United States securities and exchange commission logo
April 25, 2023
Scott Honour
Chairman of the Board
Perception Capital Corp. II
315 Lake Street East, Suite 301
Wayzata, MN 55391
Re: Perception Capital
Corp. II
Preliminary Proxy
Statement on Schedule 14A
Filed March 29,
2023
File No. 001-40976
Dear Scott Honour:
We have reviewed your filing and have the following comments. In
some of our
comments, we may ask you to provide us with information so we may better
understand your
disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Preliminary Proxy Statement on Schedule 14 A filed March 29, 2023
Q. What will be the relative equity stakes of public shareholders, the
Sponsor, Meteora and the
Spectaire Stockholders in NewCo upon . . ., page xiv
1. Please revise your
post-Closing share ownership table on pages xiv and 7 to include
interim redemption
scenarios in your sensitivity analysis and to disclose all possible
sources and extent of
dilution that shareholders who elect not to redeem their shares may
experience in
connection with the business combination. Provide disclosure of the impact
of each significant
source of dilution, including the amount of equity held by Sponsor and
Initial Shareholders,
the Spectaire earn-out shares, convertible securities, including
warrants retained by
redeeming shareholders, at each of the redemption levels detailed in
your sensitivity
analysis, including any needed assumptions. Please also disclose the
effective underwriting
fee on a percentage basis for shares at each redemption level
presented in your
sensitivity analysis.
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 225, 2023 Page 2
Page
FirstName LastName
Q. Do any of PCCT's Directors or officers or the sponsor or is affiliates have
interests in the
business combination that may differ . . ., page xxiv
2. We note that footnote 1 to the post-business combination ownership
table on page xxiv
assumes that the Sponsor exercised its option to convert up to
$2,500,000 of the unpaid
principal balance on the Working Capital Note into redeemable
warrants. However, it
appears that the 16,430,000 shares that will be owned by the Sponsor
post-Business
Combination only include the shares issuable upon the exercise of the
10,050,000 private
placement warrants and the 720,000 Extension Warrants, and the
5,660,000 shares
issuable upon conversion of the Class B Shares. Please revise to
resolve this apparent
discrepancy and to disclose how many redeemable warrants the Sponsor
could receive if it
exercises its option to convert the Working Capital Note and the
conversion rate of the
redeemable warrants.
Unaudited Pro Forma Condensed Combined Financial Information, page 68
3. We note based on adjustment (i) to the pro forma condensed combined
balance sheet that
the working capital note and extension note will be converted into
warrants. Please
discuss this conversion into warrants in your Description of the
Business Combination.
Please also disclose the terms of the warrants and how you intend to
account for the
warrants.
4. We note adjustment (l) regarding the Forward Purchase Agreement with
Meteora and that
you determined a liability should be recorded. Please expand your
disclosures to address
the key terms that led you to determine liability accounting was
appropriate under ASC
480 and ASC 815. Please also further clarify how you are reflecting
this agreement in
your pro forma financial information. Specifically it appears for your
balance sheet
presentation you are not assuming Meteroa purchases shares whereas for
purposes of
determining pro forma earnings per share amounts you are assuming that
Meteora
purchased the maximum 2,457,892 shares. Please disclose your basis for
your
assumptions and also your consideration of the guidance in Rule
11-02(a)(10) of
Regulation S-X which indicates that additional pro forma presentations
which give effect
to the range of possible results may be necessary if the transaction
is structured in such a
manner that significantly different results may occur.
5. We note based on your disclosures on page 69 that outstanding options
to purchase
Spectaire common stock, restricted stock units relating to Spectaire
common stock, and
restricted shares of Spectaire Common stock will be converted as part
of the merger
terms. Please address you consideration of whether there will be any
financial statement
impact of these exchanges. In this regard, we note that there were
significant amounts of
unrecognized compensation expense at December 31, 2022 based on
disclosures on page
F-41.
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 325, 2023 Page 3
Page
FirstName LastName
6. We note adjustment (m) indicates that you have preliminarily
determined that the Earnout
Shares should be accounted for as a liability. Please further expand
your disclosures to
clarify the specific terms that resulted in this determination
pursuant to your consideration
of ASC 815-40-15. Please also disclose and discuss the potential
impact of the shares on
future results and provide a sensitivity analysis that quantifies the
potential impact that
changes in the per share market price of the post combination common
stock could have
on the pro forma financial statements. Refer to Article 11-02(b)(10)
of Regulation S-X.
7. In note (1) on page 79, please state the share amount of any dilutive
outstanding securities
that were excluded from the computation of pro forma net loss per
share because of their
anti-dilutive effect.
8. Please expand Note (L) on page 74 to clarify why your current assets
are 95% higher in
the maximimum redemption scenario relative to the minimum redemption
scenario.
Quantify the impact of each specific assumption impacting your Escrow
cash adjustment.
Disclose any known factors that could reasonably be expected to cause
your actual
Escrow cash balance in a maximum redemption scenario to materially
dffer from the
amount presented. Disclose the restrictions on your ability to use the
Escrow cash funds
and what your strategy is to sustain operations with zero unrestricted
cash available. Note
also the guidance in Article 11-02(a)(10) of Regulation S-X.
Purchase of PCCT Ordinary Shares, page 90
9. We note the disclosure on page 90 that the Sponsor, Spectaire and its
affiliates "may"
purchase PCCT Ordinary Shares in the open market and vote the
securities in favor of
approval of the business combination transaction. Please provide your
analysis on how
such potential purchases would comply with Rule 14e-5.
Security Ownership of Certain Beneficial Owners and Management of PCCT and
NewCo, page
131
10. Please also disclose the Sponsor and its affiliates total potential
ownership interest in the
combined company, assuming the exercise and conversion of all
securities, including
warrants. We note that the 5,660,000 shares to be beneficially owned
by your Sponsor
after the business combination does not appear to assume the exercise
of the Private
Placement Warrants, the Extension Warrants or the redeemable warrants
issuable upon
conversion of the Working Capital Note.
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 425, 2023 Page 4
Page
FirstName LastName
Information About NewCo Following the Business Combination, page 134
11. Please revise to provide a supporting basis for the following
statements:
on page 134, "Our asset-light business model delivers a
win-win-win for Spectaire,
for our customers, and for the environment"; and "We believe that,
prior to our
introduction of AireCore , there was no practical way to
directly measure real-time
transportation emissions";
on page 135, "We believe that AireCore is the world s first
and only device able to
address [the technology gap between emissions requirements and
access to emissions
management capabilities] by delivering real-time, accurate, and
verifiable emissions
measurements";
throughout your prospectus, that AireCore has "industry leading"
accuracy;
on page 178, that Spectaire is part of a "Large and Growing Market
with No Viable
Competitors" and that "The PCCT Board also believed that Spectaire
s micro-mass-
spectrometer (MMS) device is the world s first and only MMS that
can directly
measure actual emissions in vehicular use and is a mobile,
affordable and reliable
emissions measurement product."
Spectaire's AireCore Solution, page 135
12. We note your disclosure that AireCore is protected by a robust
patent portfolio. Please
expand your disclosure to identify by patent family or otherwise the
type
of patent protection (such as composition of matter, use or process),
the technology to
which it relates, the relevant jurisdiction and the expiration date.
Ensure that you segregate
issued patents and patent applications.
Spectaire's Business Model, page 151
13. We note your disclosures regarding projected gross margin percentages.
Given the
limited historical operations of Spectaire including no revenues have
been recorded,
please provide disclosures in order for an investor to understand the
reasonableness of the
assumptions underlying the projected amounts as well as the inherent
limitations of the
projected amounts.
Executive and Director Compensation, page 166
14. Please revise to also provide executive compensation disclosure for
the fiscal year ended
December 31, 2020.
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 525, 2023 Page 5
Page
FirstName LastName
The Business Combination
Background to the Business Combination, page 171
15. Please revise the background section to provide additional detail
regarding
the target businesses other than Spectaire that you executed letters
of intent with. Include,
without limitation, the industries of the target businesses, proposed
valuations, the date
that the targets were identified, and the dates that discussions began
and ceased. To the
extent that any preliminary proposals were submitted, please disclose
all material proposal
terms, including transaction structure, valuation, and equity split
distribution.
16. We note that after initially being introduced to Spectaire for a
capital raising transaction,
discussions stalled until September 7, and then again until late
November 2022. Please
clarify what consideration PCCT gave to participating in a capital
raising transaction with
Spectaire, why it chose to pursue a business combination with
Spectaire instead, and at
what point PCCT began to consider Spectaire a potential target for a
business
combination. Please also disclose who reinitiated the discussions
regarding a potential
business combination between PCCT and Spectaire and the date that
these discussions
resumed.
17. Please provide more insight into the reasons for and negotiations
behind management s
decision regarding the ultimate amount and form of consideration for
the business
combination, including (i) how you determined the valuation in the
letter of intent
submitted by PCCT on November 30, 2022; (ii) how the parties
determined the structure
of the transaction and whether any alternative structures were
considered; (iii) how the
parties determined the amount of the earn-out; and (iv) changes from
letter of intent to the
final merger agreement. Please include the methodology employed in
reaching
the valuation, the underlying assumptions and conclusions of the PCCT
board.
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 625, 2023 Page 6
Page
FirstName LastName
18. Please expand your background discussion to provide more detailed
disclosure regarding
key negotiation considerations and how they changed over time.
Currently the background
disclosure generally references negotiation topics and terms of the
proposed merger
agreement, without providing details or explaining their significance,
the parties' positions
on the terms throughout the negotiations, or how the terms may have
changed before
being reflected in the proposed initial business combination. For each
exchanged draft and
discussion related to the terms of merger agreement, please elaborate
on the terms
discussed, including each material proposal, the proposing party, the
reasons for the terms,
each party's position on the issues, and how you reached agreement on
the final terms. In
addition, please expand the description of the transaction timeline to
include any relevant
disclosure to address:
whether the sponsor and management and affiliates have a track
record with SPACs
and, if so, balanced disclosure about this record and the
outcomes of the prior
transactions;
whether the sponsor has other SPACs in the process of searching
for a target
company and whether the sponsor considered more than one active
SPAC to be the
potential acquirer and how the final decision was reached;
the negotiation of any arrangements for any shareholder to waive
its redemption
rights; and
any discussions involving continuing employment or involvement for
any persons
affiliated with PCCT before the merger.
19. We note that the Letter of Intent signed December 1, 2022 contemplated
that PCCT would
arrange an equity line of credit of at least $50 million, a $25
million forward share
purchase agreement prior to signing of a definitive agreement and/or a
PIPE of
$25 million or more between signing and closing. Please disclose the
background and any
discussions related to the need to obtain additional financing,
including:
why the option of a forward share purchase agreement was selected;
whether PCCT met with any potential PIPE investors or pursued any
other financing
arrangements;
who selected Meteora for the forward share purchase agreement;
what relationships did the Meteora have with PCCT, the Sponsor and
its affiliates,
and Jeffries;
how the terms of the Forward Purchase Agreement evolved in the
drafts exchanged
between December 13, 2022 and January 10, 2023; and
the parties' positions on these terms.
Please also clarify whether disclose whether there were any valuations
or other material
information about PCCT, Spectaire, or the de-SPAC transaction provided
to Meteora or
other potential PIPE investors that have not been disclosed publicly.
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 725, 2023 Page 7
Page
FirstName LastName
20. We note that at various meetings in December and January,
representatives of PCCT and
Spectaire discussed Spectaire's business model and certain related
assumptions and
variables, Spectaire's financial model and related assumptions,
capital requirements, path
to scale, customer pipeline and the capabilities of Spectaire
products. Please revise your
disclosure to discuss what in particular was discussed with respect to
these topics, as well
as the relevant positions of each party and how these topics
influenced the terms of the
transaction.
21. We note that representatives of PCCT reviewed and discussed
Spectaire's financial model
and its underlying assumptions in July 2022 and the December 14, 2022
due diligence
session. Please elaborate upon the content of Spectaire's financial
model and
explain whether it relied upon financial projections of any kind. To
the extent
that PCCT's Board, officers and/or directors reviewed projected
financial information
provided by Spectaire, please revise to disclose such projections, how
the board used
any projections provided and discuss all material assumptions used to
develop
the projections. We note, for example, your statement on page 178 that
"Spectaire expects
to achieve positive EBITDA and cash flow by 2024." Also discuss the
possible impact if
the projections are not correct and clarify when the projections were
provided.
22. We note that it does not appear that PCCT Board sought a third-party
valuation and did
not receive any valuation report or opinion from a third party in
connection with the
business combination. Please disclose any discussions related to
obtaining a fairness
opinion for the business combination and the basis for the PCCT board
determining it was
not necessary to obtain a fairness opinion for the business
combination.
The PCCT Board's Reasons for Approval of the Merger, page 177
23. Please disclose whether and how the Board took into account the
consideration to be paid
for the transaction. If the Board did not take this factor into
account, please explain why.
U.S. Federal Income Tax Considerations, page 203
24. We note that the merger agreement indicates that the parties intend
for the merger to be
treated as a reorganization under Section 368(a) of the Internal
Revenue Code. If you
believe the business combination will be tax free, please disclose an
opinion of counsel
that supports this conclusion. Furthermore, indicate whether the
receipt of a tax opinion as
to the tax free nature of the transaction is a condition to the merger
Scott Honour
FirstName
Perception LastNameScott
Capital Corp. II Honour
Comapany
April NamePerception Capital Corp. II
25, 2023
April 825, 2023 Page 8
Page
FirstName LastName
Certain Relationships and Related Party Transactions - NewCo
Forward Purchase Agreement, page 231
25. We note that PCCT has entered into a forward stock purchase agreement
with Meteora.
Please provide your analysis demonstrating how this agreement complies
with Rule 14e-5.
Financial Statements of Spectaire, Inc.
Report of Independent Registered Public Accounting Firm, page F-27
26. The accountant's report is missing the accounting firm's signature.
Please obtain and file a
revised accountant s report that complies with Rule 2-02(a) of
Regulation S-X.
Note 1. Organization and Business Operations, page F-32
27. We note that you determined that MircoMS was the accounting acquirer
in the
recapitalization transaction that took place in December 2022. Please
expand your
disclosures to address how you made this determination pursuant to ASC
805-10-25-5 as
well as ASC 805-10-55-11 through 55-15. Please address the specific
factors you
considered including the relative voting rights that each entity held
in the combined entity.
28. Please tell us what consideration you gave as to whether the financial
statements of
Spectaire Inc. prior to the merger needed to be provided pursuant to
Rule 8-04 of
Regulation S-X.
Note 13. Subsequent Events, page F-43, page F-43
29. Please complete the date through which subsequent events were
evaluated.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
You may contact Nudrat Salik at 202-551-3692 or Al Pavot at 202-551-3738
if you have
questions regarding comments on the financial statements and related matters.
Please contact
Jordan Nimitz at 202-551-5831 or Celeste Murphy at 202-551-3257 with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of
Industrial Applications and
Services
cc: Michael Mies, Esq.