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 of the Securities and Exchange Commission (the "SEC
Staff") issued a statement entitled "Staff Statement on Accounting and Reporting
Considerations for Warrants Issued by Special Purpose Acquisition Companies
("SPACs")" (the "SEC Staff Statement") in which the SEC Staff highlighted the
potential accounting implication of certain terms that are common in warrants
issued in connection with the initial public offerings of SPACs such as 7GC &
Co. Holdings Inc. (the "Company").
Specifically, the SEC Staff Statement focused on certain settlement terms and
provisions related to certain tender offers following a business combination,
which terms are similar to those contained in the warrant agreement (the
"Warrant Agreement"), dated as of December 22, 2020, between the Company and
Continental Stock Transfer & Trust Company, as warrant agent.
As a result of the SEC Staff Statement, the Company reevaluated the accounting
treatment of (i) the 11,500,000 redeemable warrants (the "Public Warrants") that
were included in the units issued by the Company in its initial public offering
(the "IPO") and (ii) the 7,350,000 privately issued warrants (together with the
Public Warrants, the "Warrants") issued to the Company's sponsor in a private
placement that closed concurrently with the closing of the IPO, and determined
that the Warrants should be classified as derivative liabilities measured at
fair value, with changes in fair value each period reported in earnings. While
the Company has not generated any operating revenues to date and will not
generate any operating revenues until after completion of its initial business
combination, at the earliest, the change in fair value of the Warrants is a
non-cash charge and will be reflected in the Company's statement of operations.
On May 26, 2021, after consultation with the Company's management and accounting
advisors, the Audit Committee of the Company's Board of Directors (the "Audit
Committee") concluded that, in light of the SEC Staff Statement, it is
appropriate to restate the Company's previously issued audited financial
statements as of December 31, 2020 (balance sheets), and for the period from
September 18, 2020 (inception) through December 31, 2020 (statements of
operations, statements of changes in stockholders' equity (deficit), statements
of cash flows) (which were included in the Company's Annual Report on Form 10-K
for the period ended December 31, 2020) (the "Non-Reliance Period," and the
financial statements, the "Non-Reliance Financial Statements").
Considering such restatement, the Audit Committee concluded that the
Non-Reliance Financial Statements should no longer be relied upon. The Company
will file an amendment to its Annual Report on Form 10-K for the period ended
December 31, 2020 reflecting the reclassification of the Warrants for the
Non-Reliance Period contemporaneously with this Current Report on Form 8-K.
Going forward, unless the Company amends the terms of the Warrant Agreement, the
Company expects to continue to classify the Warrants as liabilities, which would
require the Company to incur the cost of measuring the fair value of the Warrant
liabilities, which may have an adverse effect on the Company's results of
operations.
The Company's management and the Audit Committee have discussed the matters
disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with
WithumSmith+Brown, PC, the Company's independent registered public accounting
firm.
1
© Edgar Online, source Glimpses