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OSTR Oyster Enterprises Acquisition

Filed: 24 May 21, 5:12pm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

March 31, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to            

Commission File Number 001-39910

Oyster Enterprises Acquisition Corp.

(Exact name of registrant as specified in its charter)

Delaware

    

85-3607783

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number) 

777 South Flagler Drive, Suite 800W

    

West Palm Beach, FL

    

33401

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (212) 888-5500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading
Symbol(s)

 

Name of each exchange on which registered

Units, each consisting of one share of Class A common stock and one-half of one redeemable warrant to purchase one share of Class A common stock

 

OSTRU

 

The Nasdaq Stock Market LLC

Class A common stock, par value $0.0001 per share

 

OSTR

 

The Nasdaq Stock Market LLC

Redeemable warrants, each exercisable for one share of Class A common stock at an exercise price of $11.50 per share, subject to adjustment

 

OSTRW

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

 

Non-accelerated filer

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes   No 

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.

As of May 24, 2021, there were 22,292,600 Units, 707,400 shares of Class A common stock and 5,750,000 shares of Class B common stock of the registrant issued and outstanding.

OYSTER ENTERPRISES ACQUISITION CORP.

CONDENSED BALANCE SHEETS

    

March 31, 2021

    

December 31, 2020

(unaudited)

Assets:

Current assets:

Cash

$

695,201

$

39,907

Prepaid expenses

 

4,480

 

Total current assets

699,681

39,907

Deferred offering costs associated with initial public offering

396,688

Investments held in Trust Account

230,002,515

Total assets

$

230,702,196

$

436,595

Liabilities and Stockholders’ Equity:

Current liabilities:

 

 

Accounts payable

$

36,181

$

36,595

Accrued expenses

 

79,600

 

21,000

Accrued offering costs

 

 

300,000

Note payable – related party

 

 

75,000

Total current liabilities

115,781

432,595

Deferred underwriting commissions in connection with the initial public offering

 

8,050,000

 

Warrant liabilities

 

9,025,000

 

Total liabilities

 

17,190,781

 

432,595

 

 

Commitments (Note 6)

 

 

 

 

Class A common stock, $0.0001 par value; 20,851,141 and NaN shares authorized, issued and outstanding, subject to possible redemption at $10.00 per share, at March 31, 2021 and December 31, 2020, respectively

 

208,511,410

 

Stockholders’ Equity:

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding at March 31, 2021 and December 31, 2020

Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 2,148,859 and NaN shares issued and outstanding (excluding Class A shares subject to possible redemption) at March 31, 2021 and December 31, 2020, respectively

215

Class B common stock, $0.0001 par value; 10,000,000 shares authorized at March 31, 2021 and December 31, 2020; 5,750,000 shares issued and outstanding at March 31, 2021 and December 31, 2020(1)

575

575

Additional paid-in capital

24,425

Retained earnings (Accumulated deficit)

4,999,215

(21,000)

Total Stockholders’ Equity

$

5,000,005

$

4,000

Total Liabilities and Stockholders’ Equity

$

230,702,196

$

436,595

(1)    As of December 31, 2020, the number includes up to 750,000 shares of Class B common stock subject to forfeiture if the over-allotment option was not exercised in full or in part by the underwriters. Subsequent to the balance sheet date, on January 25, 2021, the underwriters exercised their over-allotment option in full; thus, 0 shares of Class B common stock remain subject to forfeiture as of March 31, 2021.

The accompanying notes are an integral part of these condensed financial statements.

2

OYSTER ENTERPRISES ACQUISITION CORP.

CONDENSED STATEMENT OF OPERATIONS

Three Months Ended March 31, 2021

(Unaudited)

General and administrative costs

$

144,548

Loss from operations

(144,548)

Other income (expense), net:

Investment income on Trust Account

2,515

Change in fair value of warrant liabilities

8,680,000

Transaction costs

(672,964)

Total other income (expense), net

8,009,551

Net income

$

7,865,003

Weighted average shares outstanding of Class A redeemable common stock

22,739,130

Basic and diluted earnings per share, Class A

$

0.00

Weighted average shares outstanding of Class B non-redeemable common stock

5,516,667

Basic and diluted earnings per share, Class B

$

1.43

The accompanying notes are an integral part of this condensed financial statement.

3

OYSTER ENTERPRISES ACQUISITION CORP.

CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

Three Months Ended March 31, 2021

(Unaudited)

Retained

Common Stock

Common Stock

Additional

Earnings

Total

Class A

Class B

Paid-in

(Accumulated

Stockholders’

    

Shares

    

Amount

    

Shares

    

Amount

    

Capital

    

Deficit)

    

Equity

Balance — January 1, 2021

$

5,750,000

$

575

$

24,425

$

(21,000)

$

4,000

Sale of 23,000,000 Units, net of underwriting discount and offering costs and fair value of Public Warrants

23,000,000

2,300

205,640,112

0

205,642,412

Class A common stock subject to redemption

(20,851,141)

(2,085)

(205,664,537)

(2,844,788)

(208,511,410)

Net income

0

7,865,003

7,865,003

Balance — March 31, 2021

 

2,148,859

$

215

5,750,000

$

575

$

0

$

4,999,215

$

5,000,005

The accompanying notes are an integral part of this condensed financial statement.

4

OYSTER ENTERPRISES ACQUISITION CORP.

CONDENSED STATEMENT OF CASH FLOWS

Three Months Ended March 31, 2021

(Unaudited)

Cash Flows from Operating Activities:

    

  

Net income

$

7,865,003

Adjustments to reconcile net income to net cash used in operating activities:

 

Income earned on investments held in Trust Account

(2,515)

Change in fair value of warrant liabilities

(8,680,000)

Changes in operating assets and liabilities:

Prepaid expenses

(4,480)

Accounts payable

 

36,181

Accrued expenses

58,600

Net cash used in operating activities

 

(727,211)

Cash flows from investing activities:

Investment of cash into Trust Account

 

(230,000,000)

Net cash used in investing activities

(230,000,000)

Cash flows from financing activities:

Proceeds from sale of Units, net of underwriting discounts paid

225,953,432

Proceeds from sale of Private Placement Warrants

 

6,550,000

Repayment of note payable-related party

 

(75,000)

Payment of offering costs

 

(1,045,927)

Net cash provided by financing activities

231,382,505

Net increase in cash

 

655,294

Cash—beginning of the period

 

39,907

Cash-ending of the period

$

695,201

 

Supplemental disclosure of noncash activities:

 

Deferred underwriting fee payable

$

8,050,000

Initial classification of common stock subject to possible redemption

$

199,973,440

Change in value of Class A common stock subject to possible redemption

$

8,537,960

The accompanying notes are an integral part of this condensed financial statement.

5

Note 1 — Description of Organization and Business Operations

Organization and General

Oyster Enterprises Acquisition Corp. (the “Company”) is a blank check company that was incorporated in Delaware on October 22, 2020. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with 1 or more businesses (the “Initial Business Combination”). The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

As of March 31, 2021, the Company had not commenced any operations. All activity through March 31, 2021 relates to the Company’s formation and the initial public offering (“Initial Public Offering”) described below. The Company will not generate any operating revenues until after completion of its Initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents from the proceeds derived from the Initial Public Offering (Note 4).  The Company might also generate non-operating income from the changes in fair value of warrant liabilities. The Company has selected December 31st as its fiscal year end.

Sponsor and Initial Financing

The Company’s sponsor is Oyster Enterprises LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on January 19, 2021. On January 22, 2021, the Company closed its Initial Public Offering of 20,000,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”) at $10.00 per Unit, generating gross proceeds of $200.0 million, and incurring offering costs of approximately $12.2 million, inclusive of $7.0 million in deferred underwriting commissions (Note 6). On January 28, 2021, the Company consummated the sale of an additional 3,000,000 Units at the Initial Public Offering price of $10.00 per Unit pursuant to the full exercise by the underwriters of the Initial Public Offering of their over-allotment option, generating additional gross proceeds of $30.0 million, and incurring additional offering costs of approximately $1.7 million, inclusive of approximately $1.1 million in deferred underwriting commissions.

Simultaneously with the closing of the Initial Public Offering, the Company consummated a private placement (“Private Placement”) of an aggregate of 5,950,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) to the Sponsor and the underwriters at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $5.95 million (Note 5). On January 28, 2021, in connection with the consummation of the sale of additional Units pursuant to the underwriters’ exercise in full of their over-allotment option, the Company sold an additional 600,000 Private Placement Warrants in aggregate to the Sponsor and the underwriters at a price of $1.00 per Private Placement Warrant, generating additional gross proceeds of approximately $0.6 million.

The Trust Account

Upon the closing of the Initial Public Offering and the Private Placement on January 22, 2021, $200.0 million $10.00 per Unit) of the net proceeds from the Initial Public Offering and the Private Placement were placed in a trust account (the “Trust Account”), located in the United States at J.P. Morgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company, acting as trustee. The funds in the Trust Account are invested only in U.S. “government securities” within the meaning of Section 2(a)(16) of the Investment Company Act having a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution of the assets held in the Trust Account as described below.

6

Except with respect to interest earned on the funds held in the Trust Account that may be released to the Company to pay its taxes (less up to $100,000 interest to pay dissolution expenses), the proceeds from the Initial Public Offering and the Private Placement deposited in the Trust Account will not be released from the Trust Account until the earlier of: (i) the completion of the Company’s Initial Business Combination; (ii) the redemption of any shares of Class A common stock sold as part of the Units (as defined below) (Note 4) in the Initial Public Offering, (the Public Shares), that have been properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to provide holders of Public Shares the right to have their Public Shares redeemed or to redeem 100% of the Public Shares if the Company does not complete its Initial Business Combination within 24 months from the closing of the Initial Public Offering, as such period may be extended by a stockholder vote, the (“Combination Period”) or (B) with respect to any other material provision relating to stockholders’ rights or pre-Initial Business Combination activity; and (iii) the redemption of 100% of the Public Shares if the Company is unable to complete an Initial Business Combination within the Combination Period, subject to the requirements of law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s creditors, if any, which could have priority over the claims of the Company’s public stockholders.

Initial Business Combination

The Initial Business Combination must occur with one or more target businesses that together have an aggregate fair market value of at least 80% of the assets held in the Trust Account (excluding the amount of any deferred underwriting commissions held in the Trust Account and taxes payable on the income earned in the Trust Account) at the time of the agreement to enter into the Initial Business Combination. Furthermore, there is no assurance that the Company will be able to successfully effect an Initial Business Combination.

The Company, after signing a definitive agreement for an Initial Business Combination, will either (i) seek stockholder approval of the Initial Business Combination at a meeting called for such purpose in connection with which stockholders may seek to redeem their shares, regardless of whether they vote for or against the Initial Business Combination, for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes, or (ii) provide stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount in cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes. The decision as to whether the Company will seek stockholder approval of the Initial Business Combination or will allow stockholders to sell their Public Shares in a tender offer will be made by the Company, solely in its discretion, and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would otherwise require the Company to seek stockholder approval, unless a vote is required by law or under NASDAQ rules. If the Company seeks stockholder approval, it will complete its Initial Business Combination only if a majority of the outstanding shares of common stock voted are voted in favor of the Initial Business Combination. However, in no event will the Company redeem its Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001 or any greater net tangible asset or cash requirement which may be contained in the agreement relating to the Initial Business Combination upon consummation of the Initial Business Combination. In such case, the Company would not proceed with the redemption of the Public Shares and the related Initial Business Combination, and instead may search for an alternate Initial Business Combination.

If the Company holds a stockholder vote or there is a tender offer for shares in connection with an Initial Business Combination, a public stockholder will have the right to redeem its Public Shares for an amount in cash equal to its pro rata share of the aggregate amount then on deposit in the Trust Account as of two business days prior to the consummation of the Initial Business Combination, including interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes.

7

Pursuant to the Company’s amended and restated certificate of incorporation, if the Company is unable to complete the Initial Business Combination during the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but no more than ten business days thereafter, subject to lawfully available funds therefor, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account including interest earned on the funds held in the Trust Account and not previously released to the Company to pay the Company’s taxes (less up to $100,000 to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.

The Sponsor and the Company’s directors and officers have entered into a letter agreement with the Company, pursuant to which they have agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined below) (Note 5) held by them if the Company fails to complete an Initial Business Combination during the Combination Period. However, if the Sponsor or any of the Company’s directors, officers or affiliates acquires shares of Class A common stock in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such shares if the Company fails to complete the Initial Business Combination during the Combination Period.

Liquidity and Capital Resources

As of March 31, 2021, the Company had approximately $695,000 in its operating bank account and working capital surplus of approximately $584,000. The Company’s liquidity needs to date have been satisfied through a capital contribution of $25,000 from the Sponsor to purchase the Founder Shares (as defined below), the loan of up to $350,000 under the Note (see Note 5), and the net proceeds of $724,000 from the consummation of the Private Placement not held in the Trust Account. The Company fully repaid the $75,000 outstanding balance of the Note on January 22, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor, Alden Global Capital LLC (“Alden Global”) or any other affiliate of the Sponsor or the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans (see Note 5). As of March 31, 2021, the Company had not entered into any Working Capital Loans.

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through at least one year from the issuance of these financial statements. Over this time period, the Company 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.

Note 2 — Restatement of Previously Issued Financial Statement

In April 2021, the Company identified certain errors requiring revisions to its previously issued balance sheet as of January 22, 2021 and pro forma balance sheet as of January 28, 2021 included in its 8-K Current Report filed on January 28, 2021. The errors relate to the misapplication of the accounting guidance related to its Public and Private Placement Warrants the Company issued in January 2021. Management has determined that the correction of errors is not material to the previously issued financial statements. However, the Company has elected to restate its balance sheet as of January 22, 2021 and pro forma balance sheet as of January 28, 2021 included in its 8-K Current Report filed on January 28, 2021 to correct the errors as they would be material to the Company’s financial statements in future periods.

8

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s financial statements as opposed to equity. Since issuance on January 22, 2021, the Company’s warrants were accounted for as equity within the Company’s previously reported balance sheet, and after discussion and evaluation, including with the Company’s independent auditors, management concluded that the warrants should be presented as liabilities with subsequent fair value remeasurement.

Historically, the warrants were reflected as a component of equity as opposed to liabilities on the balance sheet, based on the Company’s application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40”). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for warrants issued on January 22, 2021 and January 28, 2021, in light of the SEC Staff’s published views. Based on this reassessment, management determined that the warrants should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the statement of operations each reporting period.

Therefore, the Company, in consultation with its Audit Committee, concluded that its previously issued 8-K Current Report dated January 22, 2021 should be restated because of a misapplication in the guidance around accounting for certain of the Company’s outstanding warrants to purchase common stock and should no longer be relied upon. The warrants were issued in connection with the Company’s Initial Public Offering of 20,000,000 Units and the sale of 5,950,000 Private Placement Warrants completed on January 22, 2021, and further consummation of the sale of an additional 3,000,000 Units and the sale of an additional 600,000 Private Placement Warrants pursuant to the full exercise by the underwriters of the Initial Public Offering of their over-allotment option, completed on January 28, 2021. Each Unit consists of 1 of the Company’s shares of Class A common stock, $0.0001 par value and one-half of one redeemable warrant. Each whole warrant entitles the holder to purchase 1 share of Class A common stock at a price of $11.50 per share. The Public Warrants and Private Placement Warrants both will expire worthless five years from the date of completion of the Initial Business Combination.

9

Impact of the Restatement

The impact of the restatement on the balance sheet as of January 22, 2021 is presented below.

    

As Previously

    

Restatement 

    

 Reported

Adjustment

As Restated

Total assets

$

200,786,448

$

$

200,786,448

Liabilities and Stockholders’ Equity:

Total current liabilities

$

58,000

$

$

58,000

Deferred underwriting commissions in connection with the initial public offering

 

7,000,000

 

 

7,000,000

Warrant liabilities

 

 

15,650,000

 

15,650,000

Total liabilities

 

7,058,000

 

15,650,000

 

22,708,000

Class A common stock, $0.0001 par value; shares subject to possible redemption

 

188,728,440

 

(15,650,000)

 

173,078,440

Stockholders’ Equity:

 

  

 

  

 

  

Preferred stock, $0.0001 par value

 

 

 

Class A common stock, $0.0001 par value

 

113

 

156

 

269

Class B common stock, $0.0001 par value

 

575

 

 

575

Additional paid-in capital

 

5,020,320

 

592,783

 

5,613,103

Accumulated deficit

 

(21,000)

 

(592,939)

 

(613,939)

Total Stockholders’ Equity

 

5,000,008

 

 

5,000,008

Total Liabilities and Stockholders’ Equity

$

200,786,448

$

$

200,786,448

Note 3 — Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements of the Company are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X of the Securities and Exchange Commission (the “SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the SEC on March 31, 2021, which contains the audited financial statements and notes thereto. The financial information as of December 31, 2020 is derived from the audited financial statements presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The interim results for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any future interim periods.

10

Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. These estimates and assumptions are used for, but not limited to (i) valuation of the Company’s common stock and warrants, (ii) measurement of warrant liabilities, (iii) income taxes, and (iv) legal contingencies. Actual results could differ from those estimates.

Emerging Growth Company

The Company is an emerging growth company, as defined in the JOBS Act, and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes- Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements,  and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (i) is no longer an emerging growth company or (ii) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards based on public company effective dates.

The Company will remain an emerging growth company until the earliest of (i) the last day of the first fiscal year (a) following the fifth anniversary of the completion of the Initial Public Offering, (b) in which the Company’s total annual gross revenue is at least $1.07 billion or (c) when the Company is deemed to be a large accelerated filer, which means the market value of its common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th and (ii) the date on which the Company has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Cash

Cash consists of bank deposits held in business checking and interest-bearing deposit accounts. As of March 31, 2021 and December 31, 2020, the Company did 0t have any cash equivalent balances, defined as highly liquid financial instruments purchased with original maturities of three months or less.

Investments Held in Trust Account

At March 31, 2021, the assets held in the Trust Account were invested in money market funds that trade in U.S. Treasury securities, meeting the conditions of Rule 2a-7 of the Investment Company Act.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. As of March 31, 2021 and December 31, 2020, the Company has not experienced losses on the account and management believes the Company is not exposed to significant risks on its account.

11

Risks and Uncertainties

Management is continuing to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, closing of the Initial Public Offering and/or search for a target company, the specific impacts are not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement, approximates the carrying amounts represented in the accompanying balance sheets, primarily due to their short-term nature.

As of March 31, 2021, the carrying values of cash, accounts payable, accrued expenses, franchise tax payable and income tax payable approximate their fair values due to the short-term nature of the instruments.  The Company’s investments held in Trust Account are comprised of money market funds invested in U.S. Treasury securities with an original maturity of 185 days or less and are recognized at fair value.  The fair value of investments held in Trust Account is determined using quoted prices in active markets. The warrant liability is recognized at fair value.

Warrant Liability

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB’s ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statement of operations.

The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model. As of March 31, 2021, the fair value of the Public Warrants has been estimated using a Black-Scholes option pricing model and the Private Placement warrants were measured using a Monte Carlo simulation model (see Note 9).

12

Class A Common Stock Subject to Possible Redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC Topic 480. Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including 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 the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock feature certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, as of March 31, 2021, 20,851,141 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 the Company’s balance sheet.

Offering Costs Associated with the Initial Public Offering

Offering costs consisted of legal, accounting and other costs incurred that were directly related to the Initial Public Offering. Total offering costs amounting to $13,875,552, comprised of $12,650,000 of underwriting fees, and $1,225,552 of other offering costs, were allocated between the proceeds of the Class A shares and Public Warrants issued based on the relative fair value method. The offering costs allocated to the Class A shares of $13,202,588 were charged to additional paid in capital in stockholders’ equity upon the completion of the Initial Public Offering.  Issuance costs of $672,694 attributed to the Private Warrants were expensed in general and administrative costs in the condensed statement of operations.

Net Earnings Per Share

Net earnings per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. The Company has not considered the effect of the Public Warrants and Private Placement Warrants sold in the Initial Public Offering and as part of the Placement Units to purchase 18,050,000 shares of Class A common stock in the calculation of diluted income per share, since the exercise of such warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

The Company’s statement of operations includes a presentation of income per share for common shares subject to redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted, for Class A redeemable common stock held by Public Stockholders for the three months ended March 31, 2021 is calculated by dividing the interest income earned on the Trust Account of $2,515, by the weighted average number of shares of Class A redeemable common stock held by Public Stockholders since issuance. Net earnings per common share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing net income for the three months ended March 31, 2021 of $7,865,003 less income attributable to Class A redeemable common stock of $2,515 by the weighted average number of Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

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The following table reflects the calculation of basic and diluted net income (loss) per ordinary share for the three months ended March 31, 2021 (in dollars, except share and per share amounts):

Redeemable Class A Ordinary Shares

    

Numerator: Earnings allocable to Redeemable Class A Ordinary Shares

Interest Income

$

2,515

Less: Franchise tax available to be withdrawn from the Trust Account

 

Net Earnings

$

2,515

Denominator: Weighted Average Redeemable Class A Ordinary Shares

Redeemable Class A Ordinary Shares, Basic and Diluted

 

22,739,130

Earnings/Basic and Diluted Redeemable Class A Ordinary Shares

$

0.00

Non-Redeemable Class Ordinary Shares

 

  

Numerator: Net Income minus Redeemable Net Earnings

 

  

Net Income

$

7,865,003

Less: Redeemable Class A Net Earnings

$

2,515

Non-Redeemable Class B Net Income

$

7,862,488

Denominator: Weighted Average Non-Redeemable Class B Ordinary Shares

 

  

Non-Redeemable Class B Ordinary Shares, Basic and Diluted

 

5,516,667

Earnings/Basic and Diluted Non-Redeemable Class B Ordinary Shares

$

1.43

As of March 31, 2021, basic and diluted shares are the same as there are 0 non-redeemable securities that are dilutive to the shareholders.

Income Taxes

The Company accounts for income taxes under ASC 740 Income Taxes, whereby deferred income tax assets are recognized for deductible temporary differences, operating losses, and tax loss carryforwards, and deferred income tax liabilities are recognized for taxable temporary differences. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. Deferred income tax assets are reduced by a valuation allowance when, considering all sources of taxable income, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

The Company recognizes the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by taxing authorities, based on the technical merits of the position. The income tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. There were 0 unrecognized tax benefits as of March 31, 2021 and December 31, 2020. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. NaN amounts were accrued for the payment of interest and penalties as of March 31, 2021 and December 31, 2020. The Company is subject to income tax examinations by major taxing authorities since inception. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The provision for income taxes was deemed to be de minimis for the three months ended March 31, 2021.

Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a significant effect on the Company’s financial statements, other than as described below.

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In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The objective of this update is to simplify the accounting for convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. This amendment also further revises the guidance in ASU 260, Earnings per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. The guidance can be adopted using a modified retrospective method or a fully retrospective method. The amendments are effective for fiscal years beginning after December 15, 2021 for public entities, excluding those that are smaller reporting companies. For all other entities the amendments are effective for fiscal years beginning after December 15, 2023. The Company is currently assessing the potential impact of adopting ASU 2020-06 on its financial statements. The Company does not expect that the changes in equity classification guidance will impact the Company’s classification of its warrant liabilities.

Note 4 — Initial Public Offering

On January 22, 2021, the Company consummated its Initial Public Offering of 20,000,000 Units at $10.00 per Unit, generating gross proceeds of $200.0 million, and incurring offering costs of approximately $12.2 million, inclusive of $7.0 million in deferred underwriting commissions. On January 28, 2021, the Company consummated the sale of an additional of 3,000,000 Units at the Initial Public Offering price of $10.00 per Unit pursuant to the full exercise by the underwriters of their over-allotment option, generating additional gross proceeds of $30.0 million, and incurring additional offering costs of approximately $1.7 million, inclusive of approximately $1.1 million in deferred underwriting commissions.

Each Unit consists of 1 share of Class A common stock (such shares of Class A common stock included in the Units being offered, the “Public Shares”), and one-half of one redeemable warrant (each, a “Public Warrant”). Each whole Public Warrant entitles the holder to purchase 1 share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 8).

Note 5 — Related Party Transactions

Founder Shares

On November 16, 2020, the Sponsor purchased 5,750,000 shares of Class B common stock (the “Founder Shares”) for an aggregate price of $25,000, or approximately $0.004 per share. The Sponsor agreed to forfeit up to 750,000 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters. On January 25, 2021, the underwriters exercised their over-allotment option in full, with the related closing of an additional 3,000,000 Units occurring on January 28, 2021; thus 0 Founder Shares remain subject to forfeiture.

The Founder Shares are identical to the Class A common stock included in the Units being sold in the Initial Public Offering except that the holders of the Founder Shares have the right to elect all of the directors prior to the Initial Business Combination, the Founder Shares automatically convert into shares of Class A common stock at the time of the Company’s Initial Business Combination, or earlier at the option of the holder, on a 1-for-one basis, subject to adjustments pursuant to certain anti-dilution rights and certain transfer restrictions, as described in more detail below.

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The Sponsor and the Company’s officers and directors have agreed, and any other permitted holders of the Founder Shares will agree, subject to limited exceptions, not to transfer, assign or sell any of their Founder Shares until the earlier to occur of: (A) one year after the completion of the Initial Business Combination or (B) subsequent to the Initial Business Combination, (x) if the last sale price of the Company’s Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the Initial Business Combination, or (y) the date on which the Company completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of Class A common stock for cash, securities or other property.

Private Placement

Simultaneously with the closing of the Initial Public Offering, the Company consummated a private placement (the “Private Placement Warrants” and, together with the Public Warrants, the “Warrants”) of an aggregate of 5,950,000 Private Placement Warrants to the Sponsor and the underwriters at a price of $1.00 per Private Placement Warrant, generating gross proceeds of $5.95 million. Among the Private Placement Warrants, 4,450,000 Private Placement Warrants were purchased by the Sponsor, 1,200,000 Private Placement Warrants were purchased by Imperial Capital, LLC, and 300,000 Private Placement Warrants were purchased by I-Bankers Securities, Inc. In connection with the consummation of the sale of additional Units pursuant to the underwriters’ exercise in full of their over-allotment option, on January 28, 2021, the Company sold an additional 600,000 Private Placement Warrants to the Sponsor and the underwriters at a price of $1.00 per Private Placement Warrant, generating additional gross proceeds of approximately $0.6 million. Among these additional Private Placement Warrants, 375,000 Private Placement Warrants were purchased by the Sponsor, 180,000 Private Placement Warrants were purchased by Imperial Capital, LLC, and 45,000 Private Placement Warrants were purchased by I-Bankers Securities, Inc.

Each whole Private Placement Warrant is exercisable for 1 whole share of the Company’s Class A common stock at a price of $11.50 per share, subject to adjustment. A portion of the purchase price of the Private Placement Warrants will be added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Initial Business Combination is not completed during the Combination Period, the proceeds from the sale of the Private Placement Warrants held in the Trust Account will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable in certain redemption scenarios and exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters or their permitted transferees.

The holders of the Private Placement Warrants will agree, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the Initial Business Combination.

Related Party Loans

The Sponsor had agreed to loan the Company an aggregate of $350,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Note”). The Note was non-interest bearing and payable on the earlier of November 30, 2021 or the completion of the Initial Public Offering. The Note was executed on November 19, 2020. The Company borrowed $75,000 under the Note in December 2020. As of December 31, 2020, the outstanding balance on the Note was $75,000. The Company fully repaid the outstanding balance of $75,000 on January 22, 2021.

16

In addition, in order to fund finance costs in connection with the Initial Business Combination, the Sponsor or any other affiliate of the Sponsor, or the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes the Initial Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company.  In the event that the Initial Business Combination is not completed, the Company may use a portion of the proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. Up to $1.5 million of the Working Capital Loans may be convertible into warrants, at a price of $1.00 per warrant at the option of the lender. Such warrants would be identical to the Private Placement Warrants. As of March 31, 2021 and December 31, 2020, there were 0 loan agreements entered into in addition to the Note.

Note 6 — Commitments and Contingencies

Registration Rights

The holders of Founder Shares and Private Placement Warrants will be entitled to registration rights (in the case of the Founder Shares, only after conversion of such shares to shares of Class A common stock) pursuant to a registration rights agreement entered into by the Company on January 19, 2021. These holders will be entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not permit any registration statement filed under the Securities Act to become effective until termination of the applicable lock-up period for the securities to be registered. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The Company granted the underwriters a 45-day option from the closing date of the Initial Public Offering to purchase up to 3,000,000 additional Units to cover over-allotments, if any, at the public offering price less underwriting discounts. Any Units issued or sold under the option will be issued and sold on the same terms and conditions as the other Units in the Initial Public Offering. On January 28, 2021, the Company consummated the sale of an additional 3,000,000 Units at the Initial Public Offering price of $10.00 per Unit pursuant to the full exercise by the underwriters of the over-allotment option.

The Company paid an underwriting discount of 2% of the per Unit offering price to the underwriters at the closing of the Initial Public Offering. An additional fee (the “Deferred Discount”) of 3.5% of the gross offering proceeds will be payable to the underwriters upon the Company’s completion of an Initial Business Combination, from the amounts held in the Trust Account.

In connection with the consummation of the sale of the additional Units pursuant to the underwriters’ full exercise of the over-allotment option, on January 28, 2021, the underwriters were entitled to an aggregate of $0.6 million in fees payable upon closing and an additional deferred underwriting commissions of approximately $1.1 million.

Note 7 — Stockholders’ Equity

Preferred Stock — The Company is authorized to issue 1,000,000 shares of preferred stock with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2021 and December 31, 2020, there were 0 shares of preferred stock issued or outstanding.

17

Class A Common Stock The Company is authorized to issue 100,000,000 shares of Class A common stock with a par value of $0.0001 per share. As of March 31, 2021, there were 23,000,000 Class A common shares outstanding, including 20,851,141 and 2,148,859 shares of Class A common stock subject to possible redemption that were classified as temporary equity and permanent equity, respectively, in the accompanying balance sheet. As of December 31, 2020, there were 0 shares of Class A common stock issued or outstanding.

If the Company enters into an Initial Business Combination, it may (depending on the terms of such an Initial Business Combination) be required to increase the number of shares of Class A common stock which the Company is authorized to issue at the same time as the Company’s stockholders vote on the Initial Business Combination to the extent the Company seeks stockholder approval in connection with the Initial Business Combination.

The shares of Class A common stock are redeemable upon the consummation of the Company’s Initial Business Combination, subject to limitation described in Note 1. In addition, if the Company is unable to complete the Initial Business Combination within the Combination Period, the Company will cease all operations except for the purpose of winding up and redeem the shares of Class A common stock at a per- share price equal to the aggregate amount then on deposit in the Trust Account, divided by the number of then outstanding Public Shares (see Note 1). In accordance with ASC Topic 480, Distinguishing Liabilities from Equity, the Company will classify a portion of the shares of Class A common stock subject to redemption rights as temporary equity.  As a result, upon completion of the Initial Public Offering, those shares of Class A common stock will be recorded at redemption amount and classified as temporary equity.

Class B Common Stock — The Company is authorized to issue 10,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of December 31, 2020, and March 31, 2021, there were 5,750,000 shares of Class B common stock issued and outstanding. As of December 31, 2020, 750,000 shares of Class B common stock were subject to forfeiture to the extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Founder Shares will represent 20% of the Company’s issued and outstanding common stock after the completion of the Initial Public Offering (see Note 4). On January 25, 2021, the underwriters exercised their over-allotment option in full; thus, 0 shares of Class B common stock remain subject to forfeiture as of March 31, 2021.

The shares of Class B common stock shall automatically convert into shares of Class A common stock at the time of the Company’s Initial Business Combination, or earlier at the option of the holder, on a 1- for-one basis, subject to adjustments pursuant to certain anti-dilution rights described in Note 5.

Holders of the Class A common stock and holders of the Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders, except as required by law and except that, prior to the Initial Business Combination, only holders of the Class B common stock will have the right to vote on the election of directors and only a majority of such holders may remove a member of the Company’s board of directors for any reason. Each share of common stock has 1 vote on all such matters.

In the event of a liquidation, dissolution or winding up of the Company after an Initial Business Combination, the Company’s stockholders are entitled to share ratably in all assets remaining available for distribution to them after payment of liabilities and after provision is made for each class of stock, if any, having preference over the common stock. The Company’s stockholders have no preemptive or other subscription rights. There are no sinking fund provisions applicable to the common stock, except that the Company will provide its stockholders with the opportunity to redeem their Public Shares for cash equal to their pro rata share of the aggregate amount then on deposit in the Trust Account, upon the completion of the Initial Business Combination, subject to the limitations described herein.

Note 8 — Warrants

As of March 31, 2021, the Company has outstanding warrants to purchase an aggregate of 18,050,000 shares of the Company’s Class A common stock issued in connection with the Initial Public Offering and the Private Placement (including warrants issued in connection with the consummation of the over-allotment).

18

Public Warrants may only be exercised for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination or (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the shares of Class A common stock issuable upon exercise of the Public Warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants on a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 15 business days, after the closing of the Initial Business Combination, the Company will use its reasonable best efforts to file with the SEC a registration statement for the registration, under the Securities Act, of the shares of Class A common stock issuable upon exercise of the Public Warrants. The Company will use its reasonable best efforts to cause the same to become effective within 60 business days after the closing of the Initial Business Combination, and the Company will use its reasonable best efforts to maintain the effectiveness of such registration statement, and a current prospectus relating thereto, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. Notwithstanding the above, if the Class A common stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option,  require holders of Public Warrants who exercise their warrants to do so on a “cashless” basis, and, in the event the Company so elects, the Company will not be required to file or maintain in effect a registration statement, but the Company will be required to use its reasonable best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The Public Warrants will expire five years after the completion of the Initial Business Combination or earlier upon redemption or liquidation.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable in certain redemption scenarios and will be exercisable on a cashless basis so long as they are held by the Sponsor, the underwriters or their permitted transferees. If the Private Placement Warrants are held by someone other than the Sponsor, the underwriters or their permitted transferees, the Private Placement Warrants will be redeemable by the Company in all redemption scenarios and exercisable by such holders on the same basis as the Public Warrants.

Once the Warrants become exercisable, the Company may call the Public Warrants for redemption:

in whole and not in part;
at a price of $0.01 per Warrant;
upon a minimum of 30 days’ prior written notice of redemption; and
if, and only if, the last reported sale price of the Class A common stock on each of 20 trading days within the 30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the Warrant holders (the “Reference Value”) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like).

If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

In addition, once the Warrants become exercisable, the Company may redeem the outstanding Warrants (including both Public Warrants and Private Placement Warrants):

in whole and not in part;

19

at $0.10 per Warrant upon a minimum of 30 days’ prior written notice of redemption, provided that holders will be able to exercise their Warrants on a cashless basis prior to redemption and receive that number of shares of Class A common stock determined by reference to an agreed table to be described in the warrant agreement, based on the redemption date and the “fair market value” of the Class A common stock;
if, and only if, the Reference Value equals or exceeds $10.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like); and
if, and only if, the Reference Value is less than $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like), the Private Placement Warrants are also concurrently called for redemption on the same terms as the outstanding Public Warrants, as described above.

The exercise price and number of common stock issuable upon exercise of the Warrants may be adjusted in certain circumstances including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities for capital raising purposes in connection with the closing of the initial Business Combination at an issue price or effective issue price of less than $9.20 per share (with such issue price or effective issue price to be determined in good faith by the Company and, (i) in the case of any such issuance to the Sponsor or its affiliates, without taking into account any Founder Shares held by the Sponsor or such affiliates, as applicable, prior to such issuance, and (ii) without taking into account the transfer of Founder Shares or Private Placement Warrants (including if such transfer is effectuated as a surrender to the Company and subsequent reissuance by the Company) by the Sponsor in connection with such issuance) (the “Newly Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Class A common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price, and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price described above will be adjusted to the nearest cent, to be equal to the higher of the Newly Issued Price and the Market Value.

In no event will the Company be required to net cash settle any warrant. If the Company is unable to complete the Initial Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Warrants will not receive any of such funds with respect to their Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Warrants. Accordingly, the Warrants may expire worthless.

Note 9 — Fair Value Measurements

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets;
Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

20

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

As of March 31, 2021, assets held in the Trust Account were comprised of $230,002,515 in money market funds that trade in U.S. Treasury securities. During the three months ended March 31, 2021, the Company did not withdraw any interest income from the Trust Account.

As of March 31, 2021, there were 11,500,000 Public Warrants and 6,550,000 Private Placement Warrants outstanding.

The following table presents information about the Company’s assets that are measured at fair value on a recurring basis as of March 31, 2021 and indicates the fair value hierarchy of the valuation techniques that the Company utilized to determine such fair value.

As of March 31, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

Financial Assets

Investments held in Trust Account

 

$

230,002,515

$

 

$

$

230,002,515

Financial Liabilities

Warrant liabilities – Public Warrants

$

$

$

5,750,000

$

5,750,000

Warrant liabilities – Private Placement Warrants

$

$

$

3,275,000

$

3,275,000

On issuance, the Company utilized a Monte Carlo simulation model to value the warrants. As of March 31, 2021, for Private Placement Warrants, the Company will continue to utilize a Monte Carlo simulation model to value the Private Placement Warrants and will use a Black-Scholes option pricing model to value the Public Warrants, with changes in fair value recognized in the statement of operations. The estimated fair value of the warrant liabilities is determined using Level 3 inputs. The Company estimates the volatility of its common stock based on historical volatility of select peer companies that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at 0.

Transfers to/from Levels 1, 2, and 3 are recognized at the end of the reporting period.  There were 0 transfers between levels of the hierarchy for the three months ended March 31, 2021.

21

The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates:

    

January 22, 2021

    

 

(At issuance)

 

March 31, 2021

Exercise price

 

$

11.50

 

$

11.50

Share price

 

$

9.51

$

9.64

Volatility

17.3

%

9.7

%

Probability of completing a Business Combination

 

88.3

%

88.3

%

Expected life of the options to convert

6.50

6.31

Risk-free rate

 

0.69

%

1.23

%

Dividend yield

%

%

The following table presents the changes in the fair value of warrant liabilities:

Warrant liabilities at January 22, 2021

$

Initial measurement of Public Warrants, at issuance

 

11,155,000

Initial measurement of Private Placement Warrants, at issuance

6,550,000

Change in fair value of warrant liabilities

(8,680,000)

Warrant liabilities at March 31, 2021

$

9,025,000

Note 10 — Subsequent Events

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Other than as described in these financial statements, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statements.

22

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This quarterly report, including, without limitation, statements under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” includes forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management team’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the headings “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2020. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

References in this report to “we,” “us,” “our,” “company” or “our company” are to Oyster Enterprises Acquisition Corp., to “management” or our “management team” are to our directors and officers; and to the “sponsor” are to Oyster Enterprises LLC, a Delaware limited liability company.

We are a recently incorporated blank check company incorporated as a Delaware corporation and 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 have not identified any business combination target and we have not, nor has anyone on our behalf, initiated any substantive discussions, directly or indirectly, with any business combination target. We intend to effectuate our initial business combination using cash from the proceeds of our IPO (as defined below) and the Private Placements (as defined below), our capital stock, debt or a combination of cash, stock and debt.

On January 22, 2021, we consummated our initial public offering (“IPO”) of 20,000,000 units (the “Units”), each Unit consisting of one share of Class A common stock of the Company, par value $0.0001 per share (the “Class A Common Stock”) and one-half of one redeemable warrant of the Company (each, a “Warrant”), each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share (subject to adjustment). The Units were sold at a price of $10.00 per Unit, and the IPO generated gross proceeds of $200,000,000. Simultaneously with the closing of the IPO, we consummated a private placement (the “Private Placement”) with our sponsor and Imperial Capital, LLC and I-Bankers Securities, Inc., the underwriters in the IPO (the “Underwriters”), of an aggregate of 5,950,000 warrants (the “private placement warrants”) at a price of $1.00 per private placement warrant, generating gross proceeds to the Company of $5,950,000. On January 22, 2021, a total of $200,000,000 of the net proceeds from the IPO and the Private Placement were deposited in a trust account (the “Trust Account”) established for the benefit of the Company’s public stockholders at JPMorgan Chase Bank, N.A., with Continental Stock Transfer & Trust Company, acting as trustee.

23

On January 25, 2021, the Underwriters exercised in full the option granted to them by the Company to purchase up to 3,000,000 additional Units solely to cover over-allotments, which option was granted to them under the underwriting agreement for the IPO. The sale of these 3,000,000 additional Units closed on January 28, 2021, generating gross proceeds of $30,000,000. Simultaneously with the closing of the over-allotment option, we consummated a private placement (the “Additional Private Placement” and, together with the Private Placement, the “Private Placements”) with our sponsor and the Underwriters of an aggregate of an additional 600,000 private placement warrants at a price of $1.00 per private placement warrant, generating gross proceeds to the Company of $600,000. On January 28, 2021, a total of $30,000,000 of the net proceeds from the closing of the over-allotment option and the Additional Private Placement were deposited into the Trust Account, resulting in a total deposit of $230,000,000 in the Trust Account since the Trust Account was established. The net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest and are available for a business combination, assuming no redemptions, after payment of up to $8,050,000 of deferred underwriting fees, before fees and expenses associated with our initial business combination.

As of May 18, 2021, we had cash of approximately $578,920 and working capital of approximately $477,361. We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial business combination will be successful.

Results of Operations and Known Trends or Future Events

We did not commence operations until after the closing of our IPO in January 2021, and we have not engaged in any significant operations nor generated any operating revenues to date. We will not generate any operating revenues until after completion of our initial business combination. We will generate non-operating income in the form of interest income on cash and cash equivalents. There has been no significant change in our financial or trading position and no material adverse change has occurred since the date of our audited financial statements. We have incurred and expect to continue 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 March 31, 2021, we had net income of $7,865,003 which consisted of $2,515 in interest income and a non-cash $8,680,000 decrease in fair value of warrant liabilities. These gains were partially offset by transaction expenses of $672,964 related to offering costs related to issuance of warrants and $144,548 in general and administrative expenses. General and administrative expenses of $144,548 were primarily comprised of legal and accounting fees.

Liquidity and Capital Resources

The funds in the Trust Account have been or will be invested only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act and that invest only in direct U.S. government obligations. We intend to use substantially all of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable and deferred underwriting commissions) to complete our initial business combination. Delaware franchise tax is based on our authorized shares or on our assumed par and non-par capital, whichever yields a lower result. Under the authorized shares method, each share is taxed at a graduated rate based on the number of authorized shares with a maximum aggregate tax of $200,000 per year. Under the assumed par value capital method, Delaware taxes each $1,000,000 of assumed par value capital at the rate of $400; where assumed par value would be (1) our total gross assets, divided by (2) our total issued shares of common stock, multiplied by (3) the number of our authorized shares. Our annual franchise tax obligation is expected to be capped at the maximum amount of annual franchise taxes payable by us as a Delaware corporation of $200,000. Our annual income tax obligations will depend on the amount of interest and other income earned on the amounts held in the Trust Account. We expect the only taxes payable by us out of the funds in the Trust Account will be income and franchise taxes. We expect the interest earned on the amount in the Trust Account will be sufficient to pay our taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our initial business combination, the remaining proceeds held in the Trust Account will be used as working capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

24

As of May 18, 2021, we held $578,920 outside the Trust Account. We expect to use these funds primarily to identify and evaluate target businesses, perform business due diligence on prospective target businesses, travel to and from the offices or similar locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements of prospective target businesses, structure, negotiate and complete a business combination, and to pay taxes to the extent the interest earned on the Trust Account is not sufficient to pay our taxes.

As of May 18, 2021, we had working capital of approximately $477,361. In order to fund working capital deficiencies or finance transaction costs in connection with an intended initial business combination, our sponsor, Alden Global, any other affiliate of our sponsor, or our officers or directors may, but none of them is obligated to, loan us funds as may be required. If we complete our initial business combination, we would repay such loaned amounts out of the proceeds of the Trust Account released to us. In the event that our initial business combination does not close, we may use a portion of the working capital held outside the Trust Account to repay such loaned amounts but no proceeds from our Trust Account would be used for such repayment. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.00 per warrant at the option of the lender. These warrants would be identical to the private placement warrants. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. We do not expect to seek loans from parties other than our sponsor, Alden Global or another affiliate of our sponsor, or our officers and directors, if any, as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our Trust Account.

We expect our primary liquidity requirements over the next 12 months will include approximately $350,000 for legal, accounting, due diligence, travel and other expenses in connection with any business combinations; $150,000 for legal and accounting fees related to regulatory reporting requirements; $75,000 for Nasdaq continued listing fees; and approximately $175,000 for working capital to cover miscellaneous expenses (including franchise taxes net of anticipated interest income).

These amounts are estimates and may differ materially from our actual expenses. In addition, we could use a portion of the funds held outside the Trust Account to pay commitment fees for financing, fees to consultants to assist us with our search for a target business or as a down payment or to fund a “no-shop” provision (a provision designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into an agreement where we paid for the right to receive exclusivity from a target business, the amount that would be used as a down payment or to fund a “no-shop” provision would be determined based on the terms of the specific business combination and the amount of our available funds at the time. Our forfeiture of such funds (whether as a result of our breach or otherwise) could result in our not having sufficient funds to continue searching for, or conducting due diligence with respect to, prospective target businesses.

25

We do not believe we will need to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial business combination. Moreover, we may need to obtain additional financing either to complete our initial business combination or because we become obligated to redeem a significant number of our public shares upon completion of our initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. In addition, we may target businesses with enterprise values that are greater than we could acquire with the net proceeds of our IPO and the Private Placements, and, as a result, if the cash portion of the purchase price exceeds the amount available from the Trust Account, net of amounts needed to satisfy redemptions by public stockholders, we may be required to seek additional financing to complete such proposed initial business combination. We may also obtain financing prior to the closing of our initial business combination to fund our working capital needs and transaction costs in connection with our search for and completion of our initial business combination. There is no limitation on our ability to raise funds through the issuance of equity or equity-linked securities or through loans, advances or other indebtedness in connection with our initial business combination, including pursuant to forward purchase agreements or backstop arrangements we may enter into. Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our business combination. If we are unable to complete our initial business combination because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the Trust Account. In addition, following our initial business combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Off-Balance Sheet Arrangements; Commitments and Contractual Obligations

As of May 18, 2021, we did not have any off-balance sheet arrangements or any commitments or contractual obligations.

Critical Accounting Policies and Estimates

Class A Common Stock Subject to Possible Redemption

We account for our common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”). Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable common stock (including 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) is classified as temporary equity. At all other times, common stock is 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, as of March 31, 2021 and December 31, 2020, respectively, 20,851,141 and no 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 condensed balance sheet.

Net Earnings Per Share

Net earnings per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. We have not considered the effect of the Public Warrants and Private Placement Warrants sold in the Initial Public Offering and as part of the Placement Units to purchase 18,050,000 shares of Class A common stock in the calculation of diluted income per share, since the exercise of such warrants are contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive.

26

Our statement of operations includes a presentation of income per share for common shares subject to redemption in a manner similar to the two-class method of income per share. Net income per common share, basic and diluted, for Class A redeemable common stock held by Public Stockholders for the three months ended March 31, 2021 is calculated by dividing the interest income earned on the Trust Account of $2,515, by the weighted average number of shares of Class A redeemable common stock held by Public Stockholders since issuance. Net earnings per common share, basic and diluted, for Class B non-redeemable common stock is calculated by dividing net income for the three months ended March 31, 2021 of $7,865,003 less income attributable to Class A redeemable common stock of $2,515 by the weighted average number of Class A and Class B non-redeemable common stock outstanding for the period. Class B non-redeemable common stock includes the Founder Shares as these shares do not have any redemption features and do not participate in the income earned on the Trust Account.

Warrant Liability

We account for our outstanding Public Warrants and Private Placement Warrants (collectively, the “Warrants”) in accordance with authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (“ASC 815”). We determined that the outstanding Warrants do not meet the criteria for equity treatment thereunder. As such, each warrant must be recorded as a liability and is subject to re-measurement at each balance sheet date and any change in fair value is recorded in the Company’s statement of operations.

Recent Accounting Pronouncements

Our management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a significant effect on our financial statements, other than as described in Note 3 to the financial statements included in this report.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

The net proceeds of our IPO and the Private Placements held in the Trust Account are invested in U.S. government securities 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 which invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.

Item 4.Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Disclosure controls are controls and other procedures that are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2021.

Based upon their evaluation, and in light of the material weakness in internal controls described below, our Chief Executive Officer and Chief Financial Officer concluded that during the period covered by this report, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective.

27

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2021 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, with the exception of the below.

Our internal control over financial reporting did not result in the proper accounting classification of certain of the Warrants we issued in January 2021 which, due to its impact on our financial statements, we determined to be a material weakness. This mistake in classification was brought to our attention only when the SEC issued a Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”) dated April 12, 2021 (the “SEC Statement”). The SEC Statement addresses certain accounting and reporting considerations related to warrants of a kind similar to those we issued at the time of our initial public offering in January 2021.

The Chief Executive Officer and Chief Financial Officer performed additional accounting and financial analyses and other post-closing procedures including consulting with subject matter experts related to the accounting for the Public Warrants and Private Placement Warrants. The Company’s management has expended, and will continue to expend, a substantial amount of effort and resources for the remediation and improvement of our internal control over financial reporting. While we have processes to properly identify and evaluate the appropriate accounting technical pronouncements and other literature for all significant or unusual transactions, we have expanded and will continue to improve these processes to ensure that the nuances of such transactions are effectively evaluated in the context of the increasingly complex accounting standards.

PART II – OTHER INFORMATION

Item 1.Legal Proceedings.

To the knowledge of our management, there is no material litigation, arbitration or governmental proceeding currently pending against us, any of our officers or directors in their capacity as such or against any of our property.

Item 1A.Risk Factors.

Factors that could cause our actual results to differ materially from those in this quarterly report are any of the risks described in our annual report on Form 10-K for the year ended December 31, 2020. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2020, except for the below:

Our warrants are accounted for as liabilities and the changes in value of our warrants could have a material effect on our financial results.

On April 12, 2021, the Acting Director of the Division of Corporation Finance and Acting Chief Accountant of the SEC together issued a statement regarding the accounting and reporting considerations for warrants issued by special purpose acquisition companies entitled “Staff Statement on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Statement”). Specifically, the SEC Statement focused on warrants that have certain settlement terms and provisions related to certain tender offers or warrants which do not meet the criteria to be considered indexed to an entity’s own stock, which terms are similar to those contained in the warrant agreement governing our Warrants. As a result of the SEC Statement, we evaluated the accounting treatment of our 11,500,000 public warrants and 6,550,000 private placement warrants, and determined that the Warrants should be recorded as derivative liabilities measured at fair value, with changes in fair value each period reported in earnings.

28

As a result, included on our balance sheet as of March 31, 2021 contained elsewhere in this Form 10-Q are derivative liabilities related to embedded features contained within our Warrants. Accounting Standards Codification 815-40, “Derivatives and Hedging - Contracts on an Entity’s Own Equity”, provides for the remeasurement of the fair value of such derivatives at each balance sheet date, with a resulting non-cash gain or loss related to the change in the fair value being recognized in earnings in the condensed statement of operations. As a result of the recurring fair value measurement, our financial statements and results of operations may fluctuate quarterly, based on factors, which are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on our Warrants each reporting period and that the amount of such gains or losses could be material.

We have identified a material weakness in our internal control over financial reporting as of March 31, 2021. If we are unable to develop and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in us and materially and adversely affect our business and operating results.

Following this issuance of the SEC Statement, after consultation with our independent registered public accounting firm, our management concluded that, in light of the SEC Statement, we identified a material weakness in our internal controls over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. We continue to evaluate steps to remediate the material weakness. These remediation measures may be time consuming and costly and there is no assurance that these initiatives will ultimately have the intended effects.

If we identify any new material weaknesses in the future, any such newly identified material weakness could limit our ability to prevent or detect a misstatement of our accounts or disclosures that could result in a material misstatement of our annual or interim financial statements. In such case, we may be unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors may lose confidence in our financial reporting and our stock price may decline as a result. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.

We may face litigation and other risks as a result of the material weakness in our internal control over financial reporting.

As a result of such material weakness, the change in accounting for the Warrants, and other matters raised or that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting and the preparation of our financial statements. As of the date of this Form 10-Q, we have no knowledge of any such litigation or dispute. However, we can provide no assurance that such litigation or dispute will not arise in the future. Any such litigation or dispute, whether successful or not, could have a material adverse effect on our business, results of operations and financial condition or our ability to complete a Business Combination.

29

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Securities

As discussed above under “Part 1 – Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” on January 22, 2021, we consummated our IPO of 20,000,000 Units, each Unit consisting of one share of Class A Common Stock and one-half of one redeemable Warrant, each whole Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share (subject to adjustment). The Units were sold at a price of $10.00 per Unit, and the IPO generated gross proceeds of $200,000,000. Simultaneously with the closing of the IPO, we consummated the Private Placement with our sponsor and the Underwriters of an aggregate of 5,950,000 private placement warrants at a price of $1.00 per private placement warrant, generating gross proceeds to the Company of $5,950,000. On January 22, 2021, a total of $200,000,000 of the net proceeds from the IPO and the Private Placement were deposited in the Trust Account.

On January 25, 2021, the Underwriters exercised in full the option granted to them by the Company to purchase up to 3,000,000 additional Units solely to cover over-allotments, which option was granted to them under the underwriting agreement for the IPO. The sale of these 3,000,000 additional Units closed on January 28, 2021, generating gross proceeds of $30,000,000. Simultaneously with the closing of the over-allotment option, we consummated the Additional Private Placement with our sponsor and the Underwriters of an aggregate of an additional 600,000 private placement warrants at a price of $1.00 per private placement warrant, generating gross proceeds to the Company of $600,000. On January 28, 2021, a total of $30,000,000 of the net proceeds from the closing of the over-allotment option and the Additional Private Placement were deposited into the Trust Account, resulting in a total deposit of $230,000,000 in the Trust Account since the Trust Account was established. The net proceeds deposited into the Trust Account remain on deposit in the Trust Account earning interest and are available for a business combination, assuming no redemptions, after payment of up to $8,050,000 of deferred underwriting fees, before fees and expenses associated with our initial business combination.

The private placement warrants are identical to the warrants sold as part of the units in the IPO except that, so long as they are held by our sponsor, the underwriters or their permitted transferees: (1) they will not be redeemable by us, except as otherwise set forth in the terms thereof; (2) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor or the underwriters, until 30 days after the completion of our initial business combination; (3) they may be exercised by the holders on a cashless basis; (4) the holders thereof (including with respect to the shares of common stock issuable upon exercise of these warrants) are entitled to registration rights; and (5) with respect to private placement warrants held by the underwriters, they will not be exercisable more than five years from the effective date of the IPO registration statement in accordance with FINRA Rule 5110(f)(2)(G)(i). No underwriting discounts or commissions were paid with respect to such sale. The sale of the private placement warrants was made pursuant to an exemption from registration contained in Section 4(a)(2) of the Securities Act.

Use of Proceeds from the Initial Public Offering

On January 22, 2021, we consummated our IPO of 20,000,000 Units. The Units were sold at a price of $10.00 per Unit, and the IPO generated gross proceeds of $200,000,000. Imperial Capital, LLC and I-Bankers Securities, Inc. acted as the joint book-running managers of the IPO. The securities sold in the IPO were registered under the Securities Act on a registration statement on Form S-1 (No. 333-251833). The SEC declared the registration statement effective on January 19, 2021. On January 25, 2021, the Underwriters exercised in full the option granted to them by the Company to purchase up to 3,000,000 additional Units solely to cover over-allotments, which option was granted to them under the underwriting agreement for the IPO. The sale of these 3,000,000 additional Units closed on January 28, 2021, generating gross proceeds of $30,000,000.

We paid a total of $12,650,000 in underwriting fees related to the IPO. In addition, the representative of the underwriters agreed to defer $8,050,000 in underwriting fees.

30

On January 22, 2021, a total of $200,000,000 of the net proceeds from the IPO and the Private Placement were deposited in the Trust Account. On January 28, 2021, a total of $30,000,000 of the net proceeds from the closing of the over-allotment option and the Additional Private Placement were deposited into the Trust Account, resulting in a total deposit of $230,000,000 in the Trust Account since the Trust Account was established. The net proceeds deposited into the Trust Account remain on deposit in the Trust Account and are available for a business combination, assuming no redemptions, after payment of up to $8,050,000 of deferred underwriting fees, before fees and expenses associated with our initial business combination. The proceeds held in the Trust Account will be invested only in U.S. government securities 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 which invest only in direct U.S. government treasury obligations.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers during the Quarter Ended March 31, 2021

None.

Item 3.Defaults Upon Senior Securities.

None.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

None.

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Item 6.Exhibits.

Exhibit

    

Description

1.1

 

Underwriting Agreement, dated January 19, 2021, by and between the Company and Imperial Capital,  as representative of the Underwriters(4)

3.1

 

Amended and Restated Certificate of Incorporation of the Company(4)

3.2

 

Amended and Restated Bylaws of the Company(4)

4.1

 

Specimen Unit Certificate(2)

4.2

 

Specimen Class A Common Stock Certificate(2)

4.3

 

Specimen Warrant Certificate (included in Exhibit 4.4)(4)

4.4

 

Warrant Agreement,  dated January 19, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as warrant agent(4)

10.1

 

Promissory Note, dated November 19, 2020 issued to Oyster Enterprises LLC(1)

10.2

 

Letter Agreement,  dated January 19, 2021, by and among the Company, its officers and directors, and the Sponsor(4)

10.3

 

Investment Management Trust Agreement,  dated January 19, 2021, by and between the Company and Continental Stock Transfer & Trust Company, as trustee(4)

10.4

 

Registration Rights Agreement,  dated January 19, 2021, by and among the Company and certain security holders(4)

10.5

 

Securities Subscription Agreement, dated November 16, 2020 between the Registrant and Oyster Enterprises LLC(1)

10.6

 

Private Placement Warrants Subscription Agreement,  dated January 19, 2021, by and between the Company and the Sponsor(4)

10.7

 

Private Placement Warrants Subscription Agreement, dated January 19, 2021, by and between the Company and Imperial Capital(4)

10.8

 

Private Placement Warrants Subscription Agreement, dated January 19,  2021, by and between the Company and I-Bankers(4)

10.9

 

Form of Indemnity Agreement(3)

14.1

 

Form of Code of Ethics(2)

31.1

*

Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2

*

Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1

**

Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350

32.2

**

Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350

99.1

 

Form of Audit Committee Charter(2)

101.INS

*

XBRL Instance Document

101.SCH

*

XBRL Taxonomy Extension Schema Document

101.CAL

*

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

*

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

*

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

*

XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith

**Furnished herewith

(1)Filed as an exhibit to the Registration Statement on Form S-1 filed with the SEC on December 30, 2020 (File No. 333-251833).

(2)Filed as an exhibit to Amendment No. 1 to the Registration Statement on Form S-1 filed with the SEC on January 11, 2021 (File No. 333-251833).

32

(3)Filed as an exhibit to Amendment No. 2 to the Registration Statement on Form S-1 filed with the SEC on January 13, 2021 (File No. 333-251833).

(4)Filed as an exhibit to the Current Report on Form 8-K filed with the SEC on January 22, 2021 (File No. 001-39910).

33

SIGNATURES

Pursuant to the requirements of the Securities Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 24, 2021

Oyster Enterprises Acquisition Corp.

 

 

 

 

By:

/s/ Heath B. Freeman

 

 

Name: Heath B. Freeman

 

 

Title: Chief Executive Officer

34