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. 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." Overview We are a blank check company incorporated inDelaware onAugust 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 5:01Acquisition LLC , an entity affiliated with two of our directors. The registration statement for our IPO was declared effectiveOctober 13, 2020 . OnOctober 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 onNovember 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 onNovember 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 inthe United States , and invested in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act and which invest solely inU.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 onNovember 12, 2020 and onNovember 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 untilOctober 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' 41
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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 OnJanuary 30, 2020 , theWorld Health Organization , or WHO, announced a global health emergency because of a new strain of coronavirus, or COVID-19. InMarch 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 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 toDecember 31, 2020 has been related to our formation, IPO, which was consummated onOctober 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 fromAugust 31, 2020 (inception) throughDecember 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 and Capital Resources As ofDecember 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 onOctober 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 ofDecember 31, 2020 , 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 from our sponsor or an affiliate of our sponsor, or certain of our officers and directors 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 for paying existing accounts payable, identifying and 42
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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. 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 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. OnNovember 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 inU.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 Class A common stock feature certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, atDecember 31, 2020 , 7,593,256 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. 43
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Net Income (Loss) Per Common Share Our statement of operations includes a presentation of income per share for common stock subject to redemption in a manner similar to the two-class method of income per share. Net income per share, basic and diluted for Class A common stock is calculated by dividing the interest income held in the trust account of approximately$480 , net of applicable income and franchise taxes of approximately$480 for the period fromAugust 31, 2020 (inception) toDecember 31, 2020 , respectively, by the weighted average number of shares of Class A common stock outstanding for the period. Net loss per share, basic and diluted for Class B common stock for the period fromAugust 31, 2020 (inception) throughDecember 31, 2020 is calculated by dividing the net loss of approximately$209,000 , less net income attributable to Class A common stock of approximately$0 , resulting in a net loss of approximately$209,000 , by the weighted average number of Class B common stock outstanding for the period. 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 ofDecember 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. ITEM 7A.
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