References in this Annual Report on Form 10-K 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 our audited financial
statements and the notes related thereto which are included in "Item 8.
Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those set
forth under "Special Note Regarding Forward-Looking Statements," "Item 1A. Risk
Factors" and elsewhere in this Annual Report on Form 10-K.
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K 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 Annual Report on Form 10-K 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 Initial Business Combination are not
satisfied. 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.
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 December 31, 2021
were organizational activities, those necessary to prepare for the Initial
Public Offering, described below, 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 year ended December 31, 2021, we had a net income of $1,482,951, which
consists of the change in fair value of warrant liability of $2,610,216, a
change in fair value of the over-allotment liability of $196,475, and interest
earned on marketable securities held in Trust Account of $39,621, offset by
transaction costs allocable to warrant liabilities of $402,827, transaction
costs allocable to representative shares, unrealized loss on marketable
securities held in the Trust Account of $14,111, and operating and formation
expenses of $877,947.
52
Table of Contents
For the period from October 29, 2020 (inception) through December 31, 2020, we
had net loss of $1,540, which consisted of operating and formation expenses.
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 year ended December 31, 2021, cash used in operating activities was
$838,145. Net income of $1,482,951 was affected by transaction costs allocable
to warrants of $402,827, transaction costs allocable to representative shares,
change in fair value of warrant liability of $2,610,216, change in fair value of
over-allotment liability of $196,475, interest earned on marketable securities
held in the Trust Account of $39,621, and unrealized loss on marketable
securities held in Trust Account of $14,111. Changes in operating assets and
liabilities provided $39,802 of cash for operating activities.
For the period from October 29, 2020 (inception) through December 31, 2020, cash
used in operating activities was $0. Net loss of $1,540 was affected by changes
in operating assets and liabilities, which provided $1,540 of cash.
As of December 31, 2021, we had marketable securities held in the Trust Account
of $317,025,510 (including approximately $25,500 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
December 31, 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 December 31, 2021, we had cash of $531,984. 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 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
53
Table of Contents
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 Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of December 31, 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 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 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' (deficit) equity section of our balance sheets.
54
Table of Contents
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
In August 2020, the Financial Accounting Standards Board ("FASB") issued
Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and
Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in
Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for
certain financial instruments. ASU 2020-06 eliminates the current models that
require separation of beneficial conversion and cash conversion features from
convertible instruments and simplifies the derivative scope exception guidance
pertaining to equity classification of contracts in an entity's own equity. The
new standard also introduces additional disclosures for convertible debt and
freestanding instruments that are indexed to and settled in an entity's own
equity. ASU 2020-06 amends the diluted earnings per share guidance, including
the requirement to use the if-converted method for all convertible instruments.
ASU 2020-06 is effective January 1, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on January
1, 2021. We adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU
2020-06 did not have an impact on our financial statements.
© Edgar Online, source Glimpses