Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
Ares Acquisition Corporation (the "Company") has followed Accounting Standards
Codification Topic 480, "Distinguishing Liabilities from Equity," ("ASC 480") in
accounting for its redeemable Class A ordinary shares, par value $0.0001 per
share (the "Public Shares"). This included recording the Public Shares in
permanent equity on its balance sheet. However, the Company maintained
shareholders' equity of at least $5,000,001 as the Company will not redeem
Public Shares that would cause the Company's net tangible assets to be less than
$5,000,001 following such redemptions.
In September 2021, the Company's management re-evaluated its previously held
view that classification of $5,000,001 in permanent equity was appropriate, and
determined that the Public Shares should be reclassified to temporary equity on
its balance sheet. In connection with the preparation of the financial
statements as of and for the three and nine months ended September 30, 2021 that
were included in the Company's Quarterly Report on Form 10-Q, filed with the SEC
on November 12, 2021 (the "Q3 Form 10-Q"), the Company concluded that it would
change its accounting and reflect the full amount of all redeemable Public
Shares in temporary equity. This was a change from the Company's previous
accounting practice whereby it maintained shareholders' equity of at least
$5,000,001 as the Company will not redeem Public Shares that would cause the
Company's net tangible assets to be less than $5,000,001 following such
redemptions. In connection with the change in presentation for the Public Shares
subject to possible redemption, the Company also restated its earnings per share
to allocate net income (loss) evenly to all Public Shares and Class B ordinary
shares.
On December 27, 2021, the Company's management and the audit committee of the
Company's board of directors (the "Audit Committee") concluded that the
Company's previously issued (i) 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 U.S. Securities and Exchange Commission (the
"SEC") on May 17, 2021; (ii) 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 and (iii) unaudited interim
financial statements included in the Company's Quarterly Report on Form 10-Q for
the quarterly period ended September 30, 2021, filed with the SEC on November
12, 2021 (collectively, the "Affected Periods"), in each case, should be
restated to classify all of the Public Shares as temporary equity and should no
longer be relied upon. As a result, the Company will restate its financial
statements for the unaudited interim quarterly period ended March 31, 2021 and
the unaudited interim quarterly period ended June 30, 2021 in an amended Q3 Form
10-Q (the "Amended 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 Initial Public Offering.
Based on the circumstances described above, the Company's management has
concluded that a material weakness exists in the Company's internal control over
financial reporting 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 Audit Committee and the Company's management have discussed the matters
disclosed in this Current Report on Form 8-K with WithumSmith+Brown, PC, the
Company's independent registered public accounting firm.
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