Restatement of Previously Issued Financial Statements

9 Months Ended

Sep. 30, 2021

Restatement of Previously Issued Financial Statements

Restatement of Previously Issued Financial Statements

4. Restatement of Previously Issued Financial Statements

The Company has restated its condensed consolidated balance sheet as of September 30, 2021, and its condensed consolidated statements of operations, stockholders’ equity (deficit) for the three- and nine-month periods ended September 30, 2021, and condensed consolidated statement of cash flows for the nine month period ended September 30, 2021, along with certain related notes to such restated condensed consolidated financial statements.

The errors that caused the Company to conclude that its financial statements should be restated are the result of a misapplication of the guidance on accounting for certain Substitute Warrants, which was identified in connection with the preparation of our condensed consolidated financial statements as of and for the quarter ended June 30, 2022.

Based on ASC 815-40, Contracts in Entity’s Own Equity, warrant instruments that do not meet the criteria to be considered indexed to an entity’s own stock shall be initially classified as liabilities at their estimated fair values. In periods subsequent to issuance, changes in the estimated fair value of the derivative instruments should be reported in the statement of operations.

The Company determined that the condensed consolidated financial statements should be restated to reflect the modification of the Substitute Warrants as a liability, with subsequent changes in their estimated fair value recorded as non-cash income or expense in the statements of operations for all periods since modification on May 24, 2021.

In addition to the restatement of the condensed consolidated financial statements, the Company has also restated the following notes for the three- and nine-month period ended September 30, 2021, to reflect the error corrections noted above.

    •         Note 3 – Summary of Significant Accounting Policies

    •         Note 5 - Reverse Recapitalization

 •         Note 10 - Commitment and Contingencies

    •         Note 11 - Equity

    •         Note 13 – Fair Value Measurements

The following table represents the estimated fair value of the Company’s Substitute Warrants liabilities recorded on our condensed consolidated balance sheet along with changes in fair value which are recorded as other income and expense on our condensed consolidated statement of operations.

The Company’s prior and updated accounting for the Substitute Warrants do not have any effect on the Company’s previously reported or future cash flows or cash.

The tables summarize the effect of the restatement on each financial statement line item as of the dates, and for the period, indicated:

Condensed Consolidated Balance Sheet as of September 30, 2021 (unaudited)	As Reported		Adjustment		As Restated
Warrant liabilities	$	775,263	$	486,287	$	1,261,550
Total current liabilities		36,282,975		486,287		36,769,262
Total liabilities		36,282,975		486,287		36,769,262
Additional paid-in capital		161,362,260		(100,415)		161,261,845
Accumulated deficit		(152,449,666)		(385,872)		(152,835,538)
Total stockholders' equity (deficit)		8,967,404		(486,287)		8,481,117

Condensed Consolidated Statement of Operations for the three months ended September 30, 2021 (unaudited)	As Reported		Adjustment		As Restated
Change in fair value of warrant liabilities	$	260,238	$	16,276,232	$	16,536,470
Total other (income) expenses		673,948		16,276,232		16,950,180
Loss before tax		(20,773,099)		(16,276,232)		(37,049,331)
Net loss		(20,773,099)		(16,276,232)		(37,049,331)
Net loss attributable to common stockholders		(20,773,099)		(16,276,232)		(37,049,331)
Net loss per share, basic and diluted	$	(0.40)		(0.32)		(0.72)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.40)		(0.32)		(0.72)

Condensed Consolidated Statement of Operations for the nine months ended September 30, 2021 (unaudited)	As Reported		Adjustment		As Restated
Change in fair value of warrant liabilities	$	(1,208,412)	$	385,873	$	(822,539)
Total other (income) expenses		(550,523)		385,873		(164,650)
Loss before tax		(62,269,946)		(385,873)		(62,655,819)
Net loss		(62,269,946)		(385,873)		(62,655,819)
Net loss attributable to common stockholders		(318,092,017)		(385,873)		(318,477,890)
Net loss per share, basic and diluted	$	(1.44)		(0.01)		(1.45)
Net loss per share attributable to common stockholders, basic and diluted	$	(7.35)		(0.01)		(7.36)

Condensed Consolidated Statement of Stockholders' Equity (Deficit) for the nine months ended September 30, 2021 (unaudited)	As Reported		Adjustment		As Restated
Effect of Merger and recapitalization, net of redemptions and issuance costs of $1,412,846	$	(26,615,796)	$	(38,220,448)	$	(64,836,244)
Issuance of common stock for exercise of warrants and Unit Purchase Options		9,199,471		38,120,033		47,319,504
Net loss for the three months ended September 30, 2021		(20,773,099)		(16,276,232)		(37,049,331)

Condensed Consolidated Statement of Cash Flows for the nine months ended September 30, 2021 (unaudited)	As Reported		Adjustment		As Restated
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(62,269,946)	$	(385,873)	$	(62,655,819)
Adjustments to reconcile net loss to net cash and used in operating activities:
Change in fair value of warrant liabilities		(1,208,412)		385,873		(822,539)
Supplemental disclosure of cash flow information:
Non-cash investing and financing activities
Reclassification of legacy NeuroRx warrants to warrant liabilities		-		38,220,448		38,220,448
Reclassification of warrant liability upon exercise of warrant		-		38,120,032		38,120,032