UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(MARK
ONE)
☒ QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the quarterly period ended June 30, 2023
or
☐ TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the transition period from to
Commission
File Number: 001-40891
Schultze
Special Purpose Acquisition Corp. II
(Exact
name of registrant as specified in its charter)
Delaware | | 86-1206818 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
800 Westchester Avenue, Suite S-632 Rye Brook, NY | | 10573 |
(Address of principal executive offices) | | (Zip Code) |
(914)
701-5260
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last report)
Securities
registered pursuant to Section 12(b) of the Act:
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Units, each consisting of one share of Class A Common Stock and one-half of one redeemable Warrant | | SAMAU | | The Nasdaq Stock Market LLC |
Class A Common Stock, par value $0.0001 per share | | SAMA | | The Nasdaq Stock Market LLC |
Warrants, each whole warrant exercisable for one share of Class A Common Stock at an exercise price of $11.50 | | SAMAW | | The Nasdaq Stock Market LLC |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files). Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
| | Emerging growth company | ☒ |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐
As
of August 3, 2023, there were 9,040,148 shares of Class A common stock, par value $0.0001 per share, issued and
outstanding.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
FORM
10-Q FOR THE QUARTER ENDED JUNE 30, 2023
TABLE
OF CONTENTS
PART
I - FINANCIAL INFORMATION
Item
1. Financial Statements.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
CONDENSED
BALANCE SHEETS
| |
June 30, | | |
December 31, | |
| |
2023 | | |
2022 | |
ASSETS | |
(Unaudited) | | |
| |
Current Assets | |
| | |
| |
Cash | |
$ | 553,847 | | |
$ | 366,794 | |
Prepaid
expenses | |
| 37,109 | | |
| 123,418 | |
Total
Current Assets | |
| 590,956 | | |
| 490,212 | |
| |
| | | |
| | |
Cash
and marketable securities held in trust account | |
| 51,589,642 | | |
| 168,830,546 | |
TOTAL
ASSETS | |
$ | 52,180,598 | | |
$ | 169,320,758 | |
| |
| | | |
| | |
LIABILITIES
AND STOCKHOLDERS’ DEFICIT | |
| | | |
| | |
Current
Liabilities | |
| | | |
| | |
Accounts payable and accrued
expenses | |
$ | 2,077,862 | | |
$ | 1,878,201 | |
Income taxes payable | |
| 777,384 | | |
| 25,184 | |
Excise taxes payable | |
| 1,193,872 | | |
| — | |
Promissory note - related
party | |
| 420,000 | | |
| — | |
Deferred
tax liability | |
| — | | |
| 293,564 | |
Total Current
Liabilities | |
| 4,469,118 | | |
| 2,196,949 | |
| |
| | | |
| | |
Deferred
underwriting fee payable | |
| 6,600,000 | | |
| 6,600,000 | |
Total
Liabilities | |
| 11,069,118 | | |
| 8,796,949 | |
| |
| | | |
| | |
Commitments
and Contingencies (Note 6) | |
| | | |
| | |
Class A common stock subject to possible redemption; 4,915,148 and 16,500,000 shares issued and outstanding at redemption value of $10.46 and $10.23 at June 30, 2023 and December 31, 2022, respectively. | |
| 51,421,762 | | |
| 168,762,109 | |
| |
| | | |
| | |
Stockholders’
Deficit | |
| | | |
| | |
Preferred Stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding | |
| — | | |
| — | |
Class A common stock, $0.0001 par value, 200,000,000 shares authorized; 4,125,000 and no shares issued and outstanding (excluding 4,915,148 and 16,500,000 shares subject to possible redemption) at June 30, 2023 and December 31, 2022, respectively | |
| 412 | | |
| — | |
Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 0 and 4,125,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | |
| — | | |
| 412 | |
Additional paid-in capital | |
| — | | |
| — | |
Accumulated
deficit | |
| (10,310,694 | ) | |
| (8,238,712 | ) |
Total
Stockholders’ Deficit | |
| (10,310,282 | ) | |
| (8,238,300 | ) |
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 52,180,598 | | |
$ | 169,320,758 | |
The
accompanying notes are an integral part of the unaudited condensed financial statements.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
CONDENSED
STATEMENTS OF OPERATIONS
(UNAUDITED)
| |
For
the Three Months Ended June 30, | | |
For
the Six Months Ended June 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
| |
| | |
| | |
| | |
| |
Formation
and operational costs | |
$ | 194,679 | | |
$ | 1,992,260 | | |
$ | 857,643 | | |
$ | 2,408,823 | |
Loss
from operations | |
| (194,679 | ) | |
| (1,992,260 | ) | |
| (857,643 | ) | |
| (2,408,823 | ) |
| |
| | | |
| | | |
| | | |
| | |
Other
income (expenses): | |
| | | |
| | | |
| | | |
| | |
Interest
income – bank | |
| 4,435 | | |
| 17 | | |
| 5,847 | | |
| 43 | |
Interest
earned on marketable securities held in Trust Account | |
| 765,651 | | |
| 265,774 | | |
| 2,532,582 | | |
| 306,818 | |
Unrealized
loss on marketable securities held in Trust Account | |
| — | | |
| (12,775 | ) | |
| — | | |
| (15,403 | ) |
Total
other income, net | |
| 770,086 | | |
| 253,016 | | |
| 2,538,429 | | |
| 291,458 | |
| |
| | | |
| | | |
| | | |
| | |
Income
(loss) before provision for income taxes | |
| 575,407 | | |
| (1,739,244 | ) | |
| 1,680,786 | | |
| (2,117,365 | ) |
Provision
for income taxes | |
| (151,218 | ) | |
| — | | |
| (512,070 | ) | |
| — | |
Net
income (loss) | |
$ | 424,189 | | |
$ | (1,739,244 | ) | |
$ | 1,168,716 | | |
$ | (2,117,365 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class A common stock - redeemable | |
| 6,442,821 | | |
| 16,500,000 | | |
| 11,443,628 | | |
| 16,500,000 | |
Basic and diluted net income (loss) per share, Class A common stock - redeemable | |
$ | 0.04 | | |
$ | (0.08 | ) | |
$ | 0.08 | | |
$ | (0.10 | ) |
Basic and diluted weighted average shares outstanding of Class A common stock - non-redeemable | |
| 3,671,703 | | |
| — | | |
| 1,845,994 | | |
| — | |
Basic and diluted net income (loss) per share, Class A common stock - non-redeemable | |
| 0.04 | | |
| — | | |
| 0.08 | | |
| — | |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares outstanding, Class B common stock | |
| 453,297 | | |
| 4,125,000 | | |
| 2,279,006 | | |
| 4,125,000 | |
Basic and diluted net income (loss) per share, Class B common stock | |
$ | 0.04 | | |
$ | (0.08 | ) | |
$ | 0.08 | | |
$ | (0.10 | ) |
The
accompanying notes are an integral part of the unaudited condensed financial statements.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
CONDENSED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(UNAUDITED)
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2023
| |
Class
A Common Stock | | |
Class
B Common Stock | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance
– January 1, 2023 | |
| — | | |
$ | — | | |
| 4,125,000 | | |
$ | 412 | | |
$ | — | | |
$ | (8,238,712 | ) | |
$ | (8,238,300 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement
of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,062,393 | ) | |
| (1,062,393 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 744,527 | | |
| 744,527 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– March 31, 2023 | |
| — | | |
| — | | |
| 4,125,000 | | |
| 412 | | |
| — | | |
| (8,556,578 | ) | |
| (8,556,166 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Conversion
of Class B common stock to Class A common stock | |
| 4,125,000 | | |
| 412 | | |
| (4,125,000 | ) | |
| (412 | ) | |
| — | | |
| — | | |
| — | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Excise
tax payable attributable to redemption of common stock | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,193,872 | ) | |
| (1,193,872 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement
of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (984,433 | ) | |
| (984,433 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
income | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| 424,189 | | |
| 424,189 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– June 30, 2023 | |
| 4,125,000 | | |
$ | 412 | | |
| — | | |
$ | — | | |
$ | — | | |
$ | (10,310,694 | ) | |
$ | (10,310,282 | ) |
FOR
THE THREE AND SIX MONTHS ENDED JUNE 30, 2022
| |
Class
A Common Stock | | |
Class
B Common Stock | | |
Additional
Paid-in | | |
Accumulated | | |
Total
Stockholders’ | |
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Capital | | |
Deficit | | |
Deficit | |
Balance
– January 1, 2022 | |
| — | | |
$ | — | | |
| 4,125,000 | | |
$ | 412 | | |
$ | 143,327 | | |
$ | (5,349,250 | ) | |
$ | (5,205,511 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (378,121 | ) | |
| (378,121 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– March 31, 2022 | |
| — | | |
| — | | |
| 4,125,000 | | |
| 412 | | |
| 143,327 | | |
| (5,727,371 | ) | |
| (5,583,632 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Remeasurement
of Class A common stock to redemption value | |
| — | | |
| — | | |
| — | | |
| — | | |
| (8,614 | ) | |
| — | | |
| (8,614 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
loss | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | | |
| (1,739,244 | ) | |
| (1,739,244 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Balance
– June 30, 2022 | |
| — | | |
$ | — | | |
| 4,125,000 | | |
$ | 412 | | |
$ | 134,713 | | |
$ | (7,466,615 | ) | |
$ | (7,331,490 | ) |
The
accompanying notes are an integral part of the unaudited condensed financial statements.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
CONDENSED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
| |
For
the Six Months Ended June 30, | |
| |
2023 | | |
2022 | |
Cash Flows from Operating
Activities: | |
| | |
| |
Net income (loss) | |
$ | 1,168,716 | | |
$ | (2,117,365 | ) |
Adjustments
to reconcile net income (loss) to net cash used in operating activities: | |
| | | |
| | |
Interest
earned on marketable securities held in Trust Account | |
| (2,532,582 | ) | |
| (306,818 | ) |
Deferred
tax benefit | |
| (293,564 | ) | |
| — | |
Unrealized
gain on marketable securities held in Trust Account | |
| — | | |
| 15,403 | |
Changes
in operating assets and liabilities: | |
| | | |
| | |
Prepaid
expenses | |
| 86,309 | | |
| 93,620 | |
Other
Assets | |
| — | | |
| 112,418 | |
Accounts
payable and accrued expenses | |
| 199,661 | | |
| 1,546,305 | |
Income
taxes payable | |
| 752,200 | | |
| — | |
Net
cash used in operating activities | |
| (619,260 | ) | |
| (656,437 | ) |
| |
| | | |
| | |
Cash Flows
from Investing Activities: | |
| | | |
| | |
Investment of cash into Trust
Account | |
| (420,000 | ) | |
| — | |
Cash withdrawn from Trust
Account to pay franchise and income taxes | |
| 806,313 | | |
| 37,301 | |
Cash
withdrawn from Trust Account in connection with redemption | |
| 119,387,173 | | |
| — | |
Net
cash provided by investing activities | |
| 119,773,486 | | |
| 37,301 | |
| |
| | | |
| | |
Cash Flows
from Financing Activities: | |
| | | |
| | |
Proceeds from promissory note
- related party | |
| 420,000 | | |
| — | |
Redemption
of common stock | |
| (119,387,173 | ) | |
| — | |
Net
cash used in financing activities | |
| (118,967,173 | ) | |
| — | |
Net Change
in Cash | |
| 187,053 | | |
| (619,136 | ) |
Cash – Beginning
of period | |
| 366,794 | | |
| 1,106,629 | |
Cash
– End of period | |
$ | 553,847 | | |
$ | 487,493 | |
| |
| | | |
| | |
Supplemental
Cash Flow Information: | |
| | | |
| | |
Cash
paid for income taxes | |
$ | 53,434 | | |
$ | — | |
| |
| | | |
| | |
Non-Cash
investing and financing activities: | |
| | | |
| | |
Remeasurement
of Class A common stock to redemption value | |
$ | 2,046,826 | | |
$ | — | |
Conversion
of Class B common stock to Class A non-redeemable common stock | |
$ | (412 | ) | |
$ | — | |
Excise
tax payable attributable to redemption of common stock | |
$ | 1,193,872 | | |
$ | — | |
The
accompanying notes are an integral part of the unaudited condensed financial statements.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
NOTE
1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS
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 June 30, 2023, the Company had not yet commenced any operations. All activity through June 30, 2023 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.
On
April 4, 2023, the Company held a special meeting in lieu of the 2023 annual meeting of stockholders of the Company (the “Special
Meeting”). At the Special Meeting, the Company’s stockholders approved, among other things, a proposal to amend the Amended
and Restated Certificate of Incorporation of the Company (as amended, the “Amended and Restated Certificate of Incorporation”)
to extend the date by which the Company must consummate an initial Business Combination (the “Extension”) from April 13,
2023 to October 13, 2023 or such earlier date as determined by the Company’s board of directors. The Sponsor or its designees will
deposit into the Trust Account $140,000, as a loan (a “Contribution”, and the Sponsor or its designee making such Contribution,
a “Contributor”), on April 13, 2023 and the 13th day of each subsequent calendar month until (but excluding) October 13,
2023 (each such date, a “Contribution Date”) or such earlier date that the Company determines it will liquidate. If a Contributor
fails to make a Contribution by an applicable Contribution Date, the Company will liquidate and dissolve as soon as practicable after
such date and in accordance with the Amended and Restated Certificate of Incorporation.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
On
April 10, 2023, in connection with the implementation of the Extension, all holders of Class B common stock voluntarily elected to convert
all shares of Class B common stock to shares of Class A common stock, on a one-for-one basis in accordance with the Amended and Restated
Certificate of Incorporation (collectively, the “Class B Conversion”).
In
connection with the implementation of the Extension, the Company’s public stockholders redeemed 11,584,852 Public Shares at a
redemption price of approximately $10.31 per share, for an aggregate redemption amount of $119,387,173 (the
“Redemption”). As a result of the Redemption and the previously discussed Class B Conversion,
there are 9,040,148 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.
On
May 2, 2023, the Company received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)
indicating that the Company is not in compliance with Nasdaq Listing Rule 5450(a)(2) (the “Minimum Total Holders Rule”),
which requires the Company to have at least 400 total holders for continued listing on the Nasdaq Global Market. The Notice is only a
notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company’s securities
on the Nasdaq Global Market. On June 15, 2023, the Company provided Nasdaq with a plan to regain compliance with the Minimum Total Holders
Rule within the required timeframe. On July 5, 2023, Nasdaq accepted the Company’s plan and granted the Company an extension until
October 30, 2023 to evidence compliance with the Minimum Total Holders Rule.
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.
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, 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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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.
In
connection with the implementation of the Extension, the Company will have until October 13, 2023, or such earlier date as determined
by its board of directors, 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.
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 on the industry, the geopolitical conditions resulting from the invasion of
Ukraine by Russia and subsequent sanctions against Russia, Belarus and related individuals and entities and the status of debt and equity
markets, as well as protectionist legislation in our target markets, and has concluded that while it is reasonably possible that these
factors 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 these uncertainties.
Inflation
Reduction Act of 2022
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for,
among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and
certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed
on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally
1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise
tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value
of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the
Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the
abuse or avoidance of the excise tax.
On April 4, 2023, in connection with the implementation
of the Extension, the Company’s public stockholders elected to redeem 11,584,852 Public Shares for a total of $119,387,173. As such
the Company has recorded a 1% excise tax liability in the amount of $1,193,872 on the Company’s condensed balance sheets as of June
30, 2023. The liability does not impact the Company’s condensed statements of operations and is offset against additional paid-in
capital or accumulated deficit if additional paid-in capital is not available. This excise tax liability can be offset by future share
issuances within the same fiscal year which will be evaluated and adjusted in the period in which the issuances occur. Should the Company
liquidate prior to December 31, 2023, the excise tax liability will not be due.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
Any
redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise,
may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business
Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions
and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii)
the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued
not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content
of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the
redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction
in the cash available on hand to complete a Business Combination and in the Company’s ability to complete a Business Combination.
Going
Concern
As of June 30, 2023, the Company had cash of $553,847
in its operating bank accounts, $51,589,642 of cash and marketable securities held in the Trust Account to be used for an initial Business
Combination or to repurchase or redeem stock in connection therewith and a working capital deficit of $3,710,282, which excludes franchise
taxes payable of $20,000 and income taxes payable of $777,384, of which such amount is expected to be paid from interest earned on the
Trust Account as well as $629,504 not yet remitted by the Company for income taxes. As of June 30, 2023, $1,526,647 of the amount on deposit
in the Trust Account represented interest income that 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 not have sufficient cash to meet its needs through the earlier
of consummation of a Business Combination or October 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). If the Company’s stockholders approve
an extension to the mandatory liquidation date beyond October 13, 2023, the Company will require additional capital support if it does
not have adequate cash through such extended date.
If
the Company does not consummate an initial Business Combination, or seek an extension, by October 13, 2023, there will be a mandatory
liquidation and subsequent dissolution of the Company. In connection with the Company’s assessment of going concern considerations
in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements - Going Concern,” management has determined
that the liquidity condition due to insufficient working capital and 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
for at least one year from the date that these financial statements are issued. No adjustments have been made to the carrying amounts
of assets or liabilities should the Company be required to liquidate after October 13, 2023. The financial statements do not include
any adjustment that might be necessary if the Company is unable to continue as a going concern.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(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 Annual Report on Form 10-K
for the fiscal year ended December 31, 2022, as filed with the SEC on February 27, 2023. The interim results for the three and six months
ended June 30, 2023 are not necessarily indicative of the results to be expected for the period ending December 31, 2023 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.
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. 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 June 30, 2023 and December 31, 2022.
Marketable
Securities Held in Trust Account
At
June 30, 2023 and December 31, 2022, substantially all of the assets held in the Trust Account were held in money market funds that invest
in U.S. Treasury Securities and U.S. Treasury Bills, respectively. The Company accounts for its marketable securities as Trading Securities
under ASC 320, where securities are presented at fair value on the balance sheets and with unrealized gains or losses, if any, presented
on the statements of operations. From inception through June 30, 2023, the Company withdrew an aggregate of $1,315,313 of interest earned
on the Trust Account to pay its franchise and income taxes and $119,387,173 was withdrawn in connection with the Redemption.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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.
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, on June 30, 2023 and December 31, 2022, 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
June 30, 2023 and December 31, 2022, the Class A common stock reflected in the condensed balance sheets is reconciled in the following
table:
| |
| |
Class
A common stock subject to possible redemption at January 1, 2022 | |
$ | 165,650,000 | |
Plus: | |
| | |
Remeasurement
adjustment of Class A common stock to redemption value | |
| 2,112,109 | |
Class A
common stock subject to possible redemption at December 31, 2022 | |
| 168,762,109 | |
Less: | |
| | |
Redemption
of Class A common stock subject to possible redemption | |
| (119,387,173 | ) |
Plus: | |
| | |
Remeasurement
adjustment of Class A common stock to redemption value | |
| 2,046,826 | |
Class
A common stock subject to possible redemption at June 30, 2023 | |
$ | 51,421,762 | |
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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 June 30, 2023 and December 31, 2022. 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.
As
of June 30, 2023 the Company’s deferred tax asset had a full valuation allowance recorded against it. As of December 31, 2022,
the Company had a net deferred tax liability of $293,564. Our effective tax rate was 26.28% and 0.0% for the three months ended June
30, 2023 and 2022, respectively, and 30.47% and 0.0% for the six months ended June 30, 2023 and 2022, respectively. The effective
tax rate differs from the statutory tax rate of 21.0% for the three and six months ended June 30, 2023 and 2022, due to changes in the
valuation allowance on the deferred tax assets.
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
Income (Loss) per Common Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss)
per share of common stock is computed by dividing net income (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 income (loss) per shares of common
stock as the redemption value approximates fair value.
The
Company calculates its earnings per share by allocating net income (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 income (losses) of the Company.
The
calculation of diluted income (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 share of common stock is the same as basic net income (loss) per share of common stock for the period presented.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
The
following table reflects the calculation of basic and diluted net income (loss) per share of common stock (in dollars, except per share
amounts):
| |
For
the Three Months Ended
June 30, 2023 | |
| |
Redeemable | | |
Non-redeemable | |
| |
Class
A | | |
Class
A | | |
Class
B | |
Basic and diluted net income
per share of common stock | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| |
Allocation
of net income, as adjusted | |
$ | 258,613 | | |
$ | 147,381 | | |
$ | 18,195 | |
Denominator: | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares of common stock outstanding | |
| 6,442,821 | | |
| 3,671,703 | | |
| 453,297 | |
Basic and diluted net income per share of common stock | |
$ | 0.04 | | |
$ | 0.04 | | |
$ | 0.04 | |
| |
For
the Six Months Ended
June 30, 2023 | |
| |
Redeemable | | |
Non-redeemable | |
| |
Class
A | | |
Class
A | | |
Class
B | |
Basic and diluted net income
per share of common stock | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| |
Allocation
of net income, as adjusted | |
$ | 859,058 | | |
$ | 138,576 | | |
$ | 171,082 | |
Denominator: | |
| | | |
| | | |
| | |
Basic and diluted weighted average shares of common stock outstanding | |
| 11,443,628 | | |
| 1,845,994 | | |
| 2,279,006 | |
Basic and diluted net income per common share | |
$ | 0.08 | | |
$ | 0.08 | | |
$ | 0.08 | |
| |
For
the Three Months Ended
June 30, 2022 | |
| |
Redeemable | | |
Non-redeemable | |
| |
Class
A | | |
Class
A | | |
Class
B | |
Basic and diluted net loss
per common share | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| |
Allocation
of net loss, as adjusted | |
$ | (1,391,395 | ) | |
$ | — | | |
$ | (347,849 | ) |
Denominator: | |
| | | |
| | | |
| | |
Basic and diluted weighted average common share outstanding | |
| 16,500,000 | | |
| — | | |
| 4,125,000 | |
Basic and diluted net loss per common share | |
$ | (0.08 | ) | |
$ | — | | |
$ | (0.08 | ) |
| |
For
the Six Months Ended
June 30, 2022 | |
| |
Redeemable | | |
Non-redeemable | |
| |
Class
A | | |
Class
A | | |
Class
B | |
Basic and diluted net loss
per common share | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| |
Allocation
of net loss, as adjusted | |
$ | (1,693,892 | ) | |
$ | — | | |
$ | (423,473 | ) |
Denominator: | |
| | | |
| | | |
| | |
Basic and diluted weighted average common share outstanding | |
| 16,500,000 | | |
| — | | |
| 4,125,000 | |
Basic and diluted net loss per common share | |
$ | (0.10 | ) | |
$ | — | | |
$ | (0.10 | ) |
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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.
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
Management
does not believe that any 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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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.
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.
On
April 10, 2023, in connection with the implementation of the Extension and the Class B Conversion all holders of Class B common stock
voluntarily elected to convert all shares of Class B common stock to Class A common stock The converted shares are not subject to possible
redemption (see Note 7).
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 each of the three and six months ended June 30, 2023, the Company incurred and
paid $75,000 and $150,000 in fees for these services, respectively. For each of the three and six months ended June 30, 2022, the Company
incurred and paid $75,000 and $150,000 in fees for these services, respectively. No amounts remain outstanding as of June 30, 2023.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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 Promissory Note of $85,000 was repaid at the closing of the Initial Public Offering on October
13, 2021.
On
April 10, 2023, in connection with the implementation of the Extension (as defined above), the Company issued an unsecured promissory
note (the “New Promissory Note”) in the principal amount of up to $840,000 to the Sponsor, which may be drawn down in connection
with the Contributions by the Sponsor or its designees to the Trust Account.
The
New Promissory Note does not bear interest and the principal balance will be payable on the earlier of: (i) the date on which the Company
consummates its initial Business Combination and (ii) the date that the winding up of the Company is effective. The New Promissory Note
is subject to customary events of default, the occurrence of certain of which automatically triggers the unpaid principal balance of
the New Promissory Note and all other sums payable with regard to the New Promissory Note becoming immediately due and payable. The issuance
of the New Promissory Note was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of
1933, as amended. As of June 30, 2023, the outstanding balance of the New Promissory Note was $420,000. Subsequent to June 30, 2023 the
Sponsor contributed an additional $140,000 to the Company under the New Promissory Note. As of the date of this filing, the outstanding
balance under the New Promissory Note was $560,000.
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 June 30, 2023 and December 31, 2022, there were
no Working Capital Loans outstanding.
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
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
NOTE
7. STOCKHOLDERS’ DEFICIT
Preferred
Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At June 30, 2023 and
December 31, 2022, 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. On April 10, 2023, in connection with the implementation
of the Extension and the Class B Conversion all holders of Class B common stock voluntarily elected to convert all shares of Class B
common stock to Class A common stock. The converted shares are not subject to possible redemption. At June 30, 2023 and December 31,
2022, there were 4,125,000 and no shares of Class A common stock issued or outstanding, excluding 4,915,148 and 16,500,000 shares subject
to possible redemption, respectively.
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 June 30, 2023 and December 31, 2022, there were 0 and
4,125,000 shares of Class B common stock issued and outstanding.
If
any shares of Class B common stock are then 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 (if any) will (a) at any time and from time to time at the option of the holder thereof and (b) automatically
upon the closing of the initial Business Combination 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 June 30, 2023 and December 31, 2022 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 30 days after the consummation of a Business Combination. 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:
|
● |
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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(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 June 30, 2023 and December 31, 2022, 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).
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. There was no stock-based compensation expense recognized for the period ended June 30,
2023 and December 31, 2022. A total of 62,500 shares vested upon consummation of the Initial Public Offering and the Company recognized
$143,327 of stock-based compensation expense for the year ended December 31, 2021.These unvested shares were converted from Class A to
Class B on April 10, 2023 as discussed in Note 7.
As
of June 30, 2023, 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.
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2023
(Unaudited)
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 | |
June
30, 2023 | | |
December 31,
2022 | |
Assets: | |
| |
| | |
| |
Cash and Marketable
securities held in Trust Account | |
1 | |
$ | 51,589,642 | | |
$ | 168,830,546 | |
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. Other than as disclosed above within these financial statements, the Company did not identify any subsequent
events, that would have required adjustment or disclosure in the condensed financial statements.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
References
in this Quarterly Report on Form 10-Q (this “Quarterly Report”) to “we,” “us,” “our”
or the “Company” refer to Schultze Special Purpose Acquisition Corp. II. References to our “management” or our
“management team” refer to our officers and directors, and references to the “Sponsor” refer to Schultze Special
Purpose Acquisition Sponsor II, LLC. The following discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and
uncertainties.
Special
Note Regarding Forward-Looking Statements
This
Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as
amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”),
that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected
and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation,
statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding
the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking
statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,”
“seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently
available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to
differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of this Quarterly
Report and our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on February
27, 2023. The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except
as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise.
Overview
We
are a blank check company formed under the laws of the State of Delaware on December 15, 2020 for the purpose of entering into a merger,
capital stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with
one or more businesses or entities (“Business Combination”). We intend to effectuate our initial Business Combination using
cash derived from the proceeds of our initial public offering (“Initial Public Offering”), including the partial exercise
of the underwriters’ over-allotment option, and the private placements of the private placement warrants (“Private Placement
Warrants”) that occurred simultaneously with the Initial Public Offering and the closing of the partial exercise of such over-allotment
option (collectively, the “Private Placement”), our capital stock, debt or a combination of cash, stock and debt.
We
expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete
our initial Business Combination will be successful.
Recent
Developments
Extension
On
April 4, 2023, we held a special meeting in lieu of the 2023 annual meeting of our stockholders (the “Special Meeting”).
At the Special Meeting, our stockholders approved, among other things, a proposal to amend our Amended and Restated Certificate of Incorporation
(as amended, our “Amended and Restated Certificate of Incorporation”) to extend the date by which we must consummate an initial
Business Combination (the “Extension”) from April 13, 2023 to October 13, 2023 or such earlier date as determined by our
board of directors. The Sponsor or its designees will deposit into the Trust Account $140,000, as a loan (a “Contribution”,
and the Sponsor or its designee making such Contribution, a “Contributor”), on each of April 13, 2023 and the 13th day of
each subsequent calendar month until (but excluding) October 13, 2023 (each such date, a “Contribution Date”) or such earlier
date that we determine we will liquidate. If a Contributor fails to make a Contribution by an applicable Contribution Date, we will liquidate
and dissolve as soon as practicable after such date and in accordance with our Amended and Restated Certificate of Incorporation.
On
April 10, 2023, in connection with the implementation of the Extension, all holders of our Class B common stock, par value $0.0001 per
share (“Class B common stock”), voluntarily elected to convert all shares of Class B common stock to shares of our Class
A common stock, par value $0.0001 per share (“Class A common stock”), on a one-for-one basis in accordance with our Amended
and Restated Certificate of Incorporation (collectively, the “Class B Conversion”).
Additionally,
in connection with the implementation of the Extension, our public stockholders redeemed 11,584,852 public shares at a redemption price
of approximately $10.31 per share, for an aggregate redemption amount of $119,387,173 (the “Redemption”).
Upon
completion of the Class B Conversion and the Redemption, 9,040,148 shares of Class A common stock and no shares of Class B common stock
remain issued and outstanding.
Promissory
Note
On
April 10, 2023, in connection with the implementation of the Extension, we issued an unsecured promissory note (the “New Promissory
Note”) in the principal amount of up to $840,000 to the Sponsor, which may be drawn down in connection with the Contributions by
the Sponsor or its designees to the Trust Account.
The
New Promissory Note does not bear interest and the principal balance will be payable on the earlier of: (i) the date on which we consummate
our initial Business Combination and (ii) the date that our winding up is effective. The New Promissory Note is subject to customary
events of default, the occurrence of certain of which automatically triggers the unpaid principal balance of the New Promissory Note
and all other sums payable with regard to the New Promissory Note becoming immediately due and payable.
As of June 30, 2023, we have borrowed $420,000
under the New Promissory Note. Subsequent to June 30, 2023, the Sponsor contributed an additional $140,000 to us under the New Promissory
Note. As of the date of this filing, the outstanding balance under the New Promissory Note was $560,000.
Nasdaq
Notice
On
May 2, 2023, we received a written notice from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”)
indicating that we are not in compliance with Nasdaq Listing Rule 5450(a)(2) (the “Minimum Total Holders Rule”), which requires
us to have at least 400 total holders for continued listing on the Nasdaq Global Market. The Notice is only a notification of deficiency,
not of imminent delisting, and has no current effect on the listing or trading of our securities on the Nasdaq Global Market. On June
15, 2023, we provided Nasdaq with a plan to regain compliance with the Minimum Total Holders Rule within the required timeframe.
Subsequent
to the period covered by this Quarterly Report, on July 5, 2023, Nasdaq accepted our plan and granted us an extension until October 30,
2023 to evidence compliance with the Minimum Total Holders Rule.
Results
of Operations
We
have neither engaged in any operations nor generated any revenues to date. Our only activities through June 30, 2023 were organizational
activities, those necessary to prepare for our Initial Public Offering, described below, and, subsequent to our Initial Public Offering,
identifying a target company for our initial Business Combination and implementing the Extension. We do not expect to generate any operating
revenues until after the completion of our initial Business Combination, at the earliest. We generate non-operating income in the form
of interest income on marketable securities held in the trust account established for the benefit of our public stockholders (the “Trust
Account”), with Continental Stock Transfer & Trust Company acting as trustee. We incur expenses as a result of being a public
company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with
searching for, and completing, an initial Business Combination.
For
the three months ended June 30, 2023, we had net income of $424,189, which consists of interest on marketable securities held in the
Trust Account of $765,651 and interest income in the operating bank account of $4,435, offset by formation and operating costs of $194,679
and a provision for income taxes of $151,218.
For
the three months ended June 30, 2022, we had a net loss of $1,739,244, which consists of formation and operating costs of $1,992,260,
and an unrealized loss on marketable securities held in the Trust Account of $12,775, offset by interest on marketable securities held
in the Trust Account of $265,774 and interest income on the operating bank account of $17. Our formation and operational costs incurred
during the quarter were largely attributed to expenses related to our search for an initial Business Combination target.
For
the six months ended June 30, 2023, we had net income of $1,168,716, which consists of interest on marketable securities held in the
Trust Account of $2,532,582 and interest income in the operating bank account of $5,847, offset by formation and operating costs of $857,643
and a provision for income taxes of $512,070.
For
the six months ended June 30, 2022, we had a net loss of $2,117,365, which consists of formation and operating costs of $2,408,823, and
an unrealized loss on marketable securities held in the Trust Account of $15,403, offset by interest on marketable securities held in
the Trust Account of $306,818 interest income on the operating bank account of $43. Our formation and operational costs incurred during
the quarter were largely attributed to expenses related to our search for a Business Combination target.
Liquidity
and Capital Resources
Until the consummation of our Initial Public Offering,
our only source of liquidity was an initial purchase of shares of Class B common stock (“Founder Shares”), by the Sponsor
and loans from the Sponsor.
On
October 13, 2021, we consummated our Initial Public Offering of 15,000,000 units (“Units”), at $10.00 per Unit, generating
total gross proceeds of $150,000,000. Simultaneously with the consummation of our Initial Public Offering, we consummated the private
placement of an aggregate of 6,200,000 Private Placement Warrants to the Sponsor and Stifel Venture Corp. (“Stifel Venture”),
an affiliate of Stifel, Nicolaus & Company, Incorporated (“Stifel”), one of the representatives of the underwriters of
our Initial Public Offering, at a price of $1.00 per Private Placement Warrant, generating total gross proceeds of $6,200,000.
On
October 19, 2021, the underwriters of our Initial Public Offering notified us 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 total
gross proceeds of $15,000,000. Simultaneously with the closing of the partial exercise of the over-allotment option, we consummated the
private placement of an aggregate of 375,000 additional Private Placement Warrants to the Sponsor and Stifel Venture at $1.00 per additional
Private Placement Warrant, generating total gross proceeds of $375,000.
Of
the aggregate 16,500,000 Units sold in our Initial Public Offering, 14,857,500 Units were purchased by certain qualified institutional
buyers or institutional accredited investors that are not affiliated with us, the Sponsor, our directors or any member of our management
team (the “anchor investors”). In connection with the closing of our 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 such Founder Shares to the anchor investors pro rata based on their indirect
ownership interest in such Founder Shares after the completion of our initial Business Combination.
Following
our Initial Public Offering, including the partial exercise of the over-allotment option, and the Private Placement, a total of $166,650,000
was placed in the Trust Account. We incurred $15,892,398 in Initial Public Offering related costs, 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.
For
the six months ended June 30, 2023, cash used in operating activities was $619,260. Net income of $1,168,716 was affected by interest
on marketable securities held in the Trust Account of $2,532,582 and a deferred tax benefit of $293,564. Changes in operating assets
and liabilities reflected a source of cash of $1,038,170 from operating activities during such period.
For
the six months ended June 30, 2022, cash used in operating activities was $656,437. Net loss of $2,117,365 was affected by interest earned
on marketable securities held in the Trust Account of $306,818 and an unrealized loss on marketable securities held in the Trust Account
of $15,403. Changes in operating assets and liabilities used $1,752,343 of cash for operating activities.
As
of June 30, 2023, we had cash and marketable securities held in the Trust Account of $51,589,642 (including approximately $1,526,647
of interest income and unrealized gains) consisting of money market funds that invest in U.S. Treasury securities. Interest income on
the balance in the Trust Account may be used by us to pay taxes. From inception through June 30, 2023, we withdrew an aggregate of $1,315,313
in interest earned from the Trust Account to pay for taxes and $119,387,173 was withdrawn in connection with the redemption of Class
A common stock.
We
intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust
Account (less deferred underwriting commissions and taxes payable), to complete our initial Business Combination. To the extent that
our capital stock or debt is used, in whole or in part, as consideration to complete our initial Business Combination, the remaining
proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make
other acquisitions and pursue our growth strategies.
As of June 30, 2023, we had cash of $553,847 held
outside of the Trust Account. We intend to use the funds held outside the trust account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective
target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses,
and structure, negotiate and complete our initial Business Combination.
In
order to fund working capital deficiencies or finance transaction costs in connection with our initial Business Combination, the Sponsor
or our officers, directors or their affiliates may, but are not obligated to, loan us funds as may be required. If we complete our initial
Business Combination, we would repay such loaned amounts. In the event that our initial Business Combination does not close, such loaned
amounts would be forgiven. Up to $1,500,000 of such working capital loans may be convertible into warrants of the post-combination entity
at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants.
Going
Concern
As of June 30, 2023, we had cash of $553,847 in
our operating bank accounts, $51,589,642 of cash and marketable securities held in the Trust Account to be used for an initial Business
Combination or to repurchase or redeem stock in connection therewith and a working capital deficit of $3,710,282, which excludes franchise
taxes payable of $20,000 and income taxes payable of $777,384, of which such amount will be paid from interest earned on the Trust Account
as well as $629,504 not yet remitted by us for income taxes. As of June 30, 2023, $1,526,647 of the amount on deposit in the Trust Account
represented interest income that is available to pay the Company’s tax obligations.
We may raise additional capital through loans
or additional investments from the Sponsor or our stockholders, officers, directors, or third parties. Our officers and directors, the
Sponsor or their affiliates may but are not obligated to loan us funds, from time to time, in whatever amount they deem reasonable in
their sole discretion, to meet our working capital needs. Based on the foregoing, we do not believe we will have sufficient cash to meet
our needs through the earlier of consummation of a Business Combination or October 13, 2023, or such earlier date as determined by
our board of directors, the deadline to complete a Business Combination pursuant to our Amended and Restated Certificate of Incorporation
(unless otherwise amended by stockholders).
As
a result, we will need to obtain additional financing either to complete our initial Business Combination or because we become obligated
to redeem a significant number of our public shares upon completion of our initial Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business Combination. Subject to compliance with applicable securities laws, we would
only complete such financing simultaneously with the completion of our initial Business Combination. If we do not complete our initial
Business Combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the
Trust Account. In addition, following our initial Business Combination, if cash on hand is insufficient, we may need to obtain additional
financing in order to meet our obligations.
If
we do not consummate an initial Business Combination, or seek and extension, by October 13, 2023, there will be a mandatory liquidation
and subsequent dissolution of the Company. In connection with the Company’s assessment of going concern considerations in accordance
with Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40,
“Presentation of Financial Statements - Going Concern,” we have determined that the liquidity condition due to insufficient
working capital and mandatory liquidation, should an initial Business Combination not occur, and potential subsequent dissolution raises
substantial doubt about our ability to continue as a going concern for at least one year from the date that these financial statements
are issued. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after October
13, 2023. The financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.
Off-Balance
Sheet Arrangements
We
did not have any off-balance sheet arrangements as of June 30, 2023.
Contractual
Obligations
We
do not have any long-term debt obligations, capital lease obligations, operating lease obligations, purchase obligations or other long-term
liabilities, other than an agreement to pay the Sponsor a monthly fee of $25,000 for general and administrative services, including office
space, utilities and administrative support. We began incurring these fees on October 7, 2021, and will continue to incur these fees
monthly until the earlier of the completion of our initial Business Combination and our liquidation.
The
underwriters of our Initial Public Offering are entitled to a deferred fee of $0.40 per Unit sold in our Initial Public Offering, or
$6,600,000 in the aggregate. Subject to the terms of the underwriting agreement, the deferred fee (i) will become payable to the underwriters
from the amounts held in the Trust Account solely in the event that we complete our initial Business Combination and (ii) will be waived
by the underwriters in the event that we do not complete our initial Business Combination.
On April 10, 2023, in connection with the implementation
of the Extension, we issued the New Promissory Note) in the principal amount of up to $840,000 to the Sponsor, which may be drawn down
in connection with the Contributions by the Sponsor or its designees to the Trust Account.
The New Promissory Note does not bear interest
and the principal balance will be payable on the earlier of: (i) the date on which we consummate our initial Business Combination and
(ii) the date that the winding up of the Company is effective. The New Promissory Note is subject to customary events of default, the
occurrence of certain of which automatically triggers the unpaid principal balance of the New Promissory Note and all other sums payable
with regard to the New Promissory Note becoming immediately due and payable. As of June 30, 2023, the outstanding balance of the New Promissory
Note was $420,000. Subsequent to June 30, 2023, the Sponsor contributed an additional $140,000 to us under the New Promissory Note. As
of the date of this filing, the outstanding balance under the New Promissory Note was $560,000.
Critical
Accounting Policies and Estimates
The
preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements, and income and expenses during the period reported. Actual
results could materially differ from those estimates. We have identified the following critical accounting policies:
Class A
Common Stock Subject to Possible Redemption
We
account for our Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing
Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument
and are measured at fair value. Conditionally redeemable shares of 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 our control) are classified as temporary equity. At all other times, shares of Class A common stock are classified as stockholders’
equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence
of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary
equity, outside of the stockholders’ deficit section of our balance sheets.
Share-Based
Payment Arrangements
We
measure and recognize 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
Income (Loss) per Common Share
Net
income (loss) per common share of common stock is computed by dividing net income (loss) by the weighted average number of common shares
issued and outstanding during the period. Subsequent measurement of the redeemable shares of Class A common stock is excluded from income
(loss) per ordinary share as the redemption value approximates fair value. We calculate our earnings per share to allocate net income
(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 income (losses) of our Company.
Income
Taxes
We
account for income taxes under ASC 740, “Income Taxes.” ASC 740, Income Taxes, requires the recognition of deferred tax assets
and liabilities for both the expected impact of differences between the financial statements and tax basis of assets and liabilities
and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation
allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized. We also
recognized accrued interest and penalties related to unrecognized tax benefits as income tax expense. We have identified the United States
as our only “major” tax jurisdiction. We are subject to income taxation by major taxing authorities since inception. These
examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance
with federal and state tax laws. We do not expect that the total amount of unrecognized tax benefits will materially change over the
next twelve months.
Recent
Accounting Standards
Management
does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect
on our financial statements.
Item
3. Quantitative and Qualitative Disclosures About Market Risk.
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise
required under this item.
Item
4. Controls and Procedures.
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons
performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Under
the supervision and with the participation of our management, including our principal executive officer and principal financial officer,
we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)
under the Exchange Act) as of June 30, 2023. Based on this evaluation, our principal executive officer and principal financial officer
have concluded that, as of June 30, 2023, our disclosure controls and procedures were effective.
Changes
in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
during the second fiscal quarter of 2023 covered by this Quarterly Report that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
PART
II - OTHER INFORMATION
Item
1. Legal Proceedings.
None.
Item
1A. Risk Factors.
Factors
that could cause our actual results to differ materially from those in this Quarterly Report are any of the risks described in our Annual
Report on Form 10-K filed with the SEC on February 27, 2023. Any of these factors could result in a significant or material adverse effect
on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial
may also impair our business or results of operations. Except as set forth below, as of the date of this Quarterly Report, there have
been no material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the SEC on February 27, 2023, except
we may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
If
we seek stockholder approval of our initial Business Combination, our initial stockholders, executive officers and directors have agreed
to vote in favor of such initial Business Combination, regardless of how our public stockholders vote, which may result in the approval
of an initial Business Combination even if no public shares are voted in favor of such initial Business Combination.
Unlike many other blank check companies in which
the founders, executive officers, directors and director nominees agree to vote their founder shares in accordance with the majority of
the votes cast by the public stockholders in connection with an initial business combination, our initial stockholders, executive officers
and directors have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with
us, to vote any common stock held by them in favor of our initial Business Combination. In connection with the Extension, we redeemed
11,584,852 public shares and only 4,915,148 public shares remain outstanding. As a result, in addition to the Founder Shares held by our
initial stockholders, executive officers and directors, we would need only 395,075, or 8.0% (assuming all outstanding shares are voted),
or none (assuming only the minimum number of shares representing a quorum are voted), of the 4,915,148 public shares outstanding after
the Extension to be voted in favor of a transaction in order to have our initial Business Combination approved. Accordingly, if we seek
stockholder approval of our initial Business Combination, it is more likely that the necessary stockholder approval will be received than
would be the case if such persons agreed to vote their Founder Shares in accordance with the majority of the votes cast by our public
stockholders.
The
ability of our public stockholders to exercise redemption rights with respect to a large number of our public shares, and the completed
redemptions of public shares in connection with the Extension, could increase the probability that our initial Business Combination would
not be consummated and that you would have to wait for liquidation in order to redeem your public shares.
If our business combination agreement requires
us to use a portion of the cash in the Trust Account to pay the purchase price, or requires us to have a minimum amount of cash at closing,
the probability that our initial Business Combination would not be consummated is increased. This risk may be increasingly prevalent given
recent high levels of redemptions among other special purpose acquisition companies, or SPACs seeking stockholder approval of certain
charter amendments or completing their initial business combinations. This risk is magnified because we paid approximately $119.4 million
out of the Trust Account to stockholders that redeemed their public shares in connection with the Extension. If our initial Business Combination
is unsuccessful, you would not receive your pro rata portion of the Trust Account until we liquidate the Trust Account. If you are in
need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount
to the pro rata amount per share in the Trust Account. In either situation, you may suffer a material loss on your investment or lose
the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.
A
new 1% U.S. federal excise tax could be imposed on us in connection with redemptions by us of our shares, including in connection
with the Extension.
On
August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act
provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly
traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring
on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares
are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase.
However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain
new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions
apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations
and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
On December 27, 2022, the Treasury released
Notice 2023-2, which provides taxpayers with interim guidance on the excise tax that may be relied upon until the Internal Revenue
Service issues proposed Treasury regulations on such matter. Notice 2023-2 includes as one of its exceptions to the excise tax a
distribution in complete liquidation of a “covered corporation”, such as ours, to which Sec. 331 of the U.S. Internal
Revenue Code of 1986, as amended (the “Code”), applies (so long as Sec. 332(a) of the Code also does not also apply).
Although it remains uncertain whether, and/or to what extent, the excise tax could apply to any redemptions of our public shares after
December 31, 2022, including any redemptions in connection with the Extension, our initial Business Combination or in the event we
do not consummate our initial Business Combination by October 13, 2023, we would not expect the excise tax to apply to redemptions of
our public shares that occur during a taxable year in which we completely liquidate under Sec. 331 of the Code.
Any
redemption or other repurchase that occurs after December 31, 2022 may be subject to the excise tax, including in connection with,
our initial Business Combination, certain amendments to our Amended and Restated Certificate of Incorporation (including in connection
with the Extension) or otherwise. Whether and to what extent we would be subject to the excise tax would depend on a number of factors,
including (i) the fair market value of the redemptions and repurchases in connection with the initial Business Combination, certain
amendments to our Amended and Restated Certificate of Incorporation (including in connection with the Extension) or otherwise, (ii) the
structure of the initial Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in
connection with the initial Business Combination (or otherwise issued not in connection with the initial Business Combination but issued
within the same taxable year of the initial Business Combination) and (iv) the content of regulations and other guidance from the
Treasury. In addition, because the excise tax would be payable by us and not by the redeeming holder, the mechanics of any required payment
of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete our initial
Business Combination and in our ability to complete our initial Business Combination.
Recent
increases in inflation and interest rates in the United States and elsewhere could make it more difficult for us to complete our initial
Business Combination.
Recent
increases in inflation and interest rates in the United States and elsewhere may lead to increased price volatility for publicly traded
securities, including ours, or other national, regional or international economic disruptions, any of which could make it more difficult
for us to complete our initial Business Combination.
Item
2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
On
January 15, 2021, we issued an aggregate of 5,750,000 Founder Shares to the Sponsor for an aggregate price of $25,000, or approximately
$0.004 per share, pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. The Sponsor subsequently
transferred 25,000 Founder Shares to each of our independent directors, 276,000 Founder Shares to Stifel Venture and an aggregate of
50,000 Founder Shares to our strategic advisors, in each case at the same price originally paid for such shares. No underwriting discounts
or commissions were paid with respect to such issuances. 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. On October 22, 2021, in connection with the
underwriters’ election to partially exercise their over-allotment option and the forfeiture of the remaining portion of such over-allotment
option, 175,500 and 12,000 Founder Shares were forfeited by the Sponsor and Stifel Venture, respectively, to us at no cost, and 4,125,000
Founder Shares remain outstanding. On April 10, 2023, pursuant to the Class B Conversion, the Founder Shares were converted from shares
of Class B common stock to shares of Class A common stock on a one-for-one basis in accordance with our Amended and Restated Certificate
of Incorporation.
On
October 13, 2021, we consummated our Initial Public Offering of 15,000,000 Units. The Units were sold at an offering price of $10.00
per Unit, generating total gross proceeds of $150,000,000. Each Unit consists of one share of Class A common stock and one-half of one
redeemable warrant, each whole warrant entitling the holder thereof to purchase one share of Class A common stock at an exercise price
of $11.50 per share, subject to adjustment. The warrants will become exercisable 30 days after the consummation of our initial Business
Combination and will expire five years after the consummation of our initial Business Combination, or earlier upon redemption or liquidation.
On
October 19, 2021, the underwriters of our Initial Public Offering notified us 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 total
gross proceeds of $15,000,000.
Stifel
and Mizuho Securities USA LLC served as joint book-running managers for our Initial Public Offering. The securities in the offering were
registered under the Securities Act on a registration statement on Form S-1 (File No. 333-254018) (the “Registration Statement”).
The SEC declared the Registration Statement effective on October 7, 2021.
Simultaneously
with the consummation of our Initial Public Offering, the Sponsor and Stifel Venture purchased an aggregate of 6,200,000 Private Placement
Warrants at a price of $1.00 per Private Placement Warrant, generating total gross proceeds of $6,200,000. Simultaneously with the closing
of the partial exercise of the over-allotment option, we consummated the sale of an aggregate of 375,000 additional Private Placement
Warrants at $1.00 per additional Private Placement Warrant to such purchasers, generating total gross proceeds of $375,000. The issuances
were made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act. No underwriting discounts or
commissions were paid with respect to the Private Placement.
The
Private Placement Warrants are identical to the warrants underlying the Units, except that 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). In addition, the Private Placement Warrants (and the shares of Class A common stock underlying the Private
Placement Warrants) will be subject to transfer restrictions until 30 days after the completion of our initial Business Combination,
subject to certain limited exceptions, and the holders thereof are entitled to certain registration rights, as described in more detail
in the Registration Statement.
We
incurred $15,892,398 of transaction costs, consisting of $2,475,000 in underwriting fees, $6,600,000 in deferred underwriting fees, $541,773
of other offering costs and expenses related to our Initial Public Offering, and $6,275,625 for the fair value of the Founder Shares
attributable to the anchor investors.
After
deducting the underwriting fees (excluding the deferred portion of $6,600,000, which amount will be payable upon consummation of our
initial Business Combination, if consummated) and the offering expenses, the total net proceeds from our Initial Public Offering, including
the partial exercise of the over-allotment option, and the Private Placement was $168,558,227, of which $166,650,000 was placed in the
Trust Account.
In
connection with the implementation of the Extension, our public stockholders redeemed 11,584,852 public shares at a redemption price
of approximately $10.31 per share, for an aggregate redemption amount of $119,387,173. Additionally, on April 10, 2023, we issued the
New Promissory Note in the principal amount of up to $840,000 to the Sponsor, which may be drawn down in connection with the Contributions
by the Sponsor or its designees to the Trust Account. The New Promissory Note does not bear interest and the principal balance will be
payable on the earlier of: (i) the date on which we consummate our initial Business Combination and (ii) the date that our winding up
is effective. The New Promissory Note is subject to customary events of default, the occurrence of certain of which automatically triggers
the unpaid principal balance of the New Promissory Note and all other sums payable with regard to the New Promissory Note becoming immediately
due and payable. The issuance of the New Promissory Note was made pursuant to the exemption from registration contained in Section 4(a)(2)
of the Securities Act of 1933, as amended.
For
a description of the use of the proceeds generated in our Initial Public Offering, including the effects of the Extension, see Part I,
Item 2 of this Quarterly Report.
Item
3. Defaults Upon Senior Securities.
None.
Item
4. Mine Safety Disclosures.
Not
applicable.
Item
5. Other Information.
None.
Item
6. Exhibits.
The
following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report.
(1) |
Previously filed as an
exhibit to our Current Report on Form 8-K filed on October 14, 2021 and incorporated by reference herein. |
(2) |
Previously filed as an
exhibit to our Current Report on Form 8-K filed on March 22, 2022 and incorporated by reference herein. |
(3) |
Previously filed as an
exhibit to our Current Report on Form 8-K filed on April 10, 2023 and incorporated by reference herein. |
(4) |
Previously filed as an
exhibit to our Registration Statement on Form S-1 filed on March 9, 2021 and incorporated by reference herein. |
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
|
SCHULTZE
SPECIAL PURPOSE ACQUISITION CORP. II |
|
|
|
Date: August 3,
2023 |
By: |
/s/
George J. Schultze |
|
Name: |
George J. Schultze |
|
Title: |
Chief
Executive Officer
(Principal Executive Officer) |
Date: August
3, 2023 |
By: |
/s/
Gary M. Julien |
|
Name: |
Gary M. Julien |
|
Title: |
Chief
Financial Officer
(Principal Financial and Accounting Officer) |
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I, George J. Schultze, certify that:
I, Gary M. Julien, certify that:
In connection with the Quarterly Report of
Schultze Special Purpose Acquisition Corp. II (the “Company”) on Form 10-Q for the quarterly period ended June 30,
2023, as filed with the Securities and Exchange Commission (the “Report”), I, George J. Schultze, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002, that:
In connection with the Quarterly Report of
Schultze Special Purpose Acquisition Corp. II (the “Company”) on Form 10-Q for the quarterly period ended June 30,
2023, as filed with the Securities and Exchange Commission (the “Report”), I, Gary M. Julien, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of
2002, that: