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Restatement of Previously Issued Consolidated Financial Statements

12 Months Ended

Dec. 31, 2020

Restatement Of Previously Issued Consolidated Financial Statements [Abstract]

Restatement of Previously Issued Consolidated Financial Statements

3. Restatement of Previously Issued Consolidated Financial Statements

On April 12, 2021, the Securities and Exchange Commission issued a public statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). The SEC Statement addressed certain accounting and reporting considerations related to warrants of a kind similar to those issued by the Company at the time of its initial public offering (“IPO”). As a result of the SEC Statement, the Company reevaluated the accounting treatment of 15.5 million public warrants issued in connection with GPAC’s formation and IPO and 12.8 million sponsor warrants issued pursuant to a simultaneous private placement. The warrants have a five-year term which commenced on March 2, 2018, 30 days after the completion of the Business Combination, and will expire on February 2, 2023, or earlier upon redemption or liquidation. The Company had been accounting for these warrants as components of equity. The guidance in ASC 815, stipulates 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 after issuance, changes in the estimated fair value of the derivative instruments should be reported in the consolidated statement of operations.

Based on the SEC Statement and the guidance in ASC 815, the Company concluded that its consolidated financial statements should be restated to reflect both the public warrants and sponsor warrants as liabilities, with subsequent changes in their estimated fair value recorded as non-cash income or expense in the consolidated statements of operations for all periods after issuance. As a result, the Company has restated its consolidated financial statements as of December 31, 2020 and 2019 and for the years then ended, as well as the unaudited condensed consolidated financial statements for each of the quarterly and year-to-date periods within those years.

The following table sets forth the consolidated balance sheets, including the balances as reported, adjustments and the as restated balances as of December 31, 2020 and 2019:

	As of December 31,
	2020									2019
(In thousands)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Warrant liabilities	$	—		$	92,708		$	92,708		$	21,622		$	23,808		$	45,430
Total liabilities		394,483			92,708			487,191			152,456			23,808			176,264
Additional paid-in capital		164,460			168,587			333,047			5,990			(3,168	)		2,822
Accumulated deficit		(4,561	)		(261,295	)		(265,856	)		(8,349	)		(20,640	)		(28,989	)
Total stockholders’ equity (deficit)		159,905			(92,708	)		67,197			(2,354	)		(23,808	)		(26,162	)
Total equity (deficit)	$	160,249		$	(92,708	)	$	67,541		$	(4,732	)	$	(23,808	)	$	(28,540	)

The following table sets forth the consolidated statements of operations, including the balances as reported, adjustments and the as restated balances for the years ended December 31, 2020 and 2019:

	Year Ended December 31,
	2020									2019
(In thousands, except per share amounts)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Change in fair value - warrant liabilities		(59,418	)		(240,655	)		(300,073	)		(16,758	)		(18,546	)		(35,304	)
Total other expense, net		(104,100	)		(240,655	)		(344,755	)		(28,193	)		(18,546	)		(46,739	)
Net loss before income taxes		(32,874	)		(240,655	)		(273,529	)		(11,979	)		(18,546	)		(30,525	)
Net income (loss)		10,875			(240,655	)		(229,780	)		(12,379	)		(18,546	)		(30,925	)
Net income (loss) attributable to Purple Innovation, Inc.	$	3,788		$	(240,655	)	$	(236,867	)	$	(4,027	)	$	(18,546	)	$	(22,573	)
Net loss per common share - basic	$	0.10		$	(6.14	)	$	(6.04	)	$	(0.40	)	$	(1.86	)	$	(2.26	)
Net loss per common share - diluted	$	0.08		$	(6.12	)	$	(6.04	)	$	(0.40	)	$	(1.86	)	$	(2.26	)

The following table sets forth the consolidated statements of stockholders’ equity (deficit), including the balances as reported, adjustments and the as restated balances for the years ended December 31, 2020 and 2019:

(In thousands)	Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity (Deficit)			Total Equity (Deficit)
Balance at December 31, 2020, as reported	$	164,460		$	(4,561	)	$	159,905		$	160,249
Adjustments		168,587			(261,295	)		(92,708	)		(92,708	)
Balance at December 31, 2020, as restated		333,047			(265,856	)		67,197			67,541

Balance at December 31, 2019, as reported	$	5,990		$	(8,349	)	$	(2,354	)	$	(4,732	)
Adjustments		(3,168	)		(20,640	)		(23,808	)		(23,808	)
Balance at December 31, 2019, as restated		2,822			(28,989	)		(26,162	)		(28,540	)

Balance at December 31, 2018, as reported	$	3,655		$	(4,322	)	$	(662	)	$	(2,011	)
Adjustments		(3,168	)		(2,094	)		(5,262	)		(5,262	)
Balance at December 31, 2018, as restated		487			(6,416	)		(5,924	)		(7,273	)

The following table sets forth the consolidated statements of cash flows from operating activities, including the balances as reported, adjustments and the as restated balances for the years ended December 31, 2020 and 2019

	Year Ended December 31,
	2020								2019
(In thousands)	As Reported		Adjustment			As Restated			As Reported			Adjustment			As Restated
Cash flows from operating activities:
Net income (loss)	$	10,875	$	(240,655	)	$	(229,780	)	$	(12,379	)	$	(18,546	)	$	(30,925	)
Loss on change in fair value – warrant liabilities		59,418		240,655			300,073			16,758			18,546			35,304
Net cash provided by operating activities	$	81,257	$	—		$	81,257		$	22,880		$	—		$	22,880

The adjustment had no impact on cash flows from investing or operating activities.

The following table sets forth the unaudited condensed consolidated statements of operations, including the balances as reported, adjustments and the as restated balances for the three and nine months ended September 30, 2020:

	Three Months Ended September 30, 2020									Nine Months Ended September 30, 2020
(In thousands, except per share amounts)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Change in fair value – warrant liabilities	$	(17,971	)	$	(85,991	)	$	(103,962	)	$	(43,308	)	$	(169,285	)	$	(212,593	)
Total other expense, net		(25,549	)		(85,991	)		(111,540	)		(86,538	)		(169,285	)		(255,823	)
Net loss before income taxes		(1,275	)		(85,991	)		(87,266	)		(22,808	)		(169,285	)		(192,093	)
Net income (loss)		(1,169	)		(85,991	)		(87,160	)		13,010			(169,285	)		(156,275	)
Net income (loss) attributable to Purple Innovation, Inc.	$	(1,022	)	$	(85,991	)	$	(87,013	)	$	5,832		$	(169,285	)	$	(163,453	)
Net income (loss) per common share - basic	$	(0.02	)	$	(1.95	)	$	(1.97	)	$	0.18		$	(5.27	)	$	(5.09	)
Net income (loss) per common share - diluted	$	(0.02	)	$	(1.95	)	$	(1.97	)	$	0.16		$	(5.25	)	$	(5.09	)

	Three Months Ended June 30, 2020									Six Months Ended June 30, 2020
(In thousands, except per share amounts)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Change in fair value – warrant liabilities	$	(38,970	)	$	(91,294	)	$	(130,264	)	$	(25,337	)	$	(83,294	)	$	(108,631	)
Total other expense, net		(73,201	)		(91,294	)		(164,495	)		(60,989	)		(83,294	)		(144,283	)
Net loss before income taxes		(41,250	)		(91,294	)		(132,544	)		(21,533	)		(83,294	)		(104,827	)
Net income (loss)		(5,822	)		(91,294	)		(97,116	)		14,179			(83,294	)		(69,115	)
Net income (loss) attributable to Purple Innovation, Inc.	$	(1,981	)	$	(91,294	)	$	(93,275	)	$	6,854		$	(83,294	)	$	(76,440	)
Net income (loss) per common share - basic	$	(0.07	)	$	(3.12	)	$	(3.19	)	$	0.26		$	(3.20	)	$	(2.94	)
Net income (loss) per common share - diluted	$	(0.11	)	$	(3.08	)	$	(3.19	)	$	0.26		$	(3.20	)	$	(2.94	)

	Three Months Ended March 31, 2020
(In thousands, except per share amounts)	As Reported		Adjustment		As Restated
Change in fair value – warrant liabilities	$	13,633	$	8,000	$	21,633
Total other income (expense), net		12,212		8,000		20,212
Net income before income taxes		19,717		8,000		27,717
Net income		20,001		8,000		28,001
Net income attributable to Purple Innovation, Inc.	$	8,835	$	8,000	$	16,835
Net income per common share - basic	$	0.39	$	0.35	$	0.74
Net income per common share - diluted	$	0.11	$	0.32	$	0.43

	Three Months Ended September 30, 2019									Nine Months Ended September 30, 2019
(In thousands, except per share amounts)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Change in fair value - warrant liabilities		(1,384	)		(1,200	)		(2,584	)		(3,372	)		(5,043	)		(8,415	)
Total other expense, net		(2,602	)		(1,200	)		(3,802	)		(13,099	)		(5,043	)		(18,142	)
Net income (loss) before income taxes		8,411			(1,200	)		7,211			350			(5,043	)		(4,693	)
Net income (loss)		8,411			(1,200	)		7,211			350			(5,043	)		(4,693	)
Net income (loss) attributable to Purple Innovation, Inc.	$	1,594		$	(1,200	)	$	394		$	126		$	(5,043	)	$	(4,917	)
Net income (loss) per common share - basic	$	0.18		$	(0.14	)	$	0.04		$	0.01		$	(0.58	)	$	(0.57	)
Net income (loss) per common share - diluted	$	0.16		$	(0.12	)	$	0.04		$	0.01		$	(0.58	)	$	(0.57	)

	Three Months Ended June 30, 2019									Six Months Ended June 30, 2019
(In thousands, except per share amounts)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Change in fair value - warrant liabilities		(3,685	)		(3,936	)		(7,621	)		(1,988	)		(3,843	)		(5,831	)
Total other expense, net		(4,980	)		(3,936	)		(8,916	)		(10,497	)		(3,843	)		(14,340	)
Net loss before income taxes		(7,341	)		(3,936	)		(11,277	)		(8,061	)		(3,843	)		(11,904	)
Net loss		(7,341	)		(3,936	)		(11,277	)		(8,061	)		(3,843	)		(11,904	)
Net loss attributable to Purple Innovation, Inc.	$	(1,338	)	$	(3,936	)	$	(5,274	)	$	(1,468	)	$	(3,843	)	$	(5,311	)
Net loss per common share - basic and diluted	$	(0.16	)	$	(0.46	)	$	(0.62	)	$	(0.17	)	$	(0.46	)	$	(0.63	)

	Three Months Ended March 31, 2019
(In thousands, except per share amounts)	As Reported			Adjustment		As Restated
Change in fair value – warrant liabilities		1,697			93		1,790
Total other expense, net		(5,517	)		93		(5,424	)
Net loss before income taxes		(720	)		93		(627	)
Net loss		(720	)		93		(627	)
Net loss attributable to Purple Innovation, Inc.	$	(130	)	$	93	$	(37	)
Net loss per common share - basic and diluted	$	(0.02	)	$	0.01	$	(0.01	)

(In thousands)	Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity (Deficit)			Total Equity (Deficit)
Balance at September 30, 2020, as reported	$	44,032		$	(2,517	)	$	41,520		$	41,564
Adjustments		1,379			(189,925	)		(188,546	)		(188,546	)
Balance at September 30, 2020, as restated		45,411			(192,442	)		(147,026	)		(146,982	)

Balance at June 30, 2020, as reported	$	20,584		$	(1,495	)	$	19,095		$	17,469
Adjustments		(3,155	)		(103,934	)		(107,089	)		(107,089	)
Balance at June 30, 2020, as restated		17,429			(105,429	)		(87,994	)		(89,620	)

Balance at March 31, 2020, as reported	$	5,955		$	486		$	6,446		$	15,114
Adjustments		(3,163	)		(12,640	)		(15,803	)		(15,803	)
Balance at March 31, 2020, as restated		2,792			(12,154	)		(9,357	)		(689	)

(In thousands)	Additional Paid-in Capital			Accumulated Deficit			Total Stockholders’ Equity (Deficit)			Total Equity (Deficit)
Balance at September 30, 2019, as reported	$	5,748		$	(4,196	)	$	1,557		$	7,983
Adjustments		(3,168	)		(7,138	)		(10,306	)		(10,306	)
Balance at September 30, 2019, as restated		2,580			(11,334	)		(8,749	)		(2,323	)

Balance at June 30, 2019, as reported	$	10,364		$	(5,790	)	$	4,579		$	(3,363	)
Adjustments		(3,168	)		(5,938	)		(9,106	)		(9,106	)
Balance at June 30, 2019, as restated		7,196			(11,728	)		(4,527	)		(12,469	)

Balance at March 31, 2019, as reported	$	3,728		$	(4,452	)	$	(719	)	$	(2,658	)
Adjustments		(3,168	)		(2,002	)		(5,170	)		(5,170	)
Balance at March 31, 2019, as restated		560			(6,454	)		(5,889	)		(7,828	)

	Nine Months Ended September 30,
	2020								2019
(In thousands)	As Reported		Adjustment			As Restated			As Reported		Adjustment			As Restated
Cash flows from operating activities:
Net income (loss)	$	13,010	$	(169,285	)	$	(156,275	)	$	350	$	(5,043	)	$	(4,693	)
Loss on change in fair value – warrant liabilities		43,308		169,285			212,593			3,372		5,043			8,415
Net cash provided by operating activities	$	87,400	$	—		$	87,400		$	15,819	$	—		$	15,819

	Six Months Ended June 30,
	2020								2019
(In thousands)	As Reported		Adjustment			As Restated			As Reported			Adjustment			As Restated
Cash flows from operating activities:
Net income (loss)	$	14,179	$	(83,294	)	$	(69,115	)	$	(8,061	)	$	(3,843	)	$	(11,904	)
Loss on change in fair value – warrant liabilities		25,337		83,294			108,631			1,988			3,843			5,831
Net cash provided by operating activities	$	72,346	$	—		$	72,346		$	2,135		$	—		$	2,135

	Three Months Ended March 31,
	2020									2019
(In thousands)	As Reported			Adjustment			As Restated			As Reported			Adjustment			As Restated
Cash flows from operating activities:
Net income (loss)	$	20,001		$	8,000		$	28,001		$	(720	)	$	93		$	(627	)
Gain on change in fair value – warrant liabilities		(13,633	)		(8,000	)		(21,633	)		(1,697	)		(93	)		(1,790	)
Net cash used in operating activities	$	(264	)	$	—		$	(264	)	$	(8,296	)	$	—		$	(8,296	)

The adjustment had no impact on cash flows from investing or operating activities for each of the quarterly periods.

In addition to the amounts noted above, impacted disclosures included in Notes 12, 16 and 17 have been restated to properly reflect this error correction.,