References to the "Company," "FAST Acquisition Corp. II," "SPAC," "our," "us" or
"we" refer to Fast 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.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. We have based these forward-looking statements on our
current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
55
Overview
We are a blank check company incorporated in Delaware on December 30, 2020. We
were formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We are an emerging growth company and, as such, the
Company is subject to all of the risks associated with emerging growth
companies.
Our sponsor is FAST Sponsor II LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for our Initial Public Offering was
declared effective on March 15, 2021. On March 18, 2021, we consummated its
Initial Public Offering of 20,000,000 units (the "Units" and, with respect to
the Class A common stock included in the Units being offered, the "Public
Shares") at $10.00 per Unit, generating gross proceeds of $200.0 million, and
incurring offering costs of approximately $11.6 million, inclusive of $7.0
million in deferred underwriting commissions. We granted the underwriter a
45-day option to purchase up to 3,000,000 additional Units at the Initial Public
Offering price to cover over-allotments, if any. The underwriter exercised the
over-allotment option in part and, on March 26, 2021, we consummated the sale of
an additional 2,233,687 Private Placement Units at the Initial Public Offering
price at $10.00 per Unit, generating additional gross proceeds of approximately
$22.3 million (the "Over-Allotment"), and incurring additional offering costs of
approximately $1.2 million, inclusive of approximately $0.8 million in deferred
underwriting commissions.
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 4,000,000 warrants (each, a
"Private Placement Warrant" and collectively, the "Private Placement Warrants")
at a price of $1.50 per Private Placement Warrant to the Sponsor, generating
proceeds of $6.0 million (see Note 4). We consummated a second closing of the
Private Placement simultaneously with the closing of the Over-Allotment on March
26, 2021, for an additional 297,825 Private Placement Warrants at a price of
$1.50 per Private Placement Warrant, generating proceeds of approximately $0.4
million.
Upon the closing of the Initial Public Offering, the Over-Allotment and the
Private Placement, $222.3 million ($10.00 per Unit) of the net proceeds were
placed in a trust account ("Trust Account") located in the United States at JP
Morgan Chase Bank, N.A. with Continental Stock Transfer & Trust Company acting
as trustee, and were initially invested only in U.S. "government securities,"
within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the "Investment Company Act"), having a maturity of 185 days or less or
in money market funds meeting certain conditions under Rule 2a-7 promulgated
under the Investment Company Act which invest only in direct U.S. government
treasury obligations, as determined by the Company, and are presently in a bank
deposit account, until the earlier of: (i) the completion of a business
combination and (ii) the distribution of the Trust Account as described below.
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of Private
Placement Warrants, although substantially all of the net proceeds are intended
to be applied generally toward consummating a business combination. There is no
assurance that we will be able to complete a business combination successfully.
We must complete one or more initial business combinations having an aggregate
fair market value of at least 80% of the net assets held in the Trust Account
(excluding the amount of any deferred underwriting discount held in the Trust
Account) at the time of the agreement to enter into the initial business
combination. However, we will only complete a business combination if the
post-transaction company owns or acquires 50% or more of the outstanding voting
securities of the target or otherwise acquires a controlling interest in the
target business sufficient for it not to be required to register as an
investment company under the Investment Company Act.
If we are unable to complete a business combination by June 18, 2023 (as such
period may be further extended by our board of directors or our stockholders in
accordance with the Certificate of Incorporation (as amended), the "Combination
Period"), we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account (net of permitted
withdrawals and up to $100,000 of interest to pay dissolution expenses), divided
by the number of then outstanding Public Shares, which redemption will
completely extinguish Public Stockholders' rights as stockholders (including the
right to receive further liquidating distributions, if any), and (iii) as
promptly as reasonably possible following such redemption, subject to the
approval of the remaining stockholders and the board of directors, liquidate and
dissolve, subject in each case to the Company's obligations under Delaware law
to provide for claims of creditors and the requirements of other applicable law.
56
Recent Events
On March 3, 2023, we held a special meeting of stockholders (the "Stockholder
Meeting"), in which our stockholders voted on the following proposals at the
Stockholder Meeting, each of which were approved.
? Proposal 1. To approve and adopt an amendment to our Certificate of
Incorporation (the "Extension Amendment") to (i) change the date by which we
must consummate a business combination from March 18, 2023 to June 18, 2023
(the "Extended Date"), and (ii) to allow us, without another stockholder vote,
by resolution of our board, to elect to further extend this date in one-month
increments (the "Additional Extended Date"), up to four additional times (the
"Extension Amendment Proposal").
? Proposal 2. To approve and adopt an amendment to our Certificate of
Incorporation to provide for the right of a holder of Class B common stock of
the Company to convert into Class A common stock on a one-for-one basis prior
to the closing of a business combination at the election of the holder (the
"Founder Share Amendment Proposal").
? Proposal 3. To approve and adopt an amendment to our Certificate of
Incorporation to delete: (i) the limitation that the Company shall not
consummate a business combination if it would cause the Company's net tangible
assets to be less than $5,000,001; and (ii) the limitation that the Company
shall not redeem public shares that would cause the Company's net tangible
assets to be less than $5,000,001 following such redemptions (the "Redemption
Limitation Amendment Proposal").
On March 10, 2023, we filed amendments to our Certificate of Incorporation to
reflect the proposals. The amendments to our Certificate of Incorporation were
filed with a Current Report on Form 8-K filed on March 10, 2023.
In connection with the Extension Amendment, 15,098,178 shares of our Company's
issued and outstanding Class A common stock were redeemed for cash at a
redemption price of approximately $10.1498 per share, for an aggregate
redemption amount of approximately $153.24 million. Immediately following such
redemptions, 7,135,509 shares of the Company's Class A common stock remained
outstanding and approximately $72.42 million remained in our Trust Account
before the deposit of funds by us as described in the following paragraph.
Also, in connection with approval of the Extension Amendment and the extension
of the date by which we must consummate a business combination to June 18, 2023,
we caused $750,000, or approximately $0.1051 per share of the Company's Class A
common stock outstanding after giving effect to the redemptions disclosed above,
to be deposited in the Trust Account. Such funds were provided by Infinite
Acquisitions LLLP, a Nevada limited liability limited partnership and currently
the holder of the majority of the equity in Falcon's ("Infinite"), pursuant to
the Promissory Note described below.
Without approval of our holders of our Public Shares, we may, by resolution of
the Board, if requested by the Sponsor, and upon 2 business days' advance notice
prior to the Extended Date or Additional Extended Date, as applicable, extend
the Extended Date up to four additional times until October 18, 2023, or a total
of up to seven months after the Current Outside Date, provided that we deposit
into the Trust Account, for each such additional month, an amount determined by
multiplying $0.05 by the number of public shares then outstanding, up to a
maximum of $250,000, which the Company shall deposit into the trust account at
the beginning of each month (the "Monthly Deposit"), for an aggregate deposit of
up to $1.75 million (if all additional extensions are exercised). For so long as
the Merger Agreement has not been terminated in accordance with its terms and
the Business Combination has not been consummated, our Board will extend the
Extended Date for the next calendar month.
We have entered into an unsecured promissory note (the "Promissory Note") with
Infinite, whereby Infinite agreed to lend the Company up to $2 million for the
sole purpose of paying the fees and expenses of the Company or the Sponsor
incurred or committed to be incurred in furtherance of the Extension, which
amount would be sufficient to fund up to approximately $1.5 million of the
Company's potential additional deposits into the trust account. The Promissory
Note is non-interest bearing and repayable in cash, or, at Pubco's option, in
shares of Pubco Class A Common Stock at a conversion price of $10.00 per share,
at the effective time of the Business Combination and will be forgiven without
payment if the Merger Agreement is terminated. Any additional deposits into the
trust account beyond the amount covered under the Promissory Note are expected
to be funded from the Company's working capital account, which may be funded by
working capital loans from our Sponsor, that would either be repaid upon
consummation of a business combination or, at the Sponsor's discretion, be
converted into warrants of the post business combination entity at a price of
$1.50 per warrant.
57
Proposed Business Combination
On January 31, 2023, the Company entered into an Amended and Restated Agreement
and Plan of Merger (as the same may be further amended, modified, supplemented
or waived from time to time, the "Merger Agreement"), by and among the Company,
Falcon's Beyond Global, LLC, a Florida limited liability company ("Falcon's"),
Falcon's Beyond Global, Inc., a Delaware corporation and wholly owned subsidiary
of Falcon's which was formerly known as Palm Holdco, Inc. ("Pubco"), and Palm
Merger Sub, LLC, a Delaware limited liability company and a wholly owned
subsidiary of Pubco ("Merger Sub"). The Merger Agreement amended and restated
the Agreement and Plan of Merger, dated July 11, 2022, by and among the Company,
Falcon's, Pubco and Merger Sub (as amended by that certain Amendment No. 1 to
Agreement and Plan of Merger, dated September 13, 2022 as previously disclosed
in the Current Report on Form 8-K filed by the Company with the Securities
Exchange Commission on September 16, 2022, the "Original Merger Agreement").
If the transactions contemplated by the Merger Agreement are completed, the
business combination will be effected in two steps: (a) at 8:01 a.m., New York
City time, on the date immediately following the Closing Date (the "SPAC Merger
Effective Time"), the Company will merge with and into Pubco (the "SPAC
Merger"), with Pubco surviving as the sole owner of Merger Sub, followed by a
contribution by Pubco of all of its cash (except for cash required to pay
certain transaction expenses) to Merger Sub to effectuate the "UP-C" structure;
and (b) at 8:02 a.m., New York City time, on the date immediately following the
SPAC Merger (the "Acquisition Merger Effective Time"), Merger Sub will merge
with and into Falcon's (the "Acquisition Merger," and collectively with the SPAC
Merger, the "Business Combination"), with Falcon's as the surviving entity of
such merger. Following the consummation of the transactions contemplated by the
Merger Agreement (the "Closing"), the direct interests in Falcon's will be held
by Pubco and the holders of the limited liability company units of Falcon's (the
"Falcon's Units") outstanding as of immediately prior to the Business
Combination.
The Merger Agreement provides that, among other things and upon the terms and
subject to the conditions thereof, the following transactions will occur:
(i) On the date that is three business days after the date on which all
conditions to Closing have been satisfied or waived by the applicable parties
(other than those conditions which can be satisfied only at the Closing, but
subject to the satisfaction or waiver of such conditions at Closing) or such
other time and place as may be agreed by Falcon's and the Company (the "Closing
Date"), each share of Class B common stock will convert into one share of Class
A common stock (such conversion, the "Class B Exchange") and shares of Class A
common stock for which redemption rights were exercised will be redeemed.
(ii) At the SPAC Merger Effective Time, (a) first, each Unit outstanding
immediately prior to the SPAC Merger Effective Time will be automatically
separated and the holder thereof will be deemed to hold one share of Class A
common stock and one-quarter of one warrant; (b) second, (1) each current share
of Class A common stock (except for each share of Class A common stock converted
from the Class B common stock pursuant to the Class B Exchange) will
automatically be cancelled and cease to exist in exchange (the "Conversion") for
the right to receive (x) 0.5 shares of Pubco's Class A common stock, par value
$0.0001 per share (the "Pubco Class A Common Stock") and 0.5 shares of Series A
Preferred Stock of Pubco (the "Pubco Series A Preferred Stock") and (y) 50% of
the Additional SPAC Share Consideration (as defined in the Merger Agreement);
(2) each share of Class A common stock converted from the Class B common stock
pursuant to the Class B Exchange will automatically be cancelled and cease to
exist in exchange for the right to receive (A) one newly issued share of Pubco
Class A Common Stock and (B) the applicable portion of any Earnout Shares (as
defined in the Merger Agreement); and (3) each warrant of the Company
outstanding immediately prior to the SPAC Merger Effective Time will be assumed
by Pubco on substantially the same terms as were in effect immediately prior to
the SPAC Merger Effective Time.
(iii) Immediately prior to the Acquisition Merger Effective Time, following the
SPAC Merger, Pubco will contribute to Merger Sub all of the Closing Surviving
Corporation Cash (as defined in the Merger Agreement).
(iv) At the Acquisition Merger Effective Time, (a) each issued and outstanding
Falcon's Unit (other than the Cancelled Units and Falcon's Financing Units (each
as defined below)) will be converted into the right to receive (x) a number of
shares of Pubco's non-economic Class B common stock, par value $0.0001 per share
("Pubco Class B Common Stock"), and a number of limited liability company
interests of Falcon's (the "New Falcon's Units"), in each case equal to the
Acquisition Merger Exchange Number (as defined in the Merger Agreement) (the
"Per Unit Consideration") and (y) the applicable portion of any Earnout Shares
and Earnout Units (as defined in the Merger Agreement); (b) each Falcon's Unit
issued in connection with the subscription for and purchase of Falcon's Units by
Infinite Acquisitions LLLP (the "Falcon's Financing Units") will be converted
into the right to receive (x) the Per Unit Consideration and (y) a number of
shares of non-economic Pubco Class B Common Stock and a number of New Falcon's
Units, in each case equal to the Additional Consideration Number (as defined in
the Merger Agreement; (c) each Falcon's Unit held in treasury of Falcon's as of
immediately prior to the Acquisition Merger Effective Time (collectively, the
"Cancelled Units") will be cancelled without any conversion and no payment or
distribution will be made with respect to such Cancelled Units; (d) the units of
Merger Sub that are issued and outstanding will be converted into and become (x)
a number of New Falcon's Units equal to the number of shares of Pubco Class A
Common Stock outstanding immediately after the SPAC Merger, (y) a number of
preferred units of Falcon's equal to the number of shares of Pubco Series A
Preferred Stock outstanding immediately after the SPAC Merger and (z) a number
of warrant units of Falcon's equal to the number of warrants of Pubco
outstanding immediately after the SPAC Merger, in each case of the foregoing
clauses (x) through (z) after giving effect to the redemption of any shares of
common stock of the Company in connection with the exercise of redemption
rights, the Class B Exchange and the Conversion.
58
The Merger Agreement provides for the following changes from the Original Merger
Agreement:
? Changes to Acquisition Merger Consideration: The number of shares of Pubco
Class B Common Stock and New Company Units to be issued in exchange for
current Falcon's Units (excluding Falcon's Financing Units) in the
Acquisition Merger was reduced from 88,653,263 to 48,587,077.
? EBITDA and Revenue Earnouts: In addition to the 40 million Seller Earnout
Shares earned based on the Pubco Common Share Price provided for in the
Original Merger Agreement, the holders of Falcon's Units immediately
before the Closing (other than the holders of Falcon's Financing Units in
their capacity as holders of Falcon's Financing Units) will now be
entitled to receive a pro rata portion of a total of up to 40 million
additional Seller Earnout Shares based on Pubco's achievement of specified
EBITDA and revenue targets in 2023 and 2024. Up to 2% of the 80 million
Seller Earnout Shares will be allocated to each of Sponsor and Jefferies
LLC if they are earned.
? Changes to Sponsor Consideration:
80% of the founder shares held by the Sponsor are now subject to
forfeiture pro rata based on the amount of funds available at the
Acquisition Merger Closing that are primarily sourced by SPAC and the
Sponsor (including funds in the Trust Account after redemptions) (the
"SPAC Capital Received"), measured against a target amount of
$222,336,870; provided the Sponsor will retain a minimum of 1,250,000
founder shares. The Sponsor will continue to forfeit the remaining 20%
of its founder shares, but will now have the opportunity to earn them
back (as well as any shares forfeited based on SPAC Capital Received)
based on achievement of the Pubco Common Share Price, Pubco revenue and
Pubco EBITDA earnout targets.
The Sponsor further agreed to forfeit 50% of its private placement
warrants if SPAC Capital Received is less than $50 million and to amend
the Warrant Agreement to provide that its private placement warrants
are redeemable (subject to the concurrent redemption of other warrants)
at a redemption price of $0.01 per warrant if the Reference Value (as
defined below) is at least $18 per share (the "Warrant Agreement
Amendment"). "Reference Value" means the last reported sales price of
the shares of SPAC Class A Common Stock for any twenty (20) trading
days within the thirty (30) trading-day period ending on the third
trading day prior to the date on which notice of the redemption is
given.
? Extension: SPAC agreed to take certain actions to extend the date by which
it has to complete a Business Combination to October 18, 2023 (the
"Extension"). Infinite agreed to fund up to $2,000,000 of expenses related
to the Extension pursuant to a promissory note, described in more detail
above.
? Termination: The Termination Date was extended from April 11, 2023 to
September 30, 2023. SPAC's termination right if fails to deliver its
audited financial statements by a specified date was eliminated.
Termination rights in favor of SPAC were added in the case where Infinite
defaults under the Promissory Note or if Falcon's enters into certain
specified interim financing arrangements (the "Interim Financing
Termination"). Mutual termination rights were added in the case where,
following a cure period, SPAC is not listed on an approved exchange or is
in default of the listing requirements of the exchange it is listed on
(the "Delisting Termination") or if the closing condition related to the
listing of Pubco shares on an approved exchange is not satisfied following
the satisfaction of all other closing conditions (the "Pubco Listing
Termination").
Termination Fee: SPAC will be entitled to a termination fee of $12,500,000
(minus 50% of any amounts funded by Infinite under the Promissory Note) at
the time of termination if the A&R Merger Agreement is terminated for any
reason specified in the Merger Agreement other than: (i) mutual agreement
of Falcon's and SPAC; (ii) SPAC's breach of the Merger Agreement in a
manner that causes the failure of a condition to Closing under the Merger
Agreement (when Falcon's is not also in breach); (iii) the consummation of
either Merger is permanently enjoined or prohibited by the terms of a
final, non-appealable Governmental Order or other Law if the final,
non-appealable Governmental Order or other Law is generally applicable to
all special purpose acquisition companies or primarily caused by any
action or inaction of SPAC; (iv) the SPAC Stockholder Approval is not
obtained at the Special Meeting; (v) if the SPAC board changes its
recommendation to stockholders or fails to recommend the Merger in the
proxy statement; (vi) pursuant to the Delisting Termination; or (vii)
failure to close by the Termination Date or two days after the Special
Meeting (when the Falcon's is not in breach). In addition, no termination
fee will be payable at any time Falcon's could terminate the Merger
Agreement pursuant to the Delisting Termination or because of SPAC's
breach of the Merger Agreement in a manner that causes the failure of a
condition to Closing under the Merger Agreement. The termination fee will
be reduced by 50% and payable at any time within 12 months of termination
instead of at the time of termination if the Merger Agreement is
terminated pursuant to the Interim Financing Termination or the Pubco
Listing Termination, or is terminated at a time when SPAC or Falcon's
could terminate the Merger Agreement pursuant to the Pubco Listing
Termination.
59
? Alternative Financing: SPAC may enter into one or more agreements with any
investor to effect certain Pre-Approved Financing Arrangements (as defined
in the Merger Agreement) without any consent or approval required from
Falcon's.
The Merger Agreement also makes certain technical and other changes to the
Original Merger Agreement. The foregoing description of the Merger Agreement
does not purport to be complete and is qualified in its entirety by the terms
and conditions of the Merger Agreement, a copy of which is attached hereto as
Exhibit 2.1 and is incorporated herein by reference. The Merger Agreement
contains representations, warranties, and covenants that the parties to the
Merger Agreement made to each other as of the date of the Merger Agreement or
other specific dates. The assertions embodied in those representations,
warranties, and covenants were made for purposes of the contract among the
parties and are subject to important qualifications and limitations agreed to by
the parties in connection with negotiating the Merger Agreement. The Merger
Agreement has been attached to provide investors with information regarding its
terms and is not intended to provide any other factual information about the
Company, Falcon's, Pubco or any other party to the Merger Agreement. In
particular, the representations, warranties, covenants and agreements contained
in the Merger Agreement, which were made only for purposes of the Merger
Agreement and as of specific dates, were solely for the benefit of the parties
to the Merger Agreement, may be subject to limitations agreed upon by the
contracting parties (including being qualified by confidential disclosures made
for the purposes of allocating contractual risk between the parties to the
Merger Agreement instead of establishing these matters as facts) and may be
subject to standards of materiality applicable to the contracting parties that
differ from those applicable to investors and reports and documents filed with
the SEC. Investors should not rely on the representations, warranties,
covenants, and agreements, or any descriptions thereof, as characterizations of
the actual state of facts or condition of any party to the Merger Agreement. In
addition, the representations, warranties, covenants, and agreements and other
terms of the Merger Agreement may be subject to subsequent waiver or
modification. Moreover, information concerning the subject matter of the
representations and warranties and other terms may change after the date of the
Merger Agreement, which subsequent information may or may not be fully reflected
in SPAC's public disclosures.
On January 31, 2023, in connection with the Merger Agreement, our Sponsor, SPAC,
Falcon's and Pubco entered into an Amended and Restated Sponsor Support
Agreement whereby, among other things, our Sponsor agreed (i) to exchange its
shares of SPAC Class B Common Stock for shares of SPAC Class A Common Stock in
accordance with SPAC's amended and restated certificate of incorporation such
that, prior to the SPAC Merger Effective Time, there shall cease to be
outstanding any shares of SPAC Class B Common Stock, (ii) to forfeit a portion
of its founder shares and private placement warrants to the extent and as
described above and (iii) to support the Warrant Agreement Amendment.
In addition, SPAC and Infinite entered into a promissory note (the "Promissory
Note") pursuant to which Infinite agreed to advance up to $2,000,000 to the
Company, with any advances under the Promissory Note to be used by SPAC to pay
certain expenses of the Extension. The Promissory Note is non-interest bearing
and repayable, in cash, or, at Pubco's option, in shares of Pubco Class A Common
Stock at a conversion price of $10.00 per share, at the effective time of the
Acquisition Merger and will be forgiven without payment if the Merger Agreement
is terminated.
Additional information regarding Falcon's and the Business Combination is
available in the proxy statement/prospectus most recently filed by Pubco with
the SEC on February 14, 2023.
Going Concern Considerations
As of December 31, 2022, we had approximately $552,000 in our operating bank
account and a working capital deficit of approximately $2.1 million (not taking
into account approximately $93,000 of tax liabilities that may be withdrawn from
the Trust Account and excluding the working capital loan -related party).
Our liquidity needs prior to the consummation of the Initial Public Offering
were satisfied through the payment of $25,000 from the Sponsor to cover for
certain offering costs on the Company's behalf in exchange for issuance of
Founder Shares (as defined in Note 4), and loan proceeds from the Sponsor of
$100,000 under the Note (as defined in Note 4). We repaid the Note in full upon
closing of the Initial Public Offering. Subsequent to the consummation of the
Initial Public Offering, our liquidity through December 31, 2022 has been
satisfied through the net proceeds from the consummation of the Initial Public
Offering and the Private Placement held outside of the Trust Account and the
proceeds from the Working Capital Loan of $600,000. In July 2022, we received
another $500,000 under the Working Capital Loan from our Sponsor, for a total of
$1.1 million of outstanding principal balance. At any time on or prior to the
consummation of the Business Combination, at the option of the lender, any
outstanding amount of the Working Capital Loan may be converted into warrants of
the post-Business Combination entity at a price of $1.50 per warrant. The
warrants would be identical to the Private Placement Warrants.
60
In connection with our management's assessment of going concern considerations
in accordance with FASB ASC 205-40, "Presentation of Financial Statements -
Going Concern," management has determined that mandatory liquidation, liquidity
condition and subsequent dissolution raise substantial doubt about our ability
to continue as a going concern. Our management intends to complete the proposed
Business Combination with Falcon's within the Combination Period. Our Sponsor
continues to have cash on hand that could be available for loans to us. Our
Sponsor has no obligation to provide further funding to us. Our management
believes we could obtain additional funding from our Sponsor.
No adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after June 18, 2023. The financial statements
do not include any adjustment that might be necessary if we are unable to
continue as a going concern.
Risks and Uncertainties
Our management continues to evaluate the impact of the COVID-19 pandemic and has
concluded that the specific impact is not readily determinable as of the date of
the financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action
with the country of Ukraine. As a result of this action, various nations,
including the United States, have instituted economic sanctions against the
Russian Federation and Belarus. Further, the impact of this action and related
sanctions on the world economy are not determinable as of the date of these
financial statements and the specific impact on our financial condition, results
of operations, and cash flows is also not determinable as of the date of these
financial statements.
On August 16, 2022, the Inflation Reduction Act of 2022 (the "IR Act") was
signed into federal law. The IR Act provides for, among other things, a new U.S.
federal 1% excise tax on certain repurchases of stock by publicly traded U.S.
domestic corporations and certain U.S. domestic subsidiaries of publicly traded
foreign corporations occurring on or after January 1, 2023. The excise tax is
imposed on the repurchasing corporation itself, not its shareholders from which
shares are repurchased. The amount of the excise tax is generally 1% of the fair
market value of the shares repurchased at the time of the repurchase. However,
for purposes of calculating the excise tax, repurchasing corporations are
permitted to net the fair market value of certain new stock issuances against
the fair market value of stock repurchases during the same taxable year. In
addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the "Treasury") has been given authority to provide regulations and
other guidance to carry out and prevent the abuse or avoidance of the excise
tax. Any share redemption or other share repurchase that occurs after December
31, 2022, in connection with a business combination, extension vote or
otherwise, may be subject to the excise tax. Whether and to what extent the
Company would be subject to the excise tax in connection with a business
combination, extension vote or otherwise will depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in
connection with the business combination, extension or otherwise, (ii) the
structure of a business combination, (iii) the nature and amount of any "PIPE"
or other equity issuances in connection with a business combination (or
otherwise issued not in connection with a business combination but issued within
the same taxable year of a business combination) and (iv) the content of
regulations and other guidance from the Treasury. In addition, because the
excise tax would be payable by the Company and not by the redeeming holder, the
mechanics of any required payment of the excise tax have not been determined.
The foregoing could cause a reduction in the cash available on hand to complete
a business combination and in the Company's ability to complete a business
combination. On December 27, 2022, the Treasury Department and Internal Revenue
Service ("IRS") issued a Notice 2023-2 ("Notice"), which provided interim
guidance regarding the application of the corporate stock repurchase excise tax
until the issuance of proposed regulations. The Notice excluded the
distributions complete liquidation of a corporation from the base of the excise
tax. The Notice also excludes from the scope of the excise tax any distribution
made during the taxable year in which a corporation fully liquidates and
dissolves, even if a distribution precedes the formal decision to liquidate.
Results of Operations
Our entire activity from inception to the Initial Public Offering was in
preparation for our formation and the Initial Public Offering, and since the
Initial Public Offering our search for an initial business combination and
actions in furtherance of the proposed business combination described above
under "-Overview-Proposed Business Combination". We will not be generating any
operating revenues until the closing and completion of our initial business
combination, at the earliest.
For the year ended December 31, 2022, we had net income of approximately
$589,000, which consisted of approximately $2.1 million of a non-operating gain
resulting from the change in fair value of derivative warrant liabilities,
approximately $5,000 of change in fair value of working capital loan and
approximately $3.2 income from investments held in Trust Account, partially
offset by approximately $3.7 million of general and administrative expenses,
$180,000 of general and administrative expenses - related party, approximately
$200,000 for franchise tax expenses and approximately $592,000 of income tax
expense.
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On March 10, 2023, 15,098,178 shares of the Company's issued and outstanding
Class A common stock were redeemed for cash at a redemption price of
approximately $10.1498 per share, for an aggregate redemption amount of
approximately $153.24 million. Following such redemptions, 7,135,509 shares of
the Company's Class A common stock remain outstanding and approximately $72.42
million remained in the Company's trust account before the deposit of funds by
the Company in the amount of $750,000, or approximately $0.1051 per share of the
Company's Class A common stock outstanding after giving effect to the
redemptions.
For the year ended December 31, 2021, we had an income of approximately $3.5
million, which consisted of approximately $4.9 million of non-operating gain
resulting from the change in fair value of derivative warrant liabilities and
approximately $44,000 of income from investments held in Trust Account, offset
by approximately $675,000 of general and administrative expenses, $150,000 of
general and administrative expenses - related party, approximately $200,000 for
franchise tax expenses and approximately $456,000 of financing costs -
derivative warrant liabilities.
Contractual Obligations
Registration Rights
The holders of Founder Shares, Private Placement Warrants and warrants that may
be issued upon conversion of Working Capital Loans, if any (and any shares of
Class A common stock issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital
Loans and upon conversion of the Founder Shares), were entitled to registration
rights pursuant to a registration rights agreement. These holders were entitled
to certain demand and "piggyback" registration rights. We will bear the expenses
incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The underwriter was entitled to an underwriting discount of $0.20 per unit, or
$4.0 million in the aggregate, paid upon the closing of the Initial Public
Offering. $0.35 per unit, or $7.0 million in the aggregate will be payable to
the underwriter for deferred underwriting commissions. The deferred fee will
become payable to the underwriter from the amounts held in the Trust Account
solely in the event that we complete a Business Combination, subject to the
terms of the underwriting agreement.
In connection with the consummation of the Over-Allotment on March 26, 2021, the
underwriters were entitled to an additional fee of approximately $447,000 paid
upon closing, and an approximately $782,000 in deferred underwriting
commissions.
Notwithstanding the foregoing, if the proposed business combination described
above under "-Overview-Proposed Business Combination" is consummated, the
underwriter will be entitled to deferred underwriting commissions totaling
$7,775,000, such amount being held in the Trust Fund until the consummation of
such business combination.
Such amounts will not be adjusted to account for redemptions of the Company's
Class A common stock by the public stockholders. Accordingly, the amount of
effective total underwriting commissions as a percentage of the aggregate
proceeds from the Initial Public Offering will increase as the number of shares
of Class A common stock redeemed increases.
Consulting Agreement
On June 13, 2022, we engaged a contractor (the "Contractor") to perform
technical diligence in exchange for a cash consideration of $125,000, with
$50,000 paid upon execution and $75,000 payable upon the consummation of the
Business Combination, and our Sponsor's agreement to issue membership interest
in the Sponsor that, in aggregate, represent an indirect economic interest in
25,000 Founder Shares of our company, upon completion of the services. The grant
date fair value of the Sponsor membership interests issued to the Contractor is
compensation expense for us, and a contribution from our Sponsor to us for the
same amount and would be recognized upon completion of the services by the
Contractor. Management estimated that the grant date fair value of the indirect
economic interest in 25,000 Founder Shares was de minimis.
Promissory Note with Infinite Acquisitions LLLP
On March 10, 2023, the Company caused $750,000, or approximately $0.1051 per
share of the Company's Class A common stock outstanding after giving effect to
the redemptions disclosed above under "-Overview-Charter Amendments and
Redemptions", to be deposited in the Company's Trust Account. Such funds were
provided by Infinite Acquisitions LLLP pursuant to the Promissory Note described
in the proxy statement for the special meeting of stockholders of the Company
that was filed with the Securities and Exchange Commission on February 10, 2023.
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Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:
Investments Held in Trust Account
Our portfolio of investments is comprised of 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 investments in money market funds that invest
in U.S. government securities and generally have a readily determinable fair
value, or a combination thereof. When the investments held in the Trust Account
are comprised of U.S. government securities, the investments are classified as
trading securities. When the investments held in the Trust Account are comprised
of money market funds, the investments are recognized at fair value. Trading
securities and investments in money market funds are presented on the balance
sheets at fair value at the end of each reporting period. Gains and losses
resulting from the change in fair value of these securities is included in
income earned from investments held in Trust Account in the accompanying
statement of operations. The estimated fair values of investments held in the
Trust Account are determined using available market information.
Working Capital Loan - Related Party
We have elected the fair value option to account for its working capital
loan-related party with our Sponsor. As a result of applying the fair value
option, we record each draw at fair value with a gain or loss recognized at
issuance, and subsequent changes in fair value are recorded as change in the
fair value of working capital loan-related party on the statements of
operations. The fair value is based on prices or valuation techniques that
require inputs that are both unobservable and significant to the overall fair
value measurement. These inputs reflect management's and, if applicable, an
independent third-party valuation firm's own assumption about the assumptions a
market participant would use in pricing the asset or liability.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
ASC Topic 815, "Derivatives and Hedging" ("ASC 815"). The classification of
derivative instruments, including whether such instruments should be recorded as
liabilities or as equity, is re-assessed at the end of each reporting period.
We account for the warrants issued in connection with its Initial Public
Offering and the Private Placement Warrants as derivative warrant liabilities in
accordance with ASC 815. Accordingly, we recognize the warrant instruments as
liabilities at fair value and adjust the instruments to fair value at each
reporting period. The liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in the
statement of operations. The fair value of the Public Warrants issued in
connection with the Initial Public Offering and Private Placement Warrants were
initially measured at fair value using a Monte Carlo simulation model and
subsequently, the fair value of the Private Placement Warrant was estimated
using a Monte Carlo simulation model, and as of December 31, 2022, the Private
Warrant was estimated by a Black-Scholes Merton model. The fair value of Public
Warrants issued in connection with the Initial Public Offering have subsequently
been measured based on the listed market price of such warrants. The
determination of the fair value of the warrant liability may be subject to
change as more current information becomes available and accordingly the actual
results could differ significantly. Derivative warrant liabilities are
classified as non-current liabilities as their liquidation is not reasonably
expected to require the use of current assets or require the creation of current
liabilities.
63
Class A Common Stock Subject to Possible Redemption
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 shares of 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 are classified as stockholders' equity. Our Class A common stock feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future events. Accordingly, at December 31,
2022 and 2021, 22,233,687 shares of Class A common stock subject to possible
redemption at the redemption amount were presented at redemption value as
temporary equity, outside of the stockholders' equity section of our balance
sheet.
As described above under "-Overview-Charter Amendments and Redemptions", on
March 10, 2023, 15,098,178 shares of the Company's issued and outstanding Class
A common stock were redeemed for cash. As a result, as of March 10, 2023,
7,135,509 shares of Class A common stock remain issued and outstanding and
subject to possible redemption.
Under ASC 480-10-S99, we have elected to recognize changes in the redemption
value immediately as they occur and adjust the carrying value of the security to
equal the redemption value at the end of each reporting period. This method
would view the end of the reporting period as if it were also the redemption
date for the security.
Effective with the closing of the Initial Public Offering and the exercise of
the over-allotment, we recognized the accretion from initial book value to
redemption amount, which resulted in charges against additional paid-in capital
(to the extent available) and accumulated deficit. Subsequently, the Company
recognized changes in the redemption value as an increase in redemption value of
Class A common stock subject to possible redemption as reflected on the
accompanying statements of changes in stockholders' deficit.
Net Income Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average shares of
common stock outstanding for the respective period.
The calculation of diluted net income (loss) per common stock does not consider
the effect of the warrants issued in connection with the Initial Public Offering
(including exercise of the over-allotment option) and the Private Placement to
purchase an aggregate of 9,856,247 shares of common stock in the calculation of
diluted income (loss) per share, because their exercise is contingent upon
future events. For the year ended December 31, 2022 we have considered the
effect of Class B shares of common stock that were excluded from the weighted
average number of basic shares outstanding as they were contingent on the
exercise of over-allotment option by the underwriters. Since the contingency was
satisfied, we have included these shares in the weighted average number as of
the beginning of the period to determine the dilutive impact of these shares.
Accretion associated with the redeemable Class A common stock is excluded from
earnings per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements
Off-Balance Sheet Arrangements
As of December 31, 2022 and 2021, we did not have any off-balance sheet
arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
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JOBS Act
The Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are 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 a result, the financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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