Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Fortistar Sustainable Solutions Corp. References to our “management” or our “management team” refer
to our officers and directors, and references to the “Sponsor” refer to FSSC Sponsor LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts
and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation,
statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and
the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify
such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying
important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with
the U.S. Securities and Exchange Commission (the “SEC”) and Item 1A of Part II of this Form 10-Q. 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.
This
Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of January 29, 2021, March 31, 2021 and June 30, 2021.
Management identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our Class A common stock subject to possible redemption. We previously determined the Class A
common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management
concluded that the redemption value should include all Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has
noted a reclassification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional
paid-in capital (to the extent available), accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on August 25, 2020 for the purpose of entering into a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, our
capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be
successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from August 25, 2020 (inception) through September 30, 2021 were organizational activities,
those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination.
We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as
well as for due diligence expenses.
For the three months ended September 30, 2021, we had a net income of $7,195,214, which consists of changes in fair value of warrant liability of $7,441,625 and interest earned on marketable
securities held in Trust Account of $3,330, offset by operating cost of $249,741.
For the nine months ended September 30, 2021, we had a net loss of $1,834,575, which consists of transaction costs of $536,079 and changes in fair value of warrant liability of $603,375,
interest earned on marketable securities held in Trust Account of $23,105, offset by operating costs of $718,226.
For the period from August 25, 2020 (inception) through September 30, 2020, we had a net loss of $659, which consists of formation and operating costs.
Liquidity and Capital Resources
On January 29, 2021, we consummated the Initial Public Offering of 25,875,000 Units at $10.00 per Unit, generating gross proceeds of $258,750,000, which is described in Note 4. Simultaneously
with the closing of the Initial Public Offering, we consummated the sale of 7,175,000 Private Placement Warrant at a price of $1.00 per Private Placement Warrant in a private placement to the Sponsor, generating gross proceeds of $7,175,000,
which is described in Note 5.
Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Units, a total of $258,750,000 was placed in the Trust Account. We incurred
$14,667,474 in Initial Public Offering related costs, including $5,175,000 of underwriting fees and $436,224 of other costs.
For the nine months ended September 30, 2021, cash used in operating activities was $856,955. Net loss of $1,834,575 was affected by interest earned on marketable securities held in the Trust
Account of $23,105, changes in warrant liability of $603,375 and transaction costs allocable to warrant liability of $536,079. Changes in operating assets and liabilities used $138,729 of cash for operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account of $258,773,105 (including approximately $23,105 of interest income) consisting of U.S. Treasury Bills with a
maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2021, we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our
Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance
the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2021, we had cash of $736,821. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due
diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates
may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held
outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,000,000 of such loans may be convertible into warrants at a price of $1.00 per warrant, at the option of the
lender. The warrants would be identical to the Private Placement Warrants.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target
business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover,
we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue
additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any
off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of one of our executive officers
a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on January 26, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business
Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per share, or $9,056,250 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust
Account solely in the event that we complete a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies/Estimates
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual
results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liabilities
The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40-15-7D and 7F, under which the warrants do not meet the criteria for equity treatment and must be
recorded as liabilities. Accordingly, the Company’s classifies the warrants as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in our condensed statements of operations.
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common stock subject to mandatory redemption are classified
as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence
of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be
outside of our control and subject to occurrence of uncertain future events. Accordingly, shares of Class A common shares subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of our
condensed balance sheet.
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. We apply the two-class method in calculating net income
(loss) per common share. Accretion associated with the redeemable shares of Class A common stock is excluded from net income (loss) per common share as the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 — “Contracts in Entity’s Own
Equity (Subtopic 815-40) (“ASU 2020-06”)”, to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective
January 1, 2022 and should be applied on a full or modified retrospective basis. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.
PART II - OTHER INFORMATION
Item 1.
|
Legal Proceedings
|
None
Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in the final prospectus for our Initial Public Offering
filed with the SEC. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our final prospectus for our Initial Public Offering filed with the SEC, except for the below:
Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results in the future.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting
considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Statement”).
Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing the Company’s
warrants. As a result of the SEC Statement, the Company reevaluated the accounting treatment of the warrants, and determined to classify the warrants as derivative liabilities measured at fair value, with changes in fair value each period
reported in earnings. As a result, included on our consolidated balance sheet as of September 30, 2021 are derivative liabilities related to embedded features contained within our warrants. ASC 815 provides for the remeasurement of the fair value
of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the statements of operations. As a result of the recurring fair value measurement, our
consolidated financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our
warrants each reporting period and that the amount of such gains or losses could be material.
We have identified a material weakness in our internal control over financial reporting as of September 30, 2021. If we are unable to develop and
maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect
our business and operating results.
Following this issuance of the SEC Statement our management and our audit committee concluded that, in light of the SEC Statement, we identified a material weakness in our internal controls
over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of
our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.
Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation
measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.
If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures
that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to
applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the
future, will be sufficient to avoid potential future material weaknesses.
We, and following our initial business combination, the post-business combination company, may face litigation and other risks as a result of the
material weakness in our internal control over financial reporting.
As a result of the material weakness in our internal controls over financial reporting described above, the change in accounting for the warrants, and other matters raised or that may in the future be raised by the
SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over
financial reporting and the preparation of our financial statements. As of the date of this Form 10-Q, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in
the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
On January 29, 2021, we consummated the Initial Public Offering of 25,875,000 Units. The Units were sold at an offering price of $10.00 per unit, generating total gross proceeds of
$258,750,000. Credit Suisse Securities LLC and BofA Securities, Inc. acted as joint book-running managers of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statement on Form
S-1 (No. 333-251922). The Securities and Exchange Commission declared the registration statements effective on January 26, 2021.
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 7,175,000 warrants (each, a “Private Placement Warrant” and, collectively, the “Private
Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to FSSC Sponsor LLC (the “Sponsor”), generating gross proceeds of $7,175,000. Each Private Unit consists of one share of common stock (“Private Share”)
and one-half of one warrant (“Private Warrant”). Each whole Private Warrant is exercisable to purchase one share of common stock at an exercise price of $11.50 per share. The issuance was made pursuant to the exemption from registration contained
in Section 4(a)(2) of the Securities Act.
The Private Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Warrants are not transferable, assignable or salable until
after the completion of a Business Combination, subject to certain limited exceptions.
On January 29, 2021, the underwriters exercised their over-allotment option in full, resulting in the sale of an additional 3,375,000 Units for gross proceeds of $33,750,000, less the
underwriters’ discount of $675,000. In connection with the underwriters’ exercise of their over-allotment option, the Company also consummated the sale of an additional 675,000 Private Units at $1.00 per Private Unit, generating total proceeds of
$675,000. A total of $33,750,000 was deposited into the Trust Account.
Of the gross proceeds received from the Initial Public Offering, the exercise of the over-allotment option and the Private Placement Warrants, an aggregate of $258,750,000 was placed in the
Trust Account.
We paid a total of $5,175,000 in cash underwriting discounts and commissions, $9,056,250 in deferred underwriting fees and $436,224 for other costs and expenses related to the Initial Public
Offering.
For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.
Item 3.
|
Defaults Upon Senior Securities
|
None
Item 4.
|
Mine Safety Disclosures
|
None
Item 5.
|
Other Information
|
None
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No.
|
|
Description of Exhibit
|
|
|
Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
101.INS*
|
|
XBRL Instance Document
|
101.SCH*
|
|
XBRL Taxonomy Extension Schema Document
|
101.CAL*
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
101.DEF*
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
101.LAB*
|
|
XBRL Taxonomy Extension Labels Linkbase Document
|
101.PRE*
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|