Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On November 10, 2021, Dynamics Special Purpose Corp. (the "Company") filed its
Form 10-Q for the quarterly period ending 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 shares sold in
the Company's initial public offering ("IPO") on May 28, 2021. 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's management 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,
management 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.
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
material quantitatively and the Company should restate its previously issued
financial statements.
Therefore, on December 9, 2021, the audit committee of the board of directors of
the Company concluded, after discussion with the Company's management, that the
Company's previously issued (i) audited balance sheet as of May 28, 2021, filed
as Exhibit 99.1 to the Company's Current Report on Form 8-K filed with the
Securities and Exchange Commission (the "SEC") on June 4, 2021 (the "Form 8-K"),
(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 6, 2021 (the "Q2 Form 10-Q"), 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
10, 2021 (collectively, the "Affected Periods"), should be restated and should
no longer be relied upon.
Additionally, the Company's management determined that it is appropriate to file
amendments to its audited balance sheet as of May 28, 2021, filed as Exhibit
99.1 to the Company's Current Report on Form 8-K filed with the SEC on June 4,
2021 and its unaudited interim financial statements included in the Q2 and Q3
Form 10-Qs for the quarterly period ended June 30, 2021 and September 30, 2021
as filed with the SEC on August 6, 2021 and November 10, 2021 reflecting the
restatement of the Class A common stock subject to redemption and change to its
presentation of earnings per share for the Affected Periods as soon as
practicable.
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.
After re-evaluation, the Company's management has concluded that in light of the
errors described above, a material weakness existed in the Company's internal
control over financial reporting during the Affected Periods and that the
Company's disclosure controls and procedures were not effective. To address this
material weakness, management has devoted, and plans to continue to devote,
significant effort and resources to the remediation and improvement of Company's
internal control over financial reporting. While the Company has processes to
identify and appropriately apply applicable accounting requirements, the
management plans to enhance these processes to better evaluate its research and
understanding of the nuances of the complex accounting standards that apply to
its financial statements. The Company plans to include providing enhanced access
to accounting literature, research materials and documents and increased
communication among its personnel and third-party professionals with whom it
consults regarding complex accounting applications.
The Audit Committee has discussed the matters disclosed in this Current Report
on Form 8-K pursuant to this Item 4.02 with Marcum LLP ("Marcum"), the Company's
independent registered public accounting firm.
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