UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, September 30, 2021

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR

TRANSITION REPORT PURSUANT TO Section 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-39735

Commission File No. 001-39735

The Beachbody Company, Inc.

(Exact name of registrant as specified in its charter)

 

FOREST ROAD ACQUISITION CORP.
(Exact name of registrant as specified in its charter)

Delaware85-3222090

Delaware

85-3222090

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3301 Exposition Blvd,

Santa Monica, California

90404

(Address of principal executive offices)

(Zip Code)

1177 Avenue of the Americas, 5th Floor

New York, New York 10036

(Address of Principal Executive Offices, including zip code)

(917) 310-3722
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Registrant’s telephone number, including area code: (310) 883-9000

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading

Symbol(s)

Trading Symbol(s)

Name of each exchange

on
which registered

Units, each consisting of one share of Class A Common Stock and one-third of one Redeemable WarrantFRX.UThe New York Stock Exchange

Class A Common Stock, par value $0.0001 per share

BODY

FRX

The New York Stock Exchange

Redeemable Warrants,warrants, each whole warrant exercisable for one share of Class A Common Stockcommon stock at an exercise price of $11.50

BODY WS

FRXWS

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

☐   Large accelerated filer☐   Accelerated filer

Large Accelerated Filer ☐

☒   Non-accelerated filer

Accelerated Filer ☐

Non-Accelerated Filer

Smaller reporting company

Reporting Company

☒   

Emerging growth companyGrowth Company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act):. Yes No

AsThe number of May 17, 2021, there were 30,000,000 shares of the registrant’s Class A common stock,Common Stock, par value $0.0001 per share outstanding was 168,218,173, and 7,500,000the number of shares of the registrant’s Class B common stock,X Common Stock, par value $0.0001 per share outstanding was 141,250,310, as of the registrant issued and outstanding.November 10, 2021.

 

 

FOREST ROAD ACQUISITION CORP.


Table of Contents

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2021

TABLE OF CONTENTS

Page
PART 1 – FINANCIAL INFORMATION

Page

PART I.

FINANCIAL INFORMATION

Item 1.

Financial Statements

Condensed Consolidated Balance Sheets

1

Unaudited Condensed Balance Sheet (unaudited)Consolidated Statements of Operations

1

2

Unaudited Condensed Consolidated Statements of Comprehensive Loss

3

Unaudited Condensed StatementConsolidated Statements of Operations (unaudited)Stockholders’ Equity

2

4

Unaudited Condensed Statement of Changes in Stockholders’ Equity (unaudited)

3
Condensed StatementConsolidated Statements of Cash Flows (unaudited)

4

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Notes to Condensed Financial Statements (unaudited)5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

32

Item 3.

Quantitative and Qualitative Disclosures aboutAbout Market Risk

20

47

Item 4.

Controls and Procedures

48

Item 4.

PART II.

Control and ProceduresOTHER INFORMATION

20

Item 1.

Legal Proceedings

48

PART II – OTHER INFORMATION

Item 1A.

Risk Factors

48

Item 1.Legal Proceedings21
Item 1A.Risk Factors21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

48

Item 5.

Other Information

48

Item 3.6.

Defaults Upon Senior SecuritiesExhibits

21

50

Signatures

Item 4.Mine Safety Disclosures21
Item 5.Other Information21
Item 6.Exhibits22
SIGNATURES23

51

i


PART I—FINANCIAL INFORMATION

Item 1.Financial StatementsStatements.

The Beachbody Company, Inc.

FOREST ROAD ACQUISITION CORP.
CONDENSED BALANCE SHEETS
Condensed Consolidated Balance Sheets

  March 31,
2021
(Unaudited)
  December 31, 2020 
Assets      
Current assets:        
Cash $730,435  $1,183,830 
Prepaid expenses  254,931   294,383 
Total current assets  985,366   1,478,213 
Marketable Securities Held in Trust account  300,004,432   300,000,000 
Total assets $300,989,798  $301,478,213 
         
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable and accrued expenses $2,675,348  $409,896 
Due to related party  20,600    
Franchise tax payable     54,149 
Total current liabilities  2,695,948   464,045 
Warrant Liabilities  45,605,664   31,735,421 
Deferred underwriters’ discount payable  10,500,000   10,500,000 
Total liabilities  58,801,612   42,699,466 
         
Commitments        
Class A common stock subject to possible redemption, 23,718,818 and 25,377,874 shares at redemption value at March 31, 2021 and December 31, 2020, respectively  237,188,180   253,778,740 
         
Stockholders’ equity:        
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding      
Class A common stock, $0.0001 par value; 300,000,000 shares authorized; 6,281,182 shares and 4,622,126 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively (excluding 23,718,818 and 25,377,874 shares subject to possible redemption, respectively)  628   462 
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 7,500,000 shares issued and outstanding at March 31, 2021 and December 31, 2020  750   750 
Additional paid-in capital  29,506,028   12,915,634 
Accumulated deficit  (24,507,400)  (7,916,839)
Total stockholders’ equity  5,000,006   5,000,007 
Total liabilities and stockholders’ equity $300,989,798  $301,478,213 

(in thousands, except par value and share data)

 

 

 

 

 

 

 

 

As of September 30,

 

 

As of December 31,

 

 

 

2021

 

 

2020

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

199,839

 

 

$

56,827

 

Accounts receivable, net

 

 

1,378

 

 

 

855

 

Inventory, net

 

 

141,139

 

 

 

65,354

 

Prepaid expenses

 

 

14,014

 

 

 

8,650

 

Other current assets

 

 

48,556

 

 

 

37,364

 

Total current assets

 

 

404,926

 

 

 

169,050

 

Property and equipment, net

 

 

115,338

 

 

 

80,169

 

Content assets, net

 

 

34,786

 

 

 

19,437

 

Intangible assets, net

 

 

92,587

 

 

 

21,120

 

Goodwill

 

 

176,903

 

 

 

18,981

 

Right-of-use assets, net

 

 

27,434

 

 

 

33,272

 

Other assets

 

 

6,847

 

 

 

14,224

 

Total assets

 

$

858,821

 

 

$

356,253

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

48,298

 

 

$

28,981

 

Accrued expenses

 

 

89,844

 

 

 

79,955

 

Deferred revenue

 

 

126,894

 

 

 

97,504

 

Current portion of lease liabilities

 

 

9,977

 

 

 

10,371

 

Other current liabilities

 

 

2,656

 

 

 

3,106

 

Total current liabilities

 

 

277,669

 

 

 

219,917

 

Long-term lease liabilities, net

 

 

23,845

 

 

 

31,252

 

Deferred tax liabilities

 

 

6,415

 

 

 

3,729

 

Warrant liabilities

 

 

19,900

 

 

 

 

Other liabilities

 

 

5,362

 

 

 

2,097

 

Total liabilities

 

 

333,191

 

 

 

256,995

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 100,000,000 shares authorized,
   
NaN issued and outstanding as of September 30, 2021 and
   December 31, 2020

 

 

 

 

 

 

Common stock, $0.0001 par value, 1,900,000,000 shares authorized
   (
1,600,000,000 Class A, 200,000,000 Class X and 100,000,000
   Class C);
168,218,173 and 101,762,614 Class A shares issued and
   outstanding at September 30, 2021 and December 31, 2020,
   respectively;
141,250,310 Class X shares issued and outstanding at
   September 30, 2021 and December 31, 2020, respectively and
0
   Class C shares issued and outstanding at September 30, 2021 and
   December 31, 2020

 

 

31

 

 

 

24

 

Additional paid-in capital

 

 

604,665

 

 

 

96,097

 

Accumulated other comprehensive income (loss)

 

 

15

 

 

 

(202

)

Retained earnings (accumulated deficit)

 

 

(79,081

)

 

 

3,339

 

Total stockholders’ equity

 

 

525,630

 

 

 

99,258

 

Total liabilities and stockholders' equity

 

$

858,821

 

 

$

356,253

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


FOREST ROAD ACQUISITION CORP.

CONDENSED STATEMENT OF OPERATIONS1


FOR THE THREE MONTHS ENDED MARCH 31, 2021The Beachbody Company, Inc.

(Unaudited)Unaudited Condensed Consolidated Statements of Operations

     
Operating costs $2,724,770 
Loss from operations  (2,724,770)
     
Other Income (Expense)    
Interest income  20 
Change in fair value of warrant liabilities  (13,870,243)
Interest income on marketable securities held in Trust account  4,432 
Total other income (expense)  (13,865,791)
     
Net loss $(16,590,561)
     
Weighted average shares outstanding - Class A common stock  30,000,000 
Basic and diluted net income per share of common stock – Class A common stock $0.00 
Weighted average shares outstanding - Class B common stock  7,500,000 
Basic and diluted net income per share of common stock – Class B common stock $(2.21)

(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

94,072

 

 

$

99,082

 

 

$

283,547

 

 

$

239,964

 

Connected fitness

 

 

5,927

 

 

 

0

 

 

 

5,937

 

 

 

0

 

Nutrition and other

 

 

108,053

 

 

 

152,397

 

 

 

367,895

 

 

 

399,335

 

Total revenue

 

 

208,052

 

 

 

251,479

 

 

 

657,379

 

 

 

639,299

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

12,124

 

 

 

9,843

 

 

 

34,858

 

 

 

27,507

 

Connected fitness

 

 

10,261

 

 

 

0

 

 

 

10,417

 

 

 

0

 

Nutrition and other

 

 

50,682

 

 

 

61,082

 

 

 

164,679

 

 

 

151,654

 

Total cost of revenue

 

 

73,067

 

 

 

70,925

 

 

 

209,954

 

 

 

179,161

 

Gross profit

 

 

134,985

 

 

 

180,554

 

 

 

447,425

 

 

 

460,138

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

153,782

 

 

 

123,980

 

 

 

438,672

 

 

 

352,872

 

Enterprise technology and development

 

 

29,680

 

 

 

23,852

 

 

 

83,718

 

 

 

67,558

 

General and administrative

 

 

23,346

 

 

 

16,523

 

 

 

58,523

 

 

 

46,229

 

Restructuring gain

 

 

0

 

 

 

(1,677

)

 

 

0

 

 

 

(1,677

)

Total operating expenses

 

 

206,808

 

 

 

162,678

 

 

 

580,913

 

 

 

464,982

 

Operating income (loss)

 

 

(71,823

)

 

 

17,876

 

 

 

(133,488

)

 

 

(4,844

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

30,274

 

 

 

0

 

 

 

35,664

 

 

 

0

 

Interest expense

 

 

(62

)

 

 

(89

)

 

 

(490

)

 

 

(432

)

Other income, net

 

 

202

 

 

 

113

 

 

 

3,155

 

 

 

555

 

Income (loss) before income taxes

 

 

(41,409

)

 

 

17,900

 

 

 

(95,159

)

 

 

(4,721

)

Income tax benefit (provision)

 

 

1,487

 

 

 

(4,129

)

 

 

12,739

 

 

 

161

 

Net income (loss)

 

$

(39,922

)

 

$

13,771

 

 

$

(82,420

)

 

$

(4,560

)

Net income (loss) per common share, basic

 

$

(0.13

)

 

$

0.06

 

 

$

(0.31

)

 

$

(0.02

)

Net income (loss) per common share, diluted

 

$

(0.13

)

 

$

0.05

 

 

$

(0.31

)

 

$

(0.02

)

Weighted-average common shares
   outstanding, basic

 

 

304,599

 

 

 

238,831

 

 

 

265,117

 

 

 

238,374

 

Weighted-average common shares
   outstanding, diluted

 

 

304,599

 

 

 

252,085

 

 

 

265,117

 

 

 

238,374

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


FOREST ROAD ACQUISITION CORP.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY2


FOR THE THREE MONTHS ENDED MARCH 31, 2021The Beachbody Company, Inc.

(Unaudited)Unaudited Condensed Consolidated Statements of Comprehensive Loss

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss)

 

$

(39,922

)

 

$

13,771

 

 

$

(82,420

)

 

$

(4,560

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative
   financial instruments, net of tax

 

 

(70

)

 

 

(209

)

 

 

(278

)

 

 

(16

)

Reclassification of losses on
   derivative financial instruments
   included in net income (loss)

 

 

142

 

 

 

78

 

 

 

481

 

 

 

31

 

Foreign currency translation
   adjustment

 

 

(40

)

 

 

52

 

 

 

14

 

 

 

(275

)

Total other comprehensive income
   (loss)

 

 

32

 

 

 

(79

)

 

 

217

 

 

 

(260

)

Total comprehensive income (loss)

 

$

(39,890

)

 

$

13,692

 

 

$

(82,203

)

 

$

(4,820

)

  Common Stock  Additional     Total 
  Class A  Class B  Paid-In  Accumulated  Stockholders’ 
  Shares  Amount  Shares  Amount  Capital  Deficit  Equity 
Balance as of December 31, 2020  4,622,126  $462   7,500,000  $750  $12,915,634  $(7,916,839) $5,000,007 
Change in Class A common stock subject to possible redemption  1,659,056   166         16,590,394      16,590,560 
Net loss                 (16,590,561)  (16,590,561)
Balance as of March 31, 2021  6,281,182  $628   7,500,000  $750  $29,506,028  $(24,507,400) $5,000,006 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


FOREST ROAD ACQUISITION CORP.

CONDENSED STATEMENT OF CASH FLOWS3


FOR THE THREE MONTHS ENDED MARCH 31, 2021The Beachbody Company, Inc.

(Unaudited)Unaudited Condensed Consolidated Statements of Stockholders’ Equity

Cash Flows from Operating Activities:   
Net loss $(16,509,561)
Adjustments to reconcile net loss to net cash used in operating activities:    
Change in fair value of warrant liabilities  13,870,243 
Interest income on trust account  (4,432)
Changes in current assets and current liabilities:    
Prepaid assets  39,452 
Accounts payable and accrued expenses  2,265,452 
Due to related party  20,600 
Franchise tax payable  (54,149)
Net cash used in operating activities  (453,395)
     
Net Change in Cash  (453,395)
Cash - Beginning  1,183,830 
Cash - Ending $730,435 
     
Supplemental Disclosure of Non-cash Financing Activities:    
Change in value of Class A common stock subject to possible redemption $(16,590,560)

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Retained

 

 

 

 

 

 

Series A

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Earnings

 

 

Total

 

 

 

Preferred

 

 

 

Common

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

(Accumulated

 

 

Stockholders'

 

 

 

Units

 

 

 

Units

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit)

 

 

Equity

 

Balances at December 31, 2019, as
   previously reported

 

$

98,245

 

 

 

$

(35,626

)

 

 

 

 

$

 

 

$

 

 

$

12

 

 

$

24,771

 

 

$

(10,843

)

Retroactive application of
   recapitalization

 

 

(98,245

)

 

 

 

35,626

 

 

 

238,142,972

 

 

 

24

 

 

 

62,595

 

 

 

 

 

 

 

 

 

98,245

 

Balance at December 31, 2019, after
   effect of reverse acquisition

 

 

 

 

 

 

 

 

 

238,142,972

 

 

 

24

 

 

 

62,595

 

 

 

12

 

 

 

24,771

 

 

 

87,402

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,328

)

 

 

(8,328

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60

 

 

 

 

 

 

60

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

895

 

 

 

 

 

 

 

 

 

895

 

Balances at March 31, 2020

 

$

 

 

 

$

 

 

 

238,142,972

 

 

$

24

 

 

$

63,490

 

 

$

72

 

 

$

16,443

 

 

$

80,029

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(10,003

)

 

 

(10,003

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(241

)

 

 

 

 

 

(241

)

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,013

 

 

 

 

 

 

 

 

 

1,013

 

Balances at June 30, 2020

 

$

 

 

 

$

 

 

 

238,142,972

 

 

$

24

 

 

$

64,503

 

 

$

(169

)

 

$

6,440

 

 

$

70,798

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,771

 

 

 

13,771

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

 

 

 

(79

)

Tax asset contribution adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(135

)

 

 

 

 

 

 

 

 

(135

)

Common shared issued in connection
   with acquisition

 

 

 

 

 

 

 

 

 

4,869,973

 

 

 

 

 

 

27,889

 

 

 

 

 

 

 

 

 

27,889

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,261

 

 

 

 

 

 

 

 

 

1,261

 

Balances at September 30, 2020

 

$

 

 

 

$

 

 

 

243,012,945

 

 

$

24

 

 

$

93,518

 

 

$

(248

)

 

$

20,211

 

 

$

113,505

 

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Retained

 

 

 

 

 

 

Series A

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Earnings

 

 

Total

 

 

 

Preferred

 

 

 

Common

 

 

Common Stock

 

 

Paid-In

 

 

Comprehensive

 

 

(Accumulated

 

 

Stockholders'

 

 

 

Units

 

 

 

Units

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit)

 

 

Equity

 

Balances at December 31, 2020, as
   previously reported

 

$

98,110

 

 

 

$

(1,989

)

 

 

 

 

$

 

 

$

 

 

$

(202

)

 

$

3,339

 

 

$

1,148

 

Retroactive application of
   recapitalization

 

 

(98,110

)

 

 

 

1,989

 

 

 

243,012,924

 

 

 

24

 

 

 

96,097

 

 

 

 

 

 

 

 

 

98,110

 

Balance at December 31, 2020, after
   effect of reverse acquisition

 

 

 

 

 

 

 

 

 

243,012,924

 

 

 

24

 

 

 

96,097

 

 

 

(202

)

 

 

3,339

 

 

 

99,258

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(30,058

)

 

 

(30,058

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

100

 

 

 

 

 

 

100

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,573

 

 

 

-

 

 

 

 

 

 

2,573

 

Balances at March 31, 2021

 

$

 

 

 

$

 

 

 

243,012,924

 

 

$

24

 

 

$

98,670

 

 

$

(102

)

 

$

(26,719

)

 

$

71,873

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,440

)

 

 

(12,440

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

85

 

 

 

 

 

 

85

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,522

 

 

 

 

 

 

 

 

 

2,522

 

Business Combination, net of
   redemptions and equity issuance
   costs of $
47.0 million

 

 

 

 

 

 

 

 

 

51,616,515

 

 

 

5

 

 

 

333,850

 

 

 

 

 

 

 

 

 

333,855

 

Myx acquisition

 

 

 

 

 

 

 

 

 

13,546,503

 

 

 

2

 

 

 

162,556

 

 

 

 

 

 

 

 

 

162,558

 

Balances at June 30, 2021

 

$

 

 

 

$

 

 

 

308,175,942

 

 

$

31

 

 

$

597,598

 

 

$

(17

)

 

$

(39,159

)

 

$

558,453

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(39,922

)

 

 

(39,922

)

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32

 

 

 

 

 

 

32

 

Options exercised, net of tax
   withholdings

 

 

 

 

 

 

 

 

 

1,292,541

 

 

 

 

 

 

1,323

 

 

 

 

 

 

 

 

 

1,323

 

Equity-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,744

 

 

 

 

 

 

 

 

 

5,744

 

Balances at September 30, 2021

 

$

 

 

 

$

 

 

 

309,468,483

 

 

$

31

 

 

$

604,665

 

 

$

15

 

 

$

(79,081

)

 

$

525,630

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


The Beachbody Company, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(82,420

)

 

$

(4,560

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation and amortization expense

 

 

40,557

 

 

 

31,881

 

Amortization of content assets

 

 

10,008

 

 

 

5,103

 

Provision for excess and obsolete inventory

 

 

4,431

 

 

 

1,083

 

Allowance for doubtful accounts

 

 

0

 

 

 

77

 

Change in fair value of derivative financial instruments

 

 

294

 

 

 

16

 

Gain on investment in convertible instrument

 

 

(3,114

)

 

 

0

 

Change in fair value of warrant liabilities

 

 

(35,664

)

 

 

0

 

Equity-based compensation

 

 

10,839

 

 

 

3,169

 

Deferred income taxes

 

 

(12,964

)

 

 

398

 

Other non-cash items

 

 

0

 

 

 

6

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(226

)

 

 

(2,150

)

Inventory

 

 

(68,765

)

 

 

(17,510

)

Content assets

 

 

(21,958

)

 

 

(9,922

)

Prepaid expenses

 

 

(5,364

)

 

 

7,838

 

Other assets

 

 

(5,575

)

 

 

(4,387

)

Accounts payable

 

 

9,095

 

 

 

9,216

 

Accrued expenses

 

 

(406

)

 

 

19,806

 

Deferred revenue

 

 

27,041

 

 

 

41,775

 

Other liabilities

 

 

(5,068

)

 

 

(9,499

)

Net cash provided by (used in) operating activities

 

 

(139,259

)

 

 

72,340

 

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(61,065

)

 

 

(28,107

)

Investment in convertible instrument

 

 

(5,000

)

 

 

0

 

Other investment

 

 

(5,000

)

 

 

0

 

Cash acquired in acquisition of Ladder

 

 

 

 

 

1,247

 

Cash paid for acquisition of Myx, net of cash acquired

 

 

(37,280

)

 

 

0

 

Net cash used in investing activities

 

 

(108,345

)

 

 

(26,860

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

4,477

 

 

 

0

 

Remittance of taxes withheld from employee stock awards

 

 

(3,154

)

 

 

0

 

Borrowings under Credit Facility

 

 

42,000

 

 

 

32,000

 

Repayments under Credit Facility

 

 

(42,000

)

 

 

(32,000

)

Business Combination, net of issuance costs paid

 

 

389,125

 

 

 

0

 

Net cash provided by financing activities

 

 

390,448

 

 

 

0

 

Effect of exchange rates on cash

 

 

168

 

 

 

(397

)

Net increase in cash and cash equivalents

 

 

143,012

 

 

 

45,083

 

Cash and cash equivalents, beginning of period

 

 

56,827

 

 

 

41,564

 

Cash and cash equivalents, end of period

 

$

199,839

 

 

$

86,647

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash paid during the year for interest

 

$

389

 

 

$

335

 

Cash paid during the year for income taxes, net

 

$

389

 

 

$

377

 

Supplemental disclosure of noncash investing activities:

 

 

 

 

 

 

Property and equipment acquired but not yet paid for

 

$

13,640

 

 

$

3,914

 

Class A Common Stock issued in connection with the acquisition of Myx

 

$

162,558

 

 

$

0

 

Fair value of Myx instrument and promissory note held by Old Beachbody

 

$

22,618

 

 

$

0

 

Old Beachbody Common units issued in connection with acquisition

 

$

0

 

 

$

27,889

 

Supplemental disclosure of noncash financing activities:

 

 

 

 

 

 

Tax asset contribution

 

$

 

 

$

(135

)

Net assets assumed from Forest Road in the Business Combination

 

$

293

 

 

$

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


The Beachbody Company, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

4

1.
Organization, Business and Summary of Accounting Policies

Organization

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 1 — Organization and Business Operations

Organization and General

On June 25, 2021 (the “Closing Date”), Forest Road Acquisition Corp. (the “Company” or “Forest(“Forest Road”) was incorporated in Delaware on September 24, 2020. The Company was formed for, a special purpose acquisition company, consummated the purpose of entering into a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businessesBusiness Combination Agreement (the “Business Combination”Combination Agreement”). The Company is not limited to a specific industry or sector for purposes of consummating a Business Combination; however, the Company intends to concentrate its efforts on identifying businesses in the technology, media and telecommunications industry. The Company is an early stage and emerging growth company and, dated as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

On February 9, 2021, Forest Road entered into an Agreementby and Plan of Merger (the “Merger Agreement”) with BB Merger Sub, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Forest Road, MFH Merger Sub, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary ofamong Forest Road, The Beachbody Company Group, LLC a Delaware limited liability company,(“Old Beachbody”), BB Merger Sub, LLC, (“BB Merger Sub”), MFH Merger Sub, LLC (“Myx Merger Sub”), and Myx Fitness Holdings, LLC a Delaware limited liability company.(“Myx”).

On February 9, 2021, Forest Road and certain investors entered into subscription agreements (the “Subscription Agreements”) pursuant to which such investors have agreed to purchase in connection with the Closing an aggregate of 22.5 million shares of Class A common stock for a purchase price of $10.00 per share, for an aggregate purchase price of $225 million (the “PIPE Investment”). The obligations of each party to consummate the PIPE Investment are conditioned upon, among other things, customary closing conditions and the consummation of the transactions contemplated by the Merger Agreement.

As of March 31, 2021 and December 31, 2020, the Company had not yet commenced any operations. All activity through March 31, 2021, relatesPursuant to the Company’s formation and the initial public offering (“IPO”) described below. The Company will not generate any operating revenues until after the completionterms of its initial business combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.

The Company’s sponsor is Forest Road Acquisition Sponsor LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s IPO was declared effective by the U.S. Securities and Exchange Commission (the “SEC”) on November 24, 2020 (the “Effective Date”). On November 30, 2020, the Company consummated the IPO of 30,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), including the issuance of 3,900,000 Units as a result of the underwriters’ partial exercise of their over-allotment option. Each Unit consists of one share of Class A common stock, $0.0001 par value, and one-third of one redeemable warrant entitling its holder to purchase one share of Class A common stock at a price of $11.50 per share. The Units were sold at an offering price of $10.00 per Unit, generating gross proceeds of $300,000,000 (Note 3).

Simultaneously with the closing of the IPO, the Company consummated the private placement (“Private Placement”) with the Sponsor of an aggregate of 5,333,333 warrants (“Private Placement Warrants”) to purchase Class A common stock, each at a price of $1.50 per Private Placement Warrant, generating total proceeds of $8,000,000 (Note 4).

Transaction costs amounted to $16,979,438, consisting of $6,000,000 of underwriting discount, $10,500,000 of deferred underwriters’ fee and $479,438 of other offering costs.

Trust Account

Following the closing of the IPO on November 30, 2020, an amount of $300,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Placement Warrants was placed in a trust account (“Trust Account”) which was invested in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act, which invest only in direct U.S. government treasury obligations, until the earlier of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s certificate of incorporation, or (c) the redemption of the Company’s public shares if the Company is unable to complete the initial Business Combination within 24 months from the closing of the IPO, or November 30, 2022 (the “Combination Period”).

5

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Initial Business Combination

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete a Business Combination with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80% of the net assets held in the Trust Account (net of amounts disbursed to management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time of the Company’s signing a definitive agreement in connection with its initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest in the target business or assets sufficient for it not to be required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”).

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination Agreement, BB Merger Sub merged with and into Old Beachbody, with Old Beachbody surviving as a wholly-owned subsidiary of Forest Road (the “Surviving Beachbody Entity”); (2) Myx Merger Sub merged with and into Myx, with Myx surviving as a wholly-owned subsidiary of Forest Road; and (3) the Surviving Beachbody Entity merged with and into Forest Road, with Forest Road surviving such merger (the “Surviving Company”, and such mergers the “Business Combination”). On the Closing Date, the Surviving Company changed its name to The Beachbody Company, Inc. (the “Company”, “Beachbody”, “we” or (ii) by means“us”).

Business

Beachbody is a leading subscription health and wellness company. Beachbody is focused on digital platform development, fitness content and brand creation, proprietary nutritional product formulation and connected fitness across three brands: Beachbody, Openfit and Myx. The Beachbody On Demand streaming service with workouts from Beachbody’s programs such as P90X, Insanity, and 21 Day Fix, and Openfit, that includes live trainer-led workouts and personalized nutrition, are each available as an app on iOS and Android mobile devices; a streaming channel on OTT devices such as Apple TV, Roku, Amazon Fire, and Chromecast; and online. Myx’s interactive fitness platform provides commercial grade stationary bikes and accessories and on-demand subscription-based instructor-led fitness classes that enable customers to have an all-in-one home fitness studio. Beachbody’s revenue is primarily generated through a network of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combinationindependent distributors (“Coaches” or conduct a tender offer will be made by the Company. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then“micro-influencers”), internet marketing channels, and direct response advertising. Beachbody markets and sells its products primarily in the Trust Account (initially anticipated to be $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust AccountUnited States, United Kingdom, and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completionCanada, and approximately 30% of a Business Combination with respect to the Company’s warrants.

The Company will only proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by applicable law or stock exchange rules and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a Business Combination.

If, however, stockholder approval of the transaction is required by applicable law or stock exchange rules, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), and any Public Shares purchased during or after the IPO in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or do not vote at all.

6

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company. The Sponsor has agreed (a) to waive its redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination and (b) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights (including redemption rights) or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.

There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period. The Sponsor has agreed to waive its liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor acquires Public Shares in or after the IPO, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period.

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 to below the lesser of (1) $10.00 per Public Share and (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO 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 vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses and 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.


FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Liquidity

As of March 31, 2021, the Company had cash outside the Trust Account of $730,435 available for working capital needs. All remaining cash held in the Trust Account is generally unavailableBeachbody’s revenues for the Company’s use, priorthree and nine months ended September 30, 2021 are attributable to an initial Business Combination, and is restricted for use either in a Business Combination or to redeem common stock. AsShakeology, Beachbody’s premium nutritional shake.

Summary of March 31, 2021, none of the amount in the Trust Account was available to be withdrawn as described above.

Through March 31, 2021, the Company’s liquidity needs were satisfied through receipt of $25,000 from the sale of the founder shares, advances from the Sponsor in an aggregate amount of $141,881 and the remaining net proceeds from the IPO and the sale of Private Placement Warrants.

The Company anticipates that the $730,435 outside of the Trust Account as of March 31, 2021 will be sufficient to allow the Company to operate for at least the next 12 months from the issuance of the unaudited condensed financial statements, assuming that a Business Combination is not consummated during that time. Until consummation of its Business Combination, the Company will be using the funds not held in the Trust Account, and any additional Working Capital Loans (as defined in Note 5) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5), 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.

The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its business prior to the business combination. Moreover, the Company will need to raise additional capital through loans from its Sponsor, officers, directors, or third parties. None of the Sponsor, officers or directors is under any obligation to advance funds to, or to invest in, the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

8

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Risks and Uncertainties

On January 30, 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (the “COVID-19 outbreak”). In March 2020, the WHO classified the COVID-19 outbreak as a pandemic, based on the rapid increase in exposure globally. The full impact of the COVID-19 outbreak continues to evolve. The impact of the COVID-19 outbreak on the Company’s financial position will depend on future developments, including the duration and spread of the outbreak and related advisories and restrictions. These developments and the impact of the COVID-19 outbreak on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s financial position may be materially adversely affected. Additionally, the Company’s ability to complete an initial Business Combination may be materially adversely affected due to significant governmental measures being implemented to contain the COVID-19 outbreak or treat its impact, including travel restrictions, the shutdown of businesses and quarantines, among others, which may limit the Company’s ability to have meetings with potential investors or affect the ability of a potential target company’s personnel, vendors and service providers to negotiate and consummate an initial Business Combination in a timely manner. The Company’s ability to consummate an initial business combination may also be dependent on the ability to raise additional equity and debt financing, which may be impacted by the COVID-19 outbreak and the resulting market downturn.

Note 2 — Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensedCompany prepares its consolidated financial statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial informationas determined by the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) and in accordance withpursuant to the instructions to Form 10-Q and Regulation S-Xregulations of the SEC. Certain information or footnote disclosures normally included in financial statements preparedU.S. Securities and Exchange Commission (“SEC”).

The merger between BB Merger Sub and Old Beachbody was accounted for as a reverse recapitalization in accordance with GAAP (the “Reverse Recapitalization”). Under this method of accounting, Forest Road is treated as the acquired company and Old Beachbody is treated as the acquirer for financial reporting purposes.

Accordingly, for accounting purposes, the Reverse Recapitalization was treated as the equivalent of Old Beachbody issuing stock for the net assets of Forest Road, accompanied by a recapitalization. The net assets of Forest Road are stated at historical cost, with no goodwill or other intangible assets recorded, see Note 2.

Old Beachbody was determined to be the accounting acquirer based on the following predominant factors:

Old Beachbody’s shareholders have been condensed or omitted, pursuant to the rules and regulationslargest portion of the SEC for interim financial reporting. Accordingly, they do not include allvoting rights in the informationCompany;
the Board and footnotes necessary for a complete presentationManagement are primarily composed of financial position,individuals associated with Old Beachbody; and
Old Beachbody was the larger entity based on historical operating activity and Old Beachbody had the larger employee base at the time of the Business Combination.

6


The consolidated assets, liabilities and results of operations or cash flows. Inprior to the opinionReverse Recapitalization are those of management,Old Beachbody. The shares and corresponding capital amounts and income (losses) per share, prior to the accompanying unaudited condensedBusiness Combination, have been retroactively restated based on shares reflecting the exchange ratio established in the Business Combination.

Old Beachbody was determined to be the accounting acquirer in the acquisition of Myx. As such, the acquisition is considered a business combination under ASC 805, Business Combinations, and was accounted for using the acquisition method of accounting. Beachbody recorded the fair value of assets acquired and liabilities assumed from Myx, see Note 9. The presented financial statements include all adjustments, consisting of a normal recurring nature, which are necessaryinformation for a fair presentation ofthe nine months ended September 30, 2021 includes the financial position, operating resultsinformation and cash flowsactivities for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, as amended, as of December 31, 2020 andMyx for the period from June 26, 2021 to September 24, 2020 (inception) through December 31, 2020 as filed with the SEC on May 3, 2021, which contains the audited30, 2021.

The unaudited condensed consolidated financial statements and notes thereto. The interim results forinclude the three months ended March 31, 2021 are not necessarily indicativeaccounts of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

Emerging Growth Company Status

The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart our Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reportscontrolled subsidiaries. All intercompany transactions and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those thatbalances have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

9been eliminated.

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Use of Estimates

The preparation of the unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates include, but are not limited to, the valuation of acquired intangible assets, revenue arrangements with multiple performance obligations, equity-based compensation, amortization of content assets, impairment of goodwill, and the useful lives and recoverability of long-lived assets. The Company bases these estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances, the results of which form the basis for making judgements about the carrying amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period.liabilities. Actual results could differ from those estimates.

Unaudited Interim Condensed Financial Statements

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, include all adjustments consisting of only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of September 30, 2021, its results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020. The financial data and other financial information disclosed in the notes to these condensed consolidated financial statements related to the three- and nine-month periods are also unaudited. The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results expected for the full fiscal year or any other period.

CashThese unaudited interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and Cash Equivalentsthe related notes included in the Company’s annual financial statements as of and for the fiscal year ended December 31, 2020.

Fair Value Option

The guidance in ASC 825, Financial Instruments, provides a fair value option election that allows entities to make an irrevocable election of fair value as the initial and subsequent measurement attribute for certain eligible financial assets and liabilities. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. The decision to elect the fair value option is determined on an instrument-by-instrument basis, must be applied to an entire instrument, and is irrevocable once elected. The Company elected to measure the investment in the convertible instrument from Myx using the fair value option at each reporting date. Assets and liabilities measured at fair value pursuant to this guidance are required to be reported separately in the unaudited condensed consolidated balance sheets or the footnotes from those instruments using another measurement method.

Fair Value

The Company applies fair value accounting for assets and liabilities measured on a recurring and nonrecurring basis. For assets and liabilities that are measured using quoted prices in active markets for identical assets or liabilities, the total fair value is the published market price per unit multiplied by the number of units held without consideration of transaction costs (Level 1). Assets and liabilities that are measured using significant other observable inputs are valued by reference to similar assets or liabilities, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data (Level 2). For all remaining assets and liabilities for which there are no significant observable inputs, fair value is derived using an assessment of various discount rates, default risk, credit quality, and the overall capital market liquidity (Level 3). These valuations require significant judgment.

7


Accounts Receivable, Net

The Company provides credit in the normal course of business to its customers. Accounts receivable consists primarily of credit card receivables arising from the sale of products to customers on an installment basis, which generally have payment terms ranging from one to three months. Receivables are individually insignificant and are due from a large number of geographically dispersed customers. Accounts receivable is reported net of allowances for doubtful accounts which were approximately zero as of September 30, 2021 and December 31, 2020. The allowance for doubtful accounts is evaluated and adjusted to reflect the Company’s expected credit losses based on collection history and an analysis of the accounts receivable aging. The change in the allowance for doubtful accounts during the three and nine months ended September 30, 2021 and 2020 is as follows (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Balance, beginning of period

 

$

16

 

 

$

41

 

 

$

16

 

 

$

69

 

Charges

 

 

0

 

 

 

45

 

 

 

0

 

 

 

77

 

Write-offs

 

 

 

 

 

(56

)

 

 

 

 

 

(116

)

Balance, end of period

 

$

16

 

 

$

30

 

 

$

16

 

 

$

30

 

Business Combinations

The Company accounts for business combinations under the acquisition method of accounting. The cost of an acquired company is assigned to the tangible and identifiable assets purchased and the liabilities assumed on the basis of their fair values at the date of acquisition. Any excess of the purchase price over the fair value of tangible and intangible assets acquired is assigned to goodwill. The transaction costs associated with business combinations are expensed as they are incurred.

Common Stock Warrant Liability

The Company assumed 10,000,000 warrants originally issued in Forest Road’s initial public offering (the “Public Warrants”) and 5,333,333 warrants issued in a private placement that closed concurrently with Forest Road’s initial public offering, (the “Private Placement Warrants”) upon the Business Combination. The Public and Private Placement Warrants entitle the holder to purchase 1 share of Class A Common Stock at an exercise price of $11.50 per share. All of the Public and Private Placement Warrants remained outstanding as of September 30, 2021. The Public Warrants are publicly traded and become exercisable on November 30, 2021 provided that the Company has an effective registration statement and are exercisable for cash unless certain conditions occur, such as the failure to have an effective registration statement related to the shares issuable upon exercise or redemption by the Company under certain conditions, at which time the warrants may be cashless exercised. The Private Placement Warrants are transferable, assignable or salable in certain limited exceptions. The Private Placement Warrants were not transferable, assignable or salable until July 25, 2021, subject to certain limited exceptions. The Private Placement Warrants are exercisable for cash or on a cashless basis, at the holder’s option, and are non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will cease to be Private Placement Warrants, and become Public Warrants and will be redeemable by the Company and exercisable by such holders on the same basis as the other Public Warrants.

8


The Company evaluated the Public and Private Placement Warrants under ASC 815, Derivatives and Hedging—Contracts in Entity’s Own Equity, and concluded they do not meet the criteria to be classified in stockholders’ equity. Specifically, the exercise of the Public and Private Placement Warrants may be settled in cash upon the occurrence of a tender offer or exchange that involves 50% or more of our Class A stockholders. Because not all of the voting stockholders need to participate in such tender offer or exchange to trigger the potential cash settlement and the Company does not control the occurrence of such an event, the Company concluded that the Public and Private Placement Warrants do not meet the conditions to be classified in equity. Since the Public and Private Placement Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities in the unaudited condensed consolidated balance sheets at fair value, with subsequent changes in their respective fair values recognized in the change in fair value of warrant liabilities within the unaudited condensed consolidated statements of operations at each reporting date. The Public Warrants were publicly traded and thus had an observable market price to estimate fair value. The Private Placement Warrants were valued using a Black-Scholes option-pricing model as described in Note 4 to the unaudited condensed consolidated financial statements.

Investment in Convertible Instrument

In December 2020, the Company purchased a $10.0 million convertible instrument from Myx. The convertible instrument was scheduled to mature 18 months from issuance and bore interest of 11% per annum. The principal and accrued interest on the convertible instrument was to automatically convert into preferred shares upon the closing by Myx of a convertible preferred equity financing with gross proceeds of at least $35.0 million (a “Qualified Financing”) at a conversion price equal to 85% of the lowest price per unit paid in cash by investors in such Qualified Financing. Upon a change in control involving the Company and a special purpose acquisition company, immediately prior to the change in control transaction, the principal and accrued interest was to be automatically converted into preferred equity units of Myx at a conversion price equal to 85% of the price per unit contemplated in the change of control transaction. Such preferred equity units were to automatically convert into common shares of the surviving entity.

In March 2021, the Company increased the principal of the convertible instrument from Myx from $10.0 million to $15.0 million.

In connection with the Business Combination, the principal and interest were effectively settled at a fair value of $18.4 million. As of December 31, 2020, the convertible instrument was included within other assets in the consolidated balance sheets.

Prior to the Business Combination, the Company elected to measure the investment in convertible instrument from Myx using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative was not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value was reflected in other income, net in the condensed consolidated statements of operations.

Other Investment

As of September 30, 2021, the Company has an investment in equity securities of $5.0 million, with no readily determinable fair value. This equity investment is reported within other assets on the unaudited condensed consolidated balance sheets. The Company uses the measurement alternative for this investment, and its carrying value is reported at cost, adjusted for impairments or any observable price changes in ordinary transaction with identical or similar instruments. As of September 30, 2021, 0 adjustments to the carrying value of this investment were made.

Revenue Recognition

The Company’s primary sources of revenue are from sales of digital subscriptions, nutritional products and connected fitness equipment. The Company records revenue when it fulfills its performance obligation to transfer control of the goods or services to its customer. Control of shipped items is generally transferred when the product is delivered to the customer.

The amount of revenue recognized is the consideration that the Company expects it will be entitled to receive in exchange for transferring goods or services to its customers. Control of services, which are primarily digital subscriptions, transfers over time, and as such, revenue is recognized ratably over the subscription period (up to 12 months), using a mid-month convention. The Company sells a variety of bundled products that combine digital subscriptions, nutritional products, and/or other fitness products. The Company considers these sales to be revenue arrangements with multiple performance obligations and allocates the transaction price to each performance obligation based on its relative stand-alone selling price. The Company defers revenue when it receives payments in advance of delivery of products or the performance of services.

9


Revenue is recorded net of expected returns, discounts, and credit card chargebacks, which are estimated using the Company’s historical experience. Revenue is presented net of sales taxes and value added taxes (VAT and GST/HST) which are collected from customers and remitted to applicable government agencies.

The Company is the principal in all short-term investmentsits relationships where third parties sell or distribute the Company’s goods or services. Payments made to the third parties are recorded in selling and marketing expenses within the unaudited condensed consolidated statements of operations.

Recently Adopted Accounting Pronouncements or Accounting Pronouncements Not Yet Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes specific exceptions to the general principles in Topic 740 in addition to simplifying other areas of Topic 740. The guidance in this update is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 and is effective for all other entities for fiscal years beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. The Company adopted ASU 2019-12 in the first quarter of 2021, and the adoption had no material impact to the Company’s unaudited condensed consolidated financial statements.

2.
Business Combination

As discussed in Note 1, on June 25, 2021, the Company consummated the Business Combination Agreement dated February 9, 2021, with Old Beachbody surviving the merger as a wholly-owned subsidiary of the Company.

At the effective time of the Merger (the “Effective Time”), and subject to the terms and conditions of the Business Combination Agreement, each equity unit of Old Beachbody, other than those held by Carl Daikeler and certain of his affiliated and related entities, was canceled and converted into the right to receive 3.359674941 shares (the “Exchange Ratio”) of the Company’s Class A Common Stock, $0.0001 par value per share (the “Class A Common Stock”), and each equity unit of Old Beachbody held by Carl Daikeler and certain of his affiliated and related entities was canceled and converted into the right to receive the number of shares of the Company’s Class X Common Stock, par value $0.0001 per share, (the “Class X Common Stock,” and, together with the Class A Common Stock, the “Common Stock”) equal to the Exchange Ratio.

Pursuant to the Business Combination Agreement, 3,750,000 shares held by Forest Road Acquisition Sponsor LLC (the “Sponsor”) will be unvested and are subject to forfeiture if certain earnout conditions are not satisfied (“Forest Road Earn-out Shares”). Subject to certain other terms and conditions, the Forest Road Earn-out Shares will vest, in equal tranches of 10% each, commencing on December 22, 2021, upon the occurrence of the Company’s last sale price on the New York Stock Exchange (“NYSE”) exceeding each of the following price-per-share thresholds for any 20 trading days within any consecutive 30-day trading period,: $12.00, $13.00, $14.00, $15.00 and $16.00. Any Sponsor Shares that do not vest within 10 years after Closing will be forfeited. The Forest Road Earn-out Shares are accounted for as equity-classified equity instruments, were included as merger consideration as part of the Reverse Recapitalization, and recorded in additional paid-in capital. As of September 30, 2021, all Forest Road Earn-out Shares are unvested.

Upon the closing of the Business Combination, the Company’s certificate of incorporation was amended and restated to, among other things, increase the total number of authorized shares of all classes of capital stock to 2,000,000,000 shares, $0.0001 par value per share, of which, 1,600,000,000 shares are designated as Class A Common Stock, 200,000,000 shares are designated as Class X Common Stock, 100,000,000 shares are designated as Class C Common Stock and 100,000,000 shares are designated as Preferred Stock. The holder of each share of Class A Common Stock is entitled to one vote, the holder of each share of Class X Common Stock is entitled to ten votes and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers.

In connection with the Business Combination, a number of subscribers purchased an originalaggregate of 22,500,000 shares of Class A Common Stock (the “PIPE”) from the Company, for a purchase price of $10.00 per share and an aggregate purchase price of $225.0 million (the “PIPE Shares”), pursuant to separate subscription agreements entered into effective as of February 9, 2021.

At the Effective Time, and subject to the terms and conditions of the Business Combination Agreement, each Myx equity unit was canceled and converted into the right to receive approximately 13.5 million shares of Class A Common Stock; provided, however, that certain holders of Myx units received an amount in cash equal to the value of such shares not to exceed $37.7 million.

10


The following table reconciles the elements of the Business Combination to the unaudited condensed consolidated statement of cash flows and the unaudited condensed consolidated statement of stockholders’ equity for the nine months ended September 30, 2021 (in thousands):

 

 

Recapitalization

 

Cash- Forest Road trust and cash, net of redemptions

 

$

216,444

 

Cash- PIPE Financing

 

 

225,000

 

Less: Non-cash net assets assumed from Forest Road

 

 

293

 

Less: Fair value of Public and Private Warrants

 

 

(60,900

)

Less: Transaction costs and advisory fees for Beachbody
   allocated to equity

 

 

(19,923

)

Less: Transaction costs and advisory fees for Forest Road

 

 

(27,059

)

Net Business Combination

 

 

333,855

 

Less: Non-cash net assets assumed from Forest Road

 

 

(293

)

Less: Transaction costs and advisory fees for Beachbody
   allocated to warrants

 

 

(5,337

)

Add: Non-cash fair value of Forest Road warrants

 

 

60,900

 

Net cash contributions from Business Combination

 

$

389,125

 

The Company recorded transaction costs and advisory fees allocated to warrants as a component of change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations.

The number of shares of common stock issued immediately following the consummation of the Business Combination:

Common stock of Forest Road, net of redemptions

21,616,515

Forest Road shares held by the Sponsor (1)

7,500,000

Shares issued in PIPE Financing

22,500,000

Business Combination and PIPE Financing shares -
   Class A common stock

51,616,515

Myx equity units- Class A common stock

13,546,503

Old Beachbody equity units - Class A Common Stock (2)

101,762,614

Old Beachbody equity units - Class X Common Stock (3)

141,250,310

Total shares of common stock immediately after
   Business Combination

308,175,942

(1)
Includes 3,750,000 Forest Road Earn-out Shares.
(2)
The number of Old Beachbody equity units - Class A Common Stock was determined from 20,220,589 common units and 10,068,841 preferred units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio.
(3)
The number of Old Beachbody equity units - Class X Common Stock was determined from 42,042,850 common units of Old Beachbody outstanding immediately prior to the closing of the Business Combination converted at the Exchange Ratio.

11


3.
Revenue

The Company’s revenue disaggregated by revenue type and geographic region is as follows (in thousands):

 

 

Reportable Segment

 

 

 

 

 

 

Beachbody

 

 

Other

 

 

Total

 

Three Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

Revenue Type:

 

 

 

 

 

 

 

 

 

Digital

 

$

86,879

 

 

$

7,193

 

 

$

94,072

 

Connected fitness

 

 

 

 

 

5,927

 

 

 

5,927

 

Nutrition and other

 

 

107,411

 

 

 

642

 

 

 

108,053

 

Total revenue

 

$

194,290

 

 

$

13,762

 

 

$

208,052

 

 

 

 

 

 

 

 

 

 

 

Geographic region:

 

 

 

 

 

 

 

 

 

United States

 

$

173,935

 

 

$

13,762

 

 

$

187,697

 

Rest of world1

 

 

20,355

 

 

 

 

 

 

20,355

 

Total revenue

 

$

194,290

 

 

$

13,762

 

 

$

208,052

 

 

 

Reportable Segment

 

 

 

 

 

 

Beachbody

 

 

Other

 

 

Total

 

Three Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

Revenue Type:

 

 

 

 

 

 

 

 

 

Digital

 

$

95,950

 

 

$

3,132

 

 

$

99,082

 

Nutrition and other

 

 

152,318

 

 

 

79

 

 

 

152,397

 

Total revenue

 

$

248,268

 

 

$

3,211

 

 

$

251,479

 

 

 

 

 

 

 

 

 

 

 

Geographic region:

 

 

 

 

 

 

 

 

 

United States

 

$

225,533

 

 

$

3,211

 

 

$

228,744

 

Rest of world1

 

 

22,735

 

 

 

 

 

 

22,735

 

Total revenue

 

$

248,268

 

 

$

3,211

 

 

$

251,479

 

 

 

Reportable Segment

 

 

 

 

 

 

Beachbody

 

 

Other

 

 

Total

 

Nine Months Ended September 30, 2021

 

 

 

 

 

 

 

 

 

Revenue Type:

 

 

 

 

 

 

 

 

 

Digital

 

$

268,812

 

 

$

14,735

 

 

$

283,547

 

Connected fitness

 

 

 

 

 

5,937

 

 

 

5,937

 

Nutrition and other

 

 

365,835

 

 

 

2,060

 

 

 

367,895

 

Total revenue

 

$

634,647

 

 

$

22,732

 

 

$

657,379

 

 

 

 

 

 

 

 

 

 

 

Geographic region:

 

 

 

 

 

 

 

 

 

United States

 

$

566,210

 

 

$

22,732

 

 

$

588,942

 

Rest of world1

 

 

68,437

 

 

 

 

 

 

68,437

 

Total revenue

 

$

634,647

 

 

$

22,732

 

 

$

657,379

 

12


 

 

Reportable Segment

 

 

 

 

 

 

Beachbody

 

 

Other

 

 

Total

 

Nine Months Ended September 30, 2020

 

 

 

 

 

 

 

 

 

Revenue Type:

 

 

 

 

 

 

 

 

 

Digital

 

$

233,746

 

 

$

6,218

 

 

$

239,964

 

Nutrition and other

 

 

399,255

 

 

 

80

 

 

 

399,335

 

Total revenue

 

$

633,001

 

 

$

6,298

 

 

$

639,299

 

 

 

 

 

 

 

 

 

 

 

Geographic region:

 

 

 

 

 

 

 

 

 

United States

 

$

577,478

 

 

$

6,298

 

 

$

583,776

 

Rest of world1

 

 

55,523

 

 

 

 

 

 

55,523

 

Total revenue

 

$

633,001

 

 

$

6,298

 

 

$

639,299

 

(1)
Consists of Canada, United Kingdom and France.

Deferred Revenue

Deferred revenue is recorded for nonrefundable cash payments received for the Company’s performance obligation to transfer, or stand ready to transfer, goods or services in the future. Deferred revenue consists of subscription fees billed that have not been recognized and physical products sold that have not yet been delivered. During the three and nine months ended September 30, 2021, the Company recognized $11.3 million and $90.5 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2020. During the three and nine months ended September 30, 2020, the Company recognized $8.5 million and $64.7 million, respectively, of revenue that was included in the deferred revenue balance as of December 31, 2019.

4.
Fair Value Measurements

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for such measurements were as follows (in thousands):

 

 

September 30, 2021

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

Derivative assets

 

$

 

 

$

187

 

 

$

 

Total Assets

 

$

 

 

$

187

 

 

$

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Common stock warrants (Public)

 

$

11,900

 

 

$

 

 

$

 

Common stock warrants (Private Placement)

 

 

 

 

 

 

 

 

8,000

 

Total Liabilities

 

$

11,900

 

 

$

 

 

$

8,000

 

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Assets

 

 

 

 

 

 

 

 

 

Derivative assets

 

$

 

 

$

164

 

 

$

 

Investment in convertible instrument

 

 

 

 

 

 

 

 

10,288

 

Total Assets

 

$

 

 

$

164

 

 

$

10,288

 

Fair values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate the recorded value due to the short period of time to maturity. The fair value of the Public Warrants, which trade in active markets, is based on quoted market prices for identical instruments. The fair value of derivative instruments is based on Level 2 inputs such as observable forward rates, spot rates, and foreign currency exchange rates. The Company’s Private Placement warrants and investment in the convertible instrument are classified within Level 3 of the fair value hierarchy because their fair values are is based on significant inputs that are unobservable in the market. The fair value of goodwill and intangible assets is based on a valuation performed by a third-party using Level 3 inputs.

13


The valuation of the Private Placement Warrants and, prior to the Business Combination, the investment in convertible instrument use assumptions and estimates the Company believes would be made by a market participant in making the same valuations. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained.

The Company determined the fair value of the Private Placement Warrants using a Black-Scholes option-pricing model and the quoted price of the Company’s common stock. Volatility was based on the implied volatility derived from the average of the actual market activity of the Company’s peer group. The expected life was based on the remaining contractual term of the Private Placement Warrants, and the risk-free interest rate was based on the implied yield available on U.S. Treasury Securities with a maturity equivalent to the warrants’ expected life. The significant unobservable input used in the fair value measurement of the Private Placement Warrants is the implied volatility. Significant changes in the implied volatility would result in a significantly higher or lower fair value measurement, respectively.

The following table presents significant assumptions utilized in the valuation of the Private Placement Warrants on the Closing Date of the Business Combination and at September 30, 2021:

 

 

As of
September 30,

 

 

As of
June 25,

 

 

 

2021

 

 

2021

 

Risk-free rate

 

 

0.9

%

 

 

0.9

%

Dividend yield rate

 

 

0.0

%

 

 

0.0

%

Volatility

 

 

55.0

%

 

 

45.0

%

Contractual term (in years)

 

 

4.74

 

 

 

5.00

 

Exercise price

 

$

11.50

 

 

$

11.50

 

The following table presents changes in the fair value of the Private Placement Warrants for the three and nine months ended September 30, 2021:

 

 

Three Months
Ended
September 30, 2021

 

 

Nine Months
Ended
September 30, 2021

 

Balance, beginning of period

 

$

20,373

 

 

$

0

 

Assumed in Business Combination

 

 

 

 

 

26,400

 

Change in fair value

 

 

(12,373

)

 

 

(18,400

)

Balance, end of period

 

$

8,000

 

 

$

8,000

 

For the three and nine months ended September 30, 2021, the change in the fair value of Private Placement Warrants resulted from the change in fair value of the Company’s Class A Common Stock. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of change in fair value of warrant liabilities.

Prior to the Business Combination and as of December 31, 2020, the convertible instrument was valued using a scenario-based analysis. Two primary scenarios were considered to arrive at the valuation conclusion for the convertible instrument. The first scenario considers the probability-weighted value of conversion at the stated discount to the issue price in a change in control event. The second scenario considers the probability-weighted value of conversion at the stated discount to the issue price in a Qualified Financing event. As of the date of the investment in the convertible instrument, an implied yield was calculated such that the sum of the value of the straight debt and the value of the conversion feature was equal to the principal investment amount. The implied yield of the investment is carried forward with a market adjustment and used as the primary discount rate for subsequent valuation dates.

The significant unobservable inputs used in the fair value measurement of the Company’s investment in convertible instrument are the probabilities of Myx closing a future Qualified Financing or change of control, which would trigger conversion of the convertible instrument, probabilities as to the periods in which the outcomes are expected to be achieved and discount rate. Significant changes in the probabilities of the completion of the future Qualified Financing or change in control would result in a significantly higher or lower fair value measurement, respectively. Significant changes in the probabilities as the period in which outcomes will be achieved would result in a significantly lower or higher fair value measurement, respectively.

14


The following table presents changes in the Level 3 investment in convertible instrument from Myx measured at fair value for the nine months ended September 30, 2021:

 

 

Nine Months
Ended
September 30, 2021

 

Balance, beginning of period

 

$

10,288

 

Investment in convertible note

 

 

5,000

 

Change in fair value

 

 

3,114

 

Conversion of investment

 

 

(18,402

)

Balance, end of period

 

$

0

 

For the nine months ended September 30, 2021, the change in the fair value of the investment in convertible instrument resulted from the effective settlement of the instrument. The changes in fair value are included in the unaudited condensed consolidated statements of operations as a component of other income, net. There was 0 change in the fair value of the investment in convertible instrument from Myx for the three months ended September 30, 2021.

5.
Inventory, net

Inventory, net consists of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Raw materials and work in process

 

$

28,675

 

 

$

26,480

 

Finished goods

 

 

112,464

 

 

 

38,874

 

Total inventory

 

$

141,139

 

 

$

65,354

 

Adjustments to change the carrying value of excess and obsolete inventory to the lower of cost or less when purchasednet realizable value were $1.6 million and $4.4 million during the three and nine months ended September 30, 2021, respectively and $1.2 million and $1.1 million during the three and nine months ended September 30, 2020, respectively. These adjustments are included in the unaudited condensed consolidated statements of operations as a component of nutrition and other cost of revenue.

6.
Other Current Assets

Other current assets consist of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Deferred coach costs

 

$

32,287

 

 

$

29,967

 

Deposits

 

 

12,087

 

 

 

3,035

 

Other

 

 

4,182

 

 

 

4,362

 

Total other current assets

 

$

48,556

 

 

$

37,364

 

7.
Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

15


 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Computer software

 

$

225,721

 

 

$

194,314

 

Leasehold improvements

 

 

24,197

 

 

 

24,197

 

Computer equipment

 

 

23,307

 

 

 

21,172

 

Computer software and web development
   projects in-process

 

 

24,373

 

 

 

12,380

 

Furniture, fixtures and equipment

 

 

6,978

 

 

 

7,016

 

Buildings

 

 

5,158

 

 

 

 

Property and equipment, gross

 

 

309,734

 

 

 

259,079

 

Less: Accumulated depreciation

 

 

(194,396

)

 

 

(178,910

)

Property and equipment, net

 

$

115,338

 

 

$

80,169

 

16


The Company recorded depreciation expense related to property and equipment in the following expense categories of its unaudited condensed consolidated statements of operations as follows (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

4,375

 

 

$

3,568

 

 

$

12,259

 

 

$

9,644

 

Selling and marketing

 

 

323

 

 

 

566

 

 

 

1,163

 

 

 

1,634

 

Enterprise technology and development

 

 

6,055

 

 

 

5,435

 

 

 

18,706

 

 

 

15,649

 

General and administrative

 

 

533

 

 

 

784

 

 

 

1,796

 

 

 

2,404

 

Total depreciation

 

$

11,286

 

 

$

10,353

 

 

$

33,924

 

 

$

29,331

 

8.
Content Assets, Net

Content assets, net consist of the following (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Released, less amortization

 

$

26,237

 

 

$

17,306

 

In production

 

 

8,549

 

 

 

2,131

 

Content assets, net

 

$

34,786

 

 

$

19,437

 

The Company expects $16.8 million of content assets to be amortized during the next 12 months and 100% of the balance within four years. The Company recorded amortization expense for content assets of $3.9 million and $10.0 million during the three and nine months ended September 30, 2021, respectively and $1.9 million and $5.1 million during the three and nine months ended September 30, 2020, respectively.

9.
Acquisitions

Myx

The Company acquired 100% of the equity of Myx pursuant to the Business Combination Agreement. The following summarizes the consideration transferred on the Closing Date for the Myx acquisition (in thousands):

Purchase Price

 

 

 

 

Cash consideration (1)

 

 

$

37,700

 

Share consideration (2)

 

 

 

162,558

 

Fair value of Myx instrument held by Old Beachbody (3)

 

 

 

18,402

 

Promissory note held by Old Beachbody (4)

 

 

 

4,216

 

Total consideration

 

 

$

222,876

 

(1)
Cash consideration includes, among other things, the payoff of certain of Myx’s existing debt obligations, payments of certain of Myx’s transaction expenses, and cash equivalents.payments as consideration for certain Myx equity units.
(2)
Share consideration was calculated based on 13,546,503 shares of Class A Common Stock issued multiplied by the share closing price on the Closing Date of $12.00.
(3)
Fair value of Myx instrument held by Old Beachbody was effectively settled on the Closing Date, see Note 1.
(4)
In April and June 2021, Old Beachbody entered into promissory note agreements with Myx. Such promissory notes were effectively settled on the Closing Date.

The acquired assets and assumed liabilities of Myx were recorded at their preliminary acquisition date fair values. The purchase price allocations are subject to material change as the Company continues to gather information relevant to its determination of the fair value of the assets and liabilities acquired primarily related to, but not limited to, inventory, intangible assets, deferred revenue, and deferred income taxes. There were 0 adjustments to the purchase price allocations during the three months ended September 30, 2021.

Marketable Securities Held

17


Adjustments to the purchase price allocations will be made as soon as practicable but no later than one year from the acquisition date. The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of September 30, 2021 (in thousands):

Allocation

 

 

 

 

Goodwill

 

 

$

157,922

 

Intangible assets:

 

 

 

 

Trade name/ Trademark

 

 

 

43,700

 

Developed technology

 

 

 

14,000

 

Customer relationships

 

 

 

20,400

 

 

 

 

 

78,100

 

Cash acquired

 

 

 

420

 

Inventory, net

 

 

 

11,447

 

Other assets

 

 

 

3,354

 

Content assets

 

 

 

3,400

 

Deferred revenue

 

 

 

(2,168

)

Other liabilities

 

 

 

(14,039

)

Deferred tax liabilities

 

 

 

(15,560

)

 

 

 

$

222,876

 

The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill. Goodwill is primarily attributable to the assembled workforce of Myx and expected synergies from combining operations. Goodwill recognized was allocated to the Other operating segment and is generally not deductible for tax purposes.

The fair values of the trade name and trademark intangible assets were determined using an “income approach”, specifically, the relief-from royalty approach, which is a commonly accepted valuation approach. This approach is based on the assumption that in Trust Accountlieu of ownership, a firm would be willing to pay a royalty in order to exploit the related benefits of this asset. Therefore, a portion of Myx’s earnings, equal to the after-tax royalty that would have been paid for the use of the asset, can be attributed to the firm’s ownership. The fair value of the developed technology intangible asset was also determined by the relief-from-royalty approach. The fair values of the customer relationship intangible assets were determined by using an “income approach,” specifically a multi-period excess earnings approach, which is a commonly accepted valuation approach. Under this approach, the net earnings attributable to the asset or liability being measured are isolated using the discounted projected net cash flows. These projected cash flows are isolated from the projected cash flows of the combined asset group over the remaining economic life of the intangible asset or liability being measured. Both the amount and the duration of the cash flows are considered from a market participant perspective. Where appropriate, the net cash flows were adjusted to reflect the potential attrition of existing customers in the future, as existing customers are a “wasting” asset and are expected to decline over time.

The revenue and operating results from Myx included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 is not discernible as the acquisition has been integrated within the Company's existing operations. During the three and nine months ended September 30, 2021, Company incurred $0.1 million and $1.9 million in transaction expenses associated with the Myx acquisition, which are included in general and administrative expenses in the unaudited condensed consolidated statements of operations.

At March 31,The following unaudited pro forma financial information presents the combined results of operations of the Company and Myx as if the companies had been combined as of January 1, 2020. The pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of the Company’s future consolidated results of operations.

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Pro forma combined:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

$

208,052

 

 

$

260,603

 

 

$

688,595

 

 

$

651,378

 

Net income (loss)

 

 

 

(41,977

)

 

 

3,129

 

 

 

(109,725

)

 

 

(23,945

)

18


Ladder

On September 18, 2020, the Company acquired Ladder, a sports nutrition company, to enhance the Openfit platform by providing premium, NSF-certified supplements developed and endorsed by elite athletes.

The Company recognized the assets and liabilities of Ladder based on its estimates of their acquisition date fair values. The purchase price allocations were subject to change as the Company continued to gather information relevant to its determination of the fair value of the assets and liabilities acquired primarily related to, but not limited to, deferred income taxes. There were no adjustments to the purchase price allocations during the three and nine months ended September 30, 2021. The following table summarizes the components of consideration and the fair value estimates of assets acquired and liabilities assumed (in thousands):

Purchase Price

 

 

 

Common units issued in connection with acquisition (1)

 

$

27,889

 

Allocation

 

 

 

Goodwill

 

$

11,606

 

Intangible assets:

 

 

 

Trade name

 

 

7,500

 

Customer-related

 

 

300

 

Formulae

 

 

1,950

 

Talent and representation contracts

 

 

10,300

 

 

 

 

20,050

 

Cash acquired

 

 

1,247

 

Other assets acquired

 

 

1,132

 

Liabilities acquired

 

 

(1,834

)

Deferred tax liabilities

 

 

(4,312

)

 

 

$

27,889

 

(1)
The fair value of common units issued in connection with the acquisition was calculated based on 1,449,537 common units of Old Beachbody multiplied by the estimated fair value per unit of $19.24.

The excess of the purchase price over the estimated fair values of the net assets acquired, including identifiable intangible assets, is recorded as goodwill. Goodwill is primarily attributable to the assembled workforce of Ladder and expected synergies from combining operations. Goodwill recognized was allocated to the Company’s Other operating segment and is generally not deductible for tax purposes. The revenue from Ladder included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 was $0.7 million and $1.2 million, respectively. The operating loss from Ladder included in the Company’s unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021 was $0.5 million and $1.0 million, respectively.

The following unaudited pro forma financial information presents the combined results of operations as if Ladder had been combined with the Company as of January 1, 2020. The pro forma financial information includes the accounting effects of the business combination, including amortization of intangible assets. The unaudited pro forma financial information is presented for information purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of the periods presented, nor should it be taken as indication of the Company’s future consolidated results of operations.

 

 

Three Months
Ended
September 30,

 

 

Nine Months
Ended
September 30,

 

 

 

2020

 

 

2020

 

Pro forma combined:

 

 

 

 

 

 

Revenue

 

$

252,230

 

 

$

641,474

 

Net (loss) income

 

 

9,599

 

 

 

(12,401

)

19


10.
Goodwill and Acquired Intangible Assets

Goodwill

Changes in goodwill for the nine months ended September 30, 2021 is as follows (in thousands):

 

 

September 30,

 

 

 

2021

 

Goodwill, beginning of period

 

$

18,981

 

Acquisition of Myx

 

 

157,922

 

Goodwill, end of period

 

$

176,903

 

Intangible Assets, Net

Intangible assets as of September 30, 2021 and December 31, 2020 consisted of the following (in thousands):

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

 

 

 

Acquired
Intangibles,
Gross

 

 

Accumulated
Amortization

 

 

Acquired
Intangibles,
Net

 

 

Acquired
Intangibles,
Gross

 

 

Accumulated
Amortization

 

 

Acquired
Intangibles,
Net

 

 

Weighted-Average Remaining Useful Life (years)

 

Contract-based

 

$

300

 

 

$

(225

)

 

$

75

 

 

$

300

 

 

$

(150

)

 

$

150

 

 

 

0.8

 

Customer-related

 

 

21,100

 

 

 

(2,344

)

 

 

18,756

 

 

 

700

 

 

 

(337

)

 

 

363

 

 

 

2.7

 

Technology-based

 

 

20,200

 

 

 

(7,124

)

 

 

13,076

 

 

 

6,200

 

 

 

(4,650

)

 

 

1,550

 

 

 

2.6

 

Talent and representation
   contracts

 

 

10,300

 

 

 

(2,575

)

 

 

7,725

 

 

 

10,300

 

 

 

(644

)

 

 

9,656

 

 

 

3.0

 

Formulae

 

 

1,950

 

 

 

(195

)

 

 

1,755

 

 

 

1,950

 

 

 

(49

)

 

 

1,901

 

 

 

9.0

 

Trade name

 

 

51,200

 

 

 

 

 

 

51,200

 

 

 

7,500

 

 

 

 

 

 

7,500

 

 

 Indefinite

 

 

 

$

105,050

 

 

$

(12,463

)

 

$

92,587

 

 

$

26,950

 

 

$

(5,830

)

 

$

21,120

 

 

 

 

Amortization expense for acquired intangible assets heldwas $3.3 million and $6.6 million during the three and nine months ended September 30, 2021 and $0.9 million and $2.6 million during the three and nine months ended September 30, 2020, respectively.

The estimated future amortization expense of acquired intangible assets as of September 30, 2021 is as follows (in thousands):

Three months ended December 31, 2021

 

$

3,330

 

Year ended December 31, 2022

 

 

13,233

 

Year ended December 31, 2023

 

 

13,070

 

Year ended December 31, 2024

 

 

8,932

 

Year ended December 31, 2025

 

 

1,896

 

Thereafter

 

 

926

 

 

 

$

41,387

 

11.
Accrued Expenses

Accrued expenses consist of the followings (in thousands):

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Coach costs

 

$

19,077

 

 

$

19,126

 

Advertising

 

 

10,924

 

 

 

3,626

 

Employee compensation and benefits

 

 

10,968

 

 

 

28,855

 

Information technology

 

 

15,725

 

 

 

5,621

 

Inventory, shipping and fulfillment

 

 

16,733

 

 

 

10,244

 

Sales and income taxes

 

 

4,173

 

 

 

4,132

 

Other accrued expenses

 

 

12,244

 

 

 

8,351

 

Total accrued expenses

 

$

89,844

 

 

$

79,955

 

20


12.
Credit Facility

In December 2018, Beachbody, LLC, as borrower, and Old Beachbody and certain of Beachbody, LLC’s subsidiaries, as guarantors, entered into a credit agreement with Bank of America, N.A., as lender, administrative agent and letter of credit issuer for a $35 million revolving credit facility with a $10 million sublimit for letters of credit (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”).

The Credit Facility was amended in April 2020 to extend the maturity date to December 2021, amend certain pricing provisions and financial covenants, and amend other provisions including the definition of applicable rates based on consolidated EBITDA pricing levels. The Credit Facility was further amended in September 2020, whereby Old Beachbody assumed the Company’s obligations under the Credit Facility, and in March 2021 to extend the maturity date to June 2022, amend financial covenants, and temporarily increase the Credit Facility by $20 million for a period of either 90 days, or until the consummation of the Business Combination.

In connection with the transactions contemplated by the Business Combination Agreement, on June 23, 2021, the Credit Facility was amended, which, among other things, (a) permitted the consummation of the Business Combination and certain other transactions contemplated by the Business Combination Agreement, and (b) amended certain terms of the Credit Facility to, among other things, (i) enable Old Beachbody and Beachbody, LLC to consummate the Business Combination and certain other transactions contemplated by the Business Combination Agreement, (ii) require that the Company join the Credit Facility as a parent guarantor thereunder, and (iii) require that Myx join the Credit Facility as a subsidiary guarantor thereunder.

Borrowings may be either Bloomberg Short-Term Bank Yield Index (“BSBY”) rate loans or base rate loans at the Company’s election. BSBY rate loans bear interest at an annual rate equal to the BSBY rate plus 1.75% to 2.25%. Base rate loans are at the base rate, as defined in the Trust Account were money market funds. Duringamended Credit Facility, plus 0.75% to 1.25%. The Company also pays a 1.75% to 2.25% fee on the letters of credit outstanding and a 0.375% to 0.5% commitment fee on the unused Credit Facility. The Company incurred approximately 0 and $0.3 million of interest and approximately 0 and $0.1 million of fees under the Credit Facility during the three and nine months ended MarchSeptember 30, 2021 and approximately 0 and $0.2 million of interest and approximately 0 and $0.1 million of fees under the Credit Facility during the three and nine months ended September 30, 2020.

As of September 30, 2021 and December 31, 2020, there were 0 borrowings outstanding, and a letter of credit was issued under the Credit Facility for $3.0 million.

In November 2021, the Company did not withdraw any interest income fromterminated the Trust Account to pay its tax obligations.Credit Facility and will maintain a compensating cash balance for the $3.0 million letter of credit.

13.
Leases

The Company leases facilities under noncancelable operating leases expiring through 2025, with payments due through 2024, and certain equipment under a finance lease expiring in 2024.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Corporation limit of $250,000. At March 31,September 30, 2021 and December 31, 2020, the Company has not experienced losses on this accounthad operating lease liabilities of $33.5 million and management believes the Company is not exposed to significant risk on such accounts.

Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standard Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Class A common stock subject to mandatory redemption (if any) are classified as a liability instrument$41.2 million, respectively, and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the controlright-of-use assets of the holder or subject to redemption upon the occurrence$27.1 million and $32.9 million, respectively. As of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s common stock features certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, as of March 31,September 30, 2021 and December 31, 2020, 23,718,818the Company had finance lease liabilities $0.3 million and 25,377,874 shares$0.4 million, respectively, and right-of-use assets of Class A common stock subject to possible redemption are presented at redemption$0.3 million and $0.4 million, respectively.

The Company’s leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value as temporary equity, outside of the stockholders’ equity sectionguarantees. Certain of the Company’s condensed balance sheet.

10

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Net Income (Loss) per Common Stock

Net income (loss) per share of common stock is computed by dividing net income (loss) by the weighted average number of common stock outstanding for the period. The Company hasleases include renewal options and escalation clauses; renewal options have not considered the effect of warrants sold in the IPO and private placement to purchase 15,333,333 of Class A common stockbeen included in the calculation of diluted income (loss) perlease liabilities and right-of-use assets as the Company is not reasonably certain to exercise these options. Variable expenses generally represent the Company’s share since the exercise of the warrantslandlord operating expenses.

The following summarizes the Company’s leases (in thousands):

21


 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Finance lease costs:

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of right-of-use assets

 

$

37

 

 

$

37

 

 

$

110

 

 

$

110

 

Interest on lease liabilities

 

 

3

 

 

 

5

 

 

 

11

 

 

 

16

 

Operating lease costs

 

 

2,342

 

 

 

2,390

 

 

 

7,245

 

 

 

7,309

 

Short-term lease costs

 

 

32

 

 

 

28

 

 

 

54

 

 

 

160

 

Variable lease costs

 

 

196

 

 

��

191

 

 

 

532

 

 

 

78

 

Sublease income

 

 

(22

)

 

 

 

 

 

(22

)

 

 

 

Total lease costs

 

$

2,588

 

 

$

2,651

 

 

$

7,930

 

 

$

7,673

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

2021

 

 

2020

 

Cash paid for amounts included in the measurement of lease liabilities

 

 

 

 

 

 

 

 

 

 

Operating cash flows from finance leases

 

 

 

 

 

$

11

 

 

$

19

 

Operating cash flows from operating leases

 

 

 

 

 

 

9,226

 

 

 

9,192

 

Financing cash flows from finance leases

 

 

 

 

 

 

110

 

 

 

105

 

Right-of-use asset obtained in exchange for new finance lease liabilities

 

 

 

 

 

 

 

 

 

 

Right-of-use asset obtained in exchange for new operating lease liabilities

 

 

 

 

 

 

 

 

 

421

 

Weighted-average remaining lease term - finance leases

 

 

 

 

 

 

2.6

 

 

 

3.5

 

Weighted-average remaining lease term - operating leases

 

 

 

 

 

 

3.3

 

 

 

4.2

 

Weighted-average discount rate - finance leases

 

 

 

 

 

 

4.0

%

 

 

4.0

%

Weighted-average discount rate - operating leases

 

 

 

 

 

 

5.5

%

 

 

5.5

%

Maturities of our operating and finance lease liabilities, excluding short-term leases, are contingent uponas follows (in thousands):

 

 

 

 

 

 

Operating Leases

 

 

Finance Leases

 

 

Total

 

Three Months Ended December 31, 2021

 

 

 

 

 

$

1,278

 

 

$

40

 

 

$

1,318

 

Year ended December 31, 2022

 

 

 

 

 

 

11,183

 

 

 

161

 

 

 

11,344

 

Year ended December 31, 2023

 

 

 

 

 

 

11,780

 

 

 

123

 

 

 

11,903

 

Year ended December 31, 2024

 

 

 

 

 

 

12,616

 

 

 

3

 

 

 

12,619

 

Total

 

 

 

 

 

 

36,857

 

 

 

327

 

 

 

37,184

 

Less present value discount

 

 

 

 

 

 

(3,349

)

 

 

(13

)

 

 

(3,362

)

Lease liabilities at September 30, 2021

 

 

 

 

 

$

33,508

 

 

$

314

 

 

$

33,822

 

As the occurrenceCompany’s lease agreements do not provide an implicit rate, the discount rates used to determine the present value of future events andlease payments are generally based on the inclusionCompany’s estimated incremental borrowing rate for a secured borrowing of such warrants would be anti-dilutive.a similar term as the lease.

TheIn November 2021, the Company complies with accounting and disclosure requirements ASC Topic 260, “Earnings Per Share.”  The Company’s statementsentered into an agreement to assign the lease of operations include a presentation of income (loss) per share for common stock subjectits Santa Monica office to possible redemptionanother party in January 2022. This assignment will result in a manner similar to the two-class method of income (loss) per share. Net income per share of common stock, basic and diluted for Class A redeemable common stock is calculated by dividing the interest income earned on the Trust Account (totaling $4,432 for the three months ended March 31, 2021) by the weighted average number of Class A redeemable common stock outstanding since original issuance. Net loss per share of common stock, basic and diluted for Class B non-redeemable common stock is calculated by dividing the net income, adjusted for income attributable to Class A redeemable common stock, by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account. The Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.

Warrant liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

The Company accounts for its 15,333,333 common stock warrants issued in connection with its IPO (10,000,000) and Private Placement (5,333,333) as derivative warrant liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations. The fair value of warrants issued by the Company in connection with the IPO and Private Placement has been estimated using Monte Carlo simulations at each measurement date.

11

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Fair Value of Financial Instruments

The fair valuemodification of the Company’s lease term and is expected to reduce right-of-use assets by $22.6 million and lease liabilities by $28.5 million and increase operating income by $2.7 million, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820, “Fair Value Measurementsis net of brokers' commissions and Disclosures,” approximates the carrying amounts represented in the balance sheet.accelerated depreciation of leasehold improvements and furniture, fixtures and equipment.

14.
Commitments and Contingencies

Inventory Purchase and Service Agreements

Income Taxes

The Company follows the assethas noncancelable inventory purchase and liability method of accounting for income taxesservice agreements with multiple service providers which expire at varying dates through 2025. Service agreement obligations include amounts related to fitness and nutrition trainers, future events, information systems support, and other technology projects.

22


Future minimum payments under ASC 740, “Income Taxes.” Deferred tax assetsnoncancelable service and liabilities are recognizedinventory purchase agreements for the estimatedperiods succeeding September 30, 2021 are as follows (in thousands):

Three Months Ended December 31, 2021

 

$

58,646

 

Year ended December 31, 2022

 

 

16,466

 

Year ended December 31, 2023

 

 

1,932

 

Year ended December 31, 2024

 

 

1,250

 

Year ended December 31, 2025

 

 

1,250

 

 

 

$

79,544

 

The preceding table excludes royalty payments to fitness trainers, talent, and others that are based on future tax consequences attributable to differences between the financial statements carryingsales as such amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected tocannot be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.reasonably estimated.

Contingencies

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of March 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.

12

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Recent Accounting Standards

Managementlitigation from time to time in the ordinary course of business. Such claims typically involve its products, intellectual property, and relationships with suppliers, customers, distributors, employees, and others. Contingent liabilities are recorded when it is both probable that a loss has occurred and the amount of the loss can be reasonable estimated. Although it is not possible to predict how litigation and other claims will be resolved, the Company does not believe that any recently issued, but not effective, accounting standards, if currently adopted, wouldidentified claims or litigation matters will have a material adverse effect on the Company’s unaudited condensedits consolidated financial statements.position or results of operations.

15.
Common Stock Warrant Liability

At September 30, 2021, there were 10,000,000 Public Warrants and 5,333,333 Private Placement Warrants outstanding.

Note 3 — InitialAs part of Forest Road’s initial public offering, 10,000,000 Public Offering

On November 30, 2020, the Company sold 30,000,000 Units at a price of $10.00 per Unit, including the issuance of 3,900,000 Units as a result of the underwriters’ partial exercise of their over-allotment option. Each Unit consists of one share of Class A common stock, par value $0.0001 per share and one-third of one redeemable warrant (each, a “Public Warrant”). Each wholeWarrants were sold. The Public Warrant entitlesWarrants entitle the holder thereof to purchase one share of Class A common stockCommon Stock at a price of $11.50$11.50 per share, subject to adjustment (see Note 8).

Note 4 — Private Placement

Simultaneously with the closing of the IPO, the Sponsor purchased an aggregate of 5,333,333 Private Placement Warrants, at a price of $1.50 per unit, for an aggregate purchase price of $8,000,000. A portion of the proceeds from the Private Placement Warrants was added to the net proceeds from the IPO held in the Trust Account. Each Private Placement Warrant is exercisable to purchase one share of Class A common stock at $11.50 per share. A portion of the proceeds from the Private Placement Warrants will be added to the proceeds from the IPO to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law), and the Private Placement Warrants will expire worthless.

13

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 5 — Related Party Transactions

Founder Shares

On September 29, 2020, the Sponsor paid $25,000 to cover certain offering costs of the Company in consideration of 7,187,500 shares of the Company’s Class B common stock (the “Founder Shares”).adjustments. The Founder Shares included an aggregate of up to 937,500 shares subject to forfeiture by the Sponsor to the extent that the underwriters’ over-allotment option was not exercised in full. On November 24, 2020, as part of an upsizing of the IPO, the Sponsor was issued an additional 316,250 Founder Shares by the Company, resulting in a increase in the total number of shares of Class B common stock outstanding from 7,187,500 to 7,503,750 (of which 978,750 were subject to surrender for no consideration depending on the extent to which the underwriters exercised their over-allotment option). On November 30, 2020, the underwriters partially exercised their over-allotment option and forfeited the remaining over-allotment option, hence, 975,000 Founder Shares were no longer subject to forfeiture and 3,750 Founder Shares were forfeited, resulting in an aggregate of 7,500,000 Founder Shares outstanding at March 31, 2021 and December 31, 2020.

Promissory Note — Related Party

The Sponsor had agreed to loan the Company an aggregate of up to $300,000 to be used for the payment of costs related to the IPO. The promissory note was non-interest bearing, unsecured and was due on the earlier of June 30, 2021 and the closing of the IPO.  The promissory note was paid in full out of the IPO proceeds on November 30, 2020, As of March 31, 2021 and December 31, 2020, there was no balance outstanding under the promissory note.

Administrative Service Fee

The Company has agreed, commencing on the effective date of the IPO through the earlier of the Company’s consummation of a Business Combination or its liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, administrative and support services. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. For the three months ended March 31, 2020, the Company has paid $30,000 of administrative fees.

Related Party Loans

In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor may, but is 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, other than the interest on such proceeds that may be released for working capital purposes. 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 $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. As of March 31, 2021 and December 31, 2020, no Working Capital Loans were outstanding.

14

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 6 — Commitments & Contingencies

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 shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights agreement signed on the effective date of the IPO requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to shares of Class A common stock). The holders of these securities will be entitled to make up to three demands, excluding short-form registration demands, that the Company register such securities. In addition, the holders will have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements. 

Underwriters Agreement

On November 30, 2020, the underwriters were paid a cash underwriting fee of 2% of the gross proceeds of the IPO, totaling $6,000,000. In addition, $0.35 per unit, or approximately $10,500,000 in the aggregate, will be payable to the underwriters for deferred underwriting commissions. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

Note 7 — Warrants

Public Warrants may only be exercised for a whole number of shares.shares of Class A Common Stock. No fractional warrantsshares will be issued upon separationexercise of the Units and only whole warrants will trade.warrants. The Public Warrants will become exercisable on the later of (a) 12 months from the closing of the IPO and (b)November 30, days after the completion of a Business Combination. The Company will not be obligated to deliver any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to2021, provided that the Company satisfying its obligationshas an effective registration statement.

Simultaneously with respect to registration. NoForest Road’s initial public offering, Forest Road consummated a private placement of 5,333,333 Private Placement Warrants with Forest Road’s sponsor. Each Private Placement warrant will beis exercisable and the Company will not be obligated to issue any shares of Class A common stock upon exercise of a warrant unless thefor one share of Class A common stock issuable upon such warrant exercise has been registered, qualified or deemedCommon Stock at a price of $11.50 per share, subject to be exempt underadjustment.

The Private Placement Warrants are identical to the securities laws ofPublic Warrants, except that the state of residence of the registered holder of the warrants. The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement registering the registration, under the Securities Act, ofPrivate Placement Warrants and the Class A common stockCommon Stock issuable upon exercise of the warrants. ThePrivate Placement Warrants were not transferable, assignable or salable until July 25, 2021, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the initial purchasers or such purchasers’ permitted transferees. If the Private Placement Warrants are held by someone other than the initial shareholders or their permitted transferees, the Private Placement Warrants will be redeemable by the Company will use its best efforts to causeand exercisable by such holders on the same to become effective and to maintainbasis as the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the warrants in accordance with the provisions of the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but will use its best efforts to qualify the shares under applicable blue sky laws to the extent an exemption is not available.Public Warrants.

15

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Redemption of warrants for cash. Once the warrants become exercisable, the Company may callredeem the Public Warrants:

in whole and not in part;
at a price of $0.01 per warrant;
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
if, and only if, the closing price of Class A Common Stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

The Company will not redeem the warrants for redemption:

in whole and not in part;

at a price of $0.01 per warrant;

upon not less than 30 days’ prior written notice of redemption to each warrant holder; and

if, and only if, the closing price of the common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock capitalizations, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities for capital raising purposes in connection with the closing of our initial business combination) for any 20 trading days within a 30-trading day period ending three business days before we send to the notice of redemption to the warrant holders.

as described above unless an effective registration statement under the Securities Act covering the Class A Common Stock issuable upon exercise of the warrants is effective and a current prospectus relating to those Class A Common Stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act. If and when the warrants become redeemable, by

23


the Company it may exercise its redemption right even if the Companyit is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

The exercise price and number of shares of common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances, including in the event of a share dividend, or recapitalization, reorganization, merger or consolidation.

If the Company has not completedcalls the initialPublic Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement. In no event will the Company be required to net cash settle any warrant.

The Company concluded the Public Warrants and Private Placement Warrants meet the definition of a derivative under ASC 815 (as described in Note 1) and are recorded as liabilities. Upon consummation of the Business Combination, within the Combination Periodfair value of the Public Warrants and the Company liquidates the funds heldPrivate Placement Warrants were recorded in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will they receive any distribution from the Company’s assets held outsideunaudited condensed consolidated balance sheets. The fair value of the Trust Account withPublic Warrants and Private Placement Warrants was remeasured as of September 30, 2021, resulting in a $30.3 million and $41.0 million non-cash change in fair value in the respectunaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2021, respectively. Transaction costs and advisory fees allocated to such warrants. Accordingly, the warrants may expire worthless. 

Note 8 — Stockholder’s Equity

Preferred Stock — The Company is authorized to issueissuance of the Public and Private Placement Warrants of $5.3 million were also recorded as a totalcomponent of 1,000,000change in fair value of warrant liabilities in the unaudited condensed consolidated statements of operations, resulting in a net change in fair value of warrant liabilities of $35.7 million for the nine months ended September 30, 2021.

16.
Stockholders’ Equity

As of September 30, 2021, 2,000,000,000 shares, of preferred stock at$0.0001 par value per share are authorized, of $0.0001 each. At March 31, 2021 and December 31, 2020, there were nowhich, 1,600,000,000 shares of preferred stock issued or outstanding. 

are designated as Class A Common Stock, 200,000,000 shares are designated as Class X Common Stock, 100,000,000 shares are designated as Class C Common Stock and 100,000,000 shares are designated as Preferred Stock.

Common Stock

Holders of each share of Class A Common Stock are entitled to dividends when, as and if declared by the Company’s board of directors, subject to the rights and preferences of any holders of outstanding series of Preferred Stock holders. As of September 30, 2021, the Company had 0t declared any dividends. The holder of each Class A Common Stock is entitled to one vote, the holder of each share of Class X Common Stock is entitled to ten votes and except as otherwise required by law, the holder of each share of Class C Common Stock is not entitled to any voting powers.

Old Beachbody

Prior to the Business Combination, Old Beachbody’s preferred units were convertible into common units, at the option of the holders at any time, with no additional consideration required. The preferred units were to convert to common units at a rate of 1-for-1, subject to adjustment for certain events including unit split, unit dividend or recapitalization. The preferred units were subject to automatic conversion if the Company is authorizedconsummates an initial public offering that meets certain criteria.

The holders could redeem the preferred units at any time after December 14, 2024, at a price equal to issuethe greater of (i) the fair market value of the common units into which such preferred units are convertible or (ii) approximately $9.93 per unit, or $100.0 million in aggregate (the “Capital Contribution”), reduced by general distributions previously made to the holders plus any declared but unpaid distributions as of the date of the redemption notice.

The holders were entitled to distributions, in the amount, if any, of available cash flows, as determined by a totalmajority of 300,000,000the Board of Managers. Distributions were to be made to common unit members and preferred unit members in proportion to their percentage of ownership interests, with priority to certain tax distributions and distributions to reimburse Beachbody Holdings and the holders for certain third-party expenses that have not been previously paid.

The redemption by the holders or the completion of an initial public offering was not solely within the control of Old Beachbody, and as such, the preferred units were classified as mezzanine members’ equity. In connection with the Business Combination, 10,068,841 preferred units were converted into 33,828,030 shares of Class A common stock at par valueCommon Stock.

As of $0.0001 each. At March 31, 2021 and December 31, 2020, there100,000,000 common units of Old Beachbody were 6,281,182authorized, and 4,622,126 shares issued and outstanding, respectively (excluding 23,718,818 and 25,377,874 shares, respectively on such dates, subject to possible redemption).

Class B Common Stock — The Company is authorized to issue a total62,263,439 common units were outstanding. In connection with the Business Combination, 62,263,439 common units of 20,000,000 shares of Class B common stock at par value of $0.0001 each. At March 31, 2021 and December 31, 2020, thereOld Beachbody were 7,500,000 shares of Class B common stock issued or outstanding.

Holders of Class A common stock and Class B common stock will vote together as a single class on all matters submitted to a vote of stockholders except as required by law. The shares of Class B common stock will automatically convertconverted into67,934,584 shares of Class A Common Stock and 141,250,310 shares of Class X Common Stock.

24


Old Beachbody members’ personal liability for the obligations or debts of the Company were limited. The Company’s operating agreement called for the Company to be dissolved and terminated upon the earliest occurrence of the following events: bankruptcy of the Company, decision by a majority of both the common stockand preferred unit holders to dissolve the Company, or the date the Company may otherwise be dissolved by operation of law or judicial decree.

Accumulated Other Comprehensive Income (Loss)

The following tables summarize changes in accumulated other comprehensive income (loss), net of tax (in thousands):

 

 

 

 

 

Foreign

 

 

 

 

 

 

Unrealized

 

 

Currency

 

 

 

 

 

 

Gain (Loss) on

 

 

 Translation

 

 

 

 

 

 

Derivatives

 

 

Adjustment

 

 

Total

 

Balances at December 31, 2019

 

$

(99

)

 

$

111

 

 

$

12

 

Other comprehensive income (loss)
   before reclassifications

 

 

(12

)

 

 

(275

)

 

 

(287

)

Amounts reclassified from accumulated
   other comprehensive income (loss)

 

 

31

 

 

 

 

 

 

31

 

Tax effect

 

 

(4

)

 

 

 

 

 

(4

)

Balances at September 30, 2020

 

$

(84

)

 

$

(164

)

 

$

(248

)

Balances at December 31, 2020

 

$

(246

)

 

$

44

 

 

$

(202

)

Other comprehensive income (loss)
   before reclassifications

 

 

(187

)

 

 

14

 

 

 

(173

)

Amounts reclassified from accumulated
   other comprehensive income (loss)

 

 

481

 

 

 

 

 

 

481

 

Tax effect

 

 

(91

)

 

 

 

 

 

(91

)

Balances at September 30, 2021

 

$

(43

)

 

$

58

 

 

$

15

 

17.
Equity-Based Compensation

Equity Compensation Plans

Prior to the Business Combination, the Company maintained its 2020 Beachbody Company Group LLC Equity Compensation Plan (the “2020 Plan”), under which, grants were awarded to certain employees, consultants, and members of the Company’s board of directors through the granting of one or more of the following types of awards: (a) nonqualified unit options, (b) unit awards, and (c) unit appreciation rights. The Company granted nonqualified unit options with vesting periods ranging from three to five years.

Upon closing of the Business Combination, awards under the 2020 Plan were converted at the timeExchange Ratio, and the Company’s board of a Business Combination on a one-for-one basis, subjectdirectors approved the 2021 Incentive Award Plan (the “2021 Plan”). The 2021 Plan provides for the grant of stock options, including ISOs and nonqualified stock options (“NSOs”), SARs, restricted stock, dividend equivalents, restricted stock units (“RSUs”) and other stock or cash-based awards.

Under the 2021 Plan, up to adjustment. In the case that additional30,442,594 shares of Class A common stock or equity-linked securities are issued or deemed issued in connection with a Business Combination,Common Stock will be available for issuance under the Plan. In addition, the number of shares of Class A common stock issuable upon conversionCommon Stock available for issuance under the 2021 Plan will be increased on January 1 of all Founder Shares willeach calendar year beginning in 2022 and ending in 2031 by an amount equal into the aggregate, on an as-converted basis, 20%lesser of (i) five percent (5%) of the total number of shares of Class A common stockand Class X Common Stock outstanding after such conversion (after giving effect to any redemptionson the final day of the immediately preceding calendar year and (ii) the number of shares determined by the Company’s board of directors. As of September 30, 2021, 21,730,778 shares of Class A common stock by public stockholders), includingCommon Stock are available for issuance under the total number2021 Plan.

All options and awards typically expire ten years from the date of shares of Class A common stock issued, or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, bygrant if not exercised. In the Company in connection with or in relation to the consummationevent of a Business Combination, excludingtermination of employment, all unvested options are forfeited immediately. Generally, any sharesvested options may be exercised within three months, depending upon the circumstances of Class termination, except for instances of termination “with cause” whereby any vested options or awards are forfeited immediately.

A common stock or equity-linked securities or rights exercisablesummary of the activity under the plans are as follows:

25


 

 

Options Outstanding

 

 

 

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

Weighted-

 

 

Average

 

 

 

 

 

 

Average

 

 

Remaining

 

 

 

 

 

 

Exercise

 

 

Contractual Term

 

 

 

Number of

 

 

Price

 

 

Term

 

 

 

Options

 

 

(per option)

 

 

(in years)

 

Outstanding at December 31, 2020 (as
   previously reported)

 

 

10,170,288

 

 

$

7.04

 

 

 

5.70

 

Conversion of awards due to
   recapitalization

 

 

23,998,437

 

 

 

(4.94

)

 

 

 

Outstanding at December 31, 2020, effect of
   reverse acquisition

 

 

34,168,725

 

 

$

2.10

 

 

 

 

Granted

 

 

9,321,807

 

 

 

9.82

 

 

 

 

Exercised

 

 

(1,292,541

)

 

 

1.02

 

 

 

 

Forfeited

 

 

(490,662

)

 

 

2.48

 

 

 

 

Outstanding at September 30, 2021

 

 

41,707,329

 

 

$

3.86

 

 

 

6.11

 

Exercisable at September 30, 2021

 

 

23,788,979

 

 

$

1.97

 

 

 

4.04

 

The intrinsic value of options exercised was $7.3 million for or convertible into shares of Class A common stock issued, or to be issued, to any seller in a Business Combination and any Private Placement Warrants issued to the Sponsor, officers or directors upon conversion of Working Capital Loans, provided that such conversion of Founder Shares will never occur on a less than one-for-one basis.

nine months ended September 30, 2021.


FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 9 — Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tierThe fair value hierarchy, which prioritizesof each award as of the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Level 1 - defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
Level 2 - defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and
Level 3 - defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

At March 31, 2021, there were 10,000,000 Public Warrants and 5,333,333 Private Placement Warrants outstanding.

date of grant is estimated using a Black-Scholes option-pricing model. The following table presents information aboutsummarizes the Company’s assets that are measured at fair value on a recurring basis at March 31, 2021 and indicatesassumptions used to determine the fair value hierarchyof option grants:

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Risk-free rate

 

 

1.0

%

 

 

0.5

%

Dividend yield rate

 

 

0.0

%

 

 

0.0

%

Volatility

 

 

53.6

%

 

 

55.0

%

Expected term (in years)

 

 

6.21

 

 

 

6.23

 

Weighted-average exercise price

 

$

9.82

 

 

$

8.44

 

The vesting periods are based on the terms of the valuation inputs the Company utilized to determine such fair value:

  March 31,  Quoted
Prices In
Active
Markets
  Significant
Other
Observable
Inputs
  Significant
Other
Unobservable
Inputs
 
  2021  (Level 1)  (Level 2)  (Level 3) 
Description            
Warrant Liability – Public Warrants $26,900,000  $26,900,000  $-  $- 
Warrant Liability – Private Warrants $18,705,664  $-  $-  $18,705,664 
  $45,605,664  $26,900,000  $                -  $18,705,664 

17

FOREST ROAD ACQUISITION CORP.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

The Company utilizes a Monte Carlo simulation model to value the warrants at each reporting period, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liability is determined using Level 3 inputs. Inherent in a binomial options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its shares of common stock based on historical volatility that matches the expected remaining life of the warrants.option grant agreements. The risk-free interest rate isrates are based on the U.S. Treasury zero-coupon yield curverates as of the grant dates for the expected terms of the options. Given the lack of public market for the Company’s common units prior to the Business Combination and minimal history as a public company subsequent to the Business Combination, the price volatilities represent calculated values based on the historical price volatilities of publicly traded companies within the Company’s industry group over the options’ expected terms. The expected terms of the options granted were estimated using the simplified method by taking an average of the vesting periods and the original contractual terms. Prior to the Business Combination, the exercise prices represent the estimated fair values of one common unit of the Company’s equity on the grant date for a maturity similardates. Subsequent to the expected remaining lifeBusiness Combination, the fair value of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rateCommon Stock is based on the historical rate,closing market price on the date of grant.

A summary of the unvested option activity is as follows:

 

 

 

 

 

Weighted-

 

 

 

 

 

 

Average

 

 

 

 

 

 

Grant Date

 

 

 

Number of

 

 

Fair Value

 

 

 

Options

 

 

(per option)

 

Unvested at December 31, 2020 (as previously reported)

 

 

3,701,114

 

 

$

4.34

 

Conversion of awards due to recapitalization

 

 

8,733,309

 

 

 

(3.05

)

Unvested at December 31, 2020, effect of reverse
   acquisition

 

 

12,434,423

 

 

$

1.29

 

Granted

 

 

9,321,807

 

 

 

5.03

 

Vested

 

 

(3,347,219

)

 

 

1.25

 

Forfeited

 

 

(490,661

)

 

 

1.19

 

Unvested at September 30, 2021

 

 

17,918,350

 

 

$

3.24

 

26


The fair value of options granted during the nine months ended September 30, 2021 and 2020 was $46.9 million (or $5.03 weighted average per option) and $5.5 million (or $4.34 weighted average per option), respectively. The total fair value of awards which vested during the nine months ended September 30, 2021 and 2020 was $4.2 million and $3.7 million, respectively.

A summary of RSU activity is as follows:

 

 

RSUs Outstanding

 

 

 

 

 

 

Weighted-

 

 

 

 

 

 

 

 

 

Average

 

 

Aggregate

 

 

 

Number of

 

 

Fair Value

 

 

Intrinsic Value

 

 

 

RSUs

 

 

(per RSU)

 

 

(in thousands)

 

Outstanding at December 31, 2020

 

 

 

 

$

 

 

 

 

Granted

 

 

280,309

 

 

 

7.67

 

 

 

 

Outstanding at September 30, 2021

 

 

280,309

 

 

$

7.67

 

 

$

1,553

 

Compensation Warrants

During the year ended December 31, 2020, the Company anticipates to remainissued warrants for the purchase of 1,184,834 of Old Beachbody’s common units at zero. an exercise price of $8.44 per unit. The warrants vest 25% at the grant date and 25% at each of the first, second, and third anniversaries of the grant date. The warrants have a 10-year contractual term. In connection with the Business Combination, the Old Beachbody warrants were exchanged for 3,980,656 warrants for the purchase of the Company’s Class A Common Stock at an exercise price of $2.52 per share.

As of March 31,September 30, 2021, the public1,990,328 warrants were valued usingexercisable. Compensation cost associated with the actual closing trading price on March 31, 2021.warrants will be recognized over the requisite service period, which is 4.25 years.

Equity-Based Compensation Expense

The aforementioned warrant liabilities are not subject to qualified hedge accounting.

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period. There were no transfers between levelsEquity-based compensation expense for the three and nine months ended MarchSeptember 30, 2021 and 2020 was as follows (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Cost of revenue

 

$

385

 

 

$

68

 

 

$

567

 

 

$

174

 

Selling and marketing

 

 

2,359

 

 

 

290

 

 

 

5,692

 

 

 

683

 

Enterprise technology and
   development

 

 

919

 

 

 

410

 

 

 

1,582

 

 

 

1,004

 

General and administrative

 

 

2,081

 

 

 

493

 

 

 

2,998

 

 

 

1,308

 

Total equity-based
   compensation

 

$

5,744

 

 

$

1,261

 

 

$

10,839

 

 

$

3,169

 

As of September 30, 2021, the total unrecognized equity-based compensation expense was $67.3 million and has a weighted-average recognition period of 3.29 years.

18.
Derivative Financial Instruments

As of September 30, 2021 and December 31, 2021, other than2020, the transfernotional amount of the Public Warrants from Level 3 to Level 1.Company’s outstanding foreign exchange options was $32.6 million and $34.0 million, respectively. There were 0 outstanding forward contracts as of September 30, 2021 and December 31, 2020.

27


The following table provides quantitative information regarding Level 3presents the fair value measurements:of the Company’s derivative instruments which are included in other current assets in the unaudited condensed consolidated balance sheets (in thousands):

  As of March 31,
2020
  As of
December 31,
2020
 
Stock price $10.12  $10.50 
Strike price $11.50  $11.50 
Term (in years)  5.0   5.0 
Volatility  43.3%  31.3%
Risk-free rate  0.92%  0.44%
Dividend yield  0.0%  0.0%

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Derivatives designated as hedging instruments

 

$

140

 

 

$

134

 

Derivatives not designated as hedging instruments

 

 

47

 

 

 

30

 

Total derivative assets

 

$

187

 

 

$

164

 

Note 10 — There were 0 derivative liabilities as of September 30, 2021 and December 31, 2020.

The following table shows the pre-tax effects of the Company’s derivative instruments on its unaudited condensed consolidated statements of operations (in thousands):

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

Financial Statement Line Item

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Unrealized (losses) gains

 

Other comprehensive income
   (loss)

 

$

(17

)

 

$

(258

)

 

$

(187

)

 

$

(12

)

(Losses) gains reclassified from
   accumulated other comprehensive

 

Cost of revenue

 

 

(56

)

 

 

(27

)

 

 

(194

)

 

 

(14

)

   income (loss) into net income (loss)

 

General and administrative

 

 

(86

)

 

 

(51

)

 

 

(287

)

 

 

(17

)

Total amounts reclassified

 

 

 

 

(142

)

 

 

(78

)

 

 

(481

)

 

 

(31

)

(Losses) gains recognized derivatives
   not designated as hedging instruments

 

Cost of revenue

 

 

(6

)

 

 

(69

)

 

 

(47

)

 

 

(38

)

The Company expects that $0.1 million of existing losses recorded in accumulated other comprehensive income (loss) will be reclassified into net income (loss) over the next 12 months. The Company assessed its derivative instruments and determined that they were effective during the three and nine months ended September 30, 2021 and 2020.

19.
Income Taxes

The Company recorded a benefit for income taxes of $1.5 million and $12.7 million for the three and nine months ended September 30, 2021, respectively. The Company recorded a provision for income taxes of $4.1 million and benefit for income taxes of $0.2 million for the three and nine months ended September 30, 2020, respectively. The effective benefit tax rate was 3.6% and 13.4% for the three and nine months ended September 30, 2021, respectively. The effective tax rate was 23.1% and the effective benefit tax rate was 3.4% for the three and nine months ended September 30, 2020, respectively.

Our tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items arising in that quarter. Our effective tax rate differs from the U.S. statutory tax rate in the three and nine months ended September 30, 2021 primarily due to changes in valuation allowances on our deferred tax assets as it is more likely than not that some or all of our deferred tax assets will not be realized. As a result of the Myx acquisition, which was a discrete second quarter 2021 event, the Company recorded deferred tax liabilities which partially reduced our need for a valuation allowance, resulting in an income tax benefit being recorded.

The Company evaluates its tax positions on a quarterly basis and revises its estimate accordingly. There are no material changes to the Company’s uncertain tax positions, interest, or penalties during the three and nine months ended September 30, 2021.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted into law, and the new legislation contains several key tax positions, including the five-year net operating loss carryback, an adjustment business interest limitation, and payroll tax deferral. The Company is required to recognize the effect of tax law changes in the period of enactment. The Company has assessed the applicability of the CARES Act and determined there to be no material impact to the Company other than its ability to use the entire $4.6 million of net operating loss carryback from 2020 to 2019 for federal income tax purposes. On December 27, 2020 the Consolidated Appropriations Act, 2021 was signed into law. It provides additional COVID-19 focused relief and extends certain provisions of the CARES Act. At this time, the Company does not believe that the Consolidated Appropriations Act, 2021 will have a material impact on its consolidated financial statements.

28


20.
Earnings (Loss) per Share

Basic net income (loss) per common share is calculated by dividing net income (loss) allocable to common shareholders by the weighed-average number of common shares outstanding during the period. Diluted net income (loss) per common share adjusts net income (loss) and net income (loss) per common share for the effect of all potentially dilutive shares of the Company’s common stock. Basic and diluted earnings (loss) per share are the same for each class of common stock because they are entitled to the same liquidation and dividend rights.

The computation of earnings (loss) per share of Class A and Class X Common Stock is as follows (in thousands, except share and per share information):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) available to common shareholders-basic
   and diluted

 

$

(39,922

)

 

$

13,771

 

 

$

(82,420

)

 

$

(4,560

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding- basic

 

 

304,599,205

 

 

 

238,831,118

 

 

 

265,117,012

 

 

 

238,374,028

 

Dilutive options

 

 

 

 

 

13,253,925

 

 

 

 

 

 

 

Weighted-average common shares outstanding- diluted

 

 

304,599,205

 

 

 

252,085,043

 

 

 

265,117,012

 

 

 

238,374,028

 

Net income (loss) per common shareholder, basic

 

$

(0.13

)

 

$

0.06

 

 

$

(0.31

)

 

$

(0.02

)

Net income (loss) per common shareholder, diluted

 

$

(0.13

)

 

$

0.05

 

 

$

(0.31

)

 

$

(0.02

)

Basic net income (loss) per common share is the same as dilutive net income (loss) per common share for the three and nine months ended September 30, 2021 and for the nine months ended September 30, 2020 as the inclusion of all potential common shares would have been antidilutive.

The following table presents the common shares that are excluded from the computation of diluted net loss per common share as of the periods presented because including them would have been antidilutive:

 

 

As of September 30,

 

 

 

2021

 

 

2020

 

Options

 

 

41,707,329

 

 

 

33,819,320

 

RSUs

 

 

280,309

 

 

 

-

 

Compensation Warrants

 

 

3,980,656

 

 

 

3,980,656

 

Public and Private Placement Warrants

 

 

15,333,333

 

 

 

-

 

Forest Road Earn-out Shares

 

 

3,750,000

 

 

 

-

 

 

 

 

65,051,627

 

 

 

37,799,976

 

21.
Related Party Transactions

In 2018, the Company entered into a lease agreement with a company owned by the controlling shareholder. In July 2021, the Company purchased the building from the related party for its appraised value of $5.1 million. Total lease payments to the related party were approximately 0 and $0.1 million for the three and nine months ended September 30, 2021, respectively and $0.1 million and $0.2 million for the three and nine months ended September 30, 2020, respectively. There were 0 material amounts due to the related party as of September 30, 2021 and December 31, 2020.

The Company has a royalty agreement with a company related to the controlling shareholder. The related party assisted the Company with the development of several products and receives royalties based on the sales of these products. Total payments to the related party were approximately 0 and $0.9 million during the three and nine months ended September 30, 2021, respectively and were approximately $0.1 million and $0.2 million during the three and nine months ended September 30, 2020, respectively. As of September 30, 2021 and December 31, 2020, $0.1 million and $0.7 million, respectively, was due to the related party pursuant to the royalty agreement.

A minority shareholder and board member of Company is also a shareholder in a law firm that provides legal services to the Company. Total payments to the related party were $0.4 million and $2.0 million during the three and nine months ended September 30, 2021, respectively and were $0.7 million and $1.2 million during the three and nine months ended September 30, 2020,

29


respectively. The Company’s accounts payable related to the firm was approximately 0 and $0.5 million as of September 30, 2021 and December 31, 2020, respectively.

22.
Segment Information

The Company applies ASC 280, Segment Reporting, in determining reportable segments for financial statement disclosure. Segment information is presented based on the financial information the Company uses to manage the business which is organized around our digital platforms. The Company has 2 operating segments, Beachbody and Other, and 1 reportable segment, Beachbody. The Beachbody segment primarily derives revenue from Beachbody on Demand digital subscriptions, nutritional products, and other fitness related products. Other derives revenue primarily from Openfit digital subscriptions and nutritional products and from connected fitness equipment (bikes and accessories) and monthly subscription revenue for workout content. The Company uses contribution as a measure of profit or loss, defined as revenue less directly attributable cost of revenue and certain selling and marketing expenses including media, Coach and social influencer compensation, royalties, and third-party sales commissions. Contribution does not include allocated costs as described below as the CODM does not include these costs in assessing performance. There are no inter-segment transactions. The Company manages its assets on a consolidated basis, and, as such, does not report asset information by segment.

Summary information by reportable segment is as follows (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Beachbody:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

194,290

 

 

$

248,268

 

 

$

634,647

 

 

$

633,001

 

Contribution

 

 

31,037

 

 

 

82,329

 

 

 

127,057

 

 

 

186,646

 

Other:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

13,762

 

 

 

3,211

 

 

 

22,732

 

 

 

6,298

 

Contribution

 

 

(10,589

)

 

 

(2,615

)

 

 

(22,136

)

 

 

(15,257

)

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

208,052

 

 

$

251,479

 

 

$

657,379

 

 

$

639,299

 

Contribution

 

 

20,448

 

 

 

79,714

 

 

 

104,921

 

 

 

171,389

 

Reconciliation of consolidated contribution to income (loss) before income taxes (in thousands):

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Consolidated contribution

 

$

20,448

 

 

$

79,714

 

 

$

104,921

 

 

$

171,389

 

Amounts not directly related to
   segments:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue (1)

 

 

9,600

 

 

 

7,361

 

 

 

25,560

 

 

 

20,809

 

Selling and marketing (2)

 

 

29,645

 

 

 

15,779

 

 

 

70,608

 

 

 

43,314

 

Enterprise technology and
   development

 

 

29,680

 

 

 

23,852

 

 

 

83,718

 

 

 

67,558

 

General and administrative

 

 

23,346

 

 

 

16,523

 

 

 

58,523

 

 

 

46,229

 

Restructuring gain

 

 

0

 

 

 

(1,677

)

 

 

0

 

 

 

(1,677

)

Change in fair value of
   warrant liabilities

 

 

(30,274

)

 

 

0

 

 

 

(35,664

)

 

 

0

 

Interest expense

 

 

62

 

 

 

89

 

 

 

490

 

 

 

432

 

Other income, net

 

 

(202

)

 

 

(113

)

 

 

(3,155

)

 

 

(555

)

Income (loss) before income taxes

 

$

(41,409

)

 

$

17,900

 

 

$

(95,159

)

 

$

(4,721

)

(1)
Cost of revenue not directly related to segments includes certain allocated costs related to management, facilities, and personnel-related expenses associated with quality assurance and supply chain logistics. Depreciation of certain software and production equipment and amortization of formulae and technology-based intangible assets are also included in this line.
(2)
Selling and marketing not directly related to segments includes indirect selling and marketing expenses and certain allocated personnel-related expenses for employees and consultants. Depreciation of certain software and amortization of contract-based intangible assets are also included in this line.

30


23.
Subsequent Events

The Company has evaluated subsequent events and transactions that occurred after the balance sheet date up tothrough the date that the unaudited condensed consolidated financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.


31


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsOperations.

The following discussion and analysis should be read in conjunction with our financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and the section entitled “Risk Factors.” Unless otherwise indicated, the terms “Beachbody,” “we,” “us,” or “our” refer to The Beachbody Company, Inc., a Delaware corporation, together with its consolidated subsidiaries.

ReferencesForward-Looking Statements

This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act), including statements about and the financial condition, results of operations, earnings outlook and prospects of the Company. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on our current expectations as applicable and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to the “Company,” “us,” “our”following:

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses including changes in selling and marketing, general and administrative expenses (including any components of the foregoing), Adjusted EBITDA (as defined below) and our ability to achieve and maintain future profitability;
our anticipated growth rate and market opportunity;
our ability to raise financing in the future;
our success in retaining or “we” referrecruiting, or changes required in, officers, key employees or directors;
our warrants are accounted for as liabilities and changes in the value of such warrants could have a material effect on our financial results;
our ability to effectively compete in the fitness and nutrition industries;
our ability to successfully acquire and integrate new operations;
our reliance on a few key products;
market conditions and global and economic factors beyond our control;
intense competition and competitive pressures from other companies worldwide in the industries in which we will operate;
litigation and the ability to adequately protect our intellectual property rights;
costs related to the Business Combination and the failure to realize anticipated benefits of the Business Combination or to realize any financial projections or estimated pro forma results and the related underlying assumptions; and
other risk and uncertainties set forth in this Report under the heading “Risk Factors.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by management prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.

Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Report or to reflect the occurrence of unanticipated events.

Overview of Our Business

We are the creator of some of the world’s most popular fitness programs, including P90X®, Insanity® and 21 Day Fix®, which transformed the in-home fitness market and disrupted the global fitness industry by making it accessible for people to get results—anytime, anywhere. We have also developed comprehensive nutrition-first programs, Portion Fix® and 2B Mindset®, which teach

32


healthy eating habits and promote healthy, sustainable weight loss. All fitness and nutrition programs are available through our Beachbody On Demand ® streaming service. In addition, we offer nutritionals such as Shakeology® nutrition shakes and BEACHBAR® snack bars.

In the health, wellness and fitness industry, we focus primarily on digital content, connected fitness and consumer health & wellness. Our goal is to continue to provide leading holistic health and wellness content and subscription-based solutions. Leveraging our history of fitness content creation and our network of micro-influencers, whom we call Coaches, we have been successful in identifying market trends and expanding our market share. With our 2021 expansion into connected fitness, through the integration of Myx’s professional grade stationery cycle and 360-degree touch screen tablet connected fitness software, weights, and accessories, we plan to leverage our distribution, marketing and content creation capabilities to reach a wider health, wellness and fitness audience.

Historically, our revenue has primarily been generated through a network of micro-influencers, social media marketing channels and direct response advertising. Components of revenue include recurring digital subscription revenue and revenue from the sale of nutritional and other products. In addition to selling individual products on a one-time basis, we also bundle fitness and nutrition products together at discounted prices.

On June 25, 2021 we consummated the Business Combination by and among Forest Road, Acquisition Corp.Old Beachbody and Myx. The Business Combination resulted in cash proceeds, net of issuance costs and cash paid for the acquisition of Myx, net of cash acquired of approximately $351.8. In addition it drove increases of $78.1 million in intangible assets and $157.9 million in goodwill as of September 30, 2021, compared to our balance sheet as of December 31, 2020. The following financial information for the three months and nine months ended September 30, 2021 includes the financial information and activities for Myx for the period from June 26, 2021 to September 30, 2021.

For the three months ended September 30, 2021, as compared to the three months ended September 30, 2020:

Total revenue was $208.1 million, a 17% decrease;
Digital revenue was $94.1 million, a 5% decrease;
Connected fitness revenue was $5.9 million;
Nutrition and other revenue was $108.1 million, a 29% decrease;
Net loss was $39.9 million, compared to net income of $13.8 million; and
Adjusted EBITDA was ($43.4) million, compared to $31.4 million.

For the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020:

Total revenue was $657.4 million, a 3% increase;
Digital revenue was $283.5 million, an 18% increase;
Connected fitness revenue was $5.9 million;
Nutrition and other revenue was $367.9 million, an 8% decrease;
Net loss was $82.4 million, compared to a net loss of $4.6 million; and
Adjusted EBITDA was ($59.5) million, compared to $34.9 million.

For a definition of digital subscriptions see the section titled “—Key Operational and Business Metrics.”

See the section titled “—Non-GAAP Information” for information regarding our use of Adjusted EBITDA and a reconciliation of net income (loss) to Adjusted EBITDA.

Impact of COVID-19

The novel coronavirus continues to have a significant impact on most businesses, including Beachbody. During the year ended December 31, 2020, we saw strong demand for our digital subscriptions as the government ordered closures and restrictions on gyms and as consumers were reluctant to return to gyms as the COVID-19 pandemic continued. We also experienced modestly slower product fulfillment to customers and supply chain delays. During the second and third quarters of 2021, the pandemic has resulted in higher shipping, freight, and fulfillment costs and the cancellation of certain Coach events.

33


The ultimate impact of COVID-19 on our financial and operating results is unknown and will depend on the length of time that these restrictions continue and whether the demand for many of our digital subscriptions continue. COVID-19 has had a significant impact and may continue to have a significant impact, the full extent of which is unknown, but which could be material. Although COVID-19 increased consumer demand for our digital solutions, we believe the structural shift towards wellness and fitness solutions like our platform existed before the impact of COVID-19, and we anticipate that this structural change to the fitness industry will continue after COVID-19.

Beachbody has business continuity programs in place to ensure that employees are safe and that the businesses continue to function while employees are working remotely. We have been closely monitoring the impact of working from home and the potential strain on internet connectivity but have not seen any adverse impact on the ability of the businesses to function and we have not seen any network connectivity issues that would have an adverse impact on our customers’ ability to access our product offerings.

Non-GAAP Information

This Report includes Adjusted EBITDA, which is a non-GAAP performance measure that we use to supplement our results presented in accordance with GAAP. We believe Adjusted EBITDA is useful in evaluating our operating performance, as it is similar to measures reported by our public competitors and is regularly used by security analysts, institutional investors and other interested parties in analyzing operating performance and prospects. Adjusted EBITDA is not intended to be a substitute for any GAAP financial measure and, as calculated, may not be comparable to other similarly titled measures of performance of other companies in other industries or within the same industry.

We define and calculate Adjusted EBITDA as net income (loss) adjusted for depreciation and amortization, amortization of capitalized cloud computing implementation costs, amortization of content assets, interest expense, income taxes, equity-based compensation, and other items that are not normal, recurring, operating expenses necessary to operate the Company’s business as described in the reconciliation below.

We include this non-GAAP financial measure because it is used by management to evaluate Beachbody’s core operating performance and trends and to make strategic decisions regarding the allocation of capital and new investments. Adjusted EBITDA excludes certain expenses that are required in accordance with GAAP because they are non-cash (for example, in the case of depreciation and amortization, equity-based compensation) or are not related to our underlying business performance (for example, in the case of interest income and expense).

The table below presents our Adjusted EBITDA reconciled to our net income (loss), the closest GAAP measure, for the periods indicated:

(in thousands)

 

Three Months Ended September 30,

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net income (loss)

 

$

(39,922

)

 

$

13,771

 

 

$

(82,420

)

 

$

(4,560

)

Adjusted for:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

14,616

 

 

 

11,203

 

 

 

40,557

 

 

 

31,881

 

Amortization of capitalized cloud computing implementation costs

 

 

168

 

 

 

 

 

 

504

 

 

 

 

Amortization of content assets

 

 

3,889

 

 

 

1,907

 

 

 

10,008

 

 

 

5,103

 

Interest expense

 

 

62

 

 

 

89

 

 

 

490

 

 

 

432

 

Income tax (benefit) provision

 

 

(1,487

)

 

 

4,129

 

 

 

(12,739

)

 

 

(161

)

Equity-based compensation

 

 

5,744

 

 

 

1,261

 

 

 

10,839

 

 

 

3,169

 

Transaction costs

 

 

677

 

 

 

612

 

 

 

2,819

 

 

 

612

 

Restructuring gain

 

 

 

 

 

(1,677

)

 

 

 

 

 

(1,677

)

Change in fair value of warrant liabilities

 

 

(30,274

)

 

 

 

 

 

(35,664

)

 

 

 

Other adjustment items (1)

 

 

3,044

 

 

 

 

 

 

9,082

 

 

 

 

Non-operating items (2)

 

 

71

 

 

 

77

 

 

 

(3,017

)

 

 

131

 

Adjusted EBITDA

 

$

(43,412

)

 

$

31,372

 

 

$

(59,541

)

 

$

34,930

 

(1)
Other adjustment items includes incremental costs associated with COVID-19.
(2)
Non-operating primarily includes interest income and gain on investment on the Myx convertible instrument.

34


Key Operational and Business Metrics

In addition to the measures presented in our unaudited condensed consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions.

 

 

As of September 30,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Digital Subscriptions (millions)

 

 

2.64

 

 

 

2.61

 

Nutritional Subscriptions (millions)

 

 

0.34

 

 

 

0.44

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Average Digital Retention

 

 

95.6

%

 

 

95.1

%

 

 

95.5

%

 

 

95.4

%

Total Streams (millions)

 

 

35.9

 

 

 

48.5

 

 

 

136.4

 

 

 

137.2

 

DAU/MAU

 

 

29.6

%

 

 

32.1

%

 

 

32.1

%

 

 

31.9

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue (millions)

 

$

208.1

 

 

$

251.5

 

 

$

657.4

 

 

$

639.3

 

Gross profit (millions)

 

$

135.0

 

 

$

180.6

 

 

$

447.4

 

 

$

460.1

 

Gross margin

 

 

65

%

 

 

72

%

 

 

68

%

 

 

72

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) (millions)

 

$

(39.9

)

 

$

13.8

 

 

$

(82.4

)

 

$

(4.6

)

Adjusted EBITDA (millions) (1)

 

$

(43.4

)

 

$

31.4

 

 

$

(59.5

)

 

$

34.9

 

(1)
Please see the section titled “—Non-GAAP Information” for a reconciliation of net loss to Adjusted EBITDA and an explanation for why we consider Adjusted EBITDA to be a helpful metric for investors.

Digital Subscriptions

Our ability to expand the number of digital subscriptions is an indicator of our market penetration and growth. Digital subscriptions include Beachbody On Demand, Nutrition+, and Openfit subscriptions. Digital subscriptions include paid and free-to-pay subscriptions. Free-to-pay subscriptions, on average, represent less than 2% of total digital subscriptions. Digital subscriptions are inclusive of all billing plans, currently for annual, semi-annual, quarterly and monthly billing intervals.

Nutritional Subscriptions

We package and synthesize the content experience of digital subscriptions with nutritional subscriptions that work together. Nutritional Subscriptions are monthly subscriptions to nutritional products such as, Shakeology, Beachbody Performance, BEACHBAR, Bevvy and Ladder Supplements.

Average Digital Retention

We use month over month digital subscription retention to measure the retention of our digital subscriptions. We define digital subscription retention as the average rate at which a subscription renews for a new billing cycle.

Total Streams

We measure streams and total streams to quantify the number of fitness or nutrition programs viewed per subscription which is a leading indicator of customer engagement and retention. While the measure of a digital stream may vary across companies, to qualify as a stream on either our Beachbody on Demand or Openfit platforms, a program must be viewed for a minimum of 25% of the total running time.

35


Daily Active Users to Monthly Active Users (DAU/MAU)

We use the ratio of daily active users to monthly active users to measure how frequently digital subscribers are utilizing our service in a given month. We define a daily active user as a unique user streaming content on our platform in a given day. We define a monthly active user as a unique user streaming content on our platform in that same month.

Components of our Operating Results and Results of Operations

We operate and manage our business in two operating segments, Beachbody and Other. For financial reporting purposes, we have one reportable segment, Beachbody. We identified the reportable segment based on the information used by management to monitor performance and make operating decisions. See Notes 1 and 22 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for additional information regarding our reportable segment. The following discussion of our results and operations is on a consolidated basis as the Other non-reportable operating segment is not material to the understanding of our business taken as a whole.

(in thousands)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

94,072

 

 

$

99,082

 

 

$

283,547

 

 

$

239,964

 

Connected fitness

 

 

5,927

 

 

 

 

 

 

5,937

 

 

 

 

Nutrition and other

 

 

108,053

 

 

 

152,397

 

 

 

367,895

 

 

 

399,335

 

Total revenue

 

 

208,052

 

 

 

251,479

 

 

 

657,379

 

 

 

639,299

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

12,124

 

 

 

9,843

 

 

 

34,858

 

 

 

27,507

 

Connected fitness

 

 

10,261

 

 

 

 

 

 

10,417

 

 

 

 

Nutrition and other

 

 

50,682

 

 

 

61,082

 

 

 

164,679

 

 

 

151,654

 

Total cost of revenue

 

 

73,067

 

 

 

70,925

 

 

 

209,954

 

 

 

179,161

 

Gross profit

 

 

134,985

 

 

 

180,554

 

 

 

447,425

 

 

 

460,138

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Selling and marketing

 

 

153,782

 

 

 

123,980

 

 

 

438,672

 

 

 

352,872

 

Enterprise technology and development

 

 

29,680

 

 

 

23,852

 

 

 

83,718

 

 

 

67,558

 

General and administrative

 

 

23,346

 

 

 

16,523

 

 

 

58,523

 

 

 

46,229

 

Restructuring gain

 

 

 

 

 

(1,677

)

 

 

 

 

 

(1,677

)

Total operating expenses

 

 

206,808

 

 

 

162,678

 

 

 

580,913

 

 

 

464,982

 

Operating income (loss)

 

 

(71,823

)

 

 

17,876

 

 

 

(133,488

)

 

 

(4,844

)

Change in fair value of warrant liabilities

 

 

30,274

 

 

 

 

 

 

35,664

 

 

 

 

Interest expense

 

 

(62

)

 

 

(89

)

 

 

(490

)

 

 

(432

)

Other income, net

 

 

202

 

 

 

113

 

 

 

3,155

 

 

 

555

 

Income (loss) before income taxes

 

 

(41,409

)

 

 

17,900

 

 

 

(95,159

)

 

 

(4,721

)

Income tax benefit (provision)

 

 

1,487

 

 

 

(4,129

)

 

 

12,739

 

 

 

161

 

Net income (loss)

 

$

(39,922

)

 

$

13,771

 

 

$

(82,420

)

 

$

(4,560

)

Revenue

Revenue includes digital subscriptions, nutritional supplement subscriptions, one-time nutritional sales, connected fitness products and other fitness-related products. Subscription revenue is recognized ratably over the subscription period (up to 12 months). We often sell bundled products that combine digital subscriptions, nutritional products, and/or other fitness and nutritional programs. We consider these sales to be revenue arrangements with multiple performance obligations and allocate the transaction price to each performance

36


obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

94,072

 

 

$

99,082

 

 

$

(5,010

)

 

(5%)

 

Connected fitness

 

 

5,927

 

 

 

 

 

 

5,927

 

 

 

 

Nutrition and other

 

 

108,053

 

 

 

152,397

 

 

 

(44,344

)

 

(29%)

 

Total revenue

 

$

208,052

 

 

$

251,479

 

 

$

(43,427

)

 

(17%)

 

The decrease in digital revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due to lower growth in our digital subscriptions as the demand for at-home fitness slowed.

The increase in connected fitness revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was due to the acquisition of Myx in June 2021.

The decrease in nutrition and other revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due to a $33.6 million decrease in revenue from nutritionals primarily driven by the decrease in nutritional subscriptions and lower customer acquisition and a $4.3 million decrease in shipping revenue due to a sales composition shift from nutritional to digital.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

283,547

 

 

$

239,964

 

 

$

43,583

 

 

 

18

%

Connected fitness

 

 

5,937

 

 

 

 

 

 

5,937

 

 

 

 

Nutrition and other

 

 

367,895

 

 

 

399,335

 

 

 

(31,440

)

 

(8%)

 

Total revenue

 

$

657,379

 

 

$

639,299

 

 

$

18,080

 

 

 

3

%

The increase in digital revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily attributable to year-over-year growth in digital subscriptions during the first half of 2021.

The increase in connected fitness revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was due to the acquisition of Myx in June 2021.

The decrease in nutrition and other revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to the decrease in revenue from nutritionals as a result of lower demand experienced during the third quarter of 2021.

Cost of Revenue

Digital Cost of Revenue

Digital cost of revenue includes costs associated with digital content creation including amortization and revisions of content assets, depreciation of streaming platforms and e-commerce websites, digital streaming costs, and amortization of acquired digital platform intangible assets. It also includes customer service costs, credit card processing fees, depreciation of production equipment, live trainer costs, facilities, and related personnel expenses.

Connected Fitness Cost of Revenue

Connected Fitness cost of revenue consists of product costs, including hardware costs, duties and other applicable importing costs, shipping and handling costs, warehousing and logistics costs, costs associated with service calls and repairs of the product under

37


warranty, payment processing and financing fees, customer service expenses, and personnel-related expenses associated with supply chain and logistics.

Nutrition and Other Cost of Revenue

Nutrition and other cost of revenue includes product costs, shipping and handling, fulfillment and warehousing, customer service, and credit card processing fees. It also includes depreciation of nutrition-related e-commerce websites and social commerce platforms, amortization of acquired formulae intangible assets, facilities, and related personnel expenses.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

12,124

 

 

$

9,843

 

 

$

2,281

 

 

 

23

%

Connected fitness

 

 

10,261

 

 

 

 

 

 

10,261

 

 

 

 

Nutrition and other

 

 

50,682

 

 

 

61,082

 

 

 

(10,400

)

 

(17%)

 

Total cost of revenue

 

$

73,067

 

 

$

70,925

 

 

$

2,142

 

 

 

3

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

81,948

 

 

$

89,239

 

 

$

(7,291

)

 

(8%)

 

Connected fitness

 

 

(4,334

)

 

 

 

 

 

(4,334

)

 

 

 

Nutrition and other

 

 

57,371

 

 

 

91,315

 

 

 

(33,944

)

 

(37%)

 

Total gross profit

 

$

134,985

 

 

$

180,554

 

 

$

(45,569

)

 

(25%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

87

%

 

 

90

%

 

 

 

 

 

 

Connected fitness

 

 

(73

%)

 

 

 

 

 

 

 

 

 

Nutrition and other

 

 

53

%

 

 

60

%

 

 

 

 

 

 

The increase in digital cost of revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily driven by a $2.0 million increase in content assets amortization due to a content asset library (new and existing content) with higher costs being amortized during the three months ended September 30, 2021 compared to the three months ended September 30, 2020. The digital gross margin was lower for the three months ended September 30, 2021 compared to the three months ended September 30, 2020 primarily due to higher content assets amortization and higher customer service expenses as more contacts were related to digital products, partially offset by lower credit card processing as we achieved rate-reducing initiatives.

The increase in connected fitness cost of revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily driven by the acquisition of Myx in June 2021.

The decrease in nutrition and other cost of revenue for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due to a $8.7 million decrease in product costs, $2.1 million decrease in shipping costs, and $0.6 million decrease in customer service expense as the result of lower nutrition and other revenue. These decreases were partially offset by a $1.1 million increase in freight and fulfillment expense. Despite the decrease in product costs, shipping and customer service costs, nutrition and other gross margin decreased as a result of a higher reserve for excess and obsolete inventory, higher

38


freight and shipping rates due to COVID-19, and the deleveraging of fixed costs such as depreciation and personnel-related expenses on lower revenue.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Cost of revenue

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

34,858

 

 

$

27,507

 

 

$

7,351

 

 

 

27

%

Connected fitness

 

 

10,417

 

 

 

 

 

 

10,417

 

 

 

 

Nutrition and other

 

 

164,679

 

 

 

151,654

 

 

 

13,025

 

 

 

9

%

Total cost of revenue

 

$

209,954

 

 

$

179,161

 

 

$

30,793

 

 

 

17

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

$

248,689

 

 

$

212,457

 

 

$

36,232

 

 

 

17

%

Connected fitness

 

 

(4,480

)

 

 

 

 

 

(4,480

)

 

 

 

Nutrition and other

 

 

203,216

 

 

 

247,681

 

 

 

(44,465

)

 

(18%)

 

Total gross profit

 

$

447,425

 

 

$

460,138

 

 

$

(12,713

)

 

(3%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross margin

 

 

 

 

 

 

 

 

 

 

 

 

Digital

 

 

88

%

 

 

89

%

 

 

 

 

 

 

Connected fitness

 

 

(75

%)

 

 

 

 

 

 

 

 

 

Nutrition and other

 

 

55

%

 

 

62

%

 

 

 

 

 

 

The increase in digital cost of revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily driven by a $4.9 million increase in content assets amortization due to a content asset library (new and existing content) with higher costs being amortized during the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020. Additional customer service expense of $1.0 million, depreciation of $0.9 million, credit card processing expense of $0.5 million, and Openfit live training costs of $0.2 million were attributable to the increase in revenue. The slight decrease in digital gross margin from the nine months ended September 30, 2020 to the nine months ended September 30, 2021 was primarily due to higher program amortization, partially offset by lower streaming costs and lower credit card processing due to rate-reducing initiatives.

The increase in connected fitness cost of revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily driven by the acquisition of Myx in June 2021.

The increase in nutrition and other cost of revenue for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was due to a $5.7 million increase in product costs, $3.2 million increase in shipping costs, $1.7 million increase in depreciation, $1.5 million increase in fulfillment, and $1.1 million in personnel-related expenses. Nutrition and other gross margin decreased during the nine months ended September 30, 2021 as a result of higher freight and shipping rates, a higher reserve for excess and obsolete inventory, and increases in personnel-related costs and depreciation expense for which there is no commensurate revenue.

Operating Expenses

Selling and Marketing

Selling and marketing expenses primarily include the cost of micro-influencer compensation, advertising, royalties, content revisions, promotions and events, and third-party sales commissions as well as the related personnel expenses for employees and consultants.

39


We intend to continue to invest in our selling and marketing capabilities and expect this expense to increase in future periods as we release new products and expand internationally. Selling and marketing expense as a percentage of total revenue may fluctuate from period to period based on total revenue and the timing of our media investments.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Selling and marketing

 

$

153,782

 

 

$

123,980

 

 

$

29,802

 

 

 

24

%

As a percentage of total revenue

 

 

73.9

%

 

 

49.3

%

 

 

 

 

 

 

The increase in selling and marketing expense for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due an increase in television media and online advertising expenses in line with our strategic focus to invest in building brand awareness and driving customer acquisition.

Selling and marketing expense increased, as a percentage of total revenue, due to increased media investments which were less effective at acquiring new customers as compared to the three months ended September 30, 2020.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Selling and marketing

 

$

438,672

 

 

$

352,872

 

 

$

85,800

 

 

 

24

%

As a percentage of total revenue

 

 

66.7

%

 

 

55.2

%

 

 

 

 

 

 

The increase in selling and marketing expense for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to a $54.8 million increase in media costs to build awareness and customer acquisition. Additional increases were $16.9 million in expenses for personnel and systems that support customer acquisition activities, $4.4 million in Coach events expenses, $3.1 million in intangible assets amortization, $2.6 million in production of marketing materials, and $0.9 million in royalties.

Selling and marketing expense increased, as a percentage of total revenue, primarily due to increased media investments on lower revenue.

Enterprise Technology and Development

Enterprise technology and development expenses relate primarily to enterprise systems applications, hardware and software that serve as the technology infrastructure for the Company and are not directly related to services provided or tangible goods sold. This includes maintenance and enhancements of the Company’s enterprise resource planning (ERP) system, which is the core of our accounting, procurement, supply chain and other business support systems. Enterprise technology and development also includes reporting and business analytics tools, security systems such as identity management and payment card industry compliance, office productivity software, research and development tracking tools, and other non—customer facing applications. Enterprise technology and development expenses include personnel-related expenses for employees and consultants who create improvements to and maintain technology systems and are involved in the research and development of new and existing nutritional products, depreciation of enterprise technology-related assets, software licenses, hosting expenses, and technology equipment leases.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Enterprise technology and development

 

$

29,680

 

 

$

23,852

 

 

$

5,828

 

 

 

24

%

As a percentage of total revenue

 

 

14.3

%

 

 

9.5

%

 

 

 

 

 

 

The increase in enterprise technology and development expense for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due to an increase in personnel and enterprise systems-related expenses.

40


Enterprise technology and development expense as a percentage of total revenue increased by 480 basis points due to the deleveraging of fixed costs, such as personnel-related expense and depreciation, on lower revenue.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Enterprise technology and development

 

$

83,718

 

 

$

67,558

 

 

$

16,160

 

 

 

24

%

As a percentage of total revenue

 

 

12.7

%

 

 

10.6

%

 

 

 

 

 

 

The increase in enterprise technology and development expense for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to a $13.0 million increase in personnel-related expenses and a $3.1 million increase in depreciation expense. Enterprise technology and development expense as a percentage of total revenue increased by 210 basis points due to the deleveraging of fixed costs, such as personnel-related expense and depreciation, on lower revenue.

General and Administrative

General and administrative expense includes personnel-related expenses and facilities-related costs primarily for our executive, finance, accounting, legal and human resources functions. General and administrative expense also includes fees for professional services principally comprised of legal, audit, tax, and insurance.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

General and administrative

 

$

23,346

 

 

$

16,523

 

 

$

6,823

 

 

 

41

%

As a percentage of total revenue

 

 

11.2

%

 

 

6.6

%

 

 

 

 

 

 

The increase in general and administrative expense for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due to increases in personnel-related expenses and other general corporate expenses, including additional expenses as a result of operating as a public company. General and administrative expense as a percentage of total revenue increased by 460 basis points due to the deleveraging of costs on lower revenue.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

General and administrative

 

$

58,523

 

 

$

46,229

 

 

$

12,294

 

 

 

27

%

As a percentage of total revenue

 

 

8.9

%

 

 

7.2

%

 

 

 

 

 

 

The increase in general and administrative expense for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to increases in transaction costs related to the Business Combination, personnel-related expenses, and other general corporate expenses. General and administrative expense as a percentage of total revenue increased by 170 basis points primarily due to the deleveraging of transaction costs on lower revenue.

Restructuring

Restructuring charges relates to our 2017 and 2018 restructuring plans, which were initiated to realign business priorities and optimize operations to maximize digital subscription scale and growth. The charges incurred primarily relate to lease termination adjustments and employee-related costs, with the restructuring benefit related to lower final lease termination expenses compared to initial estimates.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

Restructuring gain

 

$

 

 

$

(1,677

)

 

$

1,677

 

 

(100%)

41


 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

(dollars in thousands)

 

 

 

 

Restructuring gain

 

$

 

 

$

(1,677

)

 

$

1,677

 

 

(100%)

Restructuring gain for the three and nine months ended September 30, 2020 reflect adjustments to the estimated liability associated with the 2017 restructuring lease terminations.

Other Income (Expenses)

The change in fair value of warrant liabilities consists of the fair value changes of the Public Warrants and Private Warrants and the transaction costs and advisory fees for the Business Combination allocated to the warrants. Interest expense primarily consists of interest expense associated with our borrowings and amortization of debt issuance costs for our Credit Facility. Other income, net, consists of interest income earned on investments and gains (losses) on foreign currency.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Change in fair value of warrant liabilities

 

$

30,274

 

 

$

 

 

$

30,274

 

 

 

 

Interest expense

 

 

(62

)

 

 

(89

)

 

 

27

 

 

 

30

%

Other income, net

 

 

202

 

 

 

113

 

 

 

89

 

 

 

79

%

The change in fair value of warrant liabilities of $30.3 million during the three months ended September 30, 2021 primarily resulted from the decrease in our stock price during the third quarter of 2021. The decrease in interest expense for the three months ended September 30, 2021, as compared to the three months ended September 30, 2020, was primarily due to lower lease-related interest expense. The increase in other income, net was primarily due to foreign exchange rate fluctuations.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Change in fair value of warrant liabilities

 

$

35,664

 

 

$

 

 

$

35,664

 

 

 

 

Interest expense

 

 

(490

)

 

 

(432

)

 

 

(58

)

 

 

-13

%

Other income, net

 

 

3,155

 

 

 

555

 

 

 

2,600

 

 

 

468

%

The change in fair value of warrant liabilities of $35.7 million during the nine months ended September 30, 2021 primarily resulted from the decrease in our stock price following consummation of the Business Combination on June 25, 2021, partially offset by the transaction costs and advisory fees for the Business Combination allocated to the warrants. The increase in interest expense for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to higher outstanding borrowings and for a longer period in 2021 compared to 2020. The increase in other income, net was primarily due to the gain on the investment in the convertible instrument from Myx prior to June 25, 2021; there was no similar investment during the nine months ended September 30, 2020.

Income Tax Benefit (Provision)

Income tax benefit (provision) consists of income taxes related to US federal and state jurisdictions as well as those foreign jurisdictions where we have business operations.

 

 

Three Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Income tax benefit (provision)

 

$

1,487

 

 

$

(4,129

)

 

$

5,616

 

 

 

136

%

42


The income tax benefit during the three months ended September 30, 2021, as compared to the income tax provision during the three months ended September 30, 2020 was primarily due to a loss position in the third quarter of 2021 compared to a taxable income position in the third quarter of 2020. The effective benefit tax rate for the three months ended September 30, 2021 was 3.6% and differed from the federal statutory rate primarily because of valuation allowances and an increase in net benefits from discrete events. The effective tax rate for the three months ended September 30, 2020 was 23.1% and differed from the federal statutory rate primarily because of additional expense from discrete events.

 

 

Nine Months Ended September 30,

 

 

 

 

 

 

 

 

 

2021

 

 

2020

 

 

$ Change

 

 

% Change

 

 

 

(dollars in thousands)

 

 

 

 

 

Income tax benefit (provision)

 

$

12,739

 

 

$

161

 

 

$

12,578

 

 

 

7812

%

The increase in income tax benefit for the nine months ended September 30, 2021, as compared to the nine months ended September 30, 2020, was primarily due to the increase in net benefits from discrete events, primarily related to the acquisition of Myx. The effective benefit tax rate was 13.4% for the nine months ended September 30, 2021 and 3.4% for the nine months ended September 20, 2020. The increase in the effective benefit tax rate was primarily related to the increase in net benefits from discrete events, partially offset by an increase in valuation allowances.

Liquidity and Capital Resources

Historically, our operations were financed primarily through cash flow from operating activities and borrowings under our Credit Facility. In connection with the Business Combination, we received cash proceeds, net of issuance costs and cash paid for the acquisition of Myx, net of cash acquired of approximately $351.8 million. As of September 30, 2021, we had cash and cash equivalents of $199.8 million and $32.0 million of borrowing capacity available under our Credit Facility (defined below).

We believe our existing cash and cash equivalent balances and cash flow from operations will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of growth initiatives, the expansion of selling and marketing activities, the timing of new nutrition product introductions, market acceptance of our nutrition products, and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our shareholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital. The inability to raise capital would adversely affect our ability to achieve our business objectives.

Amended and Restated Credit Agreement

On December 14, 2018, Beachbody, LLC, as borrower, and Old Beachbody and certain of Beachbody, LLC’s subsidiaries, as guarantors, entered into a credit agreement with Bank of America, N.A., as lender, administrative agent and letter of credit issuer for a $35 million revolving credit facility with a $10 million sublimit for letters of credit (the “Credit Facility”). During the nine months ended September 30, 2021, the Credit Facility was amended to revise certain financial covenants, to extend the maturity date to June 2022, and temporarily increase the Credit Facility by $20 million for a period of either 90 days, or until the consummation of the Business Combination.

In connection with the transactions contemplated by the Business Combination Agreement, on June 23, 2021, the Credit Facility was amended, which, among other things, (a) permits the consummation of the Business Combination and certain other transactions contemplated by the Business Combination Agreement, and (b) amends certain terms of the Credit Facility to, among other things, (i) enable Old Beachbody and Beachbody, LLC to consummate the Business Combination and certain other transactions contemplated by the Business Combination Agreement, (ii) require that the Company join the Credit Facility as a parent guarantor thereunder, and (iii) require that Myx join the Credit Facility as a subsidiary guarantor thereunder.

As of September 30, 2021 and December 31, 2020, we had no borrowings outstanding under the Credit Facility and a letter of credit was issued for $3.0 million. Borrowings may be either Bloomberg Short-Term Bank Yield Index (“BSBY”) rate loans or base rate loans at our election. BSBY rate loans bear interest at an annual rate equal to the BSBY Rate plus 1.75% to 2.25%, with a minimum

43


BSBY of 0.75%. Base rate loans are at the base rate, as defined in the Credit Facility, plus 0.75% to 1.25%. We also pay a 1.75% to 2.25% fee on the letters of credit outstanding and a 0.375% to 0.5% commitment fee on the unused Credit Facility.

In November 2021, the Company terminated the Credit Facility and will maintain a compensating cash balance for the $3.0 million letter of credit.

Cash Flows

The following table summarizes our cash flows for the nine months ended September 30, 2021 and 2020:

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

(dollars in thousands)

 

Net cash provided by (used in) operating activities

 

$

(139,259

)

 

$

72,340

 

Net cash used in investing activities

 

 

(108,345

)

 

 

(26,860

)

Net cash provided by financing activities

 

 

390,448

 

 

 

 

Operating Activities. Net cash used in operating activities of $139.3 million for the nine months ended September 30, 2021 was primarily due to the net loss of $82.4 million and the net change in operating assets and liabilities of $71.2 million, partially offset by non-cash adjustments of $14.4 million. Non-cash adjustments primarily consisted of depreciation and amortization of $40.6 million, change in fair value of warrant liabilities of ($35.7) million, deferred income taxes of ($13.0) million, equity-based compensation of $10.8 million, and amortization of content assets of $10.0 million. The change in net operating assets and liabilities was primarily due to a $68.8 million increase in inventory, $22.0 million increase in content assets, and a $5.6 million increase in other assets; partially offset by a $27.1 million increase in deferred revenue as a result of the increase in digital subscriptions and connected fitness hardware sold but not yet delivered.

Net cash provided by operating activities of $72.3 million for the nine months ended September 30, 2020 was primarily due to the net change in operating assets and liabilities of $35.2 million and non-cash adjustments of $41.7 million, partially offset by the net loss of $4.6 million. The increase in net operating assets and liabilities was primarily due to a $41.8 million increase in deferred revenue as a result of an increase in digital subscriptions, $29.0 million increase in accounts payable and accrued expenses related to increased expenditures to support general business growth; partially offset by a $17.5 million increase in inventory as a result of building up nutritional products and accessories, a $9.9 million increase in content assets and an increase other assets driven by general growth. Non-cash adjustments primarily consisted of depreciation and amortization of $31.9 million, amortization of content assets of $5.1 million, and equity-based compensation expense of $3.2 million.

Investing Activities. Net used in investing activities for the nine months ended September 30, 2021 of $108.3 million was related to $37.3 cash consideration for the acquisition of Myx, net of cash acquired, capital expenditures of $61.1 million, the investment in a convertible instrument of $5.0 million, and an equity investment of $5.0 million.

Net cash used in investing activities for the nine months ended September 30, 2020 of $26.9 million was related to capital expenditures, partially offset by cash acquired through the acquisition of Ladder.

Financing Activities. Net cash provided by financing activities of $390.4 million for the nine months ended September 30, 2021 was primarily related to the $389.1 million in net proceeds received from the Business Combination and $1.3 million of proceeds from stock option exercises, net of tax withholdings.

Net cash provided by financing activities was $0 for the nine months ended September 30, 2020. Gross borrowings and repayments under the Credit Facility were $32.0 million.

44


Contractual Obligations and Other Commitments

The following table summarizes our contractual cash obligations as of September 30, 2021:

 

 

Total

 

 

Less than
1 Year

 

 

1-3 Years

 

 

3-5 Years

 

 

More than
5 Years

 

 

 

(in thousands)

 

Operating lease obligations

 

$

36,857

 

 

$

1,278

 

 

$

22,963

 

 

$

12,616

 

 

$

 

Finance lease obligations

 

 

327

 

 

 

40

 

 

 

284

 

 

 

3

 

 

 

 

Noncancelable service and inventory
   purchase obligations

 

 

79,544

 

 

 

58,646

 

 

 

18,398

 

 

 

2,500

 

 

 

 

Total

 

$

116,728

 

 

$

59,964

 

 

$

41,645

 

 

$

15,119

 

 

$

 

The commitment amounts in the table above are associated with contracts that are enforceable and legally binding and that specify all significant terms, including fixed or minimum services to be used, fixed, minimum or variable price provisions, and the approximate timing of the actions under the contracts.

In November 2021, the Company entered into an agreement to assign the lease of its corporate headquarters to another party in January 2022. This assignment will result in a modification of the Company’s lease term and is expected to reduce right-of-use assets by $22.6 million and lease liabilities by $28.5 million and increase operating income by $2.7 million, which is net of brokers' commissions and accelerated depreciation of leasehold improvements and furniture, fixtures and equipment.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2021.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations should be read in conjunction withare based upon our auditedunaudited condensed consolidated financial statements, which have been prepared in accordance with GAAP. In preparing the unaudited condensed consolidated financial statements, we make estimates and judgments that affect the reported amounts of assets, liabilities, stockholders, revenue, expenses, and related notes included herein.

Cautionary Note Regarding Forward-Looking Statements

All statements other than statements of historical fact included in this report including, without limitation, statements under “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. When used in this report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking statementsdisclosures. We re-evaluate our estimates on an on-going basis. Our estimates are based on historical experience and on various other assumptions that we believe to be reasonable under the beliefscircumstances. Because of management, as well asthe uncertainty inherent in these matters, actual results may differ from these estimates and could differ based upon other assumptions made by,or conditions. The critical accounting policies that reflect our more significant judgments and information currently availableestimates used in the preparation of our condensed consolidated financial statements include those noted below.

Revenue Recognition

We record revenue when we fulfill our performance obligation to transfer control of the goods or services to our customers. Control of shipped items is generally transferred when the product is delivered to the Company’s management. Actual results could differ materiallycustomer. The amount of revenue recognized is the consideration that we expect we will be entitled to receive in exchange for transferring goods or services to its customers. Control of services, which are primarily digital subscriptions, transfers over time, and as such, revenue is recognized ratably over the subscription period (up to 12 months), using a mid-month convention. We sell a variety of bundled products that combine digital subscriptions, nutritional products and/or other fitness products. We consider these sales to be revenue arrangements with multiple performance obligations and allocates the transaction price to each performance obligation based on its relative stand-alone selling price. We defer revenue when we receive payments in advance of delivery of products or the performance of services. Revenue is recorded net of expected returns, discounts and credit card chargebacks, which are estimated using our historical experience. Revenue is presented net of sales and value added taxes collected from those contemplated bycustomers and remitted to applicable government agencies.

Goodwill and Intangible Assets

Goodwill represents the forward- looking statements as a resultexcess of certain factors detailed in our filings with the SEC. All subsequent written or oral forward-looking statements attributable to us or persons acting on the Company’s behalf are qualified in their entirety by this paragraph.

The following discussion and analysis of our 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.

Results of Operations and Known Trends or Future Events

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our initial public offering and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents 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.

We have neither engaged in any operations nor generated any revenues to date. Our only activities since inception have been organizational activities, those necessary to prepare for our initial public offering and identifying a target company for our initial business combination. We do not expect to generate any operating revenues until after completion of our initial business combination. We generate non-operating income in the form of interest income on cash and cash equivalents 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 expenses as we conduct due diligence on prospective business combination candidates.

For the three months ended March 31, 2021, we had a net loss of $16,590,561. We incurred $2,724,770 of operating costs, consisting of public company operating expenses and costs related to preparing for the initial business combination. We had interest income of $20 of interest on the bank account and investment income of $4,432 from marketable securities held in trust account. For the three months ended March 31, 2021, the change in fair value of warrants resulted in an increase in the liabilityconsideration transferred over the fair value of approximately $13,870,243.

Liquiditythe underlying identifiable assets and Capital Resources

As of March 31, 2021, we had cash outside the trust account of $730,435 available for working capital needs. All remaining cash held in the trust account are generally unavailable for the Company’s use, prior to an initial business combination, and is restricted for use eitherliabilities acquired in a business combinationcombination. Goodwill and intangible assets deemed to have an indefinite life are not amortized, but instead are assessed for impairment annually in the fourth quarter as of October 1. Additionally, if an event or to redeem common stock.

Through March 31, 2021,change in circumstances occurs that would more likely than not reduce the Company’s liquidity needs were satisfied through receipt of $25,000 from the salefair value of the founder shares, advances fromreporting unit below its carrying value, we would evaluate goodwill and other intangibles at that time.

45


In testing for goodwill impairment, we have the sponsor in an aggregate amountoption to first assess qualitative factors to determine whether the existence of $141,881 and the remaining net proceeds from the initial public offering and the sale of private placement warrants.


The Company anticipatesevents or circumstances lead to a determination that it is more likely than not that the $730,735 of cash held outsidefair value of the trust account asreporting unit is less than its carrying amount. If, after assessing the totality of March 31, 2021, will be sufficient to allow the Company to operate for at least the next 12 months, assumingevents and circumstances, we conclude that a business combinationit is not consummated duringmore likely than not that time. Until consummationthe fair value of our business combination,a reporting unit is less than its carrying amount, then performing the Company will be usingtwo-step impairment test is not required. If we conclude otherwise, we are required to perform the fundstwo-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not held inimpaired. If the trust account, and any additional Working Capital Loans (as defined in Note 5 to our financial statements) from the initial stockholders, the Company’s officers and directors, or their respective affiliates (which is described in Note 5 to our financial statements), 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.

The Company does not believe it will need to raise additional funds in order to meet the expenditures required for operating its business. However, if the Company’s estimates of the costs of undertaking in-depth due diligence and negotiating business combinationestimated fair value is less than the actual amount necessarycarrying value, an impairment charge will be recorded to do so,reduce the Company mayreporting unit to fair value.

We also evaluate qualitative factors to determine whether or not its indefinite lived intangible assets have insufficient funds availablebeen impaired and then performs a quantitative test if required.

Intangible assets deemed to operate its business priorhave finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to the business combination. Moreover, the Company will needcontribute directly, or indirectly, to raise additional capital through loans from its sponsor, officers, directors, or third parties. Noneour future cash flows.

Equity-Based Compensation

We measure and recognize expense for all equity-based awards based on their estimated fair values as of the sponsor, officers or directors are under any obligation to advance funds to, or to invest in,grant date using the Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at all.

Derivative Warrant Liabilities

Black-Scholes option-pricing model. We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of our financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.

We issued an aggregate of 15,333,333 warrants in connection with our initial public offering and private placement, which are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrantsexpense on a straight-line basis over the requisite service period, and forfeitures are accounted for as liabilities atthey occur. Equity-based compensation expense is included in cost of revenue, selling and marketing, enterprise technology and development, and general and administrative expense within the unaudited condensed consolidated statements of operations.

Equity-based compensation expense for options granted to nonemployees is measured based on the fair value of the options issued, which is more reliably determined than the value of goods and adjust the instruments to fair value at each reporting period. The liabilities are subject to remeasurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statement of operations.services received. The fair value of warrantsthe equity instruments issued is measured at the performance completion date.

Common Unit Valuations

Prior to the Business Combination, we granted common unit options at an exercise price equal to the fair value as determined by the Board of Managers on the date of grant. Given the absence of a public market for our common units, we were required to estimate the fair value of our common units at the time of each grant of an equity-based award. We utilized various valuation methodologies in connectionaccordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of our common units. These estimates and assumptions include numerous objective and subjective factors to determine the fair value of our common units at each grant date, including the following factors:

Relevant precedent transaction including our capital units;
the liquidation preferences, rights, preferences, and privileges of our preferred units relative to the common units;
our actual operating and financial performance;
current business conditions and projections;
our stage of development;
the likelihood and timing of achieving a liquidity event for the common units underlying the options, such as an initial public offering, given prevailing market conditions; any adjustment necessary to recognize a lack of marketability of the common units underlying the granted options;
the market performance of comparable publicly traded companies; and
U.S. and private placement hasglobal capital market conditions.

Subsequent to the Business Combination, the Board determines the fair value of the Common Stock based on the closing market price on or around the date of grant.

Income Taxes

Effective April 2, 2019, Old Beachbody made an election with the United States taxing authorities to change its entity status to a regarded C-Corporation from a regarded pass-through entity for income tax purposes. The consequences of this election were the

46


recognition of a tax provision on our net income earned after that date and the recording of a net deferred tax asset as of the election date of $16.6 million as a benefit for income taxes from operations. The accumulated deficit and other comprehensive loss as of the election date have been estimatedeliminated against common units and preferred units with the allocation determined in accordance with the terms of the Beachbody, LLC Operating Agreement.

We are subject to income taxes in the United States, Canada, and the United Kingdom. We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between the financial statement and tax basis of assets and liabilities by using Monte Carlo simulations at each measurementenacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

In evaluating its ability to recover deferred tax assets, we consider all available positive and negative evidence, including historical and current operating results, ongoing tax planning, and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. Based on the level of losses, we have established a valuation allowance to reduce our net deferred tax assets to the amount that is more likely than not to be realized.

We record uncertain tax positions on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.

We recognize interest and penalties related to unrecognized tax benefits in interest expense and other income, net, respectively, in the accompanying unaudited condensed consolidated statements of operations. Accrued interest and penalties are included in accrued expenses and other liabilities in the unaudited condensed consolidated balance sheets.

Recent Accounting Pronouncements

See Note 1, Organization, Business and Summary of Accounting Policies, of the notes to our unaudited condensed consolidated financial statements included elsewhere in this Report for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.

Item 3. Quantitative and Qualitative Disclosures About Market RiskRisk.

Quantitative and Qualitative Disclosure About Market Risk

Not requiredForeign Currency Risk

We are exposed to foreign currency exchange risk related to transactions in currencies other than the U.S. Dollar, which is our functional currency. Our foreign subsidiaries, sales, certain inventory purchases and operating expenses expose us to foreign currency exchange risk. For the three and nine months ended September 30, 2021 approximately 10% of our revenue was in foreign currencies. For the three and nine months ended September 30, 2020 approximately 9% of our revenue was in foreign currencies. These sales were primarily denominated in Canadian dollars and British pounds.

We use derivative instruments to manage the effects of fluctuations in foreign currency exchange rates on our net cash flows. We primarily enter into option and forward contracts to hedge forecasted payments, typically for smallerup to 12 months, for cost of revenue, selling and marketing expenses, general and administrative expenses and intercompany transactions not denominated in the local currencies of our foreign operations. We designate some of these instruments as cash flow hedges and records them at fair value as either assets or liabilities within the consolidated balance sheets. Some of these instruments are freestanding derivatives for which hedge accounting does not apply.

Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income (loss) until the hedged forecasted transaction affects earnings. Deferred gains and losses associated with cash flow hedges of third-party payments are recognized in cost of revenue, selling and marketing or general and administrative expenses, as applicable, during the period when the hedged underlying transaction affects earnings. Changes in the fair value of certain derivatives for which hedge accounting does not apply are immediately recognized directly in earnings to cost of revenue.

A hypothetical 10% change in exchange rates, with the U.S. dollar as the functional and reporting companies.currency, would not result in a material increase or decrease in cost of revenue and operating expenses.

47


The aggregate notional amount of foreign exchange derivative instruments at September 30, 2021 and December 31, 2020 was $32.6 million and $34.0 million, respectively.

Interest Rate Risk

We are primarily exposed to changes in short-term interest rates with respect to our cost of borrowing under our Credit Facility. We monitor our cost of borrowing under our facility, taking into account our funding requirements, and our expectations for short-term rates in the future. As of September 30, 2021, there were no outstanding borrowings under the Credit Facility, and a letter of credit was issued for $3.0 million. A hypothetical 10% change in the interest rate on our Credit Facility for all periods presented would not have a material impact on our financial statements.

Inflation Risk

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and operating results.

Item 4. Controls and ProceduresProcedures.

Management’s Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officerChief Executive Officer and principal financial and accounting officer,Chief Financial Officer, we conducted an evaluation ofevaluated the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended March 31, 2021, as such term is(as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act.Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2021. Based upon that evaluation, our principal executive officerChief Executive Officer and principal financial and accounting officerChief Financial Officer concluded that solely due to the Company’s restatement of its financial statements to reclassify the Company’s warrants as described in the Form 10-K/A filed May 3, 2021, a material weakness existed and our disclosure controls and procedures were not effective as of March 31, 2021.

To remediate the material weakness pertaining to the presentationend of the Company’s warrants as equity instead of liability, as disclosed in the Company’s Annual Report on Form 10-K, as amended on May 5, 2021, for the period ended December 31, 2021, the Company has reviewed its internal controls and enhanced the supervisory review of accounting procedures incovered by this financial reporting area.report.

Changes in Internal Control overOver Financial Reporting

During the most recently completed fiscal quarter ended March 31, 2021, there wasThere has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.


Limitations on Effectiveness of Controls and Procedures

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives, as specified above. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met.

PART II - II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are and, from time to time, we may become, involved in legal proceedings or be subject to claims arising in the ordinary course of our business. There are no material updates to our Form S-4 declared effective on May 27, 2021.

None.

Item 1A. Risk Factors.

There have been no material changes fromto the risk factors previouslyas disclosed in Part II, Item 1A, Risk Factors in our Amendment No. 1 to the annual reportmost recent Quarterly Report on Form 10-K/A filed with the SEC on May 3, 2021 and in our Form S-4, initially filed on February 16, 2021, as amended.10-Q.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Use of Proceeds

On November 30, 2020, we consummated our initial public offering of 30,000,000 units, which included 3,900,000 units issued pursuant to the partial exercise by the underwriters of their over-allotment option. Each unit consists of one share of Class A common stock, par value $0.0001 per share, and one-third of one redeemable warrant, with each whole warrant entitling the holder thereof to purchase one share of Class A common stock for $11.50 per share. The units were sold at a price of $10.00 per unit, generating gross proceeds to us of $300,000,000.

Simultaneously with the closing of our initial public offering, we completed the private sale of an aggregate of 5,333,333 private placement warrants to Forest Road Acquisition Sponsor LLC, our sponsor, at a purchase price of $1.50 per private placement warrant, generating gross proceeds to us of $8,000,000. This issuance of private placement warrants was be made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

A total of $300,000,000, comprised of $292,000,000 of the proceeds from our initial public offering (which amount includes $10,500,000 of the underwriters’ deferred discount) and $8,000,000 of the proceeds of the sale of the private placement warrants, was placed in a U.S.-based trust account maintained by Continental Stock Transfer & Trust Company, acting as trustee. The proceeds held in the trust account are invested only in U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations.

There has been no material change in the planned use of the proceeds from the Initial Public Offering and Private Placement as is described in the Company’s final prospectus related to the Initial Public Offering.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information.

None.In November 2021, the Company terminated the Credit Facility and will maintain a compensating cash balance for the $3.0 million letter of credit.


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On November 11, 2021, at the request of Mr. Daikeler and Mr. Congdon, the Compensation Committee approved the reduction of base salaries of Mr. Daikeler and Mr. Congdon to $1 per year, effective November 15, 2021.

49


Item 6. ExhibitsExhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

No.Description of Exhibit
2.1

Exhibit
Number

Incorporated by Reference

Filed or

Furnished
Herewith

Description

Form

File No.

Exhibit

Filing Date

10.1

Agreement and PlanOffer of Merger,Employment Letter, dated as of February 9,September 27, 2021, by and among thebetween The Beachbody Company Beachbody Merger Sub, Myx Merger Sub, Beachbody and Myx. (1)Blake Bilstad

X

10.1

31.1

Form of Subscription Agreement. (1)

10.2Sponsor Agreement, dated as of February 9, 2021, by and among the Company, Forest Road Acquisition Sponsor LLC and Beachbody. (1)
10.3Member Support Agreement, dated as of February 9, 2021, by and among the Company, Beachbody, and certain equityholders of Beachbody set forth therein. (1)
10.4Myx Support Agreement, dated as of February 9, 2021, by and among the Company, Myx, Beachbody, and certain equityholders of Myx set forth therein. (1)
31.1*Certification of PrincipalChief Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.

X

31.2*

31.2

Certification of PrincipalChief Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002.

X

32.1**

32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adoptedAdopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002.

X

32.2**

32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adoptedAdopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002.

X

101.INS*

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

X

101.CAL*

101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase DocumentDocument.

X

101.SCH*

XBRL Taxonomy Extension Schema Document

101.DEF*

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase DocumentDocument.

X

101.LAB*

101.LAB

Inline XBRL Taxonomy Extension LabelsLabel Linkbase DocumentDocument.

X

101.PRE*

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase DocumentDocument.

X

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101.INS).

X

*Filed herewith.
**Furnished herewith.

50


(1)Incorporated by reference to the Company’s Form 8-K/A, filed with the SEC on February 16, 2021.

SIGNATURES

SIGNATURES

In accordance withPursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

FOREST ROAD ACQUISITION CORP.

Date: May 17, 2021

By:

/s/ Keith L. Horn

The Beachbody Company

Name: 

Keith L. Horn

Date: November 15, 2021

Title:

By:

/s/ Carl Daikeler

Carl Daikeler

Chief Executive Officer and Secretary

(Principal Executive Officer)

Date: May 17,November 15, 2021

By:

By:

/s/ Salil MehtaSue Collyns

Name:

Salil Mehta

Sue Collyns

Title:

President and Chief Financial Officer

(Principal Financial and Accounting Officer)

51

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