Beachbody Company, Inc. annual report, FY2020

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Filing summary

Entity and period: The supplied filing is Forest Road Acquisition Corp.’s Form 10-K for the fiscal year ended December 31, 2020, not an operating-company 10-K for Beachbody Company, Inc. Forest Road was a shell company formed in September 2020 to pursue a business combination. Its reported financial results cover inception through December 31, 2020, not a standalone 2020 fourth quarter.

Financial position and results

  • Revenue and operations: No operating revenue; the company had not commenced business operations. It reported $10 of interest income.
  • Profit: Net loss was $531,394, primarily from formation and operating costs of $531,404. No comparable prior-year period is presented.
  • Cash flow: Operating cash use was $361,732. Financing activities provided $301.5 million, while $300 million was placed in the trust account. Cash outside the trust was $1,183,830 at year-end.
  • Assets and liquidity: Total assets were $301.5 million, including $300 million of trust investments and $1.5 million of current assets. The trust funds were restricted for a business combination or redemptions. Management expected outside cash to fund at least 12 months of operations, assuming no combination during that time.
  • Liabilities and equity: Total liabilities were $11.0 million, including $10.5 million of deferred underwriting commissions payable upon a completed business combination. Stockholders’ equity was $5.0 million; $285.5 million of Class A shares was classified as subject to possible redemption. The filing reports no outstanding working-capital loans at year-end.
  • Margins and debt: Operating margins are not meaningful for this pre-revenue SPAC. The filing reports no year-end debt balance; the sponsor’s $141,881 short-term offering-cost loan had been repaid.

Material developments and outlook

  • Forest Road raised $300 million in its November 2020 IPO and $8 million from sponsor private-placement warrants; $300 million was deposited in trust. Public shares were initially redeemable for approximately $10 each, subject to terms and creditor claims.
  • On February 9, 2021, after year-end, Forest Road signed a merger agreement with Beachbody and Myx Fitness. Related investor subscription agreements provided for a $225 million PIPE investment. The proposed transaction was subject to customary closing conditions, stockholder approval, redemptions, and a stated minimum of $350 million in available cash from the trust after redemptions and the financing described in the filing. The merger was not completed as of the reporting period.
  • If the proposed merger did not proceed, Forest Road intended to seek an alternative business combination. Its deadline to complete a combination was November 30, 2022; otherwise, it generally was required to redeem public shares and liquidate. Warrants would expire worthless if no combination was completed.
  • Management identified potential funding shortfalls if due-diligence and transaction costs exceeded estimates. Sponsor, officers, and directors were not obligated to provide additional loans, and financing availability was not assured.

Risks, contingencies, and governance

  • The merger, Beachbody, and Myx carried transaction and business risks; the filing directs investors to the merger registration statement for fuller disclosure. Forest Road also cited execution, financing, redemption, target-selection, conflicts-of-interest, and single-business concentration risks.
  • Trust assets could be exposed to third-party or bankruptcy claims. Sponsor indemnification was limited and the filing states it had not verified the sponsor’s ability to meet that obligation.
  • Related-party arrangements included a $10,000 monthly administrative-services and office-space fee to an affiliate of the sponsor. Sponsor-owned founder shares and private warrants, as well as potential post-combination roles and compensation, may create conflicts.
  • The auditor issued an unqualified opinion on the financial statements. Management reported effective disclosure controls, but no management assessment or auditor attestation of internal control over financial reporting was included because of the new-public-company transition period.

Investor verification priorities

  1. Verify the filing identity: this is Forest Road Acquisition Corp.’s SPAC 10-K, not Beachbody’s operating-company filing.
  2. Check the subsequent merger filings for transaction status, final financing, redemption levels, and whether the $350 million minimum-cash condition was met.
  3. Review the trust balance, redemption terms, deferred underwriting fee, and potential claims against trust assets.
  4. Assess sponsor indemnification capacity, related-party interests, founder-share dilution, and warrant dilution.
  5. Confirm Forest Road’s available operating cash and financing plans if a transaction is delayed or does not close.