NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(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 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 September 30, 2021, the Company had not yet commenced any operations. All activity through September 30, 2021 relates to the Company’s
formation and the initial public offering (the “Initial Public Offering”), which is described below. Subsequent to the Initial
Public Offering, the Company’s activities have been limited to 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 will generate
non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering.
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.
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
SEPTEMBER 30, 2021
(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. 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.”
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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.
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.
Liquidity
and Management’s Plan
Prior
to the completion of the Initial Public Offering, the Company lacked the liquidity it needed to sustain operations for a reasonable period
of time, which is considered to be one year from the issuance date of the financial statements. The Company has since completed its Initial
Public Offering at which time capital in excess of the funds deposited in the Trust Account and/or used to fund offering expenses was
released to the Company for general working capital purposes. Accordingly, management has since reevaluated the Company’s liquidity
and financial condition and determined that sufficient capital exists to sustain operations one year from the date of this filing and
therefore substantial doubt has been alleviated.
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 prospectus for its Initial
Public Offering, as filed with the SEC on October 8, 2021, as well as the Company’s Current Reports on Form 8-K, as filed with
the SEC on October 19, 2021 and October 25, 2021. The interim results for the three months ended September 30, 2021 and for the period
from January 1, 2021 (commencement of operations) through September 30, 2021 are not necessarily indicative of the results to be expected
for the period ending December 31, 2021 or for any future periods.
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Use
of Estimates
The
preparation of the condensed unaudited financial statements in conformity with 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 revenues and expenses during the reporting periods.
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.
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 at September 30, 2021.
Deferred
Offering Costs
The
Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A –
“Expenses of Offering”. Offering costs principally consist of professional and registration fees incurred through the closing
date of the Initial Public Offering that are 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. Deferred
offering costs were charged to stockholders’ equity upon the completion of the Initial Public Offering as warrants after management’s
evaluation are accounted for under equity treatment. Offering costs amounted to $15,892,398 and were charged to stockholders’ equity
upon the completion of the Initial Public Offering.
As
of September 30, 2021, there were $243,359 of deferred offering costs recorded in the accompanying unaudited condensed balance sheet.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(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 Accounting Standards
Codification (“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 Class A common stock (including
Class A 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,
Class A 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 September 30, 2021, there were no shares of Class A common stock subject to possible redemption outstanding.
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 September 30, 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.
The
provision for income taxes was deemed to be de minimis for the period from January 1, 2021 (commencement of operations) through September
30, 2021. The Company’s deferred tax assets were deemed to be de minimis as of September 30, 2021.
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. The Company has not experienced losses on
these accounts.
Net
Loss per Common Share
Net
loss per common share of common stock is computed by dividing net loss by the weighted average number of common shares issued and outstanding
during the period, excluding shares of common stock subject to forfeiture. The weighted average number of shares were reduced for the
effect of an aggregate of 562,500 shares of Class B common stock that were subject to forfeiture depending on the extent to which
the underwriters’ over-allotment option was not exercised (see Note 5). At September 30, 2021, the Company did not have any
dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share
in the earnings of the Company. As a result, diluted loss per common share is the same as basic loss per common share for the periods
presented.
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,” approximate the carrying amounts represented in the accompanying condensed unaudited balance sheet, primarily due
to their short-term nature.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
Recent
Accounting Standards
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 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. INITIAL 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).
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 25,000 Founder Shares to each of the Company’s independent
director nominees, 276,000 Founder Shares to Stifel Venture and an aggregate of 50,000 Founder Shares to the Company’s strategic
advisors, in each case at the same price originally paid for such shares. 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. All share and per-share amounts
have been retroactively restated to reflect the share cancellation. 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 and 375,000 Founder Shares are no longer
subject to forfeiture, resulting in an aggregate of 4,125,000 Founder Shares outstanding at October 22, 2021 (see Note 7).
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 in accordance with the accounting of other offering costs.
The
sale of the Founder Shares to the Company’s director nominees and strategic advisors is in the scope of FASB ASC Topic 718, “Compensation-Stock
Compensation” (“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 a service condition. As such, compensation
expense related to the Founder Shares will be recognized over the applicable service period. 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.
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.
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. As of September 30, 2021, there was $85,000 outstanding under the Promissory Note. The outstanding balance under the
Promissory 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 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.
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 September 30, 2021 there were
no Working Capital Loans outstanding.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
NOTE
6. COMMITMENTS AND CONTINGENCIES
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
Company granted the underwriters a 45-day option beginning October 7, 2021 to purchase up to 2,250,000 additional Units to cover over-allotments
at the Initial Public Offering price less the underwriting discounts and commissions. 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 upon the closing of the partial exercise of the over-allotment
option.
The
underwriters were paid a cash discount of $0.15 per Unit, or an aggregate of $2,475,000, including the $225,000 cash discount on the
additional Units. The underwriters are entitled to a deferred fee of $0.40 per Unit, or an aggregate of $6,600,000, including the $600,000
deferred fee on the additional Units. 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’ EQUITY
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At September 30,
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 Class A common stock are entitled to one vote for each share. At September 30, 2021, there were no shares of Class A
common stock issued or outstanding.
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 Class B common stock are entitled to one vote for each share. At September 30, 2021, there were 4,312,500 shares
of Class B common stock issued and outstanding, of which an aggregate of up to 562,500 shares of Class B common stock were subject
to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the number
of shares of Class B common stock would equal 20% of the Company’s issued and outstanding common stock after the Initial Public
Offering. 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 and 375,000 Founder Shares
are no longer subject to forfeiture, resulting in an aggregate of 4,125,000 Founder Shares outstanding at October 22, 2021.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES
TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 holders of Class B common stock will vote together as a single class on all other matters
submitted to a vote of the Company’s stockholders except as otherwise 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 September 30, 2021 there were no 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.
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:
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in whole and not in part;
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at a price of $0.01 per
Public Warrant;
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upon not less than 30 days’
prior written notice of redemption to each warrant holder; and
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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).
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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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2021
(Unaudited)
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 September 30, 2021, there were no 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).
NOTE
8. 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, other than the Initial Public Offering and related transactions described in these financial
statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial
statements.