Explanatory Note
Fortress Capital Acquisition Corp. (the “Company”) is filing this Amendment No. 1 to its Current Report on Form 8-K (the “8-K/A”), originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on January 22, 2021 (the “Original 8-K”), solely to amend and restate the Company’s audited balance sheet and accompanying footnotes which were filed as an exhibit to the Original 8-K (the “IPO Balance Sheet”).
This 8-K/A is presented as of the filing date of the Original 8-K and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement as described below. Accordingly, this 8-K/A should be read in conjunction with our filings with the SEC subsequent to the date on which we filed the Original 8-K.
Background of Restatement
The IPO Balance Sheet is being restated to reflect the classification of the Company’s private placement warrants (the “Private Placement Warrants”) and public warrants (the “Public Warrants” and, together with the Private Placement Warrants, the “Warrants”) as derivative liabilities and to reclassify a portion of its public shares from permanent equity to temporary equity.
The Company had previously accounted for its outstanding Warrants as components of equity instead of derivative liabilities. On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the Securities and Exchange Commission 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”), informing market participants that warrants issued by SPACs may need to be classified as liabilities as opposed to equity. In further consideration of the SEC Statement, the Company re-evaluated the accounting for the Warrants as derivative liabilities. In accordance with the guidance in Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Subtopic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” (“ASC 815-40”), the Company concluded that a provision in the warrant agreement related to certain tender or exchange offers and provisions related to indexation of the equity-linked financial instrument precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815-40, the Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the initial public offering) and at each reporting date in accordance with FASB ASC Topic 820, “Fair Value Measurement”, with changes in fair value recognized in the statement of operations in the period of change.
In addition, the Company had previously classified a portion of its Class A ordinary shares, par value $0.0001 per share (“Class A Ordinary Shares”), subject to possible redemption in permanent equity. In accordance with FASB ASC Topic 480, “Distinguishing Liabilities from Equity” (“ASC 480”), paragraph 10-S99-3A, redemption provisions not solely within the control of the Company require ordinary shares subject to redemption to be classified outside of permanent equity. Although the Company did not specify a maximum redemption threshold, its amended and restated memorandum and articles of association provides that the Company will not redeem its public shares in an amount that will cause its net tangible assets to be less than $5,000,001. Upon re-evaluation, the Company determined that the Class A Ordinary Shares include certain provisions that require classification of the Class A Ordinary Shares as temporary equity regardless of the minimum net tangible assets threshold. As a result, the Company classified all of its Class A Ordinary Shares as temporary equity as of January 15, 2021 and adjusted its initial book value to redemption value in accordance with ASC 480.
On December 6, 2021, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”) concluded, after discussion with the Company’s management, that the IPO Balance Sheet should no longer be relied upon due to the aforementioned changes required to reclassify the Class A Ordinary Shares as temporary equity to align with ASC 480-10-S99, and on December 6, 2021 the Company filed a Current Report on Form 8-K disclosing the Audit Committee’s conclusion that the IPO Balance Sheet should no longer be relied upon. The Audit Committee discussed with the Company’s independent accountants and are in agreement with the matters as disclosed in this 8-K/A. The correction of the aforementioned classification of the Class A Ordinary Shares as temporary equity is reflected in Exhibit 99.1 included with this 8-K/A.