Item 4.02 Non-Reliance on Previously Issued Financial Statements or Related
Audit Report or Completed Interim Report.
The Company has re-evaluated its application of ASC 480-10-S99-3A to its
accounting classification of the redeemable common stock, par value $0.0001 per
share (the "Public Shares"), issued as part of the units sold in the Company's
initial public offering (the "IPO") on November 23, 2020. Historically, a
portion of the Public Shares was classified as permanent equity to maintain
stockholders' equity greater than $5 million on the basis that the Company will
not redeem its Public Shares in an amount that would cause its net tangible
assets to be less than $5,000,001, as described in the Company's amended and
restated certificate of incorporation (the "Charter"). Pursuant to such
re-evaluation, the Company's management has determined that the Public Shares
include certain provisions that require classification of all of the Public
Shares as temporary equity regardless of the net tangible assets redemption
limitation contained in the Charter. In addition, the Company also recorded
additional offering costs related to the excess fair value over purchase price
for the sale of common stock to the Company's Underwriters ("Representative
Shares") and to a Company Consultant ("Consultant Shares") as compensation for
the underwriting and consulting services, respectively, in connection with the
IPO. In addition, the Company recorded additional paid-in capital related to the
relative fair value of the Rights as part of the Units issued in the IPO that
were not previously recorded.
Therefore, on January 14, 2022, the Company's management and the audit committee
of the Company's board of directors (the "Audit Committee") concluded that: (i)
the Company's audited financial statements included in the previously issued
Form 10-K/A filed with the SEC on June 24, 2021 (the "First Amended Filing"),
which includes the audited financial statements as of December 31, 2020 and for
the period from June 10, 2020 through December 31, 2020; (ii) the 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 July
2, 2021; and (iii) the 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 16, 2021 (collectively, the "Affected
Periods"), should be restated to report all Public Shares as temporary equity,
record additional offering costs related to the excess fair value over purchase
price for the sale of common stock to the Company's Underwriters
("Representative Shares"), and to a Company Consultant ("Consultant Shares") as
compensation for the underwriting and consulting services, respectively, in
connection with the IPO, and the Company recorded additional paid-in capital
related to the relative fair value of the Rights as part of the Units issued in
the IPO that were not previously recorded, and should no longer be relied upon.
As such, the Company will file an amendment to the First Amended Filing, and the
unaudited condensed financial statements for the periods ended March 31, 2021
and June 30, 2021 will be restated within the Company's Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2021, to be filed with the SEC
(the "Q3 Form 10-Q").
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 (the "Trust Account").
The Company's management has concluded that in light of the errors described
above, a material weakness exists in the Company's internal control over
financial reporting related to the lack of ability to account for complex
financial instruments and that the Company's disclosure controls and procedures
were not effective.
The Company's management and the Audit Committee have discussed the matters
disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with its
independent registered public accounting firm.
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