Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed
Interim Review.
On April 12, 2021, the Staff of the Securities and Exchange Commission (the SEC) issued a statement entitled
Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs) (the SEC Statement) informing market participants that certain warrants issued by
special purpose acquisition companies may require classification as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings. Specifically, the SEC Statement focused on certain settlement terms
and provisions related to certain tender offers following a business combination. The terms described in the SEC Statement are common in SPACs and are similar to those contained in the warrant agreement (the Warrant Agreement), dated as
of February 1, 2021, between the Company and Continental Stock Transfer & Trust Company, as warrant agent. The Company previously accounted for its outstanding public warrants and private placement warrants (collectively, the
Warrants) issued in connection with its initial public offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrants includes a provision that provides for potential changes to the
settlement amounts dependent upon the characteristics of the holder of the warrant. In addition, the warrant agreement includes a provision that in the event of a tender offer or exchange offer made to and accepted by holders of more than 50% of the
outstanding shares of a single class of stock, all holders of the Warrants would be entitled to receive cash for their Warrants (the tender offer provision).
In further consideration of the SEC Statement, the Companys management further evaluated the Warrants under Accounting Standards Codification
(ASC) Subtopic 815-40, Contracts in Entitys Own Equity. ASC Section 815-40-15 addresses equity versus
liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuers common
stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuers common stock if the terms of the warrant require an adjustment to the exercise
price upon a specified event and that event is not an input to the fair value of the warrant. Based on that evaluation management concluded that the Private Placement Warrants are not indexed to the Companys common stock in the manner
contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, management concluded that the tender offer provision fails the classified in stockholders equity criteria as contemplated by ASC Section 815-40-25.
On May 21, 2021, the audit committee of the
Companys board of directors (the Audit Committee), based on the recommendation of and after consultation with management, concluded that the Companys previously issued audited balance sheet as of February 4,
2021, included in the Companys Current Report on Form 8-K filed on February 10, 2021, should no longer be relied upon due to the reclassification of the Warrants described
above. The previously issued audited balance sheet will be revised in the Companys Form 10-Q for the quarterly period ended March 31, 2021. The Audit Committee has decided to review important and
evolving accounting policies and practices, including future guidance from the SEC related to SPACs, periodically as may be appropriate to remedy any material weakness related to the reclassification of the Warrants in the Companys internal
controls.
The Audit Committee and management have discussed the matters disclosed in this Item 4.02(a) with Marcum LLP, the Companys independent
registered public accounting firm.