Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On April 12, 2021, the Staff of the Securities and Exchange Commission (the
"SEC") issued a statement entitled "Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition Companies
("SPACs")" (the "SEC Statement") informing market participants that certain
warrants issued by SPACs may require classification as a liability of the entity
measured at fair value, with changes in fair value each period reported in
earnings. Specifically, the SEC Statement focused on certain settlement terms
and provisions in warrant agreements related to certain tender offers following
a business combination. The terms described in the SEC Statement are common in
SPACs and are similar to those contained in the warrant agreement, dated as of
October 29, 2020, between CONX Corp. (the "Company") and Continental Stock
Transfer & Trust Company, as warrant agent. The Company had previously accounted
for its private placement warrants and public warrants (collectively, the
"warrants") as equity. After considering the SEC Statement, the Company
determined that the warrants should be recorded as derivative liabilities on the
balance sheet and measured at fair value at issuance (on the date of the
consummation of the Company's initial public offering) and at each reporting
date, with changes in fair value recognized in the statement of operations in
the period of the change. While the Company has not generated any operating
revenues to date and is not expected to generate any operating revenues until
after completion of its initial business combination, at the earliest, the
change in fair value of the warrants is a non-cash charge and will be reflected
in the Company's statement of operations.
On May 24, 2021, the audit committee of the Company's board of directors (the
"Audit Committee"), based on the recommendation of and after consultation with
management, concluded that the Company's previously issued audited financial
statements as of December 31, 2020 and for the period from August 26, 2020
(inception) through December 31, 2020 and certain items on its audited balance
sheet as of November 3, 2020 (collectively, the "Non-Reliance Periods"), as
reported in the Company's Annual Report on Form 10-K filed on March 31, 2021 and
the Company's Current Report on Form 8-K filed on November 9, 2020,
respectively, should no longer be relied upon due to misstatements in those
financial statements as a result of the reclassification of the Company's
warrants described above. Similarly, the related Report of Independent
Registered Public Accounting Firm on the Company's previously issued financial
statements as of December 31, 2020 and for the period from August 26, 2020
(inception) through December 31, 2020, should no longer be relied upon. As a
result, the Company determined that it will restate its historical financial
results for the Non-Reliance Periods, in each case to reflect the change in
accounting treatment. The Company will file an amendment to its Form 10-K for
the year ended December 31, 2020 to reflect the restatement and related
disclosures described in Item 4.02 of this Current Report on Form 8-K.
The Audit Committee and management have discussed the matters disclosed pursuant
to this Item 4.02(a) with WithumSmith+Brown, PC, the Company's independent
accountant.
Note Regarding Forward-Looking Statements
This Current Report includes "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act that are
not historical facts, and involve risks and uncertainties that could cause
actual results to differ materially from those expected and projected. Words
such as "expect," "believe," "anticipate," "intend," "estimate," "seek" and
variations and similar words and expressions are intended to identify such
forward-looking statements. Such forward-looking statements, which include
statements related to the restatement described herein, relate to future events
or future performance, but reflect management's current beliefs, based on
information currently available. A number of factors could cause actual events,
performance or results to differ materially from the events, performance and
results discussed in the forward-looking statements. For information identifying
important factors that could cause actual results to differ materially from
those anticipated in the forward-looking statements, please refer to the "Risk
Factors" section of the Company's Form 10-K and the Company's future reports
filed with the SEC. The Company's securities filings can be accessed on the
EDGAR section of the SEC's website at www.sec.gov. Except as expressly required
by applicable securities law, the Company disclaims any intention or obligation
to update or revise any forward-looking statements whether as a result of new
information, future events or otherwise.
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