Filing Overview
Rush Street Interactive, Inc. filed a Form 8-K dated May 7, 2021 under Item 4.02, addressing non-reliance on previously issued financial statements and the related audit report. The affected reporting period is the year ended December 31, 2020.
Business Context and Accounting Matter
Following the SEC staff’s April 12, 2021 statement regarding accounting for certain SPAC warrants, the company concluded that its private placement, working capital, and public warrants should have been classified as derivative liabilities rather than equity. The warrants were issued in February and December 2020.
The warrants will require subsequent fair value remeasurement. The company plans to file an amended 2020 Form 10-K reflecting the revised classification and related financial statement changes.
Financial Metrics and Impact
- Revenue, operating expenses, cash flow, and cash: The filing states that the prior warrant accounting did not affect these previously reported amounts.
- Common shares outstanding: No effect from the prior warrant classification.
- Profit, margins, debt, and liquidity: The filing does not provide clear updated values or quantitative impacts.
- Balance sheet and earnings: The warrant reclassification is expected to change reported balance sheet and income statement items through liability recognition and fair value remeasurement, but the filing does not quantify the adjustments.
Material Changes and Non-Reliance
On May 7, 2021, the Audit Committee concluded that the company’s previously issued audited consolidated financial statements for the year ended December 31, 2020 should no longer be relied upon because of the warrant accounting error. Related press releases, earnings releases, investor presentations, and other communications covering that period should also no longer be relied upon.
The audit report issued by WithumSmith+Brown, PC and included in the company’s 2020 Form 10-K filed March 25, 2021 should likewise no longer be relied upon.
Outlook, Risks, and Unusual Items
- The company intends to file an amended 2020 Form 10-K with revised warrant classification and related disclosures.
- Future fair value changes in the warrant liabilities may affect reported earnings and could introduce income statement volatility.
- The filing does not provide revised earnings, net loss, liabilities, or fair value amounts.
- The Audit Committee discussed the matter with management and the company’s independent auditor.
Investor Verification Checklist
- Verify the amended 2020 Form 10-K and the quantified warrant liability and fair value adjustments.
- Confirm the impact on net loss, accumulated deficit, liabilities, and other affected financial statement line items.
- Review any revised audit report issued with the amended filing.
- Assess subsequent fair value remeasurement effects on future reported earnings.