Item 4.02 Non-Reliance on Previously Issued Financial Statement or Related Audit
Report or Completed Interim Review.
(a) In connection with the preparation of the financial statements of Mudrick
Capital Acquisition Corporation II (the "Company") as of September 30, 2021, the
Company's management, in consultation with its advisors, identified an error
made in the previously issued financial statements, arising from the manner in
which, as of the closing of the Company's initial public offering, the
Company valued its Class A common stock subject to possible redemption. The
Company previously determined the value of such Class A common stock to be equal
to the redemption value of such shares of Class A common stock, after taking
into consideration the terms of the Company's Amended and Restated Certificate
of Incorporation, under which a redemption cannot result in net tangible assets
being less than $5,000,001. Management has determined, after consultation with
its advisors, that the shares of Class A common stock underlying the
units issued during the initial public offering can be redeemed or become
redeemable subject to the occurrence of future events considered to be outside
of the Company's control. Therefore, management concluded that the redemption
value of its shares of Class A common stock subject to possible redemption
should reflect the possible redemption of all shares of Class A common stock. As
a result, management has noted a reclassification error related to temporary
equity and permanent equity. This has resulted in a restatement of the initial
carrying value of the shares of Class A common stock subject
to possible redemption, with the offset recorded to additional paid-in capital
(to the extent available), accumulated deficit and shares of Class A common
stock. The Company filed its Form 10-Q for the period ended September 30, 2021
on November 10, 2021 which included a revision to previously issued financial
statements for the period ended December 31, 2020. The Company determined to
present this revision in a prospective manner in all future filings.
Subsequently, on December 14, 2021, the Company's management and the audit
committee of the Company's board of directors (the "Audit Committee") concluded
that the Company's previously issued (i) audited balance sheet as of
December 10, 2020 (the "Post IPO Balance Sheet"), as previously revised in the
Company's Amendment No. 2 on Form 10-K filed with the SEC on May 10, 2021
("Amendment No. 2 to Form 10-K/A"), (ii) audited financial statements included
in Amendment No. 2 to Form 10-K/A, (iii) unaudited interim financial statements
included in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended March 31, 2021, filed with the SEC on June 2, 2021; and (iv) unaudited
interim financial statements included in the Company's Quarterly Report on Form
10-Q for the quarterly period ended June 30, 2021, filed with the SEC on
August 10, 2021, (collectively, the "Affected Periods"), should be restated to
report all Class A common stock as temporary equity and should no longer be
relied upon.
As such, the Company will restate its financial statements of the Affected
Periods (i) for the Post IPO Balance Sheet and the Company's audited financial
statements included in the Amendment No. 2 to Form 10-K/A in an Amendment No. 3
to Form 10-K/A, and (ii) the unaudited condensed financial statements for the
periods ended March 31, 2021 and June 30, 2021 in an Amendment No. 1 to the
Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2021 ("Amendment No. 1 to Q3 Form 10-Q/A") to be filed with the
SEC. In addition, in connection with the change in presentation for Class A
common stock, the Company determined it should restate its earnings per share
calculation to allocate income and losses shared pro rata between the two
classes of shares. This presentation contemplates a business combination as the
most likely outcome, in which case, both classes of shares share pro rata in the
income and losses of the Company. The Company does not expect any of the above
changes will have any impact on its cash position and cash held in the trust
account established in connection with the initial public offering.
The Company's management has concluded that a material weakness remains in the
Company's internal control over financial reporting and that the Company's
disclosure controls and procedures were not effective as of December 31, 2021
due to a material weakness in our internal control over financial reporting
relating to accounting for complex financial instruments. The Company's
remediation plan with respect to such material weakness will be described in
more detail in the Amendment No. 3 to Form 10-K/A and Amendment No. 1 to Q3 Form
10-Q/A to be filed with the SEC.
Management and the Audit Committee have discussed the matters disclosed pursuant
to this Item 4.02(a) with WithumSmith+Brown, PC, the Company's independent
registered public accounting firm.
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Cautionary Statements Regarding Forward-Looking Statements
This Current Report on Form 8-K includes "forward-looking statements" within the
meaning of the safe harbor provisions of the United States Private Securities
Litigation Reform Act of 1995. Certain of these forward-looking statements can
be identified by the use of words such as "believes," "expects," "intends,"
"plans," "estimates," "assumes," "may," "should," "will," "seeks," or other
similar expressions. Such statements may include, but are not limited to,
statements regarding the Company's intent to restate certain historical
financial statements and the timing and impact of the restatement. These
statements are based on current expectations on the date of this Form 8-K and
involve a number of risks and uncertainties that may cause actual results to
differ significantly. The Company does not assume any obligation to update or
revise any such forward-looking statements, whether as the result of new
developments or otherwise. Readers are cautioned not to put undue reliance on
forward-looking statements.
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