Quarterly report pursuant to Section 13 or 15(d)

Comparison of Restated Financial Statements to Financial Statements As Previously Reported

v3.20.4
Comparison of Restated Financial Statements to Financial Statements As Previously Reported
 6 Months Ended
Jun. 30, 2020
Accounting Changes and Error Corrections [Abstract]  
COMPARISON OF RESTATED FINANCIAL STATEMENTS TO FINANCIAL STATEMENTS AS PREVIOUSLY REPORTED

13. COMPARISON OF RESTATED FINANCIAL STATEMENTS TO FINANCIAL STATEMENTS AS PREVIOUSLY REPORTED

 

In these restated financial statements and footnotes, we have added disclosure in Note 10 for previously undisclosed contingent liabilities. The following tables compare the Company's previously issued Balance Sheet, Statement of Operations and Statement of Cash Flows as of June 30, 2020 and for the three and six months then ended to the corresponding restated financial statements for that period end. The adjustments that relate to the restated financial statements are:

 

●

the recording of a liability for the $155,555 cash fee and the $96,011 value of the warrants due to A.G.P related to the placement of the Dominion and Kingsbrook convertible promissory notes and the related debt discount recorded against those convertible promissory notes as of June 30, 2020;
     
● the recording of a $144,085 reduction of the beneficial conversion features associated with the convertible promissory notes and the related reduction of the debt discount;
     
● the recording of a liability for the $500,000 cash fee due to the former Chief Executive Officer in connection with the Resignation Agreement as of June 30, 2020;
     
● the recording of stock-based compensation during the three and six months ended June 30, 2020 of $2,625,000 and $2,625,000, respectively, for the value of the 500,000 shares of common stock that the Company is obligated to replace with the Escrow Agent after the Escrow Agent became obligated to return 500,000 Founder Shares to the Sponsor, both as a result of the Resignation Agreement; and
     
●

the recording of the transfer of $3,269,085 of common stock subject to redemption (temporary equity) to common stock (permanent equity), in order to maintain stockholders' equity in excess of $5,000,001 as of June 30, 2020.

 

The effects of the restatement on the line items within the Company's unaudited Condensed Consolidated Balance Sheet as of June 30, 2020 are as follows:

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    June 30, 2020  
    As Originally Reported     Adjustments     As Restated  
                   
Assets                        
Current assets:                        
Cash   $ 257,601     $ -     $ 257,601  
Restricted cash     787,865       -       787,865  
Prepaid income taxes     21,806       -       21,806  
Prepaid expenses     118,645       -       118,645  
Total current assets     1,185,917       -       1,185,917  
                         
Other assets     163,797       -       163,797  
Marketable securities held in Trust Account     11,276,350       -       11,276,350  
Total Assets   $ 12,626,064     $ -     $ 12,626,064  
                         
Liabilities and Stockholders' Equity                        
Current liabilities:                        
Accounts payable and accrued expenses   $ 339,497     $ 655,555     $ 995,052  
Accrued issuable equity     -       96,011       96,011  
March promissory note – related party     337,301       -       337,301  
Due to related party     795,003       -       795,003  
Advances due - 180     1,379,815       -       1,379,815  
Convertible promissory notes, net of debt discount     431,745       (107,481 )     324,264  
Derivative liability     214,188       -       214,188  
Total liabilities     3,497,549       644,085       4,141,634  
                         
Commitments and contingencies                        
                         
Common stock subject to possible redemption     4,128,507       (644,085 )     3,484,422  
                         
Stockholders' Equity:                        
Preferred stock     -       -       -  
Common stock     508       6       514  
Additional paid-in capital     6,458,398       3,124,994       9,583,392  
(Accumulated deficit)/Retained earnings     (1,458,898 )     (3,125,000 )     (4,583,898 )
Total Stockholders' Equity     5,000,008       -       5,000,008  
Total Liabilities and Stockholders' Equity   $ 12,626,064     $ -     $ 12,626,064  

  

The effects of the restatement on the line items within the Company's unaudited Consolidated Statement of Operations for the three and six months ended June 30, 2020 are as follows:

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

  

    For the Three Months Ended June 30, 2020     For the Six Months Ended June 30, 2020  
    As Originally Reported     Adjustments     As Restated     As Originally Reported     Adjustments     As Restated  
                                     
General and administrative expenses   $ 388,039     $ 3,125,000     $ 3,513,039     $ 635,631     $ 3,125,000     $ 3,760,631  
Loss from operations     388,039       3,125,000       3,513,039       635,631       3,125,000       3,760,631  
                                                 
Other (expense) income:                                                
Interest expense     (270,257 )     -       (270,257 )     (270,257 )     -       (270,257 )
Loss on issuance of convertible promissory note     (1,657,522 )     -       (1,657,522 )     (1,657,522 )     -       (1,657,522 )
Interest income     2,950       -       2,950       38,438       -       38,438  
Other (expense) income, net     (1,924,829 )     -     (1,924,829 )     (1,889,341 )     -       (1,889,341 )
                                                 
(Loss) income before income taxes     (2,312,868 )     (3,125,000 )     (5,437,868 )     (2,524,972 )     (3,125,000 )     (5,649,972 )
BBenefit (provision) from income taxes     1,480       -       1,480       (3,827 )     -       (3,827 )
Net (loss) income   $ (2,311,388 )   $ (3,125,000 )   $ (5,436,388 )   $ (2,528,799 )   $ (3,125,000 )   $ (5,653,799 )
                                                 
Weighted average shares outstanding                                                
Basic     4,479,278       -       4,479,278       4,468,714       -       4,468,714  
Diluted     4,479,278       -       4,479,278       4,468,714       -       4,468,714  
                                                 
Net (loss) income per common share                                                
Basic   $ (0.52 )   $ (0.69 )   $ (1.21 )   $ (0.57 )   $ (0.70 )   $ (1.27 )
Diluted   $ (0.52 )   $ (0.69 )   $ (1.21 )   $ (0.57 )   $ (0.70 )   $ (1.27 )

 

The effects of the restatement on the line items within the Company's unaudited Consolidated Statement of Cash Flows for the six months ended June 30, 2020 are as follows:

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Six Months Ended June 30, 2020  
    As Originally Reported     Adjustments     As Restated  
                   
Cash Flows from Operating Activities:                        
Net (loss) income   $ (2,528,799 )   $ (3,125,000 )   $ (5,653,799 )
Adjustments to reconcile net (loss) income to net cash used in operating activities:                        
Interest income earned on investments held in Trust Account     (38,438 )     -       (38,438 )
Stock-based compensation     -       2,625,000       2,625,000  
Amortization of debt discount     252,493       -       252,493  
Loss on issuance of convertible promissory notes     1,657,522       -       1,657,522  
Changes in operating assets and liabilities:                        
Prepaid income taxes     3,827       -       3,827  
Prepaid expenses     (66,855 )     -       (66,855 )
Other asset     (163,797 )     -       (163,797 )
Accounts payable and accrued expenses     71,074       500,000       571,074  
Net cash and restricted cash used in operating activities     (812,973 )     -       (812,973 )
                         
Cash Flows from Investing Activities:                        
Cash withdrawn from Trust Account for redemptions     728,884       -       728,884  
Investment of cash in Trust Account     (89,142 )     -       (89,142 )
Net cash and restricted cash provided by investing activities     639,742       -       639,742  
                         
Cash Flows from Financing Activities:                        
Proceeds from promissory note – CannBioRx     9,990       -       9,990  
Repayment of promissory note - CannBioRx     (330,000 )     -       (330,000 )
Proceeds from convertible promissory note – related party     33,877       -       33,877  
Repayment of convertible promissory note – related party     (62,922 )     -       (62,922 )
Proceeds from convertible promissory notes     1,750,000       -       1,750,000  
Redemptions of common stock     (728,884 )     -       (728,884 )
Net cash and restricted cash provided by (used in) financing activities     672,061       -       672,061  
                         
Net Change in Cash and Restricted Cash     498,830       -       498,830  
Cash and Restricted Cash – Beginning of period     546,636       -       546,636  
Cash and Restricted Cash – Ending of period   $ 1,045,466     $ -     $ 1,045,466  
                         
Supplementary cash flow information:                        
                         
Non-cash investing and financing activities:                        
Change in value of common stock subject to possible redemption   $ 4,510,285     $ (644,085 )   $ 3,866,200  
Waiver of deferred underwriting fee   $ 4,025,000     $ -     $ 4,025,000  
Accrual of debt issuance costs   $ -     $ 251,566     $ 251,566  
Initial classification of debt discount in connection with issuance of convertible promissory note   $ 3,208,527     $ 107,481     $ 3,316,008  
Initial classification of derivative liability in connection with issuance of convertible promissory note   $ 214,188     $ -     $ 214,188  
Original issue discount in connection with issuance of convertible promissory note   $ 194,445     $ -     $ 194,445  
Initial classification of debt discount and issuance of commitment shares and leak-out shares in connection with convertible promissory note   $ 3,014,082     $ 107,481     $ 3,121,563