Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
The Securities and Exchange Commission (the "SEC") has recently issued a number
of comment letters indicating that securities which are subject to possible
redemption, such as the Class A common stock (the "Public Shares") of M3-Brigade
Acquisition II Corp. (the "Company"), should be recorded at redemption amount
and classified as temporary equity in accordance with FASB ASC 480,
"Distinguishing Liabilities from Equity" (the "SEC Guidance"). At issuance on
March 8, 2021, the Public Shares were classified by the Company as permanent
equity and the Company continued to classify the Public Shares as permanent
equity in its quarterly unaudited financial statements and related footnotes, as
of, and for the periods ended, March 31, 2021 and June 30, 2021 (the "Quarterly
Reports"). For a full description of the Public Shares, please refer to the
Company's final prospectus filed in connection with its initial public offering
("IPO") on March 3, 2021.
On November 15, 2021, the audit committee of the board of directors of the
Company (the "Audit Committee") determined, after considering information
provided by the Company's management and the Company's independent registered
public accounting firm, Marcum LLP, that the Public Shares should be recognized
outside of permanent equity for all reporting periods in order to align with the
SEC Guidance because the Company does not have control of the outcome which
could give rise the redemption. If originally recorded outside of permanent
equity, the Public Shares would have been measured at the full redemption value
at each reporting date, with changes in recorded value recognized as a charge
against paid in capital and accumulated deficit earnings in the period of change
(which only occurred at the date of the IPO). The Audit Committee also
determined that the Quarterly Reports and the Company's audited balance sheet as
of March 8, 2021 as reported in the Company's Form 8-K filed on March 12, 2021
should no longer be relied upon due to these changes and should be restated.
The Company has filed its quarterly unaudited financial statements and related
footnotes as of and for the period ended September 30, 2021 (the "Third Quarter
Filing") reflecting this reclassification of the Public Shares as temporary
equity. The adjustments to the financial statement items for the periods ended
March 8, 2021, March 31, 2021 and June 30, 2021 are set forth in the financial
statements included in the Third Quarter Filing, including a description of the
restatement and its impact on previously reported amounts.
Going forward, the Company intends to classify the Public Shares outside of
permanent equity for so long as they remain subject to possible redemption. As a
result, the Company expects to measure the Public Shares at full redemption
value at each relevant reporting date, with changes in recorded value recognized
as a charge against paid in capital and accumulated deficit earnings in the
period of change (which only occurred at the date of the IPO).
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.
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