Item 4.02 Non-Reliance on Previously Issued Financial
Statements or Related Audit Report or Completed Interim Report.
On April 12, 2021, the Acting Director of the Division of Corporation Finance and
Acting Chief Accountant of the Securities and Exchange Commission (SEC) together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled Staff
Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (SPACs) (the SEC Statement). Specifically, the SEC Statement focused on certain settlement terms and
provisions related to certain tender offers following a business combination as well as provisions that provided for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant, which terms are similar
to those contained in the warrant agreement, dated as of February 24, 2021, by and between Isleworth Healthcare Acquisition Corp., a Delaware corporation (the Company), and Continental Stock Transfer & Trust Company, a New
York corporation, as warrant agent. As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 10,350,000 redeemable warrants (the Public Warrants) that were included in the units issued by the
Company in its initial public offering (the IPO), and (ii) the 6,140,000 warrants that were issued in a private placement of private placement warrants that closed concurrently with the closing of the IPO (the Private
Warrants together with the Public Warrants, the Warrants), and determined to classify the Warrants as derivative liabilities on the balance sheet and measured at fair value at inception and at each reporting date, with changes in
fair value recognized in the statement of operations in the period of change. The Company previously accounted for the Warrants as components of equity.
On May 21, 2021, the Companys management, in consultation with its audit committee (the Audit Committee), concluded that (i) the
Companys audited balance sheet as of March 1, 2021 filed as Exhibit 99.1 to the Companys Current Report on Form 8-K filed with the SEC on March 5, 2021 and (ii) the Companys pro-forma unaudited balance sheet dated March 1, 2021 filed as Exhibit 99.2 to the Companys Current Report on Form 8-K filed with SEC on March 5, 2021 should
no longer be relied upon due to changes required to reclassify the Warrants as liabilities to align with the requirements set forth in the SEC Statement. In addition, the audit report of Marcum LLP dated March 5, 2021 should no longer be relied
upon.
The Company is in the process of preparing its Form 10-Q for the quarter ended March 31, 2021, and will include in the Notes to Unaudited
Condensed Financial Statements in such Form 10-Q a restated balance sheet dated March 1, 2021 reflecting the impact of accounting for the Warrants as liabilities at fair value.
Going forward, unless the Company amends the terms of its warrant agreement, it expects to continue to classify the Warrants as liabilities, which would
require it to incur the cost of measuring the fair value of the warrant liabilities, and which may have an adverse effect on its results of operations.
The Companys management and the Audit Committee have discussed the matters disclosed in this Current Report on Form
8-K pursuant to this Item 4.02 with the Marcum LLP, the Companys independent registered public accounting firm.
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