References to the "Company," "our," "us" or "we" refer to Fortress Value
Acquisition Corp. II. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the 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.
Cautionary 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 Form 10-Q
including, without limitation, statements in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" regarding 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. 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 final prospectus for its Initial Public
Offering filed with the U.S. Securities and Exchange Commission (the "SEC"). 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 incorporated in Delaware on June 10, 2020 and
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 that the Company has not yet identified ("Business
Combination"). Although we may pursue an acquisition in any industry or
geography, we intend to capitalize on the ability of our management team and the
broader Fortress platform to identify, acquire and operate a business that may
provide opportunities for attractive risk-adjusted returns. Our sponsor is
Fortress Acquisition Sponsor II LLC (the "Sponsor").
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The registration statement for the Company's Initial Public Offering was
declared effective on August 11, 2020. On August 14, 2020, the Company
consummated its initial public offering (the "Initial Public Offering") of
34,500,000 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
4,500,000 Units as a result of the underwriters' exercise of their
over-allotment option in full, at $10.00 per Unit, generating gross proceeds of
$345.0 million and incurring offering costs of approximately $19.4 million,
inclusive of approximately $12.1 million in deferred underwriting commissions.
Substantially concurrently with the closing of the Initial Public Offering, the
Company consummated a private placement ("Private Placement") of 5,933,333
warrants (the "Private Placement Warrants"), at a price of $1.50 per Private
Placement Warrant, with the Sponsor, generating gross proceeds of $8.9 million.
Upon the closing of the Initial Public Offering and Private Placement, $345.0
million ($10.00 per Unit) of the aggregate net cash proceeds of the sale of the
Units in the Initial Public Offering and the Private Placement was placed in a
U.S.-based trust account ("Trust Account") at J.P. Morgan Chase Bank, N.A.,
maintained by Continental Stock Transfer & Trust Company, acting as trustee. The
cash proceeds held in the Trust Account were subsequently invested in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act, with a maturity of 185 days or less or in any open-ended
investment company that holds itself out as a money market fund selected by the
Company meeting certain conditions of Rule 2a-7 of the Investment Company Act,
as determined by the Company, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the funds held in the Trust
Account as described below.
In the event of such distribution, it is possible that the per share value of
the residual assets remaining available for distribution (including Trust
Account assets) will be only $10.00 per share initially held in the Trust
Account (or less than that in certain circumstances). In order to protect the
amounts held in the Trust Account, the Sponsor has agreed to be liable to the
Company, if and to the extent any claims by a third party for services rendered
or products sold to the Company, or a prospective target business with which the
Company has discussed entering into a transaction agreement, reduce the amount
of funds in the Trust Account. This liability will not apply with respect to any
claims by a third party who executed a waiver of any right, title, interest or
claim of any kind in or to any monies held in the Trust Account or to any claims
under the Company's indemnity of the underwriters of the Initial Public Offering
against certain liabilities, including liabilities under the Securities Act of
1933, as amended (the "Securities Act"). Moreover, in the event that an executed
waiver is deemed to be unenforceable against a third party, the Sponsor will not
be responsible to the extent of any liability for such third-party claims. The
Company will seek to reduce the possibility that the Sponsor will have to
indemnify the Trust Account due to claims of creditors by endeavoring to have
all third parties, service providers (other than the Company's independent
registered public accounting firm), prospective target businesses or other
entities with which the Company does business, execute agreements with the
Company waiving any right, title, interest or claim of any kind in or to monies
held in the Trust Account.
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On September 29, 2020, the Company announced that, commencing October 2, 2020,
the holders of the Company's units may elect to separately trade the Class A
common stock and warrants comprising the units. No fractional warrants will be
issued upon separation of the units and only whole warrants will trade. Those
units not separated will continue to trade on the New York Stock Exchange under
the symbol "FAII.U," and each of the shares of Class A common stock and warrants
that are separated will trade on the New York Stock Exchange under the symbols
"FAII" and "FAII WS," respectively.
Results of Operations
Since the Initial Public Offering, our activity has been limited to the search
for a prospective initial Business Combination, and we will not be generating
any operating revenues until the closing and completion of our initial Business
Combination. We expect to incur increased expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses in connection with completing a Business
Combination.
For the three months ended September 30, 2020, we had a net loss of $1,223,337,
which consisted of $12,336 in interest income, offset by $1,173,988 in general
and administrative expenses and $61,685 in franchise tax expense.
For the period from June 10, 2020 (inception) through September 30, 2020, we had
a net loss of $1,238,957, which consisted of $12,336 in interest income, offset
by $1,189,544 in general and administrative expenses and $61,749 in franchise
tax expense.
Liquidity and Capital Resources
As indicated in the accompanying unaudited condensed financial statements, as of
September 30, 2020, we had approximately $1.5 million in cash, $12,336 of
interest income available in the Trust Account to pay for taxes (less up to
$100,000 to pay for dissolution expenses)and a working capital surplus of
approximately $331,000. Further, we have incurred and expect to continue to
incur significant costs in pursuit of our financing and acquisition plans. 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.
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Through our Initial Public Offering, our liquidity needs have been satisfied
through receipt of a $25,000 capital contribution from our Sponsor in exchange
for the issuance of the Founder Shares (as defined below) to our Sponsor, up to
$300,000 in loans from our Sponsor and the proceeds not held in the Trust
Account, which resulted from the consummation of the initial public offering and
the sale of private placement warrants to the Sponsor. Following the closing of
the Initial Public Offering, the exercise of the over-allotment option, and the
sale of Private Placement Warrants, which resulted in $345.0 million ($10.00 per
Unit) being placed into a Trust Account and payment of expenses, we had
approximately $1.5 million as of September 30, 2020 in cash held outside of the
Trust Account, which we intend to use for working capital purposes.
We intend to use substantially all of the funds held in the Trust Account,
including any amounts representing interest earned on the Trust Account
(excluding deferred underwriting commissions) to complete our initial Business
Combination. We may withdraw interest to fund our taxes, if any. Our annual
income tax obligations will depend on the amount of interest and other income
earned on the amounts held in the Trust Account. To the extent that our common
stock or debt are used, in whole or in part, as consideration to complete our
initial 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.
In order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the Sponsor, or certain of the Company's officers
and directors may, but are not obligated to, loan the Company funds as may be
required ("Working Capital Loans"). If the Company completes a Business
Combination, the Company may repay the Working Capital Loans out of the proceeds
of the Trust Account released to the Company. Otherwise, the Working Capital
Loans may be repaid only out of funds held outside the Trust Account. In the
event that a Business Combination does not close, the Company may use a portion
of proceeds held outside the Trust Account to repay the Working Capital Loans
but no proceeds held in the Trust Account would be used to repay the Working
Capital Loans. Except for the foregoing, the terms of such Working Capital
Loans, if any, have not been determined and no written agreements exist with
respect to such loans. The Working Capital Loans would either be repaid upon
consummation of a Business Combination, without interest, or, at the lender's
discretion, up to $1.5 million of such Working Capital Loans may be convertible
into warrants at a price of $1.50 per warrant. The warrants would be identical
to the Private Placement Warrants. As of September 30, 2020, no Working Capital
Loans were outstanding. Over this time period, we will be using these funds for
identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from
the offices, plants or similar locations of prospective target businesses,
reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring,
negotiating and consummating the Business Combination.
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Based on the foregoing, we believe we will have sufficient cash to meet our
needs through the earlier of consummation of a Business Combination or one year
from this filing. Over this time period, we will be using these funds for
identifying and evaluating prospective acquisition candidates, performing
business due diligence on prospective target businesses, traveling to and from
the offices, plants or similar locations of prospective target businesses,
reviewing corporate documents and material agreements of prospective target
businesses, selecting the target business to acquire and structuring,
negotiating and consummating the Business Combination.
If our estimates of the costs of undertaking in-depth due diligence and
negotiating our initial Business Combination is less than the actual amount
necessary to do so, or the amount of interest available to us from the Trust
Account is less than we expect as a result of the current interest rate
environment, we may have insufficient funds available to operate our business
prior to our initial Business Combination. Moreover, we may need to obtain
additional financing either to consummate our initial Business Combination or
because we become obligated to redeem a significant number of our public shares
upon consummation of our initial Business Combination, in which case we may
issue additional securities or incur debt in connection with such Business
Combination. Subject to compliance with applicable securities laws, we would
only consummate such financing simultaneously with the consummation of our
initial Business Combination. Following our initial Business Combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
Accounting Policies and Estimates
This management's discussion and analysis of our financial condition and results
of operations is based on our condensed financial statements, which have been
prepared in accordance with U.S. GAAP. The preparation of these condensed
financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses and the
disclosure of contingent assets and liabilities in our condensed financial
statements. On an ongoing basis, we evaluate our estimates and judgments,
including those related to fair value of financial instrument and accrued
expenses to determine their reasonableness. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe there have been
no significant changes in our accounting policies as discussed in our Current
Report on Form 8-K filed with the SEC on August 20, 2020.
Off-Balance Sheet Arrangements
As of September 30, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K. See notes to Part I, Item 1
"Condensed Financial Statements (Unaudited)" for commitments and contingencies.
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JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We will qualify as an "emerging growth company" and
under the JOBS Act will be allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As such, our condensed financial statements
may not be comparable to companies that comply with public company effective
dates.
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