Filing summary
Issuer and period: This is Property Solutions Acquisition Corp.’s unaudited Form 10-Q for the quarter ended March 31, 2021, not an operating-company 10-Q filed under Faraday Future Intelligent Electric Inc. At quarter-end, Property Solutions was a shell company pursuing a business combination with FF Intelligent Mobility Global Holdings Ltd. (Faraday Future, or FF). The filing describes the proposed combined company as Faraday Future Intelligent Electric, Inc.
Financial results and liquidity
- Revenue and operations: No operating revenue; the SPAC had not commenced operations. It reported operating and formation costs of $884,599 and a net loss of $1.817 million for the quarter. The net loss included a $963,173 non-cash increase in the fair value of warrant liabilities, partly offset by $30,713 of trust-account interest income. Non-redeemable common-stock loss per share was $0.25.
- Cash flow: Operating activities used $964,384. Cash declined by $329,721 to $219,674 outside the trust account. The company withdrew $134,663 from the trust account to pay franchise and income taxes.
- Assets and liabilities: At March 31, cash and marketable securities in the trust account were $229.781 million. Current liabilities were $2.492 million, including a $500,000 related-party note; total liabilities were $4.085 million, including $1.593 million of warrant liabilities. Working capital deficit was $2.154 million, excluding $39,800 of franchise taxes payable. No long-term debt was reported.
- Equity and redemptions: Common stock subject to possible redemption was $221.073 million, representing 22,103,036 shares. Stockholders’ equity was $5.0 million. The filing reports 29,516,511 common shares issued and outstanding at March 31, including shares subject to possible redemption.
- Margins: Not meaningful because the company had no operating revenue.
Changes versus the prior period
The comparison shown is with the period from the company’s February 11, 2020 inception through March 31, 2020, not the same quarter in the prior year. That inception-period net loss was $1,000, versus $1.817 million in Q1 2021. Cash was $549,395 at December 31, 2020, compared with $219,674 at March 31, 2021; trust assets decreased from $229.884 million to $229.781 million. Warrant liabilities increased from $630,224 to $1.593 million, driving a substantial non-cash expense.
The filing gives effect to a restatement that reclassified private placement warrants from equity to derivative liabilities. Management said disclosure controls and procedures were not effective at a reasonable-assurance level because of the events leading to that restatement; it reported no material change in internal control over financial reporting during the quarter.
Transaction, outlook, and risks
- Proposed transaction: The January 27, 2021 merger agreement contemplated FF becoming a wholly owned subsidiary and the SPAC being renamed Faraday Future Intelligent Electric, Inc. The agreement was amended on February 25 and May 3, 2021. Closing remained subject to conditions; this filing does not establish that the transaction closed.
- PIPE financing: Subscription agreements provided for 79.5 million shares at $10 per share, or approximately $795 million in aggregate, subject to transaction completion and applicable conditions. The filing notes that $175 million of the subscriptions was subject to certain regulatory approvals.
- Funding and going concern: Management stated the company would need additional capital for working capital and transaction costs. The filing’s notes say the Sponsor’s $500,000 convertible note was outstanding at quarter-end and that the funding conditions raised substantial doubt about the company’s ability to continue as a going concern through April 24, 2022, its business-combination deadline. However, MD&A says there was no outstanding balance under the note. The filing text is inconsistent on this point.
- Deadline and contingencies: The SPAC had until April 24, 2022 to complete a business combination; otherwise, it generally would wind up and redeem public shares, while warrants could expire worthless. A business-combination marketing fee of 3.5% of IPO gross proceeds—stated as $8.042 million—would be payable upon completion.
- Other risks and commentary: COVID-19 could hinder identifying a target, although the impact was not determinable. The company also warned negative interest rates could reduce trust-account value and public shareholders’ redemption proceeds. Management cited forward-looking risks and said actual results could differ materially from expectations. The filing reported no legal proceedings and no off-balance-sheet arrangements.
Investor facts to verify
- Confirm the registrant and filing scope: this 10-Q is for Property Solutions Acquisition Corp., a SPAC, not Faraday Future’s operating business.
- Check the status and final terms of the amended merger agreement, closing conditions, redemption levels, and the proposed $795 million PIPE, including the $175 million subject to regulatory approvals.
- Resolve the filing’s conflicting statements about whether the $500,000 Sponsor note was outstanding at March 31, 2021.
- Assess the going-concern warning, the SPAC’s limited cash outside the trust, and its ability to finance costs through the business-combination deadline.
- Review the warrant-liability restatement and the disclosed ineffectiveness of disclosure controls, including any subsequent remediation.