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") issued a public statement entitled "Staff Statement on Accounting and
Reporting Considerations for Warrants issued by Special Purpose Acquisition
Companies ("SPACs")" (the "Staff Statement"). In the Staff Statement, the SEC
staff expressed its view that certain terms and conditions common to SPAC
warrants may require the warrants to be classified as liabilities rather than
equity on a SPAC's balance sheet. Since their issuance on July 7, 2020, the
outstanding warrants ("Warrants") to purchase common stock of Capstar Special
Purpose Acquisition Corp. (the "Company") were accounted for as equity within
the Company's balance sheet.
TheCompany's audit committee (the "Audit Committee"), based on the
recommendation of, and after consultation with, the Company's management, and as
discussed with Marcum LLP ("Marcum"), the Company's independent registered
public accounting firm, determined that the Company's audited financial
statements as of and for the period from February 14, 2020 (inception) through
December 31, 2020 (the "Non-Reliance Period"), as reported in the Company's
Annual Report on Form 10-K filed with the SEC on March 31, 2021, should no
longer be relied upon due to the misclassification of the Company's outstanding
Warrants as components of equity instead of as liabilities. Similarly, the audit
report of Marcum dated March 30, 2021 and included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2020, and any communications
describing relevant portions of the Company's financial statements for the
Non-Reliance Period, should no longer be relied upon.
As a result, the Company will restate its historical financial results for the
Non-Reliance Period to reflect the classification of the Warrants as liabilities
(the "Restatement"). The Company has worked diligently with an independent
valuation expert to finalize the valuation of the Warrants and with Marcum to
file an amendment to the Annual Report on Form 10-K for the year ended
December 31, 2020 to reflect the Restatement as soon as practicable after the
date hereof. The Company also intends to reflect the reclassification of the
Warrants as liabilities in its forthcoming Quarterly Report on Form 10-Q for the
period ended March 31, 2021, which the Company will file as soon as practicable
after the date hereof.
Going forward, unless the Company amends the terms of its warrant agreement, the
Company expects to continue to classify the Warrants as a liability, which would
require the Company to incur the cost of measuring the fair value of the Warrant
liabilities, and which may have an adverse effect on the Company's results of
operations. 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.
The Audit Committee and management of the Company have discussed the matters
disclosed pursuant to this Item 4.02 with Marcum.
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