The accompanying notes are an integral part of the
unaudited condensed financial statements.
The accompanying notes are an integral part of the
unaudited condensed financial statements.
The accompanying notes are an integral part of the
unaudited condensed financial statements.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS,
LIQUIDITY, AND RISKS AND UNCERTAINTIES
Schultze Special Purpose Acquisition Corp. II (the
“Company”) is a blank check company incorporated in Delaware on December 15, 2020. The Company had no activity for the period
from December 15, 2020 (inception) through December 31, 2020. 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 not limited to a particular industry
or sector for purposes of consummating a 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 through March 31, 2022 relates to the Company’s formation, the initial public offering (the “Initial
Public Offering”), which is described below, and subsequent to the Initial Public Offering, identifying a target company for a Business
Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest.
The Company generates non-operating income in the form of interest income on marketable securities held in the Trust Account (as defined
below).
The registration statement for the Company’s
Initial Public Offering was declared effective on October 7, 2021. On October 13, 2021, the Company consummated the Initial Public Offering
of 15,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public
Shares”), at $10.00 per Unit, generating gross proceeds of $150,000,000, which is described in Note 3.
Simultaneously with the closing of the Initial Public
Offering, the Company consummated the sale of 6,200,000 warrants (each, a “Private Placement Warrant” and, collectively, the
“Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Schultze Special
Purpose Acquisition Sponsor II, LLC (the “Sponsor”) and Stifel Venture Corp. (“Stifel Venture”), an affiliate
of Stifel, Nicolaus & Company, Incorporated, one of the representatives of the underwriters, generating gross proceeds of $6,200,000,
which is described in Note 4.
On October 19, 2021, the underwriters notified the
Company of their exercise of the over-allotment option in part and concurrent forfeiture of the remaining portion of such option. As such,
on October 22, 2021, the underwriters purchased 1,500,000 additional Units at $10.00 per additional Unit upon the closing of the partial
exercise of the over-allotment option, generating gross proceeds of $15,000,000. Simultaneously with the sale of the additional Units,
the Company consummated the sale of an additional 375,000 Private Placement Warrants at $1.00 per additional Private Placement Warrant,
generating total gross proceeds of $375,000.
Transaction costs amounted to $15,892,398, consisting
of $2,475,000 of underwriting fees, $6,600,000 of deferred underwriting fees, $541,773 of other offering costs, and $6,275,625 for the
fair value of the Founder Shares attributable to the anchor investors (see Note 5).
Following the closing of the Initial Public Offering
on October 13, 2021, an amount of $151,500,000 ($10.10 per Unit) from the net proceeds of the sale of the Units in the Initial Public
Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”) established for
the benefit of the holders of the outstanding Public Shares (the “public stockholders”), with Continental Stock Transfer &
Trust Company acting as trustee, and invested in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment
Company Act of 1940, as amended (the “Investment Company Act”), with a maturity of 185 days or less, or in any open-ended
investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as
determined by the Company, 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.
On October 22, 2021, a total of $15,150,000 of the
net proceeds from the sale of the additional Units and the additional Private Placement Warrants was deposited in the Trust Account, bringing
the aggregate proceeds held in the Trust Account to $166,650,000.
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants,
although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There
is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete one or more initial
Business Combinations with one or more operating businesses or assets with a fair market value equal to at least 80% of the net assets
held in the Trust Account (less any deferred underwriting commissions and taxes payable on interest 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.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The Company will provide 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 stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the
Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its
discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust
Account (initially anticipated to be $10.10 per Public 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). There will be no redemption rights upon the completion of a Business
Combination with respect to the Company’s warrants. There will be no redemption rights upon the completion of a Business Combination
with respect to the Company’s warrants. The Public Shares subject to redemption were recorded at redemption value and classified
as temporary equity in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification
(“ASC”) Topic 480 “Distinguishing Liabilities from Equity” (“ASC 480”) (see Note 2).
The Company will proceed with a Business Combination
only if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination
and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder
vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will,
pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”),
conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file
tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is
required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem
shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company
seeks stockholder approval in connection with a Business Combination, the Sponsor and the Company’s directors, officers and initial
stockholders have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial
Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares
irrespective of whether they vote for or against the proposed transaction or do not vote at all.
Notwithstanding the above, if the Company seeks stockholder
approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the 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 redeeming its shares with respect to more than an aggregate of 15% or more
of the Public Shares, without the prior consent of the Company.
The Sponsor and the Company’s directors, officers
and initial stockholders have agreed (a) to waive their redemption rights with respect to their Founder Shares and any Public Shares held
by them in connection with the completion of a Business Combination, and (b) not to propose an amendment to the Amended and Restated Certificate
of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with the Company’s
initial Business Combination or to redeem 100% of the Public Shares if the Company does not complete a Business Combination within the
Combination Period (as defined below) or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial
Business Combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares
in conjunction with any such amendment.
The Company will have until April 13, 2023 to complete
a Business Combination (the “Combination Period”). If the Company is unable to complete a Business Combination within the
Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible
but not 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 not previously released to
the Company to pay its tax obligations (net of taxes payable and less up to $150,000 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 liquidating distributions, if any), and (iii) as promptly as reasonably possible following such
redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve
and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements
of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants,
which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.
The Company’s initial stockholders have agreed
to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the
Combination Period. However, if the Company’s initial stockholders acquire Public Shares in or after the Initial Public Offering,
such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination
within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note
6) 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 other 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 $10.10 per Unit.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
In order to protect the amounts held in the Trust
Account, the Sponsor has agreed to be liable to the Company to ensure that the proceeds in the Trust Account are not reduced below $10.10
per share by the claims of target businesses or claims of vendors or other entities that are owed money by the Company for services rendered
or contracted for or products sold to the Company. Additionally, the agreement entered into by the Sponsor specifically provides for two
exceptions to the indemnity it has given: it will have no liability (i) as to any claimed amounts owed to a target business or vendor
or other entity who has executed an agreement with the Company waiving any right, title, interest or claim of any kind they may have in
or to any monies held in the Trust Account, or (ii) as to any claims for indemnification by the underwriters. In the event that an
executed waiver is deemed to be unenforceable, the Sponsor will not be responsible to the extent of any liability for such third-party
claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors
by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective
target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title,
interest or claim of any kind in or to monies held in the Trust Account.
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19 pandemic 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 the financial statements. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Going Concern
As of March 31, 2022, the Company had $712,352 in
its operating bank accounts, $166,668,364 in marketable securities held in the Trust Account to be used for a Business Combination or
to repurchase or redeem stock in connection therewith and working capital of $1,016,368, which excludes a portion of franchise taxes payable
of $18,364, of which such amount will be paid from interest earned on the Trust Account. As of March 31, 2022, $18,364 of the amount on
deposit in the Trust Account represented interest income, which is available to pay the Company’s tax obligations.
The Company may raise additional capital through loans
or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The Company’s officers and
directors, the Sponsor or their affiliates may but are not obligated to loan the Company funds (see Note 5), from time to time, in whatever
amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Based on the foregoing, the Company
believes it will have sufficient cash to meet its needs through the earlier of consummation of a Business Combination or April 13,
2023, the deadline to complete a Business Combination pursuant to the Company’s Amended and Restated Certificate of Incorporation
(unless otherwise amended by stockholders).
In connection with the Company’s assessment
of going concern considerations in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic
205-40, “Presentation of Financial Statements – Going Concern,” the Company has until April 13, 2023, to consummate
an initial Business Combination. It is uncertain that the Company will be able to consummate an initial Business Combination by this time.
If an initial Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of
the Company. Management has determined that the mandatory liquidation, should an initial Business Combination not occur, and potential
subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have
been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after April 13, 2023.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for
interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management,
the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are
necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed financial statements
should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed
with the SEC on March 17, 2022. The interim results for the three months ended March 31, 2022 are not necessarily indicative of the results
to be expected for the period ending December 31, 2022 or for any future periods.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act of 1933, as amended (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, 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 a 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 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, which is neither an emerging growth company nor an emerging growth
company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting
standards used.
Use of Estimates
The preparation of condensed financial statements
in conformity with GAAP requires 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 income 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. Significant accounting estimates include the determination of the fair value of Class A common stock
subject to possible redemption and expenses associated with share-based payment arrangements. Accordingly, the actual results could differ
significantly from those estimates.
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.
Marketable Securities Held in Trust Account
At March 31, 2022 and December 31, 2021, substantially
all of the assets held in the Trust Account were held in U.S. Treasury Bills. The Company accounts for its marketable securities as Trading
Securities under ASC 320, where securities are presented at fair value on the balance sheet and with unrealized gains or losses, if any,
presented on the statement of operations.
Offering Costs
Offering costs consist of underwriting, legal, accounting
and other expenses incurred through the balance sheets date that are 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 the Class A common stock issued were initially charged to temporary equity
and then accreted to common stock subject to redemption upon the completion of the Initial Public Offering. Offering costs amounted to
$15,892,398 were charged to additional paid-in capital upon the completion of the Initial Public Offering.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
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.”
Class A common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally
redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject
to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity.
At all other times, common stock is 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 occurrence of uncertain future events.
Accordingly, at March 31, 2022 and December 31, 2021, Class A common stock subject to possible redemption is presented at redemption value
as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheets.
The Company recognizes changes in the redemption value
immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital
and accumulated deficit.
At March 31, 2022 and December 31, 2021, the Class
A common stock reflected in the condensed balance sheets is reconciled in the following table:
Gross Proceeds | |
$ | 165,000,000 | |
Less: | |
| | |
Proceeds allocated to Public Warrants | |
| (5,283,847 | ) |
Fair value of Founder Shares transferred to anchor investors (net of offering costs of $200,966 attributable to anchor investors) | |
| (6,074,659 | ) |
Class A ordinary share issuance costs | |
| (9,288,714 | ) |
Plus: | |
| | |
Accretion of Class A common stock to redemption value | |
| 22,297,220 | |
Class A common stock subject to possible redemption at March 31, 2022 and December 31, 2021 | |
$ | 166,650,000 | |
Warrant Classification
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance
in ASC 480 and ASC Topic 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants
are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants
meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s
own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment,
is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the
criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time
of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to
be recorded at their initial fair value on the date of issuance. The fair value of the warrants are remeasured at each balance sheet date
with the change in the estimated fair value of the warrants recognized as a non-cash gain or loss on the statements of operations. The
Company has analyzed the Public Warrants (as defined in Note 3) and Private Placement Warrants and determined they are considered to be
freestanding instruments and do not exhibit any of the characteristics in ASC 480 and therefore are not classified as liabilities under
ASC 480.
Income Taxes
The Company complies with the accounting and reporting
requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and
reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and
tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
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.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits, if any, as income tax expense. There were
no unrecognized tax benefits and no amounts accrued for 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.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
The provision for income taxes was deemed to be de
minimis for the period ended March 31, 2022 and December 31, 2021. The Company’s deferred tax assets were deemed to be de minimis
as of March 31, 2022 and December 31, 2021.
Share-Based Payment Arrangements
The Company accounts for share-based payments in accordance
with FASB ASC Topic 718, “Compensation - Stock Compensation,” (“ASC 718”) which requires that all equity awards
be accounted for at their “fair value.” The Company measures and recognizes compensation expense for all share-based payments
on their estimated fair values measured as of the grant date. These costs are recognized as an expense in the Statements of Operations
upon vesting, once the applicable performance conditions are met, with an offsetting increase to additional paid-in capital. Forfeitures
are recognized as they occur.
Net Loss per Common Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share”. Net loss per common share is computed by dividing net loss by the
weighted average number of common shares outstanding for the period. Subsequent measurement of the redeemable shares of Class A common
stock are excluded from loss per common share as the redemption value approximates fair value.
The Company calculates its earnings per share by allocating
net loss pro rata to shares of Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely
outcome, in which case, both classes of common stock share pro rata in the losses of the Company.
The calculation of diluted loss per share of common
stock does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private
placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 14,825,000
shares of Class A common stock in the aggregate. As a result, diluted net loss per common share is the same as basic net income (loss)
per common share for the period presented.
The following table reflects the calculation of basic
and diluted net loss per common share (in dollars, except per share amounts):
| |
For the Three Months Ended March 31, | |
| |
2022 | | |
2021 | |
| |
Class A | | |
Class B | | |
Class A | | |
Class B | |
Basic and diluted net loss per common share | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Allocation of net loss, as adjusted | |
$ | (302,497 | ) | |
$ | (75,624 | ) | |
$ | — | | |
$ | (1,099 | ) |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares of common stock outstanding | |
| 16,500,000 | | |
| 4,125,000 | | |
| — | | |
| 3,750,000 | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net loss per share | |
$ | (0.02 | ) | |
$ | (0.02 | ) | |
$ | — | | |
$ | (0.00 | ) |
Concentration of Credit Risk
Financial instruments that potentially subject the
Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal
Depository Insurance Corporation coverage limit of $250,000. The Company has not experienced losses on these accounts.
Fair value of Financial Instruments
The fair value of the Company’s assets and liabilities,
which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented
in the accompanying unaudited condensed balance sheets, primarily due to their short-term nature.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
Fair Value Measurements
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.
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; |
|
|
|
|
● |
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 |
|
|
|
|
● |
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.
Recent Accounting Standards
In August 2020, the 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 adopted ASU 2020-06
effective January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s financial statements.
Management does not believe that any other recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed
financial statements.
NOTE 3. PUBLIC OFFERING
Pursuant to the Initial Public Offering, the Company
sold 16,500,000 Units at a purchase price of $10.00 per Unit, including 1,500,000 additional Units pursuant to the underwriters’
partial exercise of their over-allotment option. Each Unit consists of one share of the Company’s Class A common stock and one-half
of one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Class A common
stock at an exercise price of $11.50 per whole share (see Note 7). The fair value attributable to the unexercised portion of the over-allotment
option was deemed to be immaterial to the financial statements.
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the Initial Public
Offering and the closing of the partial exercise of the over-allotment option, the Sponsor and Stifel Venture purchased an aggregate of
6,575,000 Private Placement Warrants at a price of $1.00 per Private Placement Warrant, for an aggregate purchase price of $6,575,000,
in private placements. Among the Private Placement Warrants, the Sponsor purchased an aggregate of 5,915,000 Private Placement Warrants
and Stifel Venture purchased an aggregate of 660,000 Private Placement Warrants. Each Private Placement Warrant is exercisable to purchase
one share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7). A portion of the proceeds from 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 requirements of applicable law) and the Private Placement Warrants will
expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On January 15, 2021, the Sponsor purchased 5,750,000
shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. The Sponsor subsequently
transferred 276,000 Founder Shares to Stifel Venture, subject to their purchase of the Private Placement Warrants, and therefore considered
part of their purchase of the Private Placement Warrants (see Note 4), 25,000 Founder Shares to each of the Company’s independent
director nominees and an aggregate of 50,000 Founder Shares to the Company’s strategic advisors (subject to certain performance
conditions discussed in Note 8). In each case, the aforementioned transfers were at the same price originally paid for such shares.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
On each of July 27, 2021 and September 20, 2021, the
Sponsor forfeited 718,750 Founder Shares, resulting in there being 4,312,500 Founder Shares issued and outstanding. The Founder Shares
included an aggregate of up to 562,500 shares subject to forfeiture by the initial stockholders to the extent that the underwriters’
over-allotment option was not exercised in full or in part, including up to 526,500 Founder Shares that were subject to forfeiture by
the Sponsor and up to 36,000 Founder Shares that were subject to forfeiture by Stifel Venture, so that the initial stockholders would
collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering.
On October 19, 2021, the underwriters notified the Company of their exercise of the over-allotment option in part and concurrent forfeiture
of the remaining portion of such option. As a result of the underwriters’ election to partially exercise their over-allotment option
and the forfeiture of the remaining portion of such over-allotment option, an aggregate of 187,500 Founder Shares were forfeited, of which
12,000 Founder Shares were forfeited by Stifel Venture, and 375,000 Founder Shares are no longer subject to forfeiture, resulting in an
aggregate of 4,125,000 Founder Shares outstanding thereafter.
The Company’s initial stockholders have agreed,
subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (A) one
year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported 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
a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar
transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash,
securities or other property.
Of the aggregate 16,500,000 Units sold in the Initial
Public Offering, 14,857,500 Units were purchased by certain qualified institutional buyers or institutional accredited investors that
are not affiliated with the Company, the Sponsor, the Company’s directors or any member of the Company’s management team (the
“anchor investors”). In connection with the closing of the Initial Public Offering, each anchor investor acquired from the
Sponsor an indirect economic interest in certain Founder Shares (937,500 Founder Shares in the aggregate) at a purchase price of $0.10
per share. The Sponsor has agreed to distribute the Founder Shares to the anchor investors pro rata based on their indirect ownership
interest in such Founder Shares after the completion of a Business Combination. The Company estimated the aggregate fair value of the
Founder Shares attributable to the anchor investors to be $6,275,625 or $6.69 per share. The excess of the fair value of the Founder Shares
was determined to be a contribution to the Company from the founders in accordance with Staff Accounting Bulletin (“SAB”)
Topic 5T and an offering cost in accordance with SAB Topic 5A. Accordingly, the offering cost were recorded against additional paid-in
capital.
Administrative Services Agreement
The Company entered into an agreement, commencing
on October 7, 2021, through the earlier of the Company’s consummation of a Business Combination and its liquidation, to pay the
Sponsor a total of up to $25,000 per month for general and administrative services, including office space, utilities and administrative
support. For the three months ended March 31, 2021, the Company did not incur any fee for these services. For the three months ended March
31, 2022 and 2021, the Company incurred and paid $75,000 and $0 in fees for these services, respectively.
Promissory Note — Related Party
On January 15, 2021, the Sponsor issued an unsecured
promissory note to the Company (the “Promissory Note”), pursuant to which the Company could borrow up to an aggregate principal
amount of $250,000. The Promissory Note, as subsequently amended and restated on June 30, 2021, was non-interest bearing and was payable
on the earlier of December 31, 2021 and the consummation of the Initial Public Offering. The outstanding balance under the Note of $85,000
was repaid at the closing of the Initial Public Offering on October 13, 2021.
Related Party Loans
In order to finance transaction costs in connection
with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may,
but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a
Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.
Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination
does not close, the Working Capital Loans would be forgiven. The Working Capital Loans would either be repaid upon consummation of a Business
Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible
into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private
Placement Warrants. As of March 31, 2022 and December 31, 2021, there were no Working Capital Loans outstanding.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 6. COMMITMENTS
Registration Rights
Pursuant to a registration rights agreement entered
into on October 7, 2021, the holders of the Founder Shares, Private Placement Warrants (and the underlying shares of Class A common stock)
and any warrants that may be issued upon conversion of the Working Capital Loans (and the underlying shares of common stock) are entitled
to registration rights. The holders of these securities will be entitled to make up to three demands, excluding short form registration
demands, that the Company register such securities. The holders of the majority of the securities can elect to exercise these registration
rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back”
registration rights with respect to registration statements filed subsequent to the completion of a Business Combination. The registration
rights agreement does not contain liquidated 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 underwriters were paid a cash discount of $0.15
per Unit, or an aggregate of $2,475,000. The underwriters are entitled to a deferred fee of $0.40 per Unit, or an aggregate of $6,600,000.
The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company
completes a Business Combination, subject to the terms of the underwriting agreement.
NOTE 7. STOCKHOLDERS’ DEFICIT
Preferred Stock— The Company is
authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At 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 200,000,000 shares of Class A, $0.0001 par value common stock. Holders of the Company’s common
stock are entitled to one vote for each share. At March 31, 2022 and December 31, 2021, there were no shares of Class A common stock issued
or outstanding, excluding 16,500,000 shares subject to possible redemption.
Class B Common Stock— The
Company is authorized to issue up to 20,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s common
stock are entitled to one vote for each share. At March 31, 2022 and December 31, 2021, there were 4,125,000 shares of Class B common
stock issued and outstanding.
Only holders of Class B common stock have the right
to vote on the election of directors prior to the Company’s initial Business Combination. Holders of Class A common stock and Class
B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.
The shares of Class B common stock will automatically
convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis (subject to adjustment). 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 a 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 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 a Business Combination (excluding
any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination).
Warrants— As of March 31, 2022
and December 31, 2021 there are 8,250,000 Public Warrants outstanding. Public Warrants may only be exercised for a whole number of shares.
No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of
(a) 30 days after the consummation of a Business Combination or (b) October 13, 2022 (12 months from the closing of the Initial Public
Offering). The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
No warrants will be exercisable for cash unless the
Company has an effective and current registration statement covering the shares of Class A common stock issuable upon exercise of the
warrants and a current prospectus relating to such shares of Class A common stock. Notwithstanding the foregoing, if a registration statement
covering the shares of Class A common stock issuable upon exercise of the Public Warrants is not effective within 90 days following the
consummation of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during
any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another
exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.
Once the warrants become exercisable, the Company
may redeem the outstanding Public Warrants:
| ● | in
whole and not in part; |
|
● |
at a price of $0.01 per Public Warrant; |
|
● |
upon not less than 30 days’ prior written notice of redemption to each warrant holder; and |
| ● | if, and only if, the last reported sale price of the Class A common stock for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and certain issuances of Class A common stock and equity-linked securities). |
If and when the warrants become redeemable by the
Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale
under all applicable state securities laws.
The exercise price and number of shares of Class A
common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share
dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the
Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise 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 Public Warrants will not receive any
of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside
of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.
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 Company’s initial stockholders or their affiliates, without taking into account any Founder Shares held by them 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 of the warrants will be adjusted (to the nearest cent) to be equal to 180% of the higher
of the Market Value and the Newly Issued Price.
As of March 31, 2022 and December 31, 2021, there
are 6,575,000 Private Placement Warrants outstanding. 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 (including the shares of Class A common stock issuable
upon the exercise of the Private Placement Warrants) will not be transferable, assignable or salable until 30 days after the completion
of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants held by Stifel Venture
will not be exercisable more than five years from the commencement of sales of the Initial Public Offering in accordance with FINRA Rule
5110(g)(8)(A).
SCHULTZE SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2022
(Unaudited)
NOTE 8. STOCK-BASED COMPENSATION
The sale of the Founder Shares to the Company’s
director nominees and strategic advisors is in the scope of ASC 718. Under ASC 718, stock-based compensation associated with equity-classified
awards is measured at fair value upon the grant date. The Company has assessed the fair value associated with the Founder Shares granted.
The fair value of the 125,000 Founder Shares granted to the Company’s director nominees (75,000 shares in total) and strategic advisors
(50,000 shares in total) was $286,654 or $2.29 per share. The Founder Shares were granted subject to certain performance conditions: (i)
the consummation of an Initial Public Offering and (ii) the occurrence of a Business Combination. Compensation expense related to the
Founder Shares is recognized only when the performance conditions are probable of occurrence under the applicable accounting literature
in this circumstance.
The Founder Shares granted to the Company’s
director nominees and strategic advisors were subject to 100% forfeiture in the event a person(s) no longer remained in such designated
position upon the completion of the Initial Public Offering. Following the completion of the Initial Public Offering, such forfeiture
is reduced to 50% in the event a person(s) no longer remains in such designated position upon the completion of the Business Combination.
A total of 62,500 shares vested upon consummation of the Initial Public Offering and the Company recognized $0 of stock-based compensation
expense for the three months ended March 31, 2022.
As of March 31, 2022, there are 62,500 shares that
remain unvested as the Company determined that a Business Combination is not considered probable. Therefore, the remaining fair value
of stock-based compensation expense associated with these shares totaling $143,327 has not been recognized. Stock-based compensation would
be recognized at the date a Business Combination is considered probable (i.e., upon consummation of a Business Combination) in an amount
equal to the number of Founder Shares times the grant date fair value per share (unless subsequently modified) less the amount initially
received for the purchase of the Founder Shares.
NOTE 9. FAIR VALUE MEASUREMENTS
The Company follows the guidance in ASC Topic 820
for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets
and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets
and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the
assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement
date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs
(market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market
participants would price assets and liabilities).
The following table presents information about the
Company’s assets that are measured at fair value on a recurring basis and indicates the fair value hierarchy of the valuation inputs
the Company utilized to determine such fair value:
Description | |
Level | | |
March 31, 2022 | | |
December 31, 2021 | |
Assets: | |
| | |
| | |
| |
Cash and Marketable securities held in Trust Account | |
| 1 | | |
$ | 166,668,364 | | |
$ | 166,667,249 | |
NOTE 10. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review,
the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.