References to the "Company," "our," "us" or "we" refer to Fortress Value
Acquisition Corp. IV. 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 October 1, 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 Value Acquisition Sponsor IV
LLC (the "Sponsor").
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Our registration statement for the initial public offering (the "Initial Public
Offering") was declared effective on March 15, 2021. On March 18, 2021, we
consummated the Initial Public Offering of 60,000,000 units ("Units" and, with
respect to the Class A common stock included in the Units being offered, the
"Public Shares"), generating gross proceeds of $600,000,000 and incurring
offering costs of $33,573,792, inclusive of $21,000,000 in deferred underwriting
commissions. In April 2021, the underwriters exercised their over-allotment
option and purchased 5,000,000 Units to cover over-allotments made in the
Initial Public Offering generating additional gross proceeds of $50,000,000 and
incurring additional offering costs of $2,775,683, inclusive of $1,750,000 in
deferred underwriting commissions. Each Unit consists of one share of Class A
common stock and one-eighth 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 7,500,000 warrants (the
"Private Placement Warrants" and together with the "Public Warrants", the
"Warrants"), at a price of $2.00 per Private Placement Warrant, with our
Sponsor, generating gross proceeds of $15,000,000. In April 2021, substantially
concurrently with the sale of the over-allotment Units, the Company completed a
Private Placement with the Sponsor for an additional 500,000 Private Placement
Warrants at a price of $2.00 per Private Placement Warrant, generating
additional gross proceeds of $1,000,000.
Upon the closing of the Initial Public Offering, the exercise of the
over-allotment option and sale of the Private Placement Warrants, $650,000,000
($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 in (i) 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 May 3, 2021, we announced that, commencing May 6, 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 "FVIV.U", and each of the
shares of Class A common stock and Public Warrants that were separated trade on
the NYSE under the symbols "FVIV" and "FVIV WS", respectively.
Results of Operations
Since the Initial Public Offering, our activity has been limited to the search
for a prospective initial Business Combination, and we will not be generating
any operating revenues until the closing and completion of our initial Business
Combination. We expect to incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses in connection with completing a Business
Combination.
For the three months ended June 30, 2022, we had net income of $6,113,465 which
consisted of $877,654 in interest and dividend income and a non-cash $5,547,000
decrease in fair value of warrant liabilities, partially offset by $188,121 in
general and administrative expenses, $49,863 in franchise tax expense and
$73,205 in provision for income taxes. General and administrative expenses were
primarily comprised of insurance expense, professional fees and administrative
fees.
For the six months ended June 30, 2022, we had net income of $12,061,032 which
consisted of $942,836 in interest and dividend income and a non-cash $11,745,750
decrease in fair value of warrant liabilities, partially offset by $454,075 in
general and administrative expenses, $100,274 in franchise tax expense and
$73,205 in provision for income taxes. General and administrative expenses were
primarily comprised of insurance expense, professional fees and administrative
fees.
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For the three months ended June 30, 2021, we had net income of $6,147,897 which
consisted of $22,477 in interest and dividend income and a non-cash $6,566,896
decrease in fair value of warrant liabilities, partially offset by a non-cash
$25,000 loss on the excess of fair value over cash received for the Private
Placement Warrants, $64,527 in offering costs related to warrant liabilities,
$302,086 in general and administrative expenses and $49,863 in franchise tax
expense. General and administrative expenses were primarily comprised of
insurance expense and administrative fees.
For the six months ended June 30, 2021, we had net income of $6,198,447 which
consisted of $26,604 in interest and dividend income and a non-cash $9,220,012
decrease in fair value of warrant liabilities, partially offset by a non-cash
$1,667,551 loss on the excess of fair value over cash received for the Private
Placement Warrants, $903,175 in offering costs related to warrant liabilities,
$378,016 in general and administrative expenses and $99,427 in franchise tax
expense. General and administrative expenses were primarily comprised of
insurance expense and administrative fees.
Liquidity and Capital Resources, Mandatory Redemption Date and Going Concern
As indicated in the accompanying unaudited condensed financial statements, as of
June 30, 2022, the Company had $1,216,683 in cash, $419,266 of accounts payable
and accrued expenses, $36,210 of franchise tax payable and $73,205 of income tax
payable. However, we do not believe we have sufficient liquidity to meet our
future estimated financial obligations. Our Sponsor or an affiliate of our
Sponsor, or certain of our officers and directors may, but are not obligated to,
provide working capital loans ("Working Capital Loans") to us as may be
required. If we complete a Business Combination, we would repay the Working
Capital Loans out of the proceeds of the Trust Account released to us. The terms
of such Working Capital Loans, if any, have not been determined and no written
agreements exist with respect to such loans through June 30, 2022. 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 $2.00 per warrant of the post-business
combination entity. The terms of the warrants would be identical to the Private
Placement Warrants. There were no Working Capital Loans outstanding as of
June 30, 2022.
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.
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If we are unable to complete a Business Combination by March 18, 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's ("FASB") Accounting Standards Codification ("ASC")
205-40, "Presentation of Financial Statements - Going Concern," the requirement
to complete a Business Combination by March 18, 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.
Other Related Party Transactions
Founder shares
In October 2020, our Sponsor purchased an aggregate of 17,250,000 Founder Shares
for an aggregate purchase price of $25,000, or approximately $0.001 per share.
Our Sponsor agreed to forfeit an aggregate of up to 2,250,000 Founder Shares to
the extent that the over-allotment option was not exercised in full by the
underwriters. In April 2021, our Sponsor forfeited 1,000,000 Founder Shares as a
result of the underwriters' partial exercise of their over-allotment option. 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.
Note payable-related party
Prior to the Initial Public Offering, our Sponsor loaned us an aggregate of
$180,000 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 September 30, 2021 and the closing of the Initial Public
Offering. We repaid the promissory note in full on March 17, 2021.
Office space and related support services
During March 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 six months ended June 30,
2022, we incurred and paid $60,000 and $120,000, respectively, in expenses for
services provided by an affiliate of our Sponsor in connection with the
aforementioned agreement. During the three and six months ended June 30, 2021,
we incurred $60,000 and $70,323, respectively, in expenses for services provided
by an affiliate of our Sponsor in connection with the aforementioned agreement.
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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 $22,750,000, 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.
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) are
classified as liability instruments and are measured at fair value.
Conditionally redeemable Class A common stock (including Class A common stock
that feature redemption rights that are either within the control of the holder
or subject to redemption upon the occurrence of uncertain events not solely
within our control) are classified as temporary equity. At all other times,
Class A common stock is classified as stockholders' equity. Our Class A common
stock features certain redemption rights that are considered to be outside of
our control and subject to the occurrence of uncertain future events.
Accordingly, as of June 30, 2022 and December 31, 2021, 65,000,000 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.
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Net income (loss) per common share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". The Company's unaudited condensed statements of
operations include a presentation of net income (loss) per common share in a
manner similar to the two-class method of net income (loss) per common share.
Earnings and losses are shared pro-rata between the two classes of shares.
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 six months ended June 30, 2022 were calculated by dividing (i)
the allocation of net income of $4,890,772 and $9,648,826, 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 six months ended June 30, 2022 were calculated by dividing (i)
the allocation of net income of $1,222,693 and $2,412,206, 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 six months ended June 30, 2021 were calculated by dividing (i)
the allocation of net income of $4,918,317 and $4,937,706, 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 six months ended June 30, 2021 were calculated by dividing (i)
the allocation of net income of $1,229,580 and $1,260,741, respectively, by (ii)
the weighted average number of shares of Class F common stock outstanding for
the respective periods.
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 16,125,000 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.
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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 June 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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