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 (the "Staff") of the Division of Corporation
Finance of the Securities and Exchange Commission issued a statement entitled
"Staff Statement on Accounting and Reporting Considerations for Warrants Issued
by Special Purpose Acquisition Companies" (the "Staff Statement"). The Staff
Statement, among other things, highlighted potential accounting implications of
certain terms that are common in warrants issued in connection with the initial
public offerings of special purpose acquisition companies ("SPACs") such as
Yunhong International (the "Company"). The Staff Statement reflected the Staff's
view that in many cases, warrants issued by SPACs should be classified as
liabilities for accounting purposes, rather than as components of equity, unless
certain conditions are met.
On June 21, 2021, the Company's audit committee (the "Audit Committee"), based
on the recommendation of, and after consultation with, the Company's management,
concluded that the Company's audited financial statements for the fiscal year
ended June 30, 2020, and the financial statements for the quarters ending
December 31, 2020, September 30, 2020, and March 31, 2020 (collectively, the
"Non-Reliance Periods"), as reported in the Company's Annual Report on Form 10-K
filed on September 28, 2020 and in the Company's Quarterly Reports on Form 10-Qs
filed on February 23, 2021, November 16, 2020, and May 15, 2020 should no longer
be relied upon due to changes required to reclassify the Company's outstanding
warrants as liabilities. Similarly, the related press releases, Report of
Independent Registered Public Accounting Firm dated September 28, 2020 on the
financial statements as of June 30, 2020 and for the year ended June 30, 2020,
and the shareholder communications, investor presentations or other
communications describing relevant portions of the Company's financial
statements for these periods should no longer be relied upon.
As a result, the Company will restate its historical financial results for the
Non-Reliance Periods, in each case to reflect the change in accounting treatment
(the "Restatement").
The Company's prior accounting treatment of the warrants as components of equity
instead of as derivative liabilities did not have any effect on the Company's
previously reported operating expenses, cash flows or cash.
The Audit Committee and management have discussed the matters disclosed pursuant
to this Item 4.02 with the Company's independent registered public accounting
firm.
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