| Item 4.02. | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review. |
(a) On May 11, 2021, the Board of Directors (the “Board”) of Decarbonization Plus Acquisition Corporation (the “Company”), in consultation with management of the Company and upon the recommendation of the Audit Committee of the Board, concluded that it is appropriate to restate (i) the Company’s previously issued audited financial statements as of December 31, 2020 and for the year ended December 31, 2020, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, originally filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 1, 2021 and (ii) certain items on the previously issued balance sheet dated as of October 22, 2020, the date the Company’s initial public offering (the “Public Offering”) closed, that were previously reported on a Current Report on Form 8-K, filed with the SEC on October 28, 2020 (the “Relevant Periods”).
On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on certain settlement terms and provisions related to certain tender offers following a business combination, which terms are similar to those contained in the warrant agreement governing the Company’s warrants. As a result of the SEC Statement, the Company reevaluated the accounting treatment of (i) the 11,286,251 redeemable warrants (the “Public Warrants”) that were included in the units issued by the Company in its Public Offering and (ii) the 6,514,500 redeemable warrants that were issued to the Company’s sponsor, independent directors and WRG DCRB Investors, LLC, an affiliate of the Company’s chief executive officer in private placements that closed concurrently with the closing of the Public Offering and the sale of over-allotment units to the Public Offering underwriters (the “Private Placement Warrants,” and together with the Public Warrants, the “Warrants”). The Company previously accounted for the Warrants as components of equity. The warrant agreement governing the Warrants includes a provision that provides for potential changes to the settlement amounts dependent upon the characteristics of the holder of the Warrant.
In further consideration of the guidance in Accounting Standards Codification (“ASC”) 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Equity” (“ASC 815”), the Company concluded that a provision in the warrant agreement related to certain tender or exchange offers precludes the Warrants from being accounted for as components of equity. As the Warrants meet the definition of a derivative as contemplated in ASC 815, the Warrants should be recorded as derivative liabilities on the balance sheet and measured at fair value at inception (on the date of the Public Offering) and at each reporting date in accordance with ASC 820, “Fair Value Measurement,” with changes in fair value recognized in the statement of operations in the period of change.
As a result, the Company today is announcing that it will restate its historical financial results for the Relevant Periods, in each case to reflect the change in accounting treatment (the “Restatement”). The Company is filing its Form 10-K/A for the year ended December 31, 2020 to reflect the Restatement contemporaneously with the filing of this Form 8-K.
The Company’s prior accounting for the warrants as components of equity instead of as derivative liabilities did not have any effect on the Company’s previously reported operating expenses, cash flows or cash.
The Audit Committee and the Company’s management have discussed the matters disclosed pursuant to this Item 4.02(a) with WithumSmith+Brown, PC, the Company’s independent registered public accounting firm.
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