the reverse recapitalization between FAII and the ATI; and

the issuance and sale of 30,000,000 shares of Class A Stock at a purchase price of $10.00 per share and an aggregate purchase price of $300.0 million pursuant to the PIPE Investment.

the accompanying notes to the unaudited pro forma condensed combined financial statements;

the historical unaudited financial statements of ATI as of and for the three months ended March 31, 2021 and the related notes, which are incorporated by reference;

the historical audited financial statements of ATI for the year ended December 31, 2020 and the related notes, which is incorporated by reference;

the historical unaudited financial statements of FAII as of and for the three months ended March 31, 2021 and the related notes, which are incorporated by reference;

the historical audited financial statements of FAII for the period from June 10, 2020 (inception) to December 31, 2020, (As Restated) and the related notes, which is incorporated by reference; and

other information relating to FAII and ATI contained in the Proxy Statement, including the Merger Agreement and the description of certain terms thereof set forth in the section entitled “The Business Combination”.

FAII public stockholders

ATI Shareholders

PIPE Investment

Pro Forma Class A Stock at March 31, 2021

ASSETS

Current Assets:

Cash and cash equivalents

Accounts receivable

Prepaid expenses

Other current assets

Total Current Assets

Investments held in Trust Account

Property and equipment, net

Operating lease right-of-use assets

Goodwill

Trade name and other intangible assets, net

Other non-current assets

Total Assets

LIABILITIES & STOCKHOLDERS’ EQUITY

Current Liabilities:

Accounts payable

Accounts payable and accrued expenses

Franchise tax payable

Accrued expenses and other liabilities

Current portion of operating lease liabilities

Current portion of long-term debt

Total Current Liabilities

Deferred underwriting commissions payable

Warrant liabilities

Long-term debt, net

Redeemable preferred stock

Deferred income tax liabilities

Operating lease liabilities

Contingent consideration common shares liability

Other non-current liabilities

Total Liabilities

Commitments and contingencies

Class A common stock subject to possible redemption

Stockholders’ Equity:

Common stock

Class A common stock

Class F common stock

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Non-controlling interests

Total Stockholders’ Equity

Total Liabilities and Stockholders’ Equity

Net patient revenue

Other revenue

Net operating revenue

Clinic operating costs:

Salaries and related costs

Rent, clinic supplies, contract labor and other

Provision for doubtful accounts

Total clinic operating costs

Selling, general and administrative expenses

General and administrative expenses

Franchise tax expense

Operating loss

Other (income) expense, net

Interest (income) expense

Interest expense, net

Interest expense on redeemable preferred stock

Decrease in fair value of warrant liabilities

Income (loss) before taxes

Income tax expense (benefit)

Net (loss) income

Net income attributable to non-controlling interest

Net (loss) income attributable to Company

Other comprehensive loss:

Unrealized gain on interest rate swap

Comprehensive loss

Weighted average shares outstanding of Class A common stock—basic and diluted

Basic and diluted net income (loss) per share attributable to common shareholders

Weighted average shares outstanding of Class F common stock

Basic and diluted net loss per share, Class F common stock

Net patient revenue

Other revenue

Net operating revenue

Clinic operating costs:

Salaries and related costs

Rent, clinic supplies, contract labor and other

Provision for doubtful accounts

Total clinic operating costs

Selling, general and administrative expenses

General and administrative expenses

Franchise tax expense

Operating loss

Other (income) expense, net

Interest (income) expense

Interest expense, net

Interest expense on redeemable preferred stock

Loss on settlement of redeemable preferred stock

Increase in fair value of warrant liabilities

Loss on excess of fair value over cash received for Private Placement Warrants

Offering costs related to warrant liabilities

Income (loss) before taxes

Income tax expense (benefit)

Net (loss) income

Net income attributable to non-controlling interest

Net (loss) income attributable to Company

Other comprehensive loss:

Unrealized loss on interest rate swap

Comprehensive loss

Weighted average shares outstanding of Class A common stock—basic and diluted

Basic and diluted net income (loss) per share attributable to common shareholders

Weighted average shares outstanding of Class F common stock

Basic and diluted net loss per share, Class F common stock

Basis of Presentation

ATI stockholders have the greatest voting interest in the combined entity with approximately 72% of the voting interest;

ATI’s former executive management makes up all of the management of the Company;

ATI’s existing directors and individuals designated by, or representing, ATI stockholders constitute a majority of the initial Company Board following the consummation of the Business Combination;

the Company assumes the name “ATI Physical Therapy, Inc.;” and

ATI is the larger entity based on assets and revenue. Additionally, ATI has a larger employee base and substantive operations.

Reflects the reclassification of $345.0 million of investments held in the Trust Account that becomes available following the Business Combination.

Reflects the proceeds of $300.0 million from the issuance and sale of 30,000,000 shares of Class A Stock at $10.00 per share in the PIPE Investment.

Reflects the settlement of $12.1 million of deferred underwriters’ fees.

Reflects the application of cash to the partial and full repayments relating to ATI’s first and second lien term loans of $448.0 million with the corresponding adjustment to pro forma long-term debt, net related to the debt payoff offset by the write-off of deferred financing costs and original issue discounts of $5.9 million.

Represents the payment of the ATI’s acquisition-related transaction costs incurred of approximately $27.9 million as part of the Business Combination. Of ATI’s transaction costs, approximately $20.5 million was capitalized as deferred offering costs, $3.9 million was capitalized in other currents assets and $5.2 million was accrued for as accrued expenses and other liabilities on ATI’s historical balance sheet as of March 31, 2021, and the remaining $6.1 million of transaction costs are not eligible to be capitalized, which has been expensed through accumulated deficit in the unaudited pro forma condensed combined balance sheet.

Represents the payment of FAII’s acquisition-related transaction costs of approximately $13.7 million as part of the Business Combination. Of the FAII transaction costs, approximately $5.5 million was accrued for as accounts payable and accrued expenses and $0.05 million was accrued for as franchise tax payable on the FAII historical balance sheet and $8.1 million was expensed through accumulated deficit in the unaudited pro forma condensed combined balance sheet.

Reflects the reclassification of $302.1 million of Class A Stock subject to possible redemption to permanent equity.

Reflects the elimination of FAII historical accumulated deficit, after recording the transaction costs incurred by FAII as described in note (F).

Reflects the settlement of the ATI’s redeemable preferred stock in exchange for $59.0 million of cash proceeds and $128.5 million of Class A Stock equal to 12,845,284 shares with a par value of $0.0001. The loss on settlement of redeemable preferred stock of $18.8 million is calculated based on the difference between the value transferred for the ATI’s redeemable preferred stock and its historical book value.

Reflects the recapitalization of ATI and issuance of 130.3 million of the Class A Stock to ATI stockholders as consideration in the Business Combination.

Reflects the conversion of 8,625,000 FAII Class F common stock at $0.0001 par value into Vesting Shares. The Vesting Shares is classified as a liability in the unaudited pro forma condensed combined balance sheet and vests upon achieving certain market share price milestones as outlined in the Business Combination Agreement during the earn-out period. The earn-out liability is recognized at their estimated fair values of $78.1 million as of March 31, 2021. Post-Business Combination, this liability will be remeasured to its fair value at the end of each reporting period and subsequent changes in the fair value post-Business Combination will be recognized in the combined company’s statement of operations.

Represents recognition of 15,000,000 Earnout Shares stipulated under terms of the Business Combination Agreement. The Earnout Shares is classified as a liability in the unaudited pro forma condensed combined balance sheet and becomes issuable upon achieving certain market share price milestones as outlined in the Business Combination Agreement during the earn-out period. The earn-out liability is recognized at their estimated fair values of $135.9 million as of March 31, 2021. Post-Business Combination, this liability will be remeasured to its fair value at the end of each reporting period and subsequent changes in the fair value post-Business Combination will be recognized in the combined company’s statement of operations.

The following table summarizes reclassification adjustments to the unaudited pro forma condensed combined balance sheet:

FAII Reclassifications

Prepaid expenses ⁽¹⁾

Other current assets ⁽¹⁾

Franchise tax payable ⁽²⁾

Accrued expenses and other liabilities ₍₂₎

Reflects the reclassification of $0.3 million of prepaid expenses into $0.3 million of other currents assets.

Reflects the reclassification of $0.004 million of franchise tax payable into $0.004 million of accrued expenses and other liabilities, after recording the settlement of transaction costs incurred by FAII.

Represents the actual redemption of 8,987,746 shares of Class A Stock for approximately $89.9 million allocated to Class A Stock and additional paid-in capital using par value of $0.0001 per share and at a redemption price of $10.00 per share.

Reflects elimination of investment (income) expense related to the interest earned on the investment held in the Trust Account.

Represents the elimination of the ATI’s redeemable preferred stock’s historical interest expense. Additionally, reflects the recognition of the pro forma loss on settlement of redeemable preferred stock, which is a non-recurring item and is reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations.

Reflects the elimination of historical interest expense, including amortization of deferred financing costs and original issue discounts related to the partial and full repayments of the ATI’s first and second lien term loans, respectively. Additionally, reflects the write-off of deferred financing costs and original issue discounts as described in adjustment (D), which is a non-recurring item.

Historical interest expense, including amortization of deferred financing costs and original issue discounts

Write-off of deferred financing costs and original issue discounts from adjustment (D)

Total pro forma adjustments to interest expense, net

Reflects the total portion of ATI transaction costs incurred not eligible for capitalization of $7.3 million. Of this amount, $2.3 million and $3.5 million are already incurred and expensed in ATI’s historical statements of operations for the three months ended March 31, 2021 and the year ended December 31, 2020, respectively. Transaction costs are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations. This is a non-recurring item.

Reflects the total transaction costs incurred by FAII of $13.9 million. Of this amount, $4.8 million and $1.1 million are already incurred and expenses in FAII’s statements of operations for the three months ended March 31, 2021 and the year ended December 31, 2020, respectively. Transaction costs are reflected as if incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations. This is a non-recurring item.

Reflects the increase in compensation expense pertaining to new executed executive employment agreements entered into in connection with the Business Combination which also includes stock-based compensation expense related to time-based incentive awards granted to the executives under these agreements.

Reflects the income tax effect of pro forma adjustments using the estimated blended tax rate of 28.0%, compromised of the federal statutory corporate tax rate of 21.0% and the blended state statutory tax rate of 7%.

The following table summarizes reclassification adjustments to the unaudited pro forma condensed combined statements of operations:

FAII Reclassifications - For the three months ended March 31, 2021

Selling, general and administrative expenses ⁽¹⁾

General and administrative expenses ⁽¹⁾

Franchise tax expense ⁽¹⁾

Reflects the reclassification of $5.0 million in general and administrative expenses and $0.05 million in franchise tax expense into $5.05 million of selling, general and administrative expense.

FAII Reclassifications - For the year ended December 31, 2020

Selling, general and administrative expenses ⁽¹⁾

General and administrative expenses ⁽¹⁾

Franchise tax expense ⁽¹⁾

Reflects the reclassification of $9.5 million in general and administrative expenses and $0.1 million in franchise tax expense into $9.6 million of selling, general and administrative expense, after recording the transaction costs incurred by FAII.

Reflects the compensation expense related to the vesting of certain ATI incentive common units, with such vesting being triggered by the Business Combination, a portion of which is non-recurring. These costs are reflected as incurred on January 1, 2020, the date the Business Combination occurred for the purposes of the unaudited pro forma condensed combined statements of operations.

Net Loss Per Share

Pro forma net loss (in thousands)

Weighted average shares outstanding of Class A Stock ⁽¹⁾⁽²⁾

Basic and diluted net loss per share - Class A Stock

The public warrants and Private Placement Warrants are exercisable at $11.50 per share which does not exceed the current market price of Class A Stock and the approximate per share redemption price, as of June 23, 2021. Additionally, including these warrants would result in anti-dilution, and thus they’ve been excluded from the calculation of diluted loss per share.

The 8,625,000 Vesting Shares and 15,000,000 Earnout Shares are excluded from the earnings per share calculation as these are not deemed to be participating securities, and further would be anti-dilutive.