EXPE INVE Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.
OnApril 12, 2021 , theSecurities and Exchange Commission (the "SEC") released a public statement (the "Public 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.Experience Investment Corp. (the "Company" or "EIC") has previously classified its private placement warrants and public warrants (collectively, the "warrants") as equity. For a description of the Company's warrants, please refer to the Company's final prospectus filed in connection with its initial public offering ("IPO") onSeptember 13, 2019 ("Final Prospectus"). OnApril 26, 2021 , management of the Company and the Audit Committee of the Board of Directors of the Company determined that the Company's balance sheet as ofSeptember 17, 2019 (date of IPO), its quarterly unaudited financial statements for the periods endedSeptember 30, 2019 ,March 31, 2020 ,June 30, 2020 andSeptember 30, 2020 , and its audited financial statements for the period fromMay 24, 2019 (Inception) throughDecember 31, 2019 and the year endedDecember 31, 2020 (collectively, the "Affected Periods") should no longer be relied upon due to changes required for alignment with theSEC's Public Statement. TheSEC's Public Statement discussed "certain features of warrants issued in SPAC transactions" that "may be common across many entities." The Public 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 Public Statement, while the terms and quantum of the warrants as described in the Final Prospectus have not changed, the Company concluded the warrants do not meet the conditions to be classified in equity and instead, the warrants meet the definition of a derivative under Accounting Standards Codification Topic 815, Derivatives and Hedging, under which the Company should record the warrants as liabilities on the Company's balance sheet. The Company has discussed this approach with its independent registered public accounting firm,Marcum LLP , and intends to file an amendment to its Annual Report on Form 10-K for the year endedDecember 31, 2020 filed with theSEC onMarch 10, 2021 (the "Amended 10-K") reflecting this reclassification of the warrants and offering costs adjustments for the Affected Periods. The Company is working diligently with its auditors and an independent valuation expert to finalize the valuation of the warrants and file the Amended 10-K as soon as practicable. The adjustments to the financial statement items for the Affected Periods will be set forth through expanded disclosure in the financial statements included in the Amended 10-K, including further describing the restatement and its impact on previously reported amounts.
On a preliminary unaudited basis, the accounting for warrants as a derivative
liability and offering costs adjustments are expected to result in the changes
set forth in the table below to the financial results reported in the Affected
Periods. The table below is only a summary of the adjustments expected to be
reflected in the Amended 10-K, and the adjustments shown below are preliminary
and remain subject to change pending the completion of the audit relating
thereto.
SUMMARY FINANCIAL STATEMENT IMPACT
(Preliminary, unaudited)
Balance Sheet as of Historical
September 17, 2019 As Reported Adjustment Period Adjustment As AdjustedWarrant Liability $ - - 18,300,000$ 18,300,000 Class A common stock subject to possible redemption 261,909,820 - (18,300,000 ) 243,609,820 Class A common stock 131 - 183 314 Additional paid-in capital$ 5,000,481 - 636,486$ 5,636,967 Accumulated deficit$ (1,297 ) - (636,669 )$ (637,966 ) Total Stockholders' Equity$ 5,000,003 - 0$ 5,000,003 Number of shares subject to possible redemption 26,190,982 -
(1,830,000 ) 24,360,982
Balance Sheet as of
September 30, 2019 Warrant Liability $ - 18,300,000 (333,333 )$ 17,966,667 Class A common stock subject to possible redemption 262,009,255 (18,300,000 ) 333,333 244,042,588 Class A common stock 131 183 (3 ) 311 Additional paid-in capital$ 4,901,046 636,486 (333,330 )$ 5,204,202 Retained earnings 98,139 (636,669 ) 333,333 (205,197 ) Total Stockholders' Equity$ 5,000,004 0 -$ 5,000,004 Number of shares subject to possible redemption 26,187,385 -
(1,795,738 ) 24,391,647
Balance Sheet as of
December 31, 2019 Warrant Liability $ - 17,966,667 (1,850,000 )$ 16,116,667 Class A common stock subject to possible redemption 262,695,890 (17,966,667 ) 1,850,000 246,579,223 Class A common stock 132 180 (19 ) 293 Additional paid-in capital$ 4,214,410 303,156 (1,849,982 )$ 2,667,585 Retained earnings$ 784,778 (303,336 ) 1,850,000$ 2,331,442 Total Stockholders' Equity$ 5,000,008 0 -$ 5,000,008 Number of shares subject to possible redemption 26,180,927 -
(1,606,227 ) 24,574,700
Statement of Operations for the period fromMay 24, 2019 (Inception) throughDecember 31, 2019 Net income$ 784,778 (303,336 ) 1,850,000$ 2,331,442 Basic and diluted weighted average shares outstanding, common stock 7,170,375 - - 7,170,375 Basic and diluted net loss per common share, common stock$ (0.01 ) - -$ 0.21 SUMMARY FINANCIAL STATEMENT IMPACT (Preliminary, unaudited) Balance Sheet as ofMarch 31, 2020
Warrant Liability $ - 16,116,667 (5,125,000 )$ 10,991,667 Class A common stock subject to possible redemption 263,267,961 (16,116,667 ) 5,125,000 252,276,294 Class A common stock 134 161 (51 ) 244 Additional paid-in capital$ 3,642,337 (1,546,825 ) (5,124,949 )$ (3,029,437 ) Retained earnings$ 1,356,849 1,546,664 5,125,000$ 8,028,513 Total Stockholders' Equity$ 5,000,008 - -$ 5,000,008 Number of shares subject to possible redemption 26,163,140 -
(1,092,334 ) 25,070,806
Balance Sheet as of
June 30, 2020
Warrant Liability $ - 10,991,667 2,508,333 $ 13,500,000
Class A common stock subject to
possible redemption 263,261,986 (10,991,667 ) (2,508,333 ) 249,761,986
Class A common stock 134 110 25 269
Additional paid-in capital $ 3,648,312 (6,671,774 ) 2,508,308 $ (515,154 )
Retained earnings $ 1,350,867 6,671,664 (2,508,333 ) $ 5,514,198
Total Stockholders' Equity $ 5,000,001 - - $ 5,000,001
Number of shares subject to possible
redemption 26,156,915 - (1,341,319 ) 24,815,596
Balance Sheet as of
September 30, 2020 Warrant Liability $ - 13,500,000 5,025,000$ 18,525,000 Class A common stock subject to possible redemption 263,161,825 (13,500,000 ) (5,025,000 ) 244,636,825 Class A common stock 136 135 50 321 Additional paid-in capital$ 3,748,471 (4,163,466 ) 5,024,950$ 4,609,955 Retained earnings$ 1,250,712 4,163,331 (5,025,000 )$ 389,043 Total Stockholders' Equity$ 5,000,007 - -$ 5,000,007 Number of shares subject to possible redemption 26,141,235 -
(1,840,185 ) 24,301,050
Balance Sheet as of
December 31, 2020 Warrant Liability $ - 18,525,000 18,241,667$ 36,766,667 Class A common stock subject to possible redemption 262,823,607 (18,525,000 ) (18,241,667 ) 226,056,940 Class A common stock 136 185 182 504 Additional paid-in capital$ 4,086,689 861,484 18,241,485$ 23,189,657 Retained earnings (Accumulated deficit)$ 912,496 (861,669 ) (18,241,667 )$ (18,190,840 ) Total Stockholders' Equity$ 5,000,009 - -$ 5,000,009 Number of shares subject to possible redemption 26,136,620 -
(3,656,279 ) 22,480,341
Statement of Operations for the
year ended December 31, 2020
Net income (loss) $ 127,718 (2,408,333 ) (18,241,667 ) $ (20,522,282 )
Basic and diluted weighted average
shares outstanding, common stock 8,214,508 - - 8,214,508
Basic and diluted net loss per common
share, common stock $ (0.05 ) - - $ (2.56 )
Item 8.01 Other Events.
EIC Special Meeting Scheduled for
With respect to the special meeting of EIC's stockholders that is scheduled to occur onWednesday, May 5, 2021 at10:00 a.m. (New York City time), EIC does not believe the application of the Public Statement to its financial statements would materially impact its stockholders' consideration of the business combination proposal and other proposals to be considered and voted upon at
the meeting. The terms and quantum of the warrants and all other securities issued by EIC have not changed and the expected restatement of its financial statements is not indicative of any change in management's expectations regarding the business prospects for EIC or the post-business combination company. The restatement is required for alignment with the Public Statement and would be undertaken regardless of the completion of the business combination. For those and other reasons, EIC does not believe the restatement should materially impact its stockholders' consideration of the business combination proposal and other proposals to be considered and voted upon at the meeting.
Increased Volatility of Financial Results
As a result of the change to liability accounting for EIC's warrants, unrealized net losses or gains resulting from changes in the fair value of the warrants will be recognized in the post-combination company's financial results following the closing of the business combination ofEIC and Blade Urban Air Mobility, Inc. The share price of our Class A common stock represents the primary underlying variable that impacts the fair value determination. Additional factors that impact the fair value determination include the volatility of our stock price, discount rates and stated interest rates. As a result, our consolidated financial statements and results of operations will fluctuate quarterly, based on various factors, such as the share price of our Class A common stock, many of which are outside of our control. In addition, we may change the underlying assumptions used in our valuation model, which could result in significant fluctuations in our results of operations. If our stock price is volatile, we expect that we will recognize non-cash gains or losses on the outstanding warrants each reporting period and that the amount of such gains or losses could be material. The impact of changes in the fair value of the warrants on earnings may have an adverse effect on the market price of our
Class A common stock.
Material Weakness in Internal Control over Financial Reporting
As a result of the determination that the warrants were improperly accounted for as equity for each of the Affected Periods and that an Amended 10-K is required to be filed to correctly classify the warrants as liabilities in the financial statements for the Affected Periods, EIC's management concluded that a material weakness in EIC's internal control over financial reporting exists related to the accounting for a significant and unusual transaction related to the warrants EIC issued in connection with the IPO. Additional Information about the Business Combination and Where to Find It This communication relates to the proposed Business Combination between Blade and EIC. This communication is not a proxy statement or solicitation of a proxy, consent, or authorization with respect to any securities or in respect of the proposed transaction and shall neither constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which the offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities laws of any such jurisdiction. EIC has filed with theSEC a Registration Statement on Form S-4 (the "Form S-4"), which includes a preliminary proxy statement/prospectus that is both the proxy statement to be distributed to the EIC's stockholders in connection with EIC's solicitation of proxies for the vote by EIC's stockholders with respect to the business combination with Blade and other matters described therein, as well as the prospectus relating to the offer and sale of the securities of EIC to be issued in the business combination. The Form S-4 was declared effective by theSEC onApril 6, 2021 and the definitive proxy statement/prospectus and other relevant documents were mailed to EIC's stockholders of record as ofMarch 17, 2021 . EIC's stockholders and other interested persons are advised to read the definitive proxy statement/prospectus in connection with EIC's solicitation of proxies for the Special Meeting because the proxy statement/prospectus contains important information about EIC, Blade and the business combination. Stockholders are also be able to obtain copies of the Form S-4 and the proxy statement/prospectus, without charge, at theSEC's website at www.sec.gov or by directing a request toExperience Investment Corp. ,100 St. Paul St. , Suite 800,Denver, CO 80206 or mrichardson@riverinc.com.
Forward Looking Statements This communication contains certain forward-looking statements within the meaning of federal securities laws, including with respect to the proposed business combination of Blade and EIC, the impact of the Public Statement, the change to liability accounting on EIC's and the post-business combination company's financial statements and the Summary Financial Statement Impact included above. Forward-looking statements are predictions, projections and other statements about future events that are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual future events to differ materially from the forward-looking statements in this communication. Such factors can be found in EIC's most recent annual report on Form 10-K, subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K, which are available, free of charge, at theSEC's website at www.sec.gov, and also in the Form S-4 and EIC's definitive proxy statement/prospectus. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us or the business combination with Blade. You are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made, and EIC and Blade undertake no obligation to update or revise the forward-looking statements, whether as a result of new information, changes in expectations, future events or otherwise.
Participants in the Solicitation
EIC, Blade and certain of their respective directors and officers may be deemed participants in the solicitation of proxies of EIC's stockholders with respect to the approval of the business combination with Blade. EIC and Blade urge investors, stockholders and other interested persons to read the Form S-4 and the definitive proxy statement/prospectus and documents incorporated by reference therein, as well as this Current Report on Form 8-K and other documents filed with theSEC in connection with the business combination, as these materials contain important information about Blade, EIC and the business combination. Information regarding the participants in the proxy solicitation, including EIC's directors and officers and Blade's directors and officers, and a description of their respective direct and indirect interests, by security holdings or otherwise, is included in the Form S-4 and the definitive proxy statement/prospectus for the business combination. Each of these documents is available at theSEC's website or by directing a request to EIC as described above under "Additional Information about the Business Combination and Where to Find It."
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