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.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations gives effect to the restatement of our financial statements for the
periods ended December 31, 2020, March 31, 2021, June 30, 2021 and September 30,
2021. Management identified errors made in its historical financial statements
where, at the closing of our Initial Public Offering, we improperly valued our
Class A common stock subject to possible redemption. We previously determined
the Class A common stock subject to possible redemption to be equal to the
redemption value of $10.00 per share of Class A common stock while also taking
into consideration a redemption cannot result in net tangible assets being less
than $5,000,001. Management determined that the Class A common stock issued
during the Initial Public Offering can be redeemed or become redeemable subject
to the occurrence of future events considered outside of the Company's control.
Therefore, management concluded that the redemption value should include all
Class A common stock subject to possible redemption, resulting in the Class A
common stock subject to possible redemption being equal to their redemption
value. As a result, management has noted a reclassification error related to
temporary equity and permanent equity. This resulted in a restatement 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.
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. 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.

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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
(Subtopic470-20)"
and "Derivatives and Hedging-Contracts in Entity's Own Equity
(Subtopic815-40):
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 consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by
Rule12b-2
of the Exchange Act and are not required to provide the information otherwise
required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls are procedures that are designed with the objective of
ensuring that information required to be disclosed in our reports filed under
the Exchange Act, such as this Quarterly Report, is recorded, processed,
summarized, and reported within the time period specified in the SEC's rules and
forms. Disclosure controls are also designed with the objective of ensuring that
such information is accumulated and communicated to our management, including
the chief executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure. Our management evaluated, with
the participation of our chief executive officer and chief financial officer
(our "Certifying Officers"), the effectiveness of our disclosure controls and
procedures as of September 30, 2021, pursuant to
Rule 13a-15(b)
under the Exchange Act. Based upon that evaluation, our Certifying Officers
concluded that our disclosure controls and procedures were not effective as of
September 30, 2021, due to a material weakness in our internal control over
financial reporting related to the Company's accounting for complex financial
instruments.

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Table of Contents 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 as the circumstances that led to the restatement of our financial statements described in this Amendment had not yet been identified. In light of the material weakness which resulted in the restatement of our financial statements included in this Amendment, we plan to enhance 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. Our plans at this time include 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 elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.


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