Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
(a) On April 12, 2021, the Staff of the Securities and Exchange Commission (the “SEC”) released a statement (the “SEC Statement”) informing market participants that warrants issued by special purpose acquisition companies (“SPACs”) may require classification as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings. Daseke, Inc. (the “Company,” “we” or “our”) has previously classified its private placement warrants and public warrants (collectively, the “warrants”), which were issued in 2015, as equity. For a description of the terms of the warrants, please refer to the Company’s prospectus filed with the SEC on April 28, 2017 (“Prospectus”), which relates to the resale from time to time of, among other things, the warrants and the shares of common stock issuable upon exercise of the warrants.
On April 21 2021, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”), after considering the recommendations of management, concluded that the Company’s previously issued audited financial statements for the years ended December 31, 2020, 2019 and 2018 and previously issued unaudited financial statements for the periods ended September 30, 2020, 2019 and 2018, June 30, 2020, 2019 and 2018, and March 31, 2020, 2019 and 2018 (such years and periods, the “Affected Periods”) should no longer be relied upon due to required corrections related to the accounting for warrants.
The SEC Statement discussed “certain features of warrants issued in SPAC transactions” that “may be common across many entities.” The SEC Statement indicated that when one or more of such features is included in a warrant, the warrant “should be classified as a liability measured at fair value, with changes in fair value each period reported in earnings.” Following consideration of the guidance in the SEC Statement, while the terms of the warrants as described in the Prospectus have not changed, the Company concluded the warrants do not meet the conditions to be classified in equity and instead, the warrants require liability classification under Accounting Standards Codification 815. The Company is working diligently with its auditors and an independent valuation expert to finalize the valuation of the warrants and file an amendment to its Annual Report on Form 10-K for the year ended December 31, 2020 (the “Amended 10-K”) reflecting this reclassification of the warrants for the Affected Periods as soon as practicable. The adjustments to the financial statement items for the Affected Periods will be set forth through disclosures in the financial statements included in the Amended 10-K. The Audit Committee has discussed the matters disclosed in this and the above paragraphs in this Item 4.02(a) with its independent registered public accounting firm, Grant Thornton LLP.
On a preliminary and unaudited basis, and subject to change upon completion of a third-party valuation analysis, we expect the impact to total liabilities and net income (loss) to be as follows (amounts in millions).
| | | | | | | | | |
| | TOTAL LIABILITIES |
| | As Previously Reported | | Estimated Adjustment Range | | Estimated As Adjusted |
| | | | | | | | | |
As of December 31, 2020 | | $ | 981.8 | | $ | 3.0 to 15.0 | | $ | 984.8 to 996.8 |
As of December 31, 2019 | | $ | 1,001.9 | | $ | 2.0 to 10.0 | | $ | 1,003.9 to 1,011.9 |
| | | | | | | | | |
| | NET INCOME (LOSS) |
| | As Previously Reported | | Estimated Adjustment Range | | Estimated As Adjusted |
| | | | | | | | | |
Year ended December 31, 2020 | | $ | 6.2 | | $ | (13.0) to 7.0 | | $ | (6.8) to 13.2 |
Year ended December 31, 2019 | | $ | (307.4) | | $ | (10.0) to 10.0 | | $ | (317.4) to (297.4) |
Year ended December 31, 2018 | | $ | (5.2) | | $ | 50.0 to 90.0 | | $ | 44.8 to 84.8 |
We will disclose the finalized impacts to these line items, as well as other line items on our financial statements, including, but not limited to, warrant liabilities, additional paid in capital, accumulated deficit, total stockholders’ equity, change in fair value of warrant liabilities, total other expense, income (loss) before income taxes, comprehensive income (loss), net income (loss) attributable to common stockholders, basic and diluted earnings (loss) per common share, in our forthcoming Amended 10-K. We are evaluating the impact on the Company’s internal controls over financial reporting.
