Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review.
On April 12, 2021, the Staff of the U.S. Securities and Exchange Commission (the
"SEC") issued the "Staff Statement on Accounting and Reporting Considerations
for Warrants Issued by Special Purpose Acquisition Companies ("SPACs")" (the
"Staff Statement"). The Staff Statement clarified guidance for all SPAC-related
companies regarding the accounting and reporting for their warrants that could
result in the warrants issued by SPACs being classified as a liability measured
at fair value, with non-cash fair value adjustments recorded in earnings at each
reporting period.
Golden Nugget Online Gaming, Inc. (the "Company") evaluated the applicability
and potential impact of the Staff Statement on the Company's financial
statements and, on May 11, 2021, the audit committee of the board of directors
of the Company (the "Audit Committee"), in consultation with management of the
Company, concluded that the Company's previously issued audited financial
statements for the year ended December 31, 2020 (the "Affected Period") should
no longer be relied upon based on the facts described below. Further, any
previously furnished or filed reports, earnings releases, guidance, investor
presentations, or similar communications, regarding the Affected Period should
also not be relied upon.
In connection with making the determination to restate the financial statements
covered by the Affected Period (the "Restatement"), the Company reviewed and
discussed the accounting treatment of its Warrants (as described below) and the
Affected Period with Marcum LLP, its independent registered public accounting
firm. The Company has previously classified its private placement warrants and
public warrants (collectively, the "Warrants"), which were initially issued by
Landcadia Holdings II, Inc. ("Landcadia") in connection with its initial public
offering, as equity. The Company has determined that the Warrants should be
accounted for as liabilities measured at fair value, with non-cash fair value
adjustments recorded in earnings at each reporting period. It is expected that
the liabilities on the Company's balance sheet in its restated consolidated
financial statements for the year ended December 31, 2020 will increase by
approximately $176.4 million, accumulated deficit will increase by approximately
$176.4 million, and total other expense in its Statement of Operations will
decrease by approximately $39.6 million. These estimates are preliminary and
subject to change as management completes the restatement. Our independent
registered public accounting firm has not audited or reviewed these estimates.
In connection with the Restatement, management has re-evaluated the
effectiveness of the Company's disclosure controls and procedures and internal
control over financial reporting as of December 31, 2020. Management has
concluded that the Company's disclosure controls and procedures and internal
controls over financial reporting were not effective as of December 31, 2020,
due to a material weakness in the internal control over financial reporting
related to the accounting for complex accounting instruments.
The Company will file an amendment to its Annual Report on Form 10-K for the
year ended December 31, 2020 (the "Amended 10-K") reflecting this change in
classification of the Warrants for the Affected Period and the corresponding
changes to the financial statement items for the Affected Period will be set
forth through disclosures in the financial statements included in the Amended
10-K. The Audit Committee and management have discussed the matters disclosed in
this and the above paragraphs in this Item 4.02(a) with its independent
registered public accounting firm, Marcum LLP.
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 revenue, operating expenses, cash flows, cash or common shares
outstanding.
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