References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Tuscan Holdings Corp. II. References to our "management" or our "management team" refer to our officers and directors, and references to the "Sponsor" refer to Tuscan Holdings Acquisition 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 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 Form 10-Q 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 Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (the "SEC") on April 25, 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 March 5, 2019 for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sale of the Private Securities, our capital stock, debt or a combination of cash, stock and debt.

All activity through September 30, 2022 relates to our formation, our Initial Public Offering, which was consummated on July 16, 2019, and searching for a target company for a Business Combination.





Recent Developments

On January 5, 2021, we received a notice from the staff of the Listing Qualifications Department of the Nasdaq Stock Market stating that we were no longer in compliance with Nasdaq Listing Rule 5620(a) for continued listing due to its failure to hold an annual meeting of stockholders within twelve months of the end of our fiscal year ended December 31, 2019. In accordance with Nasdaq Listing Rule 5810(c)(2)(G), we submitted a plan to regain compliance on February 17, 2021. Nasdaq accepted our plan and granted us an extension through June 29, 2021 to hold an annual meeting. We held the annual meeting on April 14, 2021, and extended the date by which the Company has to consummate a Business Combination from April 16, 2021 to September 30, 2021. On September 28, 2021, the Company held a stockholder meeting to further extend the date by which the Company has to consummate a Business Combination from September 30, 2021 to December 31, 2021. As part of the meeting, stockholders redeemed 2,284,305 shares of common stock for an aggregate cash balance of approximately $23,059,000. On December 27, 2021, the Company held a stockholder meeting to further extend the date by which the Company has to consummate a Business Combination from December 31, 2021 to March 31, 2022. As part of the meeting, stockholders redeemed 3,099,310 shares of common stock for an aggregate cash balance of approximately $31,596,000. On March 29, 2022, the Company held a stockholder meeting to further extend the date by which the Company has to consummate a Business Combination from March 31, 2022 to June 30, 2022. As part of the meeting, stockholders redeemed 6,650,144 shares of common stock for an aggregate cash balance of approximately $67,982,000. On June 21, 2022, the Company held a stockholder meeting to further extend the date by which the Company has to consummate a Business Combination from June 30, 2022 to December 31, 2022. As part of the meeting, stockholders redeemed 39,400 shares of common stock for an aggregate cash balance of approximately $407,192.





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On May 17, 2022, we entered into a Business Combination Agreeement ("Merger Agreement) with Surf Air Global Limited ("Surf"), Surf Air Mobility Inc., a wholly-owned subsidiary of Surf ("Parentco"), THCA Merger Sub Inc., a wholly-owned subsidiary of Parentco ("Merger Sub I"), and SAGL Merger Sub Limited, a wholly-owned subsidiary of Parentco ("Merger Sub II" and together with Surf, Parentco and Merger Sub I, the "Surf Entities").

Pursuant to the Merger Agreement, upon the closing of the transactions contemplated by the Merger Agreement (the "Transactions"), Merger Sub I will merge with and into our company, with our company surviving, and, simultaneously therewith, Merger Sub II will merge with and into Surf, with Surf surviving (collectively, the "Mergers"). The Merger Agreement contemplates a related Business Combination transaction pursuant to which on the closing date a wholly-owned subsidiary of Parentco will be merged with and into Southern Airways Corporation ("Southern"), with Southern surviving (the "Southern Acquisition"). Following the Mergers and the Southern Acquisition, (i) the Company, Southern and Surf will be wholly-owned subsidiaries of Parentco, (ii) the security holders of the Company, Surf and Southern will be security holders of Parentco, (iii) Parentco will be the publicly traded company and (iv) Parentco's business will be the business of Surf and Southern.





Results of Operations

We have neither engaged in any operations nor generated any revenues to date. Our only activities from inception through September 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, after our 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. We generate non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. 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, 2022, we had a net loss of $91,604, which consisted of the formation and operating costs of $378,417 offset by change in fair value of warrant liability of $164,088 and interest income on marketable securities held in the Trust Account of $122,725.

For the nine months ended September 30, 2022, we had a net loss of $60,879, which consisted of the formation and operating costs of $1,026,671, offset by change in fair value of warrant liability of $795,007 and interest income on marketable securities held in the Trust Account of $170,785.

For the three months ended September 30, 2021, we had a net income of $936,143, which consisted of the change in fair value of warrant liability of $1,157,100 and interest income on marketable securities held in the Trust Account of $17,677, offset by formation and operating costs of $222,865 and unrealized loss on marketable securities held in the Trust Account of $15,769.

For the nine months ended September 30, 2021, we had a net income of $1,485,603, which consisted of the change in fair value of warrant liability of $2,132,157 and interest income on marketable securities held in the Trust Account of $56,316, offset by formation and operating costs of $700,631 and provision for income taxes of $2,239.





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Liquidity and Capital Resources

For the nine months ended September 30, 2022, cash used in operating activities was $1,220,076. Net loss of $60,879 was affected by change in fair value of warrant liability of $795,007 and interest income on marketable securities held in the Trust Account of $170,785. Changes in operating assets and liabilities used $193,405 of cash for operating activities.

For the nine months ended September 30, 2021, cash used in operating activities was $584,033. Net income of $1,485,603 was affected by change in fair value of warrant liability of $2,132,157 and interest income on marketable securities held in the Trust Account of $56,316. Changes in operating assets and liabilities provided $118,837 of cash for operating activities.

As of September 30, 2022, we had cash and marketable securities held in the Trust Account of $27,253,121 (including $122,725 of interest income) consisting of funds invested primarily in U.S. treasury bills with a maturity of 180 days or less. Interest income on the balance in the Trust Account may be used by us to pay taxes.

We intend to use substantially all of the funds held in the Trust Account, to acquire a target business and to pay our expenses relating thereto, including a fee payable to EarlyBirdCapital, upon consummation of our initial Business Combination for assisting us in connection with our initial Business Combination. To the extent that our capital stock is used in whole or in part as consideration to effect a Business Combination, the remaining funds held in the Trust Account will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business' operations, for strategic acquisitions and for marketing, research and development of existing or new products. Such funds could also be used to repay any operating expenses or finders' fees which we had incurred prior to the completion of our Business Combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.

As of September 30, 2022, we had cash of $172,267. We intend to use the funds held outside the Trust Account for general operating expenses in connection with consummating the Business Combination.

In order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Insiders, 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 $750,000 of such loans may be convertible into units and up to $750,000 of such loans may be convertible into warrants identical to the Private Units and Private Warrants, at a price of $10.00 per unit and $1.00 per warrant at the option of the lender, respectively. No working capital loans were issued or outstanding as of September 30, 2022 and December 31, 2021.

The Company will need to raise additional capital through loans or additional investments from our initial stockholders, officers or directors. If the Company is unable to raise additional capital, obtain approval for an extension of the deadline or complete a Business Combination by December 31, 2022, then the Company will cease all operations except for the purpose of liquidating. The Company has until December 31, 2022 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by the specified period. If a Business Combination is not consummated by December 31, 2022 and such date is not extended by the Company's stockholders, there will be a mandatory liquidation and subsequent dissolution. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company's ability to continue as a going concern one year from the date that these financial statements are issued. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.





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Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of September 30, 2022. We do not participate in transactions that create relationships with un 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 our Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. We began incurring these fees on July 11, 2019 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

We have engaged EarlyBirdCapital as an advisor in connection with a Business Combination to assist us in holding meetings with our stockholders to discuss the potential Business Combination and the target business' attributes, introduce us to potential investors that are interested in purchasing our securities in connection with a Business Combination, assist us in obtaining stockholder approval for the Business Combination and assist us with our press releases and public filings in connection with the Business Combination. We will pay EarlyBirdCapital a cash fee for such services upon the consummation of a Business Combination in an amount equal to $6,037,500 (exclusive of any applicable finders' fees which might become payable); provided that up to 30% of the fee may be allocated at our sole discretion to other FINRA members that assist us in identifying and consummating a Business Combination.





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 income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:





Warrant Liabilities

We account for warrants in accordance with the guidance contained in ASC 815-40 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. As the Private Warrants meet the definition of a derivative as contemplated in ASC 815, we classify the Private Warrants as liabilities at their fair value and adjusts the Private Warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The Private Warrants for periods where no observable traded price was available were valued using a binomial lattice model.

Common Stock Subject to Possible Redemption

We account for common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification ("ASC") Topic 480 "Distinguishing Liabilities from Equity." 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 feature 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) is classified as temporary equity. At all other times, common stock is classified as stockholders' equity. Our common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders' deficit section of our condensed balance sheets.

Net (Loss) Income Per Common Share

Net (loss) income per common stock is computed by dividing net (loss) income by the weighted average number of common stock outstanding for the period. The Company calculates earnings per share by allocating net (loss) income to a single class of common stock. Accretion associated with the redeemable common stock is excluded from earnings per share as the redemption value approximates fair value.





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Recent Accounting Standards

We do not believe that any recently issued accounting standards, if currently adopted, would have a material effect on our condensed financial statements.

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