References in this report (this "Quarterly Report") to "we," "us" or the
"Company" refer to Social Capital Suvretta Holdings Corp. II. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to SCS 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 and Section 21E of 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 the Company's prospectus for its Initial Public Offering
filed with the SEC. 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.
This Condensed Balance Sheet has been
reported
to give effect to the restatement of our financial statements as of July 2,
2021. Management identified errors made in its historical financial statements
where, at the closing of our Initial Public Offering, we improperly valued our
Class A ordinary shares subject to possible redemption. We previously determined
the Class A ordinary shares subject to possible redemption to be equal to the
redemption value of $10.00 per share of Class A ordinary share while also taking
into consideration a redemption cannot result in net tangible assets being less
than $5,000,001. Management determined that the Class A ordinary shares issued
during the Initial Public Offering can be redeemed or become redeemable subject
to the occurrence of future events considered outside of the Company's control.
Therefore, management concluded that the redemption value should include all
Class A ordinary shares subject to possible redemption, resulting in the Class A
ordinary shares subject to possible redemption being equal to their redemption
value. As a result, management has noted a reclassification error related to
temporary equity and permanent equity. This resulted in a restatement to the
initial carrying value of the Class A ordinary shares subject to possible
redemption with the offset recorded to additional paid-in capital (to the extent
available), accumulated deficit and Class A ordinary shares.
Overview
We are a blank check company incorporated in the Cayman Islands on February 25,
2021, formed for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, reorganization or similar business combination with
one or more businesses. We intend to effectuate our Business Combination using
cash derived from the proceeds of the Initial Public Offering and the sale of
the Private Placement Shares, our shares, debt or a combination of cash, shares
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 a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations nor generated any operating revenues
to date. All activity for the period from February 25, 2021 (inception) through
September 30, 2021 relates to our formation, the Initial Public Offering,
described below, and subsequent to the Initial Public Offering, identifying a
target company for a Business Combination. We do not expect to generate any
operating revenues until after the completion of our Business Combination, at
the earliest. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Account. 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.
For the three months ended September 30, 2021, we had a net loss of $257,130,
which consisted of formation and operating costs of $260,172, offset by interest
earned on marketable securities held in Trust Account of $3,042.
For the period February 25, 2021 (inception) through September 30, 2021, we had
net loss of $262,455, which consisted of formation and operating costs of
$265,497, offset by interest earned on marketable securities held in Trust
Account of $3,042.
Liquidity and Capital Resources
On July 2, 2021, we consummated the Initial Public Offering of 25,000,000 Public
Shares, which includes the partial exercise by the underwriters of their
over-allotment option in the amount of 3,000,000 Public Shares, at $10.00 per
Public Share, generating gross proceeds of $250,000,000. Simultaneously with the
closing of the Initial Public Offering, we consummated the sale of 640,000
Private Placement Shares at a price of $10.00 per Private Placement Share in a
private placement to the Sponsor generating gross proceeds of $6,400,000.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Placement Shares, a total of
$250,000,000 was placed in the Trust Account. We incurred $12,480,145 in Initial
Public Offering related costs, including $4,400,000 of underwriting fees,
$7,700,000 of deferred underwriting fees and $380,145 of other costs.
For the period from February 25, 2021 (inception) through September 30, 2021,
cash used in operating activities was $1,143,300. Net loss of $262,455 was
affected by interest earned on marketable securities held in Trust Account of
$3,042 and formation costs paid through issuance of Class B ordinary shares to
the Sponsor of $5,000. Changes in operating assets and liabilities used $882,803
of cash for operating activities.
As of September 30, 2021, we had cash and marketable securities held in the
Trust Account of $250,003,042. 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 income taxes payable), excluding deferred underwriting
commissions, to complete our Business Combination. To the extent that our share
capital or debt is used, in whole or in part, as consideration to complete our
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.

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As of September 30, 2021, we had cash of $534,762 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,
structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, the Sponsor, or certain of our officers
and directors or their affiliates may, but are not obligated to, loan us funds
as may be required. If we complete a Business Combination, we would repay such
loaned amounts. In the event that a Business Combination does not close, we may
use a portion of the working capital held outside the Trust Account to repay
such loaned amounts but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into shares at
a price of $10.00 per share, at the option of the lender. The shares would be
identical to the Private Placement Shares.
If we are unable to raise such additional capital, we may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, curtailing operations, suspending the pursuit of a
potential transaction, and reducing overhead expenses. We cannot provide any
assurance that new financing will be available to us on commercially acceptable
terms, if at all. These conditions raise substantial doubt about the Company's
ability to continue as a going concern for a reasonable period of time, which is
considered to be one year from the issuance date of the financial statements.
Off-Balance
Sheet Arrangements
We have no obligations, assets or liabilities which would be considered
off-balance
sheet arrangements as of September 30, 2021. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating
off-balance
sheet arrangements. We have not entered into any
off-balance
sheet financing arrangements, established any special purpose entities,
guaranteed any debt or commitments of other entities, or purchased any
non-financial
assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than an agreement to pay an
affiliate of the Sponsor to $10,000 per month for office space, administrative
and support services. We began incurring these fees on June 30, 2021 and will
continue to incur these fees monthly until the earlier of the completion of a
Business Combination and our liquidation.
The underwriters are entitled to a deferred underwriting commission of $0.35 per
Public Share sold in the base offering, or $7,700,000 in the aggregate. The
deferred fee will become payable to the underwriters from the amounts held in
the Trust Account solely in the event that we complete a Business Combination,
subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed 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 revenue and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies.
Class A Ordinary Shares Subject to Possible Redemption
We account for our Class A ordinary shares subject to possible conversion in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Ordinary shares subject to mandatory redemption are classified as a
liability instrument and measured at fair value. Conditionally redeemable
ordinary shares (including ordinary shares that feature redemption rights that
are 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, Class A ordinary shares are classified as
shareholders' equity. Our ordinary shares feature certain redemption rights that
are considered to be outside of our control and subject to occurrence of
uncertain future events. Accordingly, Class A ordinary shares subject to
possible redemption are presented at redemption value as temporary equity,
outside of the shareholders' (deficit) equity section of our condensed balance
sheet.
Net Loss per Ordinary Share
Net loss per ordinary share is computed by dividing net loss by the weighted
average number of ordinary shares outstanding during the period. We have two
classes of shares, which are referred to as Class A ordinary shares and Class B
ordinary shares. Income and losses are shared pro rata between the two classes
of shares. Accretion associated with the redeemable Class A ordinary shares is
excluded from earnings per share as the redemption value approximates fair
value.
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
condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required for smaller reporting companies.
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.

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Under the supervision and with the participation of our management, including
our principal executive officer and principal financial and accounting officer,
we conducted an evaluation of the effectiveness of our disclosure controls and
procedures as of the end of the fiscal quarter ended September 30, 2021, as such
term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based
on this evaluation, our principal executive officer and principal financial and
accounting officer have concluded that solely due to the events that led to the
Company's restatement of its financial statements to reclassify all redeemable
equity instruments to temporary equity from permanent equity, during the period
covered by this report, a material weakness existed and our disclosure controls
and procedures were not effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter of 2021 covered by this Quarterly Report that
has materially affected, or is reasonably likely to materially affect, our
internal control over financial reporting, as the circumstances that led to the
restatement of our financial statement described in Note 2 to the accompanying
financial statements had not yet been identified. Management has identified a
material weakness in internal controls related to the accounting for our complex
financial instruments (including redeemable equity instruments as described
above). In light of the material weakness identified and the resulting
restatement, although we have processes to identify and appropriately apply
applicable accounting requirements, we plan to enhance our processes to identify
and appropriately apply applicable accounting requirements to better evaluate
and understand the nuances of the complex accounting standards that apply to our
financial statements. Our plans at this time include providing enhanced access
to accounting literature, research materials and documents and increased
communication among our personnel and third-party professionals with whom we
consult regarding complex accounting applications. The elements of our
remediation plan can only be accomplished over time, and we can offer no
assurance that these initiatives will ultimately have the intended effects.

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