns—or if revenue and profitability fall short of projections. Such charges would adversely impact our financial results and could signal the need for further adjustments in subsequent periods.
2.Risks Related to Cash Flow and Liquidity
If we fail to generate sufficient cash flow from our operations, we may be unable to support the growth of our brands.
We expect capital and operating expenditures to increase over the next several years as we expand our international footprint and distribution channels, as well as invest in innovation, marketing activities and group infrastructure for our Obagi Medical and Milk Makeup businesses. In addition, we incur central costs relating to supporting our operations as a public company and in connection with legacy matters.
However, our present and future funding requirements will depend on many factors, including, among other things:
a.acquisitions or disposals of additional businesses in the beauty and wellness industry;
b.costs relating to regulatory investigations or litigation;
c.the level of selling, marketing and innovation investment required to maintain and improve our competitive positions in the skincare and makeup markets; the success of our product sales and related collections of accounts receivable;
d.our need or decision to acquire or license complementary products or technologies for our Obagi Medical and/or Milk Makeup businesses;
e.costs relating to the expansion of our distribution channels and setting up direct distribution channels in certain international markets;
f.costs relating to the expansion of our sales force, management and operational support; competing technological and market developments;
g.costs relating to changes in regulatory policies or laws, including as a result of executive orders, that affect our operations; and
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h.working capital needs driven by inventory and account receivables relating to our U.S. and international expansion.
To the extent we are unable to generate sufficient cash flow, we may be forced to cancel, reduce or delay marketing initiatives, investments or acquisitions. We may have to raise additional funds, and we cannot be certain that such funds will be available on acceptable terms when needed, if at all. The incurrence of additional indebtedness would result in increased debt service obligations and operating and financing covenants that could restrict our operations and the issuance of any additional equity could result in dilution to our existing shareholders.
The financial performances of our brands are unpredictable, with histories of net losses and potential future declines in sales and operating results.
Our quarterly operating results have been historically variable and are likely to remain so due to numerous factors, many of which are beyond our control. These include fluctuations in consumer spending, demand for our products, and changes in market acceptance or treatment practices. Operational challenges, such as higher manufacturing costs, supply chain disruptions, or increased competition, also contribute to the unpredictability of our results. Additionally, external factors like economic slowdowns, legal costs, tariffs, and changes into discrepancies between projected tax rates can impact performance. Seasonal trends, such as reduced summer sales and higher fourth-quarter demand, further add to this variability, making it difficult to rely on quarterly comparisons or predict future performance with accuracy. Investors should exercise caution when evaluating our quarterly results.
Our financial results may also be impacted by the unique challenges faced by our Obagi Medical and Milk Makeup businesses, whose historical performance does not fully reflect our current operations or future potential. As standalone entities, these businesses did not bear the public company costs we now incur, such as compliance with Sarbanes-Oxley and investor relations. The financial conditions presented in historical reports are affected by significant costs from our business combination and adjustments to our capital structure, making future comparisons challenging. Investors may find it difficult to evaluate trends or assess our relative performance based on past data.
Each of our brands has a history of operating losses and may face continued challenges in achieving profitability. Despite increasing distribution channels and investments in product development, marketing, and operations, we continue to implement structural decisions to position the brands for future success, some of which may have a temporary negative impact on revenue or profitability. Success depends heavily on anticipating and adapting to rapidly shifting consumer beauty trends and preferences. Challenges such as acceptance of new product launches, delays in supply chains, and potential cannibalization of existing product sales could impede growth and profitability. These risks, combined with the competitive nature of the aesthetics and cosmetics industries, could materially affect our financial condition and operations.
Failure to comply with any of the covenants under our Lumina Credit Agreement could result in an event of default, which may accelerate our outstanding indebtedness and have a material adverse effect on our business, liquidity and financial position.
We are subject to a financial covenant under the Lumina Credit Agreement. Our ability to comply with the financial covenant under the Lumina Credit Agreement will depend on the success of our businesses, our operating results, and our ability to achieve our financial forecasts. Various risks, uncertainties and events beyond our control, including general or industry-specific economic downturns, could affect our ability to comply with the financial covenant and terms of the Lumina Credit Agreement. In addition, the Lumina Credit Agreement also requires us, among other things, to timely deliver certain financial statements to the Lenders. In addition, the Lumina Credit Agreement also requires us to comply with affirmative and negative covenants further described in “Item 5. Waldencast’s Operating and Financial Review and Prospects – Recent Events – Lumina Credit Agreement”.
One of the covenants requires us to, under certain circumstances, provide the Lenders with the right to appoint an investment bank to effect a Liquidity Event (as defined in the Lumina Credit Agreement). This could result in the sale of assets that are critical to our operations, potentially disrupting our business and adversely affecting our results of operations. In addition, the Lumina Credit Agreement requires us to issue warrants to the Lenders that hold Term Tranche B Loans to purchase up to 1,000 ordinary shares of the Company per $1,000 principal amount of Term Tranche B Loans then outstanding on or prior to July 1, 2026, so long as any Term Tranche B Loans are then outstanding. Those warrants, to the extent issued and exercised by the Lenders, would increase the number of shares eligible for future resale in the public market, reduce the market price of our common stock could result in dilution to our shareholders. The extent of such dilution will depend on the number of shares issued and the market value of our common stock at the time of issuance.
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There can be no assurance as to the timing or amount of any such issuances. Failure to comply with the covenants and other terms could result in an event of default and the acceleration of amounts owing under the Lumina Credit Agreement unless we are able to negotiate a waiver. The Lenders could condition any such waiver on an amendment to the Lumina Credit Agreement on terms that may be unfavorable to us. Under these circumstances, other sources of capital may not be available or may be available only on unfavorable terms.
Certain repayments, prepayments or accelerations under the Lumina Credit Agreement are subject to a significant prepayment premium, which represent a minimum guaranteed return on the Term Loans that is calculated as a multiple of the principal being repaid, prepaid or accelerated. Such prepayment premium may materially limit our ability to refinance or repay the Term Loans prior to maturity.
If we fail to comply with the covenants and other terms under the Lumina Credit Agreement and we are unable to negotiate a covenant waiver or replace or refinance the credit agreement on favorable terms, our business, financial condition and results of operations could be materially and adversely impacted.
If we fail to manage our inventory of products effectively, our results of operations, financial condition and liquidity may be materially and adversely affected.
Both our Obagi Medical and Milk Makeup businesses require us to manage large volumes of inventory effectively. We depend on our forecasts of demand for, and popularity of, various products to make purchase decisions and to manage our inventory of stock-keeping units (“SKUs”). Demand for products, however, can change significantly between the time inventory or components are ordered and the date of sale due to the long lead times required to manufacture our products. Demand may be affected by new product launches, changes in customer preferences, demand or spending patterns, changes in product cycles and pricing, product defects, and promotions. It may be difficult to accurately forecast demand and determine appropriate levels of products or components. Our ability to accurately forecast demand may be further hindered in the future as we expand the percentage of our sales made outside of the U.S. because we depend on our international distributors and retailers to provide us with forecasts for demand for our products in their respective territories.
If we or our distributors overestimate demand, our distributors or retail partners may not be able to sell their existing inventory to their customers, which may affect their ability to timely pay us and their demand for products in the future. We may be required to recognize inventory write-offs and increase our reserves for product returns in the future, particularly if our estimates relating to demand in certain of our markets or with respect to certain of our product lines are incorrect. If our distributors or retailers reduce their inventory for our products, it could result in lower sales for us during that period, leading to a mismatch in expected sales. For Milk Makeup specifically, if inventory levels fall too low by the retailer, we risk stockouts on retail shelves, which would reduce retail sales and, in turn, decrease demand for further inventory. As we do not have control over the inventory management decisions made by our retailers, their actions directly influence our sales volume and could create significant fluctuations in our revenues, ultimately impacting our operating results.
On the other hand, if we or our distributors or retailers underestimate demand, we may not have sufficient inventory of products to ship to our customers. Obagi Medical products have expiration dates that generally range from 24 to 36 months from the date of manufacture. We estimate the amount of potentially excess, dated or otherwise impaired inventories that we may have to write down. Although our estimates are reviewed quarterly for reasonableness, our product return activity could differ significantly from our estimates. Judgment is required in estimating the amount of inventory that may be written down and we rely on data from third parties, including, but not limited to, distributor forecasts and independent market research reports. The actual amounts could be different from our estimates, and differences are accounted for in the period in which they become known. If we determine that the actual amounts exceed our reserve amounts, we will record a charge to earnings to approximate the difference. A material reduction in earnings resulting from a charge would have a material adverse effect on our net income, results of operations, and financial condition.
Our only material asset is our indirect interest in Waldencast LP, and we are accordingly dependent upon distributions from Waldencast LP to pay dividends, taxes and other expenses.
We are a holding Company with no material assets other than indirect equity interests in Waldencast LP. As such, we do not have any independent means of generating revenue or cash flow, and our ability to pay taxes and operating expenses or declare and pay dividends in the future, if any, will be dependent upon the results of operations and cash flows of Waldencast LP and its subsidiaries, including Obagi Medical and Milk Makeup. We intend to cause Waldencast LP to make distributions to its members, including Holdco 1, in an amount at least sufficient to allow for the payment of all
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applicable taxes, and to pay our corporate and other overhead expenses and those of Holdco 1. We cannot assure you, however, that Waldencast LP and its subsidiaries will generate sufficient cash flow to distribute funds to Holdco 1, or that applicable legal and contractual restrictions, including negative covenants in Waldencast LP’s debt instruments, will permit such distributions. It could materially and adversely affect our liquidity and financial condition if Waldencast LP is restricted from, or otherwise unable to, distribute sufficient cash to us.
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.
In April 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by SPACs entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to tender offers following a business combination, which terms are similar to those contained in the Warrant Agreement (defined below).
As a result, we reevaluated the accounting treatment of our 11,500,000 public warrants and 5,933,333 private placement warrants and have recorded derivative liabilities related to embedded features contained within our warrant on our balance sheet as of December 31, 2025 and 2024. Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging (“ASC 815”), provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly based on factors that are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our warrants each reporting period and that the amount of such gains or losses could be material.
The obligations associated with being the publicly traded entity in the “Up-C” structure involve significant expenses and require significant resources and management attention, which may divert from our business operations.
As the publicly traded entity in an Up-C structure, we are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act. The Exchange Act requires the filing of annual, quarterly and current reports with respect to a public company’s business and financial condition. The Sarbanes-Oxley Act requires, among other things, that a public company establish and maintain effective internal control over financial reporting. As a result, we incur significant legal, accounting and other expenses. Our entire management team and many of our other employees will continue to need to devote substantial time to compliance matters related to the Up-C structure and regulatory requirements associated with being a publicly traded entity. We bear all of the internal and external costs of preparing and distributing periodic public reports in compliance with our obligations under the securities laws. Given the current scale of our business, the costs associated with being a public company (including legal, accounting, compliance and governance expenses) are disproportionately high relative to our revenues and overall size. These public company costs, which include but are not limited to expenses for external advisors, audit and internal control compliance, investor relations and regulatory filings, may place a significant strain on our financial resources. If we are unable to grow our business or otherwise achieve sufficient scale, there is a risk that we may not be able to sustain these public company costs on an ongoing basis. This could adversely affect our ability to comply with our reporting and regulatory obligations or require us to consider strategic alternatives, including cost reductions, restructuring, or changes to our public company status.
In addition, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act, and the related rules and regulations implemented by the SEC and Nasdaq, have increased legal and financial compliance costs and have and may continue to make some compliance activities more time-consuming. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us, and our business may be harmed. In the future, it may be more expensive or more difficult for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified people to serve on our Board, our Board committees or as executive officers.
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We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.
In order to maintain our current status as a foreign private issuer, either (a) more than 50% of our outstanding voting securities must be either directly or indirectly owned of record by non-residents of the U.S. or (b)(i) a majority of our executive officers or directors may not be U.S. citizens or residents, (ii) more than 50% of our assets cannot be located in the U.S. and (iii) our business must be administered principally outside the U.S. On an annual basis, we are required to assess whether we meet these criteria as of the last business day of our second fiscal quarter. Although we have elected to comply with certain U.S. regulatory provisions, our loss of foreign private issuer status would make such provisions mandatory. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. If we are not a foreign private issuer, we will be required to file periodic reports and registration statements on U.S. domestic issuer forms with the SEC, which are more detailed and extensive than the forms available to a foreign private issuer. For example, the annual report on Form 10-K requires domestic issuers to disclose executive compensation information on an individual basis with specific disclosure regarding the domestic compensation philosophy, objectives, annual total compensation (base salary, bonus, and equity compensation) and potential payments in connection with change in control, retirement, death or disability, while this Report permits us to disclose compensation information on an aggregate basis. We would also have to mandatorily comply with U.S. federal proxy requirements, and our officers, directors, and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the Exchange Act. We may also be required to modify certain of our policies to comply with good governance practices associated with U.S. domestic issuers. The additional requirements that we would become subject to and any modification of our policies if we were to lose our foreign private issuer status could lead us to incur significant additional legal, accounting and other expenses. In addition, we may lose our ability to rely upon exemptions from certain corporate governance requirements on U.S. stock exchanges that are available to foreign private issuers.
Further, in June 2025, the SEC issued a concept release soliciting public comment on potential changes to the definition of a foreign private issuer. This release is the first review of the foreign private issuer framework since 2008, and the SEC is considering revisions that could significantly impact which foreign companies qualify for the more-relaxed U.S. reporting requirements afforded to foreign private issuers. The concept release outlines several potential approaches to revising the foreign private issuer definition, including updating existing eligibility criteria, adding foreign trading volume requirements, and incorporating an assessment of foreign regulation.
3.Risks Related to Internal Controls and Financial Reporting
We have previously identified and disclosed material weaknesses in our internal control over financial reporting. If we fail to fully remediate these material weaknesses or otherwise are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
As previously disclosed, during the preparation of our consolidated financial statements for the fiscal year ended December 31, 2022, we identified material weaknesses in our internal control over financial reporting related to implementation of control activities, monitoring of the control environment, the implementation of a formal risk assessment process, and the implementation of the delegation of authority.
Although management has been actively engaged in ongoing remediation efforts to address these material weaknesses, including by enhancing the control environment, improving oversight, hiring additional key personnel, emphasizing the importance of internal controls and creating a more robust internal control environment, these material weaknesses have not been fully remediated as of December 31, 2025.
We will continue working to improve the operating effectiveness of our internal control over financial reporting and the timeliness of those procedures during the calendar year-ended December 31, 2026. Notwithstanding the identified material weaknesses, our management has concluded that the consolidated financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with GAAP. See “Item 15- Controls and Procedures” for further information.
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Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. As noted above, we have taken a number of measures to remediate the material weaknesses and continue to evaluate steps to enhance our internal controls. However, these remediation measures have been and may continue to be time consuming and costly and we cannot assure you that these initiatives will ultimately have the intended effects. If we are unable to remediate our material weaknesses in a timely manner or identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and may incorrectly report financial information. Any of these events, whether they have or were to occur, could have a material adverse effect on our business. In addition, the existence of material weaknesses in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our securities.
We cannot assure you that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting. Even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.
We will be required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act beginning with our Form 20-F for the fiscal year ending December 31, 2026, and there is a risk that we may not be able to achieve full compliance on a timely basis.
Beginning with our annual report on Form 20-F for the fiscal year ending December 31, 2026, we will be required to comply fully with Section 404 of the Sarbanes-Oxley Act (“SOX”), including obtaining an attestation report from our independent registered public accounting firm regarding the effectiveness of our internal control over financial reporting (“ICFR”). The process of designing, implementing, and maintaining effective ICFR that meets the standards required under SOX is time-consuming, costly, and complex. There is a risk that we may not be able to complete all necessary steps to achieve full SOX compliance, including auditor attestation, by the required deadline. If we are unable to implement and maintain effective ICFR or to remediate any existing material weaknesses before the required compliance date, we could be subject to regulatory scrutiny, penalties, or other adverse consequences. In addition, our ability to access the capital markets and the confidence of investors in our financial reporting could be adversely affected.
We are subject to an investigation by the SEC and may face litigation and other risks as a result of the previously filed restatement of our financial results and previously disclosed material weaknesses in our internal control over financial reporting.
As a result of the restatement of our financial results for certain Predecessor Periods, the previously disclosed material weaknesses in our internal control over financial reporting described below, and other matters raised or that may in the future be raised by the SEC, we are subject to an ongoing investigation by the SEC and may be exposed to a number of additional risks and uncertainties, including (i) potential litigation or other disputes or investigations that may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and preparation and/or restatement of our financial statements for certain Predecessor Periods; (ii) costs for accounting, advisory and legal fees in connection with or related to such matters which may be difficult to forecast appropriately; and (iii) fines, penalties or other actions required as the outcome of government investigations, all of which could result in a potential loss of investor confidence and/or a negative impact on the price of our securities.
As previously disclosed, we proactively and voluntarily self-reported our review of the historical accounting used by Obagi to the SEC. In connection with this matter, we received a document subpoena in September 2023. We are fully cooperating with the SEC’s investigation and believe we have completed the production of information requested by the SEC. However, we cannot predict when such matters will be fully completed or the outcome or potential impact of this matter on our business, investor confidence or the price of our securities. Any remedial measures, sanctions, fines or penalties, including, but not limited to, financial penalties and awards, injunctive relief and compliance conditions, which may be imposed on us in connection with this matter could have a material adverse effect on our business, financial condition and results of operations. Additionally, the investigation has resulted in substantial costs and we are likely to continue to incur substantial costs, regardless of the outcome of the investigation.
As of the date of this Report, other than the investigation noted above, we have no knowledge of any other litigation or dispute arising from the previously disclosed material weaknesses in our internal control over financial reporting, the preparation of our financial statements and/or the restatement of our financial results for certain Predecessor Periods.
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However, we cannot assure you that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition. We cannot assure you that the SEC or another regulatory body will not make further regulatory inquiries or pursue action against us and our senior officers.
4.Risks of Conducting International Business
Conducting international business exposes us to risks such as currency fluctuations, cash repatriation restrictions, and changes in laws and regulations, which could negatively impact our operations and financial performance.
The international expansion of Obagi Medical and Milk Makeup products is a core growth strategy for the Company. With an increasing share of revenue derived from international sales, the Company has expanded its presence in Southeast Asia. However, challenges including the complexities of setting up direct distribution networks in new markets have arisen. Establishing a presence in these markets requires significant investments in facilities, personnel, and product registration, with potential delays in revenue realization due to regulatory and market entry hurdles. While these efforts aim to strengthen the Company’s foothold in new regions, success is uncertain due to the many risks associated with global expansion.
The Company’s success in international markets depends on securing necessary licenses, building local relationships, and tailoring products to local consumer preferences. Economic, political, and regulatory environments in regions like South East Asia pose additional challenges. For instance, Vietnam’s regulatory landscape is complex and often lacks clarity, making it difficult to obtain and maintain necessary licenses. The Company faces risks such as evolving regulations, differences in legal interpretations, and uncertainties in enforcing legal rights, which could disrupt operations. These challenges are compounded by the need to navigate the legal nuances of new markets.
Expanding into international markets also entails compliance with diverse regulations and intellectual property protections. Some of these markets may have less robust intellectual property laws, increasing the risk of counterfeit products. Additionally, obtaining and maintaining regulatory approvals in multiple jurisdictions is time-consuming and fraught with uncertainties, similar to FDA approval processes. External factors like changes in labeling requirements or adverse regulatory evaluations could hinder operations and reduce the Company’s ability to compete effectively in global markets. Furthermore, the third parties we rely on internationally may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.
The Company’s reliance on international sales exposes it to broader risks inherent in global operations. These include economic instability, fluctuating exchange rates, local consumer preferences, trade disputes, including the imposition and enforceability of tariffs and related uncertainties, including U.S. tariffs imposed or threatened to be imposed, any retaliatory actions taken by other countries and uncertainties regarding the ability to obtain refunds for previously paid tariffs that have subsequently been invalidated, or sanctions, and compliance with anti-bribery and competition laws. Moreover, factors like natural disasters or the failure of distribution partners could negatively impact the business. With its revenue denominated in various currencies, the Company is also vulnerable to foreign exchange rate fluctuations and potential restrictions on cash repatriation, which could affect financial performance and operational flexibility.
Regulatory changes in international markets, especially concerning product classifications and safety standards, could impact the Company’s ability to operate. For example, in the EU, evolving standards for ingredients like alpha- and beta-arbutin, used in Obagi Medical’s products, highlight the complexities of compliance. Uncertainty around their safety, stability, and aggregate exposure has led to calls for additional scientific data. Regulatory restrictions on key ingredients such as hydroquinone and retinol further complicate market entry and product formulation, demonstrating the regulatory risks that could significantly affect the Company’s growth and operations in international markets.
Emerging risks such as economic downturns, global conflicts, and public health emergencies could significantly impact consumer spending and adversely affect our operations and financial performance.
Emerging risks for our business stem from economic pressures, geopolitical uncertainties, and public health challenges. Adverse economic conditions, such as inflation, rising interest rates, or an economic slowdown, could reduce consumer disposable income and significantly diminish spending on discretionary beauty and wellness products. As our products are not reimbursable by health insurers and rely on consumer choice, a shift in spending priorities could negatively affect our
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sales and profitability. Economic uncertainties may also disrupt our supply chain as suppliers or third-party partners face financial or operational challenges, leading to material shortages or service disruptions that could impair our operations.
Global or regional geopolitical and security issues pose additional risks. Armed conflicts, political instability, trade policy changes, natural disasters, and public health emergencies have the potential to disrupt supply chains and hinder business operations. These events, along with changes in import/export regulations, tariffs and related uncertainties, or sanctions, could impose additional costs or reduce access to key markets, thereby negatively affecting our ability to deliver products efficiently or maintain market presence. Trade tension and/or the imposition and enforceability of tariffs or other changes in trade policies and related uncertainties (including U.S. tariffs imposed or threatened to be imposed, any retaliatory actions taken by other countries and uncertainties regarding the ability to obtain refunds for previously paid tariffs that have been subsequently invalidated) could materially and adversely affect our business, financial condition and results of operations.
The expiration of the COVID-19 public health emergency in 2024 does not eliminate the risk of future disruptions. New pandemics, variants, or other unforeseen events could replicate the supply chain, operational, and consumer behavior challenges previously encountered. Any future pandemic, epidemic, natural disaster or other unanticipated event could require us to make similar unplanned investments or adversely affect our business, financial condition and results of operations.
Changes in international trade, namely in relation to global customs duties and indirect taxes, could significantly affect our reported earnings and cashflows.
Waldencast and its associated brands operate in a globally regulated industry with its supply chain and distribution channels operating across borders. Changes in trade policies, customs duties, VAT/GST and other indirect taxes could impact our cost structure and operational efficiency. Shifts in global trade policy and related uncertainties may lead to changes in tariff rates, trade agreements, or enforcement priorities, affecting our imports and exports. Additionally, evolving regulations on product classification, sustainability requirements, and ethical sourcing—such as restrictions on certain ingredients or increased compliance with supply chain due diligence—could introduce additional costs and complexities. While we continuously monitor and adapt to regulatory changes, unexpected shifts in tax laws, trade policies, or customs enforcement could materially impact our financial performance and global supply chain.
5.Regulatory and Legal Risks and Risks Related to Litigation
The design, development, manufacture and sale of our products involve the risk of product liability and other claims by consumers and other third parties, and our insurance may be insufficient to cover any such claims.
The design, development, manufacture, and sale of skincare and cosmetic products carry inherent risks of product liability claims, which could result in significant costs and harm to the business. Adverse reactions, even when products are used as directed, could lead to negative publicity, regulatory sanctions, or product recalls. Monitoring for adverse events is essential, as increases in complaints may indicate changes in product specifications or efficacy. Additionally, liability risks may arise from issues such as contamination, inadequate instructions or warnings, or side effects. Product liability claims could exceed insurance coverage, impacting financial resources, and requiring higher insurance premiums or deductibles. This risk is heightened with the introduction of new products, and past industry cases have shown substantial damage awards for similar claims.
Beyond product liability, the Company may face claims or investigations related to compliance, product regulation, environmental or safety concerns, employment practices, or intellectual property disputes. Negative publicity, whether valid or not, about product safety, efficacy, or side effects can harm market acceptance, reduce consumer trust, and lead to increased claims or litigation. Such issues could result in substantial financial losses, restrictions on sales, and damage to the Company's reputation, potentially impacting stock prices and business operations significantly.
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If intellectual property used by our companies, our contract manufacturers, or suppliers is breached, terminated, or disputed, our ability to commercialize dependent products may be potentially compromised, any resulting claims or litigation could further divert our resources, expose us to significant liabilities, and lead to substantial litigation expenses or the loss of proprietary rights.
We rely on licensing agreements with third parties for certain product and device technologies. If these licenses are terminated, breached, or disputed, our ability to develop and commercialize products that depend on these technologies could be significantly impacted which may result in a direct impact to revenue. Additionally, licensors may not uphold their contractual obligations or prevent third parties from infringing on licensed technologies, which could lead to legal disputes and financial consequences. Any loss of key licenses could materially and adversely affect our financial condition and operating results.
We source products from manufacturers and suppliers who hold patent licenses from third parties. If disputes arise over these licensed rights, we may face legal action from third-party licensors, potentially resulting in financial damages or injunctions that could disrupt our supply chain and sales. Additionally, disagreements over patent validity or royalty obligations could lead to complex and costly disputes, which may negatively affect our operations and ability to commercialize licensed products.
We may also need to engage in litigation to protect or enforce our intellectual property rights, or we may become the target of infringement claims from competitors or other third parties. Given the extensive number of issued and pending patents in our industry, we could face challenges to our patents, be involved in interference proceedings, or be required to defend our patent applications in foreign jurisdictions. Such legal proceedings can be expensive, time-consuming, and resource-intensive, diverting management’s focus from business operations.
Laws, regulations, enforcement trends or changes in existing regulations governing the formulation, manufacturing, testing, approval, distribution, marketing and sale of our products to consumers could harm our business.
Our products are subject to regulation by the FDA, FTC, and comparable state, local and foreign regulatory authorities, including the European Commission, and, over time, the regulatory landscape for our products has become more complex with increasingly strict requirements. If the laws and regulations governing our products continue to change, we may find it necessary to alter some of the ways we have traditionally marketed our products to stay in compliance with applicable regulations, and this could add to the costs of our operations and have a material adverse effect on our business. To the extent federal, state, local or foreign regulatory requirements regarding consumer protection, or the ingredients, claims or safety of our products continue to change in the future, such changes could require us to reformulate or discontinue certain products, apply for new or different marketing authorizations, revise product packaging or labeling, or adjust operations and systems, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on our business, financial condition and results of operations. Noncompliance with applicable regulations could result in enforcement action by the FDA, FTC, or other regulatory authorities within or outside the U.S., including, but not limited to, product seizures, injunctions, product recalls, and criminal or civil monetary penalties, all of which could have a material adverse effect on our business, financial condition and results of operations.
The MoCRA, enacted by Congress in late December 2022, introduced new compliance obligations for manufacturers and other “responsible persons” who sell cosmetic products in the U.S. and significantly expanded the FDA’s authority to regulate cosmetic products. Under MoCRA, companies are obligated to adhere to new requirements for cosmetics, such as new labeling standards for specific products, safety substantiation, facility registration, product listing, adverse event reporting, compliance with cGMPs, mandatory recalls and record-keeping requirements for such products and the manufacturing facilities in which they are produced, among other things. Our operations could be harmed if regulatory authorities make determinations that we or our CMOs are not in compliance with regulatory requirements.
We are also subject to FTC rules and regulations as well as state consumer protection laws. If we are unable to show adequate substantiation for our product claims, our claims are otherwise perceived to be unlawful or deceptive, our promotional materials make claims that exceed the scope of allowed claims for the classification of the specific product, or we do not adhere to certain disclosures, the FDA, the FTC or other regulatory authorities could take enforcement action or impose penalties or fines, require us to revise our marketing materials, amend our claims or stop selling certain products, all of which could harm our business, financial condition and results of operations. Any regulatory action or penalty could lead to class actions, or private parties could seek to challenge our claims even in the absence of formal regulatory actions, which could harm our business, financial condition and results of operations.
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Our products may also be subject to regulation by the CPSC in the U.S. under the provisions of the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008. These statutes and the related regulations ban consumer products that fail to comply with applicable product safety laws, regulations and standards. The CPSC has the authority to require the recall, repair, replacement or refund of any such banned products or products that otherwise create a substantial risk of injury and may seek penalties for regulatory noncompliance under certain circumstances. The CPSC also requires manufacturers of consumer products to report certain types of information regarding products that fail to comply with applicable regulations. Certain state laws also address the safety of consumer products, and mandate reporting requirements, and noncompliance may result in penalties or other regulatory action.
Moreover, new or revised government laws, regulations or guidelines could result in additional compliance costs and, in the event of non-compliance, civil remedies, including fines, injunctions, withdrawals, recalls or seizures and confiscations, as well as potential criminal sanctions, any of which could have an adverse effect on our business, financial condition, results of operations and prospects.
Any legal proceedings, investigations or claims against us could be costly and time-consuming to defend, and, if adversely decided or settled, could materially and adversely affect our business, financial condition and results of operations and could harm our reputation regardless of the outcome. In addition, our business and operations could be negatively affected if they become subject to any securities litigation or shareholder activism, which could cause us to incur significant expense, hinder execution of business and growth strategy and impact our share price.
We are and may in the future become subject to legal proceedings, investigations, such as the SEC investigation described elsewhere herein, and claims, including claims that arise in the ordinary course of business, such as claims by customers, claims or investigations brought by regulators or employment claims made by our current or former employees and independent contractors. Such claims may also involve our directors or management.
In general, claims made by or against us in disputes and other legal or regulatory proceedings can be expensive and time-consuming to bring or defend against, requiring us to expend significant resources and divert the efforts and attention of our management and other personnel from our business operations. These potential claims include, but are not limited to, personal injury claims, class action lawsuits, intellectual property claims, employment litigation and regulatory investigations and causes of action relating to the advertising and promotional claims about our products. For instance, we may face claims of trademark or copyright infringement for the use of images, pictures, or materials used in promotional materials on social media platforms. Any adverse determination against us in these proceedings, or even the allegations contained in the claims, regardless of whether they are ultimately found to be without merit, may also result in settlements, injunctions or damages that could have a material adverse effect on our business, financial condition and results of operations.
We are not currently a party to any pending or, to our knowledge, threatened litigation that will or could be expected to have a material impact on our business, financial condition and results of operations. We are currently subject to an SEC investigation described in “Item 4. Information on the Company—B. Business Overview—Legal Proceedings” and “Item 8. Financial Information—Note 17. Commitments and Contingencies.” Any litigation, investigation or claim, whether meritorious or not, could harm our reputation, will increase our costs and may divert management’s attention, time and resources, which may in turn harm our business, financial condition and results of operations. Insurance might not cover such claims, might not provide sufficient payments to cover all the costs to resolve one or more such claims and might not continue to be available on terms acceptable to us. A claim brought against us for which we are uninsured or underinsured could result in unanticipated costs, potentially harming our business, financial position and results of operations.
In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company. Shareholder activism, which could take many forms or arise in a variety of situations. Volatility in the share price of our Class A ordinary shares, impediments to our securityholders’ ability to trade our restricted securities, regulatory investigations or litigation relating to the restatement of our financial statements for certain Predecessor Periods or other reasons may in the future cause us to become the target of securities litigation or shareholder activism. Securities litigation and shareholder activism, including potential proxy contests, could result in substantial costs and divert management’s and our Board’s attention and resources from our business. Additionally, such securities litigation and shareholder activism could give rise to perceived uncertainties as to our future, adversely affect our relationships with suppliers and service providers and make it more difficult to attract and retain qualified personnel. Also, we may be required to incur significant legal fees and other expenses related to any securities litigation and activist shareholder matters. Further, our share price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any securities litigation and shareholder activism.
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We are subject to the U.K. Bribery Act, the FCPA and other anti-corruption laws and anti-money laundering laws. Failure to comply with these laws could subject us to penalties and other adverse consequences.
Our operations are subject to anti-corruption laws, including the Bribery Act, the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, and other anti-corruption laws and anti-money laundering laws that apply in countries where we conduct activities or may conduct activities in the future. The Bribery Act, the FCPA and these other anti-corruption laws generally prohibit us and our employees, agents, representatives, distributors, retailers, other business partners, and third-party intermediaries from authorizing, promising, offering, providing, soliciting, or receiving, directly or indirectly, improper or prohibited payments, or anything else of value, to or from recipients in the public or private sector in order to obtain or retain business or gain some other business advantage. These laws have been enforced aggressively in recent years and are interpreted broadly. Under the Bribery Act, we may also be liable for failing to prevent a person associated with us from committing a bribery offense. Additionally, we are required to comply with all applicable economic and financial sanctions and trade embargoes, and export/import control laws.
We sell our products in several countries outside of the U.S. and will continue to rely on local distributors and partners to expand and build out our operations in relevant markets. We, or any of our local distributors and other third parties may have direct or indirect interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or other illegal activities of these local distributors and partners, even if we do not explicitly authorize or have actual knowledge of such activities. While we strive to put in place the relevant controls to identify high-risk individuals and entities before contracting with them, we operate in a number of jurisdictions that pose a high risk of potential Bribery Act or FCPA violations. The Bribery Act and FCPA present particular challenges in the prescription product industry, because, in many countries, hospitals and clinics are run by the government, and doctors and other hospital or clinic employees may therefore be considered foreign officials. We cannot assure you that all of our local distributors or other third parties will comply with all applicable laws, for which we may be ultimately held responsible. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted and as we increase our international sales and business, our risks under these laws may increase.
Due to the changing nature of and uncertainties related to the regulatory environment, we cannot be certain if or how the U.S. Department of Justice’s (“DOJ”) enforcement of the FCPA will change or its impact on our business.
Some of these anti-corruption laws also require that we keep accurate books and records and maintain internal controls and compliance procedures reasonably designed to prevent any corrupt conduct. While we have policies and procedures to address compliance with those laws, we cannot assure you that none of our employees, agents, representatives, business partners or third-party intermediaries will take actions that violate our policies and applicable law, for which we may be ultimately held responsible. In addition, we cannot predict the nature, scope or effect of future regulatory requirements to which our international operations might be subject or the manner in which existing laws might be administered or interpreted.
Any violations of these anti-corruption laws, or even allegations of such violations, can lead to an investigation and/or enforcement action, which could disrupt our operations, involve significant management distraction and lead to significant costs and expenses, including legal fees. If we, or our local distributors or other third parties, are found to have engaged in practices that violate these laws and regulations, we could suffer hefty fines and severe penalties, profit disgorgement, injunctions on future conduct, securities litigation, bans on transacting government business, delisting from securities exchanges and other consequences that could have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation, our sales activities or our stock price could be adversely affected if we become the subject of any negative publicity related to actual or potential violations of anti-corruption, anti-bribery or trade control laws and regulations.
Our business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and any failure or perceived failure to comply could result in claims, changes to our business practices, monetary penalties or increased costs of operations, or otherwise could harm our business.
We are subject to a variety of laws and regulations in the U.S. and abroad regarding privacy and data protection, some of which can be enforced by private parties or government entities and some of which provide for significant penalties for noncompliance. Such laws and regulations govern the collection, use, disclosure, retention, and security of personal information, such as information that we may collect in connection with sales on our e-commerce websites or during
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clinical trials of our products. Implementation standards, interpretations and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, or result in additional liability for us. The cost of compliance with these laws, regulations and standards is high and is likely to increase in the future. Any failure or perceived failure by us to comply with federal, state or foreign laws or regulation, our internal policies and procedures or our contracts governing our processing of personal information could result in negative publicity, claims by third parties, government investigations and enforcement actions, including injunctions, fines and/or criminal penalties, any of which could have a material adverse effect on our operations, financial performance and business.
In the U.S., numerous federal and state laws and regulations, including federal and state health information privacy laws, state data breach notification laws, and federal and state consumer protection laws that govern the collection, use, disclosure and protection of health-related and other personal information could apply to our operations or the operations of our collaborators and third-party providers. For example, the California Consumer Privacy Act (the “CCPA”), which went into effect on January 1, 2020, creates individual privacy rights for California consumers, including the right to opt out of certain disclosures of personal information, increases the privacy and security obligations of entities handling certain personal information, and also establishes significant penalties for noncompliance. The CCPA also provides for a private right of action for data breaches, which is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Additionally, in November 2020, California voters passed the California Privacy Rights Act (the “CPRA”). The CPRA, which went into effect on January 1, 2023, significantly expands the CCPA, including by introducing additional obligations such as data minimization and storage limitations, granting additional rights to consumers such as correction of personal information and additional opt-out rights and creating a new entity, the California Privacy Protection Agency, to implement and enforce the law. The CPRA may require us to modify our data collection or processing practices and policies, cause us to incur substantial costs and expenses to comply, and increase our potential exposure to regulatory enforcement and/or litigation. Other U.S. states have also enacted or are considering enacting stricter data privacy laws. For example, in March 2021, Virginia enacted the Virginia Consumer Data Protection Act and, in March 2022, Utah enacted the Utah Consumer Privacy Act, comprehensive privacy statutes that are similar to the CCPA and CPRA.
Further, the FTC and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive. For example, according to the FTC, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal information secure can constitute unfair acts or practices in or affecting commerce in violation of Section S(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.
We are also subject to rapidly evolving data protection laws, rules and regulations in foreign jurisdictions. For example, the EU’s General Data Protection Regulation 2016/679 (the “EU GDPR”) and the U.K. General Data Protection Regulation and the U.K.'s Data Protection Act 2018 (the “U.K. GDPR”, and together with the EU GDPR, the “GDPR”) governs certain collection and other processing activities involving personal data. The U.K. GDPR is likely to be subject to divergence from the EU GDPR over time. Among other things, the GDPR imposes requirements regarding the security of personal data and the rights of data subjects (e.g., to access and delete personal data), requirements to rely on an appropriate lawful basis to process personal data, includes requirements relating to the consent of individuals to whom the personal data relates (such consent relates to the lawful processing of personal data under the GDPR and is distinct from others consents obtained from individuals in collection with clinical trial participation), requires transparency notices for all data subjects (including for clinical trial participants and investigators) and regulates transfers of personal data from within the UK or EEA (as applicable) to third countries that have not been found to provide adequate protection to such personal data, including the U.S. (and these restrictions have heightened in light of recent case law and regulatory guidance). In addition, the EU GDPR imposes substantial administrative fines for breaches and violations, which, depending on the nature of the breach, range from €10.0 million to €20.0 million or 2% to 4% of our annual global revenue, whichever is higher and the U.K. GDPR imposes separate and additional fines, which, depending on the nature of the breach, range from £8.7 million to £17.5 million or 2% to 4% of total worldwide annual revenue, whichever is higher. The GDPR also confers a private right of action on data subjects to lodge complaints with supervisory authorities, seek judicial remedies (including data subject-led class actions and injunctions) and obtain compensation for damages resulting from violations of the GDPR.
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We are also subject to EEA and U.K. rules with respect to cross-border transfers of personal data outside of the EEA and U.K. to third countries. The GDPR generally prohibits the transfer of EEA and U.K. personal data to non-adequate third countries (i.e. third countries which have not been approved by the European Commission in respect of EU GDPR regulated transfers, or the UK Secretary of State in respect of UK GDPR regulated transfers) , unless a valid data transfer mechanism has been implemented or an Article 49 GDPR derogation applies. Legal developments in the EEA and U.K. have created complexity and uncertainty regarding transfers of personal data. As supervisory authorities issue further guidance on personal data transfer mechanisms, transfer risk assessments, and supplementary measures for the security of transferred personal data or start taking enforcement action, we could be subject to additional costs, complaints or regulatory investigations or fines, or if we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we operate our business and could harm our business, financial condition and results of operations. In October 2022, President Biden signed an Executive Order on “Enhancing Safeguards for United States Signals Intelligence Activities”, which introduced new binding safeguards to address the concerns raised by the Court of Justice of the European Union in its Schrems 11 judgment. Although this Executive Order is intended to form the basis of a new EU-US Data Privacy Framework (the “Framework”), the Framework is still in development and its route to implementation remains uncertain (particularly in light of the new administration in the US). In June 2021, the European Commission published a new set of modular standard contractual clauses (the “New SCCs”). The New SCCs must be used for all relevant UK GDPR regulated transfers of personal data outside the EEA (since December 2022) and organizations must ensure that all new and existing contracts involving the transfer of personal data outside the EEA contain New SCCs, unless other appropriate safeguards or derogations can be relied upon. Although the European Commission adopted an adequacy decision for the U.K. in June 2021 allowing the continued flow of personal data from the EEA to the U.K., this decision will automatically expire in June 2025 unless the European Commission re-assesses and renews or extends that decision. The decision will be regularly reviewed by the European Commission going forward and may be revoked if the U.K. diverges from its current data protection laws and the European Commission deems the U.K. to no longer provide adequate protection of personal data.
In March 2022, the U.K. implemented its own U.K.-specific international data transfer agreement (“IDTA”) and addendum to the New SCCs (“U.K. Addendum”). For all contracts involving transfers of UK GDPR regulated personal data to non-adequate third countries, organizations are required to use the IDTA, or the U.K. Addendum. Existing contracts involving transfers of UK GDPR regulated transfers of personal data relying on standard contractual clauses must be migrated to the IDTA, or the U.K. Addendum by March 2024. The cross-border data transfer landscape in the EEA and U.K. is continually developing, and we are monitoring these developments. We may, in addition to other impacts, experience additional costs associated with increased compliance burdens and be required to engage in new contract negotiations with third parties that aid in processing data on our behalf or localize certain data. We may experience reluctance or refusal by current or prospective European customers to use our products, and we may find it necessary or desirable to make further changes to our handling of personal data of EEA and U.K.-based data subjects.
The cross-border data transfer landscape globally (including in the EEA, U.K. and U.S.) is continually evolving, and other countries outside of Europe have enacted or are considering enacting cross-border data transfer restrictions and laws requiring data localization, which may affect our ability to process or transfer personal data from Europe or elsewhere. Inability to import personal data to the U.S. may significantly and negatively impact our business.
Regulators in the EEA and the U.K. are increasingly focusing on compliance with requirements in cookies and tracking technologies and the online behavioral advertising ecosystem, with a notable rise in enforcement activity from supervisory authorities across the EEA in relation to cookies-related violations, resulting in significant fines as supervisory authorities increasing adopt a fact-based approach. In the U.K., it is possible that we will be subject to separate and additional legal regimes with respect to ePrivacy, which may result in further costs and may necessitate changes to our business practices. The GDPR requires opt-in, informed consent for the placement of cookies on a customer's device, and imposes conditions on obtaining valid consent (e.g., a prohibition on prechecked consents). Increased regulation of cookies tracking technologies and online behavioral advertising may lead to broader restrictions and impairments on our online activities, including our ability to identify and potentially target users, lead to substantial costs, require significant systems changes, negatively impact our efforts to understand our customers and subject us to additional liabilities.
There may be further changes to the U.K. data protection regime, with the UK Government introducing the new Data (Use and Access) Bill. (“DUAB”) Depending on whether the DUAB is approved (and any subsequent amendments that may be made to the Bill before it becomes law), compliance with the approved law may lead to substantial compliance costs and increased regulatory enforcement risks (e.g., the Bill currently proposes aligning the fines for electronic direct marketing breaches to those set out in the UK GDPR, and not those set out in the Privacy & Electronic Communications Regulations
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2003 (as amended)), There is also a risk that the European Commission does not renew or revokes its adequacy decision in favor of the UK, in light of the DUAB.
Compliance with existing, not yet effective, and proposed privacy and data protection laws and regulations can be costly and can delay or impede our ability to market and sell our products, affect our ability to conduct business through websites and mobile applications we and our partners may operate, require us to modify or amend our information practices and policies, change and limit the way we use consumer information in operating our business, increase our operating costs, or require significant management time and attention. Failure to comply could result in negative publicity or subject us to inquiries or investigations, claims or other remedies, including significant fines and penalties, or demands that we modify or cease existing business practices. We may also face civil claims, including representative actions and other class action type litigation (where individuals have suffered harm), potentially amounting to significant compensation or damages liabilities, as well as associated costs, and diversion of internal resources. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
The UK City Code on Takeovers and Mergers, or the Takeover Code, may apply to the Company.
Up until February 2, 2027, the Takeover Code applies, among other things, to an offer for a public company whose registered office is in the UK (or the Channel Islands or the Isle of Man) and whose securities are not admitted to trading on a regulated market in the UK (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (the “Takeover Panel”) to have its place of central management and control in the UK (or the Channel Islands or the Isle of Man). This is known as the “residency test.” Under the Takeover Code, the Takeover Panel will assess the company’s place of central management and control by looking at various factors, including the structure of the company’s Board, the functions of the directors and where they are resident. From February 3, 2027, the Takeover Code will only apply to offers for public companies who have their registered office in the UK (or the Channel Islands or the Isle of Man) and have their securities admitted to trading on a regulated market, multilateral trading facility or stock exchange in the UK (or the Channel Islands or the Isle of Man).
If, at the time of a takeover offer made prior to February 2, 2027, the Takeover Panel determines that the Company’s place of central management and control is in the UK, the Company would be subject to a number of rules and restrictions imposed by the Takeover Code, including but not limited to: (i) the Company’s ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) the Company might not, without the approval of shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out material acquisitions or disposals; and (iii) the Company would be obliged to provide equality of information to all bona fide competing bidders.
A majority of the Board currently resides outside of the UK, the Channel Islands and the Isle of Man. Accordingly, for the purposes of the Takeover Code, the Company is considered to have its place of central management and control outside the UK, the Channel Islands or the Isle of Man. The Takeover Code therefore does not currently apply to the Company. It is possible that, in the future, circumstances, in particular the composition of our Board, could change, which may cause the Takeover Code to apply to the Company.
6.Risks Related to SEC and Nasdaq Compliance, Securities Issuances, Share Price Volatility and Limitations on Investor Rights
The price of our securities has in the past and may continue to be volatile and there is limited liquidity in the trading of our securities.
The price of our securities, has in the past and may continue to fluctuate due to a variety of factors, including:
a.the volume of our Class A ordinary shares available for public sale;
b.the ability of our shareholders to trade restricted securities pursuant to Rule 144 or a shelf registration statement;
c.changes in the markets in which we and our customers operate;
d.developments involving our competitors;
e.changes in laws and regulations affecting our Obagi Medical and/or Milk Makeup businesses;
f.variations in operating performance and the performance of competitors in general; actual or anticipated fluctuations in our quarterly or annual operating results;
g.publication of research reports by securities analysts about us or our competitors or our industry;
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h.the public’s reaction to our press releases, our other public announcements and our filings with the SEC;
i.actions by shareholders, including the sale of substantial amounts of our Class A ordinary shares by any of our significant shareholders, or the perception that such sales may occur;
j.additions and departures of key personnel;
k.commencement of, or involvement in, litigation;
l.changes in our capital structure, such as future issuances of securities or the incurrence of additional debt; and
m.general economic and political conditions, such as the effects of, recessions, economic downturns, interest rates, inflation, tariffs, trade wars and related uncertainties, local and national elections, prices for fuel and consumer goods, international currency fluctuations, corruption, political instability, acts of war or terrorism, or a pandemic or epidemic.
These market and industry factors may materially reduce the market price of our Class A ordinary shares and warrants regardless of our operating performance.
Trading in our securities on Nasdaq has historically been thin and susceptible to wide fluctuations in trading prices due to such limited trading volume and other factors, some of which may have little to do with our operations or business prospects. A public trading market having the desired characteristics of depth, liquidity and orderliness depends on the presence in the market of willing buyers and sellers of our securities at any given time. This presence in turn depends on the individual decisions of investors and general economic and market conditions over which we have no control. Due to the limited volume of trading in our Class A ordinary shares, an investor in our shares may have difficulty selling larger volumes of our Class A ordinary shares in the manner, or at the price, that might be attainable if our Class A ordinary shares were more actively traded. In addition, if a more active, liquid public trading market does not develop we may be limited in our ability to raise capital by selling shares of Class A ordinary shares. We cannot assure you that more active, liquid public trading markets for our Class A ordinary shares and will develop or, if developed, will be sustained.
If we fail to maintain compliance with the continued listing standards of Nasdaq, our securities may be delisted and the price of our Class A ordinary shares and our ability to access the capital markets could be negatively impacted.
Our securities are listed on Nasdaq. If we fail to maintain compliance with the continued listing standards of Nasdaq, including the Period Listing Rule during the one-year Nasdaq panel monitor, our securities may be delisted and the price of our Class A ordinary shares and our ability to access the capital markets could be negatively impacted. On May 4, 2023, we received a written notice from Nasdaq indicating that, as a result of not having timely filed our 2022 Form 20-F, we were not in compliance with Nasdaq Listing Rule 5250(c)(l), which requires timely filing of all required periodic financial reports with the SEC. On October 31, 2023, we received a written notice from Nasdaq indicating that, based upon our non-compliance with the filing requirement as of October 30, 2023, Nasdaq had determined to delist our securities from Nasdaq by opening of business on November 9, 2023, unless we timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”). On November 7, 2023, by requesting a hearing (the “Hearing”) before the Panel, we appealed the determination of the Panel and requested that the stay of delisting be extended until the Panel issued a final decision. On November 22, 2023, Nasdaq granted our request to extend the stay. On January 3, 2024, we received an additional notice of non-compliance from Nasdaq because we had not filed interim financial statements for the period ended June 30, 2023 with the SEC by December 31, 2023, as required by Nasdaq’s Listing Rules. We subsequently filed the 2022 Form 20-F with the SEC on January 16, 2024.
Following the Hearing and the publication by us of our interim financial statements for the period ended June 30, 2023 with the SEC on March 21, 2024, we received formal notice from the Panel confirming that we had regained compliance with Nasdaq’s filing requirements (the “Periodic Filing Rule”). In line with the applicable Nasdaq Listing Rules in such circumstances, the notice also indicated that Nasdaq had imposed a “Mandatory Panel Monitor” for a period of one year from the date of the compliance determination (March 21, 2024), pursuant to which in the event we fail to timely satisfy the Periodic Filing Rule during the one-year monitor period, the Company will not have the opportunity to provide a compliance plan for Nasdaq's review; rather, Nasdaq would instead issue a delisting determination pursuant to which the Company could request a hearing and stay of the delisting determination pending another hearing before the Panel.
In the event we fail to comply with Nasdaq’s continued listing standards and the Panel does not grant our request to extend the stay of a delisting decision or the Panel does not grant any requests we may make for further extensions, our securities may be delisted from Nasdaq. In addition, our Board may determine that the cost of maintaining the listing on a national securities exchange outweighs the benefits of such listing. A delisting of our securities would materially impair our shareholders’ ability to buy and sell our Class A ordinary shares and/or our warrants and could have an adverse effect on
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the market price of, and the efficiency of the trading market for, our securities. The delisting of our securities could significantly impair our ability to raise capital and the value of your investment.
We may issue additional securities without your approval, which would dilute your ownership interests and may depress the market price of our Class A ordinary shares.
Certain directors, key employees and consultants of the Company and of our subsidiaries have been granted equity awards under the Waldencast 2022 Incentive Award Plan and the Waldencast 2022 Inducement Award Plan. You will experience additional dilution when those equity awards vest and are settled or exercisable, as applicable, for our Class A ordinary shares.
In September 2023, in connection with the 2023 PIPE Investment, we entered into the 2023 Subscription Agreements with certain investors for the issuance and sale of 14,000,000 Class A ordinary shares in a private placement to (i) one stakeholder of Beauty Ventures, (ii) certain other existing equity holders, including certain members of the Sponsor, and (iii) Michel Brousset and Hind Sebti at a purchase price of $5.00 each per share, for aggregate gross proceeds of $70.0 million. The 2023 PIPE Investment resulted in dilution of the equity interests of other existing holders of our securities who did not participate in the transaction. In the future, we may issue additional Class A ordinary shares or other equity securities of equal or senior rank in connection with, among other things, acquisitions or repayment of outstanding indebtedness, without shareholder approval, in a number of circumstances. The issuance of additional Class A ordinary shares or other equity securities could significantly dilute the equity interests of existing holders of our securities and may adversely affect prevailing market prices for our Class A ordinary shares or warrants.
Under the terms of the definitive agreement relating to the Novaestiq transaction, Waldencast agreed to acquire Novaestiq in exchange for (1) cash payable at closing, (2) certain additional ongoing royalties based on net sales of Saypha® products, and (3) the contingent issuance of Class A ordinary shares (equal to approximately 7% of Waldencast’s fully diluted Class A ordinary shares as of July 22, 2025), based on the receipt of FDA approval relating to the Saypha® products (triggering the issuance of 3,273,000 Class A ordinary shares) and the achievement of cumulative net revenue thresholds of (a) $100 million (triggering the issuance of an additional 3,273,000 Class A ordinary shares) and (b) $200 million (triggering the further issuance of 3,273,000 Class A ordinary shares), respectively, reflecting meaningful long-term commercial targets, with (a) and (b) being earnable until June 20, 2031. The issuance of additional Class A ordinary shares pursuant to this agreement is likely to further dilute the equity interests of existing holders of our securities and may adversely affect prevailing market prices for our Class A ordinary shares or warrants and shareholders may not realize a benefit from the acquisition commensurate with the ownership dilution they will experience in connection therewith.
In addition, the Lumina Credit Agreement requires us to issue warrants to the Lenders that hold Term Tranche B Loans to purchase up to 1,000 ordinary shares of the Company per $1,000 principal amount of Term Tranche B Loans then outstanding on or prior to July 1, 2026, so long as any Term Tranche B Loans are then outstanding. See “Item 3. Key Information—D. Risk Factors—Risks Related to Cash Flow and Liquidity—“Failure to comply with any of the covenants under our Lumina Credit Agreement could result in an event of default, which may accelerate our outstanding indebtedness and have a material adverse effect on our business, liquidity and financial position.”
Warrants will be exercisable for our Class A ordinary shares, which would increase the number of shares eligible for future resale in the public market and result in dilution to our shareholders, and a sale of a substantial number of our securities in the public market could cause the price of our securities to decline.
Outstanding warrants to purchase an aggregate of 29,533,282 Class A ordinary shares are exercisable in accordance with the terms of the Warrant Agreement, dated March 15, 2021, between Waldencast Acquisition Corp. and Continental Stock Transfer & Trust Company, as amended on December I, 2022, by and among Waldencast plc (f/k/a Waldencast Acquisition Corp.), Continental Stock Transfer & Trust Company and American Stock Transfer & Trust Company LLC (the “Warrant Agreement”) governing those securities at an exercise price of $11.50 per share. These warrants will expire five years after the completion of our Business Combination (July 27, 2027), at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. To the extent such warrants are exercised, additional Class A ordinary shares will be issued, which will result in dilution to our existing Class A ordinary shareholders and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class A ordinary shares. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration and as such, the warrants may expire worthless. In addition, our shareholders who exercised their redemption rights with respect to their public shares in
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connection with the Business Combination retained their public warrants, which may be exercised by such redeeming shareholders for our Class A ordinary shares resulting in further dilution.
A significant number of our shares are held by members of the Sponsor and the former owner of Obagi Medical.
As of February 27, 2026, members of the Sponsor and its affiliates have a beneficial ownership interest in our Class A ordinary shares, comprised of the following: (i) Burwell Mountain Trust (“Burwell”) holds a beneficial ownership interest of 10.0% of the Class A ordinary shares, (ii) Zeno Investment Master Fund (f/k/a Dynamo Master Fund) (“Zeno”) holds a beneficial ownership interest of 14.0% of the Class A ordinary shares, (iii) Michel Brousset (individually and as beneficial owner of the shares held by Waldencast Ventures LP) holds a beneficial ownership interest of 6.3% of the Class A ordinary shares, and (iv) Beauty Ventures holds a beneficial ownership interest of 10.2% of the Class A ordinary shares. In addition, Cedarwalk Skincare Ltd., the owner of Obagi Medical immediately prior to the close of the Business Combination (“Cedarwalk”), holds a beneficial ownership interest of 24.2% the Class A ordinary shares. See Item 7. “Major Shareholders and Related Party Transactions” for more information.
As a result of such ownership, members of the Sponsor and their affiliates and Cedarwalk exercise significant influence over all matters requiring shareholder approval, including the election and removal of directors, appointment and removal of officers, any amendment of our memorandum and articles of association (the “Constitutional Document”), and any approval of significant corporate transactions. Additionally, the interests of the Sponsor and its affiliates and/or Cedarwalk may differ from those of other shareholders. As a result, the concentration of voting power with members of the Sponsor and their affiliates and Cedarwalk may have an adverse effect on the price of our securities.
As a former shell company, resales of shares of our restricted Class A ordinary shares in reliance on Rule 144 of the Securities Act are subject to the requirements of Rule 144(i).
Prior to the closing of the Business Combination, we were deemed a “shell company” under applicable SEC rules and regulations because we had no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets. As a result, sales of our securities pursuant to Rule 144 under the Securities Act cannot be made unless, among other things, at the time of a proposed sale, we are subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act and have filed all reports and other materials required to be filed by Section 13 or 15(d) of the Exchange Act, as applicable, during the preceding 12 months, other than Form 6-K reports. Because, as a former shell company, the reporting requirements of Rule 144(i) will apply regardless of holding period, restrictive legends on our securities cannot be removed except in connection with an actual sale that is subject to an effective registration statement under, or an applicable exemption from the registration requirements of, the Securities Act. In addition, because our unregistered securities cannot be sold pursuant to Rule 144 unless we continue to meet such requirements, any unregistered securities we issue will have limited liquidity unless we can comply with such requirements. In addition, our previous status as a shell company could also limit our use of our securities to pay for any acquisitions we may seek to pursue in the future. The lack of liquidity of our securities as a result of the inability to sell under Rule 144 for a longer period of time than a non-former shell company could cause the market price of our securities to decline.
Your rights and responsibilities as a shareholder are governed by Jersey law, which differs in some material respects with respect to the rights and responsibilities of shareholders of U.S. companies.
We are organized under the laws of the Bailiwick of Jersey, Channel Islands, a British crown dependency that is an island located off the coast of Normandy, France. Jersey is not a member of the EU. Jersey legislation regarding companies is largely based on English corporate law principles. The rights and responsibilities of the holders of our Class A ordinary shares are governed by the Constitutional Document and by Jersey law, including the provisions of the Jersey Companies Law. These rights and responsibilities differ in some material respects from the rights and responsibilities of shareholders in U.S. corporations.
In particular, Jersey law significantly limits the circumstances under which shareholders of companies may bring derivative actions and, in most cases, only the corporation may be the proper claimant or plaintiff for the purposes of maintaining proceedings in respect of any wrongful act committed against it. Neither an individual nor any group of shareholders has any right of action in such circumstances. Jersey law also does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders of a U.S. corporation. However, we cannot assure you that Jersey law will not change in the future or that it will serve to protect our investors in a similar fashion afforded under corporate law principles in the U.S., which could adversely affect your rights.
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It may be difficult to enforce a U.S. judgment against us or our directors and officers outside the U.S., or to assert U.S. securities law claims outside the U.S.
Investors may have difficulties pursuing an original action brought in a court in a jurisdiction outside the U.S., including Jersey, for liabilities under the securities laws of the U.S. The U.S. and Jersey currently do not have a treaty providing for the reciprocal recognition and enforcement of judgments (as opposed to arbitration awards) in civil and commercial matters. Consequently, a final judgment for payment rendered by any federal or state court in the U.S. based on civil liability, whether or not predicated solely upon U.S. federal securities laws, would not automatically be recognized and is not directly enforceable in Jersey. Rather, a judgment of a U.S. court constitutes a cause of action which may be enforced by Jersey courts provided that:
a.the applicable U.S. courts had jurisdiction over the case, as recognized under Jersey law; the judgment is given on the merits and is final, conclusive and non-appealable;
b.the judgment relates to the payment of a sum of money, not being taxes, fines or similar governmental penalties; the defendant is not immune under the principles of public international law;
c.the same matters at issue in the case were not previously the subject of a judgment or disposition in a separate court; the judgment was not obtained by fraud; and
d.the recognition and enforcement of the judgment is not contrary to public policy in Jersey.
Subject to the foregoing, investors may be able to enforce judgments in civil and commercial matters in Jersey that have been obtained from U.S. federal or state courts. However, it is doubtful that an original action based on U.S. federal or state securities laws could be brought before Jersey courts. In addition, a plaintiff who is not resident in Jersey may be required to provide a security bond in advance to cover the potential of the expected costs of any case initiated in Jersey.
We may amend the terms of the warrants in a manner that may be adverse to holders with the approval by the holders of at least 65% of the then outstanding public warrants.
Our public warrants were issued in registered form under a Warrant Agreement between our transfer agent for our warrants and Waldencast. The Warrant Agreement provides that (a) the terms of the warrants may be amended without the consent of any holder for the purpose of (i) curing any ambiguity or correcting any mistake, including to conform the provisions of the Warrant Agreement to the description of the terms of the warrants and the Warrant Agreement set forth in this Report, or defective provision or (ii) adding or changing any provisions with respect to matters or questions arising under the Warrant Agreement as the parties to the Warrant Agreement may deem necessary or desirable and that the parties deem to not adversely affect the rights of the registered holders of the warrants under the Warrant Agreement and (b) all other modifications or amendments require the vote or written consent of at least 65% of the then outstanding public warrants; provided that any amendment that solely affects the terms of the private placement warrants or any provision of the Warrant Agreement solely with respect to the private placement warrants will also require at least 65% of the then outstanding private placement warrants. Accordingly, we may amend the terms of the public warrants in a manner adverse to a holder if holders of at least 65% of the then outstanding public warrants approve of such amendment. Although our ability to amend the terms of the public warrants with the consent of at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of our Class A ordinary shares purchasable upon exercise of a warrant.
We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.
We have the ability to redeem the outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant if, among other things, the last reported sale price of our 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 we send the notice of redemption to the warrant holders equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like). Redemption of the outstanding warrants as described above could force you to: (l) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so; (2) sell your warrants at the then current market price when you might otherwise wish to hold your warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, we expect would be substantially less than the market value of your warrants. None of the private placement warrants will be redeemable by us (subject to limited exceptions) so long as they are held by the Sponsor or its permitted transferees.
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In addition, we have the ability to redeem the outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant if, among other things, the last reported sale price of our 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 we send the notice of redemption to the warrant holders equals or exceeds $10.00 per share (as adjusted for share splits, share dividends, rights issuances, subdivisions, reorganizations, recapitalizations and the like). In such a case, the holders will be able to exercise their warrants prior to redemption for a number of our Class A ordinary shares determined based on the redemption date and the fair market value of our Class A ordinary shares. The value received upon exercise of the warrants (1) may be less than the value the holders would have received if they had exercised their warrants at a later time where the underlying share price is higher and (2) may not compensate the holders for the value of the warrants, because the number of Class A ordinary shares received is capped at 0.361 Class A ordinary shares per warrant (subject to adjustment) irrespective of the remaining life of the warrants.
We do not intend to pay cash dividends for the foreseeable future.
We currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, restrictions contained in any future agreements and financing instruments, business prospects and such other factors as our Board deems relevant.
If analysts do not publish research about our business or if they publish inaccurate or unfavorable research, our stock price and trading volume could decline.
The trading market for our Class A ordinary shares will depend in part on the research and reports that analysts publish about us. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our Class A ordinary shares or publish inaccurate or unfavorable research about our businesses, the price of our Class A ordinary shares could decline. If few analysts cover us, the demand for our shares could decrease and our stock price and trading volume may decline. Similar results may occur if one or more of these analysts stop covering us in the future or fail to publish reports on us regularly.
We are currently an emerging growth company within the meaning of the Securities Act, and to the extent we have taken advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.
We are currently an “emerging growth company” within the meaning of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and we 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 our 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. As a result, our shareholders may not have access to certain information they may deem important. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.
Further, Section 102(b)(l) 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. We have 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, we, 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 our 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.
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When we cease to be an emerging growth company, which is anticipated to occur at the end of the fiscal year ending December 31, 2026, we will no longer be able to take advantage of certain exemptions from reporting, and, absent other exemptions or relief available from the SEC, we will also be required to comply with the auditor attestation requirements of Section 404 of the SarbanesOxley Act. We will incur additional expenses in connection with such compliance and our management will need to devote additional time and effort to implement and comply with such requirements.
As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of the ordinary shares.
We have determined that we are a foreign private issuer, as such term is defined in Rule 405 under the Securities Act, however, under Rule 405, the determination of foreign private issuer status is made annually on the last business day of an issuer’s most recently completed second fiscal quarter and, accordingly, the next determination regarding our status will be made on June 30, 2026.
As a foreign private issuer, we are not subject to all of the disclosure requirements applicable to public companies organized within the U.S. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act (including the requirement applicable to emerging growth companies to disclose the compensation of our Chief Executive Officer and the other two most highly compensated executive officers on an individual, rather than an aggregate, basis). In addition, our officers and directors are exempt from the “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Moreover, while we may elect to voluntarily submit interim consolidated financial data to the SEC under cover of the SEC's Form 6-K, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies and are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. We also are exempt from the requirements to obtain shareholder approval for certain issuances of securities, including shareholder approval of share option plans. In addition, as a foreign private issuer, we are exempt from the provisions of Regulation FD, which prohibits issuers from making selective disclosure of material nonpublic information.
Furthermore, our Class A ordinary shares are not listed and we do not currently intend to list our Ordinary Shares on any market in the Bailiwick of Jersey, our home country. As a result, we are not subject to the reporting and other requirements of companies listed in the Bailiwick of Jersey. For instance, we are not required to publish quarterly or semi-annual financial statements (although we are required to comply with Nasdaq's continued listing standards to publicly disclose an interim balance sheet and income statement as of the end of our second quarter each fiscal year). Accordingly, there may be less publicly available information concerning our business than there would be if we were a U.S. public company and you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
As a public limited company incorporated under the laws of Jersey, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to securityholders than they would enjoy if we complied fully with Nasdaq corporate governance listing standards.
As a public limited company incorporated under the laws of Jersey and listed on Nasdaq, we are subject to Nasdaq corporate governance listing standards. However, Nasdaq Listing Rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Jersey, which is our home country, may differ significantly from Nasdaq corporate governance listing standards. Currently, we follow our home country practice in lieu of the provisions under Rule 5620(a), Rule 5635(c), Rule 5635(d) and Rule 5250(b)(3) of the Nasdaq Stock Market Marketplace Rules (the “Rules”) by relying on the exemption provided for foreign private issuers under Rule 5615(a)(3) of the Rules. Rule 5620(a) of the Rules requires that the Company hold an annual meeting of shareholders no later than one year after the end of the Company's fiscal year-end; Rule 5635(c) of the Rules requires shareholder approval for share incentive plans; Rule 5635(d) of the Rules requires shareholder approval for the issuance of securities, other than in a public offering, equal to 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock; and Rule 5250(b)(3) of the Rules requires disclosure of third-party director and nominee compensation. The corporate governance practice in our home country, Jersey, does not require the Company to follow or comply with the requirements of Rule 5620(a), Rule 5635(c), Rule 5635(d) and Rule 5250(b)(3). We will continue to comply with other corporate governance requirements of the Rules. However, in the future, we may
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consider following home country practice in lieu of additional requirements under the Rules with respect to certain corporate governance standards. Any foreign private issuer exemptions we avail ourselves of in the future may reduce the scope of information and protection to which you are otherwise entitled as an investor. As a result, there may be less publicly available information concerning our business than there would be if we were a U.S. public company and you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
Jersey law and our Constitutional Document contain certain provisions, including anti-takeover provisions that limit the ability of shareholders to take certain actions and could delay or discourage takeover attempts that shareholders may consider favorable.
Jersey law and our Constitutional Document contain provisions that could have the effect of rendering more difficult, delaying or preventing an acquisition that shareholders may consider favorable, including transactions in which shareholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for our Class A ordinary shares, and therefore depress the trading price of our Class A ordinary shares. These provisions could also make it difficult for shareholders to take certain actions, including electing directors who are not nominated by the current members of our Board or taking other corporate actions, including effecting changes in our management. Among other things, the Constitutional Document includes provisions regarding:
a.providing for a classified board of directors with staggered, three-year terms;
b.the ability of our Board to issue shares of preferred stock, and to determine the price and other terms of those shares, including preferences and voting rights, without shareholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
c.subject to the Investor Rights Agreement, our Board will have the exclusive right to elect directors to fill a vacancy created by the expansion of our Board or the resignation, death or removal of a director, which will prevent shareholders from being able to fill vacancies on our Board; and
d.the limitation of the liability of, and the indemnification of, our directors and officers.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our Board or management.
7.Risks Related to Dependence on Third Parties for Manufacturing, Distribution, E-Commerce, and Other Vendors
Obagi Medical and Milk Makeup rely heavily on third-party providers, making us vulnerable to disruptions that could adversely affect our business, financial condition, and operations.
Reliance on Third-Party Logistics Providers
Obagi Medical and Milk Makeup depend on third-party logistics providers for storage, distribution, and delivery of products to both domestic and international customers. Securing alternative logistics providers that meet our standards may be difficult, and the time and effort required to oversee these relationships could strain internal resources. Specifically, Obagi Medical’s operations in the U.S. heavily depend on a single distributor (the “Physician Channel Provider”), which manages sales to healthcare professionals in the physician-dispensed channel. This provider accounted for a significant portion of Obagi Medical’s net revenue in recent years. The Physician Channel Provider performs critical functions, including warehousing, order fulfillment, customer service, and regulatory compliance for prescription products. Any disruption in their services could materially and adversely affect Obagi Medical’s business, financial condition, and results of operations. Additionally, this provider acts as the third-party logistics provider for Obagi Medical’s other wholesale and direct-to-consumer channels.
Obagi Medical and Milk Makeup’s reliance on third-parties for distribution, manufacturing, and logistics introduces significant risks that could materially impact its operations. Any disruptions or cost increases from these providers could impair our ability to meet customer demand, reduce profit margins, and adversely affect financial performance. Managing these third-party relationships requires significant oversight, and failure to do so effectively could exacerbate these challenges.
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Dependence on Contract Manufacturers
Obagi Medical and Milk Makeup rely entirely on third-party Contract Manufacturers (“CMOs”) for the production of its products, exposing the Company to risks associated with capacity constraints, delays, and regulatory compliance issues. While multiple CMOs are qualified for certain key products, some items, are supplied by a single source. In particular, Croma Pharma GmbH is the sole manufacturer of the Saypha® injectables distributed by Obagi Medical. Termination or disruption in these arrangements could lead to supply chain delays, harm customer relationships, and impact the brand’s reputation. Finding alternative manufacturers for critical products could be challenging and time-consuming. Additionally, reliance on CMOs introduces risks such as breaches of manufacturing agreements, production quality, non-compliance with regulatory standards, increased production costs, and delays in transferring manufacturing operations to alternative providers.
Milk Makeup relies significantly on third-parties, such as resellers, suppliers, and sales forces, making it vulnerable to disruptions that could harm its brand, operations, and financial performance.
Dependence on Retailers for Sales
Milk Makeup’s business is significantly reliant on retailers for the sale of its products. The loss of Sephora, Ulta Beauty, or other key distributors, or a material decrease in sales to such partners, could adversely affect Milk Makeup’s business, financial condition, and results of operations. Additionally, the Company is exposed to risks tied to its retailers’ performance, which in turn is driven by economic downturns, consumer demand fluctuations, or reputational issues, which could significantly impact Milk Makeup’s results.
Quality Control and Regulatory Compliance
The reliance on third-party suppliers for Milk Makeup products also introduces risks associated with quality control and regulatory compliance. Issues such as substandard ingredients or products not meeting specifications can lead to regulatory actions, product shortages, or reputational harm. Any inability to comply with the Controlled Substances Act, FDCA, MoCRA, or other applicable regulations could result in legal prohibitions or penalties, impacting sales and creating financial losses due to unusable inventory.
Dependence on Third-Party Sales Agencies and Direct Sales Forces
Milk Makeup relies on third-party agencies and direct sales forces for product sales in the U.S. and internationally. The company does not have long-term contracts with these personnel, making it vulnerable to turnover or the loss of key contributors. Additionally, expanding the sales force to support growth in new and existing markets requires substantial training and time to build customer relationships. Challenges in retaining, replacing, or adequately training these personnel could materially harm Milk Makeup’s revenues, gross margins, and market share.
These dependencies on third parties introduce significant risks, and any disruptions in these relationships could materially and adversely affect Milk Makeup’s business and operational results.
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8.Risks Related to Intense Competition in Our Industry
The cosmetics, skincare and injectables industry is highly competitive, and challenges in product success, marketing effectiveness, and competition from larger companies could adversely affect our sales and overall performance.
Intense Competition in the Cosmetics, Skincare and Injectables Markets
The cosmetics industry is highly competitive, with numerous multinational companies and independent brands vying for market share across a wide range of distribution channels. Obagi Medical and Milk Makeup faces competition based on factors such as product innovation, quality, pricing, brand recognition, and marketing initiatives. Many competitors possess greater financial, technical, and marketing resources, allowing them to respond more effectively to market trends and economic shifts. Competitors’ substantial investments in research and development (“R&D”) and marketing can result in technological and product advancements that surpass current offerings, potentially rendering its products less competitive or obsolete. Advancements by competitors in R&D could outpace Obagi Medical’s capabilities, negatively affecting its growth prospects.
Challenges with New Product Introductions
Success in the industry heavily relies on the timely and successful introduction of new products that align with rapidly shifting consumer trends. Obagi Medical and Milk Makeup’s ability to anticipate and adapt to changes in consumer preferences, shopping habits, and attitudes is critical. Despite established processes for product development, new product launches carry risks, including potential rejection by consumers or retailers, pricing misalignment, or ineffective marketing strategies. Supply chain challenges, such as manufacturing or shipping delays, may further hinder successful product launches. Additionally, the introduction of new products can cannibalize sales of existing offerings. These factors collectively pose a risk to Obagi Medical and Milk Makeup’s ability to meet sales objectives and sustain growth.
We are subject to risks related to our dependency on our directors and officers and on key personnel, as well as risks related to attracting, retaining and developing human capital in a highly competitive market.
Our operations are dependent upon a relatively small group of individuals and in particular, Michel Brousset, our Chief Executive Officer, and Hind Sebti, our Chief Growth Officer. We believe that our success depends on the continued service of our directors and officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.
Additionally, our success and future growth depend upon the services of Obagi Medical’s and Milk Makeup’s management teams and other key employees, including highly skilled experts in their respective fields. The loss of one or more members of Obagi Medical’s or Milk Makeup’s management teams or key employees could harm our business, and we may not be able to find adequate replacements in a timely manner.
Our success depends on our continued ability to attract, retain and motivate highly qualified management, business development, sales and marketing, product development and other personnel for our Obagi Medical and Milk Makeup businesses. We may have difficulty recruiting and retaining such qualified personnel due to current market conditions, their inability to trade their equity awards and the existence of many similar competitive job openings. There is intense competition in our industry and failure to attract and retain qualified personnel could have a significant negative impact on our future product sales and business results.
Although we currently maintain directors’ and officers’ (“D&O”) liability insurance coverage, such coverage may not be sufficient to cover the types or extent of claims or loss that may be incurred or received. Additionally, such coverage may make it difficult for us to retain and attract talented and skilled directors and officers to serve our Company, which could adversely affect our business.
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9. Risks Related to Supply Chain and Operational Disruption
Operational complications in the transport and distribution of our products could adversely affect our business, net revenues, and earnings.
Disruptions to Operations
Our global operations are exposed to various risks, including industrial accidents, environmental incidents, natural disasters, labor disputes, and pandemics, as well as external factors such as acts of terrorism or geopolitical instability. These risks also affect our third-party suppliers, brokers, and delivery service providers. Any damage to or loss of critical manufacturing facilities or distribution centers could significantly disrupt our operations, impacting our ability to meet customer demands and materially affecting our business, financial condition, and results of operations.
Dependence on Third-Party Logistics and Delivery Providers
We rely heavily on third-party delivery service providers for the transportation of our products to distribution facilities, retailers, and customers. Interruptions or failures in these services, whether due to inclement weather, natural disasters, or labor unrest, could result in delays or damaged shipments. Such disruptions could lead to rejected shipments, reduced customer confidence, and harm to our brand reputation. Any sustained interruptions could have a material adverse effect on our operations and financial performance.
Third-Party Suppliers and Supply Chain Risks
We rely on various third-party suppliers, both domestic and international, for the production, assembly, and packaging of our products. Some suppliers operate on a purchase-order basis, which can create uncertainties in maintaining consistent supply. Milk Makeup is particularly dependent on a limited number of suppliers for certain critical components. Disruptions in relationships with these suppliers or their inability to meet demand due to financial, operational, or capacity constraints could lead to production delays, inefficiencies, and supply interruptions.
Vulnerability of Distribution Facilities
Our inventory is primarily stored in third-party distribution facilities, making their proper functioning critical to our operations. Damage to these facilities or the inventory stored within, whether from natural disasters, accidents, or other events, could disrupt supply chains and hinder our ability to fulfill customer orders. Insurance coverage may not fully compensate for such losses, leaving us exposed to financial and operational impacts that could materially harm our business.
Risks from Freight Carrier Disruptions and Rising Shipping Costs
Our dependence on commercial freight carriers for domestic and international product deliveries exposes us to risks of operational disruptions. Delays or interruptions in freight services could result in untimely deliveries, driving customers to competitors and affecting our net revenues. Additionally, rising fuel and freight costs, particularly for international shipments, could increase our shipping expenses. If we are unable to pass on these costs to customers or mitigate them through operational efficiencies, our gross margins and profitability may decline, adversely affecting our financial results.
Operational disruptions at any point in our supply chain could hinder our ability to meet customer expectations, jeopardize relationships with key stakeholders, and materially affect our financial condition and operational stability.
Our ability to commercially distribute products may be significantly harmed if we or our CMOs fail to comply with applicable laws and regulations.
We do not currently have the infrastructure or internal capability to manufacture our products. We rely, and expect to continue to rely, on third-party CMOs for the production of all our products. Our products and the facilities in which they are manufactured are subject to regulation under the FDCA and FDA implementing regulations, state laws and comparable regulatory frameworks in foreign markets. Federal, state, and foreign authorities may inspect the facilities of our CMOs periodically to determine if we and our CMOs are complying with applicable provisions of the FDCA, FDA and foreign regulations.
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Manufacturing facilities for our products are required to comply with the FDA's cGMPs and with similar requirements outside the U.S. If the FDA finds a violation of cGMPs, it may enjoin our CMO’s operations, seize our products, restrict importation of goods, or impose administrative, civil or criminal penalties, among other things. In addition to cGMP requirements, cosmetic manufacturing and processing facilities are required to be registered with FDA. Manufacturers and responsible persons are also required to list their respective products with FDA and to report serious adverse events associated with the use of their products in the U.S. to the FDA. Our operations could be harmed if regulatory authorities make determinations that our CMOs are not in compliance with these regulations as they take effect. We cannot assure you that the CMOS of all of our products will be able to comply with new regulations in a timely manner or that they will not decide to pass the increased costs of having to comply with the regulations onto us, which would increase our costs and negatively impact net income. In addition, FDA and state issued regulations prohibit or otherwise restrict the use of certain ingredients in cosmetic products. Similar or stricter requirements may apply in foreign jurisdictions.
We do not have complete control over all aspects of the manufacturing process and are dependent on our contract manufacturing partners for compliance with cGMP and similar regulations. Our contract manufacturing partners may be found in violation of applicable requirements, which could have a material adverse effect on us and our business. If we or our CMOs fail to comply with these applicable standards, laws, and regulations, it could lead to customer complaints, adverse events, product withdrawal or recall, or increase the likelihood that our products are rendered adulterated or misbranded, any of which could result in negative publicity, remedial costs, or regulatory enforcement that could impact our ability to continue selling certain products.
Our failure, or the failure of our CMOs, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products and harm our business and results of operations.
10.Regulatory Risks That Could Adversely Impact our Business
Risks Related to Our Obagi Medical Business
Our failure to successfully in-license or acquire additional products and technologies would impair our ability to grow the Obagi Medical business.
We intend to in-license, acquire, develop and market new products and technologies. Because we have limited internal research capabilities, our business model depends in part on our ability to license patents, products and/or technologies from third parties. The success of this strategy also depends upon our ability and the ability of our third-party formulators to formulate products under such licenses, as well as our ability to manufacture, market and sell such licensed products.
We may not be able to successfully identify any new products to in-license, acquire or internally develop. Moreover, negotiating and implementing an economically viable acquisition is a lengthy and complex process. Other companies, including those with substantially greater financial, marketing and sales resources, may compete with us for the acquisition of products or technologies. We may not be able to acquire or in-license the rights to such products on terms that we find acceptable, or at all. As a result, our ability to grow the Obagi Medical business or increase our profits could be adversely impacted.
Obagi Medical Regulatory Risks
Legal and Regulatory Risks That Could Adversely Impact Our Business
Obagi Medical products containing the active ingredient, hydroquinone, are marketed as prescription-use only drugs but have not received required premarket authorization from the FDA or other regulatory authorities, and the FDA could require us to remove these products from the market until we obtain approval of the required NDA, and we could be found to be marketing and selling these products in violation of the law.
We market Obagi Medical products that contain hydroquinone (“HQ”) on a prescription-only (i.e., not OTC) basis, and we have not sought nor obtained premarket approval from the FDA to market these products in the U.S., nor have we sought marketing authorizations in other jurisdictions. Although, to date, neither the FDA nor any other regulators have taken action against us for selling our prescription HQ products in the U.S. and in other jurisdictions without marketing approval, there can be no assurance the FDA or any other regulatory authorities will not take enforcement action against us, or
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otherwise require us to obtain premarket approval or similar authorization of our prescription HQ products, and we may be required to suspend marketing of our prescription HQ products unless and until such products are approved.
Based on the historical evolution of the legal and regulatory framework applicable to drugs in the U.S., the FDA acknowledges that there are some drugs on the market that lack required FDA approval for marketing. The FDA has historically utilized a risk-based enforcement approach with respect to drugs marketed without required approvals. In 2003, the FDA issued a Compliance Policy Guide (“CPG”), which was finalized in 2006 and subsequently amended in 2011, in which it announced a drug safety initiative to remove unapproved drugs from the market and established enforcement priorities and a policy of enforcement discretion with respect to marketed unapproved products. Under this policy, the FDA indicated that it intended to give higher priority to enforcement actions involving unapproved drug products in certain categories, including drugs with potential safety risks and ineffective drugs that could be used in lieu of effective treatments. Although this CPG was withdrawn and the drug safety initiative was terminated on the basis of a Federal Register notice in 2020, a subsequent Federal Register notice in May 2021 withdrew the prior notice terminating the program and the CPG, and the FDA indicated that it plans to continue to prioritize enforcement based on its existing general approach, which involves risk-based prioritization in light of all the facts of a given circumstance, and issue new guidance on this topic.
We believe our prescription-only HQ products do not fall within the previously established categories of unapproved drugs for which the FDA has indicated it prioritizes enforcement. We have not received any communications from the FDA or any similar regulatory authority regarding these HQ products or any of our other products. However, the FDA has issued a Warning Letter to at least one contract manufacturer of prescription-only HQ that cited and objected to another company’s sale of prescription-only HQ on grounds that the product was both an unapproved drug and failed to comply with cGMPs in violation of the FDCA. In addition, although our prescription-only HQ products are made with 4% HQ, the FDA has expressed concerns regarding the safety of 2% HQ products marketed as OTC. In addition, the CARES Act implemented a number of changes to regulation of OTC drugs, one of which prohibited the sale of any drug without a proposed or final Administrative Order, including HQ (at any concentration level), from being marketed in the U.S. as an OTC drug without FDA approval effective September 2020. In April 2022, the FDA announced that it had issued warning letters to 12 companies for continuing to sell 2% HQ products on an OTC basis in violation of the CARES Act. The FDA’s announcement also cited reports describing serious side effects associated with the use of skin lightening products containing HQ, including reports of skin rashes, facial swelling, and skin discoloration. Furthermore, in June and July of 2022, the FDA issued warning letters to two other manufacturers of products containing HQ. In the future, the FDA may pursue an enforcement action against us or suspend marketing of our prescription HQ products until we obtain marketing approval.
If the current regulatory landscape evolves and we were required to seek FDA approval, our attention and resources will be dedicated to the clinical development and regulatory approval processes, which will be time-consuming and very expensive. We may also not successfully obtain such approvals or may be delayed in obtaining such approvals if one of our competitors obtains approval and non-patent marketing exclusivity for the same uses for which we intend to seek approvals. In addition, if we are determined to be marketing our prescription HQ products unlawfully, or if patients experience adverse events from using our prescription HQ products, we may be required to recall or cease distribution of these products and may be subject to product liability claims or enforcement action. If we are required to suspend or cease marketing our prescription HQ products for any reason, our business would be materially adversely affected.
In addition, even if we obtain regulatory approvals for any of our prescription HQ products, such approvals will require the submission of reports to regulatory authorities and surveillance to monitor the safety and efficacy of the product, may contain significant limitations related to use restrictions for specified age groups, warnings, precautions or contraindications, and may include burdensome post-approval study or risk management requirements. In addition, if the FDA or foreign regulatory authorities approve our products, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements, any of which may materially increase our costs and limit our ability to maintain profitability.
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The drug regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming and inherently unpredictable, and if we are required to seek and obtain any regulatory approvals that may be required for our products, we may be unable to obtain or maintain such regulatory approvals, which would substantially harm our business.
Any products that are regulated by the FDA as drugs must generally obtain premarket approval from the FDA, unless subject to the OTC monograph process or subject to other limited exceptions. The FDA approves new drugs through the New Drug Application (“NDA”) or Abbreviated New Drug Application (“ANDA”) pathways before they may be legally marketed in the U.S. Via the NDA pathway, an applicant must generally demonstrate through well-controlled clinical trials that a drug is safe and effective for its intended uses. The Hatch-Waxman Act established the ANDA pathway, which is an abbreviated FDA approval procedure for drugs that are shown to be bioequivalent to proprietary drugs previously approved by the FDA through its NDA pathway. Premarket applications for generic drugs are termed “abbreviated” because such applications generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, an ANDA applicant must demonstrate that its product is bioequivalent to the innovator drug. In certain situations, an applicant may obtain ANDA approval of a generic drug with a strength or dosage form that differs from a referenced innovator drug pursuant to the filing and approval of an ANDA Suitability Petition. Similar requirements apply in foreign jurisdictions.
Certain Obagi Medical products, including our tretinoin-based products, are marketed pursuant to an ANDA held by Bausch Health or dispensed under the category of unlicensed medicines in the United Kingdom. However, we have not sought or obtained FDA premarket approval or foreign regulatory authorities’ authorization for any of our products. The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the applicable regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions.
The FDA or any foreign regulatory authorities can delay, limit or deny approval or require us to conduct additional nonclinical or clinical testing or abandon a program for, among others, the following reasons:
•the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of any clinical trials we may be required to conduct;
•we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product is safe and effective for its proposed indication or bioequivalent to a listed drug;
•the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
•serious and unexpected drug-related adverse events experienced by participants in our clinical trials or by individuals using drugs similar to our products;
•we may be unable to demonstrate that a product’s clinical and other benefits outweigh its safety risks;
•the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;
•the data collected from clinical trials may not be acceptable or sufficient to support the submission of an NDA, ANDA or other submission or to obtain regulatory approval in the U.S. or elsewhere, and we may be required to conduct additional clinical studies;
•the FDA’s or the applicable foreign regulatory authority may disagree regarding the formulation, labeling and/or the specifications of our products;
•the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party CMOs with which we contract for clinical and commercial supplies; and
•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for any approvals.
The lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing to obtain regulatory approvals to market our products, which could significantly harm our business, results of operations and prospects.
Adverse events or other undesirable side effects caused by our products could cause us or regulatory authorities to issue warnings about our products or could lead to recalls or regulatory enforcement action. For example, our HQ products could
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be subject to enforcement action and/or recalls based on the FDA’s concerns regarding HQ-based products. Specifically, in August 2006, the FDA issued a proposed rule that cited certain preclinical evidence suggesting that HQ may be a carcinogen, if orally administered, may present fertility risks and may be related to a skin condition called ochronosis, which results in the darkening and thickening of the skin and the appearance of small bumps and grayish-brown spots, after continued use of concentrations as low as 1 to 2 percent. The FDA also concluded that it could not rule out the potential carcinogenic risk from topically applied HQ. Accordingly, the FDA recommended that additional studies be conducted to determine if there is a risk to humans from the use of HQ. The FDA nominated HQ for further study by the National Toxicology Program (the “NTP”), and in December 2009, the NTP Board of Scientific Counselors approved the nomination and has been conducting studies related to HQ.
To the extent that the FDA were to determine that our prescription-use only HQ products present safety concerns, the FDA could determine that the products should be recalled, and such determination could trigger the FDA to require marketing authorization for these products based on the FDA’s established enforcement priorities for drugs marketed without an approved NDA. See “Item 3. Key Information—D. Risk Factors— 10. Regulatory Risks That Could Adversely Impact our Business - Obagi Medical Regulatory Risks—Legal and Regulatory Risks That Could Adversely Impact Our Business —Obagi Medical products containing the active ingredient, hydroquinone, are marketed as prescription-use only drugs but have not received required premarket authorization from the FDA or other regulatory authorities, and the FDA could require us to remove these products from the market until we obtain approval of the required NDA, and we could be found to be marketing and selling these products in violation of the law.”
If our products are associated with undesirable side effects or adverse events, a number of potentially significant negative consequences could result, including, but not limited to:
•regulatory authorities may suspend, limit, or withdraw approvals of such products (to the extent subject to such approvals), or seek an injunction against its manufacture or distribution;
•regulatory authorities may require warnings or issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warnings or other safety information about the products;
•we may be required to change the way the products are administered or conduct clinical trials;
•we may be subject to fines, injunctions or the imposition of criminal penalties;
•we could be sued and held liable for harm caused to patients; and
•our reputation may suffer.
Any of these events could seriously harm our business.
Failure to obtain regulatory approvals or to comply with regulations in foreign jurisdictions would prevent us from marketing our products internationally.
A key part of the growth strategy for our Obagi Medical business is to expand the sale of Obagi Medical products in international markets. To market our products in many non-U.S. jurisdictions, we must obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. In some countries, we do not have to obtain prior regulatory approval but do have to comply with other regulatory restrictions on the manufacture, importation, distribution, marketing and sale of our products. We may be unable to file for regulatory approvals and may not receive necessary approvals to commercialize our products in any market.
The approval procedure varies among countries and can involve additional testing and data review. The time required to obtain approval in non-U.S. jurisdictions may differ from that required to obtain FDA approval and could be lengthy. We may not obtain foreign regulatory approvals on a timely basis, if at all, or may choose not to implement a country’s labeling requirements if to do so would have a negative impact on our international or domestic operations. If any of our products receives FDA approval, such approvals do not ensure approval by regulatory agencies in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory agencies in other foreign countries or by the FDA. The failure to obtain any required approvals could materially harm our business.
In some jurisdictions, the entity that obtains approval from the applicable regulatory authority must be a domestic company. In those cases, we are required to rely on the distributor in such country to obtain the appropriate regulatory approvals, which subjects us to additional risks, such as their potential inability to effectively obtain and maintain required regulatory approvals. Furthermore, in the event that an exclusive distributor in a country terminates its agreement with us, it may not be able to transfer the approvals to a successor that we appoint, and we may face significant delays in our ability
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to import products to that country while the new distributor applies for the appropriate approvals, which it may not be able to obtain.
In the U.K., certain of Obagi Medical products may be deemed medicinal products and therefore subject to regulation by the Medicines and Healthcare products Regulatory Agency (“MHRA”) under the medicines regime. We have not obtained a marketing authorization for such products in the U.K., however the U.K.’s Human Medicines Regulations 2012 allow for supply of medicinal products that have not been authorized for marketing to patients with special needs at the request of the healthcare professional responsible for the treatment of individual patients. Unlicensed medicines should not, however, be supplied where an equivalent licensed medicinal product can meet special needs of the patient. The responsibility for deciding whether an individual patient has “special needs,” that a licensed product cannot meet, is a matter for the healthcare professional. Examples of “special needs” include an intolerance or allergy to a particular ingredient, or an inability to ingest solid oral dosage forms. The MHRA has a wide range of enforcement powers and failure to comply with regulatory restrictions or obtain regulatory approvals if required could harm our business. If the MHRA were to decide that our products do not meet the “specials” requirements, we may need to cease supply of these products and obtain a marketing authorization in the U.K.
In addition, if foreign regulatory authorities were to ban or restrict the use of certain ingredients in cosmetic products, and we are unable to comply with the applicable requirements and regulations for those products, we may be unable to continue to market those products in that jurisdiction.
If we fail to comply with governmental regulations, we could face substantial penalties and our business, financial condition and results of operations could be adversely affected.
The healthcare industry in and outside the U.S. is heavily regulated and closely scrutinized by federal, state, local and foreign authorities. Although our offerings are not currently covered by any commercial third-party payor or government healthcare program, our business activities may nonetheless be subject to regulation and enforcement by the U.S. Department of Justice, the Department of Health and Human Services and other federal, state and foreign governmental authorities.
In addition, HIPAA, as amended by HITECH, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans, and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information, may apply to us in certain circumstances. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions.
Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Achieving and sustaining compliance with these laws may prove costly. Failure to comply with these laws and other laws can result in significant penalties, including, without limitation, administrative, civil and criminal penalties, damages, fines, disgorgement, the curtailment or restructuring of operations, integrity oversight and reporting obligations and exclusion from participation in federal, state and foreign healthcare programs and imprisonment. Our failure to accurately anticipate the application of these laws and regulations to our business or any other failure to comply with regulatory requirements could create liability for us and negatively affect our business. In addition, any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and result in adverse publicity, or otherwise result in a material adverse effect on our business, results of operations, financial condition, cash flows and/or reputation.
Legal and Regulatory Risks That Could Adversely Impact Our Milk Makeup Business
New laws, regulations, enforcement trends or changes in existing regulations governing the introduction, marketing and sale of Milk Makeup products to consumers could harm our business.
Our Milk Makeup products are subject to regulation by the FDA, the FTC, the CPSC, and comparable state, local, and foreign regulatory authorities, including the European Commission, and over time, the regulatory landscape for our products has become more complex with increasingly strict requirements. There has been an increase in regulatory activity
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and activism in the U.S. and abroad, including the adoption of the MoCRA, which significantly expanded the FDA’s enforcement authorities over cosmetics products and imposes new obligations on the cosmetics industry, including requirements relating to cGMP, labeling, safety substantiation, facility registration and product listing with the FDA, adverse event reporting and recordkeeping, among others. Pursuant to MoCRA, the FDA promulgated several regulations relating to cosmetics that went into effect in 2024, with the FDA further signaling their intention to update cGMP requirements for manufacturers in future. As a result, the regulatory landscape for Milk Makeup products is becoming more complex with increasingly strict requirements. If this trend continues, we may find it necessary to alter some of the ways we have traditionally manufactured and marketed Milk Makeup products to stay in compliance with a changing regulatory landscape, and this could add to the costs of our operations and have an adverse impact on our business. To the extent federal, state, local or foreign regulatory changes regarding consumer protection, or the ingredients, claims or safety of our products, occurs in the future, they could require us to reformulate or discontinue certain of our products, revise the product packaging or labeling, change the manufacturers at which our products are made, or adjust operations and systems, any of which could result in, among other things, increased costs, delays in product launches, product returns or recalls and lower net sales, and therefore could have a material adverse effect on the business, financial condition and results of operations of our Milk Makeup business. Noncompliance with applicable regulations could result in enforcement action by regulatory authorities within or outside the U.S., including, but not limited to, warning letters, import restrictions, product seizures, injunctions, product recalls and criminal or civil monetary penalties, all of which could have a material adverse effect on our business, financial condition and results of operations.
In the U.S., with the exception of color additives, the FDA does not currently require pre-market approval for products intended to be sold as cosmetics. However, the FDA may in the future require pre-market approval, clearance or registration/notification of cosmetic products. Moreover, such products could also be regulated as both drugs and cosmetics simultaneously, as the categories are not mutually exclusive. The statutory and regulatory requirements applicable to drugs are extensive and require significant resources and time to ensure compliance. For example, if any of our products intended to be sold as cosmetics were to be regulated as drugs, we might be required to conduct, among other things, clinical trials to demonstrate the safety and efficacy of these products. We may not have sufficient resources to conduct any required clinical trials or to ensure compliance with the manufacturing requirements applicable to drugs. If the FDA determines that any of our products intended to be sold as cosmetics should be classified and regulated as drug products and we are unable to comply with applicable drug requirements, we may be unable to continue to market those products. Any inquiry into the regulatory status of our cosmetics and any related interruption in the marketing and sale of these products could damage our reputation and image in the marketplace.
In recent years, the FDA has issued warning letters to several cosmetic companies alleging improper claims regarding their cosmetic products, including improper drug claims. If the FDA determines that we have made inappropriate drug claims regarding our products intended to be sold as cosmetics, we could receive a warning or untitled letter, be required to modify our product claims or take other actions to satisfy the FDA, including the recall of products from the market. In addition, plaintiffs’ lawyers have filed class action lawsuits against cosmetic companies after receipt of these types of FDA warning letters. There can be no assurance that we will not be subject to state and federal government actions or class action lawsuits, which could harm our business, financial condition and results of operations.
Our products are also subject to regulation by the CPSC in the U.S. under the provisions of the Consumer Product Safety Act, as amended by the Consumer Product Safety Improvement Act of 2008. These statutes and the related regulations ban from the market consumer products that fail to comply with applicable product safety laws, regulations and standards. The CPSC has the authority to require the recall, repair, replacement or refund of any such banned products or products that otherwise create a substantial risk of injury, and may seek penalties for regulatory noncompliance under certain circumstances. The CPSC also requires manufacturers of consumer products to report certain types of information to the CPSC regarding products that fail to comply with applicable regulations. Certain state laws also address the safety of consumer products, and mandate reporting requirements, and noncompliance may result in penalties or other regulatory action.
Our products and facilities are subject to regulation by federal and state regulators.
Our products and the facilities in which they are manufactured are generally subject to regulation under the FDCA and the FDA implementing regulations and state laws. The FDA or state authorities may inspect any or all of our CMOs’ facilities periodically to determine if such facilities comply with the FDCA and FDA regulations and state laws. In addition, our facilities for manufacturing OTC drug products must comply with the FDA’s cGMP that require our CMOs to maintain, among other things, good manufacturing processes, including stringent vendor qualifications, ingredient identification, manufacturing controls and record keeping.
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Pursuant to MoCRA, the FDA also is required to promulgate regulations relating to cGMPs for cosmetics. In addition to cGMP requirements, cosmetic manufacturing and processing facilities are required to be registered with FDA. MoCRA also requires manufacturers and responsible persons to list their cosmetic products with FDA and to report serious adverse events associated with the use of their cosmetic products in the U.S. to the FDA. Adulterated or misbranded cosmetic products will be subject to recalls that are mandated by FDA, similar to medical devices. In addition, FDA regulations prohibit or otherwise restrict the use of certain ingredients in cosmetic products. Similar or stricter requirements may apply in foreign jurisdictions. For instance, in the EU, cosmetic products must be manufactured in compliance with good manufacturing practice and EU regulations equally prohibit or otherwise restrict the use of certain ingredients in cosmetic products, including tretinoin.
We rely on third parties to manufacture Milk Makeup products in accordance with our specifications and in compliance with applicable laws and regulations, including the MoCRA and FDA cosmetic guidelines and applicable cGMPs and other requirements for drug products. Compliance with these standards can increase the cost of manufacturing our products as we work with our vendors to assure they are qualified and in compliance. We do not have complete control over all aspects of the manufacturing process and are dependent on our contract manufacturing partners for compliance with cGMP and similar regulations. Our contract manufacturing partners may be found in violation of applicable requirements, which could have a material adverse effect on us and our business. If we or our CMOs fail to comply with these applicable standards, laws, and regulations, it could lead to customer complaints, adverse events, product withdrawal or recall, or increase the likelihood that our products are rendered adulterated or misbranded, any of which could result in negative publicity, remedial costs, or regulatory enforcement that could impact our ability to continue selling certain products.
Our failure, or the failure of our CMOs, to comply with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our product candidates or drugs and harm our business and results of operations.
The FDA, FTC or particular states may ultimately prohibit or limit the sale of some or all cosmetics containing U.S. hemp and U.S. hemp-derived ingredients, including cannabidiol (“CBD”) and other cannabinoids.
Under the Agricultural Improvement Act of 2018, the FDA has retained authority over drugs, cosmetics and other FDA-regulated products that contain U.S. hemp and U.S. hemp-derived ingredients, and cannabinoids, including CBD, even if those products are not otherwise controlled substances regulated by the Drug Enforcement Administration (“DEA”). The FDA has consistently taken the position that CBD, whether derived from U.S. hemp or U.S. Schedule I cannabis, is prohibited from use as an ingredient in food and dietary supplements. With regard to cosmetics, the FDA has stated that ingredients not specifically addressed by regulation must nonetheless comply with all applicable requirements, and no ingredient – including cannabis or a cannabis-derived ingredient – can be used in a cosmetic if it causes the product to be adulterated or misbranded in any way.
To date, the FDA and FTC have issued warning letters to companies that, in many cases, asserted that the manufacturer made unsubstantiated health claims regarding CBD, or sold CBD products in a form that appeals to children. In addition, the FTC has entered into settlements with companies to resolve claims that those companies made unsubstantiated health claims to market their CBD products. Until the FDA and FTC formally adopt regulations with respect to CBD or other U.S. hemp-derived cannabinoid products or announce an official position with respect to CBD or other U.S. hemp-derived cannabinoid products in cosmetic products, there is a risk that the FDA or FTC could take enforcement action against us in respect of U.S. hemp-derived cosmetic products, such as some of our KUSH and Hydro products, sold in the U.S.
In addition, the FDA could in the future take the position that our cosmetic products are intended for use in diagnosing, treating, mitigating or preventing disease or for use in affecting the structure or any function of the body and, therefore, seek to regulate our cosmetic products containing U.S. hemp-derived ingredients under its authorities for drug products. Though we do not market our cosmetics containing U.S. hemp-derived ingredients as drugs, the FDA could still assert that the products are intended for use as drugs, including based on the understood or presumed physical effects of cannabinoids. Thus, we may not have the ability to successfully respond to such allegations simply by modifying labeling or advertising claims. If we cannot or elect not to comply with the onerous regulatory requirements applicable to FDA-regulated drugs, we could be prevented from producing, marketing and selling cosmetic products containing U.S. hemp-derived ingredients, including CBD or other cannabinoids.
Moreover, states have retained regulatory authority through their own analogues to the FDCA and the states may diverge from the federal treatment of the use of U.S. hemp in cosmetic products. The FDA or applicable states may ultimately not
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permit the sale of products containing U.S. hemp-derived ingredients, including CBD and other cannabinoids, which could have a material adverse effect on our business, financial condition and results of operations.
11.Risks Related to Our Reputation and Threats to Our Good Standing
Damage to our reputation or brand, including through social media, or issues with product quality, efficacy, or safety, could significantly impact our business, financial condition, and operations.
Brand Reputation and Consumer Perception
The success of our business depends significantly on maintaining and enhancing the reputation and perceived uniqueness of the Milk Makeup and Obagi Medical brands. Factors such as compliance with ethical, social, product, labor, and environmental standards are critical to preserving consumer trust. Any actual or perceived failures in these areas could damage our brand reputation and diminish consumer confidence. Additionally, low brand awareness compared to competitors and the growing importance of brand recognition in a competitive market intensify the need to protect and promote our brand image.
Challenges in Consumer Experience and Product Quality
Our ability to deliver a high-quality consumer experience, including offering innovative, effective, and competitively priced products, is vital for maintaining brand loyalty. Issues such as product contamination, safety concerns, or perceived quality failures could tarnish our reputation. Even unfounded allegations regarding product safety or effectiveness may lead to recalls, adverse publicity, or regulatory scrutiny, further eroding consumer trust. Counterfeit products in the market also pose risks to brand integrity by creating potential safety hazards and disappointing consumer expectations.
Marketing and Social Media Risks
The effectiveness of our marketing efforts directly impacts brand perception. Marketing campaigns or product initiatives that fail to resonate with consumers could harm the brand's image and hinder growth. Additionally, negative commentary, false information, or user-generated content on social media and e-commerce platforms can spread rapidly, damaging our reputation. Our reliance on social media for marketing amplifies these risks, especially as platforms and regulations evolve. Failure to comply with these evolving laws could result in legal liability, regulatory penalties, and significant costs.
Impact of Adverse Publicity
Adverse publicity, whether related to product safety, ethical concerns, or operational missteps, could severely damage our brand value. This includes consumer perceptions of irresponsible actions, product failures, or diminished quality. Negative publicity could lead to consumer boycotts, loss of market share, or a decline in sales, materially affecting our business and financial results.
Risks Associated with E-Commerce and Social Media Regulations
As we increasingly rely on digital platforms for marketing and sales, evolving laws governing these platforms introduce additional risks. Non-compliance could expose us to investigations, lawsuits, fines, or other penalties. The need to monitor and ensure compliance with applicable laws for online content, data privacy, and product claims creates further operational challenges, and any lapses could negatively impact our business.
Damage to our reputation, whether from internal missteps or external factors, could have a material adverse effect on our financial condition, operational performance, and long-term success.
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12.Risks Related to Technology, E-Commerce, and Cybersecurity
We are dependent on information technology systems and infrastructure; if we, or the third parties we rely on, fail to protect sensitive information of our consumers and information technology systems against security breaches, it could damage our reputation and brand and substantially harm our business.
We rely to a large extent on our information technology systems and infrastructure, which have and may in the future experience breakdowns, malicious intrusion, and attacks. We rely on these networks and systems to market and sell our products, accurately forecast demand and manage inventory, process electronic and financial information, assist with sales tracking and reporting, manage a variety of business processes and activities and comply with regulatory, legal and tax requirements. We have been making ongoing efforts to improve our operational and financial systems to support our expected growth, increasingly complex business arrangements, and rules governing revenue and expense recognition and as the business continues to grow, we will need to continue to increase systems automation to reduce reliance on manual operations. Any inability to do so may affect our manufacturing operations, customer billing and reporting. Delays or problems associated with any improvement or expansion of our operational and financial systems and controls could adversely affect our relationships with our customers, cause harm to our reputation and brand and could also result in errors in our financial and other reporting.
We are also increasingly dependent on a variety of information systems and third-party partners to effectively process consumer orders from our e-commerce websites for Obagi Medical and Milk Makeup products. A key component of our growth strategy entails expanding our e-commerce efforts both in the U.S. and internationally. Our e-commerce websites serve as an effective extension of our marketing strategies by introducing potential new consumers to our brands, product offerings, retailers and enhanced content. Due to the increasing importance of our e-commerce operations, we are vulnerable to website downtime and other technical failures. Our failure to successfully respond to these risks in a timely manner could reduce e-commerce sales and damage our brands’ reputations. We collect, maintain, transmit and store data about our customers, suppliers and others, including personal data, financial information, such as consumer payment information, as well as other confidential and proprietary information important to our business. We also frequently employ third-party service providers that collect, store, process and transmit personal data, and confidential, proprietary and financial information on our behalf, such as credit card processing vendors and logistics providers, and as a result a number of third-party vendors may or could have access to our confidential information. If our third-party service providers fail to protect their information technology systems and our confidential and proprietary information, we may experience disruptions in service and unauthorized access to our confidential or proprietary information and we could incur liability and reputational damage.
We have in place certain technical and organizational measures designed to maintain the security and safety of critical proprietary, personal, employee, customer and financial data that we continue to maintain and upgrade. However, advances in technology, the increasing ingenuity of criminals, new exposures via cryptography, acts or omissions by our employees, contractors or service providers or other events or developments could result in a compromise or breach in the security of confidential or personal data. Further, attacks upon information technology systems are increasing in their frequency, levels of persistence, sophistication and intensity, are being conducted by sophisticated and organized groups and individuals with a wide range of motives and expertise, and could be enhanced or facilitated by artificial intelligence. Furthermore, because the techniques used to obtain unauthorized access to, or to sabotage, systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. We may also experience security breaches that may remain undetected for an extended period. We and our service providers may not be able to prevent third parties, including criminals, competitors or others, from breaking into or altering our systems, disrupting business operations or communications infrastructure through denial-of-service attacks, attempting to gain access to our systems, information or monetary funds through phishing or social engineering campaigns, installing viruses or malicious software on our e-commerce websites or mobile applications or devices used by our employees or contractors, or carrying out other activity intended to disrupt our systems or gain access to confidential or sensitive information in our or our service providers' systems. We may also face increased cybersecurity risks due to our reliance on Internet technology and the number of our employees who are working remotely, which may create additional opportunities for cybercriminals to exploit vulnerabilities. Actual or anticipated attacks have and may in the future cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants. If a material security breach were to occur, our reputation and brands could be damaged, and we could be required to expend significant capital and other resources to alleviate problems caused by such breaches, including exposure of litigation or regulatory action and a risk of loss and possible liability.
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Payment methods used on our e-commerce websites subject us to third-party payment processing-related risks.
We accept payments from our consumers using a variety of methods, including online payments with credit cards and debit cards issued by major banks, payments made with gift cards processed by third-party providers and payment through third-party online payment platforms such as Afterpay. We also rely on third parties to provide payment processing services. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins. We may also be subject to fraud and other illegal activities in connection with the various payment methods we offer, including online payment options and gift cards. Transactions on our e-commerce websites and mobile applications are card-not-present transactions, so they present a greater risk of fraud. Criminals are using increasingly sophisticated methods to engage in illegal activities such as unauthorized use of credit or debit cards and bank account information. Requirements relating to consumer authentication and fraud detection with respect to online sales are complex. We may ultimately be held liable for the unauthorized use of a cardholder's card number in an illegal activity and be required by card issuers to pay charge-back fees. Chargebacks result not only in our loss of fees earned with respect to the payment, but also leave us liable for the underlying money transfer amount. If our chargeback rate becomes excessive, card associations also may require us to pay fines or refuse to process our transactions. In addition, we may be subject to additional fraud risk if third-party service providers or our employees fraudulently use consumer information for their own gain or facilitate the fraudulent use of such information. Overall, we may have little recourse if we process a criminally fraudulent transaction.
13.Risks Related to Taxation in an International Environment
Any disparity between the U.S. corporate tax rate and the U.S. tax rate applicable to non-corporate Members of Waldencast LP may complicate our ability to maintain its intended capital structure, which could impose transaction costs on it and require management attention.
Waldencast LP is treated as a partnership for U.S. federal income tax purposes and, as such, generally is not subject to U.S. federal income tax. Instead, its taxable income is generally allocated to its members, including Holdco 1. If and when Waldencast LP generates taxable income, it will generally make cash distributions, or tax distributions, to each of its members, including Holdco 1, based on each member's allocable share of net taxable income (calculated under certain assumptions) multiplied by an assumed tax rate. The assumed tax rate for this purpose will be the highest effective marginal combined federal, state, and local income tax rate applicable to an individual or corporate member (whichever is higher). In the event of any disparity between the tax rates applicable to corporate and non-corporate taxpayers, Holdco 1 could receive tax distributions from Waldencast LP in excess of its actual tax liability, which could result in it accumulating cash in excess of its tax liability. This would complicate our ability to maintain certain aspects of our capital structure. Such cash, if retained, could cause the value of a Waldencast LP Unit to deviate from the value of a Class A ordinary share. In addition, such cash, if used to purchase additional Waldencast LP Units, could result in deviation from the one-to-one relationship between our Class A ordinary shares outstanding and Waldencast LP Units unless a corresponding number of additional Class A ordinary shares are distributed as a stock dividend. We may, if permitted under our debt agreements, choose to pay dividends to all holders of our Class A ordinary shares with any excess cash. These considerations could have unintended impacts on the pricing of our Class A ordinary shares and may impose transaction costs and require management efforts to address on a recurring basis. To the extent that we do not distribute such excess cash as dividends on our Class A ordinary shares and instead, for example, hold such cash balances or lend them to Waldencast LP, holders of Waldencast LP Units during a period in which we hold such cash balances could benefit from the value attributable to such cash balances as a result of redeeming or exchanging their Waldencast LP Units and obtaining ownership of our Class A ordinary shares (or a cash payment based on the value of our Class A ordinary shares). In such case, these holders of Waldencast LP Units could receive disproportionate value for their Waldencast LP Units exchanged during this time frame.
Failure to comply with applicable transfer pricing and similar regulations could harm our business and financial results.
In many countries, including the U.S., we are subject to transfer pricing and other tax regulations designed to ensure that appropriate levels of income are reported as earned in each jurisdiction and are taxed accordingly. Although we believe that we are in substantial compliance with all applicable regulations and restrictions, we are subject to the risk that governmental authorities could audit our transfer pricing and related practices and assert that additional taxes are owed. In the event that the audits or assessments are concluded adversely to us, we may or may not be able to offset or mitigate the consolidated effect.
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We may be a passive foreign investment company (“PFIC”), which could result in adverse U.S. federal income tax consequences to U.S. Holders.
If we are a PFIC for any taxable year, or portion thereof, that is included in the holding period of a U.S. Holder (as defined herein), such U.S. Holder may be subject to certain adverse U.S. federal income tax consequences and may be subject to additional reporting requirements. We are not expected to be treated as a PFIC for the taxable year ending on December 31, 2025 and expect to keep this status in review in future periods. However, the facts on which any determination of PFIC status are based may not be known until the close of each taxable year in question. Additionally, there is uncertainty regarding the application of the start-up exception.
We may be treated as a corporation resident in the U.S. for U.S. federal income tax purposes.
A corporation is generally considered a tax resident in the jurisdiction of its organization or incorporation in the absence of information to the contrary. As a corporation incorporated under the laws of Jersey, and from October 29, 2024, a tax resident in the United Kingdom with associated governance protocols, we should generally be classified as a non-U.S. corporation (and therefore as a non-U.S. tax resident) for U.S. federal income tax purposes. In certain circumstances, however, under section 7874 of the Code, a corporation organized outside the U.S. will be treated as a U.S. corporation (and, therefore, as a U.S. tax resident).
Based on the rules in effect currently, we do not expect to be treated as a U.S. corporation for U.S. federal income tax purposes by virtue of section 7874. Nevertheless, because the section 7874 rules and exceptions are complex, subject to factual and legal uncertainties, and may change in the future (possibly with retroactive effect), there can be no assurance that we will not be treated as a U.S. corporation for U.S. federal income tax purposes. In addition, it is possible that a future acquisition of the stock or assets of a U.S. corporation could result in our being treated as a U.S. corporation.
We operate as a Jersey incorporated, and effective October 29, 2024, United Kingdom resident company, but the tax authorities of other jurisdictions may treat us as also being a resident of, or as having a taxable presence in, another jurisdiction for tax purposes.
Our residence for tax purposes (including, for the avoidance of doubt, withholding tax and tax treaty eligibility purposes) was exclusively in Jersey for the period until October 29, 2024, and the United Kingdom in the period thereafter on account of the Company moving its place of central management and control. We have no taxable presence in the form of a fixed place of business or permanent establishment in any other jurisdiction and have protocols in place such that we were exclusively resident in Jersey until October 29, 2024, and exclusively resident in the United Kingdom after this date.
However, the determination of our tax residence, which primarily depends as mentioned upon our place of effective management, as well as the characterization of fixed places of business or permanent establishments outside our jurisdiction of incorporation, are questions of fact based on all circumstances. Because such determinations are highly fact-sensitive, no assurance can be given regarding their outcome.
A failure to maintain exclusive tax residence could result in significant adverse tax consequences for shareholders. The impact of this risk would differ based on the views taken by each relevant tax authority and in respect of the taxation of shareholders on their specific situation.
Changes in tax law could significantly affect our reported earnings and cashflows.
We have business operations and assets in different jurisdictions, which are subject to different tax regimes. Changes in tax regimes, such as the reduction or elimination of tax benefits, or limitations on the deductibility of interest expense, could have a material adverse effect on our results and cash flows.
While in the current period the OECD/G20 “Two Pillars Solution”, which broadly provides an effective global minimum tax rate of 15% on profits generated by multinational companies with consolidated revenues of at least €750 million, was not considered to be relevant to the Company it may in the future have application and have a negative impact on our financial condition, results of operations and cash flows.
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ITEM 4. INFORMATION ON THE COMPANY
A.History and Development of the Company
Waldencast was a blank check company that was incorporated on December 8, 2020, as Waldencast Acquisition Corp., a Cayman Islands exempted company. In connection with the Business Combination, on July 26, 2022, with the approval of the Company’s shareholders, and in accordance with the Cayman Companies Act, the Jersey Companies Law and the Company’s Constitutional Document, the Company’s jurisdiction of incorporation was changed from the Cayman Islands to Jersey and its name changed to Waldencast (the “Domestication”). As a result of the Domestication, (i) each then issued and outstanding Waldencast Acquisition Corp. Class A ordinary share was converted automatically, on a one-for-one basis, into a Class A ordinary share of Waldencast, (ii) each then issued and outstanding Waldencast Acquisition Corp. Class B ordinary share was converted automatically, on a one-for-one basis, into a Class A ordinary share of Waldencast, (iii) each then issued and outstanding Waldencast Acquisition Corp. warrant was converted automatically into a warrant to purchase Class A ordinary shares of Waldencast and (iv) each then issued and outstanding Waldencast Acquisition Corp. Unit was canceled and the holders thereof were entitled to one Class A ordinary share of Waldencast and one-third of one warrant.
On the Closing Date, pursuant to the Obagi Merger Agreement, Merger Sub merged with and into Obagi, with Obagi surviving as an indirect subsidiary of Waldencast LP. In addition, on the Closing Date, pursuant to the Milk Purchase Agreement, Waldencast LP acquired from the Milk Members all of their equity in Milk Makeup in exchange for cash, Waldencast LP common units (“Waldencast LP Units”) and Waldencast Class B ordinary shares, which are non-economic voting shares. The Waldencast LP Units are redeemable at the option of the holder of such units into an equal number of Class A ordinary shares or cash, at the sole discretion of Waldencast. The equity interests of Obagi Medical and Milk Makeup are held by Waldencast LP. We, in turn, hold our interests in Obagi Medical and Milk Makeup through Waldencast LP and Holdco 1. As a result of the Business Combination, we are organized as an “Up-C” structure, whereby the Milk Members retain a direct equity ownership in Waldencast LP, an entity that is classified as a partnership for U.S. federal income tax purposes, in the form of their Waldencast LP Units.
Each holder of a Class A ordinary share was entitled to redeem such share in connection with the consummation of the Business Combination for a pro rata portion of the cash then on deposit in the trust account created in connection with our IPO. Such pro rata portion was calculated as of two business days prior to the consummation of the Business Combination including interest earned on the funds held in the trust account and not previously released to us (net of taxes payable). A total of 30,021,946 Class A ordinary shares were redeemed in connection with the Business Combination.
The Company’s legal and commercial name is “Waldencast plc.” Waldencast’s registered office is 2nd Floor Sir Walter Raleigh House, 48-50 Esplanade, St. Helier, Jersey JE2 3QB, and its principal executive office is 81 Fulham Road, London, SW3 6RD, United Kingdom, and its telephone number is +44 (0)20 3196 0264.
The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC which is accessible at http://www.sec.gov. Since Waldencast is a “foreign private issuer,” it is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and its officers, directors and principal shareholders are exempt from the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act with respect to their purchase and sale of our shares. In addition, we are not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. public companies whose securities are registered under the Exchange Act. However, we are required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm.
Waldencast’s principal website address is www.waldencast.com. The information contained on Waldencast’s website does not form a part of, and is not incorporated by reference into, this Report.
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B.Business Overview
Unless the context otherwise requires, all references in this section to “we,” “our,” “us,” the “Company,” or “Waldencast” generally refer to Waldencast plc.
General
Founded by Michel Brousset and Hind Sebti, our ambition is to build a global best-in-class beauty and wellness operating platform by developing, acquiring, accelerating, and scaling conscious, high-growth purpose-driven brands. Our vision is fundamentally underpinned by our brand-led business model that ensures proximity to our customers, business agility and market responsiveness, while maintaining each brand’s distinct DNA. The first step in realizing our vision was the Business Combination with Obagi Medical and Milk Makeup. As part of the Waldencast platform, our brands will benefit from the operational scale of a multi-brand platform; the expertise in managing global beauty brands at scale; a balanced portfolio to mitigate category fluctuations; asset light efficiency; and the market responsiveness and speed of entrepreneurial indie brands.
Properties
The Company leases the following properties:
Location | Principal use(s) | Floor space (approximate square footage) | Expiration date | |||||||||||||||||
| London, United Kingdom | Office | 1,400 | December 2026 | |||||||||||||||||
| Long Beach, California | Office | 28,300 | January 2027 | |||||||||||||||||
| The Woodlands, Texas | Sublease for this office space expired December 2025. Actively marketing for sublease. | 16,500 | January 2033 | |||||||||||||||||
| Conroe, Texas | We have entered into a sublease for this warehouse and office space that will run through February 2032. | 35,000 square feet of warehouse space and 4,200 square feet of office space. | February 2032 | |||||||||||||||||
| New York, New York | Office and in-house studio | 17,500 | November 2030 | |||||||||||||||||
| Los Angeles, California | Office and in-house studio | 1,500 | Sublease from Milk Studios Los Angeles LLC on a month-to-month basis for a fee of $0.015 million per month | |||||||||||||||||
We consider our current office spaces adequate for our current operations.
Employees
We currently have 3 executive officers and 364 full-time employees across the Waldencast group. As of December 31, 2025, Obagi Medical had 248 employees and all non-unionized. As of December 31, 2025, Milk Makeup had 100 full-time employees and all non-unionized. We believe our relations with our employees are good.
Principal Markets
Please refer to “Item 8. Financial Information—Note 4. Revenue” for a description of the principal markets in which the Company operates.
Legal Proceedings
We are not involved in any material litigation nor, to management’s knowledge, was any material litigation threatened against us, which if adversely determined could have a material adverse effect on the Company.
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SEC Investigation
As previously disclosed, we proactively and voluntarily self-reported our review of the historical accounting used by Obagi Medical to the SEC. In connection with this matter, we received a document subpoena in September 2023. We are fully cooperating with the SEC’s investigation however, we cannot predict when such matters will be completed or the outcome or potential impact of this matter on our business, investor confidence, or the price of our securities. Additionally, the investigation has resulted in substantial costs and we cannot predict with certainty any further associated costs associated with the investigation.
Emerging Growth Company
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and 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 our 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. We have 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, we, 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 our financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.
We will remain an emerging growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the closing of our initial public offering, (b) in which we have total annual gross revenue of at least $1,235.0 million or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that is held by non-affiliates exceeds $700.0 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1,000 million in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Foreign Private Issuer
We are a “foreign private issuer” under SEC rules and will report under the Exchange Act as a non-U.S. company with “foreign private issuer” status and will be subject to the reporting requirements under the Exchange Act applicable to foreign private issuers. This means that, even after we no longer qualify as an “emerging growth company,” as long as we qualify as a “foreign private issuer” under the Exchange Act, we will be exempt from certain provisions of and intend to take advantage of certain exemptions from the Exchange Act that are applicable to U.S. public companies. Such exemptions include the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act.
Additionally, we will not be required to file our annual report on Form 20-F until 120 days after the end of each fiscal year and we will furnish reports on Form 6-K to the SEC regarding certain information required to be publicly disclosed by us in Jersey or that is distributed or required to be distributed by us to our shareholders. Further, based on our foreign private issuer status, we will not be required to file periodic reports and financial statements with the SEC as frequently or as promptly as a U.S. company whose securities are registered under the Exchange Act. We will also not be required to comply with Regulation FD, which addresses certain restrictions on the selective disclosure of material information. In addition, among other matters, our principal shareholders who are not officers or directors are exempt from the reporting requirements, and our officers, directors and principal shareholders are exempt from the “short-swing” profit recovery provisions and short sale prohibitions, of Section 16 of the Exchange Act .
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We (and our officers, directors and principal shareholders) may take advantage of these exemptions until such time as we are no longer a “foreign private issuer.” We could lose our status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of our outstanding voting securities become directly or indirectly held of record by U.S. Holders and any one of the following is true: (i) the majority of our directors or executive officers are U.S. citizens or residents; (ii) more than 50% of our assets are located in the U.S.; or (iii) our business is administered principally in the U.S.
We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of reduced reporting requirements in this Report. Accordingly, the information contained in this Report may be different from the information you receive from our competitors that are public companies, or other public companies in which you have made an investment. See “Item 3. Key Information—Risk Factors—Risks Related to SEC and Nasdaq Compliance, Securities Issuances, Share Price Volatility and Limitations on Investor Rights—As a foreign private issuer, we are exempt from a number of rules under the U.S. securities laws and are permitted to file less information with the SEC than a U.S. company. This may limit the information available to holders of the ordinary shares.”
Our Professional Skincare Segment: Obagi Medical
Our professional skincare segment consists of the Obagi Medical business. Unless the context otherwise requires, all references in this section to “Obagi,” “we,” “us,” “our” and the “Company” refer to the business of Obagi Medical and its subsidiaries.
Brand Overview
Acquired through the Business Combination in July 2022, Obagi Medical originates in science and is backed by over 35 years of clinical research leveraging cutting-edge technologies and pharma-grade ingredients that deliver transformative, visible results for all skin concerns, skin types, and skin tones. In July 2025, we announced the acquisition of Novaestiq Corp. and the rights to the Saypha® line of hyaluronic acid (“HA”) injectable fillers, further increasing the brand’s offerings beyond medical-grade skincare and into aesthetic solutions.
The skincare product portfolio is formulated to address the most common, visible skin concerns such as fine lines and wrinkles, elasticity, photodamage, hyperpigmentation (spots or patches of skin that are darker than surrounding areas of skin), acne, oxidative stress, environmental damage, and dehydration. The addition of injectables, launching in the first quarter of 2026, is expected to play a pivotal role in the evolution of Obagi Medical into an end-to-end, synergistic solution that integrates medical-grade skincare with aesthetic treatments to deliver enhanced outcomes, prolonged results, and greater patient satisfaction. Our portfolio today includes over 15 product franchises, composed of cosmetic, OTC, and prescription products sold in over 95 countries around the world.
As we look ahead, our growth strategy continues to be:
1.Improve profitability and resilience of the business
2.Double down on our dermatological brand DNA
3.Accelerate cutting-edge, science-backed innovation
4.Grow brand awareness and footprint
Products
Obagi Medical’s product range incorporates both prescription and non-prescription therapeutic agents, as well as cosmetic ingredients to address the needs of consumers who seek advanced skincare in a customized skincare regimen designed by a professional. Its highest selling product range in each of the last three fiscal years is the Obagi Nu-Derm® System, one of the leading prescription-based topical skin health systems on the market targeting hyperpigmentation and visible signs of skin aging. Further significant product lines within the Obagi Medical franchise include Obagi Professional-C®, a line of Vitamin C powered antioxidant products, the ELASTIderm® line, which leverages our patented Bi-Mineral Contour Complex®™ technology to address elasticity and firmness in the skin, and Obagi Nu-Cil®, to address hair density for scalp, lashes and brows. Other products within the comprehensive Obagi Medical franchise include products to address hydration, sun protection, and acne. We continually innovate with new product launches, which in 2025 included the Retinol + PHA Refining Night Cream and expanding the SUZANOBAGIMD® skincare products collection.
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In 2026, we entered the aesthetics solutions market with the launch of the Obagi Medical Saypha®, MagIQ™ and ChIQ™ lines of injectable HA fillers, with the ChIQ™ line remaining subject to FDA approval as of the date of this Report. Saypha® is distinguished by its proprietary technology delivering advanced HA treatments through a stable 3D matrix designed to provide natural-looking results with optimally balanced gel characteristics. This technology powers a portfolio of clinically proven products that lead in multiple performance categories including high HA content at injection, ideal gel distribution, and consistent injection force and swelling behavior. Saypha®, a product of Croma-Pharma GmbH, is developed and manufactured in Austria and marketed in over 80 countries, leveraging 40 years of expertise in HA-based treatments with more than 110 million syringes produced. We believe this global reach and deep market insight allow for the delivery of trusted, personalized care to patients and professionals worldwide.
Research and Development
As pioneers of medical-grade skincare, Obagi Medical transformed the industry with a commitment to unmatched safety and efficacy standards. We apply a scientific approach to all of our products from inception and all of our products are tested for integrity, safety and performance.
We have also registered a number of global patents on product and technology innovations, which we believe sets us apart from our competitors and furthers our commitment to science. Although a number of our patents will expire over the next five years, we do not believe the expiration of such patents will have a material effect on our business or results of operations because the formulations for the products covered by such patents are still treated as trade secrets, which are known only by a limited number of need-to-know employees, CMOs of the products who are bound by strict confidentiality provisions, and regulatory authorities as required.
Sales and Distribution: Domestic
For each of the last three fiscal years, our primary U.S. distribution for prescription and non-prescription (either OTC or cosmetic) Obagi Medical products is through our direct sales force to physicians, referred to as the “physician-dispensed” channel. We currently have a large account base, which includes dermatologists, plastic surgeons, medical spas, and other licensed medical professionals who dispense and sell our products in-office directly to their patients.
For non-prescription products, an increasing proportion of our domestic sales are also through brand-controlled e-commerce sites, www.obagi.com and via www.amazon.com. Our digital strategy enables us to maximize customer reach and drive conversion through direct consumer engagement and data ownership, while also benefitting from scaling volume via the global Amazon marketplace. We further sell Obagi Medical products to a select number of other authorized e-retailers and a high-end Beauty retailer.
See “Item 5. Waldencast’s Operating and Financial Review and Prospects” for more information on the recognition of revenue.
Sales and Distribution: International
For each of the last three fiscal years, Obagi Medical products have been sold internationally outside of the U.S. through three channels; indirectly through international distribution partners, directly through wholly owned subsidiaries in Southeast Asia, and via licensing agreements for China and Japan (refer to “Licensing” below).
We target distribution partners who are capable of and willing to mirror our sales and distribution model in the U.S. and who have an established business and reputation with physicians. The products that we sell internationally are generally the same formulations as those sold in the U.S., however, in some instances, formulations have been modified to comply with the regulatory requirements of certain countries, particularly in the U.K., Europe, and Asia. These distributors use a model similar to our business model in the U.S., addressing their territories through direct sales representatives who sell to physicians, or through alternative distribution channels, depending on regulatory requirements and industry practices. Our distribution agreements typically grant distributors the right to distribute and sell our products to licensed medical professionals and skincare clinics within a specified territory, require them to purchase a specified minimum amount of our products each year, and have a term of two to five years. We generally reserve the rights to distribute our products through other channels and e-commerce in such territories.
In the last three fiscal years, we have sold Obagi products directly through wholly owned subsidiaries in four countries across South East Asia, with the majority of revenue generated in Vietnam. In March 2023, Waldencast acquired a sixty
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percent (60%) controlling interest in a newly formed entity, Obagi Vietnam, comprising of the business of its Southeast Asia distributor (the “Vietnam Purchase Agreement”). This was an asset acquisition, the primary asset being the recovery of $1.6 million of inventory held by the Southeast Asia Distributor. In return, the Southeast Asia Distributor received forty percent (40%) of Obagi Vietnam’s parent company Obagi Blue Sea Holding, LLC, an indirect subsidiary of Obagi.
Due to non-performance by the Southeast Asia Distributor of its obligations pursuant to the Vietnam Purchase Agreement and certain other matters, we took further steps in 2023 to restructure the business of Obagi Vietnam by hiring new local management, finance and sales teams to replace the previous SA Distributor team, entering into new online and offline distribution agreements with reputable partners and re-applying for all product registrations. In June 2024, Obagi entered into a Settlement and Release Agreement with the Southeast Asia Distributor, which, among other things, extinguished both the Southeast Asia Distributor’s right to receive an earnout and the Southeast Asia Distributor’s 40% interest in the outstanding equity of Obagi Blue Sea Holding, LLC. In 2025, we have continued to successfully build our presence in the Vietnamese market through online, retail and medical channels.
We believe that there is potential for significant sales growth of our products in international markets and intend to continue expanding our international presence in key locations, such as Asia, Europe and South America, through strategic relationships or expanding our own distribution structure.
Sales and Distribution: Phasing
Obagi Medical’s business is subject to moderate seasonal fluctuations that impact different distribution channels differently. Brand controlled e-commerce channels are driven by retail consumers and tend to see higher sales around the timing of new launches and promotional events during which our marketing spend is also higher. The direct to physician channel is impacted by new launches as well as sales team behavior. Account driven channels, including international distributors, often see an increase in sales driven by the timing of and growth in new accounts.
Licensing
On November 13, 2025, Obagi Cosmeceuticals entered into a strategic transaction with Rohto Pharmaceutical Co., Ltd. (“Rohto”), a global health and beauty company, with respect to the Obagi brand in Japan by entering into a trademark transfer agreement (the “Trademark Transfer Agreement”) and coexistence agreement (the “Trademark Coexistence Agreement”) dated the same date. Under the terms of the Trademark Transfer Agreement, Obagi Cosmeceuticals has agreed to sell, assign, and irrevocably transfer to Rohto the ownership of certain specified trademarks, including all of those related to the "Obagi” brand registered with the Japan Patent Office and World Intellectual Property Organization for Japan (the “Obagi Japan Trademarks”) and perpetual license, and distribution rights related to such Obagi Japan Trademarks in Japan (the “Acquired Rights”). This transfer grants Rohto the sole and exclusive ownership of the Acquired Rights in Japan for an aggregate purchase price of $82.5 million. Concurrently, the parties have mutually terminated certain prior licensing and supply agreements. In conjunction with the transfer of the Acquired Rights, the parties have entered into a Trademark Coexistence Agreement to ensure that the use and registration of the Obagi Japan Trademarks by Rohto within Japan and by Obagi Cosmeceuticals and its affiliates outside of Japan do not result in consumer confusion. The Trademark Coexistence Agreement establishes a clear geographic delineation of the markets, with Rohto focused exclusively on the Japanese market and Obagi Cosmeceuticals and its affiliates retaining their rights in all other territories globally. Prior to this, Obagi had been party to a Trademark and Know-How License Agreement under which Rohto was licensed to manufacture and sell a range of OTC and cosmetic products under the Obagi brand name in the Japanese drug store and retail channels, for which they paid us a license fee.
On the Closing Date of the Business Combination in 2022, we entered into an Intellectual Property License Agreement (the “China IP License Agreement”) and Global Supply Services Agreement (the “China Supply Agreement”) with Obagi Hong Kong Limited, a subsidiary of Cedarwalk Skincare Ltd. (“Obagi Hong Kong”) for the sale of Obagi Medical products throughout the China Region. Under these agreements, we supply, or cause to be supplied through certain CMOs (as defined in the Supply Agreement), Obagi Medical products to Obagi Hong Kong and its affiliates, and Obagi Hong Kong purchases such products, with the exclusive right to distribute and sell such products in the China Region. In return, Obagi Hong Kong pays us a royalty of five and a half percent (5.5%) of gross sales of licensed products, subject to certain deductions. See “Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions” for a description of these related party transactions.
Our success also is dependent, in part, on our ability to maintain and exploit intellectual property rights through strategic licensing arrangements. We have entered into various licensing agreements with third parties to expand our product
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portfolio, and utilize established proprietary formulations, including the rights to the formulas currently marketed under our Obagi Nu-Cil® and SUZANOBAGIMD® product lines, which include exclusive distribution rights (and may be subject to territory restrictions). Additionally, through our agreement with Croma-Pharma GmbH, we have secured a non-exclusive license to certain patents originally held by Allergan, which is required for the development and commercialization of the Saypha® brand of dermal fillers within the United States market. Our business remains subject to risks associated with these licenses.
Competition
The market for aesthetic and therapeutic skin health products is highly competitive and we expect the intensity of competition to increase in the future. We also expect to encounter increased competition as we enter new markets and/or distribution channels, attempt to penetrate existing markets with new products and expand into new distribution channels.
Manufacturing
We currently outsource all our product manufacturing to third-party CMOs. We typically have two or more qualified CMOs for some of our key products, however, certain products are currently supplied by a single source. The transfer of technology required to begin using a new CMO is also a lengthy process, which can take six to 18 months to achieve. We believe our manufacturing processes provide us with a competitive advantage, which we have developed through years of experience formulating skin care products. For all of our proprietary product concepts, we believe we own the related manufacturing processes, methods, and formulations.
In the U.S., we use FDA-compliant CMOs who specialize in the manufacture of prescription and OTC pharmaceutical and/or cosmetic products. The CMOs manufacture products pursuant to our specifications. All of our CMOs are required by law to comply with cGMPs. We require all CMOs with whom we have agreements to represent and warrant to us that the products they produce for us are made in accordance with cGMPs, including documentation, recordkeeping, building and facility design, equipment maintenance and personnel requirements. We pre-qualify and continually monitor our CMOs for quality and compliance. We also require documentation of compliance and quality from those CMOs for whom we act as representative in connection with the promotion and sale of their products.
Our new HA filler, Saypha®, is a product of Croma-Pharma GmbH and is developed and manufactured in Austria and marketed in over 80 countries, leveraging 40 years of expertise in HA-based treatments with more than 110 million syringes produced.
Bausch Health, which formerly owned the business of Obagi Medical, is our only supplier and manufacturer of tretinoin. We have a contract with Bausch Health that has an initial termination date in 2027.
Intellectual Property
The design of our systems and products is generally proprietary to us, and we hold patents worldwide for the composition of several of these products. Our success depends in part on our ability to obtain and maintain proprietary protection for our product candidates, technology and know-how, to operate without infringing the proprietary rights of others and to prevent others from infringing our proprietary rights. We also rely on trade secrets, trade dress, know-how, continuing technological innovation and in-licensing opportunities to develop and maintain our proprietary position.
We have pursued a strategic trademark registration policy aimed at achieving brand recognition and product differentiation in the market. We have also acquired rights to market, distribute, sell and, in some cases, make products pursuant to license agreements with other third parties that grant us the right to use the product formulas, trademarks and other trade secrets; these agreements do not include products that have underlying patents.
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Our “Clean” Makeup Segment: Milk
Our “clean” Makeup Segment consists of the Milk Makeup business. Unless the context otherwise requires, all references in this section to “we,” “our,” “us,” the “Company,” or “Milk Makeup” generally refer to Milk and its consolidated subsidiaries.
Brand Overview
Milk Makeup was launched in 2016 with the goal of building a global movement to challenge and broaden the definition of beauty. Milk Makeup is a leading, award-winning clean prestige makeup brand with unique products, a strong following among Gen-Z and Gen-Alpha consumers and a global presence. We believe that our ability to authentically connect with culture while developing unique, effective and easy to use products that are also 100% vegan, clean and cruelty-free sets us apart from other brands.
Our plan is to continuously renew relevance with our younger core demographic while expanding into more mature demographics, who tend to have higher disposable income, through awareness building and product storytelling. This will create strong future growth potential for the brand.
Products
The Milk Makeup brand offers a portfolio of over 15 product franchises that reflect its values and commitments underpinning its product ethos: “cool, clean beauty that works.” From day one, we have always strived to create breakthrough effective products that are also clean, vegan and cruelty-free.
Milk Makeup’s product range includes primers, skin tints, lip and cheek tints, mascaras, brow products, eyeliners, lip glosses and balms and skincare. Some of our best-selling and highest ranking product franchises include:
•Hydro Grip Collection: Primers, setting sprays, a skin tint and a concealer (launched in 2026) providing 12-hour wear and added hydration.
•Cooling Water Jelly: first-of-their-kind lip and cheek tints and facial serums in a bouncy jelly texture with long-lasting staying power and skincare ingredients.
•Sticks: products for Lip & Cheek, bronzers and sculpt sticks in a creamy, blendable and buildable formulation.
•Kush: a collection of mascaras and brow tints designed for volume and definition.
At Milk Makeup, we use the word “clean” to describe how we formulate our products, defined as following the below principals:
• Animal Products and Byproducts: All of our products are Leaping Bunny Certified, which means that Milk Makeup does not test on animals at any stage in its supply chain. Additionally, our products have no animal derivatives and are 100% vegan.
•“Clean” Ingredients: We are dedicated to creating natural products, which means our products will never contain any of the over 2,500 controversial and potentially harmful or irritating ingredients, including parabens, sulfates, BHA, BPA, plastic microbeads, talc, urea, retinyl palmitate, mercury or mercury-containing ingredients, resorcinol, formaldehyde, aluminum salts, and mineral oil. We publish a complete and growing list of ingredients we will never use in our “Ingredient No List” published on milkmakeup.com.
•Natural Products: Milk Makeup follows ISO 16128 guidelines, where “natural” means plant, mineral, and/or microbiologically derived ingredients. We want to bring products that are as natural as possible to our community, while also not compromising on quality and performance. We are always striving to improve, and are currently working toward making new formulas that are over 80% natural.
•Ethically Sourced Ingredients: We have committed to ethical and responsible sourcing for our formulas from start to finish. For any products containing mica or palm-derived ingredients, we only use ethically sourced and
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sustainable mica and sustainability certified palm-derived ingredients. Milk Makeup also exclusively works with cGMP compliant factories.
Milk Makeup is further committed to creating packaging that is iconic, innovative, easy to use, pairs perfectly with our clean, vegan and cruelty-free formulas, and reduces our overall impact on the environment.
Sales and Distribution
Milk Makeup’s primary distribution is through key beauty retailers in both the U.S. and internationally. The brand was originally launched through an exclusive partnership with Sephora, through which it is sold in Sephora stores in the U.S., Sephora at Kohl’s concessions, online at www.sephora.com, and launched internationally in Canada, Europe, the Middle East, Australia, and, most recently, India.
During the year ended December 31, 2025, Milk Makeup entered into a non-exclusive agreement with Sephora and launched at Ulta Beauty, its second major retailer in the U.S., significantly increasing the brand’s North American footprint.
In the U.S., Milk Makeup is sold through two key online channels, our e-commerce site, www.milkmakeup.com, and on www.amazon.com. In the year ended December 31, 2025, Milk Makeup successfully transitioned its Amazon business from a third-party distributor to a direct wholesale relationship via Amazon Vendor Central, which enhanced the brand’s position on the site and opened up access to advanced marketing and data analytics tools.
Outside of North America, Milk Makeup ships its products to other distributors and retailers in the U.K., Germany, Scandinavia and Latin America, notably Space N.K. and Boots in the U.K., and Dermanor in Scandinavia. We continuously assess new channels and other e-commerce expansion opportunities across regions whether this be through existing channels or new partnerships.
Milk Makeup’s business is subject to moderate seasonal fluctuations driven by retail consumer purchasing habits and timing of purchases by our retail customers, in particular ahead of new product launches or holiday events. As a result of moderate seasonal fluctuations, results for any interim period are not necessarily indicative of the results that may be achieved for the full fiscal year. Additionally, because a significant percentage of our net sales are currently concentrated in a limited number of customers, a change in the order pattern or product restocking by one or more of our large retail customers could cause a significant fluctuation of our quarterly results or impact our liquidity.
Competition
Milk Makeup competes directly with other clean and/or vegan beauty brands that also sell through our key retail partners and online through their own DTC websites, including Merit Beauty, Tower 28, Saie and Rare Beauty, as well as brands that target a similar customer demographic including ONE/SIZE, Glossier, Ilia and Tarte. Additionally, Milk Makeup competes with the legacy brands and younger, previously independent brands owned by beauty conglomerates such as Unilever P.L.C., Coty Inc., e.l.f. Beauty Inc., L’Oréal S.A., LVMH , The Estée Lauder Companies Inc., P&G, Revlon Inc., and Shiseido Company, Limited.
Among other areas, Milk Makeup believes that it competes against other cosmetics brands on price, quality of products and packaging, perceived value, innovation, in-store presence and visibility, and e-commerce and mobile commerce initiatives. Milk Makeup is focused on expanding its market share in the color cosmetics industry and continuing to be a leader in clean make-up.
Manufacturing
Milk Makeup sources its formulations, and primary and secondary components from various suppliers globally, with formulations sourced and products assembled in Italy and the United States.
Intellectual Property
Milk Makeup believes that our intellectual property has substantial value and has contributed significantly to the success of our business. We rely on a combination of trademark, trade dress, copyright and trade secret protection to protect our brands, formulas and other intellectual property. Milk Makeup’s primary intellectual property includes our brands and
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trademark rights, including the Milk Makeup brand, which has significant consumer recognition. Milk Makeup’s trademarks are valuable assets that reinforce the distinctiveness of our brand and customers’ favorable perception of our products.
We have trademarks registered and applications pending throughout the world for our brand name and stylized logos in 25 countries, including the U.K., U.S. and EU. From time to time, we apply to register trademarks for our other brands in the U.S. and other countries. The registrations of these trademarks in the U.S. and foreign jurisdictions are generally effective for terms of ten years and require periodic renewals, which for our trademark registrations in the U.S., are presently scheduled between 2027 and 2031. In addition to trademark protection, Milk Makeup owns numerous domain name registrations, including milkmakeup.com. We do not have any issued patents or pending patent applications.
Government Regulation
The following section sets out the regulatory environment in which our Obagi Medical and Milk Makeup brands operate.
U.S. Regulation
In the U.S., our products and operations are subject to extensive regulation by the FDA, the FTC, and comparable state, local, and foreign regulatory authorities, and the vast majority fall into one of two categories, cosmetic or drug products, depending on their intended use.
FDA regulation encompasses the entire product lifecycle, including safety substantiation, ingredient safety, manufacturing facility registration, product listing, intended use, labeling, advertising, and post-market surveillance and adverse event reporting for our medical device, prescription and OTC products. The FTC oversees the advertising of our products to ensure that all marketing claims are truthful, not misleading, and supported by a reasonable basis of competent and reliable scientific evidence.
Obagi Medical prioritizes efficacy and safety testing for products within its range, however none of these studies have been used to support an application for marketing approval of its prescription HQ products with the FDA or other similar regulatory authorities. Consequently, they were not designed to fulfill the specific requirements of such regulatory application process and should not be viewed as a substitute for clinical trials that would be conducted in connection with the application to the FDA or similar regulatory authority.
Our products are subject to regulation by the CPSC under the provision of the Consumer Product Safety Act, which bans any consumer products that fail to comply with applicable product safety laws, regulations and standards, and requires manufacturers to report potential hazards or instances of noncompliance. Certain state laws also address the safety of consumer products, and mandate reporting requirements.
Monitoring of compliance occurs through market surveillance and inspection of manufacturers or distributors. If a regulatory body identifies non-compliance, we may be required or independently decide to conduct a recall or market withdrawal of our products, or make changes to our manufacturing processes, product formulations, labeling or marketing.
The regulatory landscape has become increasingly complex, governing the research, development, testing, manufacture, labeling, advertising, and distribution of our portfolio. Noncompliance could result in product seizures, injunctions, recalls, or criminal and civil penalties, any of which could materially adversely affect our business and financial results. For more information, refer to “Item 3. Key Information—D. Risk Factors—Regulatory Risks That Could Adversely Impact our Business.”
U.S. Regulation of Cosmetic Products
The majority of our products are classified as cosmetics under the FDCA. Cosmetics are not subject to pre-market approval by the FDA, however they must be safe for their intended use, labeled truthfully, require warning statements for specific hazards, and use certain ingredients, for example color additives, for pre-approved uses only. Labelling of cosmetics is further governed by the Fair Packaging and Labeling Act.
The MoCRA significantly expanded the FDA’s authority. We are currently implementing processes to comply with MoCRA’s requirements, which include mandatory facility registration, product listings, serious adverse event reporting, and adherence to forthcoming cGMPs.
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Should the FDA determine that a product’s claims or ingredients warrant reclassification as a drug, this would require us to cease marketing until we obtain an approved new drug application.
Under the Agricultural Improvement Act of 2018, the FDA has retained authority over drugs, cosmetics and other FDA-regulated products that contain U.S. hemp and U.S. hemp-derived ingredients, and cannabinoids, including CBD, even if those products are not otherwise controlled substances regulated by the Drug Enforcement Administration (“DEA”). The FDA has consistently taken the position that CBD, whether derived from U.S. hemp or U.S. Schedule I cannabis, is prohibited from use as an ingredient in food and dietary supplements. With regard to cosmetics, the FDA has stated that ingredients not specifically addressed by regulation must nonetheless comply with all applicable requirements, and no ingredient – including cannabis or a cannabis-derived ingredient – can be used in a cosmetic if it causes the product to be adulterated or misbranded in any way.
U.S. Regulation of Drug Products
With respect to our Obagi Medical brand, we market several products that are regulated as drugs, falling into three primary categories:
•Unapproved Prescription HQ Products: A number of our products contain 4% hydroquinone (“HQ”), including Nu-Derm® Clear, Blender, and Sunfader, and Obagi-C® Rx C-Clarifying Serum and C-Night Therapy Cream. These are marketed as prescription-only drugs. We have not sought nor obtained the required premarket approval from the FDA to market these products in the U.S. Historically, the FDA has utilized a risk-based enforcement approach for unapproved drugs under its 2006 Compliance Policy Guide (“CPG”) and we believe our 4% HQ products do not fall within the categories currently prioritized for enforcement. However, following the 2020 CARES Act, the FDA took aggressive action against 2% OTC HQ products, deeming them “new drug” and “misbranded.” In 2022, the FDA issued multiple warning letters to manufacturers of these lower-concentration OTC products. Safety concerns regarding OTC HQ could prompt the FDA to reprioritize enforcement against our higher-concentration prescription HQ products, potentially requiring their removal from the market.
•Prescription Products under ANDA: Our tretinoin products are marketed pursuant to an Abbreviated New Drug Application (“ANDA”) held by the manufacturer of these products, Bausch Health. These products are generic versions of previously approved drugs and must strictly adhere to the approved labeling and manufacturing specifications.
•Over-the-Counter (OTC) Drugs: We market non-prescription products intended to treat acne or provide sun protection. These are regulated under the FDA’s OTC Monograph system. To remain legally marketed, these must comply with specific therapeutic category rules and cGMP requirements. Failure to meet these standards could result in a “non-GRASE” (not generally recognized as safe and effective) designation, requiring an NDA for continued sale.
U.S. Regulation of Medical Devices
Medical devices are classified into Class I, II, or III based on risk. In 2026, Obagi Medical launched a hyaluronic acid injectable filler product into the U.S. market. Hyaluronic acid fillers are classified as Class III medical devices, the highest risk category, requiring Premarket Approval (PMA), which was granted by the FDA in September 2025 for the Saypha® MagIQ™ product. As such, Obagi Medical is subject to extensive regulation by the FDA and other federal and state authorities relating to the distribution and sale of these products. FDA regulations are rigorous and constantly evolving, and our ability to commercialize these products depends on maintaining strict compliance with the following regulatory risks:
• Enforcement Against Unauthorized Use: The FDA has significantly increased its scrutiny of HA fillers, including the ways in which these products are marketed and used. Any failures in compliance with the PMA and/or indications for use, could result in significant enforcement actions, including Warning Letters, seizures, or injunctions. Furthermore, any promotion of our fillers for "off-label" indications not explicitly covered by our PMA could trigger civil and criminal penalties under the FDCA.
• Heightened Post-Market Surveillance: Over the past couple of years, the FDA has implemented more rigorous post-market monitoring. We are required to report adverse events, such as vascular occlusions, granulomas, or delayed-onset inflammation following viral infections or vaccinations. An increase in the frequency or severity of
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these reports could lead the FDA to mandate additional clinical studies, restrictive labeling changes (e.g., "Black Box" warnings), or a mandatory recall of product batches from the market.
Any such enforcement action would likely result in a material adverse effect on our business, financial condition, and results of operations.
Foreign Government Regulation of Cosmetic and Drug Products
A key component of our strategy is international expansion, which requires compliance with varying global regulations. We rely on third-party distributors in many regions to maintain compliance, but we cannot guarantee that foreign authorities will not change their safety assessments of our ingredients.
In many jurisdictions, including the EU, Asia, Canada, and Australia, HQ is restricted or regulated as a drug requiring local approval. We do not distribute our HQ products in these markets and instead offer arbutin-based solutions. In January 2023, the EU’s Scientific Committee on Consumer Safety (“SCCS”) issued a final opinion confirming that alpha-arbutin (up to 2% in face creams) and beta-arbutin (up to 7%) are safe. Currently, no amendments to the EU Cosmetics Regulation have been made to restrict these ingredients further. See “Item 3. Key Information—D. Risk Factors—Regulatory Risks That Could Adversely Impact our Business—Obagi Medical products containing the active ingredient, hydroquinone, are marketed as prescription-use only drugs but have not received required premarket authorization from the FDA or other regulatory authorities, and the FDA could require us to remove these products from the market until we obtain approval of the required NDA, and we could be found to be marketing and selling these products in violation of the law.”
Other
We are subject to a number of federal, state and foreign laws and regulations with regards to e-commerce and social media activity, including consumer protection, privacy, data protection, content, intellectual property, distribution, electronic contracts, and communications. U.S. federal and state and foreign laws and regulations are constantly evolving and we utilize in-house counsel and external advisors to ensure ongoing compliance, in particular when entering new territories.
For additional information on the regulatory environment in which we operate, see “Item 3. Key Information—D. Risk Factors—Risks of Conducting International Business—Conducting international business exposes us to risks such as currency fluctuations, cash repatriation restrictions, and changes in laws and regulations, which could negatively impact our operations and financial performance.”
C.Organizational Structure
Upon consummation of the Business Combination, Waldencast became organized in an “Up-C” structure, whereby the equity interests of Obagi Medical and Milk Makeup are held by Waldencast LP, which is an indirect subsidiary of Waldencast. Obagi Holdco 1, a wholly owned subsidiary of Waldencast owns 92.2% of the partnership units in Waldencast LP. Under this structure, holders of Waldencast Class B ordinary shares hold a corresponding number of Waldencast LP partnership units, and such holders may exchange one Waldencast LP unit together with one Class B ordinary share for one
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Class A ordinary share. As of February 27, 2026, a total of 11,084,242 Class B ordinary shares have been converted into Class A ordinary shares.
The following table sets out the subsidiaries of Waldencast, as of the date of this Report.
| Company Name | Country of Incorporation | Proportion of Ownership Interest | ||||||||||||
| Milk Makeup Europe, S.L.U. | Spain | 92.2% | ||||||||||||
| Milk Makeup LLC | U.S., Delaware | 92.2% | ||||||||||||
| Milk Makeup UK Limited | England & Wales | 92.2% | ||||||||||||
| Obagi AsiaPac Limited | Hong Kong | 92.2% | ||||||||||||
| Obagi Blue Sea Holding, LLC | Cayman Islands | 92.2% | ||||||||||||
Obagi Holding LLC | U.S., Delaware | 92.2% | ||||||||||||
| Obagi Cosmeceuticals LLC | U.S., Delaware | 92.2% | ||||||||||||
| Obagi Global Holdings Limited | Cayman Islands | 92.2% | ||||||||||||
| Obagi Holdco 1 Limited | Jersey | 100% | ||||||||||||
| Obagi Holdco 2 Limited | Jersey | 92.2% | ||||||||||||
| Obagi Holdings Company Limited | Cayman Islands | 92.2% | ||||||||||||
| Obagi Netherlands B.V. | The Netherlands | 92.2% | ||||||||||||
| Obagi Viet Nam Import Export Trading MTV Company Limited | Vietnam | 92.2% | ||||||||||||
| Waldencast (Thailand) Co., Ltd. | Thailand | 92.2% | ||||||||||||
| Waldencast Canada Limited | Canada | 92.2% | ||||||||||||
| Waldencast Cayman LLC | Cayman Islands | 100% | ||||||||||||
| Waldencast Finco Limited | Jersey | 92.2% | ||||||||||||
| Waldencast Malaysia SDN. BHD. | Malaysia | 92.2% | ||||||||||||
| Waldencast Partners LP | Cayman Islands | 92.2% | ||||||||||||
| Waldencast Singapore Pte. Ltd. | Singapore | 92.2% | ||||||||||||
| Waldencast UK Operations Limited | England & Wales | 92.2% | ||||||||||||
| Waldencast Vietnam Limited | Vietnam | 92.2% | ||||||||||||
D.Property, Plants and Equipment
Waldencast’s property and equipment are held directly and through Obagi Medical and Milk Makeup. Information regarding Waldencast, Obagi Medical and Milk Makeup’s property and equipment is described above.
ITEM 4A. UNRESOLVED STAFF COMMENTS
None / Not applicable.
ITEM 5. WALDENCAST’S OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following discussion and analysis should be read in conjunction with the other sections of this Report, including “Item 4. Information on the Company,” and our audited consolidated financial statements and notes thereto found in “Item 8. Financial Information.” For purposes of this section, the “Company,” “we,” or “our” refer to (i) Waldencast plc, and its subsidiaries (“Waldencast”) for the years ended December 31, 2025 and December 31, 2024.
The following discussion contains forward-looking statements that reflect future plans, estimates, beliefs and expected performance. The forward-looking statements are dependent upon events, risks and uncertainties that may be outside of our control. Our actual results may differ significantly from those projected in the forward-looking statements. Factors that might cause future results to differ materially from those projected in the forward-looking statements include, but are not limited to, those discussed in the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Report. Certain amounts may not foot due to rounding.
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Overview
Waldencast, formerly known as Waldencast Acquisition Corp., is a Jersey incorporated company and UK tax resident. Waldencast, together with its consolidated subsidiaries, is a global multi-brand beauty and wellness platform whose ambition is to build a global best-in-class beauty and wellness multi-brand platform by creating, acquiring and accelerating the next generation of high-growth, purpose-driven brands that can benefit from the Company’s strong product and brand development capabilities. Our business is organized into two reportable segments—Obagi Medical and Milk Makeup. Obagi Medical sells industry-leading, advanced skin care products backed by science and formulated to minimize signs of skin aging, address dark spots, hyperpigmentation, fine lines and wrinkles, and to protect and enhance skin tone and texture. Obagi Medical offers over 15 product franchises in the U.S. through various channels including physician-dispensed and direct to consumer, as well as in over 95 countries through international distributors, royalty agreements and several entities based in Southeast Asia. Milk Makeup creates vegan, cruelty-free, clean formulas and is headquartered in downtown New York City. Currently, Milk Makeup offers over 15 product franchises products primarily through its U.S. and international retail partners and online through www.milkmakeup.com.
Recent Events
Acquisition of Novaestiq Corp.
On July 22, 2025, Waldencast plc, together with its newly-formed and wholly-owned subsidiary, Novaestiq Holding LLC, a Delaware limited liability company (“Buyer”), entered into a common stock purchase agreement (the “Stock Purchase Agreement”) with NVQ Investors Holding, LLC, a Delaware limited liability company (“NVQ Holding”), Croma-Pharma GmbH, a company organized under the laws of Austria (“Croma”), and Novaestiq Corp. (“Novaestiq”), a Delaware corporation. Pursuant to the terms and conditions of the Stock Purchase Agreement, Buyer purchased 100% of Novaestiq’s issued and outstanding shares of common stock, par value $0.0001 per share. In connection with the Stock Purchase Agreement, Waldencast plc entered into a registration right agreement and agreed to provide Croma and Novaestiq certain registration rights to the Class A ordinary shares issued pursuant to or in connection with the Stock Purchase Agreement.
Novaestiq owns, among other things, the exclusive rights to commercialize and distribute certain late-stage cosmetic filler products in the brand name of Saypha® (the “Products”) in the United States, subject to approval of such Products by the FDA. Saypha® is recognized globally as a proven, safe and efficacious hyaluronic acid (“HA”) injectable with high levels of patient satisfaction. Saypha® is distinguished by its proprietary technology delivering advanced HA treatments through a stable 3D matrix designed to provide natural-looking results with optimally balanced gel characteristics. This technology powers a portfolio of clinically proven products that lead in multiple performance categories including high HA content at injection, ideal gel distribution, and consistent injection force and swelling behavior. Saypha®, a product of Croma-Pharma GmbH, is developed and manufactured in Austria and marketed in over 80 countries, leveraging 40 years of expertise in HA-based treatments with more than 110 million syringes produced. This global reach and deep market insight allow for the delivery of trusted, personalized care to patients and professionals worldwide.
Under the terms of the definitive agreement relating to the transaction, Waldencast agreed to acquire Novaestiq in exchange for (i) certain amount of cash payable at closing, (ii) certain additional ongoing royalties based on net sales of Saypha® products, and (iii) the contingent issuance of Class A ordinary shares (equal to approximately 7% of Waldencast’s fully diluted Class A ordinary shares as of July 22, 2025), based on the receipt of FDA approval relating to the Saypha® products (triggering the issuance of 3,273,000 Class A ordinary shares) and the achievement of cumulative net revenue thresholds of (1) $100 million (triggering the issuance of an additional 3,273,000 Class A ordinary shares) and (2) $200 million (triggering the further issuance of 3,273,000 Class A ordinary shares), respectively, reflecting meaningful long-term commercial targets, with (1) and (2) being earnable until June 20, 2031.
On the date of acquisition, Saypha® MagIQ™ and Saypha® ChIQ™ were undergoing FDA approval. On September 10, 2025, the Company announced the FDA approved Obagi Saypha® MagIQ™ as an injectable hyaluronic acid gel in the U.S., upon which 3,273,000 Class A ordinary shares were issued to NVQ Holding (on behalf of itself and its shareholders) and
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Croma. As of the date of this Report, the ChIQ™ line of injectable HA fillers remains subject to FDA approval. See “Item 8. Financial Information—Note 3. Acquisitions and Strategic Transactions” for further information on the acquisition.
Indebtedness
Lumina Credit Agreement
On November 14, 2025, the Company, along with its indirect wholly-owned subsidiaries, and the Lumina Borrowers, entered into the Lumina Credit Agreement with the Lumina Administrative Agent and the Lenders. The Lumina Credit Agreement provides for a secured term loan facility in an aggregate principal amount of $225.0 million (the “Term Loans”) comprised of (i) a tranche of Term Loans in an aggregate principal amount of $195.0 million (the “Term Tranche A Loans”) and (ii) a tranche of Term Loans in an aggregate principal amount of $30.0 million (the “Term Tranche B Loans”). On November 17, 2025 (the “Lumina Closing Date”), the Lenders funded the Term Loans. The proceeds of the Term Loans were used to (i) repay in full all outstanding amount under, and terminate, the TCW Credit Agreement, (ii) pay fees and expenses relating to certain transactions contemplated by the Lumina Credit Agreement, and (iii) fund working capital and for general corporate purposes. The Term Loans mature on November 17, 2028 (the “Maturity Date”) and bear interest at an initial fixed rate of 14.75% per annum from the Lumina Closing Date until November 17, 2026, and the interest rate will increase by 0.25% for each three-month interval thereafter. The interest is payable in kind in arrears of each three-month interval after the Lumina Closing Date. The Term Loans have no scheduled amortization payments prior to the Maturity Date.
With respect to the Term Loans, certain prepayments prior to the Maturity Date will be subject to a prepayment premium equal to (i) if such prepayment is made on or prior to the Targeted Liquidity Event Date (as defined in the Lumina Credit Agreement), an additional amount, which represents a minimum guaranteed return on the Term Loans (the “MOIC Amount”) and is calculated as a multiple of the principal being repaid, prepaid or accelerated that is 1.20:1.00, which is reduced to 1.015:1.00 for certain prepayments, (ii) if such prepayment is made after the Targeted Liquidity Event Date but on or prior to the date that is fifteen months after the Lumina Closing Date, 7.5% of the aggregate amount of all Term Loans so prepaid, and (iii) if such prepayment is made after the date that is fifteen months after the Lumina Closing Date, 5.00% of the aggregate amount of all Term Loans so prepaid. Obligations under the Lumina Credit Agreement are (i) secured by a first priority lien on substantially all of the assets of the Lumina Borrowers and Obagi Holdings Company Limited, a Cayman Islands exempted company and an indirect subsidiary of Waldencast (“Obagi Holdings”), and (ii) guaranteed by the Lumina Borrowers, Lumina Parent Guarantor and Obagi Holdings, in each case, subject to customary exceptions and limitations.
The Lumina Credit Agreement contains (i) customary representations and warranties, (ii) affirmative covenants including, among other things, with respect to the (A) under certain circumstances, providing the Lenders with the right to appoint an investment bank to effect a Liquidity Event (as defined in the Lumina Credit Agreement), (B) appointment of an authorized representative by the Lenders that hold more than 50% of the outstanding Tranche B Term Loans which representative is entitled to attend (but not entitled to vote at) (x) each meeting of the Company’s Board and (y) each meeting of the Lumina Borrowers’ or certain of their subsidiaries’ boards of directors on which another member of the Company’s Board serves as a director, and (C) issuance of certain warrants to the Lenders that hold Term Tranche B Loans to purchase up to 1,000 ordinary shares of the Company per $1,000 principal amount of Term Tranche B Loans then outstanding on or prior to July 1, 2026, so long as any Term Tranche B Loans are then outstanding, (iii) negative covenants including, among other things, limitations on the Lumina Parent Guarantor to engage in any material business activities and limitations on the ability of the Lumina Borrowers, the Lumina Parent Guarantor and certain of their subsidiaries to incur indebtedness, create liens, make investments, enter into mergers, consolidations and other similar transactions, dispose of assets, declare dividends, enter into certain transactions with their affiliates, enter into sale and leaseback transactions, change in nature of business, amend organization documents, change in accounting policies and financial reporting practices and prepay or amend the terms of junior debt and (iv) events of defaults, including, among other things, nonpayment, misrepresentation, cross-default with other indebtedness and breach of certain covenants.
Additionally, the Lumina Credit Agreement requires the Company, the Lumina Borrowers and their subsidiaries to comply with a financial covenant to maintain a maximum Total Leverage Ratio (as defined in the Lumina Credit Agreement) of 6.50 to 1.00 with steps down over time to 2.50 to 1.00, which commences on the Targeted Liquidity Date. On March 9, 2026, the Lumina Borrowers entered into the First Amendment to the Lumina Credit Agreement, with the Lumina Administrative Agent and the lenders named therein, whereby the Borrowers, among other things, suspended the date to commence the financial covenant to December 31, 2026.
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The foregoing description of the Lumina Credit Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Lumina Credit Agreement, which is incorporated by reference hereto as Exhibit 4.15.
TCW Credit Agreement
On March 18, 2025, the Company along with Milk Makeup and Obagi Cosmeceuticals entered into the TCW Credit Agreement, which provided for a secured first lien (i) term loan facility in an aggregate principal amount of $175.0 million and (ii) revolving loan facility in an aggregate principal amount of up to $30.0 million. The proceeds of the initial borrowing under the TCW Credit Agreement were used to, among other things, repay in full all outstanding amounts under, and terminate, the 2022 JPM Credit Agreement. The TCW agreement was then amended to provide temporary covenant relief. In November 2025, the proceeds of borrowing under the Lumina Credit Agreement were used to repay in full all outstanding amounts under, and terminate, the TCW Credit Agreement.
As of December 31, 2025, the Company’s long-term debt included borrowings under the Lumina Credit Agreement.
Obagi Japan Trademark Agreement
On November 13, 2025, Obagi Cosmeceuticals entered into a strategic transaction with Rohto Pharmaceutical Co.,Ltd. (“Rohto”), a global health and beauty company, with respect to the Obagi brand in Japan by entering into a trademark transfer agreement (the “Trademark Transfer Agreement”) and coexistence agreement (the “Trademark Coexistence Agreement”) dated the same date.
Under the terms of the Trademark Transfer Agreement, Obagi Cosmeceuticals has agreed to sell, assign, and irrevocably transfer to Rohto the ownership of certain specified trademarks, including all of those related to the "Obagi” brand registered with the Japan Patent Office and World Intellectual Property Organization for Japan (the “Obagi Japan Trademarks”) and perpetual license, and distribution rights related to such Obagi Japan Trademarks in Japan (the “Acquired Rights”). This transfer grants Rohto the sole and exclusive ownership of the Acquired Rights in Japan for an aggregate purchase price of $82.5 million. Concurrently, the parties have mutually terminated certain prior licensing and supply agreements.
In conjunction with the transfer of the Acquired Rights, the parties have entered into a Trademark Coexistence Agreement to ensure that the use and registration of the Obagi Japan Trademarks by Rohto within Japan and by Obagi Cosmeceuticals and its affiliates outside of Japan do not result in consumer confusion. The Trademark Coexistence Agreement establishes a clear geographic delineation of the markets, with Rohto focused exclusively on the Japanese market and Obagi Cosmeceuticals and its affiliates retaining their rights in all other territories globally.
The majority of the proceeds received in connection with this transaction have been used to repay a portion of the Lumina Credit Agreement, with the remainder used to fund ongoing operational expenses.
The foregoing description of the Trademark Transfer Agreement and Trademark Coexistence Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Trademark Transfer Agreement and Trademark Coexistence Agreement, which are incorporated by reference hereto as Exhibit 4.11 and Exhibit 4.12 and incorporated hereto by reference.
Strategic Review
On August 18, 2025, the Company announced that its Board had resolved to undertake a review of a broad range of strategic alternatives available to the Company focused on maximizing shareholder value. In connection with this strategic review, the Board retained Lazard to serve as financial advisor to the Company. The Company does not intend to comment further on the status or timing of this process, unless or until the Board has approved a definitive course of action or if it is determined that other disclosure is appropriate. Given the broad nature of this review, there can be no assurance that this strategic review will result in the Company pursuing a transaction or any other particular outcome.
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Components of Results of Operations
Net Revenue
Net revenue is generated through both of our operating segments and is recognized net of provisions for estimated volume rebates, discounts, markdowns, margin adjustments, returns and payments to distributors.
Net Product Revenue
Our Obagi Medical segment generates net revenue through direct product sales, sales to distributors and royalties. Direct sales predominantly consists of sales through our direct to physician channel in the U.S., within which an Obagi Medical sales force manages relationships with a large network of physicians and similar accounts across the U.S., and DTC sales on www.obagi.com and Amazon. Direct sales are also generated through our owned legal entities in SAPAC. While all channels depend on the Company’s ability to effectively drive demand for products, through innovation and effective marketing, the direct to physician channel performance is also directly linked to the performance of the sales team in opening new physician accounts and maintaining relationships with existing accounts.
Obagi Medical distributor revenue consists mostly of sales to international distributors across over 95 countries across Europe, Latin America, the Middle East, and Asia. To a more limited extent, Obagi Medical sells products in the U.S. for sale on third-party e-commerce websites and through liquidation channels.
Milk Makeup generates the majority of its net revenue through direct sales, made up of U.S. and international retail and distribution partners, including Sephora, Ulta Beauty, Amazon, Dermanor, Space N.K., Boots and several others internationally, and DTC sales through its U.S. website www.milkmakeup.com. Increasing retail sales of Milk Makeup products through existing partners and building new partnerships in the U.S. and internationally is a key driver of the brand’s success. The brand launched in Ulta Beauty across the U.S. in Spring 2025 and expanded its direct-to-consumer presence at Amazon in the second quarter of 2025.
Related Party Revenue
In connection with the Obagi China Distribution at the time of the Business Combination, we entered into an IP License Agreement and a Supply Agreement with the Obagi China Business. We also entered into a Transition Services Agreement, which expired in July 2023 and does not impact current period operations. See “Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions” for additional information.
Under the China IP License Agreement, we granted an exclusive license to certain intellectual property relating to the Obagi Medical brand to Obagi Hong Kong, and we retain the rights to such intellectual property to conduct the Obagi-branded business worldwide except for the China Region. Obagi Hong Kong purchases inventory from Obagi or relevant CMOs for resale in the China Region and pays us a royalty on gross sales of licensed products.
Under the China Supply Agreement, the Company supplies or causes to be supplied through certain Obagi CMOs products for distribution and sale in the China Region by the Obagi China Business. The China Supply Agreement included transition provisions whereby the Company would supply goods to the Obagi China Business directly during an interim supply period. The parties continued to apply such interim terms until December 2024, at which point the remaining related party liability was released as the Company had fulfilled its contractual obligations related to pricing. The term of the China Supply Agreement is perpetual, subject to termination for material breach and failure to cure or termination in the event that the IP License Agreement is terminated.
Royalties
Our Obagi Medical segment generates royalty revenue from the sale of products in China by Obagi Hong Kong and previously in Japan through a strategic licensing agreement with Rohto, a Japanese pharmaceutical manufacturer and distributor that sells a series of OTC and cosmetic products under the Obagi Medical brand name in the Japanese retail skincare channels. Performance of royalty revenue is impacted by the success of sales by Obagi Hong Kong and Rohto, as well as exchange rate fluctuations.
On November 13, 2025, Obagi Medical entered into a strategic transaction with Rohto for the sale of the Obagi Japan trademark rights. Concurrently, the parties mutually terminated certain prior licensing and supply agreements. Under the
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agreements, royalties accrued prior to the Closing Date (as defined in the Trademark Transfer Agreement) remained payable to the Company. The Company is not entitled to any royalties generated from the use of these trademark in Japan after the Closing Date (as defined in the Trademark Transfer Agreement). See “Recent Events” for further information.
Cost of Goods Sold
Cost of goods sold (“COGS”) consists primarily of expenses related to inventory, and promotional product costs, including when inventory and promotional products are sold or written down, freight and inventory inspection costs, depreciation and amortization of product-related intangible asset and supply agreements, and amortization of the inventory fair value step-up related to the Business Combination. Finished goods are primarily purchased directly from third-party contract manufacturers (“CMOs”), with the increase in COGS being proportionate to increases in revenue.
Selling, General, and Administrative
Selling, general and administrative costs (“SG&A”) include expenses we incur in the ordinary course of business relating to personnel and stock-based compensation, marketing, supply chain, office costs, I.T., regulatory, research and development, and professional fees. We expect SG&A expenses to increase in absolute dollars as we continue to invest in building and maintaining our customer base, growing our business, enhancing our brand awareness, hiring additional personnel and upgrading and expanding our systems, processes, and controls to support the growth in our business, as well as our increased compliance and reporting requirements as a public company.
Depreciation and Amortization
Depreciation and amortization expenses are related to our property and equipment and intangible assets. Product-related intangible asset amortization is presented in cost of goods sold in the consolidated statement of operations and comprehensive loss. Depreciation and amortization expenses not classified in cost of goods sold are presented in SG&A expenses.
Loss on Impairment of Goodwill
Impairment of goodwill recognizes the difference between the carrying value and fair value of goodwill. The process of evaluating goodwill for impairment is subjective and requires significant judgment and estimates. At least annually, and more frequently if events and circumstances warrant, we test goodwill for impairment. This is performed first through an optional qualitative assessment and then, if indicators of impairment exist, through a quantitative assessment. When performing the optional qualitative analysis, we consider many factors including general economic conditions, industry and market conditions, financial performance, key business drivers, and long-term operating plans.
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Results of Operations
For discussion related to our financial condition, changes in financial condition, and results of operations for 2024 compared to 2023, refer to Part I, Item 5. Operating and Financial Review and Prospects, in our Annual Report on Form 20-F for the fiscal year ended December 31, 2024, which was filed with the SEC on March 20, 2025.
The following tables summarize our consolidated statements of operations and comprehensive loss data for the periods presented:
(In thousands, except for percentages) | Year ended December 31, 2025 | Year ended December 31, 2024 | Change ($) | Change (%) | |||||||||||||||||||
Net revenue | $ | 272,071 | $ | 273,868 | $ | (1,797) | (0.7) | % | |||||||||||||||
Cost of goods sold | 89,053 | 82,124 | 6,929 | 8.4 | |||||||||||||||||||
| Gross profit | $ | 183,018 | $ | 191,744 | $ | (8,726) | (4.6) | % | |||||||||||||||
| Selling, general and administrative | 247,984 | 245,297 | 2,687 | 1.1 | |||||||||||||||||||
| Loss on impairment of goodwill | 152,018 | 5,031 | 146,987 | 2921.6 | |||||||||||||||||||
Gain on sale of trademark | (5,679) | — | (5,679) | — | |||||||||||||||||||
Loss on acquisition | 6,233 | — | 6,233 | — | |||||||||||||||||||
| Total operating expenses | $ | 400,556 | $ | 250,328 | $ | 150,228 | 60.0 | % | |||||||||||||||
| Operating loss | $ | (217,538) | $ | (58,584) | $ | (158,954) | 271.3 | % | |||||||||||||||
| Interest expense, net | 25,094 | 17,155 | 7,939 | 46.3 | |||||||||||||||||||
Loss on extinguishment of debt (Note 7) | 24,398 | — | 24,398 | — | |||||||||||||||||||
Change in fair value of derivative liabilities (Note 10) | (3,695) | (23,627) | 19,932 | (84.4) | |||||||||||||||||||
Change in contingent consideration liabilities (Note 10) | (861) | — | (861) | — | |||||||||||||||||||
Other income, net | (229) | (3,574) | 3,345 | (93.6) | |||||||||||||||||||
Total other expenses (income), net | $ | 44,707 | $ | (10,046) | $ | 54,753 | (545.0) | % | |||||||||||||||
| Loss before income taxes | (262,245) | (48,538) | (213,707) | 440.3 | |||||||||||||||||||
Income tax (benefit) expense | (14,189) | 110 | (14,299) | (12999.1) | |||||||||||||||||||
| Net loss | $ | (248,056) | $ | (48,648) | $ | (199,408) | 409.9 | % | |||||||||||||||
Net Revenue
Net revenue decreased $1.8 million, or 0.7%, to $272.1 million for the year ended December 31, 2025 from $273.9 million for the year ended December 31, 2024. Key U.S. strategic channels grew in the year, with U.S. direct-to-consumer and U.S. retail growing $12.6 million and $3.9 million, respectively. International distribution fell by $8.8 million, as international Milk Makeup net revenue fell $19.8 million due to soft consumption and lower inventory levels held by retailers, however this was offset by growth in international Obagi distribution of $11.1 million year-on-year.
Cost of Goods Sold
COGS increased $6.9 million, or 8.4%, to $89.1 million for the year ended December 31, 2025 from $82.1 million for the year ended December 31, 2024. The increase in COGS was related to inventory write-offs, principally a one-time valuation adjustment for a discrete product-quality matter, and by product and channel mix.
Selling, General and Administrative
SG&A expense increased $2.7 million, or 1.1%, to $248.0 million for the year ended December 31, 2025 from $245.3 million for the year ended December 31, 2024. Selling, marketing and distribution expenses increased $6.6 million, or 5.8%, as a direct result of distribution expansion and marketing investment to grow awareness and community. Milk Makeup invested into the brand’s launch at Ulta Beauty in the first quarter of the year, offset through operational leverage.
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Obagi Medical continued growing DTC and international distribution investment to drive topline growth, and saw one-off increases in logistic costs due to the consolidation of all U.S. logistics services to one provider.
Recurring General and administrative costs increased $5.1 million as the Company continues to invest in people and infrastructure to support future growth and build Group capabilities and share based compensation increased $2.4 million. Offsetting these increases, non-recurring costs declined by $10.6 million as costs related to the SEC investigation decreased due to insurance coverage. Non-recurring costs in the year ending December 31, 2025 predominantly related to strategic growth projects, including $3.3 million in merger and acquisition costs related to the acquisition of Novaestiq and $1.9 million in costs relating to the Strategic Review. Depreciation and amortization remained in line with the prior year at $59.2 million.
Loss on Impairment of Goodwill
The Company evaluates goodwill for impairment on an annual basis on October 1st and at an interim date if indicators of a potential impairment exist. During the six months ended June 30, 2025, there were indicators of a potential impairment of the Obagi Medical and the Milk Makeup reporting units due to discrepancies between projected and actual performance post-acquisition. The Company performed its goodwill impairment analysis using the qualitative approach, and the analysis concluded that qualitative factors and relevant events and circumstances indicated it was more likely than not that the fair values of both reporting units were less than their respective carrying amounts. Therefore, the Company performed a quantitative goodwill impairment test for the reporting units. As a result, during the six months ended June 30, 2025, the Company recorded a non-cash impairment charge of $132.1 million within the Obagi Medical reporting unit and $20.0 million within the Milk Makeup reporting unit.
As a result of the interim quantitative goodwill impairment tests performed during the six months ended June 30, 2025, the Company recognized total non-cash goodwill impairment charges of $152.0 million for the year ended December 31, 2025. The Company’s annual quantitative goodwill impairment test performed on October 1, 2025 did not result in any additional impairment.
As of the annual impairment test date, the reporting units' carrying values remain marginally higher than their fair values. Given this modest cushion, if we are not successful in meeting our projected revenue or profitability growth rates, or if market conditions including inflation, the valuation of its competitors, a market capitalization decrease, or other negative factors exist, there could be future decreases in the fair value of the reporting units below the carrying values resulting in additional future impairments.
During the year ended December 31, 2024, the Company’s annual goodwill impairment analysis using the quantitative approach indicated there was an impairment of goodwill. We determined that it was more likely than not that the fair value of the reporting unit associated with the Obagi Medical reporting unit was less than its carrying amount and a quantitative analysis was performed, at an interim date. As a result, the Company recorded a non-cash goodwill impairment charge of $5.0 million during the year ended December 31, 2024.
The Company performed a qualitative review of the Milk Makeup reporting unit for the year ended December 31, 2024, which did not indicate that the fair value of the reporting unit was less than the carrying value. On that basis, management concluded that there was no change in the fair value. As a result, the goodwill balance for the Milk Makeup reporting unit did not change during the year ended December 31, 2024.
See the “Critical Accounting Estimates” section below for further detailed information surrounding management’s assumptions and estimates used in our goodwill impairment analysis.
Interest Expense, net
Interest expense, net increased $7.9 million, or 46.3%, to $25.1 million for the year ended December 31, 2025 from $17.2 million for the year ended December 31, 2024 primarily due to an increase in interest rate on the Company’s debt facilities after refinancing in March 2025 and November 2025, as well as higher debt. As of December 31, 2025, the Company had unpaid principal of $151.3 million on the Lumina Credit Agreement, with an effective interest rate of 19.1% for the year ended December 31, 2025 compared to weighted-average interest rate of 8.7% for the year ended December 31, 2024.
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Loss on Extinguishment of Debt
Loss on extinguishment of debt was $24.4 million for the year ended December 31, 2025, compared to zero in the prior year. This non-recurring loss resulted from the Company’s comprehensive debt refinancing activities during the period. Specifically, the Company recognized a $2.1 million loss upon the full repayment and termination of the JPM 2022 Credit Agreement in March 2025, and a $22.3 million loss upon the extinguishment of the TCW Credit Agreement in November 2025. These losses were primarily driven by the write-off of unamortized debt issuance costs associated with the prior facilities.
Gain on Sale of Trademark
Gain on sale of trademark was $5.7 million for the year ended December 31, 2025. This gain was recognized in connection with the strategic transaction with Rohto Pharmaceutical Co., Ltd. on November 13, 2025, for the sale and irrevocable transfer of the "Obagi" brand trademarks and related distribution rights in Japan. The gain represents the excess of the $82.5 million purchase price over the net carrying value of the transferred intangible assets.
Loss on Acquisition
Loss on acquisition was $6.2 million for the year ended December 31, 2025. This loss relates to the consolidation of Novaestiq Corp., which was acquired on July 22, 2025. Because Novaestiq was accounted for as an asset acquisition and was determined to be a variable interest entity (VIE) as of the acquisition date, the loss represents the difference between the fair value of the consideration transferred and the fair value of the net assets acquired at the date of consolidation.
Change in Fair Value of Derivative Liabilities
The change in fair value of derivative liabilities resulted in a net gain of $3.7 million for the year ended December 31, 2025. This amount primarily reflects a $3.8 million gain from the recurring remeasurement of derivative warrant liabilities, which was driven by a decrease in the market price of the Company’s Class A ordinary shares and other observable market inputs. This gain was partially offset by a $0.1 million non-cash loss related to the change in fair value of embedded derivative liabilities. These embedded derivatives, recognized in connection with the Lumina Credit Agreement in November 2025, pertain to specific debt provisions such as prepayment and premium features that require separate accounting at fair value.
Change in Contingent Consideration Liabilities
The change in contingent consideration liabilities resulted in a gain of $0.9 million for the year ended December 31, 2025. This relates to the remeasurement of liability-classified contingent consideration stemming from the Novaestiq acquisition, which includes potential future payments tied to regulatory approvals and sales milestones. The gain reflects a decrease in the estimated fair value of these liabilities as of December 31, 2025, based on updated valuation assumptions regarding the probability and timing of milestone achievements.
Other Income, Net
Other income, net totaled $0.2 million of income for the year ended December 31, 2025, comprised of various miscellaneous income and expense items, compared to $3.6 million of income for the year ended December 31, 2024. The significant decrease in income was primarily due to the non-recurrence of the $3.4 million gain recognized in 2024 related to the release of a below-market contract liability following the termination of the interim supply agreement with the Obagi China Business.
Income Tax (Benefit) Expense
Income tax benefit for the year ended December 31, 2025 was $14.2 million with a corresponding effective tax rate of 5.4% compared to an income tax expense of $0.1 million with a corresponding effective tax rate of (0.2)% for the year ended December 31, 2024. The change in effective tax rate was predominantly driven by goodwill impairment impacts during the year.
For the year ended December 31, 2025 and the year ended December 31, 2024, the Company recognized a valuation allowance of $35.1 million and $22.5 million, respectively, to account predominantly for the portion of the deferred tax asset that was more likely than not to not be realized due to cumulative loss incurred at Holdco 1 for its investment in Waldencast LP, and associated net operating losses.
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Non-GAAP Financial Measures
In addition to our results of operations and measures of performance determined in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we believe that certain non-GAAP financial measures are useful in evaluating and comparing our financial and operational performance over multiple periods, identifying trends affecting our business, formulating business plans, and making strategic decisions.
Adjusted Gross Profit, Adjusted Gross Margin, Adjusted EBITDA and Adjusted EBITDA Margin are key performance measures that our management uses to assess our financial performance and for internal planning and forecasting purposes. These metrics are not intended to be substitutes for any GAAP financial measures and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry. Additionally, investors should not solely rely on our non-GAAP financial measures as they do not reflect our current or future cash requirements and working capital needs.
There are limitations to non-GAAP financial measures because they exclude charges and credits that are required to be included in GAAP financial presentation. The items excluded from GAAP financial measures such as net income/loss to arrive at non-GAAP financial measures are significant components for understanding and assessing our financial performance. Non-GAAP financial measures should be considered together with, and not alternatives to, financial measures prepared in accordance with GAAP.
Adjusted Gross Profit and Adjusted Gross Margin
We define and calculate Adjusted Gross Profit as GAAP gross profit excluding the impact of inventory fair value adjustments, amortization of supply agreements and formulation intangible assets, discontinued product write-off, and the amortization of the fair value of the related party liability to Obagi China, which management believes is not reflective of core operating performance given the nature, size and non-recurring nature of the Business Combination. We define and calculate Adjusted Gross Margin as Adjusted Gross Profit as a percentage of net revenue. We adjust for these items because we do not believe they reflect normal, recurring activity, may obscure underlying business trends and make comparisons of long-term performance challenging.
The table below presents our Adjusted Gross Profit and Adjusted Gross Margin based on the Company’s segments reconciled to our gross profit and gross margin, the closest GAAP measures for the periods indicated:
| Year ended December 31, 2025 | |||||||||||||||||
| (In thousands, except for percentages) | Obagi Medical | Milk Makeup | Waldencast (Total) | ||||||||||||||
Net revenue | $ | 161,627 | $ | 110,444 | $ | 272,071 | |||||||||||
| Gross Profit | 111,525 | 71,493 | 183,018 | ||||||||||||||
| Gross Margin % | 69.0 | % | 64.7 | % | 67.3 | % | |||||||||||
| Gross Margin Adjustments: | |||||||||||||||||
Discontinued product write-off(1) | 494 | — | 494 | ||||||||||||||
Amortization expense of intangible assets(2) | 11,205 | — | 11,205 | ||||||||||||||
| Adjusted Gross Profit | $ | 123,224 | $ | 71,493 | $ | 194,717 | |||||||||||
| Adjusted Gross Margin % | 76.2 | % | 64.7 | % | 71.6 | % | |||||||||||
(1) Relates to the advanced purchase of specific products for the market in Vietnam sold through the SA Distributor that became obsolete when the distribution contract was terminated.
(2) The Supply Agreement and Formulations intangible assets are amortized to COGS.
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| Year ended December 31, 2024 | |||||||||||||||||
| (In thousands, except for percentages) | Obagi Medical | Milk Makeup | Waldencast (Total) | ||||||||||||||
Net revenue | $ | 149,266 | $ | 124,602 | $ | 273,868 | |||||||||||
| Gross Profit | 106,760 | 84,984 | 191,744 | ||||||||||||||
| Gross Margin % | 71.5 | % | 68.2 | % | 70.0 | % | |||||||||||
| Gross Margin Adjustments: | |||||||||||||||||
Amortization of the fair value of the related party liability(1) | (2,260) | — | (2,260) | ||||||||||||||
Discontinued product write-off(2) | 2,864 | — | 2,864 | ||||||||||||||
Amortization impact of intangible assets(3) | 11,205 | — | 11,205 | ||||||||||||||
| Adjusted Gross Profit | $ | 118,569 | $ | 84,984 | $ | 203,553 | |||||||||||
| Adjusted Gross Margin % | 79.4 | % | 68.2 | % | 74.3 | % | |||||||||||
(1) Relates to the fair value of the related party liability for the unfavorable discount to Obagi China as part of the Business Combination.
(2) Relates to the advanced purchase of specific products for the market in Vietnam sold through the SA Distributor that became obsolete when the distribution contract was terminated.
(3) The Supply Agreement and Formulations intangible assets are amortized to COGS.
Adjusted EBITDA and Adjusted EBITDA Margin
We define and calculate Adjusted EBITDA as GAAP net income (loss) before interest income or expense, income tax (benefit) expense, depreciation and amortization, and further adjusted for the items as described in the reconciliation below. We believe this information will be useful for investors to facilitate comparisons of our operating performance and better identify trends in our business. We define and calculate Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net revenue.
Adjusted EBITDA excludes certain expenses that are required to be presented in accordance with GAAP because management believes they are non-core to our regular business. These include:
•non-cash expenses, such as depreciation and amortization, stock-based compensation, the amortization of fair value and release of the related party liability to Obagi China, change in fair value of assets and liabilities, loss on impairment of goodwill, loss on extinguishment of debt, and foreign currency translation loss (gain);
•interest expense and income tax expense or benefit; and
•expenses that are not related to our underlying business performance, such as:
◦transaction-related costs which include mainly legal, advisory and consulting fees related to the restatement and acquisitions, and legal expenses in connection with the Business Combination and ongoing investigations;
◦strategic review costs;
◦non-recurring inventory recovery and discontinuation related to the termination of the relationship with the SA Distributor;
◦contract termination fees with certain distributors; and
◦other non-recurring costs, including tax restructuring.
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The tables below presents our Adjusted EBITDA reconciled to our net loss, the closest GAAP measure for the periods indicated:
| Year ended December 31, 2025 | ||||||||||||||||||||||||||
| (In thousands, except for percentages) | Obagi Medical | Milk Makeup | Central costs | Waldencast (Total) | ||||||||||||||||||||||
Net Loss | $ | (183,193) | $ | (26,785) | $ | (38,078) | $ | (248,056) | ||||||||||||||||||
| Adjusted For: | ||||||||||||||||||||||||||
| Depreciation and amortization | 40,945 | 18,239 | — | 59,184 | ||||||||||||||||||||||
Interest expense, net | 19,651 | 76 | 5,367 | 25,094 | ||||||||||||||||||||||
| Income tax (benefit) expense | (14,240) | 35 | 16 | (14,189) | ||||||||||||||||||||||
Loss on extinguishment of debt | 22,282 | — | 2,116 | 24,398 | ||||||||||||||||||||||
| Stock-based compensation expense | 402 | 2,383 | 9,011 | 11,796 | ||||||||||||||||||||||
Restatement (recoveries) and related costs(1) | (107) | — | 1,801 | 1,694 | ||||||||||||||||||||||
Merger and acquisition related costs(2) | — | — | 3,291 | 3,291 | ||||||||||||||||||||||
| Change in fair value of assets and liabilities | (671) | — | (3,839) | (4,510) | ||||||||||||||||||||||
Loss on impairment of goodwill | 132,058 | 19,960 | — | 152,018 | ||||||||||||||||||||||
Gain on sale of trademark | (5,679) | — | — | (5,679) | ||||||||||||||||||||||
Loss on acquisition | 6,233 | — | — | 6,233 | ||||||||||||||||||||||
Strategic review costs | — | — | 1,891 | 1,891 | ||||||||||||||||||||||
Foreign currency translation loss (gain) | 160 | 496 | (591) | 65 | ||||||||||||||||||||||
Other non-recurring costs(3) | 1,592 | 757 | 490 | 2,839 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 19,433 | $ | 15,161 | $ | (18,525) | $ | 16,069 | ||||||||||||||||||
| Net Revenue | $ | 161,627 | $ | 110,444 | $ | — | $ | 272,071 | ||||||||||||||||||
| Net Loss % of Net Revenue | (113.3) | % | (24.3) | % | N/A | (91.2) | % | |||||||||||||||||||
| Adjusted EBITDA Margin | 12.0 | % | 13.7 | % | N/A | 5.9 | % | |||||||||||||||||||
(1) Includes mainly legal, advisory, and consultant fees related to the financial restatement 2020-2022 periods and associated regulatory investigations and the Business Combination.
(2) Includes legal and advisory fees related to acquisitions, including due diligence and contract negotiations related to the merger and acquisition transactions.
(3) Other non-recurring costs not directly attributable to the above categories, including restructuring, product discontinuation and contract termination costs with certain distributors.
| Year ended December 31, 2024 | ||||||||||||||||||||||||||
| (In thousands, except for percentages) | Obagi Medical | Milk Makeup | Central costs | Waldencast (Total) | ||||||||||||||||||||||
| Net (Loss) Income | $ | (31,524) | $ | 8,803 | $ | (25,927) | $ | (48,648) | ||||||||||||||||||
| Adjusted For: | ||||||||||||||||||||||||||
| Depreciation and amortization | 41,591 | 18,424 | — | 60,015 | ||||||||||||||||||||||
| Interest expense (income), net | 12,391 | (1) | 4,765 | 17,155 | ||||||||||||||||||||||
| Income tax (benefit) expense | (141) | 32 | 219 | 110 | ||||||||||||||||||||||
| Stock-based compensation expense | (328) | 1,167 | 8,553 | 9,392 | ||||||||||||||||||||||
Restatement related costs(1) | 5,054 | — | 15,370 | 20,424 | ||||||||||||||||||||||
| Change in fair value of derivative warrant liabilities and interest rate collar | — | — | (23,679) | (23,679) | ||||||||||||||||||||||
Amortization and release of related party liability(2) | (5,678) | — | — | (5,678) | ||||||||||||||||||||||
| Loss on impairment of goodwill | 5,031 | — | — | 5,031 | ||||||||||||||||||||||
| Foreign currency translation loss | 223 | 373 | 140 | 736 | ||||||||||||||||||||||
Other non-recurring costs(3) | 3,897 | 266 | 1,263 | 5,426 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 30,516 | $ | 29,064 | $ | (19,296) | $ | 40,284 | ||||||||||||||||||
| Net Revenue | $ | 149,266 | $ | 124,602 | $ | — | $ | 273,868 | ||||||||||||||||||
| Net (Loss) Income % of Net Revenue | (21.1) | % | 7.1 | % | N/A | (17.8) | % | |||||||||||||||||||
| Adjusted EBITDA Margin | 20.4 | % | 23.3 | % | N/A | 14.7 | % | |||||||||||||||||||
(1) Includes mainly legal, advisory and consultant fees related to the financial restatement 2020-2022 periods and associated regulatory investigation.
(2) Relates to the fair value of the related party liability for the unfavorable discount to the Obagi Medical China Business as part of the Business Combination.
(3) Other non-recurring costs not directly attributable to the above categories.
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Liquidity and Capital Resources
We measure liquidity in terms of our ability to fund the cash requirements of our business operations, including working capital needs, capital expenditures, contractual obligations, debt service, acquisitions, tax, and other commitments with cash flows from operations and other sources of funding. Our principal sources of capital and liquidity have been proceeds from the 2023 PIPE Investments, private placements, borrowings from banks, and cash generated from the business.
Lumina Credit Agreement
On November 14, 2025, the Lumina Borrowers and the Company entered into the Lumina Credit Agreement with the Lumina Lenders and Lumina Administrative Agent. The Lumina Credit Agreement provides for a secured term loan facility in an aggregate principal amount of $225.0 million, comprised of (i) Term Tranche A Loans and (ii) Term Tranche B Loans.
As of December 31, 2025, we had an unpaid principal amount of $151.3 million, and unamortized debt issuance costs of $3.4 million on the Term Loans. The interest rate on the Term Loans was 14.8% and $2.7 million of interest was capitalized to the outstanding principal balance as payment-in-kind interest as of December 31, 2025.
As of December 31, 2025, the current liability portion of the unamortized debt issuance costs on the Term Loans was $1.5 million. The effective interest rate on the Term Loans was 19.1%.
PIPE Investments
In September 2023, we entered into the 2023 Subscription Agreements with the 2023 PIPE Investors where they collectively subscribed for 14,000,000 Class A ordinary shares in a private placement at a purchase price of $5.00 per share, for aggregate gross proceeds of $70.0 million. The 2023 PIPE Investment was anchored by a $50.0 million investment by a stakeholder in Beauty Ventures, which was the beneficial holder of 20.0% of our Class A ordinary shares as of April 15, 2024. The remainder of the 2023 PIPE Investors were certain existing shareholders including Cedarwalk, certain members of the Sponsor, and Mr. Brousset and Ms. Sebti. The 2023 Subscription Agreements relating to approximately $68.0 million of proceeds were consummated on the First PIPE Closing Date. The remaining approximately $2.0 million of Subscription Agreements closed on the Second PIPE Closing Date, following receipt of regulatory approvals (the “PIPE Closings”). No Class B ordinary shares, warrants or other securities of the Company were issued in connection with the 2023 PIPE Investment.
For information about the 2023 Subscription Agreements and their related Lock-Up Agreements, see “Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions” in this Report and “Item 8. Financial Information—Note 16. Related Party Transactions.”
As of December 31, 2025, we had cash, cash equivalents, and restricted cash of $31.9 million, of which $1.9 million is held in other currencies. As of December 31, 2024, we had cash, cash equivalents and restricted cash of $16.3 million, of which $2.4 million is held in other currencies.
Consolidated Cash Flow Data
In summary, our cash flows for each period were as follows:
(In thousands, except for percentages) | Year ended December 31, 2025 | Year ended December 31, 2024 | Change ($) | Change (%) | |||||||||||||||||||
| Net cash used in operating activities | $ | (12,816) | $ | (8,820) | $ | (3,996) | 45.3 | % | |||||||||||||||
| Net cash provided by (used in) investing activities | $ | 76,228 | $ | (2,920) | $ | 79,148 | (2710.5) | % | |||||||||||||||
| Net cash (used in) provided by financing activities | $ | (47,221) | $ | 5,582 | $ | (52,803) | (946.0) | % | |||||||||||||||
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Cash Flows from Operating Activities
Net cash used in operating activities of $12.8 million for the year ended December 31, 2025 was driven by the following:
•Net loss of $248.1 million primarily due to non-cash charges and SG&A expenses related to non-recurring legal and advisory costs and non-cash charges that did not impact the cash flow. Non-cash charges included: (i) loss on impairment of goodwill of $152.0 million, (ii) depreciation and amortization expenses of $59.2 million, (iii) loss on extinguishment of debt $24.4 million, (iv) stock-based compensation of $11.8 million, and (v) loss on acquisition of $6.2 million. The net loss was favorably impacted by non-cash income: (i) gain on sale of trademark of $5.7 million.
•Cash inflows resulting from the net change in operating assets and liabilities of $2.0 million, primarily driven by an increase in other current liabilities and other liabilities of $14.6 million. This was partially offset by a decrease in accounts payable of $6.8 million, decrease in operating lease liabilities of $3.0 million, decrease in accounts receivable of $2.7 million, and increase in inventories of $0.9 million.
•Non-cash reconciling credits related to deferred income taxes of $17.4 million.
Net cash used in operating activities of $8.8 million for the year ended December 31, 2024 was driven by the following:
•Net loss of $48.6 million primarily due to non-cash charges and SG&A expenses related to non-recurring legal and advisory costs. Non-cash charges included: (i) depreciation and amortization expenses of $60.0 million, (ii) stock-based compensation of $9.4 million, and (iii) loss on impairment of goodwill of $5.0 million. The net loss was favorably impacted by non-cash income (i) of $23.6 million related to the change in fair value of derivative warrant liabilities and (ii) amortization and release of related party liability of $5.9 million.
•Cash outflows resulting from the net change in operating assets and liabilities of $6.8 million, primarily driven by a decrease in operating lease liabilities of $2.7 million, decrease in accounts payable of $3.0 million, and an increase in accounts receivable of $3.2 million, offset by a decrease in inventories of $2.6 million.
•Non-cash reconciling credits related to deferred income taxes of $1.2 million.
Cash Flows from Investing Activities
Net cash provided by investing activities was $76.2 million for the year ended December 31, 2025 which was primarily driven by the proceeds from sale of a trademark of $82.5 million, offset by increases in capital expenditures of $3.7 million and increase in acquisition related costs of $2.6 million.
Net cash used in investing activities was $2.9 million for the year ended December 31, 2024 which was primarily driven by the increases in capital expenditures of $3.0 million.
Cash Flows from Financing Activities
Net cash used in financing activities was $47.2 million for the year ended December 31, 2025. The change was primarily driven by: (i) an increase in proceeds of $396.1 million from the Term Loans and TCW Term Loan, (ii) an increase in proceeds of $44.3 million from the 2022 Revolving Credit Facility and TCW Revolving Commitments, (iii) a decrease due to the repayment of $405.3 million for the 2022 Term Loan and TCW Term Loan, (iv) a decrease due to the repayment of $60.0 million for the 2022 Revolving Credit Facility and TCW Revolving Commitments, (v) a decrease from the payment of debt termination fees of $11.6 million, and (vi) a decrease from the payment of debt issuance costs of $10.2 million .
Net cash provided by financing activities was $5.6 million for the year ended December 31, 2024. The change was primarily driven by: (i) an increase in proceeds of $15.0 million from the 2022 Revolving Credit Facility and (ii) a decrease in repayment of $10.5 million for the 2022 Term Loan and note payable.
Critical Accounting Estimates
The preparation of our audited annual consolidated financial statements and related notes requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances at the time. We periodically review our estimates and make adjustments when facts and circumstances dictate. Due to the inherent uncertainty involved in making assumptions and estimates, changes in circumstances could result in actual results differing from those estimates, and such differences
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could be material to the Company’s consolidated balance sheets, consolidated statements of operations and comprehensive loss, consolidated statements of shareholders’ equity, and consolidated statements of cash flows.
An accounting estimate policy is considered to be critical if it requires an estimate to be made based on assumptions about matters that are highly uncertain at the time it is made. An accounting estimate policy is also considered critical if our audited consolidated financial statements could be materially impacted by (i) reasonable, alternative estimates or (ii) changes in the accounting estimates that are reasonably likely to occur on a periodic basis. We believe that our critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our audited consolidated financial statements. The critical accounting policies, judgments and estimates should be read in conjunction with the financial statements and the notes thereto within this Report.
We believe the following critical accounting policies, estimates and assumptions may have a material impact on our reported financial condition and operating performance and may involve significant levels of judgment to account for highly uncertain matters or are matters susceptible to significant change.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), which establishes principles for recognizing revenue at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. Our revenue is derived from two main sources: (1) product sales and (2) royalties from brand name licensing.
Revenue from the sale of products to customers is recognized at a point in time when control of the product transfers to the customer, based on assessment of payment and shipping terms impacting our right to payment, transfer of legal title, physical possession, and assumption of risks and rewards. When promotional products, such as samples and testers, are provided by the Company to its customers at the same time as a related saleable product, the cost of these promotional products are recognized as cost of sales at the same time as the revenue for the related product is recognized.
Royalty revenue from the licensing arrangements is recognized when the product sale occurs.
We sell products directly to consumers via our e-commerce platforms, to distributors in the U.S. and internationally, and through retailers. Our distributors may resell products to retailers, spas or other end consumers.
To determine when to recognize revenue under ASC 606, we use judgment to determine which party controls the products and when that control transfers from us to the distributor. We analyze various factors including our ability to direct products physically held by distributors, when title and risk of loss transfers, and who ultimately manages the relationship with the end customer. When we are able to direct products physically held by a distributor–such as determining which end customers’ orders are fulfilled when there is limited product inventory–we conclude that the distributor does not control the product for purposes of ASC 606 until we relinquish those abilities.
In addition, Obagi Medical’s distributors charge fees for certain services that they render to us. The services provided are in connection with the distribution of our products and include packing and shipping, marketing and advertising, monitoring product reviews, providing customer service, and generating data and analytical reports on product sales. Fees to distributors for these services are recognized as a reduction to revenue because the services provided are typically not distinct from the distributors’ purchase of products.
Typically, customers are required to pay either in advance or between 30 and 90 days from delivery of the product or invoicing.
Customers place orders for products through separate purchase orders under our written agreements with them. If the written agreement with a customer does not meet all of the criteria for a contract under ASC 606, each purchase order for products is regarded as a contract separate and apart from the written agreement between us and the customer. If we determine that it is not probable that we will collect substantially all of the consideration from the customer, we generally recognize revenue for each purchase order only after we have transferred the related products and received all or substantially all of the payment for that purchase order.
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Goodwill
We assess goodwill annually on October 1st each year for impairment and at an interim date if indicators of a potential impairment exist. We have two goodwill reporting units, Obagi Medical and Milk Makeup, which are individually tested for impairment.
Our initial review for impairment of goodwill includes considering qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform a quantitative analysis. If we determine that it is more likely than not that the fair value of reporting unit is less than its carrying amount, a quantitative analysis is then performed to identify goodwill impairment.
Determining the fair value of a reporting unit requires significant estimates and assumptions. Management, with the assistance of an independent valuation firm, estimated the value of the reporting units using a combination of the income and market approaches, specifically the discounted cash flow (“DCF”) method and the guideline public company (“GPC”) method, respectively. Under the DCF method, fair value is determined by discounting the estimated future cash flows of each reporting unit, which includes using management’s most recent projected long-term financial forecasts for revenue, earnings, operating margins, capital expenditures, working capital requirements and their expected growth rates. The discount rate used is intended to reflect the risks inherent in the future cash flows of the respective reporting unit. Under the GPC method, enterprise value (“EV”)-to-sales and EV-to-EBITDA were applied, with the selection based on assumed growth prospects, profitability, and the Company’s relative size within the peer group. The Company applies a weighted methodology considering the output from both methods.
During the second quarter of 2025, there were indicators of a potential impairment of the Obagi Medical and Milk Makeup reporting units. The Company performed its goodwill impairment analysis using the qualitative approach, and the analysis indicated it was more likely than not that both Obagi Medical and Milk Makeup reporting units were impaired. As a result, the Company performed a quantitative goodwill impairment test for both reporting units on June 30, 2025. As of the testing date, the carrying value of the Obagi Medical reporting unit was $599.8 million, exceeding its fair value of $467.7 million by approximately 22.1%. As a result, we recorded a non-cash goodwill impairment charge of $132.1 million within the Obagi Medical reporting unit as of and for the six months ended June 30, 2025, as reflected in the consolidated financial statements. As of the testing date, the carrying value of the Milk Makeup reporting unit was $280.9 million, exceeding its fair value of $261.0 million by approximately 7.1%. As a result, we recorded a non-cash goodwill impairment charge of $20.0 million within the Milk Makeup reporting unit as of and for the six months ended June 30, 2025, as reflected in the consolidated financial statements.
The Company performed its annual goodwill impairment analysis using the quantitative approach on October 1, 2025, for each of its reporting units, and the analysis indicated that there was no further impairment of goodwill. Fair value estimates result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions, similar to those used in the interim impairment testing, that have been deemed reasonable by management as of October 1, 2025.
Obagi Medical
The specific critical assumptions used in the fair value determination of Obagi Medical reporting unit include:
•Revenue and Profitability Forecasts: The forecasted revenue growth and EBITDA margins are based on a ten-year projection period reflecting strategic operating plans, including brand momentum, product innovation, international expansion efforts, and continued optimization of digital channels. Projected annual revenue and EBITDA growth rates are driven by industry trends and the Company’s strategic plans to boost sales through the development of existing channels, international expansion, and other growth initiatives, while enhancing efficiency through cost optimization and process improvements.
•Long-term Growth Rate: A long-term growth rate of 3% was applied post-2034 using the Gordon Growth Model reflecting management’s expectations of long-term, sustainable growth aligned with industry norms.
•Discount Rate: The discount rate is based on the reporting unit’s Weighted Average Cost of Capital (“WACC”), which includes a Company-Specific Risk Premium (“CSRP”). The CSRP is re-evaluated annually based on forecast reliability and reflects business risk, including contingency allocations and sensitivity to underperformance scenarios.
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•Central Cost Allocation: Corporate expenses are split evenly between Obagi Medical and Milk Makeup, as management believes this best reflects the shared nature of these costs, which are not directly driven by the relative size or performance of each unit.
•Market Multiples: Under the GPC method, EV-to-revenue (2.25x–2.50x) and EV-to-EBITDA (13.0x–17.0x) multiples were applied to 2025 and 2026 projections, reflecting stronger growth outlook and larger revenue base compared to peers.
•Method Weighting: Management determined fair value using a weighted average of the DCF method (80%) and the GPC analysis (20%).
In determining the fair value, the Company acknowledges the inherent degree of uncertainty associated with key valuation assumptions, which are, by nature, forward-looking estimates.
•Revenue and Profitability Forecasts: A decrease in projected profitability growth by 5% could reduce the fair value by 20.0% or $91.9 million.
•Long-term Growth Rate: All other assumptions held constant, if the long-term projected growth rate was decreased by 0.5%; the estimated fair value would decrease by approximately 2.1% or $9.6 million.
•Discount Rate: An increase in WACC of 1% could reduce fair value by approximately 7.9% or $36.2 million.
•Market Multiples: Using lower EV-to-Revenue multiples (2.0x-2.25x) would reduce the GPC method output by 5.7% and could negatively impact the fair value by 0.9% or $4.2 million. Using lower EV-to-EBITDA multiples (12x -16x) would reduce the GPC method output by 3.2% and could negatively impact the fair value by 0.5% or $2.3 million.
•Method Weighting: Changing the current method weighting from 80% DCF and 20% GPC to an even 50% each could reduce fair value by approximately 4.9% or $22.5 million.
Milk Makeup
The specific critical assumptions used in the fair value determination of Milk Makeup reporting unit include:
•Revenue and Profitability Forecasts: Management’s forecast of revenue growth and EBITDA margins is based on a ten-year projection period that incorporates planned investments in marketing and digitalization. The Company is expected to benefit from accelerating digital channel sales through platforms such as Amazon, Sephora, and milkmakeup.com, supported by continued investment in marketing initiatives. However, potential trade headwinds may impact revenue growth in the near future.
•Long term Growth Rate: A long-term growth rate of 3% was applied post-2034 using the Gordon Growth Model reflecting management’s expectations of long-term, sustainable growth aligned with industry norms.
•Discount Rate: The discount rate is based on the reporting unit’s WACC, which includes a CSRP. The CSRP is re-evaluated annually based on forecast reliability and reflects business risk, including contingency allocations and sensitivity to underperformance scenarios.
•Central Cost Allocation: As previously noted, corporate expenses are split evenly between Obagi Medical and Milk Makeup.
•Market Multiple: Under the GPC method, EV-to-revenue (2.00x–2.25x) multiple was applied to the 2025 projection, reflecting stronger growth outlook and larger revenue base compared to peers.
•Method Weighting: Management determined fair value using a weighted average of the DCF method (80%) and the GPC analysis (20%).
In determining the fair value, the Company acknowledges the inherent degree of uncertainty associated with key valuation assumptions, which are, by nature, forward-looking estimates.
•Revenue and Profitability Forecasts: A decrease in projected profitability growth by 5% could reduce the fair value by 32.9% or $91.9 million.
•Long-term Growth Rate: All other assumptions held constant, if the long-term projected growth rate was decreased by 0.5%; the estimated fair value would decrease by approximately 2.2% or $6.0 million.
•Discount Rate: An increase in WACC of 1% could reduce fair value by approximately 9.5% or $26.5 million.
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•Market Multiple: Using lower EV-to-Revenue multiples (1.75x-2.00x) would reduce the GPC method output by 11.1% and could negatively impact the fair value by 2.0% or $5.5 million.
•Method Weighting: Changing the current method weighting from 80% DCF and 20% GPC to an even 50% each could reduce fair value by approximately 4.2% or $11.8 million.
The Company’s annual goodwill impairment analysis using the quantitative approach on October 1, 2024, also indicated there was an impairment of goodwill. As a result, we recorded a non-cash impairment charge of $5.0 million within the Obagi Medical reporting unit as of December 31, 2024, as reflected in the consolidated financial statements. We did not perform a quantitative review of the Milk Makeup reporting unit during 2024, as qualitative factors and circumstances did not indicate that the fair value of the reporting unit was less than the carrying value on October 1, 2024. As a result, the goodwill balance for that reporting unit did not change.
While we believe that the Company has used reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur due to changes in key assumptions.
Further impairment charges, if any, may be material to our results of operations and financial position. See “Item 3.D. Risk Factors—We may face impairment of intangible assets, unknown or contingent liabilities and other charges or write-downs that could negatively impact our financial condition, profitability, and the value of our securities.”
Embedded Derivative Liabilities
Certain provisions within our debt arrangements are required to be accounted for separately as embedded derivative liabilities under ASC 815, Derivatives and Hedging. These embedded derivatives are initially recognized at fair value and subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.
The fair value of embedded derivative liabilities is determined using valuation techniques that reflect assumptions market participants would use in pricing the instrument. These techniques may include, among others, a with-and-without approach that compares the value of the debt instrument including and excluding the embedded features. The valuation incorporates significant unobservable inputs and is classified within Level 3 of the fair value hierarchy under ASC 820.
The determination of fair value requires significant management judgment, including estimates related to the contractual terms of the debt, expected timing of potential repayment or liquidity events, market-based discount rates or credit spreads, and other relevant economic assumptions. Because these inputs are inherently uncertain and subject to change, revisions to assumptions, including changes in expected timing of repayment events, credit spreads, or broader market conditions, could materially affect the estimated fair value of the embedded derivative liability and the resulting gains or losses recognized in the consolidated statements of operations.
Contingent Consideration
In connection with the acquisition of Novaestiq Corp., we recognized contingent consideration arrangements that require the issuance of additional equity or cash payments upon the achievement of specified regulatory approvals, sales milestones, and reimbursement thresholds. Contingent consideration is initially recognized at fair value on the acquisition date and subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in earnings.
The fair value of contingent consideration is determined using valuation techniques that reflect assumptions market participants would use in pricing the obligation. These techniques may include simulation models, such as Monte Carlo simulation, or other probability-weighted approaches, depending on the structure of the milestone arrangements. The valuation incorporates significant unobservable inputs and is classified within Level 3 of the fair value hierarchy under ASC 820.
Significant management judgments and assumptions used in estimating fair value include projected net sales, expected timing and probability of achieving regulatory and commercial milestones, volatility of projected financial metrics, discount rates reflecting both performance and credit risk, and estimated market value of the Company’s Class A ordinary shares when applicable. These assumptions are inherently uncertain and may differ from actual future results.
Changes in the underlying assumptions, including changes in projected net sales, volatility assumptions, discount rates, or the probability of milestone achievement, could materially affect the estimated fair value of the contingent consideration liability and the resulting gains or losses recognized in the consolidated statements of operations.
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Deferred Tax Assets (and Related Valuation Allowance)
We recognize net deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In making such a determination, management considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies and results of recent operations. If we determine that deferred tax assets may be able to be recognized in the future in excess of their net recorded amount, we adjust the deferred tax asset valuation allowance, which would reduce the provision for income taxes. We record uncertain tax positions on the basis of a two-step process whereby (i) management determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, management recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. This requires management to make judgments and estimates regarding: (i) the timing and amount of the reversal of taxable temporary differences; (ii) expected future taxable income; and (iii) the impact of tax planning strategies. Future changes to tax rates would also impact the amounts of deferred tax assets and liabilities and could adversely affect our financial statements. A valuation allowance of $35.1 million was recorded as of December 31, 2025, and has been provided for predominantly on the deferred tax assets related to the Company’s investment in Waldencast Partners LP. As of December 31, 2024, the Company had recorded a valuation allowance of $22.5 million. See “Item 8. Financial Information—Note 15, Income Tax Benefit.”
Business Combinations
When we acquire a business, the total purchase consideration provided is allocated to the identifiable assets and liabilities of the acquired business at their estimated respective fair values. Any excess consideration of the fair value of purchase consideration over the fair values of assets acquired and liabilities assumed is recognized as goodwill.
Significant management judgments and assumptions are required in determining the fair value of assets acquired and liabilities assumed. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows, useful lives and discount rates. Measurement period adjustments are reflected at the time identified, up through the conclusion of the measurement period, which is the time at which all information for determination of the values of assets acquired and liabilities assumed is received and may not exceed one year from the acquisition date. We may record adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with a corresponding offset to goodwill. If outside of the measurement period, any subsequent adjustments are recorded in our consolidated statements of operations and comprehensive loss.
Emerging Growth Company Accounting Election
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 are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. We are an “emerging growth company” as defined in Section 2(a) of the Securities Act, and have elected to take advantage of the benefits of this extended transition period, which means that when a standard is issued or revised and has different application dates for public or private companies, we, for so long as we remain an emerging growth company, will adopt the new or revised standard at the time private companies are required to adopt the new or revised standard.
Recent Accounting Pronouncements
See “Item 8. Financial Information—Note 2. Summary of Significant Accounting Policies” for more information regarding recent accounting pronouncements.
Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risks in the ordinary course of our business, which primarily relate to fluctuations in interest rates, foreign exchange and inflation.
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Interest Rates
We have interest rate risk with respect to our indebtedness. As of December 31, 2025, we had an aggregate face value of $152.1 million of outstanding indebtedness, bear interest at an initial fixed rate of 14.75% per annum from the Closing Date until November 17, 2026, and the interest rate will increase by 0.25% for each three-month interval thereafter.
Foreign Exchange Fluctuations
We transact business in multiple currencies worldwide, of which the most significant currency for the year ended December 31, 2025 and the year ended December 31, 2024 was the U.S. dollar. Our international revenue, as well as costs and expenses denominated in foreign currencies, expose us to the risk of fluctuations in foreign currency exchange rates against the U.S. dollar. As of December 31, 2025, the effect of a hypothetical 10% change in foreign currency exchange rates would not have been material to our financial condition or results of operations. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.
Inflation
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations to date; however, we continue to monitor the effects of the global macroeconomic environment, including inflationary pressures. Generally, we have been able to introduce new products at higher prices, increase prices on select products and implement other operating efficiencies to sufficiently offset cost increases.
Trend Information
Other than as disclosed elsewhere in this Report, we are not aware of any trends, uncertainties, demands, commitments or events for the year ended December 31, 2025 that are reasonably likely to have a material effect on our net sales or revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial condition.
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.Directors and Senior Management
The following table sets forth the names, ages and positions of our current directors and executive officers as of the date of this Report:
| Name | Age | Position | ||||||||||||
| Executive Officers/Directors | ||||||||||||||
| Michel Brousset | 53 | Chief Executive Officer and Class III Director | ||||||||||||
| Hind Sebti | 47 | Chief Growth Officer and Class II Director | ||||||||||||
| Manuel Manfredi | 50 | Chief Financial Officer | ||||||||||||
| Non-Employee Directors | ||||||||||||||
Kelly Brookie | 58 | Class I Director | ||||||||||||
Aaron Chatterley(1) | 59 | Class I Director | ||||||||||||
Roberto Thompson Motta(2) | 68 | Class I Director | ||||||||||||
| Juliette Hickman | 51 | Class II Director | ||||||||||||
| Cristiano Souza | 51 | Class II Director | ||||||||||||
| Simon Dai | 34 | Class III Director | ||||||||||||
| Felipe Dutra | 60 | Class III Director and Chairman | ||||||||||||
1.On December 2, 2025, the Board resolved to reclassify its members to achieve a balance among the director classes. As a result of this reclassification, Aaron Chatterley now serves as a Class I director.
2.On December 2, 2025, the Board resolved to reclassify its members to achieve a balance among the director classes. As a result of this reclassification, Roberto Thompson Motta now serves as a Class I director.
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Executive Officers
Michel Brousset has served as a director on our Board and our Chief Executive Officer since January 2021. Mr. Brousset has more than 25 years of experience leading, operating and building global brands at L’Oréal (PAR: OR) and Procter & Gamble (NYSE: PG) where he worked to launch and build iconic brands across multiple geographies. Most recently, Mr. Brousset founded Waldencast Ventures LP (“Waldencast Ventures”), a holding company and investment vehicle, in 2019 and has been the Chief Executive Officer since its inception. Waldencast Ventures partners with, creates, incubates and accelerates next-generation and early-stage beauty and wellness brands. Mr. Brousset has led investments in the current and former Waldencast Ventures portfolio companies.
Prior to founding Waldencast Ventures, Mr. Brousset was the Group President of L’Oréal’s Consumer Products Division in North America from July 2016 to April 2019. In this role, Mr. Brousset managed each of the Presidents of key L’Oréal brands and the Presidents and cross-functional teams of L’Oréal Canada CPD and L’Oréal Caribe, as well as the heads of supply chain, finance, human resources (“HR”), information technology (“IT”), legal, research and development and consumer and market intelligence (“CMI”). As the Group President of L’Oréal’s Consumer Products Division in North America, Mr. Brousset led multiple strategic initiatives and acquisitions.
Additionally, Mr. Brousset was the Chief Executive Officer and Managing Director of L’Oréal U.K. & Ireland between July 2013 and July 2016, where he managed a broad portfolio of brands and all the divisions of L’Oréal for the U.K., and Ireland. In addition, he managed across all functional areas including supply chain, finance, HR, IT, CMI, legal and regulatory. Mr. Brousset also spent nearly 14 years at Procter & Gamble in various marketing and brand management roles across North America and Western Europe.
Mr. Brousset holds a B.S. in Economics from the Universidad del Pacífico in Peru and an M.B.A. from the University of North Carolina - Kenan-Flagler Business School.
Mr. Brousset advises several Waldencast Ventures portfolio companies. Our Board has implemented guidelines, pursuant to which, unless and until we and Waldencast Ventures merge or otherwise become affiliated entities, Mr. Brousset will spend on average at least 90% of his monthly average working time providing services to us, such that a maximum of 10% may be spent to provide services to Waldencast Ventures.
Hind Sebti has served as our Chief Growth Officer since February 2021 and as a director on our Board since September 2024. Ms. Sebti has more than 20 years of experience leading and managing beauty brands across multiple categories and stages during her tenures at L’Oréal (PAR: OR) and Procter & Gamble (NYSE: PG). Ms. Sebti co-founded Waldencast Ventures alongside Mr. Brousset in 2019. Ms. Sebti brings in-depth knowledge and understanding of the beauty industry as well as consumer insights to identify and invest in the next-generation beauty brands. Importantly, Ms. Sebti plays a key role in helping portfolio brands scale, leveraging her extensive multi-category and brand management experience. Previously, Ms. Sebti also served as Chief Executive Officer of Waldencast Brands, a subsidiary of Waldencast Ventures, to incubate and commercialize new brands, where she led the brand creation process, with a focus on creative and operational optimization, through all stages from conception and product development to go-to-market strategy. She remains involved in the business, however pursuant to guidelines implemented by the Board, unless and until we and Waldencast Ventures merge or otherwise become affiliated entities, Ms. Sebti will spend on average at least 80% of her monthly average working time providing services to us, such that a maximum of 20% may be spent to provide services to Waldencast Ventures.
Prior to Waldencast Ventures, Ms. Sebti held various leadership positions at L’Oréal from April 2013 to December 2018. She was the General Manager for Maybelline and Essie in the U.K. from July 2017 to December 2018. She also held the position of General Manager of professional haircare brands Redken, Pureology and Mizani from September 2015 to July 2017, where she focused on digitalization and consumer centricity to drive growth. Ms. Sebti began her tenure at L’Oréal as the Marketing Director of L’Oréal Paris and Consumer Division Category Director. Prior to L’Oréal, Ms. Sebti held various Business Leader and Brand Manager positions at Procter & Gamble in the U.K., Ireland and France across brands such as Olay Skin Care and Gillette Venus from January 2002 to March 2013. Ms. Sebti serves as a member of the board of directors of Cosmetic Executive Women U.K. and holds a Master’s degree in Industrial Engineering from The National Institute of Applied Science of Lyon.
Manuel Manfredi has served as our Chief Financial Officer since April 2024. Mr. Manfredi has a proven track record of performance having led financial organizations in the beauty and consumer products industries for nearly 25 years. Most recently, Mr. Manfredi served as Chief Financial Officer at L’Oréal Spain and Portugal (2022-2024). Previously Mr.
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Manfredi served as Chief Financial Officer for Italy (2019-2022), Chief Financial Officer for Spain (2015-2019) and in other senior financial roles at L’Oréal, managing multi-billion-dollar businesses across Europe and North America. While at L’Oréal, Mr. Manfredi played a key role in the acquisition and integration of a new cosmetics brand, executed several transformation projects of the finance, commercial, and back-office functions, and helped unlock value and growth through strong industry and operational expertise. Mr. Manfredi began his finance career at Procter & Gamble Europe in 1998, and holds a Business Management degree from the Universidad of Sevilla.
Non-Employee Directors
Felipe Dutra has been a director and the executive chairman of the Board since January 2021. Mr. Dutra served as the Chief Financial Officer at Anheuser-Busch InBev (“AB InBev”) (Euronext: ABI) (NYSE: BUD) (MEXBOL: ANB) (JSE: ANH) from January 2005 to April 2020 and played an instrumental role in building AB InBev from a regional Brazilian brewer into the world’s largest brewer and a top five global consumer goods company according to sales through numerous landmark acquisitions. Mr. Dutra’s contributions to AmBev S.A. (“AmBev”), AB InBev’s current subsidiary, stretch back to 1990. He held multiple leadership positions in Treasury and Finance at AmBev before being appointed to Chief Financial Officer in 2000. In addition to being a seasoned deal maker, over the course of his 15-year tenure as Chief Financial Officer of AB InBev, Mr. Dutra took on the additional role of Chief Technology Officer in 2014 to lead the company’s adoption of digital technology and implementation of data analytics. Mr. Dutra also served as a member of the board of directors of AmBev (BOVESPA: ABEV) (NYSE: ABEV) from January 2005 to May 2020, Grupo Modelo from December 2010 to June 2013 and Budweiser APAC from September 2019 to June 2020. He holds a degree in Economics from Universidade Candido Mendes and an M.B.A. from Universidade de São Paulo in Brazil. Mr. Dutra serves as a member of our Finance Committee.
Kelly Brookie has served as an independent director on our Board since September 2024. Ms. Brookie has years of experience in the areas of corporate strategy, valuation, financial analysis, and risk assessment. She served as an audit partner with Deloitte and has over 25 years of experience working with companies on accounting and auditing matters, transactions, transformation and strategic risks. Throughout her career, she has gained extensive expertise in financial accounting and reporting, internal controls processes, and governance. She is active in supporting multiple non-profit organizations including serving on boards and committees. She is a Certified Public Accountant and a member of the American Institute of Certified Public Accountants. Ms. Brookie received her Bachelor's Degree in Political Science from the University of Washington and a Master of Accounting from University of Southern California. Ms. Brookie serves as Chairperson of the Audit and Governance Committee and as a member of the Compensation and Nomination Committee.
Aaron Chatterley has served as an independent director on our Board since December 2021. Mr. Chatterley founded the web development company SP New Media in 1996, where he served as the Chief Executive Officer until selling the company in 2000. In 2005, Mr. Chatterley co-founded the online beauty retailer, feelunique, where he served as the Chief Executive Officer until April 2014. Mr. Chatterley led the partial sale of feelunique to Palamon Capital Partners in December 2012, as well as the sale of feelunique to LVMH/Sephora in September 2021. In October 2021 he co-founded the teen beauty brand indu. In addition, since 2016 Mr. Chatterley has served as a Non-Executive Director of Digital Jersey, an economic development agency, and currently serves as an audit and risk committee member. Mr. Chatterley also serves as an Ambassador for The King’s Trust Women Supporting Women, a youth charity organization. Mr. Chatterley serves as a member of the Audit and Governance Committee and the Compensation and Nomination Committee.
Simon Dai has served as a director on our Board since the consummation of the Business Combination in July 2022. Mr. Dai has served on the board of directors of Obagi Medical since September 2019, including as its Chairman since July 2020, and has led several investments in the healthcare space. Since January 2020, Mr. Dai has served as the Co-Chairman and Chief Executive Officer of Presbia PLC, a medical device company focused on the development of the presbyopia-correcting lens, an innovative solution for the common age-related loss of the ability to read or focus on near objects. He also co-founded Oxford MEStar in October 2013, a spin-out company from the Institute of Biomedical Engineering of Oxford University specializing in automation solution, serving as its Chief Executive Officer from October 2016 until August 2020. Previously, Mr. Dai focused on impact investing at Bill & Melinda Gates Foundation, where he was a Liaison Officer based in Ethiopia. Mr. Dai received a BA in Sociology from Manchester University, an MSc. in Finance from the London School of Economics and an MBA from the UCLA Anderson School of Management.
Mr. Dai has been appointed to our Board by Cedarwalk pursuant to the Investor Rights Agreement, dated as of July 27, 2022, by and among us, Cedarwalk and CWC Skincare Ltd. as guarantor of Cedarwalk’s obligations thereunder (the “Investor Rights Agreement”). For additional information regarding the Investor Rights Agreement, see “Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions” in this Report.
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Juliette Hickman has served as an independent director on our Board since March 2021. Ms. Hickman served as an investment analyst at the Capital Group Companies for more than 20 years, with exposure to a broad range of industries on a global basis and specific expertise and focus on the global beverage industry. Throughout her career, Ms. Hickman has gained extensive expertise in corporate strategy, valuation, mergers and acquisitions, financial analysis, and risk assessment. She also serves on the board of directors of Keurig Dr. Pepper. Ms. Hickman holds a Bachelor’s of Arts (hons) degree in Politics and Public Administration from the Nottingham Trent University and a Postgraduate Certificate in Sustainable Business from the Cambridge Institute of Sustainability Leadership (CISL). Ms. Hickman is our lead independent director and serves as the member of our Audit and Governance Committee, as Chairperson of our Compensation and Nomination Committee, and as a member of our Finance Committee.
Roberto Thompson Motta has served as a director on our Board since September 2024. Mr. Thompson is a co-founder and member of the Investment Committee of 3G Capital, a global investment firm headquartered in New York. Mr. Thompson has served on the board of directors of AB InBev, AmBev S.A, Restaurant Brands International, Lojas Americanas S.A., and StoneCo Ltd. He was one of the founding partners of GP Investments Ltd. and a member of its board of directors until 2010. He received a BS in Mechanical Engineering from Pontifícia Universidade Católica do Rio de Janeiro and an MBA from The Wharton School of the University of Pennsylvania. Mr. Thompson is a member of The Graduate Executive Board of The Wharton School of the University of Pennsylvania, and of The International Council of The Metropolitan Museum of Art in New York. He is also a Patron of the Museum of Modern Art of São Paulo. Mr. Thompson serves as a member of the Finance Committee.
Cristiano Souza has been a director of Waldencast since January 2021. Mr. Souza is the managing partner at Zeno Equity Partners LLP (“ZEP”). Based out of the United Kingdom, ZEP is the investment manager of the Zeno Investment Fund (ZIF) (f/k/a Dynamo Investment Fund) an investment fund focused on long-term equity investments. Prior to becoming managing partner at ZEP, Mr. Souza spent 29 years as a partner of Dynamo Administração de Recursos and nine years as a partner of Dynamo Capital LLC, where he was an analyst and portfolio manager of funds managed and advised by both entities. Mr. Souza has a Bachelor’s degree in Economics from Candido Mendes University in Rio de Janeiro. Mr. Souza serves as the Chairperson of our Finance Committee.
Family Relationships
There are no family relationships between any of our executive officers and directors.
Board Skills and Qualifications
Waldencast’s mission is to build a global best-in-class beauty and wellness operating platform by creating, nurturing, and scaling conscious, high growth, purpose-driven brands. Brands that aim to make the beauty industry a little better every day: more sustainable, more inclusive and more transparent.
For that reason, it is fundamental that our Board not only reflects our commitment to economic performance, but also our desire to create, nurture, and scale brands with a soul. Brands that marry purpose, art, beauty, and design with science, industry, and commerce to make the planet and the lives of those in it better. Our Board includes a variety of skills, professional and industry backgrounds, geographical experience and expertise, tenure, and perspectives.
We firmly believe that a Board with a range of views, insights, perspectives, and opinions will support good decision making and be of benefit to the Company’s shareholders and all other stakeholders.
B.Compensation
Fiscal Year 2025 Executive Officer and Director Compensation
The aggregate compensation paid and share-based compensation, bonuses and benefits granted by us and our subsidiaries to our executive officers with respect to the year ended December 31, 2025 was $9.8 million. The total amount set aside or accrued by us or our subsidiaries to provide pension, retirement or similar benefits to our executive officers with respect to the year ended in December 31, 2025, was less than $0.1 million.
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For so long as we qualify as a foreign private issuer, we are not required to comply with the proxy rules applicable to U.S. domestic companies, including the requirement applicable to emerging growth companies to disclose the compensation of our Chief Executive Officer and other two most highly compensated executive officers on an individual, rather than an aggregate, basis.
During the year ended on December 31, 2025, our non-employee directors received in the aggregate $0.5 million in cash and stock based compensation. No pension, retirement or similar benefits were paid to our non-employee directors with respect to the year ended in December 31, 2025
Our Equity Plans
We maintain two equity incentive plans: (i) our 2022 Incentive Award Plan (the “2022 Plan”), which became effective upon the closing of the Business Combination, and (ii) our 2022 Inducement Incentive Award Plan (the “2022 Inducement Plan”), which became effective on September 16, 2022 (collectively, the “Equity Plans”).
Type of Awards
Under the 2022 Plan we may grant eligible officers, employees, non-employee directors and consultants restricted share units (“RSUs”) and performance-vested share units (“PSUs”), restricted stock, non-qualified options or “Incentive stock options,” stock appreciation rights (“SARs”), other stock-based awards (valued in whole or in part by reference to, or otherwise based on, our ordinary shares, including divided equivalents) and bonuses payable in fully vested ordinary shares and awards that are payable solely in cash.
Under the 2022 Inducement Plan, we may grant RSUs, PSUs, non-qualified options, SARs, other stock-based awards (valued in whole or in part by reference to, or otherwise based on our ordinary shares, including dividend equivalents) and bonuses payable in fully vested ordinary shares to individuals who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules and the related guidance issued thereunder.
Share Reserves
As of December 31, 2025, the notional maximum number of Class A ordinary shares authorized under the 2022 Plan was 26,704,741, subject to adjustment for changes in capitalization as provided under the 2022 Plan. The share reserve under the 2022 Plan will automatically increase on January 1st of each calendar year (each, an “Evergreen Date”), prior to the tenth anniversary of the Effective Date (as such term is defined in the 2022 Plan), in an amount equal to the lesser of (i) 3% of the total number of our Class A ordinary shares issued and outstanding on the December 31st immediately preceding the applicable Evergreen Date and (ii) a number of our Class A ordinary shares determined by the plan administrator, including zero. All of our ordinary shares reserved for issuance under the 2022 Plan may be granted as incentive stock options. In December 2025, the plan administrator determined that the share reserve under the 2022 Plan would not be increased for on January 1, 2026.
As of December 31, 2025, taking into account previous grants and forfeitures, we had a total of 11,509,249 Class A ordinary shares which remained available for future issuance under the 2022 Plan.
Administration
Our 2022 Plan is administered by our Board, unless the Board appoints a committee of directors to administer certain aspects of the 2022 Plan. In August 2022, the Board appointed the Compensation Committee as the “plan administrator” of the 2022 Plan. Our 2022 Inducement Plan is administered by our Board, unless the Board appoints a committee of directors to administer certain aspects of the 2022 Inducement Plan.
Terms of Awards
Under the terms of the Equity Plans, the exercise price of all options and SARs granted under the Equity Plans will be determined by the plan administrator, but in no event may the exercise price be less than 100% of the fair market value of our related Class A ordinary shares on the date of grant, unless otherwise set forth in the applicable award agreement for an award grant under the 2022 Plan. Each stock option and free-standing SAR will vest and become exercisable (including in the event of the optionee’s termination of employment or service) at such time and subject to such terms and conditions as determined by the plan administrator in the applicable individual option agreement.
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Under the Equity Plans, the plan administrator may grant RSUs, PSUs, restricted stock awards, stock options and SARs that are subject to vesting, forfeiture and other terms and conditions as determined by the plan administrator in the applicable award agreement. The applicable individual award agreement may provide for the lapse of restrictions in installments or the acceleration or waiver of restrictions (in whole or part) under certain circumstances as set forth in the applicable individual award agreement, including the attainment of certain performance goals, a recipients’ termination of employment or service, or a recipient’s death or disability.
In the event that a “change in control” (as such term is defined in the Equity Plans) occurs, each award granted under the Equity Plans, as applicable, will continue to operate in accordance with its terms, subject to adjustment (including, without limitation, assumption or conversion into equivalent awards of the acquirer’s equity).
Under the Equity Plans, if (i) a change in control occurs and (ii) either (x) an outstanding award is not assumed or substituted in connection with such change in control or (y) an outstanding award is assumed or substituted in connection with such change in control and a recipient’s employment or service is terminated without cause or by the recipient for good reason (if applicable) within 12 months following the change in control, then, except as provided in the applicable award agreement, (i) any unvested or unexercisable portion of an award carrying a right to exercise will become fully vested and exercisable and (ii) the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any other award granted under the 2022 Plan will lapse, the awards will vest in full and any performance conditions will be deemed to be achieved at target performance levels.
Amendments and Plan Termination
The Equity Plans provide the Board with the authority to amend, alter or terminate the Equity Plans, but no such action may adversely affect the rights of any recipient with respect to outstanding awards without the recipient’s consent. The applicable plan administrator may amend an award, prospectively or retroactively, but no such amendment may adversely affect the rights of any recipient without the recipient’s consent. Shareholder approval of any such action under the 2022 Plan will be obtained if required to comply with applicable law.
No award will be granted pursuant to the 2022 Plan on or after July 27, 2032, but awards granted before that date may extend beyond that date.
All awards granted under the Equity Plans will be subject to the provisions of any clawback policy implemented by us (including the policy adopted by us in November 2023 in accordance with the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the applicable Nasdaq listing standards) to the extent set forth in such clawback policy, and will be further subject to such deductions and clawback as may be required to be made pursuant to any law, government regulation or stock exchange listing standard.
Grants Made to Executive Officers of the Company under the Equity Plans in 2025
During the year ended on December 31, 2025, the Company granted our Chief Executive Officer 4,135,340 stock options and our Chief Growth Officer 1,594,660 stock options, respectively (the “2025 Founder Awards”). Each 2025 Founder Award vests in three equal installments beginning on January 1, 2026 and each anniversary thereafter; subject to the founder’s continued employment with the Company, with a five-year exercise window following each vesting date. In connection with the grant of the 2025 Founder Awards, on April 9, 2025, the Board canceled all previously issued stock options to our Chief Executive Officer and our Chief Growth Officer (both vested and unvested).
C.Board Practices
Composition of the Board of Directors
Our business and affairs are managed under the direction of our Board. As of the date of this Report, our Board consists of nine directors. Subject to the terms of the Investor Rights Agreement, our Constitutional Document provides that the number of directors on our Board will be fixed by our Board.
When considering whether directors and director nominees have the experience, qualifications, attributes and skills, taken as a whole, to enable our Board to satisfy its oversight responsibilities effectively in light of its business and structure, our Board focuses primarily on each person’s background and experience in order to provide an appropriate mix of experience and skills relevant to the size and nature of the business.
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Pursuant to our Investor Rights Agreement with Cedarwalk, the Sponsor and CWC Skincare Ltd., the guarantor of Cedarwalk’s obligation thereunder, we have agreed to take all necessary action to cause our Board to be comprised of one director nominated by Cedarwalk for as long as Cedarwalk owns 5% of our then outstanding Ordinary Shares. Mr. Simon Dai has been elected as the initial director nominee of Cedarwalk, and serves as a Class III director. See “Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions” for more information on the Investor Rights Agreement.
Classified Board of Directors
In accordance with the terms of our Constitutional Document, our Board may consist of no less than five, but no more than 15 natural persons, such number to be set by the Board by resolution from time to time. Our Board is divided into classes of directors that will serve staggered three-year terms. At each annual meeting of shareholders, a class of directors will be elected for a three-year term to succeed the same class whose term is then expiring. As a result, only one class of directors will be elected at each annual meeting of our shareholders, with the other classes continuing for the remainder of their respective three-year terms. Following the reassignment of directors to relevant classes at our annual general meeting of shareholders held on January 14, 2026, our Board is divided among the three classes as follows:
•the Class I directors, which are Kelly Brookie, Aaron Chatterley, and Roberto Thompson Motta, and their terms will expire at the annual meeting of shareholders to be held in 2026;
•the Class II directors, which are Juliette Hickman, Hind Sebti, and Cristiano Souza, and their terms will expire at the annual meeting of shareholders to be held in 2027; and
•the Class III directors, which are Michel Brousset, Simon Dai, and Felipe Dutra, and their terms will expire at the annual meeting of shareholders to be held in 2028.
Each director’s term will continue until the election and qualification of his or her successor, or his or her earlier death, resignation or removal. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. This classification of our Board may have the effect of delaying or preventing changes in control of our Company.
Director Independence
As a result of our Class A ordinary shares being listed on Nasdaq, we are required to comply with the applicable rules of the Nasdaq in determining whether a director is independent. We believe that each of Ms. Kelly Brookie, Ms. Juliette Hickman, and Mr. Aaron Chatterley qualifies as “independent” as defined under the applicable Nasdaq Listing Rules.
Foreign Private Issuer Status
For so long as we qualify as a foreign private issuer, we will be exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies, including:
•the sections of the Exchange Act imposing liability for insiders who profit from trades made within a short period of time;
•the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered under the Exchange Act;
•the rules under the Exchange Act requiring the filing with the SEC of an annual report on Form 10-K (although we will file annual reports on a corresponding form for foreign private issuers), quarterly reports on Form 10-Q containing unaudited financial and other specified information (although we will file semi-annual financial information on a current reporting form for foreign private issuers), or current reports on Form 8-K, upon the occurrence of specified significant events; and
•Regulation Fair Disclosure or Regulation FD, which regulates selective disclosure of material non-public information by issuers.
Accordingly, there may be less publicly available information concerning our business, executive compensation and other matters than there would be if we were a U.S. public company. Additionally, certain accommodations in the Nasdaq corporate governance standards allow foreign private issuers, such as us, to follow “home country” corporate governance practices in lieu of the otherwise applicable corporate governance standards. To that end, we have elected to follow our
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home country practices, which do not require us to have a majority of independent directors on our Board. However, we continue to comply with the applicable requirements of the Nasdaq Listing Rules and SEC rules, including with respect to the composition of our Audit and Governance Committee and to our Compensation and Nomination Committee, as further detailed below.
Committees of the Board of Directors
Our Board directs the management of our business and affairs, as provided by Jersey law, and conducts its business through meetings of our Board and standing committees. We have three standing committees: (i) an audit and governance committee (the “Audit and Governance Committee”), (ii) a compensation and nomination committee (the “Compensation and Nomination Committee”) and (iii) a finance committee (the “Finance Committee”).
In addition, from time to time, special committees may be established under the direction of our Board when it deems it necessary or advisable to address specific issues. Copies of the charters for each committee are available on our website, www.waldencast.com, as required by applicable SEC and Nasdaq Listing Rules. The information on or available through our website is not deemed incorporated in this Report and does not form part of this Report.
Ms. Lindsay Pattison and Mr. Zack Werner resigned as directors of the Company prior to the Company’s annual general meeting held on January 14, 2026, during which the Company’s shareholders voted on the renewal of Class III directors. To that extent, the Board consists of 9 members, as detailed in this Report, each of whom possesses significant expertise, particularly in the beauty, financial and consumer products sectors.
Audit and Governance Committee
The Audit and Governance Committee’s responsibilities include, among other things:
•assisting board oversight of (i) the integrity of our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) our independent auditor’s qualifications and independence and (iv) the performance of our internal audit function and independent auditors;
•the appointment, compensation, retention, replacement and oversight of the work of the independent auditors and any other independent registered public accounting firm engaged by us;
•pre-approving all audit and non-audit services to be provided by the independent auditors or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;
•reviewing and discussing with the independent auditors all relationships the auditors have with us in order to evaluate their continued independence;
•monitoring compliance by the independent auditors with the audit partner rotation requirements contained in applicable laws and regulations;
•discuss guidelines and policies governing the process by which senior management of the Company assess and manage the Company’s exposure to risk, as well as the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposures;
•monitoring our compliance with the employee conflict of interest requirements contained in applicable laws and regulations;
•obtaining and reviewing a report from the independent auditors describing (i) all critical accounting policies and practices to be used; (ii) any critical audit matters arising from the current period audit; (iii) all alternative treatments of financial information that have been discussed by the independent auditors and management, ramifications of the use of such alternative disclosures and treatments, and the treatment preferred by the independent auditors; (iv) all other material written communications between the independent auditors and management, such as any management letter and any schedule of unadjusted audit differences; and (v) any material financial arrangements which do not appear on our financial statements;
•reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures on a regular basis;
•obtaining and reviewing a report, at least annually, from our management, attested to by the independent auditors, assessing the effectiveness of our internal control over financial reporting and stating management’s responsibility for establishing and maintaining adequate internal control over financial reporting prior to its inclusion in our Annual Report on Form 20-F or Form 10-K, as applicable;
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•meeting to review and discuss our annual audited financial statements and quarterly financial statements with management and the independent auditor;
•reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction;
•reviewing with our legal advisors, when appropriate, any legal, regulatory matters, including any matters (i) that may have a material impact on our financial statements and (ii) involving potential or ongoing material violations of law or breaches of fiduciary duty by us or any of our directors, officers, employees, or agents or breaches of fiduciary duty to us;
•review and oversight of the Company's cybersecurity risks and the steps that management has taken to protect against threats to the Company's information systems and security;
•establishing procedures for (i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and (ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters;
•reviewing the corporate governance principles adopted by the Board and recommending changes as necessary;
•considering other corporate governance issues as they arise and developing appropriate recommendations;
•periodically reviewing the size of the Board and recommending changes;
•making recommendations on the frequency and structure of Board meetings;
•making recommendations concerning any other aspect of Board procedures;
•recommending to the Board the size and composition of each standing committee;
•monitoring the functioning and effectiveness of the Board committees and recommending any changes, including the creation or elimination of committees;
•reviewing annually committee assignments and the policy on rotation of committee memberships and/or chairpersonships, and reporting any recommendations to the Board; and
•recommending the establishment of special committees by the Board to address ethical, legal, or other matters.
The Audit and Governance Committee consists of Juliette Hickman, Aaron Chatterley, and Kelly Brookie, with Kelly Brookie serving as chair. Our Board has determined that each of the members of the Audit and Governance Committee qualifies as independent under the Nasdaq Listing Rules applicable to members of our Board generally and under the Nasdaq Listing Rules and Exchange Act Rule 10A-3 specific to audit committee members. In addition, our Board has determined that Kelly Brookie and Juliette Hickman both meet the requirements for financial sophistication under the applicable Nasdaq Listing Rules and qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
Compensation and Nomination Committee
The functions of the Compensation and Nomination Committee include, among other things:
•reviewing and approving compensation plans for the Company’s executive officers and recommending to the Board for approval;
•evaluating on an annual basis the performance of the Company’s executive officers, taking into consideration, among other things the short-term and long-term goals and objectives of the Company’s executive compensation plans and determining and approving the remuneration of our executive officers (other than our Chief Executive Officer and our Chief Growth Officer) and recommending to our Board the remuneration of our Chief Executive Officer and our Chief Growth Officer; in each case, based on such evaluations;
•reviewing and making recommendations to our Board with respect to the compensation, and any incentive-compensation and equity-based plans that are subject to the Board’s approval;
•determining and approving any grants of equity awards to be made to eligible participants (other than our Chief Executive Officer and our Chief Growth Officer) and recommending to the Board for approval any equity awards to be made to our Chief Executive Officer and our Chief Growth Officer;
•implementing and administering our incentive compensation and equity-based remuneration plans;
•assisting management in complying with our proxy statement and annual report disclosure requirements and recommending to the Board for approval, if necessary;
•approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;
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•producing a report on executive compensation to be included in our annual report on Form 20-F or Form 10-K, as applicable;
•reviewing and approving the terms of any compensation “clawback” or similar policy or agreement between the Company and our executive officers or other employees, as deemed necessary or as required by applicable law;
•reviewing, evaluating and recommending changes, if appropriate, to the remuneration for non-employee directors;
•assisting in identifying, recruiting, and evaluating Board candidates, establishing procedures for shareholder nominations, and recommending director nominees to the Board based on established criteria and qualifications;
•reviewing the suitability of current directors for continued service;
•reviewing the composition of the Board annually, ensuring the appropriate balance of knowledge, experience, skills, expertise, and compliance with applicable regulatory requirements;
•making recommendations on committee memberships and filling vacancies;
•developing and recommending succession plans for the chief executive officer and senior management positions; and
•overseeing an annual evaluation of the Board and management and reporting on performance and effectiveness, establishing procedures for this evaluation.
The Compensation and Nomination Committee consists of Aaron Chatterley, Kelly Brookie and Juliette Hickman, with Juliette Hickman serving as chair. Our Board has determined that each of the members of the compensation committee meets the independence requirements under Nasdaq and SEC rules. Our Board has determined that each member of this committee will also be a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act.
The composition and function of the Compensation and Nomination Committee complies with all applicable requirements of the Sarbanes-Oxley Act and all applicable SEC rules and regulations. We will comply with future requirements to the extent they become applicable.
Finance Committee
The oversight functions of the Finance Committee include, among other things:
•reviewing the Company’s capital structure and borrowing position to support the Company’s strategic objectives;
•reviewing the annual budget and long range plans, including three-year forecasts and submitting recommendations to the Board;
•reviewing material capital expenditure not included in the annual budget and providing recommendations to the board;
•reviewing and monitoring the Company’s quarterly performance;
•reviewing and monitoring the Company’s treasury management;
•reviewing and monitoring the Company’s mergers and acquisitions process;
•periodically reviewing and assessing the Company’s tax structure and submitting any amendments for recommendation to the Board;
•reviewing material reduction-in-force or layoff’s; and
•assisting the Board and the Company’s management in ensuring that the Company communicates effectively with the financial community.
The Finance Committee consists of Cristiano Souza, Juliette Hickman, Felipe Dutra and, Roberto Thompson Motta, with Cristiano Souza serving as the chair. Our Board has determined that each member of the Finance Committee qualifies for service on the committee.
Compensation and Nomination Committee Interlocks and Insider Participation
None of the members of the Compensation and Nomination Committee is currently, or has been at any time, one of our officers or employees. None of our executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board or compensation committee.
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D.Employees
Information pertaining to Waldencast’s employees is set forth in “Item 4. Information on the Company—4.B. Business Overview” of this Report.
E.Share Ownership
Information pertaining to Waldencast’s share ownership is set forth in “Item 7. Major Shareholders and Related Party Transactions—7.A. Major Shareholders” of this Report.
F.Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation
Not applicable.
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.Major Shareholders
The following table sets forth information regarding the beneficial ownership of Ordinary Shares as of February 27, 2026, by:
•each person known by us to be the beneficial owner of more than 5% of Ordinary Shares;
•each of our directors and executive officers; and
•all our directors and executive officers as a group.
Beneficial ownership is determined according to the rules of the SEC, which generally provide that a person has beneficial ownership of a security if that person possesses sole or shared voting or investment power over that security. A person is also deemed to be a beneficial owner of the securities that such person has a right to acquire within 60 days including, without limitation, through the exercise of any option, warrant or other right or the conversion of any other security. Such securities, however, are deemed to be outstanding only for the purpose of computing the percentage beneficial ownership of that person but are not deemed to be outstanding for the purpose of computing the percentage beneficial ownership of any other person. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities.
As of February 27, 2026, there were 118,239,889 Class A ordinary shares and 10,019,983 Class B ordinary shares issued and outstanding. The number of Class A ordinary shares issued as of the date above has been used for the purposes of the denominator when calculating the beneficial ownership positions in the table below.
Unless otherwise indicated, we believe that all persons named in the table below have sole voting and investment power with respect to all voting shares beneficially owned by them.
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Name and Address of Beneficial Owner(1) | Class A Ordinary Shares | % of Class A Ordinary Shares Outstanding | Class B Ordinary Shares(19) | % of Combined Voting Power(20) | ||||||||||||||||||||||
| 5% Holders | ||||||||||||||||||||||||||
Cedarwalk Skincare Ltd(2) | 28,637,506 | 24.2 | % | — | 22.3 | % | ||||||||||||||||||||
Zeno Investment Master Fund(3) | 17,145,347 | 14.0 | % | — | 12.9 | % | ||||||||||||||||||||
Waldencast Long-Term Capital LLC (the Sponsor)(5) | 12,412,267 | 10.2 | % | — | 9.4 | % | ||||||||||||||||||||
Burwell Mountain Trust(6) | 11,826,110 | 10.0 | % | — | 9.2 | % | ||||||||||||||||||||
Santa Venerina Inv. & Arbitrage Ltd(7) | 10,000,000 | 8.5 | % | — | 7.8 | % | ||||||||||||||||||||
Annapurna Investment Fund Ltd(8) | 7,013,119 | 5.9 | % | — | 5.4 | % | ||||||||||||||||||||
Main Post Growth Capital, L.P.(9) | 6,090,058 | 5.2 | % | — | 4.7 | % | ||||||||||||||||||||
| Directors and Executive Officers | ||||||||||||||||||||||||||
Simon Dai(2) | 28,637,506 | 24.2 | % | — | 22.3 | % | ||||||||||||||||||||
Cristiano Souza(4) | 17,857,430 | 15.1 | % | — | 13.9 | % | ||||||||||||||||||||
Michel Brousset(10) | 7,490,758 | 6.3 | % | — | 5.8 | % | ||||||||||||||||||||
Hind Sebti(11) | 1,038,986 | * | — | * | ||||||||||||||||||||||
Lindsay Pattison(12) | 81,798 | * | — | * | ||||||||||||||||||||||
| Juliette Hickman | 80,952 | * | — | * | ||||||||||||||||||||||
Zack Werner(13) | 76,180 | * | — | * | ||||||||||||||||||||||
Manuel Manfredi | 39,644 | * | — | * | ||||||||||||||||||||||
Aaron Chatterley | 57,453 | * | — | * | ||||||||||||||||||||||
Roberto Thompson Motta(14) | 118,727 | * | — | * | ||||||||||||||||||||||
| Kelly Brookie | 37,454 | * | — | * | ||||||||||||||||||||||
Felipe Dutra(6) | — | — | — | — | ||||||||||||||||||||||
All Waldencast directors and executive officers as a group (12 individuals) | 55,516,888 | 46.7 | % | — | 43.1 | % | ||||||||||||||||||||
*Less than one percent.
1.Unless otherwise noted, the business address for each of those listed in the table above is c/o Waldencast plc, 81 Fulham Rd., London, United Kingdom, SW3 6RD.
2.This information is based on (i) a Schedule 13D filed with the SEC on August 5, 2022, by Cedarwalk Skincare Ltd. (“Cedarwalk”), and (ii) information provided to the Company via written correspondence on March 7, 2025. According to the information provided to the Company on March 7, 2025, Cedarwalk directly holds 28,637,506 Class A ordinary shares, and Simon Dai may be deemed to be the beneficial owner of the 28,637,506 Class A ordinary shares. Mr. Dai’s business address is c/o Cedarwalk Skincare Limited, Rm 3001-3010, 30/F, China Resource Building, 26 Harbour Road, Wanchai, Hong Kong.
3.This information is based solely on a Schedule 13D filed with the SEC on July 31, 2025, by Zeno Equity Partners LLP and without independent investigation of the disclosures contained therein. Zeno Equity Partners beneficially owns 17,145,347 Class A ordinary shares (comprised of 12,252,580 Class A ordinary shares and 4,892,767 Class A ordinary shares issuable upon exercise of the Private Placement Warrants). Zeno Equity Partners LLP, a British limited liability partnership, is the investment manager of Zeno Investment Master Fund. The business address of Zeno Equity Partners LLP and Zeno Investment Master Fund is 272 Kings Road, College House 3rd floor, London SW3 5AW.
4.Cristiano Souza is the controlling shareholder of Zeno Equity Partners LLP, which beneficially owns 17,145,347 Class A ordinary shares (comprised of 12,252,580 Class A ordinary shares and 4,892,767 Class A ordinary shares issuable upon exercise of the Private Placement Warrants). See footnote 3 of this table. Additionally, Cristiano Souza holds a put option allowing him to exchange his equity interest in Waldencast UK Limited for 712,083 Class A ordinary shares held by Waldencast Ventures LP, a direct shareholder of Waldencast.
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5.Reflects securities held directly by Beauty Ventures consisting of (i) 9,309,200 Class A ordinary shares and (ii) 3,103,067 Class A ordinary shares issuable upon exercise of warrants held by Beauty Ventures. Waldencast Long-Term Capital LLC, (the “Sponsor”), is the managing member of Beauty Ventures. The voting and investment power of the Sponsor is exercised jointly by Waldencast Ventures, LP, Burwell Mountain Trust, and Zeno Investment Master Fund (f/k/a Dynamo Master Fund). Waldencast Ventures, LP is controlled by Michel Brousset. Burwell Mountain PTC LLC is the trustee of Burwell Mountain Trust, a non-grantor, fully discretionary dynasty trust duly organized under Wyoming law. See footnote 5 of this table for further details. Zeno Investment Master Fund is controlled by Cristiano Souza. See footnote 3 of this table for further details.
6.This information is based solely on a Schedule 13D filed with the SEC on August 8, 2022, by Burwell Mountain Trust and without independent investigation of the disclosures contained therein. According to this Schedule 13D, Burwell Mountain Trust directly holds 7,848,333 Class A ordinary shares and Private Placement Warrants exercisable for 3,977,777 Class A ordinary shares. Burwell Mountain PTC LLC, as trustee of Burwell Mountain Trust, has the sole voting and dispositive power over the shares held on behalf of the Burwell Mountain Trust, a non-grantor, fully discretionary dynasty trust duly organized under Wyoming law of which Felipe Dutra and his descendants are eligible beneficiaries. Burwell Mountain PTC LLC is an independent trustee over which Mr. Dutra has no control. The business address of each is 270 W. Pearl, Suite 103, Jackson, WY 83001.
7.This information is based solely on a Schedule 13G filed with the SEC on February 1, 2024, by Santa Venerina Inv. & Arbitrage Ltd, and without independent investigation of the disclosures contained therein. Santa Venerina Inv. & Arbitrage Ltd holds 10,000,000 Class A ordinary shares. The business address of Santa Venerina Inv. & Arbitrage Ltd. is East Bay Street, P.O. Box N-7757, Nassau, Bahamas.
8.This information is based solely on a Schedule 13G filed with the SEC on September 4, 2025, by Annapurna Investment Fund Ltd. and without independent investigation of the disclosures contained therein. Securities held directly by Annapurna Investment Fund Ltd consisting of (i) 5,401,986 Class A ordinary shares and (ii) 1,611,133 Class A ordinary shares issuable upon exercise of warrants. Antonio Carlos de Freitas Valle may be deemed to have sole voting and dispositive power over these securities via his interest in Annapurna Investment Fund Ltd. The business address of Annapurna Investment Fund Ltd is Goodman's Bay Corporate Centre, 2nd Floor, P.O. BOX 61567, Nassau, Bahamas.
9.Main Post Growth Management, LLC is the general partner of Main Post Growth Capital, L.P. R. Sean Honey and Jeff Mills may be deemed to have voting and dispositive power over these securities via their interest in Main Post Growth Management, LLC. The business address of Main Post Growth Capital, L.P. is One Embarcadero Center, Suite 3500, San Francisco, CA 94111.
10.Waldencast Ventures, LP holds (i) 2,848,334 Class A ordinary shares, (ii) 1,977,779 Class A ordinary shares issuable upon exercise of the Private Placement Warrants and (iii) 333,334 Class A ordinary shares issuable upon exercise of the Working Capital Loan warrants. Mr. Brousset is the chief executive officer of Waldencast Management, LLC, the general partner of Waldencast Ventures, LP. As such, Mr. Brousset may be deemed to beneficially own the shares held by Waldencast Ventures, LP. Mr. Brousset also holds (i) 862,625 Class A ordinary shares, (ii) 1,378,447 Class A ordinary shares that may be acquired pursuant to vested stock option awards, subject to a per share exercise price of $3.98 and an expiration date of January 1, 2031, and (iii) 90,240 vested RSUs. For more information on the stock options granted to Mr. Brousset in 2025, refer to Item 6. Directors, Senior Management and Employees.
11.Ms. Sebti holds (i) 441,258 Class A ordinary shares, (ii) 531,553 Class A ordinary shares that maybe be acquired pursuant to vested stock option awards, subject to a per share exercise price of $3.98 and an expiration date of January 1, 2031, and (iii) 66,175 vested RSUs. For more information on the stock options granted to Ms. Sebti in 2025, refer to item 6. Directors, Senior Management and Employees.
12.Ms. Pattison resigned from our Board ahead of Waldencast’s annual general meeting held on January 14, 2026 and is no longer a director as of the date of this Report.
13.Mr. Werner resigned from our Board ahead of Waldencast’s annual general meeting held on January 14, 2026 and is no longer a director as of the date of this Report.
14.Mr. Motta holds a total of 118,727 Class A ordinary shares, which include (a) 18,727 Class A shares ordinary shares held directly by him, and (b) 100,000 Class A ordinary shares held by Nexus Limited, which is controlled by his spouse, Amalia Cristina Spinardi Thompson Motta.
15.Class B ordinary shares are non-economic voting shares and may be exchanged, together with an equal amount of Waldencast LP Units, for Class A ordinary shares.
16.Includes both Class A ordinary shares and Class B ordinary shares.
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Based on a review of the information provided to us by our transfer agent, as of February 27, 2026, there were 139 registered holders of our Class A ordinary shares, 104 of which are United States registered holders (including Cede & Co., the nominee of the Depository Trust Company), holding approximately 47.57% of our outstanding Class A ordinary shares; and there were 6 registered holders of our Class B ordinary shares, 5 of which are United States registered holders, holding approximately 72.14% of our outstanding Class B ordinary shares. The number of record holders in the United States is not representative of the number of beneficial holders nor is it representative of where such beneficial holders reside since many of these ordinary shares are held by brokers or other nominees.
B.Related Party Transactions
Waldencast
Private Placement Warrants
Simultaneously with the consummation of our IPO, the Sponsor purchased 5,933,333 private placement warrants at a purchase price of $1.50 per private placement warrant, or $8.9 million in the aggregate. Each private placement warrant entitles the holder to purchase one Class A ordinary share for $11.50 per share. The private placement warrants may not be redeemed by us so long as they are held by the Sponsor or its permitted transferees. If the private placement warrants are held by holders other than the Sponsor or its permitted transferees, the private placement warrants will be redeemable by us and exercisable by the holders on the same basis as the warrants included in the Units that were sold as part of our IPO. The Sponsor, or its permitted transferees, has the option to exercise the private placement warrants on a cashless basis.
The private placement warrants are identical to the warrants included in the Units sold in our IPO, except that the private placement warrants: (i) are not redeemable by us, (ii) may be exercised for cash or on a cashless basis so long as they are held by the Sponsor or any of its permitted transferees and (iii) are entitled to registration rights (including the Class A ordinary shares issuable upon exercise of the private placement warrants). Additionally, the purchasers have agreed not to transfer, assign or sell any of the private placement warrants, including our Class A ordinary shares issuable upon exercise of the private placement warrants (except to certain permitted transferees), until 30 days after the completion of our initial business combination.
In connection with the Business Combination, each of the 5,933,333 private placement warrants converted automatically into a warrant to acquire one Class A ordinary share. The foregoing description of the private placement Warrant Agreement is not complete and is subject to and qualified in its entirety by reference thereto, a copy of which is incorporated by reference as Exhibit 2.2 and Exhibit 2.3 to this Report and the terms of which are incorporated by reference herein.
Legacy Registration Rights
The holders of the sponsor shares and private placement warrants, (and any Class A ordinary shares issuable upon (i) the exercise of the private placement warrants and (ii) the conversion of the sponsor shares) are entitled to registration rights pursuant to a registration rights agreement dated March 15, 2021 (the “Legacy Registration Rights Agreement”) requiring us to register such securities for resale (in the case of the sponsor shares, only after conversion to our Class A ordinary shares). The holders of these securities are entitled to make up to three demands, excluding short form demands, that we register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of the Business Combination and rights to require us to register for resale such securities pursuant to Rule 415 under the Securities Act. We will bear the expenses incurred in connection with the filing of any such registration statements.
We, the Sponsor, the members of the Sponsor and certain of our shareholders, Obagi Medical and Milk Makeup and certain of their respective affiliates entered into an amended and restated registration rights agreement, dated July 27, 2022 (the “2022 Registration Rights Agreement”), pursuant to which we agreed to register for resale, pursuant to Rule 415 under the Securities Act, certain of our Class A ordinary shares and our other securities that are held by the parties thereto from time to time, subject to the restrictions on transfer therein. The 2022 Registration Rights Agreement amended and restated the Legacy Registration Rights Agreement and terminates with respect to any party thereto, on the date that such party no longer holds any registrable securities (as defined therein).
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The foregoing description of the 2022 Registration Rights Agreement and the transactions contemplated thereby is not complete and is subject to and qualified in its entirety by reference thereto, a copy of which is incorporated by reference as Exhibit 4.4 to this Report and the terms of which are incorporated by reference herein.
2023 PIPE Transaction
In September 2023, we entered into the 2023 Subscription Agreements with the 2023 PIPE Investors, pursuant to, and on the terms and subject to the conditions of which, the 2023 PIPE Investors collectively subscribed for 14,000,000 Class A ordinary shares in a private placement at a purchase price of $5.00 each per share, for aggregate gross proceeds of $70.0 million. The 2023 PIPE Investment was anchored by a $50 million investment by a Beauty Ventures stakeholder. The remainder of the 2023 PIPE Investors were certain existing shareholders, certain members of the Sponsor, Mr. Brousset and Ms. Sebti. The 2023 Subscription Agreements relating to approximately $68 million of proceeds was consummated in September 2023, with the closings of 2023 Subscription Agreements relating to the remaining approximately $2 million consummated in November 2023 (the “PIPE Closing Date”).
The 2023 Subscription Agreements provide for certain registration rights pursuant to which Waldencast is required to, as soon as practicable but no later than 60 days following the SEC notice that the post-effective amendment filed in connection with the Company’s Registration Statement on Form F-1, has been declared effective, submit to or file with the SEC a registration statement registering the resale of such shares. Additionally, Waldencast is required to use its commercially reasonable efforts to have the registration statement declared effective as soon as practicable after the filing thereof, but no later than the earlier of (i) the 90th calendar day following the filing date thereof if the SEC notifies us that it will review the registration statement and (ii) the 10th business day after the date we are notified (orally or in writing, whichever is earlier) by the SEC that the registration statement will not be “reviewed” or will not be subject to further review. We must use commercially reasonable efforts to keep the registration statement effective until the earliest of: (i) the date the 2023 PIPE Investors no longer hold any registrable shares, (ii) the date all registrable shares held by the 2023 PIPE Investors may be sold without restriction under Rule 144 under the Securities Act and (iii) two years from the date of effectiveness of the registration statement.
In connection with the 2023 PIPE Investment, we agreed to register for resale, pursuant to Rule 415 under the Securities Act, certain of our Class A ordinary shares and our other securities that are held by the parties thereto from time to time, subject to the restrictions on transfer therein (the “2023 PIPE Registration Rights”). The 2023 PIPE Registration Rights terminate with respect to any party thereto, on the date that such party no longer holds any registrable securities.
The foregoing description of the 2023 Subscription Agreements and the transactions contemplated thereby is not complete and is subject to, and qualified in its entirety by, the full text of the form of 2023 Subscription Agreement, the form of which is attached as Exhibit 4.8 to this Report on Form 20-F and incorporated by reference herein.
Pursuant to the 2022 Registration Rights Agreement and the 2023 Subscription Agreements, we filed a registration statement on Form F-3 with the SEC on June 26, 2024 (File No. 333-280502), which was declared effective on July 5, 2024, to register the resale of securities held by such holders.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. The indemnification agreements provide, to the fullest extent permitted under law, indemnification against all expenses, judgments, fines and amounts paid in settlement relating to, arising out of or resulting from indemnitee’s status as a director, officer, employee, fiduciary or agent of the Company or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity which such person is or was serving at the Company’s request as a director, officer, employee or agent. In addition, the indemnification agreements provide that the Company will advance, to the extent not prohibited by law, the expenses incurred by the indemnitee in connection with any proceeding, and such advancement will be made within thirty (30) days after the receipt by the Company of a statement requesting such advances from time to time, whether prior to or after final disposition of any proceeding. The foregoing description of the indemnification agreements and the transactions contemplated thereby is not complete and is subject to and qualified in its entirety by reference thereto, a copy of the form of indemnification agreement is incorporated by reference as Exhibit 4.6 to this Report and the terms of which are incorporated by reference herein.
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Director Interests
Pursuant to Article 75 of the Jersey Companies Law and the Constitutional Document, any director of the Company who has, directly or indirectly, an interest in a transaction entered into or proposed to be entered into by the Company or by a subsidiary of the Company which to a material extent conflicts or may conflict with the interests of the Company and of which the director is aware, is required to disclose to the Company the nature and extent of the director’s interest.
•Mr. Dutra and his descendants are eligible beneficiaries of Burwell Mountain Trust and should be regarded as interested accordingly in any transaction involving Burwell and its affiliates;
•In February 2021, the Sponsor transferred 20,000 Class B ordinary shares to each of the Company’s then-serving independent directors, Ms. Sarah Brown, Ms. Juliette Hickman, Ms. Lindsay Pattison and Mr. Zack Werner (the “Investor Directors”). Investor Directors and Mr. Chatterley each owns 20,000 Class A ordinary shares and should be regarded as interested accordingly in any transaction involving such Class A ordinary shares;
•Simon Dai was nominated for appointment to our Board by Cedarwalk, pursuant to the Investor Rights Agreement, and should be regarded as interested accordingly in any transaction involving Cedarwalk and its affiliates. Cedarwalk holds 28,637,506 Class A ordinary shares;
•Mr. Brousset is the chief executive officer of Waldencast Management, LLC, the general partner of Waldencast Ventures. Waldencast Ventures holds (a) 2,848,334 Class A ordinary shares; (b) 1,977,779 Class A ordinary shares issuable upon exercise of the Private Placement Warrants; and (c) 333,334 Class A ordinary shares issuable upon exercise of the Working Capital Loan warrants. Mr. Brousset should be regarded as interested accordingly in any transaction involving such Class A ordinary shares, Waldencast Ventures and its affiliates; and
•Mr. Souza is the controlling shareholder of Zeno Equity Partners LLP, the investment manager of Zeno Investment Master Fund. Zeno Investment Master Fund holds (a) 12,252,580 Class A ordinary shares; and (b) 4,892,767 Class A ordinary shares issuable upon exercise of the Private Placement Warrants. Mr. Souza should be regarded as interested accordingly in any transaction involving such Class A ordinary shares, Zeno Investment Master Fund and its affiliates.
As a matter of Jersey law, each director of the Company is under a duty to act honestly and in good faith with a view to acting in the best interests of the Company, regardless of any other directorship such director may hold. Each director is responsible for advising the Board in advance of any potential conflicts of interest.
Obagi Medical
Obagi China Distribution
As a condition under the Obagi Merger Agreement, prior to the Closing Date, Obagi Holdco distributed to Obagi and then Obagi distributed to Cedarwalk all of the issued and outstanding shares of capital stock of Obagi Hong Kong and certain related assets. Prior to the closing of the Business Combination, the Obagi China Business had been conducted through Obagi Hong Kong and its subsidiaries. The following agreements were entered into in connection with the closing of the Business Combination: (a) a Transition Services Agreement, dated as of July 27, 2022, which was deemed to have expired on July 27, 2023, (b) the China IP License Agreement, and (c) the China Supply Agreement.
China IP License Agreement
Under the China IP License Agreement, Obagi Medical exclusively licenses intellectual property relating to the Obagi Medical brand to Obagi Hong Kong with respect to the China Region, and Obagi Medical retains the rights to such intellectual property to conduct the Obagi Medical-branded business worldwide except for the China Region. The license from Obagi to Obagi Hong Kong includes future intellectual property of Obagi Medical relating to the Obagi Medical brand in the worldwide business, including, but not limited to: (i) trademarks; (ii) domain names; (iii) patents; (iv) trade secrets and know-how; (v) copyrights; and (vi) product specifications and formulas.
The license is perpetual, irrevocable, non-transferable and sublicensable, subject to: (x) a limited right of Obagi to terminate for an uncured material breach by Obagi Hong Kong; (y) limited rights of either party to transfer the IP License Agreement without consent of the other party; and (z) a right of Obagi Hong Kong to sublicense to affiliates, Approved CMOs and other approved third parties.
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Under the IP License Agreement, Obagi Hong Kong is required to pay Obagi Medical a royalty of 5.5% of gross sales of licensed products, subject to certain deductions.
As of December 31, 2025, the Company had $1.2 million in related party accounts receivable from the Obagi China Business in the consolidated balance sheet. As of December 31, 2024, the Company had $0.8 million in related party accounts receivable from the Obagi China Business in the consolidated balance sheet.
China Supply Agreement
Pursuant to the China Supply Agreement, Obagi Medical will supply, or cause to be supplied through certain CMOs, products to Obagi Hong Kong and its affiliates, and Obagi Hong Kong may purchase such products for distribution and sale in the China Region (as such term is defined under the agreements). The China Supply Agreement envisaged a transition period during which Obagi Hong Kong would purchase products directly from Obagi Medical. This arrangement was deemed terminated in December 2024 as the Company had fulfilled its contractual obligations related to pricing, at which point the remaining related party liability was amortized and released. The term of the China Supply Agreement is perpetual, subject to termination for uncured material breach or termination in the event that the Intellectual Property License Agreement is terminated.
Upon termination of the Obagi Supply Agreement:
•Obagi Hong Kong will promptly refrain from using the Product Information File, the Specifications and the Confidential Information of Obagi Medical (each as defined in the Supply Agreement);
•Obagi Hong Kong will return to Obagi Medical all documents relating to the Product Information File, Specifications and Confidential Information of Obagi Cosmeceuticals. The relevant costs will be borne by the party who is responsible for the termination or the non-renewal of the Supply Agreement; and
•Unless the Obagi Supply Agreement is terminated by Obagi Hong Kong due to Obagi Medical’s breach of its obligations related to the quality of the products, Obagi Cosmeceuticals will complete the manufacturing of all products covered by firm orders and deliver them to the applicable recipient.
Investor Rights Agreement
In connection with the consummation of the Business Combination, we entered into an Investor Rights Agreement. Pursuant to this agreement, Cedarwalk has the right to nominate one director for election or appointment to the Board for so long as Cedarwalk owns 5% of the then-outstanding common stock of Waldencast, and such appointee was initially Simon Dai. In addition, Waldencast has the right to acquire Obagi Hong Kong in certain circumstances set out in the agreement.
The foregoing description of the Investor Rights Agreement and the transactions contemplated thereby is not complete and is subject to and qualified in its entirety by reference thereto, a copy of which is incorporated by reference as Exhibit 4.7 to this Report and the terms of which are incorporated by reference herein.
Milk Makeup
Milk Makeup subleases from Milk Studios Los Angeles LLC certain space in Los Angeles, CA, on a month-to-month basis. Milk Makeup primarily uses these facilities for corporate offices and as an in-house studio. Milk Makeup also receives certain services from an employee of Milk Studios. During each of the years ended December 31, 2025, December 31, 2024, and December 31, 2023, the Company incurred administrative fees of $0.3 million, in connection with the sublease and services, which is recorded in SG&A expenses in the consolidated statements of operations and comprehensive loss
One of the co-founders of Milk Makeup and a shareholder of the Company, is party to an influencer agreement with Milk Makeup, pursuant to which such co-founder provides certain brand services to Milk Makeup. Milk Makeup incurred $0.1 million in fees pursuant to this agreement during each of the years December 31, 2025, December 31, 2024, and December 31, 2023.
C.Interests of Experts and Counsel
Not applicable.
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ITEM 8. FINANCIAL INFORMATION
Waldencast plc
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID No. | F-2 | ||||
Consolidated Balance Sheets | F-3 | ||||
Consolidated Statements of Operations and Comprehensive Loss | F-4 | ||||
Consolidated Statements of Shareholders’ Equity | F-5 | ||||
Consolidated Statements of Cash Flows | F-6 | ||||
Notes to Consolidated Financial Statements | F-8 | ||||
F-1
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the Board of Directors of Waldencast plc
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Waldencast plc and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations and comprehensive loss, shareholders' equity, and cash flows, for each of the three years in the period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
March 13, 2026
We have served as the Company’s auditor since 2018.
F-2
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WALDENCAST PLC
CONSOLIDATED BALANCE SHEETS
(In thousands of U.S. dollars, except share and per share data)
| December 31, 2025 | December 31, 2024 | ||||||||||
| ASSETS | |||||||||||
| CURRENT ASSETS: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash | |||||||||||
| Accounts receivable, net | |||||||||||
Related party accounts receivable (Note 16) | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Intangible assets, net | |||||||||||
| Goodwill | |||||||||||
| Right-of-use asset, net | |||||||||||
| Other non-current assets | |||||||||||
| TOTAL ASSETS | $ | $ | |||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
| CURRENT LIABILITIES: | |||||||||||
| Accounts payable | $ | $ | |||||||||
Current portion of operating lease liabilities | |||||||||||
Current portion of long-term debt | |||||||||||
Embedded derivative liabilities | |||||||||||
Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Long-term debt, net | |||||||||||
| Derivative warrant liabilities | |||||||||||
Long-term operating lease liabilities | |||||||||||
| Deferred income tax liabilities | |||||||||||
Contingent consideration liabilities | |||||||||||
| Other non-current liabilities | |||||||||||
| TOTAL LIABILITIES | |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 17) | |||||||||||
| SHAREHOLDERS’ EQUITY: | |||||||||||
Preferred shares, | |||||||||||
Class A ordinary shares, $ | |||||||||||
Class B ordinary shares, $ | |||||||||||
| Additional paid-in capital | |||||||||||
Accumulated deficit | ( | ( | |||||||||
Accumulated other comprehensive (loss) income | ( | ||||||||||
| TOTAL CONTROLLING SHAREHOLDERS’ EQUITY | |||||||||||
| Noncontrolling interest | |||||||||||
| TOTAL SHAREHOLDERS' EQUITY | |||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | $ | |||||||||
F-3
See accompanying notes to consolidated financial statements.
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WALDENCAST PLC
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands of U.S. dollars, except share and per share data)
| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||
Net revenue | $ | $ | $ | ||||||||||||||
Cost of goods sold | |||||||||||||||||
| Gross profit | |||||||||||||||||
| Selling, general and administrative | |||||||||||||||||
| Loss on impairment of goodwill | |||||||||||||||||
Gain on sale of trademark | ( | ||||||||||||||||
Loss on acquisition | |||||||||||||||||
| Total operating expenses | |||||||||||||||||
| Operating loss | ( | ( | ( | ||||||||||||||
| Interest expense, net | |||||||||||||||||
Loss on extinguishment of debt (Note 7) | |||||||||||||||||
Change in fair value of derivative liabilities (Note 10) | ( | ( | |||||||||||||||
Change in contingent consideration liabilities (Note 10) | ( | ||||||||||||||||
Other (income) expense, net | ( | ( | |||||||||||||||
| Total other expenses (income), net | ( | ||||||||||||||||
| Loss before income taxes | ( | ( | ( | ||||||||||||||
Income tax (benefit) expense | ( | ( | |||||||||||||||
| Net loss | ( | ( | ( | ||||||||||||||
| Net loss attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
| Net loss attributable to Class A shareholders | $ | ( | $ | ( | $ | ( | |||||||||||
Net loss per share attributable to Class A shareholders (Note 14): | |||||||||||||||||
| Basic and Diluted | $ | ( | $ | ( | $ | ( | |||||||||||
Shares used in computing net loss per share (Note 14): | |||||||||||||||||
| Basic and Diluted | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
Other comprehensive (loss) income — foreign currency translation adjustments, net of tax | ( | ( | |||||||||||||||
| Comprehensive loss | ( | ( | ( | ||||||||||||||
Comprehensive loss attributable to noncontrolling interests | ( | ( | ( | ||||||||||||||
Comprehensive loss attributable to Class A shareholders | $ | ( | $ | ( | $ | ( | |||||||||||
F-4
See accompanying notes to consolidated financial statements.
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| WALDENCAST PLC | ||
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY | ||
| (In thousands of U.S. dollars, except share data) | ||
| Class A Ordinary Shares | Class B Ordinary Shares | Additional Paid-In Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Noncontrolling Interest | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares in connection with the PIPE investment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fees paid in connection with the PIPE | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class B to Class A shares | — | ( | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU taxes paid on behalf of employees | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Distribution to pay withholding taxes | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class B to Class A shares | $ | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | $ | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU taxes paid on behalf of employees | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2024 | $ | $ | $ | $ | ( | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Class B to Class A shares | $ | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | $ | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| RSU taxes paid on behalf of employees | — | — | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock for acquisition | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BALANCE—December 31, 2025 | $ | $ | $ | $ | ( | $ | ( | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
F-5
See accompanying notes to consolidated financial statements.
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WALDENCAST PLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||||||||
Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||||||||
| Stock-based compensation | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Non-cash lease expense | |||||||||||||||||
| Paid-in-kind interest expense | |||||||||||||||||
Provision (recovery) for credit losses | ( | ||||||||||||||||
| Change in fair value of derivative warrant liabilities | ( | ( | |||||||||||||||
| Change in fair value on interest rate collar | |||||||||||||||||
| Change in fair value of contingent consideration liabilities | ( | ||||||||||||||||
Change in fair value of embedded derivative | |||||||||||||||||
| Amortization of debt issuance costs | |||||||||||||||||
Amortization and release of related party liability | ( | ( | |||||||||||||||
| Loss on extinguishment of debt | |||||||||||||||||
| Deferred income taxes | ( | ( | ( | ||||||||||||||
| Loss on impairment of goodwill | |||||||||||||||||
Loss on acquisition | |||||||||||||||||
Gain on sale of trademark | ( | ||||||||||||||||
| Loss on impairment of right of use assets | |||||||||||||||||
Loss on disposal of equipment | |||||||||||||||||
Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ( | ( | ||||||||||||||
| Related party accounts receivable | ( | ||||||||||||||||
| Inventories | ( | ( | |||||||||||||||
| Prepaid expenses | ( | ||||||||||||||||
| Other current assets and other assets | ( | ||||||||||||||||
| Accounts payable | ( | ( | |||||||||||||||
| Related party accounts payable | ( | ( | |||||||||||||||
| Operating lease liabilities | ( | ( | ( | ||||||||||||||
| Other current liabilities and other liabilities | |||||||||||||||||
Net cash used in operating activities | ( | ( | ( | ||||||||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||||||||
| Capital expenditure on intangible assets | ( | ( | ( | ||||||||||||||
| Capital expenditure on property and equipment | ( | ( | ( | ||||||||||||||
| Proceeds from sale of trademark | |||||||||||||||||
| Acquisition of Novaestiq | ( | ||||||||||||||||
Cash received from interest rate collar premium | |||||||||||||||||
Net cash provided by (used in) investing activities | ( | ( | |||||||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||||||||
| Proceeds from PIPE investments | |||||||||||||||||
| Payment of PIPE transaction costs | ( | ||||||||||||||||
| Proceeds from term loan, net of discount | |||||||||||||||||
| Repayment of term loan | ( | ( | ( | ||||||||||||||
| Proceeds from revolving credit facility, net of discount | |||||||||||||||||
| Repayment of revolving credit facility | ( | ( | |||||||||||||||
| Proceeds from note payable | |||||||||||||||||
F-6
See accompanying notes to consolidated financial statements.
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| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||
| Repayment of note payable | ( | ( | ( | ||||||||||||||
| Payment of debt issuance costs | ( | ||||||||||||||||
| Payment of debt termination fees | ( | ||||||||||||||||
| RSU taxes paid on behalf of employees | ( | ( | ( | ||||||||||||||
| Distribution to pay withholding taxes | ( | ||||||||||||||||
Net cash (used in) provided by financing activities | ( | ||||||||||||||||
| CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ||||||||||||||||
| Effect of foreign exchange rates on cash and cash equivalents | ( | ( | ( | ||||||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period | |||||||||||||||||
| CASH, CASH EQUIVALENTS AND RESTRICTED CASH—End of period | $ | $ | $ | ||||||||||||||
| SUPPLEMENTAL CASH FLOW DATA – CASH PAID: | |||||||||||||||||
| Interest | |||||||||||||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES: | |||||||||||||||||
| Non-cash portion of distribution agreement acquired | $ | $ | $ | ||||||||||||||
| Capital expenditures in accounts payable and accruals | |||||||||||||||||
| Shares issued in connection with asset acquisition | |||||||||||||||||
| Initial measurement of contingent considerations | |||||||||||||||||
| Initial measurement of embedded derivatives | |||||||||||||||||
| Accrued but unpaid debt issuance costs | |||||||||||||||||
| Deferred tax liability on acquisition | |||||||||||||||||
Reconciliation of cash, cash equivalents and restricted cash. The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows: | |||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||
| Restricted cash | |||||||||||||||||
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows | $ | $ | $ | ||||||||||||||
F-7
See accompanying notes to consolidated financial statements.
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Waldencast plc NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In U.S. dollars, except share and per share data) | ||
1.ORGANIZATION AND DESCRIPTION OF BUSINESS
Waldencast plc (“Waldencast” or the “Company”), formerly known as Waldencast Acquisition Corp., is a Bailiwick of Jersey (“Jersey”) company. Waldencast was originally incorporated on December 8, 2020, as a Cayman Islands exempted company and a blank check company solely for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On March 18, 2021, Waldencast consummated an initial public offering of 34,500,000 units (the “IPO”), with each unit consisting of one Class A ordinary share and one-third of one redeemable warrant (“Public Warrant”) to acquire one Class A ordinary share (together, a “Unit”), at $10.00 per Unit.
In connection with the Business Combination (as defined below), on July 26, 2022, Waldencast obtained shareholder approval to change its jurisdiction of incorporation. Pursuant to the Cayman Companies Act (the “Cayman Act”) and the Companies (Jersey) Law 1991, as amended (the “Jersey Companies Law”), Waldencast effected a deregistration under the Cayman Act and a domestication under Part 18C of the Jersey Companies Law. This was accomplished by filing a memorandum and articles of association with the Registrar of Companies in Jersey (the “Domestication”). Upon the effective time of the Domestication, Waldencast Acquisition Corp. was renamed Waldencast.
On July 27, 2022 (the “Closing Date”), Waldencast acquired (the “Business Combination”) Obagi Global Holdings Limited, a Cayman Islands exempted company, and its subsidiaries (collectively, “Obagi”) and Milk Makeup LLC, a Delaware limited liability company, and its subsidiaries (collectively “Milk” or “Milk Makeup”). Following the closing of the Business Combination, the Company conducts its business through the following operating and reportable segments: (i) Obagi Medical and (ii) Milk Makeup.
Obagi is a global skincare company that develops, markets, and sells proprietary-topical aesthetic and therapeutic prescription-strength skincare systems and related products primarily in the physician-dispensed market, direct-to-consumer through ecommerce sites and internationally via distributors. Obagi provides cosmetic, over-the-counter and prescription products.
Milk Makeup develops and sells cosmetic, skin care and other beauty products. The brand creates vegan, cruelty-free, clean formulas from its Milk Makeup headquarters in downtown New York City. Milk Makeup’s products are offered through its U.S. website, www.milkmakeup.com, and its retail partners both in the U.S. and internationally.
As a result of the Business Combination, Waldencast is organized as an “Up-C” structure, whereby the equity interests of Obagi Medical and Milk Makeup are held by Waldencast Partners LP (“Waldencast Partners LP”), a Cayman Islands exempted limited partnership and indirect subsidiary of Waldencast, which is an entity that is classified as a partnership for U.S. federal income tax purposes.
Unless the context requires otherwise, the “Company,” “we,” or “our” refers to Waldencast together with its consolidated subsidiaries.
Basis of Presentation
Waldencast has prepared the accompanying consolidated financial statements pursuant to generally accepted accounting principles in the United States (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation—The accompanying consolidated financial statements include the accounts of Waldencast and its consolidated subsidiaries. The Company consolidates entities in which the Company has a majority voting interest. The Company eliminates intercompany transactions and accounts in consolidation. The Company separately presents within equity on the consolidated balance sheets the ownership interests attributable to parties with noncontrolling interests in the Company's consolidated subsidiaries, and separately presents net income attributable to such parties on the consolidated statements of operations and comprehensive loss.
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Emerging Growth Company—Section 102(b)(1) of the Jumpstart Our Business Startups Act of 2012 (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 registration statement declared effective under the Securities Act of 1933, as amended (“Securities Act”), or do not have a class of securities registered under the Exchange Act of 1934, as amended) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth 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, will 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 consolidated financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Segments—An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses and about which separate financial information is regularly evaluated by the Company’s chief operating decision maker (“CODM”) in deciding how to allocate resources. Similar operating segments can be aggregated into a single operating segment if the businesses are similar. Management has determined that, following the Business Combination, the Company has two
Use of Estimates—The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates and assumptions reflected in the consolidated financial statements include, but are not limited to, revenue recognition, fair value measurements, stock-based compensation, goodwill valuation, inventory valuation, and valuation allowance for deferred tax assets. The Company bases its estimates on historical experience and assumptions that it believes are reasonable at the time. Due to the inherent uncertainty involved in making assumptions and estimates, changes in circumstances could result in actual results differing from those estimates, and such differences could be material to the Company’s consolidated balance sheets and consolidated statements of operations and comprehensive loss.
Concentrations of Credit Risk—Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash balances in accounts held by major banks and financial institutions located primarily in the U.S. and considers such risk to be minimal. Such bank deposits may be exposed to credit risk in excess of the Federal Deposit Insurance Corporation insurance limit.
The Company’s accounts receivable primarily represent amounts due from distributors, and third-party logistics companies, directly and indirectly from major retailer located both inside and outside the U.S. The Company mitigates its credit risks by performing ongoing credit evaluations of its customers’ financial conditions, monitoring payment frequency, and requiring customer advance payments in certain circumstances. The Company generally does not require collateral.
As of December 31, 2025, two U.S. customers accounted for 14 % and 12 % of accounts receivable. As of December 31, 2024, one U.S. customer accounts for 33 % of accounts receivable.
During the year ended December 31, 2025, the Company purchased approximately 15 %, 10 %, and 10 % of inventory from three vendors, respectively. During the year ended December 31, 2024, the Company purchased approximately
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As of December 31, 2025, one vendor exceeded 10 % of accounts payable. As of December 31, 2024, no vendor exceeded 10 % of accounts payable.
A significant portion of the Company’s revenue is derived from a limited number of customers. Although accounts receivable from these customers may not be significant at period end due to payment terms, timing of collections, or the use of third-party intermediaries, the Company remains exposed to credit and operating risk associated with this customer concentration. Additional information regarding customers that accounted for a significant portion of the Company’s revenue during the periods presented is included in “Note 4. Revenue.”
Cash and Cash Equivalents—The Company considers highly liquid investments with an initial maturity of three months or less to be cash and cash equivalents.
Restricted Cash—The Company’s restricted cash represents funds that were not accessible for general purpose cash needs due to contractual limitations. As of December 31, 2025, 2024, and 2023, the Company’s restricted cash balances in each year was $1.5 0.7 0.8
Accounts Receivable, Net—Accounts receivable are recorded at the net estimated realizable value and do not bear interest. Accounts receivables are unsecured and represent amounts billed to and currently due from customers. Payment terms are generally short-term in nature and are determined based on the financial stability of the customer. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and estimated future economic and market conditions and periodic evaluation of customers’ receivables balances using relevant available information from internal and external sources relating to past events, current conditions, and forecasts. Historical credit loss experience provides the basis for estimation of expected credit losses and are adjusted as necessary using the relevant information available. The Company writes off accounts receivable balances when it is determined that there is no possibility of collection.
Inventories and Costs of Goods Sold—The Company’s products are produced by third-party contract manufacturers (“CMOs”). Inventories consist of finished goods, work-in-process products and promotional products, valued at the lower of cost or net realizable value using the standard cost method, which approximates actual costs determined on a first-in, first-out (“FIFO”) basis. In order to track inventory quantities, the Company uses a perpetual inventory system. Promotional products are charged to cost of goods sold at the time the product is shipped to the Company’s customer.
The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of historical and anticipated future sales compared with quantities on hand, the price the Company expects to obtain for products in their respective markets compared with historical cost, and the remaining shelf life of goods on hand. Inventory write-downs are charged to cost of goods sold.
In addition to inventory and promotional product costs, cost of goods sold also includes freight and inventory inspection costs, and depreciation and amortization of product-related intangible asset and supply agreements.
Fair Value Measurement—The Company uses valuation approaches that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
•Level 1 inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
•Level 2 inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
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•Level 3 inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The fair value of the warrant liabilities was estimated using inputs based on management’s judgment and conditions that existed at each reporting date. See “Note 10. Fair Value Measurements” for further details.
Derivatives—The Company accounts for derivative instruments in accordance with ASC 815, Derivatives and Hedging (“ASC 815”), which requires additional disclosures about the Company’s objectives and strategies for using derivative instruments, how the derivative instruments and related hedged items are accounted for, and how the derivative instruments and related hedging items affect the consolidated financial statements.
Historically, the Company utilized an interest rate collar to mitigate exposure to variability in cash flows associated with variable-rate debt under its prior credit agreement. The interest rate collar was not designated as a hedging instrument for accounting purposes and changes in fair value were recognized in earnings. The collar arrangement terminated in October 2024, and no derivative contracts related to interest rate collars were outstanding during the year ended December 31, 2025.
Terms of debt instruments are reviewed to determine whether they contain embedded derivative instruments that are required to be accounted for separately from the host contract and recorded on the consolidated balance sheets at fair value under ASC 815.
Warrant Liabilities
The Company accounts for Public Warrants and Private Placement Warrants (each as defined in “Note 9. Financial Instruments”) as liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance. Specifically, the Public and Private Placement Warrants meet the definition of a derivative but do not qualify for an exception from derivative accounting since the warrants are not indexed to the Company’s stock and, therefore, are precluded from equity classification. Since the Public and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company measures the warrants at fair value at inception and at each reporting date, with changes in fair value recognized in change in fair value of derivative warrant liabilities in the consolidated statements of operations and comprehensive loss in the period of change. The Public Warrants are valued using quoted market prices and are classified within Level 1 of the fair value hierarchy, while the Private Placement Warrants are valued using observable inputs and are classified within Level 2 of the fair value hierarchy. See “Note 9. Financial Instruments” for further discussion of the warrants, including the FPA Warrants (as defined therein).
Embedded Derivative Liabilities
Certain provisions of the Company’s debt arrangements, including prepayment, refinancing and premium features, were determined to contain embedded derivative instruments that require bifurcation from the host debt contract under ASC 815. Embedded derivatives are initially recognized at fair value on the issuance date of the related debt instrument and subsequently remeasured at fair value at each reporting date. Such instruments are measured using valuation techniques that incorporate significant unobservable inputs and are generally classified within Level 3 of the fair value hierarchy. Changes in fair value are recognized in earnings within change in fair value of embedded derivatives in the consolidated statements of operations and comprehensive loss. Embedded derivative liabilities are presented within embedded derivative liabilities on the consolidated balance sheets based on the expected timing of settlement. See “Note 10. Fair Value Measurements” and “Note 7. Debt” for additional information.
Contingent Consideration—Contingent consideration arrangements arising from business combinations are recognized at fair value on the acquisition date in accordance with ASC 805, Business Combinations. Contingent consideration may be classified as either a liability or equity depending on the nature of the arrangement and the terms of settlement.
Contingent consideration classified as a liability is remeasured at fair value at each reporting date until the contingency is resolved, with changes in fair value recognized in earnings within change in fair value of contingent consideration liabilities in the consolidated statements of operations and comprehensive loss. Contingent consideration classified as equity is measured at fair value on the acquisition date and is not subsequently remeasured.
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The fair value of contingent consideration is estimated using valuation techniques that incorporate significant unobservable inputs and is classified within Level 3 of the fair value hierarchy. See “Note 10. Fair Value Measurements” and “Note 3. Acquisitions and Strategic Transactions” for additional information.
Prepaid Expenses—Prepaid expenses are recorded at cost and are recognized in the period in which the related goods or services are received or used. These amounts include deposits made to vendors for inventory production and certain advertising production costs, which are reclassified to inventory or expensed when the related inventory is delivered or the advertising occurs. Prepaid balances are assessed regularly and written off when the underlying goods or services are no longer expected to be received or utilized within the normal operating cycle.
Property and Equipment, Net—Property and equipment are stated at cost, net of accumulated depreciation. In the case of a business combination, acquired property and equipment are recognized at their fair value as of the date of acquisition. Following initial recognition, property and equipment are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of respective assets. No depreciation is charged to construction in progress. The estimated useful lives of the Company’s assets are as follows:
| ESTIMATED USEFUL LIVES | |||||
| Computer hardware and software | |||||
| Furniture and fixtures | |||||
| Machinery and equipment | |||||
| Leasehold improvements | Lesser of useful life or term of lease | ||||
The Company capitalizes costs related to (i) internal-use software (ii) cloud computing arrangement (“CCA”) implementation costs, and (iii) other software-related costs (e.g., website development costs). These costs are classified as property and equipment in the accompanying consolidated financial statements and amortized on a straight-line basis over the estimated useful life of three years upon being placed in service.
Expenditures for maintenance and repairs are charged to expense as incurred. When an asset is sold or otherwise disposed of, the cost and associated accumulated depreciation are removed from the accounts and the resulting gain or loss is recognized in the consolidated statements of operations and comprehensive loss.
Intangible Assets, Net—Intangible assets consist primarily of trademarks and trade names, a supply agreement, customer relationships, and formulations. Intangible assets acquired in a business combination are recognized at their fair value as of the date of acquisition. Following initial recognition, intangible assets are carried at cost less accumulated amortization and impairment losses, if any, and are amortized on a straight-line basis over the estimated useful life of the asset to their estimated residual values. The residual value of an intangible asset is generally assumed to be zero, with certain limited exceptions. Finite lived intangible assets are reviewed for impairment when indicators of impairment are present. Indicators of impairment for finite lived intangible assets are the same as those for impairment of long-lived assets. For finite lived intangible assets, an impairment loss is recognized if the carrying amount of the asset exceeds the undiscounted cash flows projected to be generated by the asset. If the finite lived intangible asset is impaired, then the amount of the impairment is calculated as the excess of the asset’s carrying amount over its fair value. After an impairment loss is recognized, the adjusted carrying amount of the intangible asset will be its new accounting basis and the useful life of that asset will be reevaluated.
Goodwill—Goodwill represents the difference between the purchase price and the fair value of assets and liabilities acquired in a business combination. The Company evaluates goodwill for impairment annually on October 1st and at an interim date if events or changes in circumstances indicate the occurrence of a triggering event. The goodwill impairment test is conducted at the reporting unit level. The Company reviews goodwill for impairment by initially considering qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is
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less than its carrying amount, including goodwill, as a basis for determining whether it is necessary to perform a quantitative analysis. If it is determined that it is more likely than not that the fair value of reporting unit is less than its carrying amount, a quantitative analysis is performed to identify goodwill impairment.
The fair value of the Company’s reporting units is determined using a combination of the discounted cash flow method under the income approach and the guideline public company method under the market approach. Fair value estimates result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions that have been deemed reasonable by management as of the measurement date. Under the discounted cash flow method, fair value is determined by discounting the estimated future cash flows of each reporting unit, which includes the Company’s most recent projected long-term financial forecasts for revenue, earnings, capital expenditures, and working capital. The discount rate used is intended to reflect the risks inherent in the future cash flows of the respective reporting unit. Under the guideline public company method, fair value is estimated using market multiples of various financial metrics observed for the reporting unit’s comparable public companies (Level 3).
During the second quarter of 2025, the Company identified indicators of potential impairment for the Obagi Medical and Milk Makeup reporting units. These indicators primarily included updates to the Company’s operating forecasts, reflecting revised expectations for future revenue growth and profitability, as well as changes in market conditions and valuation multiples for comparable companies. Accordingly, the Company performed a qualitative goodwill impairment assessment as of June 30, 2025, which concluded that it was more likely than not that the fair value of each reporting unit was less than its respective carrying amount. As a result, the Company performed quantitative goodwill impairment tests for both reporting units. During the six months ended June 30, 2025, the Company recorded non‑cash goodwill impairment charges of $132.1 million for the Obagi Medical reporting unit and $20.0 million for the Milk Makeup reporting unit.
The Company subsequently performed its annual goodwill impairment analysis using the quantitative approach as of October 1, 2025 for each reporting unit, which indicated that no additional impairment of goodwill existed.
In connection with its annual goodwill impairment analysis using the qualitative approach as of October 1, 2024, the Company identified indicators of potential impairment for the Obagi Medical reporting unit. These indicators included changes in forecasted performance and market conditions affecting valuation assumptions. Accordingly, the Company performed a quantitative goodwill impairment test and recorded an impairment charge of $5.0 million for the Obagi Medical reporting unit during the year ended December 31, 2024.
The qualitative assessment performed for the Milk Makeup reporting unit as of October 1, 2024, did not indicate that the fair value of the reporting unit was less than its carrying amount. Accordingly, no goodwill impairment was recorded, and the goodwill balance for the Milk Makeup reporting unit remained unchanged.
Leases—At the inception of a contractual arrangement, the Company determines whether the contract contains a lease by assessing whether there is an identified asset and whether the contract conveys the right to control the use of the identified asset in exchange for consideration over a period of time. If both criteria are met, the contract contains a lease and upon lease commencement, the Company records a lease liability which represents the Company’s obligation to make lease payments arising from the lease, and a corresponding right-of-use (“ROU”) asset which represents the Company’s right to use an underlying asset during the lease term. Operating lease assets and liabilities are included in right-of-use assets, current portion of lease liabilities and long-term lease liabilities in the accompanying consolidated balance sheets.
ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the underlying asset unless the implicit rate is readily determinable. In determining the incremental borrowing rate, the Company may consider factors such as its estimated credit risk, the term of the lease, the currency in which the lease payments are denominated, and the nature and quality of the underlying leased asset.The incremental borrowing rate, the ROU asset and the lease liability are reevaluated upon a lease modification. ROU assets also include any lease payments made at or before lease commencement and any lease incentives received, if
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any. The Company determines the lease term as the noncancellable period of the lease and may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. The Company’s leases do not contain any residual value guarantees. Leases with a term of 12 months or less are not recognized on the consolidated balance sheets. For operating leases, the Company recognizes rent expense on a straight-line basis over the lease term. There were no significant finance leases as of December 31, 2025.
Long-term Debt—The Company accounts for debt net of debt issuance costs and debt discount. Debt issuance costs and debt discount are capitalized, netted against the related debt for presentation purposes, and amortized to interest expense over the terms of the related debt using the effective interest method.
Revenue Recognition—The Company recognizes revenue when control of the promised goods or services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to for those goods or services. In that determination, under ASC 606 the Company follows a five-step model that includes: (1) determination of whether a contract or an agreement between two or more parties that creates legally enforceable rights and obligations exists; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when (or as) performance obligations are satisfied. Net revenue excludes taxes collected by us on behalf of governmental authorities.
Product Sales
The Company’s revenue is primarily generated from product sales to distributors, retailers, physicians and directly to consumers (“DTC”) via its e-commerce platforms. Distributors may resell products to retailers, physicians, or end consumers. To determine when to recognize revenue under ASC 606 in cases where products are sold to distributors, the Company analyzes various factors including its ability to direct products physically held by the distributors, when title and risk of loss transfers, and who ultimately manages the relationship with the end consumer. The Company does not recognize revenue until control of the products is transferred to the distributor.
The Company has determined that each of its products is distinct and represents a separate performance obligation. The Company does not have any contracts that contain multiple performance obligations. Product sales revenue is recognized net of estimated variable considerations such as volume rebates and discounts, markdowns, margin adjustments, allowances and returns. The Company estimates variable consideration using the expected value method and adjusts the transaction price when control of the related product is transferred to the customer.
The Company’s distributors charge us fees for certain services rendered by them, including packing and shipping, marketing and advertising the Company’s products, monitoring product reviews, regulatory services, providing customer service, and generating data and analytical reports on product sales. Distributor fees for services are recognized as a reduction to revenue because the services provided are not distinct from the distributors’ purchase of products.
Typically, customers are required to pay either in advance or between 30 and 90 days from delivery or invoicing,
The Company has different contracted shipping terms with different customers that dictate the timing of payment, passage of legal title, transfer of physical possession, and when assumption of the risks and rewards occur. For distributors (other than the “Physician Channel Provider”) and retailers, depending on the contract, the Company considers transfer of control to have occurred either once the delivery of the product has occurred or once the product has been picked up from the Company’s designated warehouse/distribution center by the customer’s shipping agent, unless the Company is responsible for shipping the goods, in which case transfer of control passes upon delivery to the customer.
Obagi’s operations in the U.S. heavily depend on a single distributor, referred to as the Physician Channel Provider, which manages sales to healthcare professionals in the physician-dispensed channel as well as retail and spa customers. For DTC sales and sales to physicians through the Physician Channel Provider, control transfers upon shipment to the end consumer or physician.
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Promotional Products
When the Company provides promotional products (e.g., samples and testers) alongside a related saleable product, their cost is recognized in cost of sales at the same time the related product’s revenue is recognized.
Royalties
The Company generates royalty revenue from products in China by Obagi Hong Kong and until November 2025 in Japan through a strategic licensing agreement with Rohto, a Japanese pharmaceutical manufacturer and distributor that sells a series of OTC and cosmetic products under the Obagi Medical brand name in the Japanese retail skincare channels. Under these agreements, the Company provides or provided the local operators with a license of intellectual property and receives a royalty based upon a percentage of net sales of Obagi-branded products sold in the China Region (as defined under the agreements) and Japan. The Company recognizes revenue for the sales-based royalty at the later of when the local operators make sales of the products or when the purchase obligation has been satisfied. See “Note 3. Acquisitions and Strategic Transactions” for more information on a trademark transfer agreement with Rohto.
Costs to Obtain a Contract with a Customer
The Company expenses sales commissions when incurred as the amortization period is one year or less. These costs are recorded within selling, general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.
Contract Balances
Distribution—Costs related to shipping, handling, warehousing and distribution for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, were $5.9 million, $8.7 million, and $6.6 million, respectively. These costs include costs that are incurred in order to get the product from the distribution centers to the end consumer and are included within selling, general and administrative expense (“SG&A”). The Company accounts for shipping and handling activities as fulfillment activities instead of as performance obligations and recognizes these costs as SG&A expenses. Amounts billed to customers for shipping and handling are included in revenue.
Research and Development—Research and development costs are expensed as incurred and included in SG&A expense on the consolidated statements of operations and comprehensive loss.
Stock-Based Compensation—The Company measures the cost of share-based awards granted to eligible employees, directors, and consultants based on the grant-date fair value of the awards in accordance with ASC 718, Compensation—Stock Compensation. The fair value of stock options and similar awards is estimated using option pricing models, which may include the Black-Scholes option pricing model, lattice-based models, or Monte Carlo simulation techniques, depending on the specific terms of the award. These valuation models require the use of assumptions such as expected term, stock price volatility, dividend yield, risk-free interest rate, and expected exercise behavior.
The fair value of restricted stock is equal to the price of the Company’s ordinary shares on the grant date.
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The Company recognizes compensation expense for awards with service conditions on a straight-line basis over the requisite service period, which is generally the vesting period. For awards subject to both service and performance conditions, compensation expense is recognized when achievement of the performance condition is deemed probable and over the remaining requisite service period.
The Company has elected to recognize the effect of forfeitures in the period in which they occur. Share-based awards are classified as equity unless the terms of the award require liability classification or settlement in cash or other assets.
Income Taxes—The Company accounts for income taxes using the asset and liability approach. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid.
The provision for income taxes represents income taxes paid or payable for the current period plus the change in deferred taxes during the period. Deferred taxes result from differences between the financial and tax basis of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The assessment of whether a valuation allowance is required often requires significant judgment including the long-range forecasting of future taxable income and the evaluation of planning initiatives. Adjustments to the deferred tax valuation allowances are made to earnings in the period when such assessments are made. A valuation allowance of $35.1 million was recorded as of December 31, 2025, and $22.5 million was recorded as of December 31, 2024.
The Company accounts for a tax benefit from an uncertain position in the consolidated financial statements only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authority’s widely understood administrative practices and precedents. If the recognition threshold for the tax position is met, the Company records only the portion of the tax benefit that is greater than 50% likely to be realized. As of December 31, 2025, and December 31, 2024, the Company had no
Noncontrolling Interests—Noncontrolling interests represent the portion of Waldencast Partners LP that the Company controls and consolidates but does not own. The Company recognizes each noncontrolling holder’s respective share of the estimated fair value of the net assets at the date of formation or acquisition. Noncontrolling interests are subsequently adjusted for the noncontrolling holder’s share of additional contributions, distributions and their share of the net earnings or losses of each respective consolidated entity. The Company allocates net income or loss to noncontrolling interests based on the weighted average ownership interest during the period. The net loss that is not attributable to the Company is reflected in net loss attributable to noncontrolling interests in the consolidated statements of operations and comprehensive loss. The Company does not recognize a gain or loss on transactions with a consolidated entity in which it does not own 100% of the equity, but the Company reflects the difference in cash received or paid from the noncontrolling interests carrying amount as additional paid-in-capital.
Commitments and Contingencies—In the normal course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters. Liabilities for such contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.
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Recently Adopted Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate). Early adoption is permitted and the Company adopted this Update for annual periods beginning after December 15, 2024. The Company elected prospective application. See “Note 15. Income Tax Benefit.”
Recently Issued Accounting Standards, Not Yet Adopted
In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The guidance provides a practical expedient related to the estimation of expected credit losses on current accounts receivable and current contract assets that arise from transactions accounted for under Topic 606, Revenue from Contracts with Customers by allowing the assumption that current conditions as of the balance sheet date will not change during the remaining life of the asset. ASU 2025-05 is effective for annual reporting periods beginning after December 15, 2025 and interim periods within those annual reporting periods, with early adoption permitted. The Company is in the process of assessing the impact of this ASU on its future consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income – Expense Disaggregation Disclosures. The guidance will require disaggregated disclosures and of certain cost and expense categories presented on the face of the income statement. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026 and interim periods beginning after December 15, 2027, with early adoption permitted. The Company is in the process of assessing the impact of this ASU on its future consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial position, statements of operations, cash flows, and disclosures.
3.ACQUISITIONS AND STRATEGIC TRANSACTIONS
Acquisition of Novaestiq Corp.
On July 22, 2025, the Company acquired 100 % of the equity interests of Novaestiq Corp. (“Novaestiq”), which holds exclusive U.S. distribution rights for certain Saypha® dermal filler products under an amended Market Development Agreement with Croma-Pharma GmbH (“Croma”). The FDA approved the first Saypha® product in September 2025, and commercial launch took place in Q1 2026.
Novaestiq did not meet the definition of a business under ASC 805 because substantially all of the fair value of the acquired set was concentrated in a single identifiable intangible asset representing U.S. distribution rights. Accordingly, the transaction was accounted for as an asset acquisition.
Novaestiq was determined to be a variable interest entity (“VIE”), and identifiable assets and liabilities were recorded at fair value on the acquisition date. No goodwill was recognized.
Consideration
Total consideration included cash payments, settlement of certain pre-existing obligations, contingent equity awards tied to regulatory approval and future sales milestones, and contingent cash reimbursement obligations related to development costs.
Contingent equity consideration includes up to 9,819,000 Class A ordinary shares issuable upon the achievement of specified regulatory and commercial milestones. FDA approval of one of the Saypha® products resulted in the issuance of 3,273,000 shares in September 2025. Two additional share issuances of up to 3,273,000 shares each may be issued
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upon achievement of cumulative net revenue thresholds of $100 million and $200 million, respectively, through June 2031. In addition, the sellers are entitled to ongoing royalties based on future net sales of Saypha® products.
Liability-classified contingent consideration is remeasured at fair value each reporting period (see “Note 10. Fair Value Measurements”), while equity-classified consideration is not subsequently remeasured.
Purchase Price Allocation
The following is a summary of the purchase price calculation:
| (In thousands) | |||||
Cash | $ | ||||
Contingent consideration (Equity classified) | |||||
Contingent cash consideration (Liability classified) | |||||
Contingent share consideration (Liability classified) | |||||
Total consideration | $ | ||||
The allocation of the purchase price was as follows:
| (In thousands) | |||||
Working capital | $ | ( | |||
Deferred tax liability | ( | ||||
Intangible asset - distribution agreement | |||||
Net assets acquired | $ | ||||
Loss on acquisition | |||||
Total purchase price | $ | ||||
The fair value of the acquired distribution agreement was estimated using an income approach, specifically the excess earnings method, based on the expected future cash flows associated with the agreement. The valuation considered projected product sales, expected operating margins, required returns on supporting assets and workforce, and a discount rate reflecting the risks associated with achieving those projections. The acquired distribution rights are recognized as a finite-lived intangible asset and are amortized over its estimated useful life.
A loss of approximately $6.2 million was recognized upon acquisition representing the difference between the fair value of consideration transferred and the fair value of net assets acquired.
Subsequent Milestone Achievement
On September 10, 2025, upon FDA approval of Obagi® Saypha® MagIQ™, 3,273,000 Class A ordinary shares were issued to NVQ Investors Holding, LLC, a Delaware limited liability company (“NVQ Holding”) and Croma, in accordance with the regulatory milestone provisions.
In addition, the Company is subject to a separate 5 % sales-based royalty obligation payable only after cumulative product sales exceed $120.0 million, which will be recognized as expense in the period the related sales occur. This royalty arrangement was not included in the consideration transferred in the asset acquisition and will be accounted for as a period expense when incurred.
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Trademark Transfer Agreement
On November 13, 2025, Obagi entered into transaction with Rohto Pharmaceutical Co., Ltd. (“Rohto”), a global health and beauty company, with respect to the Obagi brand in Japan by entering into a trademark transfer agreement (the “Trademark Transfer Agreement”) and coexistence agreement (the “Trademark Coexistence Agreement”) dated the same date. Under the terms of the Trademark Transfer Agreement, the Company sold, assigned, and irrevocably transferred to Rohto the sole and exclusive ownership of certain specified trademarks related to the “Obagi” brand registered with the Japan Patent Office and World Intellectual Property Organization for Japan (the “Obagi Japan Trademarks”), along with the perpetual license and distribution rights related to such Obagi Japan Trademarks in Japan (collectively, the “Acquired Rights”). This transfer was executed for an aggregate purchase price of $82.5 million. Concurrently with this transfer, the parties mutually terminated certain prior licensing and supply agreements. A gain of $5.7 million was recorded in connection with the transaction and is recorded as gain on sale of trademark in the consolidated statements of operations and comprehensive loss. See “Note 6. Intangible Assets—Net” for the related impact the transaction had on the Company’s intangible assets.
In conjunction with the transfer of the Acquired Rights, the parties entered into a Trademark Coexistence Agreement. This agreement establishes a clear geographic delineation of the markets to ensure that the use and registration of the Obagi Japan Trademarks by Rohto within Japan and by Obagi Cosmeceuticals and its affiliates outside of Japan do not result in consumer confusion. Rohto’s rights are exclusively focused on the Japanese market, while the Company and its affiliates retain all ownership rights to the Obagi brand in all other territories globally.
4.REVENUE
The Company disaggregates its revenue from customers by sales channel, as well as by revenue source and geographic region, based on the location of the end customer, as it believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.
Revenue by Sales Channel
The Company’s revenue is primarily generated from product sales. Direct sales revenue listed in the table below includes (i) sales to physicians through a single authorized wholesale distributor (“Physician Channel Provider”), (ii) DTC sales via the Company’s e-commerce platforms, and (iii) sales directly to retailers. Distributors revenue includes products sold through distributors other than the Physician Channel Provider.
The Physician Channel Provider is an authorized wholesale distributor and service provider for the Company in the U.S. Revenue from sales to physicians and e-commerce customers made through this provider are considered direct sales revenue.
Total revenue by sales channel was as follows for the periods indicated:
| Year ended December 31, 2025 | |||||||||||||||||
| (In thousands) | Obagi Medical | Milk Makeup | Total | ||||||||||||||
| Revenue by Sales Channel | |||||||||||||||||
| Direct sales | $ | $ | $ | ||||||||||||||
| Distributors | |||||||||||||||||
| Net product sales | $ | $ | $ | ||||||||||||||
| Royalties | |||||||||||||||||
| Net revenue | $ | $ | $ | ||||||||||||||
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| Year ended December 31, 2024 | |||||||||||||||||
| (In thousands) | Obagi Medical | Milk Makeup | Total | ||||||||||||||
| Revenue by Sales Channel | |||||||||||||||||
| Direct sales | $ | $ | $ | ||||||||||||||
| Distributors | |||||||||||||||||
| Net product sales | $ | $ | $ | ||||||||||||||
| Royalties | |||||||||||||||||
| Net revenue | $ | $ | $ | ||||||||||||||
| Year ended December 31, 2023 | |||||||||||||||||
| (In thousands) | Obagi Medical | Milk Makeup | Total | ||||||||||||||
| Revenue by Sales Channel | |||||||||||||||||
| Direct sales | $ | $ | $ | ||||||||||||||
| Distributors | |||||||||||||||||
| Net product sales | $ | $ | $ | ||||||||||||||
| Royalties | |||||||||||||||||
| Net revenue | $ | $ | $ | ||||||||||||||
For the year ended December 31, 2025, four customers accounted for 16 %, 16 %, 11 %, and 11 % of the Company’s revenue, respectively. For the year ended December 31, 2024, three customers accounted for 18 %, 17 %, and 10 % of the Company’s revenue, respectively. During the year ended December 31, 2023, two customers accounted for 28 % and 20 % of the Company’s revenue, respectively.
Revenue by Geographic Region
Total revenue by geographic region, based on the location of the end customer, was as follows for the periods indicated:
| (In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Revenue by Geographic Region | |||||||||||||||||
North America1 | $ | $ | $ | ||||||||||||||
| Rest of the World | |||||||||||||||||
| Net product sales | $ | $ | $ | ||||||||||||||
| Royalties | |||||||||||||||||
| Net revenue | $ | $ | $ | ||||||||||||||
During the years ended December 31, 2025, December 31, 2024, and December 31, 2023 only one country, the United States, accounted for more than 10 % of the Company’s total revenues, with net product sales amounting to $204.5 million, $192.6 million, and $145.3 million, respectively.
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5.GOODWILL
Gross goodwill acquired in the Business Combination of its Obagi Medical and Milk Makeup reporting units was $268.3 million and $135.1 million, respectively, prior to cumulative historical impairment charges. The following table presents changes in goodwill by reportable segment:
| (In thousands) | Obagi Medical | Milk Makeup | Total Goodwill | ||||||||||||||
Balance as of December 31, 2023 | $ | $ | $ | ||||||||||||||
| Impairment loss | ( | ( | |||||||||||||||
Balance as of December 31, 2024 | $ | $ | $ | ||||||||||||||
| Impairment loss | ( | ( | $ | ( | |||||||||||||
Balance as of December 31, 2025 | $ | $ | $ | ||||||||||||||
6.INTANGIBLE ASSETS—NET
Intangible assets, net consisted of the following as of December 31, 2025:
| (In thousands) | Weighted Average Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Trademarks and trade name | $ | $ | ( | $ | |||||||||||||||||||
| Customer/distributor relationships | ( | ||||||||||||||||||||||
Tretinoin distribution and supply agreement | ( | ||||||||||||||||||||||
| Formulations | ( | ||||||||||||||||||||||
| Novaestiq distribution agreement | |||||||||||||||||||||||
| Patents | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||||||||
During the year ended December 31, 2025, certain Japan-related “Obagi” trademarks and associated rights were sold and transferred pursuant to the Trademark Transfer Agreement (see “Note 3. Acquisitions and Strategic Transactions”). In connection with the transaction, intangible assets with a net carrying value of approximately $76.8 million were derecognized from the consolidated balance sheets. The Company recognized a gain on sale of $5.7 million, representing the excess of consideration received over the net carrying value of the assets sold, which is included within gain on sale of trademark in the consolidated statements of operations and comprehensive loss.
In addition, the Company acquired a distribution agreement with the fair value amount of $32.6 million in connection with the acquisition noted in Note 3.
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Intangible assets, net consisted of the following as of December 31, 2024:
| (In thousands) | Weighted Average Useful Lives (Years) | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Trademarks and trade name | $ | $ | ( | $ | |||||||||||||||||||
| Customer/distributor relationships | ( | ||||||||||||||||||||||
| Tretinoin distribution and supply agreement | ( | ||||||||||||||||||||||
| Formulations | ( | ||||||||||||||||||||||
| Patents | ( | ||||||||||||||||||||||
| Total | $ | $ | ( | $ | |||||||||||||||||||
Amortization expense for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, was $56.1 million, $56.7 million, and $56.7 million, respectively.
Expected amortization for each of the years between 2026 through 2030, and thereafter are as follows:
(In thousands)
Years ending December 31, | |||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| $ | |||||
7.DEBT
| (In thousands) | Maturity Date | As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||
| Term Loans | November 2028 | $ | $ | ||||||||||||||
| 2022 Term Loan | July 2026 | ||||||||||||||||
| Note Payable | May 2026 | ||||||||||||||||
| 2022 Revolving Credit Facility | July 2026 | ||||||||||||||||
| Unamortized debt discount | ( | ||||||||||||||||
| Unamortized debt issuance costs | ( | ( | |||||||||||||||
| Net carrying amount | $ | $ | |||||||||||||||
Less: Current portion of long-term debt | ( | ( | |||||||||||||||
| Total long-term portion | $ | $ | |||||||||||||||
Amortization of debt issuance costs included in interest expense was $2.4 million, $1.7 million, and $1.6 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Lumina Credit Agreement
On November 14, 2025, the Company together with the Milk Makeup LLC and Obagi Cosmeceuticals LLC, (the “Lumina Borrowers”), entered into a credit agreement with the Lumina Administrative Agent, and the Lenders providing for a secured term loan facility in an aggregate principal amount of $225.0 million comprised of (i) a tranche of Term Loans in an aggregate principal amount of $195.0 million and (ii) a tranche of Term Loans in an aggregate principal amount of $30.0 million.
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On November 17, 2025, the Lenders funded the Term Loans. The Term Loans mature on November 17, 2028, and bear interest at a fixed rate of 14.75 % per annum from the Lumina Closing Date through November 17, 2026. Beginning November 17, 2026, the interest rate increases by 0.25 % for each three-month interval thereafter. The interest is payable in kind in arrears of each three-month interval after the Lumina Closing Date. The Term Loans have no scheduled amortization payments prior to the Maturity Date.
With respect to the Term Loans, certain prepayments prior to the Maturity Date will be subject to a prepayment premium equal to (i) if such prepayment is made on or prior to the Targeted Liquidity Event Date (as defined in the Lumina Credit Agreement), an additional amount, which represents a minimum guaranteed return on the Term Loans and is calculated as a multiple of the principal being repaid, prepaid or accelerated that is 1.20 :1.00, which is reduced to 1.015 :1.00 for certain prepayments, (ii) if such prepayment is made after the Targeted Liquidity Event Date but on or prior to the date that is fifteen months after the Lumina Closing Date, 7.5 % of the aggregate amount of all Term Loans so prepaid, and (iii) if such prepayment is made after the date that is fifteen months after the Lumina Closing Date, 5.00 % of the aggregate amount of all Term Loans so prepaid. Early repayment may require the Company to pay a minimum guaranteed return to lenders with the applicable penalty decreasing over time. These provisions may materially limit the Company’s ability to refinance or repay the Term Loans prior to maturity.
Certain provisions of the Lumina Credit Agreement, including prepayment and premium features associated with early repayment, refinancing or other specified events, were determined to contain embedded derivative features that require separate accounting under ASC 815, Derivatives and Hedging. Accordingly, the Company bifurcated an embedded derivative liability from the host debt instrument at issuance. The embedded derivative liability is recorded within other current liabilities on the consolidated balance sheets and is remeasured at fair value at each reporting date, with changes in fair value recognized in earnings. For the year ended December 31, 2025, the Company recognized a $0.1 million change in fair value related to the embedded derivative liability, which is included in change in fair value of derivative liabilities in the consolidated statements of operations and comprehensive loss. See “Note 10. Fair Value Measurements” for additional information regarding the valuation methodology and significant assumptions used to measure the embedded derivative liability.
Additionally, the Lumina Credit Agreement requires the Company, the Lumina Borrowers and their subsidiaries to comply with a financial covenant to maintain a maximum Total Leverage Ratio (as defined in the Lumina Credit Agreement) of 6.50 to 1.00 with steps down over time to 2.50 to 1.00, which commences on the Targeted Liquidity Date.
The Lumina Credit Agreement contains (i) customary representations and warranties, (ii) affirmative covenants including, among other things, with respect to the (A) under certain circumstances, providing the Lenders with the right to appoint an investment bank to effect a Liquidity Event (as defined in the Lumina Credit Agreement), (B) appointment of an authorized representative by the Lenders that hold more than 50 % of the outstanding Tranche B Term Loans which representative is entitled to attend (but not entitled to vote at) (x) each meeting of the Company’s Board and (y) each meeting of the Lumina Borrowers’ or certain of their subsidiaries’ boards of directors on which another member of the Company’s Board serves as a director, and (C) issuance of certain warrants to the Lenders that hold Term Tranche B Loans to purchase up to 1,000 ordinary shares of the Company per $1,000 principal amount of Term Tranche B Loans then outstanding on or prior to July 1, 2026, so long as any Term Tranche B Loans are then outstanding, (iii) negative covenants including, among other things, limitations on the Lumina Parent Guarantor to engage in any material business activities and limitations on the ability of the Lumina Borrowers, the Lumina Parent Guarantor and certain of their subsidiaries to incur indebtedness, create liens, make investments, enter into mergers, consolidations and other similar transactions, dispose of assets, declare dividends, enter into certain transactions with their affiliates, enter into sale and leaseback transactions, change in nature of business, amend organization documents, change in accounting policies and financial reporting practices and prepay or amend the terms of junior debt and (iv) events of defaults, including, among other things, nonpayment, misrepresentation, cross-default with other indebtedness and breach of certain covenants.
In connection with the Lumina Credit Agreement, if any portion of the Term Tranche B Loans are outstanding as of such date, the Company shall issue to the holder of Term Tranche B Loans, on a pro rata basis, warrants to purchase 1,000 ordinary shares of the Company per $1,000 principal amount of the Term Tranche B Loans on July 1, 2026. Under the terms of the warrant, the exercise price per ordinary share is the lower of (i) 80 % of the volume‑weighted average price (“VWAP”) of the Company’s ordinary shares over the 30 ‑trading‑day period beginning on the trading day immediately preceding the Initial Exercise Date, and (ii) the fixed exercise price applicable to the Holder’s
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conversion period. In all cases, the exercise price may not be less than $0.50 . The obligation to issue the warrants is automatically cancelled upon full repayment of all obligations under the Tranche B Loans.
Management evaluated the potential issuance of warrants in connection with the accounting assessment of the Lumina Credit Agreement. Based on management’s assessment that the probability of warrant issuance was remote, the fair value attributable to the contingent warrant feature was determined to be de minimis and did not have a significant impact on the embedded derivative liability recognized under ASC 815. See “Note 10 — Fair Value Measurements” for additional information.
In November 2025, the Company paid down $76.4 million of Tranche A Loans with the proceeds from the sale of Obagi Japan Trademarks to Rohto.
In connection with the issuance of the Lumina Credit Agreement, the Company incurred $3.5 million of debt issuance costs. As of December 31, 2025, the Company had unpaid principal of $151.3 million and unamortized debt issuance costs of $3.4 million. As of December 31, 2025, the effective interest rate was 19.1 %. Interest of $2.7 million was capitalized to the outstanding principal balance as payment-in-kind (“PIK”) interest as of December 31, 2025.
Scheduled maturities under the Company’s Lumina Credit Agreement and the Note Payable as of December 31, 2025, are as follows:
(In thousands)
| Year Ending December 31, | Amount | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Total unpaid principal | $ | ||||
TCW Credit Agreement
On March 18, 2025, the Company and certain subsidiaries entered into a credit agreement with TCW Asset Management Company, LLC providing for a $175.0 million first-lien term loan facility and a $30.0 million revolving credit facility. The Company borrowed $175.0 million under the term loan facility on March 18, 2025, and borrowings under the TCW Credit Agreement bore interest at variable rates based on either an alternate base rate or term SOFR plus an applicable margin. The Company utilized the full revolving credit facility of $30.0 million during the period. Subsequently, the Company entered into certain limited consents, amendments and letter agreements that modified certain covenants and pricing terms and provided temporary covenant relief.
In November 2025, the Company fully repaid and extinguished all obligations under the TCW Credit Agreement. Upon extinguishment, all outstanding borrowings were settled and the remaining unamortized debt issuance costs were written off and recognized as a loss on extinguishment of debt within the consolidated statements of operations and comprehensive loss. Accordingly, no amounts were outstanding under the TCW Credit Agreement as of December 31, 2025. The loss on extinguishment of debt recognized during the year ended December 31, 2025 was $22.3 million.
JPM 2022 Credit Agreement
In June 2022, the Company entered into a senior secured credit agreement providing for a $175.0 million term loan facility and a revolving credit facility of up to $45.0 million with JPMorgan Chase Bank, N.A. as administrative agent (the “JPM 2022 Credit Agreement”). Borrowings under the facility bore interest at variable rates based on either an alternate base rate or a term benchmark rate plus an applicable margin. In connection with entering into the agreement, the Company incurred approximately $6.3 million of debt issuance costs.
In March 2025, the Company fully repaid and extinguished all outstanding obligations under the JPM 2022 Credit Agreement in connection with entering into the TCW Credit Agreement. Upon extinguishment, all related commitments were terminated and the remaining unamortized debt issuance costs were written off and recognized as a
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loss on extinguishment of debt of $2.1 million in the consolidated statements of operations and comprehensive loss. Accordingly, no amounts were outstanding under the JPM 2022 Credit Agreement as of December 31, 2025.
As of December 31, 2024, the weighted-average interest rate on borrowings under the JPM 2022 Credit Agreement was approximately 8.7 %. The current portion of outstanding borrowings totaled $30.3 million and accrued interest was $1.4 million as of December 31, 2024.
Note Payable — Directors and Officers (“D&O”) Insurance
In August 2025, the Company entered into an agreement with a financing company for $1.5 million to finance its D&O insurance policy. The terms of the agreement stipulated equal monthly payments of principal and interest payments of $0.2 million over a ten-month period, ending in May 2026. Interest is accrued on this loan at an annual rate of 8.25 %. A similar facility entered into in July 2024 was fully repaid during fiscal year 2025.
8.LEASES
The Company has operating leases for real estate properties for office and warehouse spaces with initial terms between approximately 1 and 11 years. Some of the Company’s lease contracts include options to extend the leases for up to 5 years. Our lease agreements generally do not contain any residual value guarantees or restrictive covenants.
The Company’s lease expenses of $3.8 million, $3.7 million and $3.5 million during the years ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively, were composed of operating lease costs. The Company does not have any finance leases, short-term lease costs or variable lease costs.
Supplemental cash flow information related to the Company’s operating leases was as follows:
(In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | $ | |||||||||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | $ | $ | |||||||||||||||||
| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||||||
| Weighted-average remaining lease term | ||||||||||||||||||||
| Weighted-average discount rate | ||||||||||||||||||||
Reconciliation of the undiscounted future minimum lease payments under non-cancelable operating leases to the total operating lease liability recognized on the consolidated balance sheet as of December 31, 2025 was as follows:
(In thousands) | Amount | ||||
| 2026 | $ | ||||
| 2027 | |||||
| 2028 | |||||
| 2029 | |||||
| 2030 | |||||
| Thereafter | |||||
| Total future minimum lease payments | $ | ||||
Less: Imputed interest | ( | ||||
| Total reported lease liability | $ | ||||
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Texas Leases
In December 2021 and July 2022, Obagi entered into a lease for a warehouse and office space, respectively, in Texas. The warehouse and office space leases will expire in 2032 and 2033, respectively.
The warehouse space was never made operational and in 2023, the Company actively began marketing the space for sublease. The Company entered into a sublease for the warehouse space that will run through February 2032 with annual rent of $0.3 million. The sublease does not contain a provision for early termination or extension at the end of the lease. As a result, the Company recorded an impairment charge of $0.8 million during the year ended December 31, 2023 which was the excess of the carrying value of the associated lease right-of-use asset over its fair value.
In September 2023, Obagi vacated the Texas office space and relocated its headquarters to California, and actively began marketing the space for sublease. The Company entered into a sublease for the office space that ran through December 2025 with annual rent of $0.4 million. The sublease did not contain a provision for early termination or extension at the end of the lease. As a result, the Company recorded an impairment charge of $2.7 million during the year ended December 31, 2023 which was the excess of the carrying value of the associated office lease right-of-use asset over its fair value. The Company has been actively marketing the vacant space for sublease.
The Company estimated the fair values using discounted cash flows from the estimated net sublease rental income as of the date the decision to sublease was made. The impairment charges are included in selling, general and administrative expense in the consolidated statements of operations and comprehensive loss.
9.FINANCIAL INSTRUMENTS
Warrant Liabilities
Pursuant to Waldencast’s IPO, the Company issued 11,499,950 Public Warrants to third-party investors. Simultaneously with the closing of the IPO, Waldencast completed the private sale of 5,933,333 warrants (the “Sponsor Warrants”) to the Sponsor. Also, in connection with the IPO, on February 22, 2021, Waldencast, the Sponsor and Zeno Investment Master Fund (f/k/a Dynamo Master Fund), a member of the Sponsor (“Zeno”), entered into a Forward Purchase Agreement (the “Sponsor FPA”), which was subsequently amended by the assignment and assumption agreement entered into by and between the Sponsor and Burwell Mountain Trust (“Burwell”) on December 20, 2021. Under the assignment and assumption agreement, Sponsor assigned, and Burwell assumed, all of the Sponsor’s rights and benefits under the Sponsor FPA, pursuant to which, Burwell and Zeno committed to subscribe for and purchase 16,000,000 Class A ordinary shares and 5,333,333 warrants (the “Sponsor FPA Warrants”) in connection with the closing of the Business Combination. In addition, Waldencast and Beauty Ventures LLC (“Beauty Ventures”) entered into a Forward Purchase Agreement on March 1, 2021 (the “Third-Party FPA”, and together with the Sponsor FPA, the “FPAs”), pursuant to which Beauty Ventures committed to subscribe for and purchase up to 17,300,000 Class A ordinary shares and 5,766,666 warrants (the “Third-Party FPA Warrants” and together with the Sponsor FPA Warrants, the “FPA Warrants”) for an aggregate commitment amount of $173.0 million, in connection with the closing of Waldencast’s initial business combination. Finally, in connection with the Business Combination, Waldencast issued 1,000,000 warrants to settle $1.5 million working capital loans with its Sponsor, the terms of which are identical to the Sponsor FPA Warrants (the “Sponsor Loan Warrants”). The Sponsor Loan Warrants and Third-Party FPA Warrants are collectively referred to as the “Private Placement Warrants.”
As of December 31, 2025, all of the above-noted warrants, totaling 29,533,182 , remained issued and outstanding. The Company recognized a gain of $3.8 million, a gain of $23.6 million, and a loss of $10.3 million from the change in fair value of the Public Warrants and Private Placement Warrants in the Company’s consolidated statements of operations and comprehensive loss during the years ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively.
Following the Domestication, Public Warrants and Private Placement Warrants each entitle the holder to purchase one share of the Company’s Class A ordinary shares at an exercise price of $11.50 per share. Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued and only whole warrants can trade. The Public Warrants became exercisable 30 days after the completion of the Business Combination. The Public Warrants will expire June 27, 2027, or earlier upon redemption or liquidation.
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The Company may redeem the Public Warrants:
–in whole and not in part;
–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, based on the redemption date and the “fair market value” of the Class A ordinary shares;
–at a price of $0.01 per warrant 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);
–at a price of $0.01 per warrant if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted); and
–if the Reference Value is less than $18.00 per share (as adjusted), the Private Placement Warrants must also be concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.
The exercise price and number of Class A ordinary shares issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of ordinary shares at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants.
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10.FAIR VALUE MEASUREMENTS
Liabilities Measured at Fair Value on a Recurring Basis
The following tables present information by year about the Company’s financial instruments that are measured at fair value on a recurring basis, by level, within the fair value hierarchy:
As of December 31, 2025 | |||||||||||||||||||||||
($ in thousands) | Total | Quoted Prices in Active Market | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Derivative warrant liabilities - Public | |||||||||||||||||||||||
| Derivative warrant liabilities - Private | |||||||||||||||||||||||
Contingent consideration liabilities | |||||||||||||||||||||||
Embedded derivatives | |||||||||||||||||||||||
As of December 31, 2024 | |||||||||||||||||||||||
($ in thousands) | Total | Quoted Prices in Active Market | Significant Other Observable Inputs | Significant Other Unobservable Inputs | |||||||||||||||||||
| (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Derivative warrant liabilities - Public | |||||||||||||||||||||||
| Derivative warrant liabilities - Private | |||||||||||||||||||||||
The Company did not transfer any assets or liabilities measured at fair value on a recurring basis between levels during the year ended December 31, 2025.
Private derivative warrants are classified as Level 2 financial instruments. The fair value of the Level 2 Private Placement Warrant liabilities has been measured based on the fair value of Public Warrant liabilities.
The Company determines the fair value of the contingent consideration liabilities based on Level 3 inputs using the Monte-Carlo method. Significant unobservable input assumptions that can significantly change the fair value include the projected amount and timing of the net sales of Saypha® products, the net sales volatility and the discount rate. During the year ended December 31, 2025, the Company utilized net sales volatility of 24.0 % and discount rate of 17.0 %. Significant increases or decreases in the net sales volatility, discount rate, and to the projected net revenues would result in a significantly lower or higher fair value measurement, which could materially impact the fair value reported on the consolidated balance sheet.
The Company determines the fair value of the embedded derivatives based on Level 3 inputs using a probability weighted value analysis. Significant unobservable input assumptions that can significantly change the fair value include the amount and timing of related debt repayments and the probability outcome percentage assigned to each scenario. Significant increases or decreases in the amount and timing of related debt repayments and the probability outcome percentage assigned to each scenario would result in a significantly lower or higher fair value measurement, which could materially impact the fair value reported on the consolidated balance sheet.
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The following tables summarize the change of all liabilities measured at estimated fair value on a recurring basis using significant unobservable inputs (Level 3):
| (In thousands) | Contingent Consideration | Embedded Derivatives | |||||||||
Liabilities: | |||||||||||
Balance at January 1, 2025 | $ | $ | |||||||||
Additions | |||||||||||
Settlements | ( | ||||||||||
Change in fair value | ( | ||||||||||
Balance at December 31, 2025 | $ | $ | |||||||||
Other Financial Assets and Liabilities
11.SUPPLEMENTAL BALANCE SHEET DISCLOSURES
Accounts Receivable, Net
As of December 31, 2025, accounts receivable, net consisted of gross accounts receivable of $28.2 million, less allowance for credit losses of $0.2 million. As of December 31, 2024, accounts receivable, net consisted of gross accounts receivable of $25.6 million, less allowance for credit losses of $0.1 million.
Changes in the allowance for credit losses were as follows:
| (In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Balance at beginning of period | $ | $ | $ | ||||||||||||||
Provision (recovery) for credit losses | ( | ||||||||||||||||
| Write-off of uncollectible accounts, net | ( | ( | |||||||||||||||
| Balance at end of period | $ | $ | $ | ||||||||||||||
Inventories
The components of inventories were as follows:
| (In thousands) | As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||||||||||||
| Work in process | $ | $ | ||||||||||||||||||||||||
| Finished goods | ||||||||||||||||||||||||||
| Total inventories | $ | $ | ||||||||||||||||||||||||
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Property and Equipment, Net
Property and equipment, net consisted of the following:
| (In thousands) | As of December 31, 2025 | As of December 31, 2024 | |||||||||||||||||||||
| Computer hardware, software and equipment | $ | $ | |||||||||||||||||||||
| Furniture and fixture | |||||||||||||||||||||||
| Machinery and equipment | |||||||||||||||||||||||
| Internally developed software | |||||||||||||||||||||||
| Construction in process | |||||||||||||||||||||||
| Leasehold improvements | |||||||||||||||||||||||
| Total property and equipment | $ | $ | |||||||||||||||||||||
| Less accumulated depreciation | ( | ( | |||||||||||||||||||||
| Property and equipment, net | $ | $ | |||||||||||||||||||||
Depreciation expense for property and equipment for the years ended December 31, 2025, December 31, 2024, and December 31, 2023, were $3.1 million, $3.3 million, and $3.8 million, respectively.
Depreciation expense pertains to property and equipment utilized as part of the Company’s SG&A activities and therefore has not been allocated to cost of goods sold.
Other Current Liabilities
The major components of other current liabilities consisted of the following:
| (In thousands) | As of December 31, 2025 | As of December 31, 2024 | |||||||||||||||||||||
| Accrued salaries and related expenses | $ | $ | |||||||||||||||||||||
| Accrued sales returns and damages | |||||||||||||||||||||||
Accrued interest(1) | |||||||||||||||||||||||
| Accrued professional services | |||||||||||||||||||||||
Accrued freight | ( | ||||||||||||||||||||||
| Income taxes payable | |||||||||||||||||||||||
Other taxes | ( | ||||||||||||||||||||||
| Other | |||||||||||||||||||||||
| Total | $ | $ | |||||||||||||||||||||
(1) Under the Lumina Credit Agreement, accrued interest is PIK and increases the principal balance of the Term Loan rather than paid in cash. As a result, no accrued interest is recorded in other current liabilities as of December 31, 2025.
12.STOCK-BASED COMPENSATION
Incentive Award Plan
The Company’s 2022 Incentive Award Plan (the “2022 Plan”) provides for incentives to be provided to selected officers, employees, non-employee directors and consultants of the Company in the form of options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses or other stock-based awards granted under the 2022 Plan. All shares reserved for issuance under the 2022 Plan may be granted as incentive stock options. The 2022 Plan became effective on July 27, 2022, in connection with the closing of the Business Combination.
The notional maximum number of ordinary shares authorized under the 2022 Plan for the fiscal year ended December 31, 2025 was 26,704,741 (the “Share Reserve”). The Share Reserve automatically increases on January 1st of each calendar year by 3 % of the total ordinary shares then issued and outstanding, or such lesser amount as determined by the Board. In December 2025, the plan administrator determined that the Share Reserve under the 2022 Plan would not
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be increased for January 1, 2026. As of December 31, 2025, taking into account previous grants and forfeitures, the Company had 11,509,249 ordinary shares remaining available for future issuances under the 2022 Plan.
Inducement Plan
Under the 2022 Inducement Plan, we may grant Restricted Stock Units (“RSUs”), Performance Stock Units (“PSUs”), non-qualified options, Stock Appreciation Rights (“SARs”), other stock-based awards (valued in whole or in part by reference to, or otherwise based on our ordinary shares, including dividend equivalents) and bonuses payable in fully vested ordinary shares to individuals who satisfy the standards for inducement grants under Rule 5635(c)(4) of the Nasdaq Listing Rules and the related guidance issued thereunder.
As of December 31, 2025, the notional maximum number of Class A ordinary shares authorized for issuance under the 2022 Inducement Plan was 950,000 , subject to adjustment for changes in capitalization as provided under the 2022 Inducement Plan.
Founder Replacement Options
On April 9, 2025, the Board approved the cancellation of all previously issued founder stock options (both vested and unvested) and the grant of replacement stock options (the “2025 Founder Awards”) to the Company’s Chief Executive Officer and Chief Growth Officer. The replacement awards were issued pursuant to the 2022 Plan and represent a modification of the original awards in accordance with ASC 718.
A total of 5,730,000 stock options were granted, consisting of 4,135,340 options to the Chief Executive Officer and 1,594,660 options to the Chief Growth Officer, each with an exercise price of $3.98 per share. The awards vest in three equal installments beginning on January 1, 2026, and each anniversary thereafter, subject to continued service, and expire five years after each vesting date.
The Company determined the grant date and service inception date to be April 9, 2025. The fair value of the replacement options was estimated on the grant date using the Black-Scholes-Merton option pricing model. Significant assumptions used in the valuation included an expected term ranging from 3.85 to 5.58 years, expected volatility ranging from 67.5 % to 70.0 %, risk-free interest rates ranging from 3.97 % to 4.10 %, and an expected dividend yield of 0.0%. Expected exercise behavior was reflected in the determination of the expected term based on historical experience and peer-group data.
The cancellation and concurrent replacement of the original awards was accounted for as a modification under ASC 718. Compensation expense reflects the remaining unrecognized cost of the original awards together with any incremental fair value of the replacement awards and is recognized on a straight-line basis over the revised requisite service period.
Restricted Stock Units
There were no RSU grants made for the year December 31, 2023.
In 2024, the Company granted an aggregate of 3,828,878 RSU incentive awards to employees and non employees of the Company, generally vesting over one to three years. Some portion vested immediately with the balance vesting annually. Of these awards, 312,830 were granted to the Founders. Also in 2024, the Company granted an aggregate of 319,471 RSUs to directors, typically vesting immediately or over one to three years.
A grant of 50,000 RSUs was made for the year ended December 31, 2025, to an employee, vesting over three years.
Strategic Growth Incentive
In 2024, the Company granted an aggregate of 2,557,119 strategic growth incentive 2027 awards in performance vested share units to certain Company employees, in an amount up to 200 % of the target share units allocated to the program, which are based on meeting the Company’s Net Revenue and earnings before interest, taxes, depreciation, and amortizations (“EBITDA”) targets for the year ended December 31, 2027. These awards had a grant date fair
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value per share ranging between $2.88 and $6.48 . Some of the awards require a one-year post vesting holding period once the shares have been awarded.
In 2023, the Company granted an aggregate of 2,290,000 strategic growth incentive 2025 awards in performance vested share units to certain Company employees, in an amount up to 200 % of the target share units allocated to the program, which are based on meeting the Company’s net revenue and EBITDA targets for the year ended December 31, 2025. These awards had a grant date fair value per share of $8.88 and require a one-year post vesting holding period once the shares have been awarded. Given the Company’s performance for the year ended December 31, 2025, the Board determined that the targets were not met and accordingly, such awards were cancelled.
Restricted stock activity for the year ended December 31, 2025, was as follows:
| Shares | Weighted Average Grant Date Fair Value per Share | ||||||||||
Outstanding as of December 31, 2024 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | ( | ||||||||||
Outstanding as of December 31, 2025 | $ | ||||||||||
Stock option activity for the year ended December 31, 2025, was as follows:
| Number of Common Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in years) | Aggregate intrinsic Value (in thousands) | ||||||||||||||||||||
Balance as of December 31, 2024 | $ | $ | |||||||||||||||||||||
| Granted | — | ||||||||||||||||||||||
| Exercised | — | — | |||||||||||||||||||||
Modified | ( | — | — | ||||||||||||||||||||
| Forfeited | ( | — | — | ||||||||||||||||||||
Balance as of December 31, 2025 | |||||||||||||||||||||||
Exercisable as of December 31, 2025 | |||||||||||||||||||||||
Vested and expected to vest as of December 31, 2025 | $ | $ | |||||||||||||||||||||
The weighted average grant date fair value of stock options granted during the year ended December 31, 2025 was $1.30 per option. There were no stock options granted in 2024 or 2023.
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13. SHAREHOLDERS’ EQUITY
Share Capital
Under the Company’s Memorandum of Association (the “Constitutional Document”), its authorized share capital consists of 1,000,000,000 Class A ordinary shares, 100,000,000 Class B ordinary shares and 25,000,000 Preferred Shares, each having a par value of $0.0001 118,217,630 and 10,019,983 Class A and Class B ordinary shares, respectively, issued and outstanding. The Company did no
Each Class A ordinary share is entitled to one vote per share. The Company can, at the discretion of its Board, declare dividends and distributions out of the funds of the Company lawfully available therefor. In the event of a voluntary or involuntary liquidation or wind-up, assets available for distribution among the holders of Class A ordinary shares will be distributed on a pro rata basis.
Each Class B ordinary share is entitled to one vote per share and will vote together with holders of Class A ordinary shares as a single class. Class B ordinary shares are non-economic shares that are not entitled to dividends. Upon a liquidation, dissolution or winding up of the Company, the holders of Class B ordinary shares will not be entitled to receive any assets of the Company, except to the extent of the par value of their shares, pro rata with the distributions that are shared with the Class A ordinary shares.
Class B ordinary shares were issued by the Company to the Milk Members in connection with the Business Combination, giving rise to noncontrolling interest in the Company’s controlled subsidiary, Waldencast Partners LP. Holders of Class B ordinary shares also hold a corresponding number of Waldencast LP partnership units in Waldencast Partners LP. The Constitutional Document prohibits issuances of additional shares of Class B ordinary shares, unless issued to a noncontrolling interest in connection with the Company’s Up-C structure. Each Class B ordinary share, together with one corresponding Waldencast LP partnership unit, may be exchanged for one Class A ordinary share at the option of the holder. If such option is exercised, the exchanged Class B ordinary share will automatically be surrendered and retired for no consideration and the corresponding Waldencast LP partnership unit will be redeemed or exchanged by Waldencast Partners LP. If the Company issues or redeems Class B ordinary shares, Waldencast Partners LP is obligated to issue or redeem a corresponding number of Waldencast LP partnership units, such that the number of issued and outstanding partnership units at any time will correspond and be equivalent to the then number of issued and outstanding Class B ordinary shares.
14. NET LOSS PER SHARE
The Company uses the weighted average ownership percentages during the period to calculate the net loss per share attributable to public shareholders and the noncontrolling interest holders. The following table sets forth the computation of basic and diluted net loss using the treasury stock method:
| (In thousands, except for share and per share amounts) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Numerator: | |||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | |||||||||||
| Net loss attributable to noncontrolling interest | ( | ( | ( | ||||||||||||||
| Net loss attributed to Class A shareholders - basic and diluted EPS | ( | ( | ( | ||||||||||||||
| Denominator: | |||||||||||||||||
| Weighted-average basic shares outstanding | |||||||||||||||||
| Effect of dilutive securities | |||||||||||||||||
| Weighted-average diluted shares | |||||||||||||||||
| Basic and diluted net loss per share | $ | ( | $ | ( | $ | ( | |||||||||||
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The following table represents potential ordinary shares outstanding that were excluded from the computation of diluted net loss per share because their effect would have been anti-dilutive:
| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||
| Warrants | |||||||||||||||||
| Stock options | |||||||||||||||||
| Restricted stock | |||||||||||||||||
| Total | |||||||||||||||||
15. INCOME TAX BENEFIT
The Company, incorporated in the Bailiwick of Jersey migrated its place of residence on October 29, 2024. It was tax resident in the Bailiwick of Jersey prior to this date, resident in the United Kingdom in the period thereafter, and subject to taxation in the U.S. and various states jurisdictions throughout. ASC Topic 740, Income Taxes (“ASC 740”) indicates that the federal statutory income tax rate of a foreign reporting entity be used when preparing the rate reconciliation disclosure. As such, the Company and its wholly-owned subsidiaries use the statutory income tax rate in the Bailiwick of Jersey and the Cayman Islands of 0 % through October 29, 2024, and the statutory income tax rate in the United Kingdom for the period thereafter of 25.0 %.
The Company’s consolidated pretax (loss) income for the periods presented were generated by domestic and foreign operations as follows:
| (In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
(Loss) income before income taxes: | |||||||||||||||||
| United States | $ | ( | $ | $ | ( | ||||||||||||
| Foreign | ( | ( | ( | ||||||||||||||
| Total | $ | ( | $ | ( | $ | ( | |||||||||||
The provision for income taxes for the periods presented consisted of the following:
| (In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
Current: | |||||||||||||||||
| Federal | $ | $ | $ | ||||||||||||||
State and local | ( | ||||||||||||||||
| Foreign | |||||||||||||||||
Total current tax expense | |||||||||||||||||
Deferred: | |||||||||||||||||
| Federal | ( | ( | ( | ||||||||||||||
State and local | ( | ( | |||||||||||||||
| Foreign | ( | ||||||||||||||||
Total deferred tax expense: | ( | ( | ( | ||||||||||||||
| Federal | ( | ( | |||||||||||||||
State and local | ( | ( | |||||||||||||||
| Foreign | |||||||||||||||||
| Net income tax (benefit) provision | $ | ( | $ | $ | ( | ||||||||||||
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For the year ended December 31, 2025, the income tax provision (benefit) related to continuing operations differs from the amounts computed by applying the statutory income tax rate of 25% to loss before income tax. The reconciliation, presented in accordance with ASU 2023-09, is as follows:
| Year ended December 31, 2025 | ||||||||
| Income tax benefit of the United Kingdom | % | |||||||
| Change in Valuation Allowance | ( | % | ||||||
| Nondeductible Items | ||||||||
| Goodwill impairment | ( | % | ||||||
Non-deductible loss | ( | % | ||||||
| Other | ||||||||
| Tax effect of eliminations | ( | % | ||||||
| Foreign Tax Effects | ||||||||
| Cayman Islands | ( | % | ||||||
United States | ( | % | ||||||
| United States withholding tax | ( | % | ||||||
| Other foreign jurisdictions | % | |||||||
| Total | % | |||||||
For the years ended December 31, 2024 and December 31, 2023, income taxes differed from the amounts computed by applying the indicated current U.S. federal income tax rate to pretax losses from operations as a result of the following:
| Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||
| Income tax benefit at Bailiwick of Jersey/United Kingdom for Successor and Income tax benefit at Cayman Islands for Predecessor statutory rate | % | % | |||||||||
| U.S./foreign tax rate differential | % | % | |||||||||
| State income tax benefit, net of federal benefit | % | % | |||||||||
| Permanent Items | % | ( | % | ||||||||
| Noncontrolling interest | ( | %) | ( | %) | |||||||
| Change in valuation allowance | ( | %) | ( | %) | |||||||
| True-Ups | ( | % | % | ||||||||
| Equity Compensation | % | % | |||||||||
| Withholding tax | ( | % | % | ||||||||
| Goodwill impairment | % | % | |||||||||
| Total income tax (benefit) expense | ( | % | % | ||||||||
As of each reporting date, the Company considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2025, a valuation allowance of $35.1 million has been provided for predominantly on the deferred tax assets related to the Company’s investment in Waldencast Partners LP. If or when recognized, the tax benefits related to any reversal of valuation allowance will be accounted for as a reduction of income tax expense. A valuation allowance of $22.5 million was recorded as of December 31, 2024.
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
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The tax effects of temporary differences that give rise to portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and December 31, 2024 are presented below:
| (In thousands) | As of December 31, 2025 | As of December 31, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Inventory reserve | $ | $ | |||||||||
Net operating losses | |||||||||||
| Non-deductible interest carryover | |||||||||||
| Accruals and other temporary differences | |||||||||||
Goodwill | |||||||||||
| Investment in Waldencast LP | |||||||||||
| Total deferred tax assets | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed asset basis | ( | ( | |||||||||
| Other temporary differences | ( | ( | |||||||||
| Total deferred tax liabilities | ( | ( | |||||||||
| Less: valuation allowance | ( | ( | |||||||||
Net deferred taxes | $ | ( | $ | ( | |||||||
The Company revised the presentation of certain deferred tax assets by aggregating previously separate components within the deferred tax footnote. This reclassification had no impact on total deferred tax assets, the net deferred tax position, income tax expense, or any amounts previously reported.
Net operating losses and tax credit carryforwards as of December 31, 2025 and December 31, 2024 were as follows:
As of December 31, 2025 | As of December 31, 2024 | ||||||||||||||||||||||
| (In thousands) | Amount | Expiration Year | Amount | Expiration Year | |||||||||||||||||||
Net operating losses, federal (Post December 31, 2017) | $ | Do not expire | $ | Do not expire | |||||||||||||||||||
| Net operating losses, state | 2039 - 2045 | 2039 - 2045 | |||||||||||||||||||||
| Tax Credits, federal | 2039 - 2041 | 2039 - 2041 | |||||||||||||||||||||
| Tax Credits, state | Do not expire | Do not expire | |||||||||||||||||||||
Pursuant to Sections 382 and 383 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), annual use of the Company’s net operating losses (“NOLs”) and research and development (“R&D”) credit carryforwards may be limited in the event that a cumulative change in ownership of more than 50.0% occurs within a three-year period. The Company has not undergone an analysis to determine whether this limitation would apply to the utilization of the NOL carryforward. However, as the federal NOLs do not expire, the Company does not believe that any potential limitations to federal or state NOLs, or federal credit carryforwards, if applicable, would be material to the financial statements.
The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits, and uncertain income tax positions must meet a more likely than not recognition threshold to be recognized. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the consolidated statements of operations and comprehensive loss. There were no such unrecognized tax benefits as of December 31, 2025 or December 31, 2024. The Company does not expect material changes to its unrecognized tax benefits for the twelve month period following the reporting date.
As of December 31, 2025, there were no active taxing authority examinations in any of the Company's major tax jurisdictions other than in relation to Obagi Cosmeceuticals LLC for the 2021 tax year. There have been no findings or
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adjustments related to this open tax examination. The Company remains subject to examination for federal and state income tax purposes for the tax years ending 2020 through 2025.
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes various provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. While the OBBBA did not have a significant impact on the Company’s total tax provision as of December 2025, the Company is still evaluating the Company’s position on the elective provisions of the law and the potential impacts of those elections on the consolidated financial statements.
The cash paid for income taxes (net of refunds) during the year was as follows:
(In thousands) | Year ended December 31, 2025 | |||||||
United States State and Local Taxes | $ | |||||||
Other | ||||||||
| Foreign Taxes | ||||||||
| Singapore | ||||||||
| Total | $ | |||||||
In relation to United States State and Local Taxes, income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
| (In thousands) | Year ended December 31, 2025 | |||||||
California | $ | |||||||
| Massachusetts | ||||||||
New York | ||||||||
New York City | ||||||||
South Carolina | ||||||||
Tennessee | ||||||||
Texas | ||||||||
Total United States State and Local Taxes | $ | |||||||
No single jurisdiction or state included in Other represents 5% or more of total cash paid for income taxes (net of refunds) for any period presented. Accordingly, these amounts have been aggregated and presented within their respective categories.
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16. RELATED PARTY TRANSACTIONS
Waldencast
2023 Subscription Agreement with PIPE Investors
In September 2023, the Company entered into subscription agreements (the “2023 Subscription Agreements”) with certain investors (collectively, the “2023 PIPE Investors”), pursuant to, and on the terms and subject to the conditions of which, the 2023 PIPE Investors collectively subscribed for 14,000,000 Class A ordinary shares (the “PIPE Shares”), in a private placement at a purchase price of $5.00 each per share, for aggregate gross proceeds of $70.0 million (the “2023 PIPE Investment”). The 2023 Subscription Agreements relating to approximately $68.0 million of proceeds were consummated in September 2023, with the remaining approximately $2.0 million of proceeds related to the closing of the 2023 Subscription Agreements in November 2023, following receipt of regulatory approvals (the “2023 PIPE Closings” and the date on which such Closing occurred, the “PIPE Closing Date”). No Class B ordinary shares, warrants or other securities of the Company were issued in connection with the 2023 PIPE Investment.
In connection with the 2023 PIPE Investment, the Company agreed to register for resale, pursuant to Rule 415 under the Securities Act, certain of our Class A ordinary shares that are held by the parties thereto from time to time, subject to the restrictions on transfer therein (the “2023 PIPE Registration Rights”). The 2023 PIPE Registration Rights terminate with respect to any party thereto, on the date that such party no longer holds any Registrable Securities (as defined therein).
Indemnification Agreements
The Company enters into indemnification agreements with its directors, executive officers, and certain employees in the normal course of business. The indemnification agreements provide, to the fullest extent permitted under law, indemnification against all expenses, judgments, fines and amounts paid in settlement relating to, arising out of or resulting from an indemnitee’s status as a director, officer, employee, fiduciary or agent of the Company or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity which such person is or was serving at the Company’s request as a director, officer, employee or agent. During the year ended December 31, 2025, the total benefit received by the Company in connection with the indemnification agreements was $0.2 million, primarily due to the receipt of insurance reimbursement amounts that were higher than the estimated receivables initially recorded in the prior fiscal year. During the year ended December 31, 2024, the total expense related to the indemnification agreements was $4.6 million.
Transactions with Cedarwalk in Connection with the Business Combination
Immediately prior to the closing of the Business Combination, Obagi carved out and distributed all of the outstanding shares of its subsidiary, Obagi Hong Kong Limited (“Obagi Hong Kong”), to its shareholder, Cedarwalk Skincare Ltd. (“Cedarwalk”) (the “Obagi China Distribution”). All sales of Obagi products in the People’s Republic of China, inclusive of the Hong Kong Special Administrative Region, the Macau Special Administrative Region, and Taiwan (the “China Region”) prior to the Business Combination had been conducted through Obagi Hong Kong and its subsidiaries (the “Obagi China Business”), which were not acquired by Waldencast in the Business Combination.
In connection with the Obagi China Distribution, the Company entered into an Intellectual Property License Agreement (the “IP License Agreement”), a Global Supply Services Agreement (the “Supply Agreement”), and a Transition Services Agreement (the “Transition Services Agreement”) with Obagi Hong Kong, which is owned by Cedarwalk, the former owner of Obagi and a beneficial holder of 24.5 % of the Company’s fully diluted Class A ordinary shares as of the closing of the Business Combination.
Under the IP License Agreement, the Company exclusively licenses intellectual property relating to the Obagi brand to the Obagi China Business, and the Company retains the rights to such intellectual property to conduct the Obagi-branded business worldwide except for the China Region. The Obagi China Business pays the Company a royalty on gross sales of licensed products. The IP License Agreement is perpetual subject to certain conditions.
Under the Supply Agreement, the Company supplies or causes to be supplied through certain Obagi CMOs products for distribution and sale in the China Region by the Obagi China Business. The term of the Supply Agreement is perpetual, subject to termination for material breach and failure to cure or termination in the event that the IP License
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Agreement is terminated. The Company anticipates it will continue supplying the Obagi China Business with products until the Obagi China Business is added to Obagi’s CMO agreements, at which time it will then order directly from the CMOs.
During the year ended December 31, 2025, there was no 2.8 million and the related cost of goods sold was $0.8 million. During the year ended December 31, 2023, net revenue generated from supplying products to the Obagi China Business was $5.6 million and the related cost of goods sold was $1.7 million.
As of December 31, 2025, the Company had $1.2 million in related party accounts receivable from the Obagi China Business in the consolidated balance sheet. As of December 31, 2024, the Company had $0.8 million in related party accounts receivable from the Obagi China Business in the consolidated balance sheet.
Under the Transition Services Agreement, which expired on July 27, 2023, the Company provided Obagi Hong Kong and its affiliates certain transition services to enable them to conduct the Obagi China Business as a going concern in the China Region. The transition services were provided for an initial term of up to twelve (12) months, with an option to extend the service, which was not exercised. The Company earned no revenue under the agreement as the contractual threshold amount was not reached prior to expiration.
Milk Makeup
Milk Makeup subleases from Milk Studios Los Angeles LLC certain space in Los Angeles, CA on a month-to-month basis. Milk Makeup primarily uses these facilities for corporate offices and as an in-house studio. Milk Makeup also receives certain services from an employee of Milk Studios. During each of the years ended December 31, 2025, December 31, 2024, and December 31, 2023, the Company incurred administrative fees of $0.3
17. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
The Company is and may in the future become subject to legal proceedings, investigations, such as the SEC investigation described below, and claims, including claims that arise in the ordinary course of business, such as claims by customers, claims or investigations brought by regulators, IP infringement claims or employment claims made by our current or former employees and independent contractors. Management evaluates these matters on an ongoing basis and records accruals for loss contingencies when required. While management does not currently expect known matters to have a material adverse effect on the Company’s business, results of operations, liquidity, or financial condition, the outcome of legal proceedings is inherently uncertain, and an unfavorable resolution could have a material impact in a particular reporting period. The Company maintains insurance coverage that may provide coverage for certain losses and related legal costs.
SEC Investigation
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18. SEGMENT REPORTING
The Company reports segment information based on the management approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of our reportable segments. The Company determined that it has two
Obagi Medical - this segment consists of the business of Obagi. Obagi’s business activities include developing, marketing, and selling skin health products. These assets and activities are conducted by Obagi Global Holdings Limited and its wholly-owned subsidiaries.
Milk Makeup - this segment consists of the business of Milk. Milk’s business activities include developing, marketing, and selling cosmetics, skincare, and other beauty products. Milk generates revenue from the sale of cosmetics to retailers, including off-price retailers, and sales DTC via its website.
The accounting policies of the segments are the same as those described in “Note 2. Summary of Significant Accounting Policies.”
The Company's chief operating decision maker (“CODM”) is its Chief Executive Officer, who utilizes adjusted gross profit as the financial measure for assessing the performance of each segment. The CODM evaluates each segment's performance by comparing the current period's adjusted gross margin to those of prior periods and allocates resources based on the adjusted gross margin.
The following table includes segment revenue and significant segments expenses:
| Year ended December 31, 2025 | Year ended December 31, 2024 | ||||||||||||||||||||||||||||||||||
| (In thousands) | Obagi Medical | Milk Makeup | Total | Obagi Medical | Milk Makeup | Total | |||||||||||||||||||||||||||||
Net revenue | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Adjusted cost of goods sold(1) | ( | ( | $ | ( | ( | ( | $ | ( | |||||||||||||||||||||||||||
Adjusted gross profit | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
(1) Adjusted gross cost of goods sold excludes the fair value of the related party liability for the unfavorable discount to Obagi China Business as part of the Business Combination, the advanced purchase of specific products for the market in Vietnam sold through the SA Distributor that became obsolete when the contract was terminated, and the Supply Agreement and Formulations intangible assets amortized to cost of goods sold.
| Year ended December 31, 2023 | |||||||||||||||||
| (In thousands) | Obagi Medical | Milk Makeup | Total | ||||||||||||||
Net revenue | $ | $ | $ | ||||||||||||||
Adjusted cost of goods sold(1) | ( | ( | $ | ( | |||||||||||||
Adjusted gross profit | $ | $ | $ | ||||||||||||||
(1) Adjusted gross cost of goods sold excludes the fair value of the related party liability for the unfavorable discount to Obagi China Business as part of the Business Combination, the amortization of the inventory fair value step-up as a result of the Business Combination, and the Supply Agreement and Formulations intangible assets amortized to cost of goods sold.
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The following table reconciles total consolidated adjusted gross profit to consolidated net loss before and after income taxes:
| (In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
| Adjusted gross profit | $ | $ | $ | ||||||||||||||
Amortization of the fair value of the related party liability(1) | ( | ( | |||||||||||||||
Discontinued product write-off(2) | |||||||||||||||||
Amortization of the inventory fair value adjustment(3) | |||||||||||||||||
Amortization impact of intangible assets(4) | |||||||||||||||||
| Selling, general and administrative | |||||||||||||||||
| Loss on impairment of goodwill | |||||||||||||||||
| Interest expense, net | |||||||||||||||||
Loss on extinguishment of debt | |||||||||||||||||
Gain on sale of trademark | ( | ||||||||||||||||
Loss on acquisition | |||||||||||||||||
Change in fair value of derivative liabilities | ( | ( | |||||||||||||||
Change in contingent consideration liabilities | ( | ||||||||||||||||
| Other expenses (income), net | ( | ( | |||||||||||||||
| Loss before income taxes | $ | ( | $ | ( | $ | ( | |||||||||||
(1) Relates to the fair value of the related party liability for the unfavorable discount to Obagi China Business as part of the Business Combination.
(2) Relates to the advance purchase of specific products for the market in Vietnam sold through the SA Distributor that became obsolete when the contract was terminated.
(3) Relates to the amortization of the inventory fair value step-up as a result of the Business Combination.
(4) The Supply Agreement and Formulations intangible assets are amortized to cost of goods sold.
The Company does not evaluate performance or allocate resources based on segment asset data, and therefore such information is not presented. All of the Company’s long-lived assets are located in the U.S.
19. EMPLOYEE BENEFIT PLAN
The Company sponsors a Section 401(k) retirement plan and pension plans for employees in the U.S. and the United Kingdom. During the year ended December 31, 2025, the year ended December 31, 2024, and the year ended December 31, 2023 the Company’s contributions to the plan were $1.2 million, $1.3 million, and $1.2 million, respectively.
20. SUBSEQUENT EVENTS
Amendment to the Lumina Credit Agreement
On March 9, the Lumina Borrowers entered into the First Amendment to the Lumina Credit Agreement, with the Lumina Administrative Agent and the lenders named therein, whereby the Borrowers, among other things, suspended the date to commence the financial covenant to December 31, 2026.
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ITEM 9. THE OFFER AND LISTING
A.Offer and Listing Details
Nasdaq Listing of Waldencast Plc Class A Ordinary Shares and Waldencast Plc Warrants
Waldencast Class A ordinary shares and Waldencast Warrants are listed on Nasdaq under the symbols “WALD” and “WALDW,” respectively. Holders of Waldencast Class A ordinary shares and Waldencast Warrants should obtain current market quotations for their securities.
B.Plan of Distribution
Not applicable.
C.Markets
Waldencast Class A ordinary shares and Waldencast Warrants are listed on Nasdaq under the symbols “WALD” and “WALDW,” respectively.
D.Selling Shareholders
Not applicable.
E.Dilution
Not applicable.
F.Expenses of the Issue
Not applicable.
ITEM 10. ADDITIONAL INFORMATION
A.Share Capital
Not applicable.
B.Memorandum and Articles of Association
The Memorandum and Articles of Association of the Company were amended by the shareholders’ special resolutions passed on October 28, 2024 and are incorporated by reference in this Report as Exhibit 1.1.
C.Material Contracts
Material Contracts Relating to Waldencast Plc’s Operations
Lumina Credit Agreement
On November 14, 2025, the Company, along with its indirect wholly-owned subsidiaries, the Lumina Borrowers, entered into the Lumina Credit Agreement with the Lumina Administrative Agent and the Lenders. The Lumina Credit Agreement provides for the Term Loans comprised of (i) a tranche of Term Loans in an aggregate principal amount of $195.0 million and (ii) a tranche of Term Loans in an aggregate principal amount of $30.0 million. On the Lumina Closing Date, the Lenders funded the Term Loans. The proceeds of the Term Loans were used to (i) repay in full all outstanding amount under, and terminate, the TCW Credit Agreement, (ii) pay fees and expenses relating to certain transactions contemplated by the Lumina Credit Agreement, and (iii) fund working capital and for general corporate purposes. The Term Loans mature on the Maturity Date and bear interest at an initial fixed rate of 14.75% per annum from the Lumina Closing Date until November 17, 2026, and the interest rate will increase by 0.25% for each three-month interval thereafter. The interest
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is payable in kind in arrears of each three-month interval after the Lumina Closing Date. The Term Loans have no scheduled amortization payments prior to the Maturity Date.
With respect to the Term Loans, certain prepayments prior to the Maturity Date will be subject to a prepayment premium equal to (i) if such prepayment is made on or prior to the Targeted Liquidity Event Date (as defined in the Lumina Credit Agreement), an additional amount, which represents a minimum guaranteed return on the Term Loans and is calculated as a multiple of the principal being repaid, prepaid or accelerated that is 1.20:1.00, which is reduced to 1.015:1.00 for certain prepayments, (ii) if such prepayment is made after the Targeted Liquidity Event Date but on or prior to the date that is fifteen months after the Lumina Closing Date, 7.5% of the aggregate amount of all Term Loans so prepaid, and (iii) if such prepayment is made after the date that is fifteen months after the Lumina Closing Date, 5.00% of the aggregate amount of all Term Loans so prepaid. Obligations under the Lumina Credit Agreement are (i) secured by a first priority lien on substantially all of the assets of the Lumina Borrowers and Obagi Holdings, and (ii) guaranteed by the Lumina Borrowers, Lumina Parent Guarantor and Obagi Holdings, in each case, subject to customary exceptions and limitations.
The Lumina Credit Agreement contains (i) customary representations and warranties, (ii) affirmative covenants including, among other things, with respect to the (A) under certain circumstances, providing the Lenders with the right to appoint an investment bank to effect a Liquidity Event (as defined in the Lumina Credit Agreement), (B) appointment of an authorized representative by the Lenders that hold more than 50% of the outstanding Tranche B Term Loans which representative is entitled to attend (but not entitled to vote at) (x) each meeting of the Company’s Board and (y) each meeting of the Lumina Borrowers’ or certain of their subsidiaries’ boards of directors on which another member of the Company’s Board serves as a director, and (C) issuance of certain warrants to the Lenders that hold Term Tranche B Loans to purchase up to 1,000 ordinary shares of the Company per $1,000 principal amount of Term Tranche B Loans then outstanding on or prior to July 1, 2026, so long as any Term Tranche B Loans are then outstanding, (iii) negative covenants including, among other things, limitations on the Lumina Parent Guarantor to engage in any material business activities and limitations on the ability of the Lumina Borrowers, the Lumina Parent Guarantor and certain of their subsidiaries to incur indebtedness, create liens, make investments, enter into mergers, consolidations and other similar transactions, dispose of assets, declare dividends, enter into certain transactions with their affiliates, enter into sale and leaseback transactions, change in nature of business, amend organization documents, change in accounting policies and financial reporting practices and prepay or amend the terms of junior debt and (iv) events of defaults, including, among other things, nonpayment, misrepresentation, cross-default with other indebtedness and breach of certain covenants.
Additionally, the Lumina Credit Agreement requires the Company, the Lumina Borrowers and their subsidiaries to comply with a financial covenant to maintain a maximum Total Leverage Ratio (as defined in the Lumina Credit Agreement) of 6.50 to 1.00 with steps down over time to 2.50 to 1.00, which commences on the Targeted Liquidity Date. On March 9, the Lumina Borrowers entered into the First Amendment to the Lumina Credit Agreement, with the Lumina Administrative Agent and the lenders named therein, whereby the Borrowers, among other things, suspended the date to commence the financial covenant to December 31, 2026.
TCW Credit Agreement
On March 18, 2025, the Company along with Milk Makeup and Obagi Cosmeceuticals entered into the TCW Credit Agreement, which provided for a secured first lien (i) term loan facility in an aggregate principal amount of $175.0 million and (ii) revolving loan facility in an aggregate principal amount of up to $30.0 million. The proceeds of the initial borrowing under the TCW Credit Agreement were used to, among other things, repay in full all outstanding amounts under, and terminate, the JPM 2022 Credit Agreement. The TCW agreement was then amended to provide temporary covenant relief. In November 2025, the proceeds of borrowing under the Lumina Credit Agreement were used to repay in full all outstanding amounts under, and terminate, the TCW Credit Agreement.
Acquisition of Novaestiq Corp.
On July 22, 2025, Waldencast plc, together with its newly-formed and wholly-owned subsidiary, Novaestiq Holding LLC, a Delaware limited liability company, entered into a common stock purchase agreement with NVQ Investors Holding, LLC, a Delaware limited liability company, Croma-Pharma GmbH, a company organized under the laws of Austria, and Novaestiq Corp., a Delaware corporation. Pursuant to the terms and conditions of the Stock Purchase Agreement, the Company purchased 100% of Novaestiq’s issued and outstanding shares of common stock, par value $0.0001 per share. In connection with the Stock Purchase Agreement, Waldencast plc entered into a registration rights agreement and agreed to
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provide Croma and Novaestiq certain registration rights to the Class A ordinary shares issued pursuant to or in connection with the Stock Purchase Agreement.
Novaestiq owns, among other things, the exclusive rights to commercialize and distribute certain late-stage cosmetic filler products in the brand name of Saypha® in the United States, subject to approval of such Products by the U.S. Food & Drug Administration. Saypha® is recognized globally as a proven, safe and efficacious hyaluronic acid injectable with high levels of patient satisfaction. Saypha® is distinguished by its proprietary technology delivering advanced HA treatments through a stable 3D matrix designed to provide natural-looking results with optimally balanced gel characteristics. This technology powers a portfolio of clinically proven products that lead in multiple performance categories including high HA content at injection, ideal gel distribution, and consistent injection force and swelling behavior. Saypha®, a product of Croma-Pharma GmbH, is developed and manufactured in Austria and marketed in over 80 countries, leveraging 40 years of expertise in HA-based treatments with more than 110 million syringes produced. We believe this global reach and deep market insight allow for the delivery of trusted, personalized care to patients and professionals worldwide.
Under the terms of the definitive agreement relating to the transaction, Waldencast agreed to acquire Novaestiq in exchange for (i) certain amount of cash payable at closing, (ii) certain additional ongoing royalties based on net sales of Saypha® products, and (iii) the contingent issuance of Class A ordinary shares of a par value of $0.0001 per share (equal to approximately 7% of Waldencast’s fully diluted Class A ordinary shares as of July 22, 2025), based on the receipt of FDA approval relating to the Saypha® products (triggering the issuance of 3,273,000 Class A ordinary shares) and the achievement of cumulative net revenue thresholds of (1) $100 million (triggering the issuance of an additional 3,273,000 Class A ordinary shares) and (2) $200 million (triggering the further issuance of 3,273,000 Class A ordinary shares), respectively, reflecting meaningful long-term commercial targets, with (1) and (2) being earnable until June 20, 2031.
On the date of acquisition, Saypha® MagIQ™ and Saypha® ChIQ™ were undergoing FDA approval. On September 10, 2025, the Company announced the FDA approved Obagi Saypha® MagIQ™ as an injectable hyaluronic acid gel in the U.S., upon which 3,273,000 Class A ordinary shares were issued to NVQ Holding (on behalf of itself and its shareholders) and Croma. As of the date of this Report, the ChIQ™ line of injectable HA fillers remains subject to FDA approval.. See “Item 8. Financial Information—Note 3. Acquisitions and Strategic Transactions” for further information on the acquisition.
Contracts Material to Our Obagi Medical and Milk Makeup Businesses
Information relating to agreements that are material to our Obagi Medical business and Milk Makeup business can be found in “Item 4. Information on the Company—4.B. Business Overview” of this Report.
Obagi Japan Trademark Agreement
On November 13, 2025, Obagi Cosmeceuticals entered into a strategic transaction with Rohto, a global health and beauty company, with respect to the Obagi brand in Japan by entering into a trademark transfer agreement and coexistence agreement dated the same date.
Under the terms of the Trademark Transfer Agreement, Obagi Cosmeceuticals has agreed to sell, assign, and irrevocably transfer to Rohto the ownership of certain specified trademarks, including all of those related to the "Obagi” brand registered with the Japan Patent Office and World Intellectual Property Organization for Japan and perpetual license, and distribution rights related to such Obagi Japan Trademarks in Japan. This transfer grants Rohto the sole and exclusive ownership of the Acquired Rights in Japan for an aggregate purchase price of $82.5 million. Concurrently, the parties have mutually terminated certain prior licensing and supply agreements.
In conjunction with the transfer of the Acquired Rights, the parties have entered into a Trademark Coexistence Agreement to ensure that the use and registration of the Obagi Japan Trademarks by Rohto within Japan and by Obagi Cosmeceuticals and its affiliates outside of Japan do not result in consumer confusion. The Trademark Coexistence Agreement establishes a clear geographic delineation of the markets, with Rohto focused exclusively on the Japanese market and Obagi Cosmeceuticals and its affiliates retaining their rights in all other territories globally.
The majority of the proceeds received in connection with this transaction are intended to be used to repay a portion of the Lumina Credit Agreement, with the remainder used to fund ongoing operational expenses.
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The foregoing description of the Trademark Transfer Agreement and Trademark Coexistence Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Trademark Transfer Agreement and Trademark Coexistence Agreement, which are incorporated by reference hereto as Exhibit 4.11 and Exhibit 4.12.
Material Contracts with Directors, Executive Officers, Major Shareholders and Related Parties
The information relating to material agreements with our directors and executive officers, major shareholders and related parties can be found in “Item 7. Major Shareholders and Related Party Transactions—7.B. Related Party Transactions” of this Report.
D.Exchange Controls
There are no governmental laws, decrees, regulations or other legislation in Jersey that may affect the import or export of capital, including the availability of cash and cash equivalents for use by the Company, or that may affect the remittance of dividends, interest, or other payments by the Company to non-resident holders of its ordinary shares. There is no limitation imposed by the laws of Jersey or in the Company’s articles of association on the right of non-residents to hold or vote shares.
E.Taxation
U.S. Federal Income Tax Considerations
The following is a discussion of U.S. federal income tax considerations generally applicable to the ownership and disposition of Class A ordinary shares by U.S. Holders. This discussion addresses only those holders of Class A ordinary shares that hold their ordinary shares as capital assets (generally, property held for investment) and assumes that any distributions made (or deemed made) by us and any consideration received (or deemed received) by a holder in consideration for the sale or other disposition of Class A ordinary shares will be in U.S. dollars. This discussion does not discuss all aspects of U.S. federal income taxation that may be relevant to holders in light of their particular circumstances or status including:
•the Sponsor or Waldencast’s officers or directors;
•financial institutions or financial services entities;
•broker-dealers;
•taxpayers that are subject to the mark-to-market accounting rules;
•tax-exempt entities;
•governments or agencies or instrumentalities thereof;
•insurance companies;
•regulated investment companies or real estate investment trusts;
•expatriates or former long-term residents of the U.S.;
•persons that actually or constructively own five percent or more of our voting shares or five percent or more of the total value of any class of our shares;
•persons that acquired our ordinary shares pursuant to an exercise of employee share options, in connection with employee share incentive plans or otherwise as compensation or in connection with the performance of services;
•persons that hold our ordinary shares as part of a straddle, constructive sale, hedging, conversion or other integrated or similar transaction; or
•persons whose functional currency is not the U.S. dollar.
This discussion is based on the Code, proposed, temporary and final Treasury Regulations promulgated under the Code, and judicial and administrative interpretations thereof, all as of the date of this Report. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax considerations described herein. This discussion does not address U.S. federal taxes other than those pertaining to U.S. federal income taxation (such as estate or gift taxes, the alternative minimum tax or the Medicare tax on investment income), nor does it address any aspects of U.S. state or local or non-U.S. taxation.
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We have not and do not intend to seek any rulings from the IRS regarding any of the U.S. federal income tax considerations described herein. There can be no assurance that the IRS will not take positions inconsistent with the considerations discussed below or that any such positions would not be sustained by a court.
This discussion does not consider the tax treatment of partnerships or other pass-through entities or persons who hold our ordinary shares through such entities. If a partnership (or any entity or arrangement so characterized for U.S. federal income tax purposes) holds our ordinary shares, the tax treatment of such partnership and a person treated as a partner of such partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships holding any of our ordinary shares and persons that are treated as partners of such partnerships should consult their tax advisors as to the particular U.S. federal income tax consequences of the ownership and disposition of Class A ordinary shares.
EACH HOLDER SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF CLASS A ORDINARY SHARES, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. TAX LAWS.
As used herein, a “U.S. Holder” is a beneficial owner of Class A ordinary shares who or that is, for U.S. federal income tax purposes:
1.an individual citizen or resident of the U.S.;
2.a corporation (or other entity that is treated as a corporation for U.S. federal income tax purposes) that is created or organized (or treated as created or organized) in or under the laws of the U.S. or any state thereof or the District of Columbia;
3.an estate whose income is subject to U.S. federal income tax regardless of its source; or
4.a trust if (i) a U.S. court can exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (ii) it has a valid election in place to be treated as a U.S. person.
Tax Residence of Waldencast Plc for U.S. Federal Income Tax Purposes
A corporation is generally considered for U.S. federal income tax purposes to be a tax resident in the jurisdiction of its organization or incorporation. Section 7874 of the Code provides an exception to this general rule, under which a non-U.S. incorporated entity may, in certain circumstances, be treated as a U.S. corporation for U.S. federal income tax purposes. These rules are complex and there is limited guidance regarding their application.
Based on the rules currently in effect, we do not expect to be treated as a U.S. corporation for U.S. federal income tax purposes by virtue of Section 7874 of the Code as a result of the Business Combination. Nevertheless, because the rules and exceptions under Section 7874 of the Code are complex, subject to factual and legal uncertainties, and may change in the future (possibly with retroactive effect), there can be no assurance that we will not be treated as a U.S. corporation for U.S. federal income tax purposes. In addition, it is possible that a future acquisition of the stock or assets of a U.S. corporation could result in our being treated as a U.S. corporation at the time of the Business Combination.
If we were to be treated as a U.S. corporation for U.S. federal income tax purposes, we could be subject to liability for additional U.S. income taxes, and the gross amount of any dividend payments to our non-U.S. shareholders could be subject to 30% U.S. withholding tax, depending on the application of any income tax treaty that might apply to reduce the withholding tax. If Holdco 1 were to be disregarded, or we were otherwise to be treated as a direct partner in Waldencast LP, dividend payments by us could be treated as wholly or partially U.S.-source for foreign tax credit and other U.S. federal income tax purposes even if we are treated as a non-U.S. corporation under Section 7874 of the Code.
The remainder of this discussion assumes that Waldencast will not be treated as a U.S. corporation for U.S. federal income tax purposes under Section 7874 of the Code.
U.S. Federal Income Tax Considerations of Owning Class A Ordinary Shares
Taxation of Dividends and Other Distributions on Class A Ordinary Shares
Subject to the PFIC rules discussed below, any distribution of cash or other property to a U.S. Holder of Class A ordinary shares, will generally be treated as a dividend for U.S. federal income tax purposes to the extent the distribution is paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Such
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dividends will be taxable to a corporate U.S. Holder at regular rates and will not be eligible for the dividends-received deduction generally allowed to domestic corporations in respect of dividends received from other domestic corporations.
Distributions in excess of such earnings and profits will generally be applied against and reduce the U.S. Holder’s basis in its Class A ordinary shares (but not below zero) and, to the extent in excess of such basis, will be treated as gain from the sale or exchange of such Class A ordinary shares. We may not determine our earnings and profits on the basis of U.S. federal income tax principles, however, in which case any distribution paid by us will be treated as a dividend.
With respect to non-corporate U.S. Holders, dividends will generally be taxed at preferential long-term capital gains rates only if (i) Class A ordinary shares are readily tradable on an established securities market in the U.S. or (ii) we are eligible for the benefits of an applicable income tax treaty, in each case provided that we are is not treated as a PFIC in the taxable year in which the dividend was paid or in any previous year and certain holding period or other requirements are met. If our Class A ordinary shares are delisted from Nasdaq and are not otherwise readily tradable on an established securities market in the U.S., and provided that we remain ineligible for the benefits of an applicable tax treaty with the U.S., dividends received on our Class A ordinary shares would generally not be eligible to be taxed at preferential rates. U.S. Holders should consult their tax advisors regarding the availability of the lower rate for any dividends paid with respect to Class A ordinary shares.
Taxation on the Disposition of Class A Ordinary Shares
Subject to the PFIC rules discussed below, upon a sale or other taxable disposition of Class A ordinary shares, a U.S. Holder will generally recognize capital gain or loss. The amount of gain or loss recognized will generally be equal to the difference between (i) the sum of the amount of cash and the fair market value of any property received in such disposition and (ii) the U.S. Holder’s adjusted tax basis in such ordinary shares.
Under tax law currently in effect, long-term capital gains recognized by non-corporate U.S. Holders are generally subject to U.S. federal income tax at a reduced rate of tax. Capital gain or loss will constitute long-term capital gain or loss if the U.S. Holder’s holding period for the ordinary shares exceeds one year. The deductibility of capital losses is subject to various limitations.
PFIC Considerations
Definition of a PFIC
A foreign (i.e., non-U.S.) corporation will be a PFIC for U.S. federal income tax purposes if at least 75% of its gross income in a taxable year of the foreign corporation, including its pro rata share of the gross income of any corporation in which it is considered to own at least 25% of the shares by value, is passive income. Alternatively, a foreign corporation will be a PFIC if at least 50% of its assets in a taxable year of the foreign corporation, ordinarily determined based on fair market value and averaged quarterly over the year, including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, passive income. Passive income generally includes dividends, interest, rents and royalties (other than certain rents or royalties derived from the active conduct of a trade or business) and gains from the disposition of passive assets.
Pursuant to a start-up exception, a corporation will not be a PFIC for the first taxable year the corporation has gross income, if (1) no predecessor of the foreign corporation was a PFIC; (2) the corporation satisfies the IRS that it will not be a PFIC for either of the first two taxable years following the start-up year; and (3) the corporation is not in fact a PFIC for either of those years.
PFIC Status of Waldencast
Although a foreign corporation’s PFIC determination will be made annually, absent certain elections described below, a determination that Waldencast Acquisition Corp., our predecessor (“WAC”) was or Waldencast is a PFIC will continue to apply to subsequent years in which a U.S. Holder continues to hold shares in such entity (including a successor entity), whether or not such entity is a PFIC in those subsequent years. Because, following the Domestication, Waldencast is treated as the successor to WAC for U.S. federal income tax purposes, any Class A ordinary shares treated as received in exchange for WAC Class A ordinary shares in the Domestication may, in the absence of certain elections described below, be treated as stock of a PFIC if WAC or Waldencast was treated as a PFIC during the holding period of a U.S. Holder.
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Although WAC likely met the PFIC income or asset tests for the Start-Up Year, the start-up exception is expected to apply to prevent such entity from being treated as a PFIC for the taxable year ending on December 31, 2021 (the “Start-Up Year”) provided that the combined company did not meet either test in the two subsequent taxable years. Based on the timing of the Business Combination and the assets and income of the combined company, we do not believe we met either test for our taxable years ended December 31, 2023, December 31, 2024 or December 31, 2025. However, because PFIC status is an annual factual determination, we may become a PFIC in future if the composition of our income or assets, or the market price of our Class A ordinary shares, were to change. Accordingly, there can be no assurance with respect to the PFIC status of Waldencast for the current taxable year or any future taxable year.
Application of PFIC Rules to Ordinary Shares
If (i) WAC or Waldencast is determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. Holder and (ii) the U.S. Holder did not make a timely and effective QEF Election (as defined below) for the first year in its holding period in which WAC or Waldencast (as the case may be) was or is a PFIC (such taxable year as it relates to each U.S. Holder, the “First PFIC Holding Year”), a QEF Election along with a purging election, or a “mark-to-market” election, each as described below under “QEF Election, Mark-to-Market Election and Purging Election,” then such holder will generally be subject to special rules (the “Default PFIC Regime”) with respect to:
•any gain recognized by the U.S. Holder on the sale or other disposition of its ordinary shares; and
•any “excess distribution” made to the U.S. Holder (generally, any distributions to such U.S. Holder during a taxable year of the U.S. Holder that are greater than 125% of the average annual distributions received by such U.S. Holder in respect of its ordinary shares during the three preceding taxable years of such U.S. Holder or, if shorter, such U.S. Holder’s holding period for such ordinary shares).
Under the Default PFIC Regime:
•the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for its ordinary shares (taking into account the relevant holding period of the WAC Class A ordinary share treated as exchanged therefor);
•the amount of gain allocated to the U.S. Holder’s taxable year in which the U.S. Holder recognized the gain or received the excess distribution, or to the period in the U.S. Holder’s holding period before the first day of the first taxable year in which WAC was or Waldencast is a PFIC, will be taxed as ordinary income;
•the amount of gain allocated to other taxable years (or portions thereof) of the U.S. Holder and included in such U.S. Holder’s holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. Holder; and
•an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed on the U.S. Holder in respect of the tax attributable to each such other taxable year of such U.S. Holder.
A U.S. Holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. Holder may be required to file an IRS Form 8621 (whether or not the U.S. Holder makes one or more of the elections described below with respect to such shares) with such U.S. Holder’s U.S. federal income tax return and provide such other information as may be required by the U.S. Treasury Department.
QEF Election, Mark-to-Market Election and Purging Election
In general, if WAC or Waldencast is determined to be a PFIC, a U.S. Holder may avoid the Default PFIC Regime with respect to its ordinary shares by making a timely and effective “qualified electing fund” (“QEF”) election under Section 1295 of the Code (a “QEF Election”) for such holder’s First PFIC Holding Year. In order to comply with the requirements of a QEF Election with respect to Class A ordinary shares, a U.S. Holder must receive a PFIC Annual Information Statement from us. If we determine we are a PFIC for any taxable year, we may endeavor to provide to a U.S. Holder such information as the IRS may require, including a PFIC Annual Information Statement, in order to enable the U.S. Holder to make and maintain a QEF Election. However, there is no assurance that we will so endeavor, or that we will have timely knowledge of our status as a PFIC in the future or of the required information to be provided. U.S. Holders are urged to consult their tax advisors with respect to any QEF Election previously made with respect to Waldencast shares.
Alternatively, if a U.S. Holder, at the close of its taxable year, owns (or is deemed to own) shares in a PFIC that are treated as marketable shares, the U.S. Holder may make a mark-to-market election with respect to such shares for such taxable year. If the U.S. Holder makes a valid mark-to-market election for such holder’s First PFIC Holding Year, such holder will
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generally not be subject to the Default PFIC Regime in respect of its ordinary shares as long as such shares continue to be treated as marketable shares. Instead, the U.S. Holder will generally include as ordinary income for each year in its holding period that Waldencast or WAC is treated as a PFIC the excess, if any, of the fair market value of its ordinary shares at the end of its taxable year over the adjusted basis in its ordinary shares. The U.S. Holder also will be allowed to take an ordinary loss in respect of the excess, if any, of the adjusted basis of its Class A ordinary shares over the fair market value of its ordinary shares at the end of its taxable year (but only to the extent of the net amount of previously included income as a result of the mark-to-market election). The U.S. Holder’s basis in its ordinary shares will be adjusted to reflect any such income or loss amounts, and any further gain recognized on a sale or other taxable disposition of the ordinary shares in a taxable year in which WAC was or Waldencast is treated as a PFIC will be treated as ordinary income. Special tax rules may also apply if a U.S. Holder makes a mark-to-market election for a taxable year after such holder’s First PFIC Holding Year.
The mark-to-market election is available only for “marketable stock,” which generally includes stock that is regularly traded on a national securities exchange that is registered with the SEC, including Nasdaq. If our Class A ordinary shares are delisted from Nasdaq (and are not otherwise regularly traded on another national securities exchange that is registered with the SEC), our Class A ordinary shares would generally not be treated as “marketable stock” for such purposes, and a U.S. Holder would not be eligible to make a mark-to-market election with respect to our Class A ordinary shares. Any mark-to-market election that is otherwise in effect with respect to our Class A ordinary shares at the time that they are delisted would generally terminate automatically, effective as of the beginning of the U.S. Holder’s taxable year in which the delisting occurs. U.S. Holders should consult their own tax advisors regarding the availability and tax consequences of a mark-to-market election in respect of WAC Class A ordinary shares or the Class A ordinary shares under their particular circumstances, as well as regarding any mark-to-market elections previously made with respect to WAC Class A ordinary shares or our Class A ordinary shares.
Class A ordinary shares treated as stock of a PFIC under the Default PFIC Regime (including Class A ordinary shares treated as received in exchange for WAC Class A ordinary shares that were so treated at the time of the Domestication) will continue to be treated as stock of a PFIC, including in taxable years in which we cease to be a PFIC, unless the applicable U.S. Holder makes a “purging election” with respect to such shares. Under one type of purging election, the U.S. Holder will be deemed to have sold such shares at their fair market value on the last day of the last year in which WAC or Waldencast, as applicable, is treated as a PFIC, and any gain recognized on such deemed sale will be treated as an excess distribution, as described above. As a result of this election, the U.S. Holder will have additional basis (to the extent of any gain recognized in the deemed sale) and, solely for purposes of the PFIC rules, a new holding period in such holder’s Class A ordinary shares. U.S. Holders should consult their tax advisors regarding the application of the purging elections rules to their particular circumstances.
If we are a PFIC and, at any time, have foreign subsidiary that is a PFIC, U.S. Holders would be deemed to own a portion of the shares of such lower-tier PFIC, and could incur liability for the deferred tax and interest charge described above if we receive a distribution from, or disposes of all or part of our interest in, the lower-tier PFIC or the U.S. Holders otherwise were deemed to have disposed of an interest in the lower-tier PFIC. A mark-to-market election would not be available with respect to such lower-tier PFIC. U.S. Holders should consult their own tax advisors regarding the tax issues raised by lower-tier PFICs.
The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. Holders of Class A ordinary shares should consult their own tax advisors concerning the application of the PFIC rules to Class A ordinary shares under their particular circumstances.
THE RULES DEALING WITH PFICS ARE COMPLEX AND ARE IMPACTED BY VARIOUS FACTORS IN ADDITION TO THOSE DESCRIBED ABOVE. U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING THE CONSEQUENCES TO THEM OF THE PFIC RULES, INCLUDING, WITHOUT LIMITATION, WHETHER A QEF ELECTION, A MARK-TO-MARKET ELECTION OR ANY OTHER ELECTION IS AVAILABLE AND THE CONSEQUENCES TO THEM OF ANY SUCH ELECTION, AND THE IMPACT OF ANY PROPOSED OR FINAL PFIC TREASURY REGULATIONS.
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Jersey Tax Considerations, for the period through October 29, 2024 and United Kingdom Tax Considerations for the period thereafter
This summary of both Jersey and UK taxation issues can only provide a general overview of this area and it is not a description of all the tax considerations that may be relevant to a decision to invest in our Class A ordinary shares. The following summary of the anticipated treatment of Waldencast and holders of Class A ordinary shares (other than residents of Jersey and/or the United Kingdom) is based on Jersey and United Kingdom taxation law and practice as it is understood to apply at the date of this document and may be subject to any changes after such date. It does not constitute legal or tax advice and does not address all aspects of relevant tax law and practice (including such tax law and practice as it may apply to land or buildings). Legal advice should be taken with regard to individual circumstances. Prospective investors in our Class A ordinary shares should consult their professional advisers on the implications of acquiring, buying, selling or otherwise disposing of Waldencast Class A ordinary shares under the laws of any jurisdiction in which they may be liable to taxation.
Shareholders should note that tax law and interpretation can change and that, in particular, the levels and basis of, and reliefs from, taxation may change and may alter the benefits of investment in our Class A ordinary shares.
Any person who is in any doubt about their tax position should consult their own professional adviser.
The following considerations apply for the period through October 29, 2024, prior to the Company’s migration of tax residency in United Kingdom
Company Residence
Under the Income Tax (Jersey) Law 1961 (as amended) (“Tax Law”), a company shall be regarded as resident in Jersey if it is incorporated under the Jersey Companies Law unless:
•its business is centrally managed and controlled outside Jersey in a country or territory where the highest rate at which any company may be charged to tax on any part of its income is 10% or higher; and
•the company is resident for tax purposes in that country or territory.
We were resident for tax purposes in Jersey and subject to tax in Jersey for the period to October 29, 2024, the point at which the Company migrated its tax residency to the United Kingdom.
Summary
Under current Jersey law, there are no capital gains, capital transfer, gift, wealth or inheritance taxes, or any death or estate duties. No capital or stamp duty is levied in Jersey on the issue, conversion, redemption, or transfer of ordinary shares. On the death of an individual holder of ordinary shares (whether or not such individual was domiciled in Jersey), duty at rates of up to 0.75% of the value of the relevant ordinary shares may be payable on the registration of any Jersey probate or letters of administration which may be required in order to transfer, convert, redeem, or make payments in respect of, ordinary shares held by a deceased individual sole shareholder, subject to a cap of £100,000.
Income Tax
The general rate of income tax under the Tax Law on the profits of companies regarded as resident in Jersey or having a permanent establishment in Jersey is 0% (“zero tax rating”), though certain exceptions from zero tax rating might apply.
Withholding Tax
For so long as we are subject to a zero tax rating, or are deemed to be resident for tax purposes in Jersey, no withholding in respect of Jersey taxation will be required on payments in respect of our Class A ordinary shares to any holder of our Class A ordinary shares not resident in Jersey.
Stamp Duty
In Jersey, no stamp duty is levied on the issue or transfer of our Class A ordinary shares except that stamp duty is payable on Jersey grants of probate and letters of administration, which will generally be required to transfer ordinary shares on the
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death of a holder of such ordinary shares if such holder was entered as the holder of the shares on the register maintained in Jersey. In the case of a grant of probate or letters of administration, stamp duty is levied according to the size of the estate (wherever situated in respect of a holder of ordinary shares domiciled in Jersey, or situated in Jersey in respect of a holder of ordinary shares domiciled outside Jersey) and is payable on a sliding scale at a rate of up to 0.75% on the value of an estate up to a maximum stamp duty charge of £100,000. The rules for joint holders through a nominee are different and advice relating to this form of holding should be obtained from a professional adviser.
Jersey does not otherwise levy taxes upon capital, inheritances, capital gains or gifts nor are there otherwise estate duties.
Goods and Services Tax
Pursuant to the Goods and Services Tax (Jersey) Law 2007 (“GST Law”), a tax rate which is currently 5% applies to the supply of goods and services (“GST”), unless the supply is regarded as exempt or zero rated, or the relevant supplier or recipient of such goods and services is registered as an “international services entity.”
A company must register for GST if its turnover is greater than £300,000 in any 12-month period, and will then need to charge GST to its customers. Companies can also choose to register voluntarily.
A company may apply to be registered as an International Services Entity (“ISE”) if it mainly serves non-Jersey residents. By virtue of a company being an ISE, it will not have to register for GST, will not charge GST on its supplies, and will not be charged GST on its purchases.
We will be an ISE within the meaning of the GST Law, as we satisfy the requirements of the Goods and Services Tax (International Services Entities) (Jersey) Regulations 2008, as amended. As long as we continue to be such an entity, a supply of goods or of a service made by or to us shall not be a taxable supply for the purposes of the GST Law.
Substance Legislation
With effect from January 1, 2019, Jersey has implemented legislation to meet EU demands for companies to have substance in certain circumstances. Broadly, part of the legislation is intended to apply to holding companies managed and controlled in Jersey.
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The following select considerations apply from October 29, 2024, when the Company became a tax resident in the United Kingdom
Company residence
The Company migrated its place of tax residence to the United Kingdom on October 29, 2024 on occasion of it being centrally managed and controlled in the United Kingdom from this time.
Corporation Tax
The headline rate of Corporation Tax in the United Kingdom is 25%.
Withholding Tax
Dividends received from subsidiaries are exempt from UK Corporation Tax, provided certain conditions are met, while dividends paid by the Company to shareholders are generally not subject to UK withholding tax. Withholding tax can also apply in interest, royalty and other scenarios to the extent that double tax treaties do not shield exposure.
Stamp Duty and Capital Gains Taxes
Since the Company is not incorporated in the UK, transfers of shares executed outside the UK should generally not attract UK Stamp Duty unless settled electronically.
Capital Gains Tax positions will depend on specific circumstances.
Value Added Tax
The buying and selling of shares is generally treated as an exempt supply for UK VAT purposes, but depending on circumstances the VAT on associated costs may not be recoverable.
F.Dividends and Paying Agents
Not applicable.
G.Statement by Experts
Not applicable.
H.Documents on Display
The Company is subject to certain of the informational filing requirements of the Exchange Act. Since the Company is a “foreign private issuer,” the Company is exempt from the rules and regulations under the Exchange Act prescribing the furnishing and content of proxy statements, and our officers, directors and principal shareholders are exempt from the “short-swing” profit recovery provisions contained in Section 16 of the Exchange Act, with respect to their purchase and sale of our shares. In addition, the Company is not required to file reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we are required to file with the SEC an Annual Report on Form 20-F containing financial statements audited by an independent accounting firm. The Company may, but is not required, to furnish to the SEC, on Form 6-K, unaudited financial information after each of our first three fiscal quarters. Information filed with or furnished to the SEC by us will be available on our website. The SEC also maintains a website at http://www.sec.gov that contains reports and other information that we file with or furnish electronically with the SEC. You may read and copy any report or document we file, including the exhibits, at the SEC’s public reference room located at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.
I.Subsidiary Information
Not applicable.
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J.Annual Reports to Security Holders
Not applicable.
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain market risks in the ordinary course of its business, including fluctuations in interest rates, foreign exchange and inflation. Currently, these risks are not material to the Company’s financial condition or results of operations, but they may be in the future.
Further information regarding quantitative and qualitative disclosure about market risk is included in “Item 4. Information on the Company—B. Business Overview” of this Report.
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Warrants
As of December 31, 2025, there were 12,921,042 warrants outstanding that had been issued in our initial public offering (the “Public Warrants”) and 16,612,140 private placement warrants (together with the Public Warrants, the “Warrants”, and, individually, the “private placement warrants”). The private placement warrants are identical to the Public Warrants in all material respects. The Warrants entitle the holder to purchase one Waldencast Class A ordinary share at an exercise price of $11.50 per share. The Public Warrants will expire on July 27, 2027 (i.e., five years after the completion of the Business Combination), at 5:00 p.m., New York City time, or earlier upon redemption or liquidation in accordance with their terms.
PART II
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None/not applicable.
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
None/not applicable.
ITEM 15. CONTROLS AND PROCEDURES
A. Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act),are required to be designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that information relating to the Company is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2025 (the end of the period covered by this Report). Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2025, were not effective because of material weaknesses in internal control over financial reporting as described below.
B. Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our management evaluated the effectiveness of our internal control over financial reporting based on criteria established in the framework in Internal Control-Integrated
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Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on this evaluation, our management has concluded that our internal control over financial reporting was ineffective as of December 31, 2025, due to the material weaknesses described below.
Material Weaknesses
A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
As previously reported in the Company’s 2024 Annual Report on Form 20-F as filed with the SEC on March 20, 2025, management of the Company had identified material weaknesses primarily related to controls around the accounting process. Based upon the current year evaluation by our Chief Executive Officer and Chief Financial Officer, we have concluded that we continue to have material weaknesses in each of the components of the COSO framework. The identified material weaknesses related to the lack of a formal and documented risk assessment process by the Company; that not all control activities, including the delegation of authority control, have been implemented or are operating effectively; and insufficient monitoring of the control environment.
Remediation Plan and Status
Management has been actively engaged in ongoing remediation efforts to address the material weaknesses. We have continued to make enhancements to our control environment throughout 2025 and to date by improving oversight, communication of expectations, emphasizing the importance of internal controls and creating a more robust internal control environment. We plan to continue improving the operating effectiveness of our internal controls over financial reporting and the timeliness of those procedures for full compliance with Section 404(b) of the Sarbanes-Oxley (“SOX 404(b)”) Act during the year ending December 31, 2026. Management’s ongoing commitment to organizational improvements and remediation efforts included, but were not limited to, the following actions:
•We implemented a system to document the approval of contracts in accordance with an established delegation of authority. We are currently strengthening the consistent application and oversight of our delegation of authority to ensure consistent compliance and to address prior deficiencies in the operating effectiveness of our control activities;
•We conducted and documented two comprehensive risk assessment processes during 2025. We are currently engaged in the ongoing refinement of this process to ensure its effectiveness and long-term sustainability as part of our broader remediation effort;
•We engaged a third‑party SOX advisory firm to support SOX 404(b) readiness, including risk assessment, control design, documentation, testing, and remediation, with the objective of achieving effective internal control over financial reporting for the fiscal year ending December 31, 2026;
•Our third-party SOX advisory firm completed a design assessment of our Information Technology General Controls (ITGCs). By establishing this firm ITGC foundation, we are streamlining and paving the way for greater efficiencies in our business process controls, ensuring the underlying systems are reliable and secure;
•We hired a specialized technical accounting and financial reporting personnel. This expansion of our internal expertise is designed to strengthen our accounting policies and financial reporting controls while ensuring compliance with U.S. GAAP and SEC requirements; and
•We enhanced the design, formal documentation, and evaluation processes for both business process controls and information technology general controls. These improvements represent a more robust and disciplined approach to our overall internal control environment.
While we have made significant progress towards the remediation of the material weaknesses noted above, management has concluded that the material weaknesses were not fully remediated as of December 31, 2025. The material weaknesses will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.
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Notwithstanding the identified material weaknesses, management has concluded that the consolidated financial statements included in this Report present fairly, in all material respects, our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted accounting principles (U.S. GAAP).
C. Attestation Report of the Registered Public Accounting Firm
Because we are an “emerging growth company” under the JOBS Act, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting for so long as we are an emerging growth company.
D. Changes in Internal Control over Financial Reporting
Other than as described above and under “Remediation Plan and Status,” there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the fiscal year-ended December 31, 2025, which have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16. [RESERVED]
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our Board has determined that each of the members of the Audit and Governance Committee qualifies as independent under the Nasdaq Listing Rules applicable to members of our Board generally and under the Nasdaq Listing Rules and Exchange Act Rule 10A-3 specific to audit committee members. In addition, our Board has determined that Kelly Brookie and Juliette Hickman both meet the requirements for financial sophistication under the applicable Nasdaq Listing Rules and qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K..
ITEM 16B. CODE OF ETHICS
We have a code of ethics and business conduct that applies to all of our directors, officers and employees, and is intended to meet the definition of “code of ethics” under Item 16B of Form 20-F. Our code of ethics, as amended on March 12, 2025, is incorporated by reference as Exhibit 11.2 to this Report and is available on our website, www.waldencast.com. The information on or available through our website is not deemed incorporated in this Report and does not form part of this Report. We intend to make any legally required disclosures regarding amendments to, or waivers of, the provisions of its code of ethics on our website rather than by filing a Current Report on Form 6-K.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets out the aggregate fees for professional audit services and other services rendered by the Company’s independent registered public accounting firm, Deloitte & Touche LLP, for each of the periods presented:
(In thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | ||||||||||||||
Audit fees1 | $ | 2,293 | $ | 3,856 | $ | 2,866 | |||||||||||
Tax fees2 | 325 | 321 | 459 | ||||||||||||||
| Total fees | $ | 2,618 | $ | 4,177 | $ | 3,325 | |||||||||||
1.Audit fees consist of professional services provided in connection with the audit of our annual financial statements and other audit or interim review services provided in connection with regulatory filings or engagements.
2.Tax fees consist of fees for professional services for tax compliance, tax advice, and tax audits.
Audit Committee Pre-Approval Policies and Procedures
Our Audit and Governance Committee has adopted policies and procedures for the pre-approval of audit and permitted non-audit services to be performed by our independent registered public accounting firm, in accordance with the requirements of the Sarbanes-Oxley Act of 2002 and rules issued by the SEC. Under these policies, the Audit and
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Governance Committee either pre-approves services prior to engagement or establishes specific pre-approval policies and procedures pursuant to which such services may be provided. The Audit and Governance Committee is informed of each service approved pursuant to such policies.
The policies prohibit the engagement of our independent registered public accounting firm to perform any non-audit services prohibited by applicable law or SEC rules and are designed to ensure that the provision of audit and permitted non-audit services does not impair the independence of our independent registered public accounting firm.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None/not applicable.
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
None/not applicable.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
None/not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a foreign private issuer, we are not subject to all of the corporate governance requirements applicable to public companies organized within the U.S. For example, we are exempt from certain rules under the Exchange Act that regulate disclosure obligations and procedural requirements related to the solicitation of proxies, consents or authorizations applicable to a security registered under the Exchange Act, including the U.S. proxy rules under Section 14 of the Exchange Act (including the requirement applicable to emerging growth companies to disclose the compensation of our Chief Executive Officer and the other two most highly compensated executive officers on an individual, rather than an aggregate, basis). In addition, our officers and directors are exempt from the “short-swing” profit recovery provisions of Section 16 of the Exchange Act. Moreover, while we submit interim consolidated financial data to the SEC under cover of the SEC’s Form 6-K, we are not required to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. public companies and are not required to file quarterly reports on Form 10-Q or current reports on Form 8-K under the Exchange Act. We also are exempt from the requirements to obtain shareholder approval for certain issuances of securities, including shareholder approval of share option plans. In addition, as a foreign private issuer, we are exempt from the provisions of Regulation FD, which prohibits issuers from making selective disclosure of material nonpublic information.
We were incorporated under the laws of Jersey and our corporate governance practices are governed by applicable Jersey law, including the provisions of the Jersey Companies Law, and the Constitutional Document. In addition, because our securities are listed on Nasdaq, we are subject to Nasdaq’s corporate governance listing standards.
Rule 5615(a)(3) of the Rules permits a foreign private issuer like us to follow home country practices in lieu of certain requirements of Listing Rule 5600, provided that such foreign private issuer discloses in its annual report filed with the SEC each requirement of Rule 5600 that it does not follow and describes the home country practice followed in lieu of such requirement.
We currently follow our home country practice in lieu of the requirements of the 5600 Series of the Rules to be exempt from the requirements as follows: (i) Rule 5620(a) of the Rules which provides that (with certain exceptions not relevant to the conclusions expressed herein) each company listing common stock or voting preferred stock, and their equivalents, shall hold an annual meeting of shareholders no later than one year after the end of the company’s fiscal year-end; (ii) Rule 5635(c) of the Rules which sets forth the circumstances under which shareholder approval is required prior to an issuance of securities of the Company in connection with equity-based compensation of officers, directors, employees or consultants; (iii) Rule 5635(d) of the Rules which sets forth the circumstances under which shareholder approval is required prior to an issuance of securities, other than in a public offering, equal to 20% or more of the voting power outstanding at a price less than the lower of: (x) the Nasdaq Official Closing Price (as reflected on Nasdaq.com) immediately preceding the signing of the binding agreement; or (y) the average Nasdaq Official Closing Price of the common stock (as reflected on Nasdaq.com) for the five trading days immediately preceding the signing of the binding
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agreement; and (iv) Rule 5250(b)(3) of the Rules which requires disclosure of third-party director and nominee compensation.
If we choose to follow additional home country practice in the future, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq corporate governance requirements applicable to U.S. domestic issuers.
ITEM 16H. MINE SAFETY DISCLOSURE
None/not applicable.
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
None/not applicable.
ITEM 16J. INSIDER TRADING POLICY
We have adopted an Insider Trading Policy, as amended on October 29, 2024, that applies to all directors, officers and employees of Waldencast and (a) their spouses, minor children, adult family members sharing the same house, and (b) any other person or entity over whom a person subject to the policy has substantial influence or control when it relates to decisions to purchase or sell securities. The Insider Trading Policy, which applies to any purchases and sales of our securities (including ordinary shares, warrants, shares issued under stock options, RSUs or other equity awards, and if we ever issue them preferred shares, bonds or debt securities or convertible debentures and warrants) is designed to promote compliance with applicable insider trading laws, rules and regulations, and the Nasdaq listing standards. The foregoing description of the Insider Trading Policy, as amended is not complete and is subject to and qualified in its entirety by reference thereto, a copy of which is incorporated by reference as Exhibit 11.1 to this Report and the terms of which are incorporated by reference herein.
ITEM 16K. CYBERSECURITY
Risk Management and Strategy
Our information technology department, led by our Chief Technology Officer (“CTO”), in connection with management and legal, assesses risks based on probability and potential impact to key business systems and processes. Our CTO has over two decades of expertise in managing information security, developing cybersecurity strategies and internal awareness programs, and implementing effective cybersecurity programs, including serving as chief information officer for over 10 years in previous roles. Our CTO leads the assessment and management of cybersecurity risks, including business continuity planning, incident response and regular disaster recovery testing.
We take a risk-based approach to cybersecurity and have implemented cybersecurity policies and practices throughout our operations that are designed to address cybersecurity threats and incidents.
Key elements of our cybersecurity risk management program include, among others, the following:
•Deployment of monitoring tools designed to identify material cybersecurity risks within our enterprise IT environment and critical systems;
•Engagement of external service providers to assess, test, or audit specific aspects of our security controls and processes;
•Regular cybersecurity awareness training for employees, including phishing simulations and threat scenarios;
•A cybersecurity incident response plan that establishes procedures for identifying, containing, and remediating incidents, and includes a materiality assessment framework with escalation protocols to senior leadership to determine reporting requirements;
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•Third-party risk management processes to review service providers based on their criticality to our operations and their respective risk profiles; and
•Cybersecurity insurance coverage to mitigate potential financial impacts.
Throughout 2025, we undertook significant steps to enhance our cybersecurity posture. Specifically, we focused on the hardening of our digital workplace and cloud ecosystem and reinforced the security of our endpoints by deploying advanced protection tools, remote control capabilities, and enhanced endpoint monitoring.
Furthermore, we have updated our security policies to reflect the evolving threat landscape and completed a comprehensive assessment of our critical applications conducted by an independent third party and implemented a company-wide cybersecurity awareness program aimed at ensuring knowledge of best practices permeates all departments.
For additional description of cybersecurity risks and potential related impacts on the Company, refer to “Item 3. Key Information—D. Risk Factors—Risks Related to Technology, E-Commerce, and Cybersecurity—We are dependent on information technology systems and infrastructure; if we, or the third parties we rely on, fail to protect sensitive information of our consumers and information technology systems against security breaches, it could damage our reputation and brand and substantially harm our business.”
Governance
PART III
ITEM 17. FINANCIAL STATEMENTS
See “Item 18. Financial Statements.”
ITEM 18. FINANCIAL STATEMENTS
The consolidated financial statements and the related notes required by this Item are included in this annual report on Form 20-F beginning on page F-1. See “Item 8. Financial Information.”
ITEM 19. EXHIBITS
EXHIBIT INDEX
| EXHIBIT NUMBER | DESCRIPTION | |||||||
| 1.1 | Memorandum and Articles of Association of Waldencast plc (incorporated by reference to Exhibit 3.1 to the Report on Form 6-K filed with the SEC on October 30, 2024). | |||||||
| 1.2 | Waldencast Partners LP Amended and Restated Exempted Limited Partnership Agreement, dated as of July 27, 2022 (incorporated by reference to Exhibit 1.2 to the Report on Form 20-F (Reg. No. 001-40207), filed with the SEC on March 20, 2025). | |||||||
| 2.1+ | Specimen ordinary share certificate of Waldencast plc (incorporated by reference to Exhibit 4.5 to Amendment No. 3 to the Registration Statement on Form F-4 (Reg. No. 333-262692), filed with the SEC on April 27, 2022). | |||||||
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| 2.2 | Warrant Agreement, dated March 15, 2021, between Waldencast Acquisition Corp. and Continental Stock Transfer & Trust Company (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K (Reg. No. 001-40207), filed with the SEC on March 18, 2021). | |||||||
| 2.3 | Amendment to Warrant Agreement, dated as of December 1, 2022, by and among Waldencast plc, Continental Stock Transfer & Trust Company, and American Stock Transfer & Trust Company, LLC (incorporated by reference to Exhibit 4.1 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on December 5, 2022). | |||||||
| 2.4* | Description of the Registrant’s Securities | |||||||
| 4.1 | Agreement and Plan of Merger, dated as of November 15, 2021, by and among the Company, Merger Sub and Obagi (incorporated by reference to Annex A to Amendment No. 7 to the Registration Statement on Form F-4 (Reg. No. 333-262692), filed with the SEC on July 1, 2022). | |||||||
| 4.2 | Equity Purchase Agreement, dated as of November 15, 2021, by and among the Company, Waldencast LP, Holdco Purchaser, Milk, the Milk Members and the Equityholder Representative (incorporated by reference to Exhibit 2.2 to Amendment No. 1 to the Current Report on Form 8-K (Reg. No. 001-40207), filed with the SEC on November 17, 2021). | |||||||
| 4.3 | Form of deSPAC Subscription Agreement, by and between the Company and the undersigned subscriber party thereto (incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the Current Report on Form 8-K (Reg. No. 001-40207), filed with the SEC on November 17, 2021). | |||||||
| 4.4 | Amended and Restated Registration Rights Agreement, by and among the Company, the Sponsor, certain former shareholders of Obagi and certain former members of Milk (incorporated by reference to Exhibit 4.8 to the Report on Form 20-F (Reg. No. 001-40207), filed with the SEC on August 3, 2022). | |||||||
| 4.5 | Waldencast plc 2022 Incentive Award Plan (incorporated by reference to Exhibit 4.9 to the Report on Form 20-F/A (Reg. No. 001-40207), filed with the SEC on August 3, 2022). | |||||||
| 4.6 | Form of Indemnification Agreement between Waldencast and each of its executive officers and directors (incorporated by reference to Exhibit 4.6 to the December 31, 2023 Annual Report on Form 20-F (Reg. No. 001-40207), filed with the SEC on April 30, 2024). | |||||||
| 4.7 | Investor Rights Agreement, by and among the Company, Cedarwalk Skincare Ltd., the Sponsor and CWC Skincare Ltd., the guarantor of Cedarwalk Skincare Ltd.’s obligations thereunder (incorporated by reference to Exhibit 10.28 to the Registration Statement on Form F-4 (Reg No. 333-262692), filed with the SEC on February 14, 2022). | |||||||
| 4.8 | Form of 2023 Subscription Agreement, by and between the Company and the undersigned subscriber party thereto (incorporated by reference to Exhibit 99.2 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on September 18, 2023). | |||||||
| 4.9 | ||||||||
| 4.10 | Credit Agreement, dated November 14, 2025, by and among Milk Makeup LLC, and Obagi Cosmeceuticals LLC, as borrowers, Waldencast plc, as the parent guarantor, the lenders party thereto and LSSF II Offshore Investments, LP, as administrative agent (incorporated by reference to Exhibit 99.2 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on November 24, 2025). | |||||||
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| 4.11 | Trademark Transfer Agreement, dated November 13, 2025, by and between Rohto Pharmaceutical Co., Ltd. and Obagi Cosmeceuticals LLC (incorporated by reference to Exhibit 99.3 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on November 24, 2025). | |||||||
| 4.12 | Trademark Coexistence Agreement, dated November 13, 2025, by and between Rohto Pharmaceutical Co., Ltd. and Obagi Cosmeceuticals LLC (incorporated by reference to Exhibit 99.4 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on November 24, 2025). | |||||||
| 4.13 | Stock Purchase Agreement dated July 22, 2025, by and among the Waldencast plc, Novaestiq Holding LLC, NVQ Investors Holding, LLC, Croma-Pharma-GmbH and Novaestiq Corp (incorporated by reference to Exhibit 4.1 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on July 23, 2025). | |||||||
| 4.14 | Registration Rights Agreement dated July 22, 2025, by and among Waldencast plc, NVQ Investors Holding, LLC, Croma-Pharma-GmbH and each member of NVQ Investors Holding, LLC (incorporated by reference to Exhibit 4.2 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on July 23, 2025). | |||||||
| 4.15 | Credit Agreement, dated November 14, 2025, by and among Milk Makeup LLC, Obagi Cosmeceuticals LLC, Waldencast plc, as the parent, the lenders party thereto and LSSF II Offshore Investments, LP, as administrative agent (incorporated by reference to Exhibit 99.2 to the Report on Form 6-K (Reg. No. 001-40207), filed with the SEC on November 24, 2025). | |||||||
| 4.16* | First Amendment to Credit Agreement, dated March 9, 2026, by and among Milk Makeup LLC, Obagi Cosmeceuticals LLC, Waldencast plc, as the parent, the lenders party thereto and LSSF II Offshore Investments, LP, as administrative agent. | |||||||
| 8.1* | Subsidiaries of Waldencast plc. | |||||||
| 11.1 | Insider Trading Policy, as amended October. 29, 2024 (incorporated by reference to Exhibit 11.1 to the Report on Form 20-F (Reg. No. 001-40207), filed with the SEC on March 20, 2025). | |||||||
| 11.2 | Code of Ethics, as amended March 12, 2025 (incorporated by reference to Exhibit 11.2 to the Report on Form 20-F (Reg. No. 001-40207), filed with the SEC on March 20, 2025). | |||||||
| 12.1* | Certification of the Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | |||||||
| 12.2* | Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended. | |||||||
13.1** | Certification of the Principal Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
13.2** | Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002. | |||||||
| 15.1* | Consent of Independent Registered Public Accounting Firm. | |||||||
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| 97.1 | Waldencast plc Supplemental Executive Officer Clawback Policy.(incorporated by reference to Exhibit 97.1 to the December 31, 2023 Annual Report on Form 20-F (Reg. No. 001-40207), filed with the SEC on April 30, 2024). | |||||||
| 101.INS* | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |||||||
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |||||||
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
| 104* | Cover Page Interactive Data File (embedded as Inline XBRL and contained in Exhibit 101). | |||||||
*Filed herewith.
** Furnished herewith. This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certification shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
+Portions of this exhibit have been omitted pursuant to the Instructions as to Exhibit of Form 20-F on the basis that the Company customarily and actually treats that information as private or confidential and the omitted information is not material.
† Pursuant to Instructions as to Exhibit of Form 20-F, certain schedules and exhibits have been omitted. The registrant agrees to furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request.
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SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
| WALDENCAST PLC | ||||||||
| March 13, 2026 | By: | /s/ Manuel Manfredi | ||||||
| Name: Manuel Manfredi | ||||||||
| Title: Chief Financial Officer and Principal Financial Officer | ||||||||
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FAQ
What are the main businesses of Waldencast plc (WALD)?
Waldencast plc operates two primary reporting units: the Obagi Medical skincare business and the Milk Makeup cosmetics business. Both were acquired in 2022 and are positioned in medical-grade skincare and color cosmetics, respectively, serving U.S. and international markets across retail, physician and e-commerce channels.
How significant are goodwill and intangible assets for Waldencast (WALD)?
Goodwill and intangible assets are critical to Waldencast’s balance sheet, representing about
What impairments did Waldencast (WALD) record in 2025?
Waldencast recorded substantial non-cash impairment charges in 2025:
What are the key risks from Waldencast’s Lumina Credit Agreement?
The Lumina Credit Agreement includes financial covenants, potential lender-appointed liquidity events and significant prepayment premiums. It also requires issuing warrants tied to Term Tranche B Loans, potentially allowing purchase of up to 1,000 ordinary shares per
Does Waldencast (WALD) have internal control issues or regulatory investigations?
Yes. Waldencast discloses ongoing material weaknesses in internal control over financial reporting that were not fully remediated by
What is Waldencast’s current strategic review and what does it involve?
In August 2025, Waldencast’s board began reviewing a broad range of strategic alternatives aimed at maximizing shareholder value. The company notes there is no assurance any particular transaction will be pursued or completed, nor that any resulting action will increase shareholder value or occur within a set timeframe.
How many shares of Waldencast were outstanding at year-end 2025?
As of
Waldencast plc
NASDAQ:WALD
WALD Rankings
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Mar 13, 2026
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Mar 11, 2026
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Jan 15, 2026
[6-K] Waldencast plc Current Report (Foreign Issuer)
Nov 24, 2025
[6-K] Waldencast plc Current Report (Foreign Issuer)
WALD Stock Data
180.98M
47.71M
Household & Personal Products
Perfumes, Cosmetics & Other Toilet Preparations
United States
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