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 March 17, 2022. 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.





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Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities through March 31, 2022 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. 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 March 31, 2022, we had a net loss of $378,121, which consists of formation and operating costs of $416,537 and an unrealized gain on marketable securities held in the Trust Account of $2,628, offset by interest on marketable securities held in the Trust Account of $41,044.

For the three months ended March 31, 2021, we had a net loss of $1,099, which consists of formation and operating costs of $1,100, offset by interest income earned on our bank account of $1.

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, par value $0.0001 per share ("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 three months ended March 31, 2022, cash used in operating activities was $431,578. Net loss of $378,121 was affected by interest earned on marketable securities held in the Trust Account of $41,044 and an unrealized gain on marketable securities held in the Trust Account of $2,628. Changes in operating assets and liabilities used $127,459 of cash for operating activities.

For the three months ended March 31, 2021, cash used in operating activities was $99. Net loss of $1,099 was affected by changes in operating assets and liabilities provided $1,000 of cash for operating activities.

As of March 31, 2022, we had cash and marketable securities held in the Trust Account of $166,668,364 (including approximately $18,364 of interest income and unrealized gains) consisting of U.S. Treasury Bills with a maturity of 185 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes. Through March 31, 2022, we drew $37,301 in interest earned from the Trust Account to pay for taxes.

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 March 31, 2022, we had cash of $712,352 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.





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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 March 31, 2022, we had $712,352 in our operating bank accounts, $166,668,364 in marketable securities held in the Trust Account to be used for a Business Combination or to repurchase or redeem stock in connection therewith and working capital of $1,016,368, which excludes a portion of franchise taxes payable of $18,364, of which such amount will be paid from interest earned on the Trust Account. As of March 31, 2022, $18,364 of the amount on deposit in the Trust Account represented interest income, which is available to pay our 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 believe we will have sufficient cash to meet our needs through the earlier of consummation of a Business Combination or April 13, 2023, the deadline to complete a Business Combination pursuant to our Amended and Restated Certificate of Incorporation (unless otherwise amended by stockholders).

However, if our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may 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.

In connection with our 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 until April 13, 2023, to consummate an initial Business Combination. It is uncertain that we will be able to consummate an initial Business Combination by this time. If an initial Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution of the Company. We have determined that the 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. No adjustments have been made to the carrying amounts of assets or liabilities should we be required to liquidate after April 13, 2023.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of March 31, 2022.





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.

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.





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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 Loss per Common Share

Net loss per common share of common stock is computed by dividing net loss by the weighted average number of common shares issued and outstanding during the period. Subsequent measurement of the redeemable shares of Class A common stock is excluded from loss per ordinary share as the redemption value approximates fair value. We calculate our earnings per share to allocate net loss pro rata to shares of Class A and Class B common stock. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of common stock share pro rata in the loss of our company.





Recent Accounting Standards

In August 2020, the FASB issued Accounting Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity's own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity's own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective January 1, 2022 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. We adopted ASU 2020-06 effective January 1, 2021. The adoption of ASU 2020-06 did not have an impact on our financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial statements.

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