Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
Kadem Sustainable Impact Corporation, a Delaware corporation (the
"Corporation"), was formed for the purpose of effecting a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar business
combination, involving the Corporation and one or more businesses (a "Business
Combination"). The Amended and Restated Certificate of Incorporation of the
Corporation (the "Charter") provides that, prior to the consummation of the
initial Business Combination, the Corporation must provide all holders of shares
of the Corporation's Class A Common Stock included as part of the units sold in
the Corporation's initial public offering ("Offering Shares") with the
opportunity to have their Offering Shares redeemed upon the consummation of the
initial Business Combination pursuant to, and subject to the limitations of, the
Charter for cash equal to the applicable redemption price per share determined
in accordance with the Charter; provided, however, that the Corporation may not
redeem or repurchase Offering Shares to the extent that such redemption would
result in the Corporation's failure to have net tangible assets (as determined
in accordance with Rule 3a51-1(g)(1) under the Securities Exchange Act of 1934,
as amended (or any successor rule)) in excess of $5 million or any greater net
tangible asset or cash requirement which may be contained in the agreement
relating to the initial Business Combination.
In accordance with Financial Accounting Standards Board Accounting Standards
Codification 480, "Distinguishing Liabilities from Equity" ("ASC 480"),
redemption provisions not solely within the control of the Corporation require
common stock subject to redemption to be classified outside of permanent equity.
In the Corporation's (i) balance sheet as of March 19, 2021 included in the
Corporation's Current Report on Form 8-K filed with the U.S. Securities and
Exchange Commission (the "SEC") on March 25, 2021 (the "March 19, 2021 Balance
Sheet"), (ii) financial statements as of March 31, 2021 and for the three months
ended March 31, 2021 included in the Corporation's Quarterly Report on Form 10-Q
filed with the SEC on May 17, 2021 (as amended) (the "Q1 2021 Financial
Statements"), and (iii) financial statements as of June 30, 2021 and for the
three and six months ended June 30, 2021 included in the Corporation's Quarterly
Report on Form 10-Q filed with the SEC on August 16, 2021 (the "Q2 2021
Financial Statements" and, together with the March 19, 2021 Balance Sheet and
the Q1 2021 Financial Statements, the "Financial Statements"), the Corporation
classified a portion of its Class A Common Stock in permanent equity, or total
stockholders' (deficit) equity. Although the Corporation did not specify a
maximum redemption threshold, the Charter provision described above does not
permit the Company to redeem Offering Shares in an amount that would cause its
net tangible assets to be less than $5,000,001. Management has now determined,
after consultation with its advisors, and in light of SEC comments recently
reported in respect of other special purpose acquisition companies, that the
Offering Shares can be redeemed or become redeemable subject to the occurrence
of future events considered to be outside the Corporation's control.
Accordingly, the Corporation's management has concluded that the Corporation
should present all redeemable Class A Common Stock as temporary equity and
recognize accretion from the initial book value to redemption value at the time
of the Corporation's initial public offering and in accordance with ASC 480.
On November 15, 2021, the Audit Committee of the Board of Directors of the
Corporation concluded, after discussion with the Corporation's management, that
the Financial Statements should no longer be relied upon due to changes required
to reclassify all of the Corporation's Class A Common Stock subject to possible
redemption in temporary equity. The Corporation plans to reflect this
reclassification of the Corporation's Class A Common Stock subject to possible
redemption in its upcoming Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2021, to be filed with SEC.
In addition, the Corporation's management has concluded that, as of September
30, 2021, there was a material weakness in the Corporation's internal control
over financial reporting relating to the Corporation's interpretation and
accounting for certain complex features of the Offering Shares.
The Corporation does not expect any of the above changes will have any impact on
its cash position or cash held in the trust account.
The Corporation has discussed the matters disclosed in this Current Report on
Form 8-K with its independent registered public accounting firm, Marcum LLP.
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