Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On April 12, 2021, the Acting Director of the Division of Corporation Finance
and Acting Chief Accountant of the U.S. Securities and Exchange Commission
("SEC") together issued a statement entitled "Staff Statement on Accounting and
Reporting Considerations for Warrants Issued by Special Purpose Acquisition
Companies ("SPACs")" (the "SEC Staff Statement"). The SEC Staff Statement, among
other things, discussed potential accounting implications of certain terms that
are common in warrants issued in connection with the initial public offerings of
special purpose acquisition companies, and similar to terms contained in the
Warrant Agreement, dated December 10, 2019 (the "Warrant Agreement"), between
LIV Capital Acquisition Corp. (the "Company") and Continental Stock Transfer &
Trust Company, as warrant agent.
In light of the SEC Staff Statement, the Company reevaluated the accounting
treatment of (i) the 8,050,000 redeemable warrants (the "Public Warrants") that
were included as part of the units issued by the Company in its initial public
offering (the "IPO") and (ii) the 2,811,250 private placement warrants (the
"Private Placement Warrants" and, together with the Public Warrants, the
"Warrants") that were issued to the Company's sponsor in a private placement
that closed concurrently with the IPO, and determined to classify the Warrants
as derivative liabilities measured at fair value, with changes in fair value
each period being reported in earnings. While the Company has not generated any
operating revenues to date and does not expect to generate any operating
revenues until after completion of its initial business combination, the change
in fair value of the Warrants is a non-cash charge and will be reflected in the
Company's statement of operations.
On May 11, 2021, the Company's management and the Audit Committee of the
Company's board of directors (the "Audit Committee"), after consultation with
management and a discussion with Marcum LLP, the Company's independent
registered public accounting firm (the "Independent Accounting Firm"), concluded
that it is appropriate to restate certain items in the Company's previously
issued (i) audited balance sheet dated as of December 13, 2019, which was
related to the Company's IPO, (ii) quarterly unaudited financial statements for
the periods ended March 31, 2020, June 30, 2020 and September 30, 2020, and
(iii) audited financial statements for the period from May 24, 2019 (Inception)
through December 31, 2019 and the year ended December 31, 2020 (collectively,
the "Relevant Periods"). Considering such restatement, such audited financial
statements should no longer be relied upon. The Company will file an amendment
to its Annual Report on Form 10-K for the fiscal year ended December 31, 2020,
which will include the restated audited financial statements for the Relevant
Periods.
Going forward, unless the Company amends the terms of the Warrants, the Company
expects to continue to classify the Warrants as liabilities, which would require
the Company to incur the cost of measuring the fair value of the warrant
liabilities.
The Company's management and the Audit Committee have discussed the matters
disclosed in this Current Report on Form 8-K pursuant to this Item 4.02 with the
Independent Accounting Firm.
Cautionary Note Regarding Forward-Looking Statements
This report contains "forward looking statements" within the meaning of the
"safe harbor" provisions of the United States Private Securities Litigation
Reform Act of 1995. Such forward-looking statements include statements
regarding: the Company's intention to restate its financial statements; the
periods that are expected to be impacted by the restatement of the financial
statements; the timing of filing of the reports which will include the restated
financial statements; the type, extent and size of adjustments expected to be
reflected in such restated financial statements and the effect of the accounting
treatment of the warrants on the Company's past and future financial statements
and financial results. Forward-looking statements may be identified by the use
of words such as "expect," "plan," "will" and other similar expressions that
predict or indicate future events or that are not statements of historical
matters. These forward-looking statements are based on information available to
the Company as of the date of this report, and current expectations, forecasts
and assumptions, and involve a number of risks and uncertainties. Among the
factors that could cause actual results to differ materially from those
indicated in the forward-looking statements are the risk that the Company may
not complete its restatements in a timely manner and the risk that the Company's
audit committee and/or independent registered public accounting firm could reach
further and different conclusions concerning matters related to the financial
statements. Although the Company believes that the expectations reflected in its
forward-looking statements are reasonable, the Company cannot guarantee future
results, events or outcomes. The Company undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, unless required by law.
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