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 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 Annual Report on Form 10-K.
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").
Our registration statement for 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, 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 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 the Private Placement of 5,066,667 Private Placement 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 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 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 us meeting certain conditions of
Rule 2a-7 of the Investment Company Act, as determined by us, 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.
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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.
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.
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 year ended December 31, 2021, we had net income of $1,697,520 which
consisted of $26,609 in interest income and a non-cash $9,951,387 decrease in
fair value of warrant liabilities, partially offset by a non-cash $2,396,195
loss on the excess of fair value over cash received for the Private Placement
Warrants, $495,479 in offering costs related to warrant liabilities, $5,188,802
in general and administrative expenses and $200,000 in franchise tax expense.
General and administrative expenses were primarily comprised of professional
fees.
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For the period from August 28, 2020 (inception) through December 31, 2020, we
had a net loss of $19,749 which consisted of general and administrative
expenses.
Liquidity and Capital Resources, Mandatory Redemption Date and Going Concern
As indicated in the accompanying financial statements, as of December 31, 2021,
we had $132,907 in cash and $3,171,660 of accounts payable and accrued expenses
and $200,000 of franchise tax payable. As such, we do not believe we have
sufficient liquidity to meet our current and 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. 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 through December 31, 2021.
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 warrants would be identical to the Private Placement
Warrants. There were no Working Capital Loans outstanding as of December 31,
2021. Subsequent to December 31, 2021, our Sponsor loaned us $175,000.
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 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.
If 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's ("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 financial statements do
not include any adjustment that might be necessary if we were unable to continue
as a going concern.
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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.
Note 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.
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 year ended
December 31, 2021, we incurred and paid $237,419 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 $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.
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 Financial Accounting Standards Board's ("FASB")
Accounting Standards Codification ("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 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 balance
sheets. As of December 31, 2020, there were no shares of Class A common stock
issued and outstanding.
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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 statements of operations includes
a presentation of net income (loss) per share for common stock subject to
redemption 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 year ended December 31, 2021 was calculated by dividing (i) the
allocation of net income of $1,358,016 by (ii) the weighted average number of
shares of Class A common stock outstanding for the period.
Net income (loss) per common share, basic and diluted for Class F common stock
for the year ended December 31, 2021 was calculated by dividing (i) the
allocation of net income of $339,504 by (ii) the weighted average number of
shares of Class F common stock outstanding for the period.
Net income (loss) per common share, basic and diluted for Class F common stock
for the period from August 28, 2020 (inception) through December 31, 2020 was
calculated by dividing (i) the net loss of $19,749 by (ii) the weighted average
number of shares of Class F common stock outstanding for the period.
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 statements of operations. One of the more significant
accounting estimates included in these financial statements is the determination
of the fair value of the warrant liabilities.
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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 financial statements.
Off-Balance Sheet Arrangements
As of December 31, 2021, 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 financial statements may not be
comparable to companies that comply with public company effective dates.
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