Restatement of Previously Issued Financial Statements to Reflect Derivative Accounting
|12 Months Ended|
Dec. 31, 2020
|Restatement of Previously Issued Financial Statements to Reflect Derivative Accounting|
|Restatement of Previously Issued Financial Statements to Reflect Derivative Accounting||
2. Restatement of Previously Issued Financial Statements to Reflect Derivative Accounting
The consolidated financial statements for the year ended December 31, 2020 included in the Original 10-K, filed March 12, 2021, have been restated to reflect the fair value of our warrant derivative liability, which was initially recorded as a component of equity. The Company recently evaluated the terms of its warrants and determined such warrants should be classified as a liability measured at fair value, with the changes in fair value each period reported in earnings in accordance with GAAP. Volatility in our Common Stock and Public Warrants may result in significant changes in the value of the derivatives and resulting gains and losses on our statement of operations. Further if our Sponsor Warrants are held by someone other initial purchases of the Sponsor Warrants or their permitted transferees, the Sponsor Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants. Because the terms of the Sponsor Warrants and Public Warrants are so similar, we classified both types of warrants as a derivative liability measured at fair value. The Company determined, at the time of the Public Offering, the initial value of its Public Warrants and Sponsor Warrants were $18,830,000 and $9,200,000, respectively. As of December 31, 2020, the value of our Public Warrants and Sponsor Warrants were $37,000,000 and $18,720,000, respectively. We have restated our December 31, 2020 financial statements to reflect the initial warrant derivative liability of $28,030,000 with an offsetting amount recorded in additional paid in capital. Subsequently we adjusted the liability to fair value at December 31, 2020 and recorded a change in fair value of warrant derivative liability of $27,690,000 in other income and expense on our statement of operations. As of December 31, 2020 our warrant derivative liability was $55,720,000.
Because a portion of the Public Offering is now accounted for as a liability at fair value instead of equity, we reclassed a portion of transaction costs associated with the Public Offering. We allocated offering costs and underwriting discounts between the public equity and warrants based on the relative fair value method. On October 14, 2020, we issued $500,000,000 of Public Units. We have determined fair value of the Public Warrants on October 14, 2020 was $18,830,000, and therefore, assigned a value to the Public Warrants of $18,830,000 and to the Common Stock of $481,170,000. Because the fair value of the Public Warrants is 3.7% of total Public Units, we reclassed $1,046,115, or 3.7%, of underwriting discounts and offering costs from additional paid in capital to general and administrative expenses in the 4th quarter. As the bulk of these expenses are commissions, we have included the entire amount in underwriting discounts in the Statement of Cash Flows.
The following table summarizes the effect of the restatement on each financial statement line item, as indicated:
The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef