References in this Quarterly Report on Form 10-Q (the "Quarterly Report") to
"we," "us," "our" or the "Company" refer to Fortistar Sustainable Solutions
Corp. References to our "management" or our "management team" refer to our
officers and directors, and references to the "Sponsor" refer to FSSC Sponsor
LLC. References to our "Initial Public Offering" are to our initial public
offering pursuant to the Registration Statement on Form S-1, declared effective
on January 26, 2021 and consummated on January 29, 2021. 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 Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act
that are not historical facts and involve risks and uncertainties that could
cause actual results to differ materially from those expected and projected. All
statements, other than statements of historical fact included in this Quarterly
Report including, without limitation, statements in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding the completion of the proposed Business Combination (as defined
below), the Company's financial position, business strategy and the plans and
objectives of management for future operations, are forward-looking statements.
Words such as "expect," "believe," "anticipate," "intend," "estimate," "seek"
and variations and similar words and expressions are intended to identify such
forward-looking statements. Such forward-looking statements relate to future
events or future performance, but reflect management's current beliefs, based on
information currently available. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements, including that the
conditions of the proposed Business Combination are not satisfied. For
information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements,
please refer to the Risk Factors section of the Company's Annual Report on Form
10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on March
30, 2022 and Item 1A of Part II of this Quarterly Report. The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
August 25, 2020 for the purpose of entering into a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination with one or more businesses (a "Business Combination"). We intend to
effectuate our Business Combination using cash from the proceeds of the Initial
Public Offering and the sale of the Private Placement Warrants, our capital
stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Special Meeting to allow early redemption and liquidation
On November 10, 2022, the Company filed a definitive proxy statement relating to
a special meeting of shareholders to approve (i) an amendment to the Company's
amended and restated certificate of incorporation (the "Charter") (the "Charter
Amendment Proposal") and (ii) an amendment to the Investment Management Trust
Agreement, dated January 29, 2021, by and between the Company and Continental
Stock Transfer & Trust Company, as trustee (the "Trust Amendment Proposal" and
together with the Charter Amendment Proposal, the "Proposals"), which would, if
implemented, allow the Company to redeem all of its outstanding Public Shares in
advance of the Company's contractual expiration date of January 29, 2023 by
changing the date by which the Company must cease all operations except for the
purpose of winding up if it fails to complete a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or similar business
combination (a "Business Combination") from January 29, 2023 to the later of (x)
December 2, 2022 or (y) the date of effectiveness of the second amended and
restated charter (the "Amended Termination Date").
If the Proposals are approved, and because the Company will not be able to
complete an initial Business Combination by the Amended Termination Date, the
Company will immediately after the special meeting, cease all operations, except
for the purpose of winding up and as promptly as reasonably possible, but not
more than ten business days thereafter, redeem all Public Shares (the "Mandatory
Redemption"). The Company expects to complete the Mandatory Redemption on or
around December 7, 2022, if shareholders approve the Proposals. Additionally,
the last day of trading of the Public Shares will be December 2, 2022, if
shareholders approve the Proposals.
As promptly as reasonably possible following such Mandatory Redemption, and
subject to the approval of the Company's then remaining stockholders and the
Board, in accordance with applicable law, the Company shall dissolve and
liquidate, subject in each case to the Company's obligations under the General
Corporation Law of the State of Delaware to provide for claims of creditors and
the requirements of other applicable law.
The virtual special meeting will be held on Friday, December 2, 2022 at 9:30
a.m. Eastern Time, and the record date for the meeting is the close of business
(New York time) on October 28, 2022.
Pursuant to the Charter, a public stockholder may request that the Company
redeem all or a portion of its Public Shares for cash if the Charter Amendment
Proposal is approved. Notwithstanding the foregoing, if the Charter Amendment
Proposal is approved, and because the Company will not be able to complete an
initial Business Combination by the Amended Termination Date, the Company will
be obligated to redeem all Public Shares as promptly as reasonably possible
after the Amended Termination Date. Therefore, no action is required by our
Public Stockholders to redeem their Public Shares. If the Proposals are
approved, the Public Shares will be automatically redeemed as part of the
Mandatory Redemption.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date.
Our only activities from August 25, 2020 (inception) through September 30, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, and identifying a target company for a
Business Combination. We do not expect to generate any operating revenues until
after the completion of our Business Combination. We generate non-operating
income in the form of interest income on marketable securities held in the Trust
Account and changes in fair value of the warrant liabilities. We incur expenses
as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a net income of $849,543,
which consists of changes in fair value of warrant liabilities of $139,621 and
interest earned on marketable securities held in the Trust Account of
$1,175,831, offset by operating costs of $229,484 and provision for income taxes
of $236,425.
For the nine months ended September 30, 2022, we had a net income of
$10,385,872, which consists of changes in fair value of warrant liabilities of
$9,826,953, reduction of deferred underwriter fee of $146,712 and interest
earned on marketable securities held in the Trust Account of $1,543,438, offset
by operating costs of $875,575 and provision for income taxes of $255,656.
For the three months ended September 30, 2021, we had a net income of
$7,195,214, which consists of changes in fair value of warrant liability of
$7,441,625 and interest earned on marketable securities held in Trust Account of
$3,330, offset by operating costs of $249,741.
For the nine months ended September 30, 2021, we had a net loss of $1,834,575,
which consists of transaction costs of $536,079, changes in fair value of
warrant liability of $603,375 and operating costs of $718,226, offset by
interest earned on marketable securities held in Trust Account of $23,105
Liquidity and Capital Resources
On January 29, 2021, we consummated the Initial Public Offering of 25,875,000
Units at $10.00 per Unit, generating gross proceeds of $258,750,000, which is
described in Note 3 to the condensed financial statements. Simultaneously with
the closing of the Initial Public Offering, we consummated the sale of 7,175,000
Private Placement Warrant at a price of $1.00 per Private Placement Warrant in a
private placement to the Sponsor, generating gross proceeds of $7,175,000, which
is described in Note 4.
Following the Initial Public Offering, the full exercise of the over-allotment
option, and the sale of the Private Units, a total of $258,750,000 was placed in
the Trust Account. We incurred $14,667,474 in Initial Public Offering related
costs, including $5,175,000 of underwriting fees $9,056,250 of deferred
underwriting fees and $436,224 of other offering costs.
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For the nine months ended September 30, 2022, cash used in operating activities
was $657,910. Net income of $10,385,872 was affected by changes in fair value of
warrant liabilities of $9,826,953, reduction of deferred underwriter fee of
$146,712 and interest earned on marketable securities held in the Trust Account
of $1,543,438. Changes in operating assets and liabilities provided $326,609 of
cash for operating activities.
For the nine months ended September 30, 2021, cash used in operating activities
was $856,955. Net loss of $1,834,575 was affected by interest earned on
marketable securities held in the Trust Account of $23,105, changes in warrant
liability of $603,375 and transaction costs allocable to warrant liability of
$536,079. Changes in operating assets and liabilities used $138,729 of cash for
operating activities.
As of September 30, 2022, we had marketable securities held in the Trust Account
of $260,322,011 (including $1,572,011 of interest income) consisting of U.S.
Treasury Bills with a maturity of 185 days or less. Interest income on the
balance in the Trust Account may be used by us to pay taxes. Through September
30, 2022, we have not withdrawn any interest earned from the Trust Account. On
October 27, 2022, we withdrew $360,000 of interest income from the Trust Account
to pay certain tax obligations.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account (less
income taxes payable), to complete our Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to
complete our Business Combination, the remaining proceeds held in the Trust
Account will be used as working capital to finance the operations of the target
business or businesses, make other acquisitions and pursue our growth
strategies.
As of September 30, 2022, we had cash of $3,365. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,000,000 of such loans may be convertible into warrants
at a price of $1.00 per warrant, at the option of the lender. The warrants would
be identical to the Private Placement Warrants.
Liquidity and Going Concern
We will need to raise additional capital through loans or additional investments
from our sponsor, stockholders, officers, directors, or third parties. Our
officers, directors and sponsor may, but are not obligated to, loan us funds,
from time to time or at any time, in whatever amount they deem reasonable in
their sole discretion, to meet our working capital needs. Accordingly, we may
not be able to obtain additional financing. If we are unable to raise additional
capital, we may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations,
suspending the pursuit of a potential transaction, and reducing overhead
expenses. We cannot provide any assurance that new financing will be available
to us on commercially acceptable terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Update ("ASU") 2014-15,
Disclosures of Uncertainties about an Entity's Ability to Continue as a Going
Concern," the Company has until January 29, 2023 to consummate a Business
Combination. It is uncertain that the Company will be able to consummate a
Business Combination by this time. If a Business Combination is not consummated
by this date and an extension has not been requested by the Sponsor and approved
by the Company's stockholders, there will be a mandatory liquidation and
subsequent dissolution of the Company. Management has determined that the
liquidity condition and mandatory liquidation raise substantial doubt about the
Company's ability to continue as a going concern. These financial statements do
not include any adjustments relating to the recovery of the recorded assets or
the classification of the liabilities that might be necessary should the Company
be unable to continue as a going concern. On November 10, 2022, the Company
filed a definitive proxy statement which contains proposals to (1) amend the the
Company's Charter by adopting the Charter Amendment Proposal and to (2) amend
the Trust Agreement, by and between the Company and Continental, pursuant to an
amendment to the Trust Agreement to change the date on which Continental must
commence liquidation of the trust account established in connection with the
Company's Initial Public Offering to the Amended Termination Date. The Company
is within 12 months of its mandatory liquidation date as of the time of this
Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2022. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of one of our executive officers a monthly fee of $10,000 for office
space, utilities and secretarial and administrative support. We began incurring
these fees on January 26, 2021 and will continue to incur these fees monthly
until the earlier of the completion of the Business Combination and our
liquidation.
The underwriters were entitled to a deferred fee of $0.35 per Unit, or
$9,056,250 in the aggregate at the closing of the Initial Public Offering. On
September 30, 2022, one of the underwriters waived its entitlement to the
payment of any deferred fee to be paid under the terms of the underwriting
agreement and is no longer serving in an advisor capacity. As a result, we
recognized $146,712 of income and $3,928,601 was recorded to additional paid-in
capital in relation to the reduction of the deferred underwriter fee in the
accompanying condensed financial statements. As of September 30, 2022 and
December 31, 2021, the deferred underwriting fee payable is $4,980,937 and
$9,056,250, respectively. The deferred fee will become payable to the
underwriters from the amounts held in the Trust Account solely in the event that
the Company completes a Business Combination, subject to the terms of the
underwriting agreement.
If the Proposals are approved, and because the Company will not be able to
complete an initial Business Combination by the Amended Termination Date, the
deferred underwriting commission will be included in the distribution of the
proceeds held in the Trust Account made to the public stockholders upon
liquidation in accordance with the terms of the underwriting agreement entered
into in connection with the Initial Public Offering. In connection with the
liquidation, the underwriters will forfeit any rights or claims to the deferred
underwriting commission.
Critical Accounting Policies/Estimates
The preparation of condensed 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:
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Warrant Liabilities
The Company accounts for its warrants in accordance with the guidance contained
in ASC 815-40-15-7D and 7F, under which the warrants do not meet the criteria
for equity treatment and must be recorded as liabilities. Accordingly, the
Company's classifies the warrants as liabilities at their fair value and adjusts
the warrants to fair value at each reporting period. This liability is subject
to re-measurement at each balance sheet date until exercised, and any change in
fair value is recognized in our condensed statements of operations.
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 ASC 480. Shares of Class A common stock subject
to mandatory redemption are classified as a liability instrument and are
measured at fair value. Conditionally redeemable common stock (including common
stock that features 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) is classified as temporary equity. At all other
times, 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 occurrence of uncertain future events. Accordingly,
shares of Class A common shares subject to possible redemption are presented as
temporary equity, outside of the stockholders' deficit section of our condensed
balance sheets.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of common shares outstanding during the period. We
apply the two-class method in calculating net income (loss) per common share.
Remeasurement associated with the redeemable shares of Class A common stock is
excluded from net income (loss) per common share as the redemption value
approximates fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update No. ("ASU") 2020-06 - "Contracts in Entity's Own
Equity (Subtopic 815-40) ("ASU 2020-06")", to simplify accounting for certain
financial instruments. ASU 2020-06 eliminates the current models that require
separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective for fiscal years beginning after December 15, 2023,
including interim periods within those fiscal years, with early adoption
permitted. The Company is currently assessing the impact, if any, that ASU
2020-06 would have on its financial position, results of operations or cash
flows.
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