References to the "Company," "our," "us" or "we" refer to Fortress Value
Acquisition Corp. II. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the financial statements and the notes thereto contained elsewhere in this
report. Certain information contained in the discussion and analysis set forth
below includes forward-looking statements that involve risks and uncertainties.
Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those set
forth under "Cautionary Note Regarding Forward-Looking Statements," "Item 1A.
Risk Factors" and elsewhere in this Annual Report on Form 10-K/A.
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Overview
We are a blank check company incorporated on June 10, 2020 as a Delaware
corporation formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses ("Business Combination"). Although we
may pursue an acquisition in any industry or geography, we intend to capitalize
on the ability of our management team and the broader Fortress platform to
identify, acquire and operate a business that may provide opportunities for
attractive risk-adjusted returns. Our Sponsor is Fortress Acquisition Sponsor II
LLC (the "Sponsor").
Our registration statement for the initial public offering (the "Initial Public
Offering") was declared effective on August 11, 2020. On August 14, 2020, we
consummated the Initial Public Offering of 34,500,000 units ("Units"), including
the issuance of 4,500,000 units as a result of the underwriters' exercise of
their over-allotment option in full, at $10.00 per Unit, generating gross
proceeds of $345.0 million and incurring offering costs of approximately $19.4
million, inclusive of approximately $12.1 million in deferred underwriting
commissions.
Substantially concurrently with the closing of the Initial Public Offering, we
consummated a private placement ("Private Placement") of 5,933,333 warrants (the
"Private Placement Warrants"), at a price of $1.50 per private placement
warrant, with our Sponsor, generating gross proceeds of $8.9 million.
Upon the closing of the Initial Public Offering and Private Placement, $345.0
million ($10.00 per Unit) of the aggregate net cash proceeds of the sale of the
Units in the Initial Public Offering and the Private Placement was placed in a
U.S.-based Trust Account ("Trust Account") at J.P. Morgan Chase Bank, N.A.,
maintained by Continental Stock Transfer & Trust Company, acting as trustee. The
cash proceeds held in the Trust Account have been invested in U.S. government
securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less or in any open-ended investment
company that holds itself out as a money market fund selected by us meeting
certain conditions of Rule 2a-7 of the Investment Company Act, as determined by
us, until the earlier of: (i) the completion of a Business Combination and (ii)
the distribution of the funds held in the Trust account as described below.
In the event of such distribution, it is possible that the per share value of
the residual assets remaining available for distribution (including Trust
Account assets) will be only $10.00 per share initially held in the Trust
Account (or less than that in certain circumstances). In order to protect the
amounts held in the Trust Account, the Sponsor has agreed to be liable to the
Company, if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the
Company has discussed entering into a transaction agreement, reduce the amount
of funds in the Trust Account. This liability will not apply with respect to any
claims by a third party who executed a waiver of any right, title, interest or
claim of any kind in or to any monies held in the Trust Account or to any claims
under the Company's indemnity of the underwriters of the Initial Public Offering
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, the Sponsor will not
be responsible to the extent of any liability for such third-party claims.
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The Company will seek to reduce the possibility that the Sponsor will have to
indemnify the Trust Account due to claims of creditors by endeavoring to have
all third parties, service providers (other than the Company's independent
registered public accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies
held in the Trust Account.
On September 29, 2020, the Company announced that, commencing October 2, 2020,
the holders of the Company's units may elect to separately trade the Class A
common stock and Public Warrants comprising the units. No fractional warrants
will be issued upon separation of the units and only whole warrants will trade.
Those units not separated will continue to trade on the New York Stock Exchange
under the symbol "FAII.U," and each of the shares of Class A common stock and
Public Warrants that are separated will trade on the New York Stock Exchange
under the symbols "FAII" and "FAII WS," respectively.
Results of Operations
Since the Initial Public Offering, our activity has been limited to the search
for a prospective initial Business Combination, and we will not be generating
any operating revenues until the closing and completion of our initial Business
Combination. We expect to incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses in connection with completing a Business
Combination.
For the period from June 10, 2020 (inception) through December 31, 2020, we had
a net loss of $13,612,039, which consisted of a non-cash $7,031,641 increase in
the fair value of warrant liabilities, a non- cash loss of $4,216,725 related to
the excess of fair value over the cash received for Private Placement Warrants,
$775,034 related to offering costs related to the warrant liabilities,
$1,495,574 in general and administrative expenses and $112,022 in franchise tax
expense. These losses and expenses were offset by $18,957 in interest income.
General and administrative expenses of $1,495,574 is primarily comprised of
legal and due diligence fees.
Liquidity and Capital Resources
As indicated in the accompanying financial statements, as of December 31, 2020,
we had approximately $1.3 million in our operating bank account and working
capital deficit of approximately $26,000.
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Through our Initial Public Offering, our liquidity needs have been satisfied
through receipt of a $25,000 capital contribution from our Sponsor in exchange
for the issuance of the Founder Shares (as defined below) to our Sponsor, up to
$300,000 in loans from our Sponsor and the proceeds not held in the Trust
Account, which resulted from the consummation of the initial public offering and
the sale of Private Placement Warrants to the Sponsor. Following the closing of
the Initial Public Offering, the exercise of the over-allotment option, and the
sale of Private Placement Warrants, which resulted in $345.0 million ($10.00 per
Unit) being placed into a Trust Account and payment of expenses, we had
approximately $1.3 million as of December 31, 2020 in cash held outside of the
Trust Account, which we intend to use for working capital purposes.
In addition, in order to finance transaction costs in connection with a business
combination, the Sponsor or an affiliate of the Sponsor, or certain of our
officers and directors may, but are not obligated to, loan us funds as may be
required ("Working Capital Loans").
In connection with the Company's assessment of going concern considerations in
accordance with ASU 2014-15, "Disclosures of Uncertainties about an Entity's
Ability to Continue as a Going Concern," as of December 31, 2020 the Company
does not have sufficient liquidity to meet its current obligations. However,
management has determined that the Company has access to funds from the Sponsor,
and the Sponsor has the financial wherewithal to fund the Company, that are
sufficient to fund the working capital needs of the Company until the earlier of
the consummation of the Business Combination and a minimum one year from the
date of issuance of these financial statements. Over this time period, we will
be using these funds for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the Business Combination.
If our estimates of the costs of undertaking in-depth due diligence and
negotiating our initial Business Combination is less than the actual amount
necessary to do so, or the amount of interest available to us from the Trust
Account is less than we expect as a result of the current interest rate
environment, we may have insufficient funds available to operate our business
prior to our initial Business Combination. Moreover, we may need to obtain
additional financing either to consummate our initial Business Combination or
because we become obligated to redeem a significant number of our public shares
upon consummation of our initial Business Combination, in which case we may
issue additional securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would
only consummate such financing simultaneously with the consummation of our
initial Business Combination. Following our initial Business Combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
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Related Party Transactions
Founder shares
In June 2020, we issued an aggregate of 8,625,000 shares of Founder Shares to
our Sponsor (the "Founder Shares") in exchange for an aggregate capital
contribution of $25,000. The Sponsor agreed to forfeit an aggregate of up to
1,125,000 Founder Shares to the extent that the over-allotment option was not
exercised in full by the underwriters. On August 14, 2020, the underwriters
exercised their over-allotment option in full. As a result, the 1,125,000
Founder Shares were no longer subject to forfeiture. The Founder Shares will
automatically convert into Class A common stock upon the consummation of a
business combination, or earlier at the option of the holder, on a one-for-one
basis, subject to adjustment.
Promissory note-related party
The Sponsor had loaned us an aggregate of $97,250 to cover expenses related to
the Initial Public Offering pursuant to a promissory note. The loan was
non-interest bearing, unsecured and due on the earlier of April 30, 2021 or the
closing of the Initial Public Offering. We repaid the promissory note on August
14, 2020.
Related party loans
In order to finance transaction costs in connection with a business combination,
the Sponsor or an affiliate of our Sponsor, or certain of our officers and
directors may, but are not obligated to, provide Working Capital Loans to us as
may be required. If we complete a business combination, we would repay the
Working Capital Loans out of the proceeds of the Trust Account released to us.
Otherwise, the Working Capital Loans would be repaid only out of funds held
outside the Trust Account. In the event that a business combination does not
close, we may use a portion of proceeds held outside the Trust Account to repay
the Working Capital Loans but no proceeds held in the Trust Account would be
used to repay the Working Capital Loans, other than the interest on such
proceeds that may be released for working capital purposes. Except for the
foregoing, the terms of such Working Capital Loans, if any, have not been
determined and no written agreements exist with respect to such loans. The
Working Capital Loans would either be repaid upon consummation of a business
combination, without interest, or, at the lender's discretion, up to $1,500,000
of such Working Capital Loans may be convertible into Public Warrants of the
post business combination entity at a price of $1.50 per warrant. The Public
Warrants would be identical to the Private Placement Warrants. There were no
Working Capital Loans outstanding as of December 31, 2020.
Office space and related support services
During August 2020, we entered into an agreement with an affiliate of our
Sponsor a monthly fee of $20,000 for office space and related support services.
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We had incurred approximately $93,000 in expenses for the period from June 10,
2020 (inception) through December 31, 2020, respectively, as reflected in the
accompanying Statements of Operations for services provided by related parties
in connection with these aforementioned agreements with related parties. As of
December 31, 2020, the Company had $20,000 in accrued expenses for services
provided by an affiliate, as reflected in the accompanying balance sheet.
Contractual Obligations
Registration rights
The holders of the Founder Shares, Private Placement Warrants and Public
Warrants that may be issued upon conversion of Working Capital Loans (and any
Class A common stock issuable upon the exercise of the Private Placement
Warrants and Public Warrants that may be issued upon conversion of Working
Capital Loans) are entitled to registration rights pursuant to a registration
rights agreement signed prior to the closing date of the Initial Public
Offering. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that the Company register such
securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the
consummation of a Business Combination. However, the registration rights
agreement provides that the Company will not permit any registration statement
filed under the Securities Act to become effective until termination of the
applicable lock-up period. The Company will bear the expenses incurred in
connection with the filing of any such registration statements.
Underwriting agreement
The underwriters are entitled to a deferred underwriting discount of $0.35 per
unit, or approximately $12.1 million, which will be payable to the underwriters
from the amounts held in the Trust Account solely in the event the Company
completes a Business Combination, subject to the terms of the underwriting
agreement.
Critical Accounting Policies and Estimates
Class A common stock subject to possible redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Class A common stock subject to
mandatory redemption (if any) are classified as liability instruments and are
measured at fair value. Conditionally redeemable Class A common stock (including
Class A common stock that feature redemption rights that are either within the
control of the holder or subject to redemption upon the occurrence of uncertain
events not solely within our control) are classified as temporary equity. At all
other times, Class A common stock is classified as stockholders' equity. Our
Class A common stock features certain redemption rights that are considered to
be outside of our control and subject to the occurrence of uncertain future
events. Accordingly, at December 31, 2020, 29,428,392 shares of Class A common
stock subject to possible redemption at the redemption amount are presented as
temporary equity, outside of the stockholders' equity section of our balance
sheet.
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Net loss per share
The Company's statement of operations includes a presentation of income per
share for common stock subject to redemption in a manner similar to the
two-class method of income per share.
Net income (loss) per common stock, basic and diluted for Class A common stock
for the period from June 10, 2020 (inception) through December 31, 2020 were
calculated by (i) dividing the interest income earned on the Trust Account of
$18,957 less funds available to be withdrawn from the Trust Account for taxes of
$18,957 which resulted in net income of none, respectively, by (ii) the weighted
average number of Class A common stock outstanding for the period.
Net income (loss) per common stock, basic and diluted for Class F common stock
for the period from June 10, 2020 (inception) through December 31, 2020 were
calculated by dividing (i) the net income less income attributable to Class A
common stock by (ii) the weighted average number of Class F common stock
outstanding for the respective period.
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Net loss per share of common stock is computed
by dividing net loss applicable to common stockholders by the weighted average
number of common stock outstanding for the period. The Company has not
considered the effect of the Public Warrants sold in the Initial Public Offering
(including the consummation of the over-allotment) and Private Placement to
purchase an aggregate of 12,833,333 shares of Class A common stock in the
calculation of diluted loss per share, since their inclusion would be
anti-dilutive under the treasury stock method as of December 31, 2020.
Warrant liabilities
The Company accounts for its outstanding Public Warrants and Private Placement
Warrants in accordance with the guidance contained in Accounting Standards
Codification 815-40, "Derivatives and Hedging - Contracts on an Entity's Own
Equity" ("ASC 815-40") and determined that the Warrants do not meet the criteria
for equity treatment thereunder. As such, each Warrant must be recorded as a
liability and is subject to re-measurement at each balance sheet date and any
change in fair value is recognized in the Company's statements of operations.
Recent accounting pronouncements
Our management does not believe that any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on our balance sheet.
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Off-Balance Sheet Arrangements
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our financial statements may not be
comparable to companies that comply with public company effective dates.
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