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 Annual Report on Form 10-K 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 March 31, 2022
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below,and
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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 March 31, 2022, we had a net income of $1,610,657,
which consists of change in fair value of warrant liability of $1,957,413 and
interest earned on marketable securities held in Trust Account of $56,916,
offset by unrealized loss on marketable securities held in the Trust Account of
$3,012, and operating costs of $400,660.
For the three months ended March 31, 2021, we had a net loss of $280,931, which
consists of operating costs of $486,566, transaction costs related to warrant
liability of $402,827, transaction costs allocable to representative shares of
68,476, offset by change in fair value of warrant liability of $488,085, a
change in fair value of over-allotment liability of $183,877, and interest
earned on marketable securities held in Trust Account of $4,976.
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 EarlyBirdCapital, 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 three months ended March 31, 2022, cash used in operating activities was
$211,742. Net income of $1,610,657 was affected by a change in fair value of
warrant liability of $1,957,413 and interest earned on marketable securities
held in the Trust Account of $56,916, and unrealized loss on marketable
securities held in Trust Account of $3,012. Changes in operating assets and
liabilities used $188,918 of cash for operating activities.
For the three months ended March 31, 2021, cash used in operating activities was
$415,515. Net loss of $280,931 was affected by transaction costs allocated to
warrants of $402,827 and transaction costs allocable to representative shares of
68,476, change in fair value of warrant liability of $488,085, a change in fair
value of over-allotment liability of $183,877, and interest earned on marketable
securities held in the Trust Account of $4,976. Changes in operating assets and
liabilities provided $71,051 of cash for operating activities.
As of March 31, 2022, we had marketable securities held in the Trust Account of
$317,079,414 (including approximately $53,904 of interest income and net
unrealized loss) 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 March 31, 2022, 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 March 31, 2022, we had cash of $320,242. 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
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similar locations of prospective target businesses or their representatives or
owners, review corporate documents and material agreements of prospective target
businesses, and structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 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.
Going Concern
We have until March 8, 2023 to consummate an initial business combination. It is
uncertain that we will have sufficient liquidity to fund the working capital
needs of the Company until the liquidation date and/or through twelve months
from the issuance of this report. Additionally, it is uncertain that we will be
able to consummate an initial business combination by this time. The Company may
not have sufficient liquidity to fund the working capital needs of the Company
until March 8, 2023, the liquidation date, and/or through twelve months from the
issuance of this report. If an initial business combination is not consummated
by the liquidation date, there will be a mandatory liquidation and subsequent
dissolution. Management has determined that the mandatory liquidation, should an
initial business combination not occur, and potential subsequent dissolution
raises substantial doubt about our ability to continue as a going concern. No
adjustments have been made to the carrying amounts of assets or liabilities
should we be required to liquidate after March 8, 2023.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of March 31, 2022. 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-
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measurement at each balance sheet date until exercised, and any change in fair
value is recognized in our statements 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.
Net Income (Loss) Per Common Share
Net income (loss) per common stock is computed by dividing net income (loss) by
the weighted average number of common stock outstanding for the period. The
Company applies the two-class method in calculating earnings per share.
Accretion associated with the redeemable shares of Class A common stock is
excluded from earnings per share as the redemption value approximates fair
value.
Recent Accounting Standards
Management does not believe that there are any recently issued, but not yet
effective, accounting standards, if currently adopted, would have a material
effect on our condensed financial statements.
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