Business Context and Reporting Period
Stable Road Acquisition Corp., a special purpose acquisition company associated with the proposed combination involving Momentus Inc., filed this Form 8-K on June 8, 2021, with the report signed June 10, 2021. The filing addresses accounting treatment for the company’s publicly issued warrants and affects historical reporting periods from November 13, 2019 through December 31, 2020, including interim periods in 2020.
Financial Reporting and Key Metrics
The filing does not provide updated revenue, profit, cash flow, margin, debt, liquidity, or other operating metrics. It states that the company previously classified its outstanding warrants as equity but determined that they should instead be recorded as derivative liabilities measured at fair value under ASC 815.
Changes in the fair value of the warrants are required to be recognized in earnings for each reporting period. The terms and quantum of the warrants have not changed; the accounting classification has changed.
Material Changes Versus Prior Reporting
- The Audit Committee concluded that the company’s previously issued financial statements for the affected periods should be restated.
- The affected filings include the 2020 annual financial statements; financial statements as of November 13, 2019 and for the period ended December 31, 2019; and unaudited interim periods ended March 30, June 30, and September 30, 2020.
- Previously filed reports, earnings releases, investor presentations, and similar communications describing results for the affected periods should no longer be relied upon.
- The company intends to file an amended 2020 Form 10-K as soon as practicable, with expanded disclosures describing the restatement and its effect on previously reported amounts.
Outlook, Risks, Contingencies, and Unusual Items
Management was assessing the impact of the restatement on internal control over financial reporting and disclosure controls and procedures. Its conclusions were to be reported in the amended Form 10-K. The filing does not quantify the restatement, the resulting derivative liability, fair-value gains or losses, or any effect on net income, assets, liabilities, or equity.
The restatement followed the SEC’s April 12, 2021 Staff Statement concerning warrant accounting by special purpose acquisition companies. The company discussed the accounting approach with its independent registered public accounting firm, WithumSmith+Brown, PC.
Investor Verification Items
- Verify the amended 2020 Form 10-K and the restated historical financial statements when filed.
- Review the quantified warrant liability and cumulative and period-specific fair-value adjustments.
- Assess any revisions to net income, total liabilities, shareholders’ equity, earnings per share, and other affected financial statement amounts.
- Review management’s conclusions regarding internal control over financial reporting and disclosure controls.
- Confirm whether the restatement affects transaction-related disclosures or other communications concerning Momentus and the proposed business combination.