You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our audited financial statements
and related notes included in Part II, Item 8 of this Annual Report on Form
10-K/A. This discussion and other parts of this report contain forward-looking
statements that involve risks and uncertainties, such as statements of our
plans, objectives, expectations and intentions. Our actual results could differ
materially from those discussed in these forward-looking statements. See
"Cautionary Note Regarding Forward-Looking Statements." Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in Item 1A "Risk Factors."
This Amendment No. 1 ("Amendment No. 1") to the Annual Report on Form 10-K/A
amends the Annual Report on Form 10-K of 5:01 Acquisition Corp. (the "Company")
for the period from August 31, 2020 (inception) through December 31, 2020, as
filed with the Securities and Exchange Commission ("SEC") on March 17, 2021 (the
"Original Filing")
The Company has re-evaluated the Company's application of ASC 480-10-S99-3A to
its accounting classification of the Class A common stock, par value $0.0001 per
share, sold in the Company's initial public offering (the "IPO") on October 16,
2020 and upon exercise of the underwriters' over-allotment option (collectively,
the "Public Shares"). Historically, a portion of the outstanding Public Shares
was classified as permanent equity to maintain stockholders' equity greater than
$5 million on the basis that the Company will not redeem its Public Shares in an
amount that would cause its net tangible assets to be less than $5,000,001, as
described in the Company's amended and restated certificate of incorporation
(the "Charter"). Pursuant to such re-evaluation, the Company has determined that
the Public Shares include certain provisions that require classification of all
of the Public Shares as temporary equity regardless of the net tangible assets
redemption limitation contained in the Charter. In addition, in connection with
the change in presentation for the Public Shares, the Company determined it
should restate its earnings per share calculation to allocate income and losses
shared pro rata between the two classes of shares. This presentation
contemplates a Business Combination as the most likely outcome, in which case,
both classes of shares share pro rata in the income and losses of the Company.
Therefore, on December 6, 2021, the audit committee of the Company's board of
directors (the "Audit Committee") concluded, after discussion with the Company's
management, that the Company's previously issued (i) audited balance sheet as of
October 16, 2020 (the "Post IPO Balance Sheet"); (ii) audited financial
statements included in the Annual Report on Form 10-K for the fiscal year ended
December 31, 2020, filed with the SEC on March 17, 2021 ("2020 Form 10-K");
(iii) unaudited condensed financial statements included in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2021,
filed with the SEC on May 7, 2021; (iv) unaudited condensed financial statements
included in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 2021, filed with the SEC on August 11, 2021; and (v) Note 2 to
the unaudited condensed financial statements included in the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30, 2021, filed
with the SEC on November 15, 2021 (collectively, the "Affected Periods"), should
be restated to report all Public Shares as temporary equity and restate earnings
per share and should no longer be relied upon. As such, the Company will restate
its financial statements for the Affected Periods in this Form 10-K/A for the
Post IPO Balance Sheet and the Company's audited financial statements included
in the 2020 Form 10-K, and the unaudited condensed financial statements for the
periods ended March 31, 2021 and June 30, 2021 in the Company's amended
Quarterly Report on Form 10-Q/A for the quarterly period ended September 30,
2021, to be filed with the SEC (the "Q3 Form 10-Q/A").
The restatement does not have an impact on its cash position and cash held in
the trust account established in connection with the IPO (the "Trust Account").
The Company's management has concluded that a material weakness remains in the
Company's internal control over financial reporting and that the Company's
disclosure controls and procedures were not effective as of the end of each of
the Affected Periods or September 30, 2021. The Company's remediation plan with
respect to such material weakness will be described in more detail in Item 9A of
Part II to this Amendment No. 1.
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Overview
We are a blank check company incorporated in Delaware on August 31, 2020. We
were formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We are not limited to a particular industry or sector
for purposes of consummating a business combination. We are an early stage and
emerging growth company and, as such, we are subject to all the risks associated
with early stage and emerging growth companies.
Our sponsor is 5:01 Acquisition LLC, an entity affiliated with two of our
directors. The registration statement for our IPO was declared effective October
13, 2020. On October 16, 2020, we consummated the IPO of 8,000,000 shares of our
Class A common stock (each, a public share and collectively, the public shares)
at $10.00 per share, generating gross proceeds of $80.0 million, and incurring
offering costs of approximately $4.9 million, inclusive of $2.8 million in
deferred underwriting commissions. The underwriter was granted a 45-day option
from the date of the final prospectus relating to our IPO to purchase up to
1,200,000 additional shares to cover over-allotments, if any, at $10.00 per
share. The underwriters partially exercised their over- allotment option and on
November 12, 2020 purchased an additional 256,273 shares of Class A common
stock, generating gross proceeds of approximately $2.6 million, and incurred
additional offering costs of approximately $141,000 in underwriting fees
(inclusive of approximately $90,000 in deferred underwriting fees).
Simultaneously with the closing of our IPO, we consummated the private placement
of 360,000 shares of our Class A common stock (each, a private placement share
and collectively, the private placement shares), at a price of $10.00 per
private placement share to our sponsor, generating proceeds of $3.6 million.
With the closing of the underwriters' over-allotment on November 12, 2020, we
consummated the second closing of the private placement, resulting in the
purchase by our sponsor of an aggregate of an additional 5,126 private placement
shares, generating gross proceeds of approximately $51,000.
Upon the closing of the IPO and the private placement, $80.0 million ($10.00 per
share) of the net proceeds of the sale of the public shares in the IPO and of
the private placement shares in the private placement were placed in a trust
account located in the United States, and invested in money market funds meeting
certain conditions under Rule 2a-7 under the Investment Company Act and which
invest solely in U.S. Treasuries, as determined by us, until the earlier of: (i)
the completion of a business combination and (ii) the distribution of the trust
account.
In addition, our sponsor agreed to forfeit up to 300,000 shares of our Class B
common stock, par value $0.0001, or the founder shares, to the extent that the
over-allotment option was not exercised in full by the underwriters. The
underwriters partially exercised their over-allotment option on November 12,
2020 and on November 30, 2020, our sponsor forfeited 235,932 shares of our Class
B common stock.
We only have 24 months from the closing of our IPO, or until October 16, 2022,
to complete our initial business combination. We refer to this time period as
the "Combination Period." If we are unable to complete a business combination
during the Combination Period, we will (i) cease all operations except for the
purpose of winding up, (ii) as promptly as reasonably possible but not more than
ten business days thereafter, redeem 100% of the outstanding public shares
(including any public shares issued in the IPO or any public shares or shares
that the initial stockholders or their affiliates purchased in the IPO or later
acquired in the open market or in private transactions), which redemption will
completely extinguish public stockholders' rights as stockholders (including the
right to receive further liquidation distributions, if any), subject to
applicable law, and (iii) as promptly as reasonably practicable following such
redemption, subject to the approval of the remaining holders of common stock and
the board of directors, proceed to commence a voluntary liquidation and thereby
a formal dissolution of our company, subject (in the case of (ii) and
(iii) above) to our obligations to provide for claims of creditors and the
requirements of applicable law.
Covid-19
On January 30, 2020, the World Health Organization, or WHO, announced a global
health emergency because of a new strain of coronavirus, or COVID-19. In March
2020, the WHO classified the COVID-19 outbreak as a pandemic based on the rapid
increase in exposure globally. The full impact of the COVID-19 pandemic
continues to evolve. The impact of the
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COVID-19 pandemic on our results of operations, financial position and cash
flows will depend on future developments, including the duration and spread of
the pandemic and related advisories and restrictions. These developments and the
impact of the COVID-19 pandemic on the financial markets and the overall economy
are highly uncertain and cannot be predicted. If the financial markets and/or
the overall economy are impacted for an extended period, our results of
operations, financial position and cash flows may be materially adversely
affected. Additionally, our ability to complete an initial business combination,
may be materially adversely affected due to significant governmental measures
being implemented to contain the COVID-19 pandemic or treat its impact,
including travel restrictions, the shutdown of businesses and quarantines, among
others, which may limit our ability to have meetings with potential investors or
affect the ability of a potential target company's personnel, vendors and
service providers to negotiate and consummate an initial business combination in
a timely manner. Our ability to consummate an initial business combination may
also be dependent on the ability to raise additional equity and debt financing,
which may be impacted by the COVID-19 pandemic and the resulting market
downturn.
Results of Operations
Our entire activity since inception up to December 31, 2020 has been related to
our formation, IPO, which was consummated on October 16, 2020, and since the
IPO, our activity has been limited to the search for a prospective initial
business combination, and we will not be generating any operating revenues until
the closing and completion of our initial business combination. We expect to
incur increased expenses as a result of being a public company (for legal,
financial reporting, accounting and auditing compliance), as well as for due
diligence expenses.
For the period from August 31, 2020 (inception) through December 31, 2020, we
had a net loss of approximately $209,000, which consisted of approximately
$163,000 in general and administrative expenses, approximately $47,000 in
franchise tax expense, offset by approximately $480 in interest income on the
trust account.
Liquidity, Capital Resources and Going Concern
As of December 31, 2020, we had approximately $1.1 million outside of the trust
account, approximately $480 of interest income available in the trust account to
pay for tax obligations and working capital of approximately $1.3 million.
Our liquidity needs to date have been satisfied through a capital contribution
of $20,000 from our sponsor to purchase the founder shares (as defined below),
the related party loan under a promissory note of $300,000, which was repaid in
full on October 16, 2020, and the net proceeds from the consummation of the
private placement not held in the trust account. In addition, in order to
finance transaction costs in connection with a business combination, our
officers, directors and initial stockholders may, but are not obligated to,
provide working capital loans. As of December 31, 2020, there were no amounts
outstanding under any working capital loans.
In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standards Board ("FASB") ASC Topic 205-40,
"Presentation of Financial Statements -Going Concern," management has determined
that the mandatory liquidation and subsequent dissolution raises substantial
doubt about the Company's ability to continue as a going concern. No adjustments
have been made to the carrying amounts of assets or liabilities should the
Company be required to liquidate after October 16, 2022. The financial
statements do not include any adjustment that might be necessary if the Company
is unable to continue as a going concern.
Commitments and Contingencies
Registration Rights
The holders of founder shares and private placement shares are entitled to
registration rights pursuant to a registration and stockholder rights agreement.
The holders of these securities are entitled to make up to three demands that we
register such securities, subject to specified conditions. In addition, the
holders have certain "piggy-back" registration rights with respect to
registration statements filed subsequent to the consummation of the business
combination. We will bear the expenses incurred in connection with the filing of
any such registration statements. However, the registration and stockholder
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rights agreement will provide that we will not be required to effect or permit
any registration or cause any registration statement to become effective until
termination of the applicable lock-up period.
Underwriting Agreement
We granted the underwriter a 45-day option to purchase up to 1,200,000
additional units to cover any over-allotments, at the IPO price less the
underwriting discounts and commissions. On November 12, 2020, the underwriter
partially exercised the over-allotment option.
The underwriter was entitled to an underwriting discount of $0.20 per share, or
$1.6 million in the aggregate, paid upon the closing of the IPO. In addition,
$0.35 per share, or $2.9 million in the aggregate will be payable to the
underwriter for deferred underwriting commissions. The deferred fee will become
payable to the underwriter from the amounts held in the trust account solely in
the event that we complete a business combination, subject to the terms of the
underwriting agreement.
The underwriter received an additional fee of approximately $51,000 upon closing
of the underwriter's over-allotment option and approximately $90,000 in deferred
underwriting commissions.
Critical Accounting Policies and Estimates
Investments held in Trust Account
Our portfolio of investments held in trust is comprised solely of investments in
money market funds that invest in U.S. government securities. Our investments
held in the trust account are classified as trading securities. Trading
securities are presented on the balance sheet at fair value at the end of each
reporting period. Gains and losses resulting from the change in fair value of
these investments are included in interest income held in trust account in the
accompanying statement of operations. The estimated fair values of investments
held in the trust account are determined using available market information,
other than for investments in open-ended money market funds with published daily
net asset values, or NAV, in which case we use NAV as a practical expedient to
fair value. The NAV on these investments is typically held constant at $1.00 per
unit.
Class A Common Stock Subject to Possible Redemption
Class A common stock subject to mandatory redemption (if any) are classified as
liability instruments and are measured at fair value. Conditionally redeemable
Class A common stock (including shares of Class A common stock that feature
redemption rights that are either within the control of the holder or subject to
redemption upon the occurrence of uncertain events not solely within our
control) are classified as temporary equity. At all other times, Class A common
stock are classified as stockholders' equity. Our outstanding Public Shares
feature certain redemption rights that are considered to be outside of our
control and subject to occurrence of uncertain future events. Accordingly, at
December 31, 2020, 8,256,273 shares of Class A common stock subject to possible
redemption were presented at redemption value as temporary equity, outside of
the stockholders' equity section of our balance sheet.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of redeemable common stock to equal the redemption value at
the end of each reporting period. Effective with the closing of the Initial
Public Offering, we recognized the remeasurement of Class A common stock subject
to possible redemption from initial book value to redemption amount, which,
resulted in charges against additional paid-in capital (to the extent available)
and accumulated deficit.
Net Income (Loss) Per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per common share is
calculated by dividing the net income (loss) by the weighted average shares of
common stock outstanding for the respective period. Diluted net income (loss)
per
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share is the same as basic net income (loss) per share for the period from
August 31, 2020 (inception) through December 31, 2020. The remeasurement of the
Class A common stock subject to possible redemption is excluded from earnings
per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Our management does not believe that there are any other recently issued, but
not yet effective, accounting pronouncements, if currently adopted, would have a
material effect on our balance sheet.
Off-Balance Sheet Arrangements and Contractual Obligations
As of December 31, 2020, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments
or contractual obligations.
JOBS Act
The Jumpstart Our Business Startups Act of 2012, or the JOBS Act, contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" and
under the JOBS Act are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non- emerging growth companies. As a result, the financial statements may
not be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
Additionally, we are in the process of evaluating the benefits of relying on the
other reduced reporting requirements provided by the JOBS Act. Subject to
certain conditions set forth in the JOBS Act, if, as an "emerging growth
company," we choose to rely on such exemptions we may not be required to, among
other things, (i) provide an auditor's attestation report on our system of
internal controls over financial reporting pursuant to Section 404, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our IPO or until we are no longer an "emerging
growth company," whichever is earlier.
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