UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(MARK ONE)
For the quarter ended
For the transition period from to
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Securities registered pursuant to Section 12(b) of the Act:
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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.
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).
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 definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ |
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| Emerging growth 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
As of November 10, 2021, there were 8,971,365 units,
PROPERTY SOLUTIONS ACQUISITION CORP. II
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2021
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1. Interim Financial Statements.
PROPERTY SOLUTIONS ACQUISITION CORP. II
CONDENSED BALANCE SHEETS
| September 30, 2021 |
| December 31, 2020 | |||
(Unaudited) | ||||||
ASSETS | ||||||
Current assets | ||||||
Cash | $ | | $ | | ||
Prepaid expenses |
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Total Current Assets | | | ||||
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Deferred offering costs | | | ||||
Marketable securities held in Trust Account | | | ||||
TOTAL ASSETS | $ | | $ | | ||
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY |
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Current liabilities | ||||||
Accrued expenses | $ | | $ | | ||
Accrued offering costs | | | ||||
Promissory note - related party | | | ||||
Total Current Liabilities | | | ||||
Warrant Liability |
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Deferred underwriting fee payable |
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Total Liabilities |
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Commitments |
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Class A common stock, $ | | | ||||
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Stockholders’ (Deficit) Equity |
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Preferred stock, $ |
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Class A common stock, $ |
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Class B common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total Stockholders’ (Deficit) Equity |
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TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
1
PROPERTY SOLUTIONS ACQUISITION CORP. II
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | Nine Months Ended | |||||
September 30, | September 30, | |||||
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Operating and formation expenses | $ | | $ | | ||
Loss from operations | ( | ( | ||||
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Other income: |
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Interest earned on marketable securities held in Trust Account | | | ||||
Change in fair value of warrant liability | | | ||||
Transaction costs allocable to warrant liability | — | ( | ||||
Total Other income, net | | | ||||
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Income before income taxes | | | ||||
Benefit from (Provision for) income taxes | — | — | ||||
Net income | $ | | $ | | ||
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Weighted average shares outstanding of Class A common stock |
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Basic and diluted net income per share, Class A commons stock | $ | | $ | | ||
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Weighted average shares outstanding of Class B common stock |
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Basic and diluted net income per share, Class B common stock | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited condensed financial statements.
2
PROPERTY SOLUTIONS ACQUISITION CORP. II
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
THREE AND NINE MONTHS ENDED September 30, 2021
(UNAUDITED)
Additional | Total | ||||||||||||||||||
Class A Common Stock | Class B Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||
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| Amount |
| Shares |
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| Capital |
| Deficit |
| Equity(Deficit) | ||||||
Balance — January 1, 2021 | | $ | | | $ | | $ | | $ | ( | $ | | |||||||
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Sale of | | | — | — | | | | ||||||||||||
Issuance of Representative Shares | | | — | — | | | | ||||||||||||
Forfeiture of Founder Shares | — | — | ( | ( | | | — | ||||||||||||
Accretion to amount subject to redemption | — | — | — | — | ( | ( | ( | ||||||||||||
Net loss |
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Balance — March 31, 2021 (Restated) |
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Net loss | — | — | — | — | | ( | ( | ||||||||||||
Balance — June 30, 2021 (Restated) | | $ | | | | $ | | $ | ( | $ | ( | ||||||||
Net income | — | — | — | — | | | | ||||||||||||
Balance — September 30, 2021 | | $ | | | $ | | $ | | $ | ( | $ | ( | |||||||
The accompanying notes are an integral part of the unaudited condensed financial statements.
3
PROPERTY SOLUTIONS ACQUISITION CORP. II
CONDENSED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2021
(UNAUDITED)
Cash Flows from Operating Activities: |
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Net income | $ | | |
Adjustments to reconcile net income to net cash used in operating activities: |
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Interest earned on marketable securities held in Trust Account | ( | ||
Change in fair value of warrant liability | ( | ||
Offering cost allocable to warrant liabilities | | ||
Changes in operating assets and liabilities: |
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Prepaid expenses | ( | ||
Accrued expenses |
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Net cash used in operating activities | $ | ( | |
Cash Flows from Investing Activities: | |||
Investment of cash in Trust Account | $ | ( | |
Net cash used in investing activities | $ | ( | |
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Cash Flows from Financing Activities: |
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Proceeds from sale of Units, net of underwriting discounts paid | $ | | |
Proceeds from sale of Private Placement Units | | ||
Proceeds from issuance of Representative Shares | | ||
Repayment of promissory note-related party |
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Payment of offering costs |
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Net cash provided by financing activities | $ | | |
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Net Change in Cash | $ | | |
Cash — Beginning of period |
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Cash — End of period | $ | | |
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Non-Cash investing and financing activities: |
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Offering costs included in accrued offering costs | $ | | |
Initial classification of Class A common stock subject to possible redemption, as revised | $ | | |
Deferred underwriting fee payable | $ | | |
Forfeiture of Founder Shares | $ | ( |
The accompanying notes are an integral part of the unaudited condensed financial statements.
4
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS
Property Solutions Acquisition Corp. II (the “Company”) was incorporated in Delaware on October 29, 2020. The Company is a blank check company formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with
The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of September 30, 2021, the Company had not commenced any operations. All activity through September 30, 2021 relates to the Company’s formation, initial public offering (“Initial Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.
The registration statement for the Company’s Initial Public Offering was declared effective on March 3, 2021. On March 8, 2021, the Company consummated the Initial Public Offering of
Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of
On March 12, 2021, the underwriters partially exercised their over-allotment option (see Note 4), resulting in an additional
Transaction costs amounted to $
Following the closing of the Initial Public Offering on March 8, 2021 and the partial exercise of the underwriter’s over-allotment option on March 12, 2021, an amount of $
The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Units, although substantially all of the net proceeds are intended to be applied generally toward completing a Business Combination. The Company must complete a Business Combination having an aggregate fair market value of at least
5
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The Company will provide its 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 or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $
The Company will proceed with a Business Combination if the Company has net tangible assets of at least $
The Sponsor has agreed (a) to waive its redemption rights with respect to the Founder Shares, Private 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 that would affect a public stockholders’ ability to convert or sell their shares to the Company in connection with a Business Combination or affect the substance or timing of the Company’s obligation to redeem
The Company will have until March 8, 2023 to complete a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay taxes, divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. 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.
6
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The Sponsor and Early Bird Capital have agreed to waive their liquidation rights with respect to the Founder Shares, Representative Shares and Private Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Sponsor or Early Bird Capital acquire Public Shares in or after the Initial Public Offering, 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. The underwriter has agreed to waive its rights to the deferred underwriting commission (see Note 7) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($
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 vendor 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 $
Liquidity and Financial Condition
As of September 30, 2021, the Company had $
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Risks and Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and/or search for a target company, the specific impact is not readily determinable as of the date of the financial statement. The financial statement does not include any adjustments that might result from the outcome of this uncertainty.
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In connection with the preparation of the Company’s financial statements as of September 30, 2021, management identified errors made in its historical financial statements where, at the closing of the Company’s Initial Public Offering, the Company improperly valued its Class A common stock subject to possible redemption. The Company previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $
7
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
equity. This resulted in an adjustment to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock subject to redemption, the Company also restated its income (loss) per common stock calculated to allocate net income (loss) evenly to Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock pro rata in the income (loss) of the Company. There is no impact to the reported amounts for total assets, total liabilities, cash flows, or net income (loss).
The impact of the restatement on the Company’s financial statements is reflected in the following table.
| As Previously |
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Balance Sheet as of March 8, 2021 (audited) |
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Class A common stock subject to possible redemption | $ | | $ | | $ | | |||
Class A common stock | $ | | $ | ( | $ | | |||
Additional paid-in capital | $ | | $ | ( | $ | — | |||
Accumulated deficit | $ | ( | $ | ( | $ | ( | |||
Total Stockholders’ Equity (Deficit) | $ | | $ | ( | $ | ( | |||
Balance Sheet as of March 31, 2021 | |||||||||
Class A common stock subject to possible redemption | $ | | $ | | $ | | |||
Class A common stock | $ | | $ | ( | $ | | |||
Additional paid-in capital | $ | | $ | ( | $ | — | |||
Accumulated deficit | $ | ( | $ | ( | $ | ( | |||
Total Stockholders’ Equity (Deficit) | $ | | $ | ( | $ | ( | |||
Balance Sheet as of June 30, 2021 | |||||||||
Class A common stock subject to possible redemption | $ | | $ | | $ | | |||
Class A common stock | $ | | $ | ( | $ | | |||
Additional paid-in capital | $ | | $ | ( | $ | — | |||
Accumulated deficit | $ | ( | $ | ( | $ | ( | |||
Total Stockholders’ Equity (Deficit) | $ | | $ | ( | $ | ( | |||
Statement of Operations for the Three Months Ended March 31, 2021 | |||||||||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | | ( | — | ||||||
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | | ( | — | ||||||
Weighted average shares outstanding of Class A common stock | — | | | ||||||
Weighted average shares outstanding of Class B common stock | — | | | ||||||
Basic and diluted loss per share, Class A common stock | $ | — | $ | ( | $ | ( | |||
Basic and diluted loss per share, Class B common stock | $ | — | $ | ( | $ | ( | |||
Statement of Operations for the Three Months Ended June 30, 2021 | |||||||||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | | | — | ||||||
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | | | — | ||||||
Basic and diluted net (loss) income per share, Non-redeemable common stock | $ | ( | $ | | $ | — | |||
Weighted average shares outstanding of Class A common stock | — | | | ||||||
Weighted average shares outstanding of Class B common stock | — | | | ||||||
Basic and diluted loss per share, Class A common stock | — | ( | ( | ||||||
Basic and diluted loss per share, Class B common stock | $ | — | $ | ( | $ | ( | |||
Statement of Operations for the Six Months Ended June 30, 2021 | |||||||||
Basic and diluted weighted average shares outstanding, Class A common stock subject to possible redemption | | ( | — | ||||||
Basic and diluted weighted average shares outstanding, Non-redeemable common stock | | ( | — | ||||||
Basic and diluted net (loss) income per share, Non-redeemable common stock | $ | ( | $ | | $ | — | |||
Weighted average shares outstanding of Class A common stock | — | | | ||||||
Weighted average shares outstanding of Class B common stock | — | | | ||||||
Basic and diluted loss per share, Class A common stock | — | ( | ( | ||||||
Basic and diluted loss per share, Class B common stock | $ | — | $ | ( | $ | ( | |||
Statement of Changes in Stockholders’ Equity for the Three Months Ended March 31, 2021 | |||||||||
Sale of | $ | | $ | ( | $ | — | |||
Common stock subject to possible redemption | $ | ( | $ | | $ | — | |||
Accretion to amount subject to redemption | $ | — | $ | ( | $ | ( | |||
Statement of Changes in Stockholders’ Equity for the Three Months Ended June 30, 2021 | |||||||||
Common stock subject to possible redemption | $ | | $ | ( | $ | — | |||
Statement of Cash Flows for the Three Months Ended March 31, 2021 | |||||||||
Initial classification of Class A common stock | $ | | $ | | $ | | |||
Change in value of Class A common stock subject to possible redemption | $ | | $ | ( | $ | — | |||
Statement of Cash Flows for the Six Months Ended June 30, 2021 | |||||||||
Initial classification of Class A common stock | $ | | $ | | $ | | |||
Change in value of Class A common stock subject to possible redemption | $ | ( | $ | | $ | — | |||
8
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s prospectus for its Initial Public Offering as filed with the SEC on March 5, 2021. The interim results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of 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 independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports 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 that 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 statement 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.
Use of Estimates
The preparation of the condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Making estimates require management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. Such estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly from those estimates.
9
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have any cash equivalents as of September 30, 2021 and December 31, 2020.
Marketable Securities Held in Trust Account
At September 30, 2021, substantially all of the assets held in the Trust Account were held in money market funds which are invested primarily in U.S. Treasury securities. All of the Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information. At December 31, 2020, there were no assets held in the Trust Account.
Warrant Liabilities
The Company accounts for the Public Warrants (as defined in Note 4) and Private Placement Warrants (together with the Public Warrants, the “Warrants”) in accordance with the guidance contained in ASC 815-40, under which the Warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the Warrants as liabilities at their fair value and adjusts the Warrants to fair value in respect of each reporting period. This liability is subject to re-measurement at each balance sheet date until the Warrants are exercised, and any change in fair value is recognized in the statements of operations. The Private Placement Warrants and the Public Warrants for periods where no observable traded price was available are valued using a Binomial lattice model, specifically a binomial lattice model.
Class A 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 ASC 480. Class A common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable ordinary shares (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, ordinary shares are classified as shareholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2021, Class A common stock subject to possible redemption are presented as temporary equity, outside of the stockholders’ equity section of the Company’s condensed balance sheet.
The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the Initial Public Offering, the Company recognized the accretion from initial book value to redemption amount value. The change in the carrying value of redeemable Class A common stock resulted in charges against additional paid-in capital and accumulated deficit
At September 30, 2021, the Class A common stock reflected in the condensed balance sheet are reconciled in the following table:
Gross proceeds |
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Less: |
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Proceeds allocated to Public Warrants | $ | ( | |
Class A common stock issuance costs | $ | ( | |
Plus: |
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Accretion of carrying value to redemption value | $ | | |
Class A common stock subject to possible redemption | $ | |
10
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statements carrying 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 to 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.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position 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
The Company is subject to income tax examinations by major taxing authorities since inception. The effective tax rate differs from the statutory tax rate of
Net Income (Loss) per Common Share
Net income (loss) per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture. At September 30, 2021, weighted average shares were reduced for the effect of an aggregate of
The Company’s statement of operations includes a presentation of income (loss) per share for common stock subject to possible redemption in a manner similar to the two-class method of income (loss) per share. Net income (loss) per common share, basic and diluted, for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of Class A common stock subject to possible redemption outstanding since original issuance.
Net income (loss) per share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to Class A common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.
Non-redeemable common stock includes Founder Shares and non-redeemable shares of common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.
11
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):
| Three Months |
| Nine Months | |||||||||
Ended |
| Ended | ||||||||||
September 30, 2021 |
| September 30, 2021 | ||||||||||
Class A |
| Class B | Class A |
| Class B | |||||||
Basic and diluted net income per common share |
|
|
| |||||||||
Numerator: |
|
|
| |||||||||
Allocation of net income, as adjusted | $ | | $ | | $ | | $ | | ||||
Denominator: |
|
|
|
| ||||||||
Basic and diluted weighted average common shares outstanding | $ | | $ | | $ | | $ | | ||||
Basic and diluted net income per common share | $ | | $ | | $ | | $ | | ||||
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature, excluding the Warrant liability (see Note 11).
Recent Accounting Standards
In August 2020. The FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt –debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company adopted ASU 2020-06 in the current quarter. Adoption of the ASU did not impact the Company’s financial position, results of operations or cash flows.
The Company’s management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying unaudited condensed financial statements.
NOTE 4. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company sold
12
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 5. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public Offering, the Sponsor and Early Bird Capital purchased an aggregate of
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
On November 10, 2020, the Sponsor paid $
The Sponsor has agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A)
Administrative Services Agreement
The Company agreed, commencing on March 3, 2021 through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay an affiliate of the Company’s executive officers a total of $
Promissory Note — Related Party
On November 10, 2020, the Company issued an unsecured promissory note to the Sponsor (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal amount of $
13
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
on the earlier of (i) December 31, 2021, (ii) the consummation of the Initial Public Offering or (ii) the date on which the Company determines not to proceed with the Initial Public Offering. As of September 30, 2021 and December 31, 2020, there was
Related Party Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would 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. 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 $
NOTE 7. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered into on March 3, 2021, the holders of the Founder Shares and Representative Shares, as well as the holders of the Private Placement Units and any units that may be issued in payment of Working Capital Loans made to the Company, have registration rights to require the Company to register for resale of any of the Company’s securities held by them. The holder of these securities and the Sponsor are entitled to make unlimited demands that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. Notwithstanding anything to the contrary, Early Bird Capital may only make a demand on
Underwriting Agreement
The Company granted the underwriters a
The underwriters are entitled to a deferred fee of $
14
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
NOTE 8. STOCKHOLDERS’ EQUITY
Preferred Stock —The Company is authorized to issue
Class A Common Stock — The Company is authorized to issue up to
Class B Common Stock — The Company is authorized to issue up to
Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the Company’s shareholders except as otherwise required by law.
The shares of Class B common stock will automatically convert into Class A common stock at the time of a Business Combination, or earlier at the option of the holder, on a one-for-one basis, subject to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the Sponsor agrees to waive such adjustment with respect to any such issuance or deemed issuance, including a specified future issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis,
NOTE 9. WARRANTS
Public Warrants may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only whole warrants will trade. The Public Warrants will become exercisable
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 covering the issuance of the shares of Class A common stock underlying the warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed to be exempt under the securities laws of 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
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the ninetieth 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.
Redemption of warrants when the price per Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at a price of $ |
| ● | upon not less than |
| ● | if, and only if, the reported closing price of the Class A common stock equals or exceeds $ |
If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under all applicable state securities laws.
Redemption of warrants when the price per Class A common stock equals or exceeds $
| ● | in whole and not in part; |
| ● | at $ |
| ● | if, and only if, the Private Placement Warrants are also concurrently called for redemption at the same price (equal to a number of shares of Class A common stock) as the outstanding Public Warrants, as described above; and |
| ● | if, and only if, there is an effective registration statement covering the issuance of the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given. |
If the Company calls the Public 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. The exercise price and number of shares of Class A common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. However, except as described below, the warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates the funds held 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 outside of the Trust Account with the respect to such warrants. Accordingly, the warrants may expire worthless.
16
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of a Business Combination at an issue price or effective issue price of less than $
The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants will and the Class A common stock issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until
Representative Shares
The Company issued
The Representative Shares have been deemed compensation by FINRA and are therefore subject to a lock-up for a period of
NOTE 10. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
17
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
| Level 1: | Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
| Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. |
| Level 3: | Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability. |
The following table presents information about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
|
| September 30, |
| March 8, | ||||
Description | Level |
| 2021 |
| 2021 | |||
Assets: |
|
|
|
|
|
| ||
Marketable securities held in Trust Account |
| 1 | $ | | $ | | ||
Liabilities: |
|
|
|
|
|
| ||
Warrant Liability - Private Placement Warrants | 3 | $ | | $ | | |||
Warrant Liability - Public Warrants |
| 1 | | | ||||
18
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
The Public Warrants and Private Placement Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on our accompanying September 30, 2021 condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.
Initial Measurement
The Company established the initial fair value for the Public and Private Placement Warrants on March 8, 2021, the date of the Company’s Initial Public Offering, using a binomial lattice model. The Company allocated the proceeds received from (i) the sale of Units (which is inclusive of
The key inputs into the binomial lattice model for the Public Warrants and Private Placement Warrants were as follows at initial measurement:
| March 8, 2021 |
| ||
(Initial |
| |||
Input | Measurement) |
| ||
Risk-free interest rate |
| | % | |
Effective expiration date |
| |||
One-touch hurdle | $ | | ||
Dividend yield |
| | % | |
Expected volatility |
| | % | |
Exercise price | $ | | ||
Unit Price | $ | | ||
On March 8, 2021, the Public Warrants and Private Placement Warrants were determined to be $
Subsequent Measurement
The warrants are measured at fair value on a recurring basis. The subsequent measurement of the Public Warrants as of September 30, 2021 is classified as Level 1 due to the use of an observable market quote in an active market. The subsequent measurement of the Private Placement Warrants was calculated using a Black Scholes model which is considered a Level 3 measurement.
The key inputs into the binomial lattice model for the Private Placement Warrants were as follows at September 30, 2021:
Input |
| |||
Risk-free interest rate |
| | % | |
Effective expiration date |
| |||
One-touch hurdle | $ | | ||
Dividend yield |
| | % | |
Expected volatility |
| | % | |
Exercise price | $ | | ||
Unit Price | $ | |
19
PROPERTY SOLUTIONS ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
September 30, 2021
(Unaudited)
As of September 30, 2021, the aggregate values of the Private Placement Warrants were $
The following table presents the changes in the fair value of Level 3 warrant liabilities:
| Private Placement |
| Public | |||
Warrant Liability | Warrant Liability | |||||
Fair value as of January 1, 2021 | $ | — | $ | — | ||
Issuance of warrants on March 8, 2021 (IPO) |
| | | |||
Issuance of warrants on March 12, 2021 (Over Allotment) |
| | | |||
Change in valuation inputs or other assumptions |
| ( | | |||
Transfers out of Level 3 to Level 1 | — | ( | ||||
Fair value as of September 30, 2021 | $ | | $ | — | ||
Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the nine months ended September 30, 2021 was $
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed 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 condensed financial statements.
20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Property Solutions Acquisition Corp. II. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to Property Solutions Acquisition Sponsor II, LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the completion of the Proposed Business Combination (as defined below), the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements, including that the conditions of the Proposed Business Combination are not satisfied. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s final prospectus for its Initial Public Offering filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of December 31, 2020, March 31, 2021, and June 30, 2021. Management identified errors made in its historical financial statements where, at the closing of our Initial Public Offering, we improperly valued our Class A common stock subject to possible redemption. We previously determined the Class A common stock subject to possible redemption to be equal to the redemption value of $10.00 per share of Class A common stock while also taking into consideration a redemption cannot result in net tangible assets being less than $5,000,001. Management determined that the Class A common stock issued during the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control. Therefore, management concluded that the redemption value should include all Class A common stock subject to possible redemption, resulting in the Class A common stock subject to possible redemption being equal to their redemption value. As a result, management has noted a reclassification error related to temporary equity and permanent equity. This resulted in a restatement to the initial carrying value of the Class A common stock subject to possible redemption with the offset recorded to additional paid-in capital (to the extent available), accumulated deficit and Class A common stock.
Overview
We are a blank check company formed under the laws of the State of Delaware on October 29, 2020 for the purpose of effecting a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Placement Units, our capital stock, debt or a combination of cash, stock and debt.
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete a Business Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities from October 29, 2020 (inception) through September 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below,
21
and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2021, we had a net income of $3,921,124, which consists of change in fair value of warrant liability of $4,230,070 and interest earned on marketable securities held in Trust Account of $4,080, offset by operating costs of $313,026.
For the nine months ended September 30, 2021, we had a net income of $625,111, which consists of change in fair value of warrant liability of $1,626,950 and interest earned on marketable securities held in Trust Account of $20,391, offset by transaction related to warrant liability of $402,827 and operating cost of $619,403.
Liquidity and Capital Resources
On March 8, 2021, we consummated the Initial Public Offering of 30,000,000 Units at $10.00 per Unit, generating gross proceeds of $300,000,000. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 805,000 Private Placement Units at a price of $10.00 per Private Placement Unit in a private placement to the Sponsor and Early Bird Capital, generating gross proceeds of $8,050,000.
On March 12, 2021, the underwriters partially exercised their over-allotment option, resulting in an additional 1,700,000 Units issued for an aggregate amount of $17,000,000. In connection with the underwriters’ partial exercise of their over-allotment option, the Company also consummated the sale of an additional 34,000 Private Placement Units at $10.00 per Private Placement Units, generating total proceeds of $340,000.
Following the Initial Public Offering, the partial exercise of the over-allotment option, and the sale of the Private Placement Units, total of $17,000,000 was deposited into the Trust Account. We incurred $18,140,741 in Initial Public Offering related costs, including $6,340,000 of cash underwriting fees, 11,095,000 of deferred underwriting fees and $705,741 of other offering costs.
For the nine months ended September 30, 2021, cash used in operating activities was $739,037. Net income of $625,111 was affected by transaction costs allocated to warrants of $402,827, change in fair value of warrant liability of $1,626,950 and interest earned on marketable securities held in the Trust Account of $20,391. Changes in operating assets and liabilities used $119,634 of cash for operating activities.
As of September 30, 2021, we had marketable securities held in the Trust Account of $317,020,391 (including approximately $20,391 of interest income) consisting of U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through September 30, 2021, we have not withdrawn any interest earned from the Trust Account.
We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less income taxes payable), to complete our Business Combination. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Business Combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.
As of September 30, 2021, we had cash of $642, 392. We intend to use the funds held outside the Trust Account primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor, or certain of our officers and directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete a Business Combination, we would repay such loaned amounts. In the event that a Business Combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account
22
would be used for such repayment. Up to $1,500,000 of such loans may be convertible into units at a price of $10.00 per unit, at the option of the lender. The units would be identical to the Private Placement Units.
We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon consummation of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2021. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Company’s executive officers a total of $10,000 per month for office space and general and administrative services. We began incurring these fees on March 3, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or $10,500,000 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Warrant Liability
The Company accounts for the warrants in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, the Company classifies the warrants as liabilities at their fair value and adjust the Private Placement Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The warrants are valued using a binomial lattice model.
Common Stock Subject to Possible Redemption
We account for our common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of our condensed balance sheets.
23
Net Loss Per Common Share
We apply the two-class method in calculating earnings per share. Net income (loss) per common share, basic and diluted for Class A common stock subject to possible redemption is calculated by dividing the interest income earned on the Trust Account, net of applicable taxes, if any, by the weighted average number of shares of Class A common stock subject to possible redemption outstanding for the period. Net income (loss) per common share, basic and diluted for and non-redeemable common stock is calculated by dividing net loss less income attributable to Class A common stock subject to possible redemption, by the weighted average number of shares of non-redeemable common stock outstanding for the period presented.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
Item 4. Controls and Procedures
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.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our principal executive officer and principal financial and accounting officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2021. Based upon their evaluation, our principal executive officer and principal financial and accounting officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
Management has implemented remediation steps to improve our internal control over financial reporting. Specifically, we expanded and improved our review process for complex securities and related accounting standards. We plan to further improve this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 1A. Risk Factors
Factors that could cause our actual results to differ materially from those in this report include the risk factors described in our final prospectus for its Initial Public Offering filed with the SEC. As of the date of this Report, there have been no material changes to the risk factors disclosed in our final prospectus for its Initial Public Offering filed with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
No. |
| Description of Exhibit |
31.1* | ||
31.2* | ||
32.1* | ||
32.2* | ||
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Data File (the cover page XBRL tags are embedded within the iXBRL document). |
* | Filed herewith. |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| PROPERTY SOLUTIONS ACQUISITION CORP. II | |
|
|
| |
Date: November 15, 2021 | By: | /s/ Jordan Vogel | |
| Name: | Jordan Vogel | |
| Title: | Co-Chief Executive Officer | |
|
| (Principal Executive Officer) | |
|
|
| |
Date: November 15, 2021 | By: | /s/ Aaron Feldman | |
| Name: | Aaron Feldman | |
| Title: | Co-Chief Executive Officer | |
|
| (Principal Financial and Accounting Officer) | |
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