Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
(a) On April 20, 2021, the Audit Committee of the Board of Directors of
GigCapital2, Inc. (the "Company"), after considering the recommendations of
management, concluded that the Company's (1) financial statements and other
financial data as of December 31, 2020 and 2019, for the year ended December 31,
2020, and the period from March 6, 2019 (date of inception) through December 31,
2019 included in the Annual Report on From 10-K for the year ended December 31,
2020 and (2) condensed financial statements included in the Company's Quarterly
Reports for the three month period ended March 31, 2020, the three and six month
periods ended June 30, 2020 and 2019, and the three and nine month periods ended
September 30, 2020 and 2019 (collectively, the "Non-Reliance Periods") should
not be relied upon because of errors identified therein, which are summarized
below.
The errors that caused the Company to conclude that its financial statements and
other financial information for the Non-Reliance Periods should not be relied
upon are the result of a misapplication of the guidance on accounting for
certain of our issued warrants, which came to light when the staff of the
Securities and Exchange Commission issued a Staff Statement on Accounting and
Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies ("SPACs") dated April 12, 2021 (the "SEC Staff Statement"). The SEC
Staff Statement addresses certain accounting and reporting considerations
related to warrants of a kind similar to those issued by the Company at the time
of its initial public offering in June 2019. Based on Accounting Standards
Codification 815-40, Contracts in Entity's Own Equity, warrant instruments that
do not meet the criteria to be considered indexed to an entity's own stock shall
be initially classified as liabilities at their estimated fair values,
regardless of the likelihood that such instruments will ever be settled in cash.
In periods subsequent to issuance, changes in the estimated fair value of the
derivative instruments should be reported in the statement of operations.
On June 10, 2019 and June 13, 2019, in addition to other securities, we issued
private warrants to purchase 567,500 shares of our common stock at an exercise
price of $11.50 per share to our founders, concurrently with our initial
underwritten public offering. The Audit Committee, together with management,
determined that the financial statements in the Non-Reliance Periods should be
restated to reflect these private warrants issued in June 2019 as a liability,
with subsequent changes in their estimated fair value recorded as non-cash
income or expense in each Non-Reliance Period. These restatements will result in
non-cash, non-operating financial statement corrections and will have no impact
on our current or previously reported cash position, operating expenses or total
operating, investing or financing cash flows. Furthermore, the most that the
private warrants can be redeemed for is $5,675, and then, only if the warrants
have been transferred to a party that is not one of our founders or their
permitted transferees, and the then-holder of the warrants doesn't exercise the
warrants when the Company seeks to redeem the warrants.
Accordingly, investors, analysts and other persons should not rely upon the
Company's previously released financial statements and other financial data for
the Non-Reliance Periods. Similarly, the related press releases, Report of
Independent Registered Public Accounting Firm on the financial statements as of
December 31, 2020 and 2019, for the year ended December 31, 2020 and for the
period from March 6, 2019 (date of inception) through December 31, 2019, and the
stockholder communications, investor presentations or other communications
describing the relevant portions of our financial statements for these periods
that need to be restated should no longer be relied upon. Concurrently with the
filing of this Current Report on Form 8-K, the Company is filing a revised
Annual Report on Form 10-K/A that includes restated financial statements for the
Non-Reliance Periods and that corrects the errors and provides additional
explanation of the changes.
The Audit Committee and management have discussed the matters disclosed in this
Item 4.02(a) with the Company's independent registered public accounting firm.
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