You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our financial statements and
related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q,
or this Quarterly Report. 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 Part I, Item 1A "Risk Factors" of our Annual Report on
Form 10-K for the year ended December 31, 2020 as filed with the SEC on March
17, 2021.
Overview
We are a blank check company incorporated in Delaware on August 31, 2020 for the
purpose of effecting a merger, capital stock exchange, asset acquisition, stock
purchase, reorganization or similar business combination with one or more
businesses, which we refer to as the initial business combination. We are not
limited to a particular industry or sector for purposes of consummating a
business combination. We are an "emerging growth company," as defined in
Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act,
as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act
and, as such, we are subject to all of 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 initial public offering, or IPO, was declared
effective October 13, 2020 and on October 16, 2020, we issued 8,000,000 shares
of our Class A common stock (each, a public share and collectively, the public
shares) in our IPO 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 the
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 the
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 the IPO, we consummated the private placement
of 360,000 shares of Class A common stock (each, a private placement share and
collectively, the private placement shares), at a price of $10.00 per share to
our sponsor, generating proceeds of $3.6 million. Simultaneously 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 of an
aggregate of an additional 5,126 private placement shares by our sponsor,
generating gross proceeds to us of approximately $51,000.
Upon the closing of the IPO, the private placement and the partial exercise of
the underwriters' over-allotment, approximately $82.6 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 and to the underwriters' upon
partial exercise of the over-allotment option were placed in a trust account
located in the United States, and invested only in U.S. government treasury
bills, notes and bonds with a maturity of 185 days or less or 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 Class B common stock,
par value $0.0001, or the founder shares to the extent that the overallotment
option is not exercised in full by the underwriters. The underwriters partially
exercised their over-allotment option on November 12, 2020; thus, on November
30, 2020, the remaining 235,932 shares of Class B common stock subject to
forfeiture were forfeited.
If we are unable to complete a business combination within 24 months from the
closing of the IPO, or October 16, 2022 (or 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 sold 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.
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Risks and Uncertainties
The full long-term impact of the COVID-19 pandemic continues to evolve. The
impact of the COVID-19 pandemic on our results of operations, financial position
and cash flows will depend on future developments, including the duration and
subsequent waves, including due to variants of the virus, of the pandemic and
related advisories and restrictions. These developments and the long-term 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
Since August 31, 2020 (inception), our entire activity has been limited to the
search for a prospective initial business combination. We will not generate any
operating revenues until the closing and completion of our initial business
combination, at the earliest. We generate non-operating income in the form of
investment income from our investments held in the trust account. 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 three months ended September 30, 2021, we had a net loss of
approximately $246,000 which consisted of approximately $198,000 of general and
administrative expenses and approximately $50,000 of franchise tax expense,
offset by approximately $1,000 of interest income from investments held in the
trust account.
For the nine months ended September 30, 2021, we had a net loss of approximately
$726,000, which consisted of approximately $587,000 in general and
administrative expenses and approximately $148,000 in franchise tax expense,
offset by approximately $9,000 of interest income from investments held in the
trust account.
For the period from August 31, 2020 (inception) through September 30, 2020, we
had a net loss of approximately $18,000, which consisted of approximately $1,000
in general and administrative expenses and approximately $17,000 franchise tax
expense.
Liquidity and Capital Resources
As of September 30, 2021, we had approximately $650,000 in cash held outside of
the trust account and working capital of approximately $524,000.
Our liquidity needs to date have been satisfied through a capital contribution
of $20,000 from our sponsor to purchase the founder shares, the 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. As of September 30,
2021, there were no amounts outstanding under any working capital loans.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet our needs through the earlier of the
consummation of a business combination or one year from this filing. Over this
time period, we will be using these funds held outside of the trust account for
paying existing accounts payable, identifying and evaluating prospective initial
business combination candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating the
business combination.
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Contractual Obligations
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
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
The underwriter was entitled to an underwriting discount of $0.20 per share, or
$1.7 million in the aggregate, paid upon the closing of the IPO and partial
exercise of the over-allotment option. 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.
Critical Accounting Policies
There have been no significant changes in our critical accounting policies and
estimates disclosed in our annual report on Form 10-K for the year ended
December 31, 2020. See Note 2 to the unaudited condensed financial statements
included in Part I, Item 1 of this Quarterly Report for more information.
Recent Accounting Pronouncements
Our management does not believe that there are any recently issued, but not yet
effective, accounting pronouncements, that if currently adopted, would have a
material effect on our condensed financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we
did not have any off-balance sheet arrangements as defined in
Item 303(a)(4)(ii) of Regulation S-K.
JOBS Act
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
unaudited condensed 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 control 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 Public Company
Accounting Oversight Board, or 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 chief executive officer'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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