Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
In the evening, Eastern Time, on April 12, 2021, the Acting Chief Accountant and
Acting Director of the Division of Corporation Finance of the Securities and
Exchange Commission (the "SEC") released the Staff Statement on Accounting and
Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies (the "Staff Statement"). The Staff Statement sets forth the conclusion
of the SEC's Office of the Chief Accountant that certain provisions included in
the warrant agreements entered into by many special purpose acquisition
companies require such warrants to be accounted for as liabilities measured at
fair value, rather than as equity securities, with changes in fair value during
each financial reporting period reported in earnings. Stable Road Acquisition
Corp. (the "Company") has previously classified its outstanding warrants issued
in connection with its initial public offering in November 2019 as components of
equity (for a full description of the Company's outstanding warrants, refer to
the Registration Statement on S-1 (File No. 333- 233980), filed in connection
with the Company's initial public offering and declared effective by the SEC on
November 7, 2019).
On June 8, 2021, the Audit Committee of the Board of Directors of the Company
(the "Audit Committee"), in response to the Staff Statement, and after
discussion with management and its legal advisors, concluded that the Company's
previously issued (i) consolidated financial statements as of and for the year
ended December 31, 2020 and (ii) consolidated financial statement as of November
13, 2019; as of and for the period ended December 31, 2019; and as of and for
the unaudited periods ended March 30, 2020, June 30, 2020 and September 30, 2020
(collectively, the "Affected Periods") should be restated to reflect the impact
of the guidance in the Staff Statement and accordingly, should no longer be
relied upon. Similarly, any previously furnished or filed reports, related
earnings releases, investor presentations or similar communications of the
Company describing the Company's financial results for the Affected Periods
should no longer be relied upon. While the terms and quantum of the warrants
have not changed, the Company concluded the warrants do not meet the conditions
to be classified in equity and instead, the warrants meet the definition of a
derivative under ASC 815, under which the Company should record the warrants as
derivative liabilities on the Company's balance sheet.
The Company has discussed this approach with its independent registered public
accounting firm, WithumSmith+Brown, PC, and intends to file, as soon as
practicable, an amendment to its Annual Report on Form 10-K for the year ended
December 31, 2020 filed with the SEC on March 8, 2021 (the "Amended 10-K")
reflecting this reclassification of the warrants for the Affected Periods. The
adjustments to the financial statement items for the Affected Periods will be
set forth through expanded disclosure in the financial statements included in
the Amended 10-K, including further describing the restatement and its impact on
previously reported amounts.
Management is assessing the effect of the restatements on the Company's internal
control over financial reporting and its disclosure controls and procedures and
will report its conclusions in the Amended 10-K.
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