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Item 4.02
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Non-Reliance on Previously Issued Financial Statement or Related
Audit Report or Completed Interim Review.
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(a) On April 12, 2021, the staff (the “Staff”) of the Securities and
Exchange Commission (the “SEC”) issued a statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) (the “SEC Staff
Statement”).” In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to
equity. Since issuance, the outstanding warrants to purchase Class A common stock (the “Warrants”) of Mudrick Capital Acquisition Corporation II, a Delaware corporation (the “Company,” “we,” “us” or
“our”), were accounted for as equity within our balance sheet. After discussion and evaluation, including with our independent registered public accounting firm and the Audit Committee of our Board of Directors (the “Audit
Committee”), and taking into consideration the SEC Staff Statement, we have concluded that the Warrants should be presented as liabilities with subsequent fair value remeasurement.
As a result of the foregoing, on May 10, 2021, the Audit Committee concluded, in consultation with the Company’s management, that its previously
issued financial statements for the periods beginning with the period from July 30, 2020 (date of inception) through December 31, 2020 (the “Affected Periods”) should be restated because of a misapplication of the guidance around
accounting for the Warrants and should no longer be relied upon.
Historically, the Warrants were reflected as a component of equity as opposed to
liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s
application of ASC 815-40 to the warrant agreement. In light of the SEC Staff’s published views, we reassessed our accounting for the Warrants. Based on this reassessment, we determined that the Warrants
should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in our statement of operations each reporting period.
As a result, investors, analysts and other persons should not rely upon the Company’s previously released financial statements and other financial data
for the Affected Periods. Similarly, the related press releases, Report of Independent Registered Public Accounting Firm on the financial statements as of December 31, 2020 and for the period from July 30, 2020 (date of inception) through
December 31, 2020, and the stockholder communications, investor presentations or other communications describing relevant portions of our financial statements for the periods that need to be restated should no longer be relied upon.
Concurrently with this filing, the Company is filing Amendment No. 2 to its Annual Report on Form 10-K for the fiscal period ended December 31, 2020 that restates our audited financial statements as
of, and for the period from July 30, 2020 (date of inception) to December 31, 2020.
The Company’s prior accounting for the Warrants as
components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported operating expenses, cash flows or cash or cash equivalents.
The Audit Committee and management have discussed the matters disclosed pursuant to this Item 4.02(a) with the Company’s independent registered public
accounting firm.