Business Context and Reporting Period
Decarbonization Plus Acquisition Corporation III, a special purpose acquisition company formed to complete an initial business combination, filed this Form 8-K under Item 4.02 on November 22, 2021. The filing was signed on November 29, 2021. The filing concerns previously issued financial statements for the periods ended March 31, 2021 and June 30, 2021, as well as the planned amendment to the September 30, 2021 Form 10-Q.
Financial Reporting Matter
Management determined that all shares sold in the company’s initial public offering that are subject to potential redemption should have been classified as temporary equity rather than partially classified within permanent equity.
- The required accounting treatment is based on ASC 480, because redemption may depend on future events outside the company’s control.
- The company expects to recognize accretion from the shares’ initial book value to their redemption value at the time of the initial public offering.
- The filing does not provide a clear quantified amount for the required adjustments.
Material Changes and Non-Reliance
On November 22, 2021, the Audit Committee concluded that the previously issued financial statements for the periods ended March 31 and June 30, 2021 should no longer be relied upon because of the required reclassification of all offering shares to temporary equity.
The company intends to file an amended third-quarter Form 10-Q for the period ended September 30, 2021. The amendment is expected to include expanded financial statement disclosures reflecting the reclassification.
Management Commentary, Risks, and Other Matters
- The company’s charter prohibits redemptions that would reduce net tangible assets below $5,000,001, but management determined that this limitation does not prevent the shares from being subject to redemption provisions outside the company’s control.
- Management and the Audit Committee discussed the matter with WithumSmith+Brown, PC, the company’s independent registered public accounting firm.
- This filing addresses accounting presentation and financial statement reliance; it does not provide operating guidance, revenue forecasts, profitability guidance, liquidity metrics, debt balances, or cash flow information.
Investor Verification Items
- Verify the amended third-quarter Form 10-Q and the final quantitative impact of the reclassification.
- Confirm the revised presentation of redeemable shares, temporary equity, permanent equity, and any related accretion.
- Review whether the amendment identifies any effects on net loss, earnings per share, stockholders’ equity, or previously reported balance sheet totals.
- Confirm the timing and status of the company’s initial business combination and any associated redemption activity.