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MarketScreener Homepage  >  Equities  >  Nasdaq  >  5:01 Acquisition Corp.    FVAM


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5:01 ACQUISITION CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

11/18/2020 | 04:20pm EST

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and related notes included in Part I, Item 1 of this 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. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled "Risk factors."

Unless the context otherwise requires, we use the terms "5:01," "company," "we," "us" and "our" in this report to refer to 5:01 Acquisition Corp.


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, or the business combination. We are an emerging growth company and, as such, we are subject to all of the risks associated with emerging growth companies.

Our sponsor is 5:01 Acquisition LLC, an entity affiliated with two of our directors, or our sponsor. The registration statement for our Initial Public Offering was declared effective October 13, 2020. On October 16, 2020, we consummated our initial public offering, or the IPO, of 8,000,000 shares of Class A common stock, or, 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 underwriter partially exercised the over-allotment option on November 12, 2020 and purchased an additional 256,273 shares of Class A common stock, or the Additional Shares, generating gross proceeds of approximately $2.6 million, or the Over-Allotment. We incurred additional offering costs of approximately $141,000 in underwriting fees (inclusive of approximately $90,000 in deferred underwriting fees). The over-allotment option remains exercisable as to 943,727 shares.

Concurrently with the closing of our IPO, we consummated the private placement, or the private placement, of 360,000 shares of Class A common stock, or 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 gross proceeds of $3.6 million. Simultaneously with the closing of the Over-Allotment on November 12, 2020, we consummated the second closing of the private placement, resulting in the purchase of an additional 5,126 private placement shares by our sponsor, generating gross proceeds of approximately $51,000. If the over-allotment option is exercised as to any additional shares, the sponsor will purchase an additional amount of up to 18,874 private placement shares at a price of $10.00 per share.

Upon the closing of the IPO, the Over-Allotment and the private placement, approximately $83.0 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, or the 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 as described below.

We will provide the holders of our outstanding public shares, or the public stockholders, with the opportunity to redeem all or a portion of their public shares upon the completion of a business combination either (i) in connection with a stockholder meeting called to approve the business combination or (ii) by means of a tender offer.


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 that our sponsor, directors, officers or their affiliates purchased in the IPO or later acquired in the open market or in private transactions), which redemption will completely extinguish the 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.

The issuance of additional shares in our business combination:

• may significantly dilute the equity interest of our stockholders, which

   dilution would increase if the anti-dilution provisions in the shares of
   Class B common stock resulted in the issuance of shares of Class A common stock
   on a greater than one-to-one basis upon conversion of the shares of Class B
   common stock;

• may subordinate the rights of holders of shares of Class A common stock if

   shares of preferred stock are issued with rights senior to those afforded our
   shares of Class A common stock;

• could cause a change in control if a substantial number of our shares of

   Class A common stock are issued, which may affect, among other things, our
   ability to use our net operating loss carry forwards, if any, and could result
   in the resignation or removal of our present officers and directors;

• may have the effect of delaying or preventing a change of control of us by

   diluting the share ownership or voting rights of a person seeking to obtain
   control of us; and

• may adversely affect prevailing market prices for our Class A common stock.

Similarly, if we issue debt securities, it could result in:

• default and foreclosure on our assets if our operating revenues after a

   business combination are insufficient to pay our debt obligations;

• acceleration of our obligations to repay the indebtedness even if we have made

   all principal and interest payments when due if the debt security contains
   covenants that require the maintenance of certain financial ratios or reserves
   and we breach any such covenant without a waiver or renegotiation of that

• our immediate payment of all principal and accrued interest, if any, if the

   debt security is payable on demand; and

• our inability to obtain additional financing, if necessary, if the debt

security contains covenants restricting our ability to obtain additional

financing while such security is outstanding.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. Our plans to raise capital or to consummate our initial business combination may not be successful.

Liquidity and Capital Resources

As of September 30, 2020, we had approximately $289,000 in its operating bank account, and working capital deficit of approximately $321,000.

Prior to September 30, 2020, our liquidity needs were satisfied through a capital contribution of $20,000 from our sponsor to purchase the 2,300,000 shares of our common stock, which were latter re-classified into 2,300,000 shares of Class B common stock, or the founder shares, the loan under our promissory note of $300,000, or the Note. Subsequent to September 30, 2020, our liquidity needs have been satisfied through the net proceeds from the consummation of the private placement not held in the trust account. We fully repaid the Note on October 16, 2020. In addition, in order to finance transaction costs in connection with a business combination, our sponsor, officers, directors and their permitted transferees may, but are not obligated to, provide us working capital loans. As of October 16, 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 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 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.

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Results of Operations

Our entire activity since inception up to September 30, 2020 was in preparation for our formation and the IPO. We will not be generating any operating revenues until the closing and completion of our initial business combination.

For the period from August 31, 2020 (inception) through September 30, 2020, we had net loss of approximately $18,000, which consisted of approximately $1,300 in general and administrative expenses and approximately $16,500 in franchise tax expense.

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 $1.6 million in the aggregate, paid upon the closing of the IPO. In addition, $0.35 per share, or $2.8 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.

In connection with the consummation of the Over-Allotment on November 12, 2020, the underwriter received an additional fee of approximately $51,000 paid upon closing, and approximately $90,000 in deferred underwriting commissions.

Director Compensation

Upon closing of the IPO, we agreed to pay our non-employee directors $50,000 annually, payable in equal monthly installments, for service on our board of directors. In addition, our sponsor also agreed to transfer 30,000 of its founder shares to each such director, representing a transfer of an aggregate of 120,000 of its founder shares. Our sponsor transferred such founder shares to Ms. Beckman, Dr. Mackay and Mr. Patterson in October 2020 upon closing of the IPO. Our sponsor transferred such founder shares to Ms. Singer in November 2020 when she became a member of our board of directors.


Critical Accounting Policies

Deferred Offering Costs Associated with the IPO

Deferred offering costs consisted of legal, accounting, underwriting fees and other costs incurred through the balance sheet date that were directly related to the IPO and that were charged to stockholders' equity upon the completion of the IPO in October 2020.

Net Loss Per Common Share

We comply with accounting and disclosure requirements of FASB ASC Topic 260, "Earnings Per Share." Net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period, excluding common stock subject to forfeiture. Weighted average shares at September 30, 2020 were reduced for the effect of an aggregate of 300,000 founder shares that were subject to forfeiture by our sponsor if the over-allotment option is not exercised in full or in part by the underwriter. Upon the partial exercise of the over-allotment option on November 12, 2020, 64,068 of these founder shares were no longer subject to forfeiture by our sponsor At September 30, 2020, we did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into shares of common stock and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the period presented.

Off-Balance Sheet Arrangements

As of September 30, 2020, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.


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.

© Edgar Online, source Glimpses

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Managers and Directors
Andrew J. Schwab Co-Chief Executive Officer & Director
Kush M. Parmar Co-Chief Executive Officer & Director
Rebecca L. Lucia Chief Financial Officer & Treasurer
Daniella Beckman Independent Director
Martin W. MacKay Independent Director
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