Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On November 3, 2021, Equity Distribution Acquisition Corp. (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 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 common stock subject to redemption issued as part of the units sold in
the Company's initial public offering ("IPO") on September 18, 2020. As
described in Note 2, upon its IPO, the Company classified a portion of the
Class A common stock 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 re-evaluated the conclusion and
determined that the Class A common stock subject to redemption included certain
provisions that require classification of the Class A common stock 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,
the Company corrected the error by revising all Class A common stock subject to
redemption as temporary equity. This resulted in an adjustment to the initial
carrying value of the Class A common stock subject to possible redemption with
the offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock.
Also in Note 2 of the Q3 Form 10-Q, in connection with the change in
presentation for the Class A common stock subject to possible redemption, the
Company revised its earnings per share calculation to allocate income and losses
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 common stock
subject to redemption and change to its presentation of earnings per share is
quantitatively material and the Company should restate its previously issued
financial statements.
On December 9, 2021, the Company and the audit committee of the Company's board
of directors (the "Audit Committee"), after discussion with Marcum LLP
("Marcum"), the Company's independent registered public accounting firm,
concluded that the Company's previously issued (i) audited balance sheet as of
September 18, 2020, as previously restated in the Company's Annual Report on
Form 10-K/A as of December 31, 2020, filed with the Securities and Exchange
Commission ("SEC") on May 24, 2021 (the "Form 10-K/A"), (ii) audited financial
statements as of December 31, 2020 and for the period from July 7, 2020
(inception) through December 31, 2020, as previously restated in the Form
10-K/A, (iii) unaudited 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 May 24, 2021, (iv) unaudited financial statements included in
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
2021, filed with the SEC on August 6, 2021, and (v) unaudited financial
statements included in the Q3 Form 10-Q, filed with the SEC on November 3, 2021
(collectively, the "Affected Periods"), should no longer be relied upon and that
it is appropriate to restate the Company's financial statements for all of the
Affected Periods. As a result, the Company plans to restate its financial
statements for all of the Affected Periods in a further amended Annual Report on
Form 10-K (the "Amended Form 10-K") and an amended Q3 Form 10-Q (the "Amended Q3
Form 10-Q"), as applicable, each of which the Company intends to file as soon as
practicable. The Amended Form 10-K and Amended Q3 Form 10-Q will include
restatements of the audited financial statements and the unaudited interim
condensed financial statements for the Affected Periods.
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 Company has concluded that in light of the classification error described
above, a material weakness exists in the Company's internal control over
financial reporting for accounting for complex financial instruments 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 Amended Q3 Form 10-Q.
The Company and the Audit Committee have discussed the matters disclosed in this
Current Report on Form 8-K pursuant to this Item 4.02 with Marcum.
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