Item 4.02. Non-Reliance on Previously Issued Financial Statements or Related Audit Report or Completed Interim Review
On April 12, 2021, the Staff of the Securities and Exchange Commission (the “SEC”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies” (“SPACs”) (the “Statement”). In the Statement, the SEC staff expressed its view that certain terms and conditions common to SPAC warrants may require such warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity and will be measured at fair value with non-cash fair value adjustments recorded into earnings at the end of each reporting period. After considering the Statement, Skillz Inc. (the “Company”) re-evaluated its historical accounting for its warrants which were classified as equity and concluded it must amend the accounting treatment of the public warrants and private placement warrants (collectively, the “Warrants”) issued in connection with the initial public offering of Flying Eagle Acquisition Corp. (“FEAC”) and recorded to the Company’s consolidated financial statements as a result of the Company’s business combination with FEAC and the reverse recapitalization that occurred on December 16, 2020.
On April 29, 2021, the Audit Committee of the Board of Directors of the Company concluded that the Company’s consolidated financial statements for the year ended December 31, 2020 should no longer be relied upon due to changes required to reclassify the Warrants as liabilities and record non-cash fair value adjustments into earnings to align with the guidance set forth in the Statement. Similarly, the related press releases, Report of Independent Registered Public Accounting Firm on the consolidated financial statements as of December 31, 2020 and for the year then ended, and the stockholder communications, investor presentations or other communications describing the relevant portions of the Company’s consolidated financial statements for the year ended December 31, 2020 should no longer be relied upon. The Company is preparing an amendment (the “Amended Form 10-K”) to its Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 12, 2021 reflecting this reclassification of the Warrants as liabilities and recognition of related non-cash fair value adjustments into earnings. As soon as practicable following the filing of this Current Report on Form 8-K, the Company will file the Amended Form 10-K, which will include restated consolidated financial statements that reflect the revised accounting and valuation of the Warrants.
The Company’s management and the Audit Committee have discussed the matters disclosed in this Item 4.02 with the Company’s independent registered public accounting firm, Ernst & Young LLP.