pcct-10q_20220630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

☐ 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 001-40976

PERCEPTION CAPITAL CORP. II

(Exact name of registrant as specified in its charter)

Cayman Islands

98-1578608

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

315 Lake Street East, Suite 301

Wayzata, MN 55391

(Address of principal executive offices and zip code)

(952) 456-5300

(Registrant’s telephone number, including area code)

N/A

(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 Class A ordinary share and one-half of one redeemable warrant	PCCTU	The Nasdaq Stock Market
Class A ordinary shares, par value $0.0001 per share	PCCT	The Nasdaq Stock Market
Redeemable warrants, each whole warrant exercisable for one Class A ordinary share at an exercise price of $11.50	PCCTW	The Nasdaq Stock Market

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 (Section 232.405 of this chapter) during the preceding 12 months (or 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 11, 2022, there were 23,000,000 shares of the registrant’s Class A ordinary shares, par value $0.0001 per share, and 5,750,000 shares of the registrant's Class B ordinary shares, par value $0.0001 per share, issued and outstanding.

PERCEPTION CAPITAL CORP. II

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION		3

Item 1.	CONDENSED FINANCIAL STATEMENTS	3

	Condensed Balance Sheets as of June 30, 2022 (Unaudited) and December 31, 2021	3

	Condensed Statements of Operations for the three and six months ended June 30, 2022, for the three months ended June 30, 2021, and for the period from January 21, 2021 (inception) through June 30, 2021 (Unaudited)	4

	Condensed Statements of Changes in Shareholders' Equity (Deficit) for the three and six months ended June 30, 2022, for the three months ended June 30, 2021, and for the period from January 21, 2021 (inception) through June 30, 2021 (Unaudited)	5

	Condensed Statements of Cash Flows for the six months ended June 30, 2022 and for the period from January 21, 2021 (inception) through June 30, 2021 (Unaudited)	6

	Notes to Unaudited Condensed Financial Statements	7

Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	20

Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	24

Item 4.	CONTROLS AND PROCEDURES	24

PART II - OTHER INFORMATION		25

Item 1.	LEGAL PROCEEDINGS	25

Item 1A.	RISK FACTORS	25

Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	26

Item 3.	DEFAULTS UPON SENIOR SECURITIES	27

Item 4.	MINE SAFETY DISCLOSURES	27

Item 5.	OTHER INFORMATION	27

Item 6.	EXHIBITS	28

SIGNATURES		29

PART 1 - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

PERCEPTION CAPITAL CORP. II

CONDENSED BALANCE SHEETS

	June 30, 2022			December 31, 2021
	(Unaudited)
Assets:
Current assets:
Cash	$	403,375		$	818,833
Prepaid expenses - current		301,929			342,364
Total current assets		705,304			1,161,197
Prepaid expenses - noncurrent	—				107,084
Investments held in Trust Account		233,796,790			233,452,747
Total Assets	$	234,502,094		$	234,721,028
Liabilities and Shareholders' Deficit:
Current liabilities:
Accounts payable	$	2,902		$	10,035
Accounts payable - related party		102,103			49,182
Accrued expenses		406,854			126,644
Accrued offering costs		224,235			231,235
Total current liabilities		736,094			417,096
Deferred underwriting fee payable		8,050,000			8,050,000
Total Liabilities		8,786,094			8,467,096
Commitments and Contingencies (Note 6)
Class A ordinary shares subject to possible redemption, 23,000,000 shares at redemption value of $10.15 per share		233,696,790			233,450,000
Shareholders' Deficit:
Preference shares, $0.0001 par value; 5,000,000 shares authorized; no shares issued and outstanding	—				—
Class A ordinary shares, $0.0001 par value; 500,000,000 shares authorized; no shares issued and outstanding (excluding 23,000,000 shares subject to possible redemption)	—				—
Class B ordinary shares, $0.0001 par value; 50,000,000 shares authorized; 5,750,000 issued and outstanding		575			575
Additional paid-in capital		—			—
Accumulated deficit		(7,981,365	)		(7,196,643	)
Total Shareholders' Deficit		(7,980,790	)		(7,196,068	)
Total Liabilities and Shareholders' Deficit	$	234,502,094		$	234,721,028

The accompanying notes are an integral part of the unaudited condensed financial statements.

PERCEPTION CAPITAL CORP. II

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the Three Months Ended June 30, 2022			For the Three Months Ended June 30, 2021		For the Six Months Ended June 30, 2022			For the Period from January 21, 2021 (Inception) Through June 30, 2021
Operating and formation costs	$	373,599		$	—	$	881,975		$	5,500
Loss from operations		(373,599	)		—		(881,975	)		(5,500	)
Interest income on investments held in Trust Account		325,846			—		344,043			—
Net loss	$	(47,753	)	$	—	$	(537,932	)	$	(5,500	)

Basic and diluted weighted average shares outstanding, Class A ordinary shares		23,000,000			—		23,000,000			—
Basic and diluted net loss per share, Class A ordinary shares	$	(0.00	)	$	—	$	(0.02	)	$	—
Basic and diluted weighted average shares outstanding, Class B ordinary shares⁽¹⁾⁽²⁾		5,750,000			5,000,000		5,750,000			5,000,000
Basic and diluted net loss per share, Class B ordinary shares	$	(0.00	)	$	0.00	$	(0.02	)	$	(0.00	)

⁽¹⁾ Excludes up to 750,000 Class B ordinary shares subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriter for the three months ended June 30, 2021 and for the period from January 21, 2021 (inception) through June 30, 2021. The underwriters exercised their over-allotment option in full on November 1, 2021; thus, no ordinary shares remain subject to forfeiture (see Note 6).

⁽²⁾ In August 2021, the Sponsor surrendered 1,437,500 Class B ordinary shares for no consideration, resulting in an aggregate of 5,750,000 Class B ordinary shares outstanding. All share and per-share amounts have been retroactively restated to reflect the share surrender (see Note 5).

The accompanying notes are an integral part of the unaudited condensed financial statements.

PERCEPTION CAPITAL CORP. II

CONDENSED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)

(UNAUDITED)

	Class A ordinary shares				Class B ordinary shares				Additional		Accumulated			Total Shareholders'
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Deficit
Balance - January 1, 2022		—	$	—		5,750,000	$	575		—	$	(7,196,643	)	$	(7,196,068	)
Net loss		—		—		—		—		—		(490,179	)		(490,179	)
Balance - March 31, 2022		—		—		5,750,000		575		—		(7,686,822	)		(7,686,247	)
Net loss		—		—		—		—		—		(47,753	)		(47,753	)
Remeasurement of Class A common stock to redemption amount		—		—		—		—		—		(246,790	)		(246,790	)
Balance - June 30, 2022		—	$	—		5,750,000	$	575		—	$	(7,981,365	)	$	(7,980,790	)

	Class A ordinary shares				Class B ordinary shares				Additional		Accumulated			Total Shareholders'
	Shares		Amount		Shares		Amount		Paid-in Capital		Deficit			Equity
Balance - January 21, 2021 (Inception)		—	$	—		—	$	—	$	—	$	—		$	—
Issuance of Class B ordinary shares to Sponsor⁽¹⁾⁽²⁾		—		—		5,750,000		575		24,425		—			25,000
Net loss		—		—		—		—		—		(5,500	)		(5,500	)
Balance - March 31, 2021		—		—		5,750,000		575		24,425		(5,500	)		19,500
Net loss		—		—		—		—		—		—			—
Balance - June 30, 2021		—	$	—		5,750,000	$	575	$	24,425	$	(5,500	)	$	19,500

⁽¹⁾ Includes up to 750,000 Class B ordinary shares subject to forfeiture if the over-allotment option is not exercised in full or in part by the underwriter. The underwriters exercised their over-allotment option in full on November 1, 2021; thus, no ordinary shares remain subject to forfeiture (see Note 6).

The accompanying notes are an integral part of the unaudited condensed financial statements.

PERCEPTION CAPITAL CORP. II

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Six Months Ended June 30, 2022			For the Period from January 21, 2021 (Inception) Through June 30, 2021
Cash Flows from Operating Activities:
Net loss	$	(537,932	)	$	(5,500	)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest income on investments held in Trust Account		(344,043	)	—
Changes in operating assets and liabilities:
Prepaid expenses		147,519		—
Accounts payable		(7,133	)	—
Accounts payable - related party		52,921		—
Accrued expenses		280,210			5,500
Net cash used in operating activities		(408,458	)	—
Cash Flows from Financing Activities:
Payment of offering costs		(7,000	)	—
Net cash used in financing activities		(7,000	)	—
Net Change in Cash		(415,458	)	—
Cash - Beginning of period		818,833		—
Cash - End of period	$	403,375		$	—
Supplemental disclosures of non-cash investing and financing activities:
Remeasurement of Class A ordinary shares subject to redemption to redemption amount	$	246,790		$	—
Deferred offering costs paid in exchange for issuance of Class B ordinary shares to Sponsor	$	—		$	25,000
Deferred offering costs included in accrued offering costs	$	—		$	300,467
Proceeds on promissory note - related party used to pay deferred offering costs	$	—		$	141,166

The accompanying notes are an integral part of the unaudited condensed financial statements.

PERCEPTION CAPITAL CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN

Perception Capital Corp. II (the “Company”) is a blank check company incorporated as a Cayman Islands exempted company on January 21, 2021. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses (a “Business Combination”).

The Company is not limited to a particular industry or geographic region 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, 2022, the Company had not commenced any operations. All activity for the period from January 21, 2021 (inception) through June 30, 2022 relates to the Company’s formation and initial public offering (“Initial Public Offering”), and since the closing of the Initial Public Offering, the search for a prospective initial Business Combination. The Company will not generate any operating revenues until after the completion of a Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income from the proceeds derived from the Initial Public Offering. The Company has selected December 31 as its fiscal year end.

The registration statement for the Company's Initial Public Offering was declared effective on October 27, 2021. On November 1, 2021, the Company consummated the Initial Public Offering of 23,000,000 units, (the “Units” and, with respect to the Class A ordinary shares included in the Units sold, the “Public Shares”), including 3,000,000 Units issued pursuant to the exercise of the underwriters' over-allotment option in full, generating gross proceeds of $230,000,000, which is discussed in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 10,050,000 warrants (the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to Perception Capital Partners II LLC (the “Sponsor”), including 1,050,000 Private Placement Warrants issued pursuant to the exercise of the underwriters' over-allotment option in full, generating gross proceeds of $10,050,000, which is described in Note 4.

Following the closing of the Initial Public Offering, an amount of $233,450,000 ($10.15 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”), and will be invested only in U.S. government treasury obligations with maturities of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described below.

Transaction costs related to the issuances described above amounted to $13,507,794, consisting of $4,600,000 of cash underwriting fees, $8,050,000 of deferred underwriting fees and $857,794 of other offering costs.

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 a Business Combination with one or more target businesses that together have an aggregate fair market value of at least 80% of the value of the Trust Account (excluding the deferred underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into an initial Business Combination. The Company will only complete a Business Combination if the post-transaction 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 of 1940, as amended (the “Investment Company Act”).

PERCEPTION CAPITAL CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

The Company will provide its holders of Public Shares (the “Public Shareholders”) 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 general meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek shareholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Shareholders 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 $10.15 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants. The Public Shares subject to redemption are 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").

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 shareholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a shareholder vote is not required by law and the Company does not decide to hold a shareholder vote for business or other reasons, the Company will, pursuant to its amended and restated memorandum and articles of association (the “Amended and Restated Memorandum and Articles of Association”), 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, shareholder approval of the transaction is required by law, or the Company decides to obtain shareholder 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 shareholder approval in connection with a Business Combination, the Sponsor has agreed to vote its 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 Shareholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or don’t vote at all.

Notwithstanding the above, if the Company seeks shareholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Memorandum and Articles of Association provides that a Public Shareholder, together with any affiliate of such shareholder or any other person with whom such shareholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Sponsor has agreed to waive (i) redemption rights with respect to its Founder Shares and Public Shares held by it in connection with the completion of a Business Combination, (ii) redemption rights with respect to any Founder Shares and Public Shares held by it in connection with a shareholder vote to amend the Company's Amended and Restated Memorandum and Articles of Association to modify the substance or timing of the Company's obligation to allow redemption in connection with an initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete an initial Business Combination within 12 months from the closing of the Initial Public Offering, (or up to 18 months from the closing of the Initial Public Offering if the Sponsor extends the time to complete an initial Business Combination by depositing into the Trust Account $2,300,000 ($0.10 per share in either case) for each three-month extension), or with respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity; and (iii) rights to liquidating distributions from the Trust Account with respect to any Founder Shares it holds if the Company fails to complete an initial Business Combination within 12 months (or up to 18 months if the Sponsor exercises its extension options) from the closing of the Initial Public Offering or any extended period of time that the Company may have to consummate an initial Business Combination. However, if the Sponsor acquires 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 18 months from the closing of the Initial Public Offering.

The Company will have until 12 months (November 1, 2022) (or up to 18 months if the Sponsor exercises its extension options) from the closing of the Initial Public Offering 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

PERCEPTION CAPITAL CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

than 10 business days thereafter, redeem 100% of 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 and not previously released to the Company to pay its taxes (less up to $100,000 of interest to pay dissolution expenses and which interest shall be net of taxes payable), divided by the number of then issued and outstanding Public Shares, which redemption will completely extinguish Public Shareholders’ rights as shareholders (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 shareholders and board of directors, liquidate and dissolve, subject in each case to the Company's obligations under Cayman Islands 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 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 the Initial Public Offering price per Unit.

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.15 per Public Share or (2) such lesser amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, 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.

Going Concern

As of June 30, 2022, the Company had $403,375 in cash held outside of the Trust Account and working capital deficit of $30,790. Subsequent to the consummation of the Initial Public Offering, the Company’s liquidity will be satisfied through the net proceeds from the private placement held outside of the Trust Account and proceeds made available to the Company under Working Capital Loans (as defined in Note 5). While the Company expects to have sufficient access to additional sources of capital if necessary, there is no current commitment on the part of any financing source to provide additional capital and no assurances can be provided that such additional capital will ultimately be available if necessary.

The Company will have until November 1, 2022 to complete a Business Combination. If the Company anticipates that it not be able to consummate a Business Combination by November 1, 2022, the Sponsor may cause the Company to extend the available time to consummate a Business Combination by three months. In order to exercise the extension option, the Sponsor must deposit into the Trust Account $0.10 per share (a total of $2,300,000) on or prior to the date of the applicable deadline. The Sponsor may exercise the extension option up to two times, allowing for up to an additional six months (extending the Combination Period to May 1, 2023) to complete a Business Combination. If a Business Combination is not consummated by November 1, 2022 and an extension has not been effected as described above, there will be a mandatory liquidation and subsequent dissolution of the Company.

PERCEPTION CAPITAL CORP. II

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the accompanying condensed financial statements are issued. There is no assurance that the Company’s plans to raise additional capital (to the extent ultimately necessary) or to consummate a Business Combination will be successful or successful within the Combination Period (including any extended period of time as described above). The accompanying condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, close of the Initial Public Offering, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome

SEC Form 10-Q filed by Perception Capital Corp. II