Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On November 5, 2021, ArcLight Clean Transition Corp. II (the "Company") filed
its Form 10-Q for the quarterly period ending September 30, 2021 (the "Q3 Form
10-Q"), which included in Note 2, Revision of Previously Issued Financial
Statements, ("Note 2") a discussion of the revision to a portion of the
Company's previously issued financial statements for the classification of its
Class A ordinary shares subject to redemption issued as part of the units sold
in the Company's initial public offering ("IPO") on March 25, 2021. As described
in Note 2, upon its IPO, the Company classified a portion of the Class A
ordinary shares subject to redemption as permanent equity to maintain net
tangible assets greater than $5,000,000 on the basis that the Company will
consummate its initial business combination only if the Company has net tangible
assets of at least $5,000,001. The Company's management re-evaluated the
conclusion and determined that the Class A ordinary shares subject to redemption
included certain provisions that require classification of the Class A ordinary
shares subject to redemption as temporary equity regardless of the minimum net
tangible assets required to complete the Company's initial business combination.
As a result, management corrected the error by revising all Class A ordinary
shares subject to redemption as temporary equity. This resulted in an adjustment
to the initial carrying value of the Class A ordinary shares subject to possible
redemption with the offset recorded to additional paid-in capital (to the extent
available), accumulated deficit and Class A ordinary shares.
Also in Note 2 of the Company's Form 10-Q for the quarterly period ending
September 30, 2021, in connection with the change in presentation for the
Class A ordinary shares subject to possible redemption, the Company revised its
earnings per share calculation to allocate income and losses shared pro rata
between the two classes of shares. This presentation differs from the previously
presented method of earnings per share, which was similar to the two-class
method.
As described above, originally the Company determined the changes were not
qualitatively material to the Company's previously issued financial statements
and revised its previously issued financial statements in Note 2 to its Q3 Form
10-Q. However, upon further consideration of the material nature of the changes,
the Company determined the change in classification of the Class A ordinary
shares subject to redemption and change to its presentation of earnings per
share is material quantitatively and the Company should restate its previously
issued financial statements.
Therefore, on November 24, 2021, the audit committee of the board of directors
of the Company concluded, after discussion with the Company's management, that
the Company's previously issued (i) audited balance sheet as of March 25, 2021,
filed as Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission (the "SEC") on March 31, 2021, as revised in
the Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2021 filed with the SEC on May 21, 2021 (the "Q1 Form 10-Q"), (ii)
unaudited interim financial statements included in the Q1 Form 10-Q, and
(iii) 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 5, 2021 (collectively, the "Affected Periods"), should be restated
and should no longer be relied upon.
Similarly, other communications describing the Company's financial statements
and other related financial information covering the Affected Periods should no
longer be relied upon. In addition, the audit report of the Company's current
independent registered public accounting firm, Marcum LLP ("Marcum") included in
the Company's Form 8-K relating to the audited balance sheet as of March 25,
2021, as filed on March 31, 2021 with the Securities and Exchange Commission
should no longer be relied upon.
Additionally, the Audit Committee determined that it is appropriate to file
amendments to its unaudited interim financial statements included in the Q1, Q2
and Q3 Form 10-Qs for the quarterly period ended March 31, 2021, June 30, 2021
and September 30, 2021 as filed with the SEC on May 21, 2021, August 10, 2021
and November 9, 2021 reflecting the restatement of the Class A ordinary shares
subject to redemption and change to its presentation of earnings per share for
the Affected Periods as soon as practicable.
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 IPO.
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After re-evaluation, the Company's management has concluded that in light of the
errors described above, a material weakness existed in the Company's internal
control over financial reporting during the Affected Periods and that the
Company's disclosure controls and procedures were not effective. To address this
material weakness, management has devoted, and plans to continue to devote,
significant effort and resources to the remediation and improvement of Company's
internal control over financial reporting. While the Company has processes to
identify and appropriately apply applicable accounting requirements, the
management plans to enhance these processes to better evaluate its research and
understanding of the nuances of the complex accounting standards that apply to
its financial statements. The Company plans to include providing enhanced access
to accounting literature, research materials and documents and increased
communication among its personnel and third-party professionals with whom it
consults regarding complex accounting applications.
The Audit Committee has discussed the matters disclosed in this Current Report
on Form 8-K pursuant to this Item 4.02 with Marcum LLP ("Marcum"), the Company's
independent registered public accounting firm.
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