Quarterly report pursuant to Section 13 or 15(d)

Restatement of Previously Issued Financial Statement as of March 19, 2021

v3.21.1
Restatement of Previously Issued Financial Statement as of March 19, 2021
3 Months Ended
Mar. 31, 2021
Accounting Changes And Error Corrections [Abstract]  
Restatement of Previously Issued Financial Statement as of March 19, 2021

NOTE 2 — RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENT AS OF MARCH 19, 2021

 

The Company previously accounted for its outstanding Public Warrants (as defined in Note 5) and Private Placement Warrants (collectively, with the Public Warrants, the “Warrants”) issued in connection with its Initial Public Offering as components of equity instead of as derivative liabilities. The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the warrant. In Addition, the warrant agreement includes a provision that in the event of a tender offer or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of a single class of stock, all holders of the Warrants would be entitled to receive cash for their Warrants (the “tender offer provision”).

 

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the 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, which terms are similar to those contained in the warrant agreement (the “Warrant Agreement”).

 

In further consideration of the SEC Statement, the Company’s management further evaluated the Warrants under Accounting Standards Codification (“ASC”) Subtopic 815-40, Contracts in Entity’s Own Equity. ASC Section 815-40-15 addresses equity versus liability treatment and classification of equity-linked financial instruments, including warrants, and states that a warrant may be classified as a component of equity only if, among other things, the warrant is indexed to the issuer’s common stock. Under ASC Section 815-40-15, a warrant is not indexed to the issuer’s common stock if the terms of the warrant require an adjustment to the exercise price upon a specified event and that event is not an input to the fair value of the warrant. Based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the Company’s Private Placement Warrants are not indexed to the Company’s common stock in the manner contemplated by ASC Section 815-40-15 because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares. In addition, based on management’s evaluation, the Company’s audit committee, in consultation with management, concluded that the tender offer provision fails the “classified in stockholders’ equity” criteria as contemplated by ASC Section 815-40-25.

 

As a result of the above, the Company should have classified the Warrants as derivative liabilities in its previously issued financial statement as of March 19th, 2021. Under this accounting treatment, the Company is required to measure the fair value of the Warrants at the end of each reporting period as well as re-evaluate the treatment of the warrants and recognize changes in the fair value from the prior period in the Company’s operating results for the current period.

 

The Company’s accounting for the Warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported investments held in trust or cash.

 

 

 

As

 

 

 

 

 

 

 

 

 

 

 

Previously

 

 

 

 

 

 

As

 

 

 

Reported

 

 

Adjustment

 

 

Restated

 

Balance sheet as of March 19, 2021 (audited)

 

 

 

 

 

 

 

 

 

 

 

 

Warrant Liability

 

$

 

 

$

8,000,000

 

 

$

8,000,000

 

Class A Common Stock Subject to Possible Redemption

 

 

189,561,590

 

 

 

(8,000,000

)

 

 

181,561,590

 

Class A Common Stock

 

 

104

 

 

 

80

 

 

 

184

 

Additional Paid-in Capital

 

 

5,001,302

 

 

 

292,840

 

 

 

5,294,142

 

Accumulated Deficit

 

 

(1,976

)

 

 

(292,920

)

 

 

(294,896

)