Restatement of Previously Issued Audited and Unaudited Financial Statements
|12 Months Ended|
Dec. 31, 2020
|Restatement Of Previously Issued Audited And Unaudited Financial Statements|
|Restatement of Previously Issued Audited and Unaudited Financial Statements||
Note 11. Restatement of Previously Issued Audited and Unaudited Financial Statements
On May 14, 2021, the Company concluded, with concurrence from the Audit Committee of our Board of Directors (the “Audit Committee”), that the Affected Periods should no longer be relied upon because of errors in such financial statements addressed in the Financial Accounting Standards Board’s Accounting Standards Codification (“ASC”) Topic 250, Accounting Changes and Error Corrections.
The errors relate to the treatment under GAAP of the Warrants issued in connection with our Initial Public Offering. In the affected financial statements, the Warrants are incorrectly classified as equity of the Company.
As previously disclosed in the Current Report on Form 8-K filed with the SEC on May 17, 2021, on April 12, 2021, the Staff of the Securities and Exchange Commission (the “SEC”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACS”)” (the “SEC Statement”). The SEC Statement discussed certain features of warrants similar to the Warrants issued in connection with the Initial Public Offering of the Company, specifically, settlement terms and provisions related to certain tender offers following a business combination, as well as certain warrant instruments that do not meet the criteria to be considered indexed to an entity’s own stock, and noted that entities must consider whether to classify contracts that may be settled in its own stock, such as warrants, as equity or as an asset or liability. After considering the SEC Statement, the Company re-evaluated its historical accounting for the Warrants and concluded it must amend the accounting treatment of the Warrants. On May 14, 2021 management and the Audit Committee of the Board of Directors of the Company, in response to the SEC Statement and, after discussion with the Company’s financial and legal advisors, concluded that the previously issued consolidated financial statements of the Company (formerly known as LF Capital Acquisition Corp. or “LF Capital”) for the Affected Periods should no longer be relied upon.
After considering the SEC Statement, the Company re-evaluated its historical accounting for the Warrants and concluded it must amend the accounting treatment of the Warrants issued in connection with the initial public offering of LFAC. The Warrants were presented within equity in LFAC’s financial statements for the fiscal years ended December 31, 2020 and 2019. After reviewing the SEC Statement, the Company concluded that the exercise and settlement features of the Private Placement Warrants may change with a change in the holder, which precludes the Private Placement Warrants from being considered indexed to the Company’s own stock and therefore, precludes the Private Placement Warrants from meeting the scope exception from derivative accounting prescribed by Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”). In addition, the Company concluded that the Warrants may be settled in cash upon the occurrence of a tender offer or exchange that involves 50% or more of the Company’s common stock, an event that is outside the control of the Company. As such, the Warrants do not meet the conditions to be classified within equity under the SEC Statement and should be presented as a liability. The material terms of the Warrants are more fully described in Note 7 – Stockholders’ equity. In the process of evaluating the Warrants, the Company also considered the Convertible Note which is convertible into warrants identical to the Private Placement Warrants. The Company determined to elect the fair value option for the convertible note. During the periods presented, the carrying value of the Convertible Note approximated fair value and therefore no change in value was presented in the balance sheets or statements of operations.
The following presents a reconciliation of the balance sheets, statements of operations and cash flows as of and for the years ended December 31, 2020 and 2019. The restatement had no impact on net cash flows from operating, investing, or financing activities.
December 31, 2020 balance sheet:
Year ended December 31, 2020 statement of operations:
Year ended December 31, 2020 statement of cash flows:
December 31, 2019 balance sheet:
Year ended December 31, 2019 statement of operations:
Year ended December 31, 2019 statement of cash flows: