References to the "Company," "us," "our" or "we" refer to Mudrick Capital
Acquisition Corporation II. The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with
our audited financial statements and related notes included herein.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this Form
10-K/A
including, without limitation, statements under "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. When used in
this Form
10-K/A,
words such as "anticipate," "believe," "estimate," "expect," "intend" and
similar expressions, as they relate to us or the Company's management, identify
forward-looking statements. Such forward-looking statements are based on the
beliefs of management, as well as assumptions made by, and information currently
available to, the Company's management. Actual results could differ materially
from those contemplated by the forward- looking statements as a result of
certain factors detailed in our filings with the SEC. All subsequent written or
oral forward-looking statements attributable to us or persons acting on the
Company's behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this 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 has been amended and restated to give effect to the restatement and
revision of our financial statements as more fully described in the Explanatory
Note and in "Note 2-Restatement of Previously Issued Financial Statements" to
our accompanying financial statements. For further detail regarding the
restatement adjustments, see Explanatory Note and Item 9A: Controls and
Procedures, both contained herein.
We have not amended our previously filed Quarterly Reports on Form
10-Q
for the period affected by the restatement. The financial information that has
been previously filed or otherwise reported for these periods is superseded by
the information in this Third Amendment to Form
10-K/A,
and the financial statements and related financial information contained in such
previously filed reports should no longer be relied upon.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of December 31, 2020. 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 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.
In addition, in connection with the change in presentation for the public
shares, 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.
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 December 31, 2020 were
organizational activities, those necessary to prepare for the Initial Public
Offering, described below and after the Initial Public Offering, the search for
a target company. We do not expect to generate any operating revenues until
after the completion of our Business Combination, at the earliest. We generate
non-operating
income in the form of interest income on marketable securities held in the Trust
Account 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 period from July 30, 2020 (inception) through December 31, 2020, we had
a net loss of $1,737,398, which consisted of formation and operating costs of
$110,911, change in fair value of warrants of $938,033 and transactions costs of
$696,870, which are offset by interest earned on marketable securities held in
the Trust Account of $8,416.


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Liquidity and Capital Resources
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.
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 period from July 30, 2020 (inception) through December 31, 2020, cash
used in operating activities was $175,021. Net loss of $1,737,398 was affected
by change in fair value of warrants of $938,033, transaction costs allocated to
warrants of $696,870, operating costs paid through a promissory note of $1,250,
interest earned on marketable securities held in the Trust Account of $8,416 and
changes in operating assets and liabilities, which used $65,360 of cash from
operating activities.
As of December 31, 2020, we had cash and investments held in the Trust Account
of $321,002,166. 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 December 31, 2020, we had $1,117,679 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 do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking
in-depth
due diligence and negotiating a Business Combination are less than the actual
amount necessary to do so, we may have insufficient funds available to operate
our business prior to our Business Combination. Moreover, we may need to obtain
additional financing either to complete our Business Combination or because we
become obligated to redeem a significant number of our public shares upon
consummation of our Business Combination, in which case we may issue additional
securities or incur debt in connection with such Business Combination. Subject
to compliance with applicable securities laws, we would only complete such
financing simultaneously with the completion of our Business Combination. If we
are unable to complete our Business Combination because we do not have
sufficient funds available to us, we will be forced to cease operations and
liquidate the Trust Account. In addition, following our Business Combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
Going Concern
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 December 31, 2020. 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.


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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.
Pursuant to a registration rights agreement entered into on December 7, 2020,
the holders of the Founder Shares, Private Placement Warrants and securities
that may be issued upon conversion of Working Capital Loans will be entitled to
registration rights require us to register a sale of any of the securities held
by them pursuant to a registration rights agreement. The holders of the majority
of these securities will be entitled to make up to three demands, excluding
short form registration demands, that we register such securities for sale under
the Securities Act. In addition, these holders will have certain "piggy-back"
registration rights to include their securities in other registration statements
filed by us, subject to certain limitations. Notwithstanding the foregoing,
Jefferies may not exercise its demand and "piggyback" registration rights after
five (5) and seven (7) years, respectively, after the Initial Public Offering
and may not exercise its demand rights on more than one occasion. We will bear
the expenses incurred in connection with the filing of any such registration
statements.
Critical Accounting Policies
The preparation of 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 Liability
We account for the warrants issued in connection with our Initial Public
Offering in accordance with the guidance contained in ASC
815-40-15-7D
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 statement of operations. The fair value of the warrants was
estimated using a Monte Carlo simulation approach.
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 sheet.
Net 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 financial statements.

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