References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Mudrick Capital Acquisition Corporation II. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Mudrick Capital Acquisition Holdings 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 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 definitive merger proxy statement in connection with the Company's
special meeting of stockholders filed with the U.S. Securities and Exchange
Commission (the "SEC") on July 30, 2021. 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.
Revision of Previously Issued Financial Statements
In connection with the preparation of our financial statements as of September
30, 2021, we determined we should revise our previously reported financial
statements. We determined, at the closing of our Initial Public Offering, we had
improperly valued our Class A common stock subject to possible redemption. As a
result, we noted a reclassification adjustment related to temporary equity and
permanent equity, which resulted in an adjustment to the initial carrying value
of the Class A common stock subject to possible redemption with the offset
recorded to additional paid-in capital (to the extent available), accumulated
deficit and Class A common stock.
In connection with the change in presentation for the Class A common stock
subject to redemption, we also revised our income (loss) per common share
calculation to allocate net income (loss) evenly to 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 our
income (loss).
Recent Developments
On April 6, 2021, we entered into the Merger Agreement and related agreements
with Topps. Pursuant to the Merger Agreement, the Company agreed to acquire all
of the outstanding capital stock of Topps. On August 20, 2021, the parties
terminated the Topps Merger, effective August 20, 2021.
Overview
We are a blank check company formed under the laws of the State of Delaware on
July 30, 2020 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 Placement Warrants, 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 a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our only activities from inception through September 30, 2021 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below, identifying a target company for a Business
Combination and activities in connection with the announced and subsequently
terminated acquisition of Topps. 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. 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 net income of
$112,281,206, which consisted of the change in fair value of warrant liabilities
of $114,371,811 and interest earned on investment held in Trust Account of
$17,658, offset by general and administrative expenses of $2,108,263.
For the nine months ended September 30, 2021, we had net income of $657,461,
which consisted of the change in fair value of warrant liabilities of $6,509,908
and interest earned on investment held in Trust Account of $52,237, offset by
general and administrative expenses of $5,904,684.
For the period from July 30, 2020 (inception) through September 30, 2020, we had
net loss of $1,251, which consisted of general and administrative expenses.
Liquidity and Going Concern
On December 10, 2020, we consummated the Initial Public Offering of 27,500,000
Units, at a price of $10.00 per Unit, generating gross proceeds of $275,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 11,375,000 Private Placement Warrants at a price of $1.00 per
Private Placement Warrant in a private placement to our Sponsor and Jefferies,
generating gross proceeds of $11,375,000.
On December 14, 2020, the Company sold an additional 4,125,000 Units for total
gross proceeds of $41,250,000 in connection with the underwriters' full exercise
of their over-allotment option. Simultaneously with the closing of the
over-allotment option, we also consummated the sale of an additional 1,443,750
Private Placement Warrants at $1.00 per Private Placement Warrant, generating
total proceeds of $1,443,750.

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Following the Initial Public Offering, the full exercise of the over-allotment
option and the sale of the Private Placement Warrants, a total of $320,993,750
was placed in the Trust Account. We incurred $17,874,801 in transaction costs,
including $6,325,000 of underwriting fees, $11,068,750 of deferred underwriting
fees and $481,051 of other offering costs.
For the nine months ended September 30, 2021, cash used in operating activities
was $968,390. Net income of $657,461 was affected by a change in the fair value
of warrant liabilities of $6,509,908, interest earned on marketable securities
held in Trust Account of $52,237, and changes in operating assets and
liabilities, which provided $4,936,294 of cash from operating activities.
As of September 30, 2021, we had cash and investments held in the Trust Account
of $321,019,295. We intend to use substantially all of the funds held in the
Trust Account, including any amounts representing interest earned on the Trust
Account to complete our Business Combination. We may withdraw interest to pay
taxes. To the extent that our capital stock 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.
As of September 30, 2021, we had $184,877 of cash 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 a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. 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 warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants.
We may need to raise additional capital through loans or additional investments
from the Sponsor or our stockholders, officers, directors, or third parties. Our
officers and directors and the Sponsor 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. If we are unable to raise
additional capital, we may be required to take additional measures to conserve
liquidity, which could include, but not necessarily be limited to, suspending
the pursuit of a Business Combination. We cannot provide any assurance that new
financing will be available to us on commercially acceptable terms, if at all.
In connection with the Company's assessment of going concern considerations in
accordance with FASB's Accounting Standards Update ("ASU") 2014-15, "Disclosures
of Uncertainties about an Entity's Ability to Continue as a Going Concern,"
management has determined that if the Company is unable to complete a Business
Combination by December 10, 2022, then the Company will cease all operations
except for the purpose of liquidating. The date for mandatory liquidation and
subsequent dissolution raise substantial doubt about the Company's ability to
continue as a going concern. No adjustments have been made to the carrying
amounts of assets or liabilities should the Company be required to liquidate
after December 10, 2022.
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 the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and
administrative support services. We began incurring these fees on December 7,
2020 and will continue to incur these fees monthly until the earlier of the
completion of the Business Combination and our liquidation.
The underwriters are entitled to a deferred fee of $0.35 per Unit, or
$11,068,750 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 income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies:

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Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate all of our financial instruments, including
issued stock purchase warrants, to determine if such instruments are derivatives
or contain features that qualify as embedded derivatives, pursuant to ASC 480
and ASC 815. We account for the warrants issued in connection with our Initial
Public Offering in accordance with the guidance contained in ASC 815 under which
the warrants do not meet the criteria for equity treatment and must be recorded
as liabilities. Accordingly, we classify the warrants as liabilities at their
fair value and adjust the 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.
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 Accounting Standards Codification ("ASC") Topic
480 "Distinguishing Liabilities from Equity." Shares of Class A common stock
subject to mandatory redemption are classified as a liability instrument and is
measured at fair value. Conditionally redeemable Class A common stock (including
Class A 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, Class A common stock is 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, shares of Class A common stock subject to possible redemption are
presented as temporary equity, outside of the stockholders' equity section of
our balance sheets.
Net Income (Loss) per Common Share
Net income (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding for the
period. The Company applies the
two-class
method in calculating income (loss) per common share. Accretion associated with
the redeemable shares of Class A common stock is excluded from income (loss) per
common share as the redemption value approximates fair value.
Recent Accounting Standards
In August 2020, the FASB issued Accounting Standards Update No. 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):
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,"
which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. ASU 2020-06 removes certain
settlement conditions that are required for equity contracts to qualify for the
derivative scope exception and it also simplifies the diluted earnings per share
calculation in certain areas. ASU 2020-06 is effective for fiscal years
beginning after December 15, 2023, including interim periods within those fiscal
years, with early adoption permitted. We adopted ASU 2020-06 effective as of
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 condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule
12b-2
of the Exchange Act and are not required to provide the information otherwise
required under this item.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed in our
reports filed or submitted under the Exchange Act is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
Management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
as of September 30, 2021. Based on their evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of such date.

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Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that
occurred during the fiscal quarter ended September 30, 2021 that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Remediation of a Material weakness in Internal Control over Financial Reporting
We designed and implemented remediation measures to address the material
weakness previously identified and enhance our internal control over financial
reporting. In light of the material weakness, we enhanced 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, including 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 foregoing actions, which
we believe remediated the material weakness in internal control over financial
reporting, were completed as of the date of June 30, 2021 and such material
weakness was remediated as of September 30, 2021.

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