On April 8, 2022, IronNet Inc. (the “Company” or “IronNet”) disclosed its preliminary determination that the Company’s unaudited consolidated financial statements and related disclosures as of October 31, 2021 and for the three and nine months then ended included in its quarterly report for the three months ended October 31, 2021 (“Form 10-Q”) contained an overstatement of stock-based compensation expense, resulting in an overstatement of the Company’s net loss. On April 22, 2022, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company determined, based on the analysis and recommendation of management, that the Company’s unaudited consolidated financial statements and related disclosures included in the Form 10-Q should no longer be relied upon due to such error. The error was the result of the Company not appropriately applying modification accounting to stock-based compensation awards that were issued and outstanding as of August 26, 2021, the closing date of the merger between the Company and IronNet Cybersecurity, Inc. (“Legacy IronNet”). These overstatements relate to stock-based compensation expense for certain of the Company’s outstanding restricted stock units (“RSUs”) granted pursuant to Legacy IronNet’s 2014 Stock Incentive Plan.

When calculating the additional stock-based compensation cost to recognize for modified unvested awards for the three months ended October 31, 2021, the Company considered requisite service rendered by the employee from the original vesting commencement date of the award. Upon further evaluation, the Company determined that the correct expense recognition applicable under Accounting Standards Codification Topic 718, Stock Compensation for a Type III (improbable-to-probable) modification requires the use of a method that utilizes the date of modification (August 26, 2021) as the beginning of the requisite service period for unvested portions of the RSUs outstanding, rather than the original vesting commencement date of the award. The impact of correcting the requisite service period start date is to shift the recognition of stock-based compensation expense to later periods. The Company expects that the preliminary, unaudited adjustments to stock-based compensation will decrease stock-based compensation expense and net loss by approximately $30 million for the three and nine months ended October 31, 2021.

The Company determined that it is appropriate to correct the material error by restating the unaudited financial statements. In connection with the restatement, the Company plans to also correct previously identified immaterial errors. The misstatements described above are non-cash in nature, do not impact the total cash flows on the unaudited condensed consolidated statement of cash flows, and do not impact the number of shares awarded, the timing of issuance of shares, or the aggregate amount of equity-based compensation expense to be recognized from the awards.

The Company intends to restate its financial statements included in the Form 10-Q, which will be addressed in an amendment to the Form 10-Q for the three months ended October 31, 2021, to record the overstatement of stock-based compensation expense and to correct for other previously identified immaterial errors.

Management is also continuing to assess the impact of this matter on the Company’s internal control over financial reporting.

The Audit Committee has discussed the matters disclosed in this Item 4.02(a) with PricewaterhouseCoopers LLP, the Company’s independent registered public accounting firm.