Movella Holdings Inc.
11/25/2024 | Press release | Distributed by Public on 11/25/2024 16:27
Non Reliance of Financial Report Form 8 K
| Item 4.02 | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. |
On November 19, 2024, management of Movella Holdings Inc. (the "Company") concluded that the Company's previously issued audited financial statements for the years ended December 31, 2022, 2021, and 2020, as well as the interim periods therein, included in the Company's Form 8-K/A filed on March 31, 2023 (the "Affected Periods") should no longer be relied upon and should be restated. These restatements are necessary to correct an error identified relating to the allocation of losses from the Company's consolidated variable interest entity between Movella and the non-controlling interests in the variable interest entity. The Company entered into the variable interest entity in 2018 and contributed intellectual property for its 70% ownership, while the non-controlling interest (the "NCI") contributed cash for 30% ownership in the entity. Historically Movella has attributed gains and losses from the variable interest entity to Movella and to the NCI based on their 70% and 30% ownership, respectively. While both Movella and the NCI have common shares, the NCI has a liquidation preference in the amount of their initial contribution, adjusted for the accrual of interest at the People's Bank of China's benchmark interest rate. Accordingly, the Company believes that 100% of the variable interest entity's losses, up to the amount of the liquidation preference, should have been allocated to the NCI since inception of the variable interest entity in 2018.
The Company does not expect that this item will have an impact on cash, net cash used in or provided by operating, financing, and investing activities for any period presented. At this time, a review of the Company's financial statements has not been fully completed, and the expected financial impact of the items described above is preliminary and subject to change.
Subsequent to further review, the Company expects to file restated financial statements for the Affected Periods on Form 10-K as soon as reasonably practicable. Because of these restatements, the previously-issued financial statements for the Affected Periods, as well as the relevant portions of any communication which describes or are based on such financial statements, should no longer be relied upon. The Company cannot provide assurance that other items will not be identified or impact additional prior accounting periods. The Company is also evaluating the impact of the identified items on its internal control over financial reporting and disclosure controls and procedures. Although the evaluation is not yet complete, the Company expects it will likely result in one or more material weaknesses in the Company's internal control over financial reporting and that its disclosure controls and procedures were ineffective during the Affected Periods. The Company continues to evaluate and implement remedial measures to address such material weaknesses.
The Company's Audit Committee, along with management discussed with its independent registered public accounting firm, Marcum LLP, as well as with its former auditor, RSM US LLP, the matters disclosed in this filing pursuant to this Item 4.02.
Cautionary Statement Regarding Forward Looking Statements
The disclosure contained in this current report contains "forward-looking statements" within the meaning of federal securities laws. The words "accelerate," "anticipate," "believe," "continue," "could," "enable," "estimate," "expect," "extend," "fuel," "future," "growth," "intend," "may," "might," "opportunity," "outlook," "plan," "position," "possible," "potential," "predict," "progress," "project," "realize," "see," "seem," "should," "will," "would," and similar expressions, or the negative of such expressions, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. These forward-looking statements include, but are not limited to, statements regarding the Company's expectations about the impact of the accounting items, including their financial effects. These statements are based on the current expectations of the Company's management and are not predictions of actual performance and as such, are provided for illustrative purposes only. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the Company's control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, the risk that additional accounting items may become known, the ultimate conclusions regarding the restatement of the Company's financial statements, as well as the factors described under the headings "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in the Company's Form 10-K for the year ended December 31, 2022 and Form 8-K/A filed March 31, 2023, and in those documents that the Company will file with the SEC in the future. If any of these risks materialize or the underlying assumptions prove incorrect, actual results could differ materially from the results implied by these forward-looking statements. There may be additional risks that the Company presently knows or currently believes are immaterial that could also cause actual results to differ from those contained in the forward-looking statements. In addition, forward-looking statements reflect expectations, plans or forecasts of future events and views as of the date of this current report. The Company anticipates that subsequent events and developments will cause its assessments to change. However, while the Company may elect to
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update these forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so, except to the extent required by applicable law. These forward-looking statements should not be relied upon as representing the Company's assessments as of any date subsequent to the date of this current report and are not intended to serve as a guarantee, an assurance, a prediction or a definitive statement of fact or probability. Accordingly, undue reliance should not be placed upon the forward-looking statements.