Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
On April 12, 2021, the Securities and Exchange Commission (the “SEC”) released a public statement (the “Public Statement”) informing market participants that warrants issued by special purpose acquisition companies may require classification as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings. Hudson Executive Investment Corp. (the “Company”) has previously classified its private placement warrants and public warrants (collectively, the “warrants”) issued in connection with its initial public offering in June 2020 and the forward purchase agreement entered into with the sponsor in connection therewith as components of equity. For a full description of the Company’s warrants and the forward purchase agreement, please refer to the Company’s final prospectus filed in connection with its initial public offering on June 10, 2020 (the “Final Prospectus”).
Following review of the Public Statement, the Company’s management further evaluated the warrants and the forward purchase agreement under Accounting Standards Codification Subtopic 815-40, Contracts in Entity’s Own Equity. Based on management’s evaluation, on May 2, 2021, the Audit Committee of the Board of Directors (the “Audit Committee”) of the Company, in consultation with management of the Company and WithumSmith+Brown, PC, the Company’s independent registered public accounting firm, concluded that the warrants and the forward purchase agreement did not meet the criteria to be classified in stockholders’ equity, and should have been classified as liabilities in the Company’s previously issued financial statements, and accordingly, the Company’s previously issued financial statements as of December 31, 2020 and for the period from February 6, 2020 (inception) through December 31, 2020, as well as its financial data as of June 11, 2020, and other financial data related to the foregoing periods, should no longer be relied upon.
Concurrent with the filing of this Form 8-K, the Company intends to file its amended Form 10-K that will include restated financial statements as of December 31, 2020 and for the period from February 6, 2020 (inception) through December 31, 2020, as well as the data as of June 11, 2020.
The Company’s prior accounting for the warrants and the forward purchase agreement as components of equity instead of as liabilities did not have any effect on the Company’s previously reported operating expenses, cash flows or cash.
The Company’s management and Audit Committee have discussed the matters disclosed in this Item 4.02 with the Company’s independent registered public accounting firm, WithumSmith+Brown, PC.
In connection with the restatement, the Company’s management reassessed the effectiveness of its disclosure controls and procedures for the periods affected by the restatement. As a result of that reassessment, the Company’s management determined that its disclosure controls and procedures for such periods were not effective with respect to the classification of the Company’s warrants and forward purchase agreement as components of equity instead of as liabilities as well as the related determination of the fair value of warrant liabilities, additional paid-in capital and accumulated deficit, and related financial disclosures.
