OneSpaWorld Holdings Limited — Form 8-K Summary
Reporting date: April 30, 2021; the filing was signed and furnished on May 6, 2021. The company reported a restatement of previously issued financial statements due to the accounting treatment of certain warrants issued in connection with SPAC transactions.
Business Context and Reporting Period
OneSpaWorld Holdings Limited is incorporated in The Bahamas and trades on the Nasdaq Capital Market under the symbol OSW. The filing addresses the company’s consolidated financial statements for 2019 and 2020 and interim periods within those years, collectively referred to as the affected periods.
- Annual periods affected: December 31, 2019 and December 31, 2020.
- Interim periods affected: quarters ended March 31, June 30, and September 30, 2019 and 2020.
- The company’s previously issued financial statements, earnings releases, investor presentations, and similar communications for the affected periods should no longer be relied upon.
Financial Metrics and Restatement Impact
| Metric | Estimated impact |
|---|---|
| Liabilities as of December 31, 2020 | Increase of approximately $103 million to $107 million |
| Liabilities as of December 31, 2019 | Increase of approximately $54 million to $58 million |
| Net loss for the year ended December 31, 2020 | Increase of approximately $5 million to $9 million |
| Net loss for the 2019 Successor period | Increase of approximately $18 million to $22 million |
| Cash and cash equivalents | No expected impact |
| Adjusted EBITDA | No expected impact |
The filing does not provide revised revenue, gross margin, operating margin, free cash flow, debt, or liquidity balances. The disclosed earnings effects are non-cash fair-value adjustments associated with warrant liabilities.
Material Changes Versus Prior Reporting
The company previously classified its Sponsor Warrants, Public Warrants, and 2020 PIPE Warrants as equity. Following the SEC staff’s April 12, 2021 statement regarding SPAC warrant accounting, management and the Audit Committee concluded that the warrants should have been classified as liabilities measured at fair value in relevant periods.
- Sponsor Warrants should have been classified as liabilities upon issuance on March 20, 2019.
- 2020 PIPE Warrants should have been classified as liabilities upon issuance on June 12, 2020.
- Public Warrants should have been classified as liabilities upon issuance of the company’s Non-Voting Common Shares on June 12, 2020.
- Changes in warrant fair value must be recognized in earnings in each reporting period.
Outlook, Risks, Contingencies, and Unusual Items
The company intends to file a Form 10-K/A containing restated 2020 and 2019 Successor-period financial statements, together with restated interim information. The disclosed amounts are preliminary and unaudited or unreviewed by Ernst & Young LLP and may change materially upon completion of the audit and quarterly reviews.
The accounting conclusion was based on features that may permit cashless exercise or cash settlement in circumstances potentially outside the company’s control, including certain tender or exchange offers involving at least 50% of outstanding common shares. The company stated that further details and remediation plans will be included in the Form 10-K/A.
Investor Verification Items
- Verify the final restated amounts in the Form 10-K/A and subsequent amended quarterly information.
- Confirm the final fair values and earnings effects of the Sponsor Warrants, Public Warrants, and 2020 PIPE Warrants.
- Assess whether the restatement affects reported net loss, loss per share, balance-sheet leverage, covenant calculations, or other non-GAAP measures beyond the preliminary ranges disclosed.
- Confirm that cash balances and adjusted EBITDA remain unchanged after completion of the audit and reviews.
- Review management’s remediation plans and any disclosures regarding internal control over financial reporting.