References to the "Company," "our," "us" or "we" refer to Fortress Value
Acquisition Corp. III. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited condensed 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 Quarterly Report on
Form 10-Q.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q includes, and oral statements made from time
to time by representatives of the Company may include, forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (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. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q. Factors that might cause or contribute to such
a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings. Forward-looking statements
in this Quarterly Report may include, for example, statements about:
•our ability to select an appropriate target business or businesses;
•our ability to complete our initial business combination;
•our expectations around the performance of the prospective target business or
businesses;
•our success in retaining or recruiting, or changes required in, our officers,
key employees or directors following our initial business combination;
•our officers and directors allocating their time to other businesses and
potentially having conflicts of interest with our business or in approving our
initial business combination;
•our potential ability to obtain additional financing to complete our initial
business combination;
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•our pool of prospective target businesses;
•our ability to consummate an initial business combination due to the
uncertainty resulting from the recent COVID-19 pandemic;
•the ability of our officers and directors to generate a number of potential
business combination opportunities;
•our public securities' potential liquidity and trading;
•the lack of a market for our securities;
•the use of proceeds not held in the Trust Account (as defined below) or
available to us from interest and dividend income on the Trust Account balance;
•the Trust Account not being subject to claims of third parties;
•our financial performance; and
•the other risks and uncertainties discussed in "Risk Factors".
The forward-looking statements contained in this Quarterly Report are based on
our current expectations and beliefs concerning future developments and their
potential effects on us. There can be no assurance that future developments
affecting us will be those that we have anticipated. These forward-looking
statements involve a number of risks, uncertainties (some of which are beyond
our control) or other assumptions that may cause actual results or performance
to be materially different from those expressed or implied by these
forward-looking statements. These risks and uncertainties include, but are not
limited to, those factors described under the heading "Item 1A. Risk Factors."
Should one or more of these risks or uncertainties materialize, or should any of
our assumptions prove incorrect, actual results may vary in material respects
from those projected in these forward-looking statements. We undertake no
obligation to update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise, except as may be required
under applicable securities laws.
Overview
We are a blank check company incorporated in Delaware on August 28, 2020, 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 to identify, acquire and operate a business that may
provide opportunities for attractive risk-adjusted returns. We are an emerging
growth company and, as such, we are subject to all of the risks associated with
emerging growth companies. Our sponsor is Fortress Acquisition Sponsor III LLC
(the "Sponsor").
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Our registration statement for the initial public offering (the "Initial Public
Offering") was declared effective on January 4, 2021. On January 7, 2021, we
consummated the Initial Public Offering of 23,000,000 units ("Units" and, with
respect to the Class A common stock included in the Units being offered, the
"Public Shares"), which included the issuance of 3,000,000 Units as a result of
the underwriters' exercise of their over-allotment option in full, at $10.00 per
Unit, generating gross proceeds of $230,000,000 and incurring offering costs of
$13,193,049, inclusive of $8,050,000 in deferred underwriting commissions. Each
Unit consists of one share of Class A common stock and one-fifth of one
redeemable warrant ("Public Warrant"). Each whole Public Warrant entitles the
holder to purchase one share of Class A common stock at an exercise price of
$11.50 per share, subject to adjustment.
Substantially concurrently with the closing of the Initial Public Offering, we
consummated a private placement ("Private Placement") of 5,066,667 warrants (the
"Private Placement Warrants" and together with the "Public Warrants", the
"Warrants"), at a price of $1.50 per Private Placement Warrant, with our
Sponsor, generating gross proceeds of $7,600,000.
Upon the closing of the Initial Public Offering and the sale of the Private
Placement Warrants, $230,000,000 ($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 Warrants was placed in a U.S.-based trust account (the "Trust
Account"), maintained by Continental Stock Transfer & Trust Company, acting as
trustee. The cash proceeds held in the Trust Account were subsequently invested
(i) in U.S. government treasury bills, within the meaning set forth in Section
2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), with a maturity of 185 days or less or (ii) 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. Consistent with our desire to comply with the terms of the
proposed safe harbor outlined in the 2022 Proposed Rule, we may elect to hold
such proceeds in a non-interest bearing account. If we make such an election,
the funds held in the Trust Account will not increase, which will limit the
funds available for payment of taxes and dissolution expenses or for
distribution to public stockholders.
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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, our Sponsor will not
be responsible to the extent of any liability for such third-party claims. The
Company will seek to reduce the possibility that our 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 February 22, 2021, we announced that, commencing February 25, 2021, the
holders of our Units may elect to separately trade the Class A common stock and
Public Warrants comprising the Units. Those Units not separated will continue to
trade on the New York Stock Exchange (the "NYSE") under the symbol "FVT.U", and
each of the shares of Class A common stock and Public Warrants that were
separated trade on the NYSE under the symbols "FVT" and "FVT WS", respectively.
Recent Developments
Special Meeting to allow early redemption and liquidation
Management continues to evaluate the impact of the COVID-19 pandemic and while
the virus could have an adverse effect on the future financial results, cash
flows and/or search for a target company, the specific impact is not readily
determinable as of the date of these unaudited condensed financial statements.
The unaudited condensed financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
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On November 1, 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 Amendment
Proposal") and (ii), an amendment to the Investment Management Trust Agreement,
dated January 4, 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 7, 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 7, 2023 to the later of (x) November 22,
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 November 23, 2022, if shareholders approve the Proposals. Additionally,
the last day of trading of the Public Shares will be November 22, 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,
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 Tuesday, November 22, 2022 at 9:00
a.m. Eastern Time, and the record date for the meeting is the close of business
(New York time) on October 27, 2022.
Pursuant to the amended and restated certificate, 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.
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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 three months ended September 30, 2022, we had net income of $1,437,600
which consisted of $1,037,199 in interest and dividend income and a non-cash
$773,333 decrease in fair value of warrant liabilities, partially offset by
$276,280 in general and administrative expenses, $50,411 in franchise tax
expense and $46,241 in provision for income taxes. General and administrative
expenses were primarily comprised of insurance expense, professional fees and
administrative fees.
For the nine months ended September 30, 2022, we had net income of $7,762,360
which consisted of $1,370,768 in interest and dividend income and a non-cash
$7,328,667 decrease in fair value of warrant liabilities, partially offset by
$737,676 in general and administrative expenses, $148,045 in franchise tax
expense and $51,354 in provision for income taxes. General and administrative
expenses were primarily comprised of insurance expense, professional fees and
administrative fees.
For the three months ended September 30, 2021, we had a net income of $3,309,154
which consisted of $307,395 in general and administrative expenses and $50,411
in franchise tax expense. These losses and expenses were partially offset by
$2,960 related to interest and dividend income and a non-cash $3,664,000
decrease in fair value of warrant liabilities. General and administrative
expenses were primarily comprised of professional fees.
For the nine months ended September 30, 2021, we had a net loss of $238,057
which consisted of a non-cash loss of $2,396,195 on the excess of fair value
over cash received for the Private Placement Warrants, $495,479 in offering
costs related to warrant liabilities, $4,793,265 in general and administrative
expenses and $149,589 in franchise tax expense. These losses and expenses were
partially offset by $21,750 related to interest and dividend income and a
non-cash $7,574,721 decrease in fair value of warrant liabilities. General and
administrative expenses were primarily comprised of professional fees.
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Liquidity and Capital Resources, Mandatory Redemption Date and Going Concern
As indicated in the accompanying unaudited condensed financial statements, as of
September 30, 2022, the Company had $202,881 in cash, $2,711,037 of accounts
payable and accrued expenses, $975,000 of notes payable (working capital loans),
$180,007 of other amounts due to affiliates and $30,546 of franchise tax
payable. As such, we do not believe we have sufficient liquidity to meet our
current and future estimated financial obligations. On February 28, 2022, our
Sponsor loaned us $175,000 through a note payable. If we complete a Business
Combination, we would repay the working capital loans out of the proceeds of the
Trust Account released to us. The working capital loans would either be repaid
without interest, or, at the lender's discretion, up to $1,500,000 of such
working capital loans may be convertible into warrants at a conversion price of
$1.50 per warrant of the post-business combination entity. The terms of the
warrants would be identical to the Private Placement Warrants. Our Sponsor or an
affiliate of our Sponsor, or certain of our officers and directors may, but are
not obligated to, provide additional working capital loans to us as may be
required. On April 11, 2022 and May 25, 2022, the Sponsor loaned the Company an
additional $650,000 and $150,000, respectively.
Additionally, 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 and dividends
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.
In the event the Proposals are not approved and we are unable to complete a
Business Combination by January 7, 2023, we will cease all operations except for
the purpose of winding up. In connection with our assessment of going concern
considerations in accordance with Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 205-40, "Presentation of Financial
Statements - Going Concern," the requirement to complete a Business Combination
by January 7, 2023 raises substantial doubt about our ability to continue as a
going concern. The unaudited condensed financial statements do not include any
adjustment that might be necessary if we were unable to continue as a going
concern. See section "Special Meeting to allow early redemption and liquidation"
above.
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Other Related Party Transactions
Founder shares
In September 2020, our Sponsor purchased an aggregate of 8,625,000 Founder
Shares for an aggregate purchase price of $25,000, or approximately $0.003 per
share. In November 2020, our Sponsor surrendered 2,875,000 Founder Shares to the
Company for no consideration, resulting in an aggregate of 5,750,000 shares of
Class F common stock being issued and outstanding. Our Sponsor agreed to forfeit
an aggregate of up to 750,000 Founder Shares to the extent that the
over-allotment option was not exercised in full by the underwriters. On January
7, 2021, the underwriters exercised their over-allotment option in full. As a
result, the 750,000 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, on a one-for-one basis, subject to
adjustment.
Notes payable-related party
Prior to the Initial Public Offering, our Sponsor loaned us an aggregate of
$61,000 to cover expenses related to the Initial Public Offering pursuant to a
promissory note. The promissory note was non-interest bearing, unsecured and due
on the earlier of July 31, 2021 and the closing of the Initial Public Offering.
We repaid the promissory note in full on January 6, 2021.
On February 28, 2022, our Sponsor loaned us $175,000 through a note payable. If
we complete a Business Combination, we may repay the working capital loans out
of the proceeds of the Trust Account released to us. The working capital loans
would either be repaid without interest, or, at the lender's discretion, up to
$1,500,000 of such working capital loans may be convertible into warrants at a
price of $1.50 per warrant of the post-business combination entity. The terms of
the warrants would be identical to the Private Placement Warrants. Our Sponsor
or an affiliate of our Sponsor, or certain of our officers and directors may,
but are not obligated to, loan us additional funds as may be required. On April
11, 2022 and May 25, 2022, our Sponsor loaned us an additional $650,000 and
$150,000, respectively, under similar terms discussed above.
Office space and related support services
During January 2021, we entered into an agreement with an affiliate of our
Sponsor to pay a monthly fee of $20,000 for office space and related support
services. Upon completion of the initial Business Combination or our
liquidation, we will cease paying these monthly fees. During the three and nine
months ended September 30, 2022, we incurred $60,000 and $180,000, respectively,
in expenses for services provided by an affiliate of our Sponsor in connection
with the aforementioned agreement. During the three and nine months ended
September 30, 2021, we incurred $60,000 and $177,419, respectively, in expenses
for services provided by an affiliate of our Sponsor in connection with the
aforementioned agreement. As of September 30, 2022, we have a payable to an
affiliate of the Sponsor for $180,000 in expenses for services.
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Contractual Obligations
Registration rights
The holders of the Founder Shares, Private Placement Warrants and 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 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 $8,050,000, 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.
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.
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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 FASB ASC Topic 480 "Distinguishing Liabilities
from Equity". Class A common stock subject to mandatory redemption (if any) is
classified as a liability instrument and is measured at fair value.
Conditionally redeemable Class A common stock (including Class A 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, 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,
as of September 30, 2022 and December 31, 2021, 23,000,000 shares of Class A
common stock subject to possible redemption at the redemption value were
presented as temporary equity, outside of the stockholders' equity section of
our condensed balance sheets.
Net income (loss) per common share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Remeasurement adjustment associated with the
redeemable shares of Class A common stock is excluded from earnings per share as
the redemption value approximates fair value.
Net income (loss) per common share, basic and diluted for Class A common stock
for the three and nine months ended September 30, 2022 were calculated by
dividing (i) the allocation of net income of $1,150,080 and $6,209,888,
respectively, by (ii) the weighted average number of shares of Class A common
stock outstanding for the respective periods.
Net income (loss) per common share, basic and diluted for Class F common stock
for the three and nine months ended September 30, 2022 were calculated by
dividing (i) the allocation of net income of $287,520 and $1,552,472,
respectively, by (ii) the weighted average number of shares of Class F common
stock outstanding for the respective periods.
Net income (loss) per common share, basic and diluted for Class A common stock
for the three and nine months ended September 30, 2021 were calculated by
dividing (i) the allocation of net income of $2,647,323 and net loss of
$190,446, respectively, by (ii) the weighted average number of shares of Class A
common stock outstanding for the respective periods.
Net income (loss) per common share, basic and diluted for Class F common stock
for the three and nine months ended September 30, 2021 were calculated by
dividing (i) the allocation of net income of $661,831 and net loss of $47,611,
respectively, by (ii) the weighted average number of shares of Class F common
stock outstanding for the respective periods.
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The Company has not considered the effect of the Warrants sold in the Initial
Public Offering (including the exercise of the over-allotment option) and
Private Placement to purchase an aggregate of 9,666,667 shares of Class A common
stock in the calculation of diluted net income (loss) per share, since the
exercise of the Warrants into Class A common shares is contingent upon the
occurrence of future events. As a result, diluted net income (loss) per common
share is the same as basic net income (loss) per common share for the periods
presented.
Warrant liabilities
The Company accounts for its outstanding Public Warrants and Private Placement
Warrants in accordance with the guidance contained in FASB ASC Subtopic 815-40,
"Derivatives and Hedging - Contracts in Entity's Own Equity" 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 remeasurement at
each balance sheet date and any change in fair value is recorded in the
Company's unaudited condensed statements of operations. One of the more
significant accounting estimates included in these unaudited condensed financial
statements is the determination of the fair value of the warrant liabilities.
Recent accounting pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting pronouncements, if currently adopted, would have a material effect on
our unaudited condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2022, 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 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 unaudited condensed financial
statements may not be comparable to companies that comply with public company
effective dates.
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