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 June 30, 2021, the Company had not yet commenced any operations. All activity for the period from August 6, 2020 (inception) through
June 30, 2021 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 5).
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 4).
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 5). 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 4) 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 and six months ended June
30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any future period.
The
accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto
included in the Form 10-K/A filed by the Company with the SEC on May 24, 2021.
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 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 Capital Resources
As
of June 30, 2021, the Company had approximately $1.3 million in cash, and working capital of approximately $1.5 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 4), and loan proceeds from the Sponsor of $163,000 under the Note (as defined
in Note 4). 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.
Based
on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs
through the earlier of the consummation of a Business Combination or one year from the date of this filing. Over this time period, the
Company will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective
initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting
the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.
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 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 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 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.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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.
There were no cash equivalents at June 30, 2021 and December 31, 2020.
Investments
Held in Trust Account
The
Company’s portfolio of investments held in the Trust Account is comprised solely 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 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 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 are
determined using available market information.
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 Corporation limit of $250,000, and any cash held in the Trust Account. As
of June 30, 2021, the Company had not experienced losses on these accounts and management believes the Company is not exposed to significant
risks on such accounts.
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:
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●
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Level 1,
defined as observable inputs such as quoted prices for identical instruments in active markets;
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|
●
|
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 June 30, 2021 and December 31, 2020, the carrying values of cash, 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 portfolio of investments
held in the Trust Account is comprised of investments in U.S. Treasury securities with an original maturity of 185 days or less or investments
in money market funds that invest in U.S. government securities, or a combination thereof. The fair value for trading securities is determined
using quoted market 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
Offering
costs consisted of legal, accounting, underwriting fees and other costs incurred that were directly related to the Initial Public Offering.
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 derivative warrant liabilities are expensed as incurred, and
were presented as non-operating expenses in the statement of operations. Offering costs associated with the Public Shares were charged
to stockholders’ equity upon the completion of the Initial Public Offering.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Derivative
Warrant liabilities
The
Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. Management 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.
We
issued and aggregate of 7,666,667 warrants for Class A common stock in the Initial Public Offering and upon the underwriters’
exercise of their over-allotment option and issued 4,833,333 Private Placement Warrants. All of the Company’s outstanding warrants
are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities
at fair value and adjust the instruments to fair value at each reporting period. The liabilities are 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 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.
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 June 30, 2021
and December 31, 2020, 20,550,478 and 19,933,518 shares of Class A common stock subject to possible redemption are presented as temporary
equity, respectively, outside of the stockholders’ equity section of the Company’s unaudited condensed balance sheet.
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 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. As of June 30, 2021 and December 31, 2020, the Company had deferred tax assets of approximately $115,000 and $27,000,
respectively, with a full valuation allowance against them.
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 June 30, 2021 and December
31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. The Company’s
currently taxable income primarily consists of interest and dividends earned and unrealized gains on investments held in the Trust Account.
The Company’s general and administrative costs are generally considered start-up costs and are not currently deductible.
No
amounts were accrued for the payment of interest and penalties as of June 30, 2021 and December 31, 2020. 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.
Net
Income (Loss) Per Common Share
Net
income (loss) per common share is computed by dividing net income (loss) by the weighted-average number of common stock outstanding during
the periods. 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 their inclusion would be anti-dilutive.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
The
Company’s unaudited condensed statement of operations include a presentation of income per share for common stock subject to redemption
in a manner similar to the two-class method of income per share. Net (loss) income per share of common stock, basic and diluted for shares
of Class A common stock are calculated by dividing the income (loss) earned on investments held in the Trust Account, net of applicable
taxes and working capital amounts available to be withdrawn from the Trust Account, which was $0 for the three and six months ended June
30, 2021, by the weighted average number of Class A common stock outstanding for the period. Net (loss) income per share of common stock,
basic and diluted for shares of Class B common stock is calculated by dividing the net income of approximately $6.2 million, less income
attributable to Class A common stock by the weighted average number of Class B common stock outstanding for the periods.
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Three Months
Ended
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|
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Six Months
Ended
|
|
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|
June 30,
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June 30,
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|
|
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2021
|
|
|
2021
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|
Redeemable Common Stock
|
|
|
|
|
|
|
Numerator: Earnings allocable to Redeemable Common Stock
|
|
|
|
|
|
|
Interest Income
|
|
$
|
7,682
|
|
|
$
|
20,558
|
|
Income and Franchise Tax
|
|
|
(7,682
|
)
|
|
|
(20,558
|
)
|
Net Income (Loss)
|
|
$
|
-
|
|
|
$
|
-
|
|
Denominator: Weighted Average Redeemable Common Stock
|
|
|
|
|
|
|
|
|
Redeemable Class A Common Stock, Basic and Diluted
|
|
|
23,000,000
|
|
|
|
23,000,000
|
|
Loss/Basic and Diluted Redeemable Common Stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
Numerator: Net Loss minus Redeemable Net Loss
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(2,722,216
|
)
|
|
$
|
6,169,651
|
|
Redeemable Net Income (Loss)
|
|
|
-
|
|
|
|
-
|
|
Non-Redeemable Net Income (Loss)
|
|
$
|
(2,722,216
|
)
|
|
$
|
6,169,651
|
|
Denominator: Weighted Average Non-Redeemable Common Stock
|
|
|
|
|
|
|
|
|
Non-Redeemable Class B Common Stock, Basic and Diluted
|
|
|
5,750,000
|
|
|
|
5,750,000
|
|
Income (Loss)/Basic and Diluted Non-Redeemable Common Stock
|
|
$
|
(0.47
|
)
|
|
$
|
1.07
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|
Recent
Accounting Standards
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 financial statements.
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, 2022 and should be applied on a full or modified retrospective basis, with
early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would have
on its financial position, results of operations or cash flows.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
3—Initial Public Offering
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. All shares and associated amounts have been retroactively restated to reflect
the stock dividend.
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.
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. As of March 31, 2021, the Company no longer has access to monies 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 June 30, 2021 and December
31, 2020, 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 and six months ended June 30, 2021, the Company incurred
$45,000 and $90,000, respectively, for these services. No amounts were due as of June 30, 2021 and December 31, 2020.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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 financial statements. The financial statements
do not include any adjustments that might result from the outcome of this uncertainty.
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.
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 agreed to pay a $10,000 initial fee upon execution and a deferred success fee of $50,000 upon the consummation of the initial
Business Combination.
Note
6—Derivative Warrant Liabilities
As
of June 30, 2021 and December 31, 2020, the Company has 7,666,667 and 4,833,333 Public Warrants and Private Placement Warrants, respectively,
outstanding.
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.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
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.
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 affect 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, 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.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note
7—Stockholders’ Equity
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. As of June 30, 2021
and December 31, 2020, 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 June 30, 2021 and December 31, 2020,
there were 23,000,000 shares of Class A common stock issued and outstanding. Of the outstanding shares of Class A common stock, 20,550,478
and 19,933,518 shares were subject to possible redemption at June 30, 2021 and December 31, 2020, respectively, and therefore classified
outside of permanent equity.
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 June 30, 2021 and December 31, 2020. All shares and associated amounts have been retroactively restated to reflect
the stock dividend.
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 tables present information about the Company’s assets that are measured at fair value on a recurring basis and indicate
the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.
June
30, 2021
Description
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
$
|
230,004,127
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public
|
|
$
|
7,896,670
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Derivative warrant liabilities - Private
|
|
$
|
-
|
|
|
$
|
5,002,500
|
|
|
$
|
-
|
|
December
31, 2020
Description
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Other
Unobservable
Inputs
(Level 3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
Mutual Funds
|
|
$
|
230,007,668
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative warrant liabilities - Public
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
11,883,330
|
|
Derivative warrant liabilities - Private
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
7,733,340
|
|
Transfers
to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. The estimated fair value of the Public Warrants transferred
from a Level 3 measurement to a Level 1 fair value measurement and the estimated fair value of the Private Placement Warrants transferred
from a Level 3 measurement to a Level 2 in January 2021, when the Public Warrants were separately listed and traded.
PROPTECH INVESTMENT CORPORATION
II
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Level
1 instruments include investments in mutual funds invested in government securities and Public Warrants. The Company uses inputs such
as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine the fair
value of its investments.
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 and six months ended June 30, 2021, the Company recognized a (loss) gain to the statement of operations resulting from an
(increase) decrease in the fair value of liabilities of $(2.4) million and $6.7 million, respectively, presented as change in fair value
of derivative warrant liabilities on the accompanying 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 estimates the volatility of its 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
December 31,
2020
|
|
|
As of
June 30,
2021
|
|
Volatility
|
|
|
21.0
|
%
|
|
|
16.8
|
%
|
Stock price
|
|
$
|
10.12
|
|
|
$
|
9.74
|
|
Expected life of the options to convert
|
|
|
6.00
|
|
|
|
5.33
|
|
Risk-free rate
|
|
|
0.51
|
%
|
|
|
0.93
|
%
|
Dividend yield
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
The
change in the fair value of the derivative warrant liabilities for the six months ended June 30, 2021 is summarized as follows:
Derivative warrant liabilities at December 31, 2020
|
|
$
|
19,616,670
|
|
Transfer of Public Warrants out of Level 3
|
|
|
(11,883,330
|
)
|
Transfer of Private Warrants out of Level 3
|
|
|
(7,733,340
|
)
|
Change in fair value during the six months ended June 30, 2021
|
|
$
|
-
|
|
The Company transferred $19,616,670 out of of Level 3 in the six months ended June 30, 2021.
Note
9—Subsequent Events
Management
has evaluated subsequent events to determine if events or transactions occurring after the date the financial statements were issued,
require potential adjustment to or disclosure in the financial statements and has concluded that, other than contained herein, all such
events that would require recognition or disclosure have been recognized or disclosed.