Item
4.02. Non-Reliance on Previously Issued Financial Statements or a Related Auditor Report or Completed Interim Review.
Reference
is made to the Current Report on Form 8-K filed by BM Technologies, Inc. (the “Company”) on March 31, 2022 (the “Prior
Form 8-K”) reporting under Item 4.02 thereof that the Company had concluded that its previously
issued unaudited consolidated financial statements for the periods ended March 31, 2021, June 30, 2021, and September 30, 2021(collectively,
the “Prior Non-Reliance Periods”), as reported in the Company’s Quarterly Reports
on Form 10-Q filed on May 24, 2021, August 16, 2021, and November 15, 2021, respectively, should no longer be relied upon, and are to
be restated to reflect the share-based compensation expense for the severance awards granted by the Company’s former parent.
The Prior 8-K is incorporated herein by this reference. Reference also is made to the Form 12b-25 filed by the Company on March
31, 2022 (the “12b-25”) with respect to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021
(the “2021 Form 10-K”) in which it reported that, as a result of the foregoing, it was unable to file the 2021 Form 10-K
within the prescribed time period, which delay could not be eliminated by the Company without unreasonable effort and expense. The Company
has worked diligently, along with its independent registered accounting firm, BDO USA LLP, to complete the 2021 Form 10-K. The
12b-25 is incorporated herein by this reference.
In
addition, and also in connection with its January 4, 2021 divestiture of the Company, Customers Bank accelerated the vesting for existing
restricted stock units and stock options previously granted to certain employees of the Company. The net of forfeiture expense associated
with the accelerated vesting totaling $0.8 million was also incorrectly excluded from the Company’s stand-alone financial statements
and should be recorded as of the divestiture date. Accordingly, the restatement will increase the
Company’s previously reported share-based compensation expense for the nine months ending September 30, 2021 by a total of $7.9
million (rather than the $7.1 million reported in the Prior Form 8-K) with a corresponding increase to additional paid-in capital.
As
a result of the Company’s continued review, the Company determined that it did not correctly apply the technical accounting of
FASB ASC 210-20-45 and FASB ASC 606-10-45, as required under U.S. generally accepted accounting principles, to the presentation of certain
contract liabilities, accounts receivable, and accounts payable positions with a related party. The Company determined that a correction
of the Payable to partner bank account
balance to separately report the composition as Accounts receivable, net, Accounts payable
and accrued liabilities, and Deferred revenue, current was required
to present the balances in accordance with U.S. generally accepted accounting principles. These positions were incorrectly presented
net on the Company’s Consolidated Balance Sheets for the periods ended December 31, 2020, and March 31, June 30, and September
30, 2021. For the periods ended December 31, 2020, and March 31, June 30, and September 30, 2021 the correction has the effect of increasing
previously reported total assets and total liabilities on the Company’s Consolidated Balance Sheets by an equal and offsetting
$3.1 million, $6.2 million, $4.3 million, and $5.3 million, respectively, with no impact on net working capital, cash balances, or the
income statement; additionally the company will quantify the amounts in Accounts receivable, net,
Accounts payable and accrued liabilities, and Deferred revenue, current that
are attributable to a related party in its financial statement footnotes.
The
correction of the Company’s previously reported share-based compensation expense and correction of presentation of certain contract
liabilities will have no effect on the Company’s previously reported revenues, Core EBITDA, total cash balance, total equity, net
working capital, net cash flows from operating activities, investing activities, or financing activities.[1] Similarly,
this correction has no impact on the Company’s operations or its underlying business fundamentals.
On
April 13, 2022, the Audit Committee of the Board of Directors of the Company, concluded that, in addition to the financial statements
related to the Prior Non-Reliance Periods referenced above, the Company’s previously issued consolidated financial statements for
the period ended December 31, 2020 (together with the Prior Non-Reliance Periods, the “Non-Reliance Periods”), as reported
in the Company’s Annual Report filed on Form 8K-A on March 31, 2021 should no longer be relied upon. These Non-Reliance Periods
are to be restated to reflect the share-based compensation expense for the severance awards granted by our former parent and the cost
of accelerated vesting of legacy awards by our former parent, as well to correct the presentation of certain contract liabilities. Similarly,
any previously furnished or filed reports, related earnings releases, investor presentations, or similar communications of the Company
describing the Company's financial results for the Non-Reliance Periods should no longer be relied upon.
The
Company has not filed, and does not intend to file, an amendment to the Company’s previously filed Annual Report on Form 8-KA and
Quarterly Reports on Form 10-Q for the Non-Reliance Periods, but will restate its consolidated financial statements for the Non-Reliance
Periods to reflect the corrected share-based compensation expense and correct the presentation of certain contract liabilities within
the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which the Company will file as soon as practicable
following this Form 8-K/A filing. With respect to the Non-Reliance Periods, investors and others should rely only on the financial information
and other disclosures regarding those periods when restated, to be disclosed in the Company’s 2021 Form 10-K and in the Company’s
future filings with the SEC.
The
Company’s management and the Audit Committee have discussed the matters disclosed in this Current Report on Form 8-K with
BDO USA LLP, the Company’s registered public accounting firm.
In
connection with the restatements, the Company’s management has concluded that a material weakness existed in the Company’s
internal control over financial reporting with respect to the presentation of certain contract liabilities in accordance with U.S. generally
accepted accounting principles, as well as the material weakness previously reported with respect to the technical accounting application
of FASB ASC 718, Stock Compensation, as required under U.S. generally accepted accounting principles, to acceleration of existing
awards and issuance of new awards as severance made by our former parent to certain employees and executives of the Company in connection
with the January 4, 2021 divestiture. As a result, the Company’s disclosure controls and procedures were not effective at the reasonable
assurance level as of December 31, 2021, and the Company’s management has concluded that its internal control over financial reporting
was not effective as of December 31, 2021.
Subsequent
to year-end, the Company’s management developed a remediation plan for the identified material weaknesses. Management has recently
added personnel to the accounting function who have deeper technical accounting training and experience. Management will utilize these
new personnel to perform a comprehensive review and enhancement of its internal accounting policies and procedures including accounting
for share-based compensation and classification of contract assets, contract liabilities, receivables, and payables in accordance with
U.S. generally accepted accounting procedures. As management continues to evaluate and enhance its internal control over financial reporting,
it may determine that additional measures are required to address control deficiencies, strengthen internal control over financial reporting,
or it may determine to modify the remediation plan described above. The Company’s remediation efforts will be further described
in its 2021 Form 10-K.
[1]
Core EBITDA is a non-GAAP measure, which the Company defines as GAAP net income adjusted to exclude depreciation and amortization, interest,
taxes, non-cash equity compensation, fair value adjustments on its private warrant liability, and any non-core items such as merger costs.