NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1—Description
of Organization, Business Operations and Basis of Presentation
PropTech Investment Corporation
II (the “Company”) is a blank check company incorporated in Delaware on August 6, 2020 (inception). The Company was formed
for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business
combination with one or more businesses (the “Business Combination”). 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 March 31, 2022, the Company
had not yet commenced any operations. All activity for the period from August 6, 2020 (inception) through March 31, 2022 relates to the
Company’s formation and the preparation of the initial public offering (the “Initial Public Offering”) described below,
and since the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating
revenues until after the completion of its initial Business Combination, at the earliest. The Company generates non-operating income in
the form of income on investments from the proceeds derived from the Initial Public Offering.
The Company’s sponsor
is HC PropTech Partners II LLC, a Delaware limited liability company controlled by certain of the Company’s officers, directors
and advisors (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective
on December 3, 2020. On December 8, 2020, the Company consummated its Initial Public Offering of 23,000,000 units (the “Units”
and, with respect to the shares of Class A common stock included in the Units offered, the “Public Shares”), including 3,000,000
additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $230.0
million, and incurring offering costs of approximately $13.2 million, inclusive of approximately $8.1 million in deferred underwriting
commissions (Note 6).
Simultaneously with the closing
of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 4,833,333 warrants
(each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per
Private Placement Warrant to the Sponsor, generating proceeds of approximately $7.3 million (Note 5).
Upon the closing of the Initial
Public Offering and the Private Placement, $230.0 million ($10.00 per Unit) of the proceeds of the Initial Public Offering and the sale
of the Private Placement Warrants were deposited into a trust account (the “Trust Account”) in the United States, with Continental
Stock Transfer & Trust Company acting as trustee, to be invested in U.S. government securities, within the meaning set forth in Section
2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in any money market funds meeting certain conditions of
Rule 2a-7 of the Investment Company Act of 1940, as amended (the “Investment Company Act”), which invest only in direct U.S,
government treasury obligations until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds
in the Trust Account to the Company’s stockholders, as described below.
The Company’s management
has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and sale of the Private
Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business
Combination. Nasdaq rules provide that the Business Combination must be with one or more target businesses that together have a fair market
value equal to at least 80% of the balance in the Trust Account (excluding the deferred underwriting commissions and taxes payable on
income earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will
only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding voting securities
of the target or otherwise acquires a controlling interest in the target sufficient for it not to be required to register as an investment
company under the Investment Company Act. There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its
holders of the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholders meeting called to approve the
Business Combination or (ii) by means of a tender offer. In connection with a proposed Business Combination, the Company may seek stockholder
approval of a Business Combination at a meeting called for such purpose at which public stockholders may seek to redeem their shares,
regardless of whether they vote for or against a Business Combination. The Company will proceed with a Business Combination only if the
Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation of a Business Combination
and, if the Company seeks stockholder approval, a majority of the outstanding shares voted are voted in favor of the Business Combination.
If the Company seeks stockholder
approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Company’s Amended
and Restated Certificate of Incorporation provides that, a Public Stockholder, together with any affiliate of such stockholder or any
other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from seeking redemption rights with respect to
15% or more of the Public Shares without the Company’s prior written consent.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The Public Stockholders will
be entitled to redeem their shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per share, plus any
pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The per-share amount to be distributed to Public Stockholders who redeem their shares will not be reduced by the deferred underwriting
commissions the Company will pay to the representative of the underwriters (as discussed in Note 6). There will be no redemption rights
upon the completion of a Business Combination with respect to the Company’s warrants. These shares of Class A common stock were
recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering, in accordance with
Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.”
If a stockholder vote is not
required and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to
its Amended and Restated Certificate of Incorporation, offer such redemption pursuant to the tender offer rules of the Securities and
Exchange Commission (the “SEC”), and file tender offer documents containing substantially the same information as would be
included in a proxy statement with the SEC prior to completing a Business Combination.
The Company’s Sponsor
agreed (a) to vote its Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering
in favor of a Business Combination, (b) not to propose an amendment to the Company’s amended and restated certificate of incorporation
with respect to the Company’s pre-Business Combination activities prior to the consummation of a Business Combination unless the
Company provides dissenting Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment;
(c) not to redeem any shares (including the Founder Shares) and Private Placement Warrants (including underlying securities) into the
right to receive cash from the Trust Account in connection with a stockholder vote to approve a Business Combination (or to sell any shares
in a tender offer in connection with a Business Combination if the Company does not seek stockholder approval in connection therewith)
or a vote to amend the provisions of the amended and restated certificate of incorporation relating to stockholders’ rights of pre-Business
Combination activity and (d) that the Founder Shares and Private Placement Warrants (including underlying securities) shall not participate
in any liquidating distributions upon winding up if a Business Combination is not consummated. However, the Sponsor will be entitled to
liquidating distributions from the Trust Account with respect to any Public Shares purchased during or after the Initial Public Offering
if the Company fails to complete its Business Combination.
If the Company is unable to
complete a Business Combination within 24 months from the closing of the Initial Public Offering, or December 8, 2022 (the “Combination
Period”), the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but no more than ten 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 (less up to $100,000 of interest to pay dissolution expenses), 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 liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the Company’s board of directors, proceed to commence a voluntary liquidation
and thereby a formal dissolution of the Company, subject in each case to its obligations to provide for claims of creditors and the requirement
of applicable law. The representative of the underwriters agreed to waive its rights to the deferred underwriting commission 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 ($10.00).
The Sponsor agreed that it
will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement
or business combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share
and (ii) the actual amount per public share held in the Trust Account as of the day of liquidation of the Trust Account, if less than
$10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to
any claims by a third party or prospective target business who executed a waiver of any and all rights to monies held in the Trust Account
(whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of
the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities
Act”). However, the Company has not asked the Sponsor to reserve for such indemnification obligations, nor has the Company independently
verified whether the Sponsor has sufficient funds to satisfy its indemnity obligations. None of the Company’s officers or directors
will indemnify the Company for claims by third parties including, without limitation, claims by vendors and prospective target businesses.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Basis of
Presentation
The accompanying unaudited
condensed financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles
(“U.S. GAAP”) for interim financial information and Article 8 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal accruals) considered
for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2022 or any future period.
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 of 2002, 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 an emerging growth 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 an 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 unaudited condensed financial statements with another public company that is neither an emerging
growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because
of the potential differences in accounting standards used.
Liquidity
and Going Concern
As
of March 31, 2022, the Company had approximately $0.5 million in cash, and working capital of approximately $0.6 million (not taking into
account tax obligations that may be paid using the interest income earned from investments in the Trust Account).
The
Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the proceeds of $25,000
from the sale of the Founder Shares (as defined in Note 5), and loan proceeds from the Sponsor of $163,000 under the Note (as defined
in Note 5). The Company repaid the Note in full on December 8, 2020. Subsequent to the consummation of the Initial Public Offering, the
Company’s liquidity needs have been satisfied through the net proceeds from the Initial Public Offering and the sale of the Private
Placement Warrants held outside of the Trust Account.
The
Company may need to raise additional funds through loans from its Sponsor and/or third parties in order to meet the expenditures required
for operating its business. If the Company’s estimate of the costs of undertaking in depth due diligence and negotiating the initial
business combination is less than the actual amount necessary to do so, the Company may have insufficient funds available to operate its
business prior to the initial business combination. The Sponsor is not under any obligation to advance funds to, or to invest in, the
Company. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity, which
could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of its business plan, and reducing overhead
expenses. The Company cannot provide any assurance that new financing will be available to it on commercially acceptable terms, if at
all. In connection with the Company’s assessment of going concern considerations in accordance with FASB’s Accounting Standards
Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,”
management has determined the date for mandatory liquidation and dissolution raises substantial doubt about the Company’s ability
to continue as a going concern through December 8, 2022, the scheduled liquidation date of the Company if it does not complete a Business
Combination prior to such date. Management of the Company plans to complete a business combination prior to the date for mandatory liquidation.
These unaudited condensed financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification
of the liabilities that might be necessary should the Company be unable to continue as a going concern.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 2 — Summary
of Significant Accounting Policies
Use of Estimates
The preparation of the unaudited
condensed financial statements in conformity with U.S. 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 unaudited
condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Making estimates requires
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 unaudited condensed financial statements, which management considered in formulating
its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ
significantly from those estimates. One of the more significant estimates included in these unaudited 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.
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 Deposit Insurance Corporation limit of $250,000, and investments held in the Trust Account. The Company has not
experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Investments Held in the Trust Account
The Company’s portfolio
of investments held in the Trust Account is comprised of U.S. government securities, within the meaning set forth in Section 2(a)(16)
of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government
securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities.
Trading securities are presented on the unaudited condensed balance sheet at fair value at the end of each reporting period. Gains and
losses resulting from the change in fair value of these securities is included in net gain on investments held in the Trust Account in
the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account were
determined using available market information.
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 March 31, 2022 and December 31, 2021.
Fair Value of Financial Instruments
Fair value is defined as the
price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants
at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair
value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:
|
● |
Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
|
● |
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
|
|
|
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● |
Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some circumstances, the
inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair
value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the
fair value measurement.
As of March 31, 2022 and December
31, 2021, the carrying values of prepaid expenses, accounts payable, accrued expenses, and franchise tax payable approximate their fair
values due to the short-term nature of the instruments. The Company’s investments held in the Trust Account are comprised
of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments in a money market funds that comprise
only U.S. Treasury securities and are recognized at fair value. The fair value of investments held in the Trust Account is determined
using quoted prices in active markets.
The fair value of the Public
Warrants issued in connection with the Initial Public Offering and the Private Placement Warrants were initially measured at fair value
using a Monte Carlo simulation model. Subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte
Carlo simulation model at each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering
has subsequently been measured based on the listed market price of such warrants.
Offering Costs Associated with the Initial
Public Offering
The Company complies with
the requirements of the ASC 340-10-S99-1. Offering costs consist of legal, accounting, and underwriting fees, and other costs. Offering
costs are allocated to the separable financial instruments issued in the Initial Public Offering based on a relative fair value basis,
compared to total proceeds received. Offering costs associated with warrant liabilities are expensed as incurred, presented as non-operating
expenses in the unaudited condensed statements of operations. Offering costs associated with the Public Shares were charged to temporary
equity upon the completion of the Initial Public Offering. Of the total offering costs of the Initial Public Offering, approximately $0.6
million was included in financing cost related to derivative warrant liabilities in the unaudited condensed statement of operations in
2020 and $12.6 million is included in temporary equity.
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 Topic 480 “Distinguishing Liabilities
from Equity.” Shares of Class A common stock subject to mandatory redemption (if any) are classified as liability instruments
and are measured at fair value. Shares of conditionally redeemable Class A common stock (including Class A 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, shares of Class A common stock
are classified as stockholders’ equity. The Company’s Class A common stock features certain redemption rights that are
considered to be outside of the Company’s control and subject to the occurrence of uncertain future events. Accordingly, at March
31, 2022 and December 31, 2021, 23,000,000 shares of Class A common stock subject to possible redemption are presented as temporary
equity, outside of the stockholders’ deficit section of the Company’s unaudited condensed balance sheets.
Net Income Per Common Share
The Company complies with the accounting and disclosure requirements
of Financial Accounting Standards Board (“FASB”) ASC Topic 260, “Earnings Per Share”. Net income (loss) per common
share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. The
Company has two classes of shares, which are referred to as Class A common stock and Class B common stock. Income and losses are shared
pro rata between the two classes of shares. Net income (loss) per common share is calculated by dividing the net income (loss) by the
weighted average shares of common stock outstanding for the respective period. Accretion associated with the redeemable shares of Class
A common stock is excluded from earnings per share as the redemption value approximates fair value.
The Company has not considered
the effect of the warrants sold in the Initial Public Offering and the Private Placement to purchase an aggregate of 12,500,000 shares
of the Company’s Class A common stock in the calculation of diluted income per share, since the exercise of warrants is contingent
upon the occurrence of future events.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The following table reflects
the calculation of basic and diluted net income per common share (in dollars, except per share amounts):
| |
Three Months Ended | |
| |
March 31, 2022 | |
| |
Class A | | |
Class B | |
Basic and diluted net income per common share | |
| | |
| |
Numerator: | |
| | |
| |
Allocation of net income | |
$ | 3,018,335 | | |
$ | 754,583 | |
Denominator: | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 23,000,000 | | |
| 5,750,000 | |
Basic and diluted net income per common share | |
$ | 0.13 | | |
$ | 0.13 | |
| |
Three Months Ended | |
| |
March 31, 2021 | |
| |
Class A | | |
Class B | |
Basic and diluted net income per common share | |
| | |
| |
Numerator: | |
| | |
| |
Allocation of net income, as adjusted | |
$ | 7,113,494 | | |
$ | 1,778,373 | |
Denominator: | |
| | | |
| | |
Basic and diluted weighted average shares outstanding | |
| 23,000,000 | | |
| 5,750,000 | |
Basic and diluted net income per common share | |
$ | 0.31 | | |
$ | 0.31 | |
Derivative Warrant Liabilities
The Company does not use derivative
instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments,
including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives, pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
The 7,666,667 warrants issued
in connection with the Initial Public Offering (the “Public Warrants”) and the 4,833,333 Private Placement Warrants are recognized
as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at
fair value and adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each unaudited
condensed balance sheet date until exercised, and any change in fair value is recognized in the Company’s unaudited condensed statement
of operations. The fair value of warrants issued in connection with the Initial Public Offering and Private Placement were initially measured
at fair value using a Monte Carlo simulation model. The fair value of Public Warrants issued in connection with the Initial Public Offering
have been measured based on the listed market price of such warrants, a Level 1 measurement, since January 25, 2021.
Income Taxes
The Company follows the asset
and liability method of accounting for income taxes under FASB ASC 740, “Income Taxes.” Deferred tax assets and liabilities
are recognized for the estimated future tax consequences attributable to differences between the unaudited condensed financial statement
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.
The Company has a full valuation allowance at March 31, 2022 and December 31, 2021.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FASB ASC Topic 740 prescribes
a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or
expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained
upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2022 and December 31, 2021. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.
No amounts were accrued for
the payment of interest and penalties as of March 31, 2022 and December 31, 2021. The Company is currently not aware of any issues under
review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax
examinations by major taxing authorities since inception.
Recent Accounting Pronouncements
The Company’s management
does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect
on the accompanying unaudited condensed financial statements.
Note 3 — Initial Public Offering
Public Units
On December
8, 2020, the Company consummated its Initial Public Offering of 23,000,000 units
(the “Units” and, with respect to the Class A common stock included in the Units offered, the “Public Shares”),
including 3,000,000 additional Units to cover over-allotments (the “Over-Allotment
Units”), at $10.00 per Unit, generating gross proceeds of $230.0 million, and incurring offering costs of approximately
$13.2 million, inclusive of approximately $8.1 million in deferred underwriting commissions.
Each Unit consists of one
share of Class A common stock of the Company, par value $0.0001 per share (“Class A Common Stock”), and one-third of one redeemable
warrant of the Company (“Warrant”), with each whole Warrant entitling the holder thereof to purchase one share of Class A
common stock for $11.50 per share.
Note 4 — Related Party Transactions
Founder Shares
On August 27, 2020, the
Sponsor purchased 5,031,250 shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder
Shares”) for an aggregate purchase price of $25,000, or approximately $0.005 per share. On December 3, 2020, the Company effected
a stock dividend of approximately 0.143 shares for each share of Class B common stock outstanding, resulting in an aggregate of 5,750,000 shares
of Class B common stock outstanding.
The Company’s initial
stockholders agreed not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after
the completion of a Business Combination or (B) subsequent to the initial Business Combination, (x) if the last sale price of
the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business
Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange, reorganization or other
similar transaction that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities
or other property.
Private Placement Warrants
Simultaneously
with the closing of the Initial Public Offering, the Company consummated the Private Placement of 4,833,333 Private
Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $7.3 million.
Each warrant is exercisable
to purchase one share of the Company’s Class A common stock at a price of $11.50 per share. Certain proceeds from the sale
of the Private Placement Warrants were added to the proceeds from the Initial Public Offering held in the Trust Account. If the Company
does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will
be used to fund the redemption of the Public Shares (subject to the requirement of applicable law) and the Private Placement Warrants
will expire worthless.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Promissory Note Related Party
On August 6, 2020, the
Sponsor agreed to loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the “Note”). This loan was non-interest bearing and was due on the earlier of March 31, 2021
or the completion of the Initial Public Offering. The Company borrowed $163,000 under the Note. The Company fully repaid the Note on December
8, 2020 and no longer has access to borrowings under this Note.
Related Party Loans
In order to finance transaction
costs in connection with a Business Combination, the Company’s Sponsor, an affiliate of the Sponsor, or the Company’s officers
and directors may, but are not obligated to, loan the Company funds as may be required (the “Working Capital Loans”). Such
Working Capital Loans would be evidenced by promissory notes. The notes would either be repaid upon consummation of a Business Combination,
without interest, or, at the lender’s discretion, up to $1.5 million of notes may be converted upon consummation of a Business
Combination into additional Private Placement Warrants at a price of $1.50 per Warrant. 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. As of March 31, 2022 and December 31, 2021, the Company had
no Working Capital Loans outstanding.
Administrative Support Agreement
The Company agreed to pay
$15,000 a month for office space, utilities, and secretarial and administrative support to the Sponsor. Services commenced on the date
the securities were first listed on the Nasdaq and will terminate upon the earlier of the consummation by the Company of a Business Combination
or the liquidation of the Company. For the three months ended March 31, 2022 and March 31, 2021, the Company incurred and paid $45,000
for these services. No amounts were due as of March 31, 2022 and December 31, 2021.
Note 5 — Commitments and Contingencies
Risks and Uncertainties
Management continues to evaluate
the impact of the COVID-19 global pandemic on the industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company,
the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensed
financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian
Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including
the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and
related sanctions on the world economy are not determinable as of the date of these unaudited condensed financial statements and the specific
impact on the Company's financial condition, results of operations, and cash flows is also not determinable as of the date of these unaudited
condensed financial statements.
Registration Rights
The holders of the Founder
Shares, Private Placement Warrants and any Warrants that may be issued upon conversion of the Working Capital Loans (and any shares of
Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion
of Working Capital Loans and upon conversion of the Founder Shares) are entitled to registration rights pursuant to a registration rights
agreement entered into on the effective date of the registration statement for the Initial Public Offering. The holders of these securities
are entitled to make up to three demands, excluding short form 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 consummation
of a Business Combination. The registration rights agreement does not contain liquidating damages or other cash settlement provisions
resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Underwriting Agreement
The Company granted the underwriters
a 45-day option to purchase up to 3,000,000 additional Units to cover over-allotments at the Initial Public Offering price,
less the underwriting discounts and commissions. The underwriters exercised the option in full on December 8, 2020.
The underwriters were entitled
to a cash underwriting discount of 2.0% of the gross proceeds of the Initial Public Offering, or $4.6 million in the aggregate, which
was paid upon closing of the Initial Public Offering. In addition, the representative of the underwriters will be entitled to a deferred
fee of 3.5% of the gross proceeds of the Initial Public Offering, or approximately $8.1 million. The deferred fee will become payable
to the representative of 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.
Deferred Consulting Fee
In October 2020, the Company
entered into an agreement with a third party that will provide investor relations services pursuant to which the Company paid a $10,000
initial fee upon execution and agreed to pay a deferred success fee of $50,000 upon the consummation of the initial Business Combination.
Note 6 — Derivative Warrant Liabilities
As of March 31, 2022 and December
31, 2021, the Company had 7,666,667 and 4,833,333 Public Warrants and Private Placement Warrants outstanding, respectively.
The Public Warrants will become
exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the closing of
the Initial Public Offering, provided in each case that the Company has an effective registration statement under the Securities Act covering
the shares of Class A common stock issuable upon exercise of the warrants and a current prospectus relating to them is available
(or the Company permits holders to exercise their warrants on a cashless basis under certain circumstances). The Company agreed that as
soon as practicable, but in no event later than 15 business days after the closing of the initial Business Combination, it will its best
efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants,
to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A
common stock until the warrants expire or are redeemed. If a registration statement covering the shares of Class A common stock issuable
upon exercise of the warrants is not effective by the 60th business day after the closing of the initial Business Combination,
the 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. If that exemption, or another exemption, is not available, holders will not be able to exercise
their warrants on a cashless basis.
The warrants have an exercise
price of $11.50 per share, subject to adjustments, and will expire five years from the consummation of a Business Combination or earlier
upon redemption or liquidation. 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 share dividend, or recapitalization, reorganization, merger or consolidation.
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 its initial Business Combination at an issue price or effective issue price of less
than $9.20 per share of Class A common stock (with such issue price or effective issue price to be determined in good faith by the
Company’s board of directors and, in the case of any such issuance to the Sponsor or its affiliates, without taking into account
any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance) (the “Newly Issued Price”),
(y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon,
available for the funding of the Company’s initial Business Combination on the date of the consummation of such initial Business
Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the
20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such
price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent)
to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described
below will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Additionally, in no event
will the Company be required to net cash settle the Public 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. 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 common shares issuable upon exercise of the Public
Warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization,
reorganization, merger or consolidation. 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 respect to such
warrants. Accordingly, the warrants may expire worthless.
Once the warrants become exercisable,
the Company may redeem the outstanding warrants (excluding the Private Placement Warrants):
| ● | in whole and not in part; |
|
● |
at a price of $0.01 per warrant; |
|
● |
upon a minimum of 30 days’ prior written notice of redemption (the “30 day redemption period”); and |
| ● | if, and only if, the last sale price of Class A common stock equals or exceeds $18.00 per share(as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing once the warrants become exercisable ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders. |
The Company will not redeem
the warrants unless a registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise
of the warrants is effective and a current prospectus relating to those shares of Class A common stock is available throughout the
30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration
under the Securities Act. If and when the warrants become redeemable by the Company, it may not exercise its redemption right if the issuance
of shares of common stock upon exercise of the warrants is not exempt from registration or qualification under applicable state blue sky
laws or the Company is unable to effect such registration or qualification.
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
are, and the common shares issuable upon the exercise of the Private Placement Warrants are not, transferable, assignable or salable until
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will
be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
See Note 8 for additional information regarding the valuation of derivative warrant liabilities.
Note 7 — Stockholders’ Deficit
Preferred Stock —
The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. As of March 31, 2022 and December 31, 2021,
there were no shares of preferred stock issued or outstanding.
Class A Common
Stock — The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common
stock. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of December 31, 2021 and 2020,
there were 23,000,000 shares of Class A common stock issued and outstanding. Of the outstanding shares of Class A common stock, 23,000,000
shares were subject to possible redemption at March 31, 2022 and December 31, 2021, and therefore classified outside of permanent equity.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Class B Common
Stock — The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock.
On August 27, 2020, the Company issued 5,031,250 shares of Class B common stock. On December 3, 2020, the Company
effected a stock dividend of approximately 0.143 shares for each share of Class B common stock outstanding, resulting in an aggregate
of 5,750,000 shares of Class B common stock outstanding at March 31, 2022 and December 31, 2021.
Holders of the Company’s
Class B common stock are entitled to one vote for each share. The shares of Class B common stock will automatically convert
into shares of Class A common stock at the time of the Business Combination on a one-for-one basis, subject to adjustment for
stock splits, stock dividends, reorganizations, recapitalizations and the like. 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 the Initial Public Offering and
related to the closing of the initial 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 holders of a majority of the outstanding shares of Class B common
stock agree to waive such adjustment with respect to any such issuance or deemed 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,
20% of the sum of the total number of all shares of common stock outstanding upon the completion of the Initial Public Offering plus all
shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business
Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination
and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
Note 8 — Fair Value Measurements
The following table presents
information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March
31, 2022 by level within the fair value hierarchy:
Description |
|
Quoted
Prices in
Active
Markets
(Level 1) |
|
|
Significant
Other
Observable
Inputs
(Level 2) |
|
|
Significant
Other
Unobservable
Inputs
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
Money Market Fund |
|
$ |
230,041,986 |
|
|
$ |
- |
|
|
$ |
- |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public Warrants |
|
$ |
1,993,330 |
|
|
$ |
- |
|
|
$ |
- |
|
Derivative warrant liabilities - Private Warrants |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,256,670 |
|
The following table presents
information about the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of December
31, 2021 by level within the fair value hierarchy:
Description |
|
Quoted
Prices in
Active
Markets
(Level 1) |
|
|
Significant
Other
Observable
Inputs
(Level 2) |
|
|
Significant
Other
Unobservable
Inputs
(Level 3) |
|
Assets: |
|
|
|
|
|
|
|
|
|
Money Market Fund |
|
$ |
230,003,947 |
|
|
$ |
- |
|
|
$ |
- |
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public Warrants |
|
$ |
4,523,330 |
|
|
$ |
- |
|
|
$ |
- |
|
Derivative warrant liabilities - Private Warrants |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
2,900,000 |
|
Transfers to/from Levels 1,
2, and 3 are recognized at the end of the reporting period. There were no transfers between levels for the three months ended March 31,
2022. The Company transferred the public warrants from Level 3 to Level 1 during the year ended December 31, 2021.
PROPTECH INVESTMENT CORPORATION II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The fair value of the Public
Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte
Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation
model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have been measured
based on the listed market price of such warrants, a Level 1 measurement, since January 25, 2021. For the three months ended March 31,
2022 and March 31, 2021, the Company recognized a gain in the unaudited condensed statement of operations resulting from a change in the
fair value of liabilities of approximately $4.2 million and $9.1 million, respectively, presented as change in fair value of derivative
warrant liabilities on the accompanying unaudited condensed statement of operations.
The estimated fair value of
the Private Placement Warrants, and the Public Warrants prior to being separately listed and traded, was determined using Level 3 inputs.
Inherent in a Monte Carlo simulation are assumptions related to expected stock-price volatility, expected life, risk-free interest rate
and dividend yield. The Company continues to use a Monte Carlo simulation to value the Private Placement Warrants. The Company estimates
the volatility of its Class A common stock based on historical volatility of select peer companies that matches the expected remaining
life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity
similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining
contractual term. The dividend rate is based on the historical rate, which the Company anticipates remaining at zero.
The following table provides
quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:
| |
As
of March 31, 2022 | | |
As
of December 31, 2021 | |
Volatility | |
| 4.4 | % | |
| 10.7 | % |
Stock price | |
$ | 9.80 | | |
$ | 9.80 | |
Expected life of the options to convert | |
| 5.00 | | |
| 5.00 | |
Risk-free rate | |
| 2.42 | % | |
| 1.31 | % |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % |
The change in the fair value
of the Level 3 derivative warrant liabilities from inception through March 31, 2022 is summarized as follows:
| |
Private
Warrants | | |
Public
Warrants | |
Derivative warrant liabilities at January 1, 2021 | |
$ | 7,733,337 | | |
$ | 11,883,330 | |
Transfer from Level 3 | |
| - | | |
| (11,883,330 | ) |
Change in fair value of derivative warrant liabilities | |
| (3,673,337 | ) | |
| - | |
Derivative warrant liabilities at March 31, 2021 | |
$ | 4,060,000 | | |
$ | - | |
| |
| | | |
| | |
Derivative warrant liabilities at December 31, 2021 | |
$ | 2,900,000 | | |
$ | - | |
Change in fair value of derivative warrant liabilities | |
| (1,643,330 | ) | |
| - | |
Derivative warrant liabilities at March 31, 2022 | |
$ | 1,256,670 | | |
$ | - | |
Note 9 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred after the unaudited condensed balance sheet date up to the date the unaudited condensed financial
statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the unaudited
condensed financial statements.