System1(SST) - 2021 Q1 - Quarterly Report

Part I. Financial Information This section provides the company's unaudited condensed financial statements, management's analysis, market risk disclosures, and internal controls assessment Financial Statements This section presents the unaudited condensed financial statements for the three months ended March 31, 2021, detailing the company's financial position and performance as a blank check company Condensed Balance Sheets The balance sheet as of March 31, 2021, details total assets of $518.0 million, primarily trust cash, and a shareholders' deficit of $(60.8) million Condensed Balance Sheet Summary (as of March 31, 2021) | Category | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | Assets | | | | Cash | $319,237 | $843,643 | | Cash held in Trust Account | $517,500,000 | $517,500,000 | | Total Assets | $517,988,612 | $518,553,433 | | Liabilities | | | | Warrant Liability | $38,225,001 | $53,005,335 | | FPA Liability | $3,160,168 | $10,654,540 | | Deferred Underwriting Fee | $18,112,500 | $18,112,500 | | Total Liabilities | $61,263,070 | $82,385,425 | | Shareholders' Equity (Deficit) | $(60,774,458) | $(75,454,532) | Condensed Statements of Operations The statement of operations for Q1 2021 shows a net income of $20.6 million, primarily from non-cash gains on warrant and FPA liabilities Statement of Operations Summary (Three Months Ended March 31, 2021) | Line Item | Amount (USD) | | :--- | :--- | | Loss from operations | $(1,717,172) | | Gain on change in fair value of warrant liability | $14,780,334 | | Gain on change in fair value of FPA liability | $7,494,372 | | Net income | $20,557,534 | Condensed Statements of Changes in Shareholders' Equity Shareholders' deficit improved from $(75.5) million to $(60.8) million, driven by net income and reclassification adjustments Changes in Shareholders' Equity (Deficit) | Description | Amount (USD) | | :--- | :--- | | Balance – December 31, 2020 | $(75,454,532) | | Change in value of ordinary shares subject to redemption | $(5,877,460) | | Net income | $20,557,534 | | Balance – March 31, 2021 | $(60,774,458) | Condensed Statements of Cash Flows Net cash used in operating activities was $0.5 million, resulting in a decrease in the company's cash balance to $0.32 million Cash Flow Summary (Three Months Ended March 31, 2021) | Category | Amount (USD) | | :--- | :--- | | Net cash used in operating activities | $(524,406) | | Net Change in Cash | $(524,406) | | Cash – Beginning | $843,643 | | Cash - Ending | $319,237 | Notes to Condensed Financial Statements The notes detail the company's blank check status, accounting policies for financial instruments, and a 'going concern' warning due to working capital deficit - The Company is a blank check company with a Business Combination deadline of June 19, 2022[22][36] - A 'Going Concern' issue is raised due to a working capital deficit of $1,276,789 and the need for additional capital, casting substantial doubt on the Company's ability to continue[40][42] - Warrants and the Forward Purchase Agreement (FPA) are accounted for as liabilities at fair value, with fair value changes recognized in the statement of operations[56][57] - The company has a Forward Purchase Agreement with Cannae Holdings to purchase 7.5 million Class A ordinary shares and 2.5 million warrants for $75 million upon Business Combination closing[83] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operations, and liquidity, highlighting a $20.6 million net income from non-cash gains and a 'going concern' warning - For Q1 2021, the company reported a net income of $20,557,534, primarily from non-cash gains on warrant and FPA liabilities[123] - As of March 31, 2021, cash outside the Trust Account for working capital was $319,237, a decrease from $843,643 at year-end 2020[129] - The company needs to raise additional capital for working capital, raising substantial doubt about its ability to continue as a going concern[133] - Key contractual obligations include a $18,112,500 deferred underwriting fee and a $75,000,000 Forward Purchase Agreement with Cannae Holdings, both contingent on Business Combination completion[137][138] Quantitative and Qualitative Disclosures Regarding Market Risk The company faces no material market or interest rate risk, as Trust Account funds are invested in short-term U.S. government securities - The company is not subject to material market or interest rate risk, with IPO proceeds in the Trust Account invested in short-term U.S. government securities or money market funds[147] Controls and Procedures Disclosure controls and procedures were ineffective as of March 31, 2021, due to a material weakness in accounting for warrants and redeemable shares - Following the SEC Staff Statement, the company re-evaluated its accounting for Warrants and FPA, resulting in restatement of prior financial statements[149] - Disclosure controls and procedures were not effective as of March 31, 2021, due to a material weakness in classifying Warrants, FPAs, and Class A ordinary shares[151] - Remediation involves expanding and improving the review process for complex securities and accounting standards[152] Part II. Other Information This section provides disclosures on legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits Legal Proceedings The company reports no legal proceedings - The company has no legal proceedings to report[154] Risk Factors No material changes to previously disclosed risk factors are reported - There have been no material changes to previously disclosed risk factors in the final prospectus or subsequent filings[155] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities or changes in the use of proceeds are reported - None[157] Defaults Upon Senior Securities The company reports no defaults upon senior securities - None[158] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[159] Other Information The company reports no other material information - None[160] Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL data - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer, along with XBRL Instance Documents[162]