ESS Tech, Inc. Form 8-K Summary
Reporting date: November 22, 2021. ESS Tech, Inc. (formerly ACON S2 Acquisition Corp.) completed its business combination with Legacy ESS on October 8, 2021. This filing reports an accounting classification error affecting the former SPAC’s financial statements and related disclosures.
Financial and Accounting Matters
- Management reevaluated the application of ASC 480-10-S99-3A to Class A ordinary shares issued in the SPAC’s September 21, 2020 initial public offering.
- The shares were historically classified partly as permanent equity to maintain the minimum net tangible assets required for the business combination.
- Management concluded that provisions in the shares required classification as temporary equity, or liabilities, regardless of the minimum net tangible asset requirement.
- The filing does not provide revised revenue, profit, cash flow, margin, debt, liquidity, or other operating metrics.
- The historical financial statements of Legacy ESS are not affected by this accounting issue.
Restatement and Prior-Period Impact
Management and the Audit Committee concluded that previously issued financial statements and related reports for the affected period should no longer be relied upon. The affected information includes:
- The September 21, 2020 audited balance sheet.
- Financial statements for the period from July 21, 2020 through December 31, 2020.
- Interim financial information for the periods ended September 30, 2020, March 31, 2021, and June 30, 2021.
- Related statements of shareholders’ equity and earnings per share, which must be revised to reflect the liability classification and pro rata allocation of income and losses between the two share classes.
The Company plans to restate its December 31, 2020 audited financial statements and amend the previously filed Form 10-K/A. Marcum, LLP remains engaged to assist with the restatement, although the Company had previously announced that Marcum would be dismissed after its review of the quarter ended September 30, 2021.
Controls, Outlook, and Risks
- Management concluded that the classification error represents a material weakness in internal control over financial reporting.
- The Company also concluded that its disclosure controls and procedures were not effective.
- No specific completion date, quantified restatement adjustment, or expected charge is provided.
- Potential risks include discovery of additional information, higher-than-expected charges, delays in amended filings, and delays associated with responding to possible SEC comments.
- The filing’s forward-looking statements relate primarily to the timing and effects of the restatement and amended filings.
Key Facts for Investors to Verify
- Whether the restated filings have been completed and accepted by the SEC.
- The final amount by which Class A ordinary shares, liabilities, shareholders’ equity, and earnings per share are revised.
- Whether the identified material weakness has been remediated and whether additional control deficiencies are identified.
- Any resulting impact on reported capitalization, liquidity, financing arrangements, or compliance with listing requirements.
- Any subsequent change in the Company’s independent registered public accounting firm or auditor conclusions.