Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On November 15, 2021, Powered Brands (the "Company") filed its Form 10-Q for the
quarterly period ended September 30, 2021 (the "Q3 Form 10-Q"), which included
in Note 2, Revision to Previously Reported 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"). 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 Q3 Form 10-Q, 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 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 March 2, 2022, the audit committee of the board of directors of
the Company (the "Audit Committee") concluded, after discussion with the
Company's management, that the Company's previously issued (i) audited balance
sheet as of January 12, 2021, filed as Exhibit 99.1 to the Company's Current
Report on Form 8-K, filed with the SEC on January 19, 2021; (ii) unaudited
interim financial statements included in the Company's Quarterly Report on Form
10-Q for the quarterly period ended March 31, 2021, filed with the SEC on June
3, 2021; 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 13, 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.
Additionally, the Audit Committee determined that it is appropriate to file (i)
an amendment to its Q3 Form 10-Q (the "Q3 Form 10-Q/A"), including restated
unaudited interim financial statements for the quarterly periods ended March 31,
2021 and June 30, 2021; (ii) a restated Note 2 to the unaudited interim
financial statements and Item 4 of Part I of the Q3 Form 10-Q; and (iii) a
restated audited balance sheet as of January 12, 2021, in the Company's Annual
Report on Form 10-K for the year ended December 31, 2021, in each case,
reflecting the restatement of the Class A ordinary shares subject to redemption
and the change to its presentation of earnings per share, 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.
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 for complex securities during the Affected
Periods and that the Company's disclosure controls and procedures were not
effective. The Company's remediation plan with respect to such material weakness
will be described in more detail in the Q3 Form 10-Q/A.
The Audit Committee has discussed the matters disclosed in this Current Report
on Form 8-K pursuant to this Item 4.02 with WithumSmith+Brown, P.C., the
Company's independent registered public accounting firm.
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