SEC Filing Summary: Experience Investment Corp. (EXPC)
Business Context and Reporting Period
This Form 8-K, dated April 26, 2021, is filed by Experience Investment Corp. (EIC), a Special Purpose Acquisition Company (SPAC). The filing addresses a non-reliance on previously issued financial statements due to an SEC public statement regarding the accounting treatment of SPAC warrants. The filing also notes a scheduled special meeting of stockholders on May 5, 2021, to vote on a proposed business combination with Blade Urban Air Mobility, Inc.
Key Financial Metrics and Adjustments
The filing details a material restatement of financial results for periods from inception (May 24, 2019) through December 31, 2020. Warrants previously classified as equity are being reclassified as derivative liabilities measured at fair value. Key preliminary adjustments include:
- Warrant Liability: As of December 31, 2020, a warrant liability of $36,766,667 is recognized (previously $0).
- Net Income/Loss: For the year ended December 31, 2020, reported net income of $127,718 is adjusted to a net loss of $(20,522,282).
- EPS Impact: Basic and diluted net loss per share for 2020 changes from $(0.05) to $(2.56).
- Equity: Total Stockholders' Equity remains approximately $5,000,000 across periods, but the composition shifts significantly with reductions in "Class A common stock subject to possible redemption" and increases in "Accumulated deficit."
Material Changes Versus Prior Periods
The primary material change is the reclassification of warrants from equity to liability. This adjustment results in:
- Recognition of unrealized gains or losses on the fair value of warrants in the statement of operations.
- Significant volatility in reported earnings driven by changes in the fair value of the warrants, which is heavily influenced by the company's stock price.
- A reduction in the number of shares subject to possible redemption across all affected periods.
Guidance, Outlook, Risks, and Contingencies
Management Commentary: Management states that the restatement is required for alignment with SEC guidance and does not reflect a change in the terms of the warrants or management's expectations regarding the business combination with Blade Urban Air Mobility. The company does not believe the restatement will materially impact stockholder consideration of the business combination proposal.
Risks and Contingencies:
- Increased Volatility: Future financial results will fluctuate quarterly based on the fair value of warrants, driven by stock price volatility, discount rates, and other factors outside the company's control.
- Material Weakness: Management has identified a material weakness in internal control over financial reporting related to the accounting for the warrants.
- Future Filings: The company intends to file an amended Form 10-K for the year ended December 31, 2020, to reflect these adjustments.
Important Facts for Investor Verification
- Verify the final valuation of the warrant liability in the upcoming amended Form 10-K, as current figures are preliminary and unaudited.
- Review the definitive proxy statement/prospectus (Form S-4) for details on the business combination with Blade Urban Air Mobility, Inc.
- Monitor future quarterly reports for non-cash gains or losses related to warrant fair value adjustments, which may obscure operating performance.
- Note the identified material weakness in internal controls and any remediation plans disclosed in future filings.