ITEM 1. CONDENSED FINANCIAL STATEMENTS
FINSERV ACQUISITION CORP.
CONDENSED BALANCE SHEETS
|
|
September 30,
2020
|
|
|
December 31,
2019
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
1,179,883
|
|
|
$
|
1,578,075
|
|
Prepaid expenses and other current assets
|
|
|
77,250
|
|
|
|
126,022
|
|
Total Current Assets
|
|
|
1,257,133
|
|
|
|
1,704,097
|
|
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account
|
|
|
251,276,227
|
|
|
|
250,567,358
|
|
Total Assets
|
|
$
|
252,533,360
|
|
|
$
|
252,271,455
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
64,625
|
|
|
$
|
118,805
|
|
Income taxes payable
|
|
|
81,285
|
|
|
|
102,450
|
|
Total Current Liabilities
|
|
|
145,910
|
|
|
|
221,255
|
|
|
|
|
|
|
|
|
|
|
Deferred underwriting fee payable
|
|
|
9,350,000
|
|
|
|
9,350,000
|
|
Total Liabilities
|
|
|
9,495,910
|
|
|
|
9,571,255
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A Common stock subject to possible redemption, 23,803,744 and 23,770,019, respectively, shares at redemption value at $10.00 per share at September 30, 2020 and December 31, 2019
|
|
|
238,037,440
|
|
|
|
237,700,190
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
|
|
|
—
|
|
|
|
—
|
|
Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 1,861,256 and 1,894,981 issued and outstanding (excluding 23,803,744 and 23,770,019 shares subject to possible redemption) at September 30, 2020 and December 31, 2019, respectively
|
|
|
186
|
|
|
|
189
|
|
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 6,250,000 shares issued and outstanding September 30, 2020 and December 31, 2019
|
|
|
625
|
|
|
|
625
|
|
Additional paid-in capital
|
|
|
4,368,987
|
|
|
|
4,706,234
|
|
Retained earnings
|
|
|
630,212
|
|
|
|
292,962
|
|
Total Stockholders’ Equity
|
|
|
5,000,010
|
|
|
|
5,000,010
|
|
Total Liabilities and Stockholders’ Equity
|
|
$
|
252,533,360
|
|
|
$
|
252,271,455
|
|
The accompanying notes are an integral part
of the unaudited condensed financial statements.
FINSERV ACQUISITION CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
For the
Period from
August 9,
2019
(Inception)
Through
September 30,
|
|
|
|
2020
|
|
|
2020
|
|
|
2019
|
|
General and administrative expenses
|
|
$
|
176,390
|
|
|
$
|
584,826
|
|
|
$
|
1,000
|
|
Loss from operations
|
|
|
(176,390
|
)
|
|
|
(584,826
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest earned on money market account
|
|
|
6,269
|
|
|
|
9,919
|
|
|
|
—
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
9,760
|
|
|
|
1,114,757
|
|
|
|
—
|
|
Other income
|
|
|
16,029
|
|
|
|
1,124,676
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before provision for income taxes
|
|
|
(160,361
|
)
|
|
|
539,850
|
|
|
|
(1,000
|
)
|
Benefit (provision) for income taxes
|
|
|
8,449
|
|
|
|
(202,600
|
)
|
|
|
—
|
|
Net (loss) income
|
|
$
|
(151,912
|
)
|
|
$
|
337,250
|
|
|
$
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class A redeemable common stock
|
|
|
25,000,000
|
|
|
|
25,000,000
|
|
|
|
—
|
|
Basic and diluted income per share, Class A redeemable common stock
|
|
$
|
0.00
|
|
|
$
|
0.03
|
|
|
$
|
(0.00
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding of Class A and Class B non-redeemable common stock
|
|
|
6,915,000
|
|
|
|
6,915,000
|
|
|
|
5,500,00
|
|
Basic and diluted net loss per share, Class A and Class B non-redeemable common stock
|
|
$
|
(0.02
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.00
|
)
|
The accompanying notes are an integral part
of the unaudited condensed financial statements.
FINSERV ACQUISITION CORP.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’
EQUITY
THREE AND NINE MONTHS ENDED SEPTEMBER
30, 2020
(Unaudited)
|
|
Class A
Common Stock
|
|
|
Class B
Common Stock
|
|
|
Additional
Paid in
|
|
|
Retained
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Equity
|
|
Balance – January 1, 2020
|
|
|
1,894,981
|
|
|
$
|
189
|
|
|
|
6,250,000
|
|
|
$
|
625
|
|
|
$
|
4,706,234
|
|
|
$
|
292,962
|
|
|
$
|
5,000,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
(56,118
|
)
|
|
|
(5
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(561,175
|
)
|
|
|
—
|
|
|
|
(561,180
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
561,178
|
|
|
|
561,178
|
|
Balance – March 31, 2020
|
|
|
1,838,863
|
|
|
|
184
|
|
|
|
6,250,000
|
|
|
|
625
|
|
|
|
4,145,059
|
|
|
|
854,140
|
|
|
|
5,000,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
7,201
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
72,009
|
|
|
|
—
|
|
|
|
72,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(72,016
|
)
|
|
|
(72,016
|
)
|
Balance – June 30, 2020
|
|
|
1,846,064
|
|
|
|
185
|
|
|
|
6,250,000
|
|
|
|
625
|
|
|
|
4,217,068
|
|
|
|
782,124
|
|
|
|
5,000,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
|
15,192
|
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
151,919
|
|
|
|
—
|
|
|
|
151,920
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(151,912
|
)
|
|
|
(151,912
|
)
|
Balance – September 30, 2020
|
|
|
1,861,256
|
|
|
$
|
186
|
|
|
|
6,250,000
|
|
|
$
|
625
|
|
|
$
|
4,368,987
|
|
|
$
|
630,212
|
|
|
$
|
5,000,010
|
|
FOR THE PERIOD FROM AUGUST 9, 2019 (INCEPTION)
THROUGH SEPTEMBER 30, 2019
(UNAUDITED)
|
|
Class B
Common Stock
|
|
|
Additional
Paid in
|
|
|
Accumulated
|
|
|
Total
Stockholders’
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Equity
|
|
Balance – August 9, 2019 (inception)
|
|
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of Class B common stock to
Sponsor (1)
|
|
|
6,325,000
|
|
|
|
633
|
|
|
|
24,367
|
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,000
|
)
|
|
|
(1,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – September 30, 2019
|
|
|
6,325,000
|
|
|
$
|
633
|
|
|
$
|
24,367
|
|
|
$
|
(1,000
|
)
|
|
$
|
24,000
|
|
|
(1)
|
Included up to 750,000 shares subject to forfeiture if
the over-allotment option was not exercised in full or in part by the underwriters (see Notes 5).
|
The accompanying notes are an integral part
of the unaudited condensed financial statements.
FINSERV ACQUISITION CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
Nine Months
Ended
September 30,
|
|
|
For the
Period from
August 09,
2019
(Inception)
Through
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
337,250
|
|
|
$
|
(1,000
|
)
|
Adjustments to reconcile net income (loss) to net cash and cash equivalents used in operating activities:
|
|
|
|
|
|
|
|
|
Interest earned on marketable securities held in Trust Account
|
|
|
(1,114,757
|
)
|
|
|
—
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
48,772
|
|
|
|
—
|
|
Accounts payable and accrued expenses
|
|
|
(54,180
|
)
|
|
|
1,000
|
|
Income taxes payable
|
|
|
(21,165
|
)
|
|
|
—
|
|
Net cash and cash equivalents used in operating activities
|
|
|
(804,080
|
)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
Interest withdrawn for income and franchise taxes
|
|
|
405,888
|
|
|
|
—
|
|
Net cash and cash equivalents provided by investing activities
|
|
|
405,888
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from promissory note – related party
|
|
|
—
|
|
|
|
1,000
|
|
Payment of offering costs
|
|
|
—
|
|
|
|
(292
|
)
|
Net cash and cash equivalents provided by financing activities
|
|
|
—
|
|
|
|
708
|
|
|
|
|
|
|
|
|
|
|
Net Change in Cash and Cash Equivalents
|
|
|
(398,192
|
)
|
|
|
708
|
|
Cash and Cash Equivalents – Beginning of period
|
|
|
1,578,075
|
|
|
|
—
|
|
Cash and Cash Equivalents – End of period
|
|
$
|
1,179,883
|
|
|
$
|
708
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
223,765
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
Change in value of common stock subject to possible redemption
|
|
$
|
337,250
|
|
|
$
|
—
|
|
Payment of offering costs through promissory note
|
|
$
|
—
|
|
|
$
|
55,327
|
|
Offering costs included in accrued offering costs
|
|
|
—
|
|
|
$
|
50,764
|
|
Deferred offering costs paid directly by stockholder in exchange for the issuance of Class B common stock to stockholder
|
|
|
—
|
|
|
$
|
25,000
|
|
The accompanying notes are an integral part
of the unaudited condensed financial statements.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 1. DESCRIPTION OF ORGANIZATION
AND BUSINESS OPERATIONS
FinServ Acquisition Corp. (the “Company”)
was incorporated in Delaware on August 9, 2019. The Company was 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 (the “Business
Combination”).
Although the Company is not limited to
a particular industry or sector for purposes of consummating a Business Combination, the Company intends to focus its search on
companies in the financial services industry or businesses providing technology services to the financial industry. The Company
is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage
and emerging growth companies.
As of September 30, 2020, the Company had
not commenced any operations. All activity through September 30, 2020 relates to the Company’s formation, the initial public
offering (“Initial Public Offering”), which is described below, and since the Initial Public Offering, identifying
a target company for a Business Combination. The Company will not generate any operating revenues until after the completion of
its initial Business Combination, at the earliest. The Company generates non-operating income in the form of interest income from
the proceeds derived from the Initial Public Offering.
The registration statements for the Company’s
Initial Public Offering were declared effective on October 31, 2019. On November 5, 2019, the Company consummated the Initial Public
Offering of 25,000,000 units (the “Units” and, with respect to the shares of Class A common stock included in the Units
sold, the “Public Shares”) at $10.00 per Unit, which includes the partial exercise by the underwriter of the over-allotment
option to purchase an additional 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $250,000,000, which is described
in Note 3.
Simultaneously with the closing of the
Initial Public Offering, the Company consummated the sale of 665,000 units (each, a “Placement Unit” and collectively,
the “Placement Units”) at a price of $10.00 per Placement Unit in a private placement to the Company’s sponsor,
FinServ Holdings LLC, a Delaware limited liability company (the “Sponsor”), generating gross proceeds of $6,650,000,
which is described in Note 4.
Offering costs amounted to $14,267,762,
consisting of $4,400,000 of underwriting fees, $9,350,000 of deferred underwriting fees and $517,762 of other offering costs. In
addition, at September 30, 2020, cash of $1,179,883 was held outside of the Trust Account (as defined below) and is available for
working capital purposes.
Following the closing of the Initial Public
Offering on November 5, 2019, an amount of $250,000,000 ($10.00 per Unit) from the net proceeds of the sale of the Units in the
Initial Public Offering and the sale of the Placement Units was placed in a trust account (“Trust Account”) and invested
only in U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act of 1940, as
amended (the “Investment Company Act”), with a maturity of 180 days or less or in any open-ended investment company
that holds itself out as a money market fund selected by the Company meeting the conditions of Rule 2a-7 of the Investment Company
Act, as determined by the Company, until the earlier of: (i) the completion of a Business Combination and (ii) the distribution
of the Trust Account, as described below.
The Company’s management has broad
discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of Placement
Units, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination.
There is no assurance that the Company will be able to complete a Business Combination successfully. The Company must complete
one or more initial Business Combinations having an aggregate fair market value of at least 80% of the assets held in the Trust
Account (excluding the deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time
of the agreement to enter into the initial Business Combination. The Company will only complete a Business Combination if the post-transaction
company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
The Company will provide its holders of
the outstanding Public Shares (the “Public Stockholders”) with the opportunity to redeem all or a portion of their
Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve
the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval
of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders
will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00
per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company
to pay its tax obligations). The per-share amount to be distributed to Public Stockholders who redeem their Public Shares will
not be reduced by the deferred underwriting commissions the Company will pay to the underwriters (as discussed in Note 6). There
will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Company will proceed with a Business
Combination if the Company has net tangible assets of at least $5,000,001 either immediately prior to or upon such consummation
of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of
the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote
for business or other legal reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation, as amended
(the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities
and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination.
If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval
for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the
proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business
Combination, the Company’s Sponsor has agreed to vote its Founder Shares (as defined in Note 5), Placement Shares (as defined
in Note 4) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination.
Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against
the proposed transaction.
If the Company seeks stockholder approval
of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Certificate of Incorporation
provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder
is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or
more of the Public Shares, without the prior consent of the Company.
The Sponsor has agreed (a) to waive its
redemption rights with respect to its Founder Shares, Placement Shares and Public Shares held by it in connection with the completion
of a Business Combination and (b) not to propose an amendment to the Certificate of Incorporation (i) that would affect the substance
or timing of the Company’s obligation to allow redemption in connection with a Business Combination or to redeem 100% of
its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating
to stockholders’ rights or pre-business combination activity, unless the Company provides the Public Stockholders with the
opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a
Business Combination by November 5, 2021 (the “Combination Period”), the Company will (i) cease all operations except
for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 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 its tax obligations (less
up to $100,000 of interest 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 the case of clauses (ii) and (iii) above to the Company’s obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with
respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within
the Combination Period.
The Sponsor has agreed to waive its liquidation
rights with respect to the Founder Shares and Placement Shares if the Company fails to complete a Business Combination within the
Combination Period. However, if the Sponsor acquires Public Shares in or after the Initial Public Offering, such Public Shares
will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within
the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note
6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and,
in such event, such amounts will be included with the other funds held in the Trust Account that will be available to fund the
redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining
available for distribution will be less than the Initial Public Offering price per Unit ($10.00).
In order to protect the amounts held in
the Trust Account, the Sponsor has agreed to be liable to the Company if and to the extent any claims by a third party for services
rendered or products sold to the Company, or a prospective target business with which the Company has discussed entering into a
transaction agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per Public Share and (ii)
the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than
$10.00 per share due to reductions in the value of the trust assets. This liability will not apply with respect to any claims by
a third party who executed a waiver of any right, title, interest or claim of any kind in or to any monies held in the Trust Account
or to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities,
including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that
an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any
liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify
the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except for the Company’s
independent registered accounting firm), prospective target businesses or other entities with which the Company does business,
execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Going Concern
In connection with the Company's assessment
of going concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern,” the Company has until
November 5, 2021 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination
by this time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution
of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur, and potential
subsequent dissolution, raises substantial doubt about the Company's ability to continue as a going concern. No adjustments have
been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after November 5, 2021.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance 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 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, 2019
as filed with the SEC on March 27, 2020, which contains the audited financial statements and notes thereto. The financial information
as of December 31, 2019 is derived from the audited financial statements presented in the Company’s Annual Report on Form
10-K for the year ended December 31, 2019. The interim results for the three and nine months ended September 30, 2020 are not necessarily
indicative of the results to be expected for the year ending December 31, 2020 or for any future interim periods.
Emerging Growth Company
The Company is an “emerging growth
company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(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 financial accounting standards until private
companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of
securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The
JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such
extended transition period which means that when a standard is issued or revised and it has different application dates for public
or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies
adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company
which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible because of the potential differences in accounting standards used.
Use of Estimates
The preparation of condensed financial
statements in conformity with GAAP requires 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 revenues and expenses during the reporting period.
Making estimates requires management to
exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or
set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate,
could change in the near term due to one or more future events. Accordingly, the actual results could differ significantly from
those estimates.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. At September 30, 2020 and December 31,
2019, cash equivalents, consisting of money market funds, amounted to $1,133,230 and $1,556,055, respectively.
Marketable Securities Held in Trust
Account
At September 30, 2020 and December 31,
2019, the assets held in the Trust Account were invested in money market funds, meeting the conditions of Rule 2a-7 of the Investment
Company Act. During the nine months ended September 30, 2020, the Company withdrew $405,888 of interest earned on the Trust Account
to pay for its franchise and income taxes.
Common Stock Subject to Possible Redemption
The Company accounts for its common stock
subject to possible redemption in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480
“Distinguishing Liabilities from Equity.” 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 is 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 common stock features certain redemption rights that are considered to be outside of the Company’s
control and subject to occurrence of uncertain future events. Accordingly, at September 30, 2020 and December 31, 2019, there were
23,803,744 and 23,770,019 shares of Class A common stock subject to possible redemption, respectively, presented as temporary equity,
outside of the stockholders’ equity section of the Company’s condensed balance sheets.
Offering Costs
Offering costs consist of legal, accounting,
underwriting fees and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering.
Offering costs amounting to $14,267,762 were charged to stockholders’ equity upon the completion of the Initial Public Offering.
Income Taxes
The Company follows the asset and liability
method of accounting for income taxes under ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized
for the estimated future tax consequences attributable to differences between the financial statements carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included
the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected
to be realized. As of September 30, 2020 and December 31, 2019, the Company had a deferred tax asset of approximately $109,000
and $19,000, respectively, which had a full valuation allowance recorded against it of approximately $109,000 and $19,000, respectively.
The Company’s currently taxable
income primarily consists of interest income on the Trust Account. The Company’s general and administrative costs are
generally considered start-up costs and are not currently deductible. During the three and nine months ended September 30,
2020, the Company recorded income tax benefit (expense) of approximately $8,000 and ($202,600), respectively, primarily
related to interest income earned on the Trust Account. The Company’s effective tax rate for the three and nine months
ended September 30, 2020 was approximately 5% and 38%, which differs from the expected income tax rate due to the start-up
costs (discussed above) which are not currently deductible.
ASC 740 prescribes a recognition threshold
and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken
in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax
expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2020 and
December 31, 2019. 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 Company is subject to income tax examinations by major taxing authorities since inception.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Net Income (Loss) Per Common Share
Net income (loss) per common share is computed
by dividing net income (loss) by the weighted average number of common shares outstanding for the period. The Company has not considered
the effect of warrants sold in the Initial Public Offering and private placement to purchase 12,832,500 shares of Class A common
stock in the calculation of diluted income (loss) per share, since the exercise of the 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 (loss) 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 is calculated
by dividing the interest income earned on the Trust Account of $9,760 and $1,114,757 for the three and nine months ended September
30, 2020, respectively (net of applicable franchise and income taxes of approximately $10,000 and $353,000 for the three and nine
months ended September 30, 2020, respectively), by the weighted average number of Class A redeemable common stock of 25,000,000
shares outstanding for the periods. Net loss per common share, basic and diluted for Class A and Class B non-redeemable common
stock is calculated by dividing the net income (loss), less income attributable to Class A redeemable common stock, by the
weighted average number of Class A and Class B non-redeemable common stock outstanding for the periods. Class A and Class
B non-redeemable common stock includes the Founder Shares and the Placement Units as these shares do not have any redemption features
and do not participate in the income earned on the Trust Account.
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. At September 30, 2020 and December 31, 2019, the Company has not
experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Fair Value of Financial Instruments
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates
the carrying amounts represented in the accompanying condensed balance sheets, primarily due to their short-term nature.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s
condensed financial statements.
NOTE 3. INITIAL PUBLIC OFFERING
Pursuant to the Initial Public Offering,
the Company sold 25,000,000 Units at a price of $10.00 per Unit, which includes the partial exercise by the underwriter of its
option to purchase an additional 3,000,000 Units at $10.00 per Unit. Each Unit consists of one share of Class A common stock and
one-half of one redeemable warrant (“Public Warrant”). Each whole Public Warrant entitles the holder to purchase one
share of Class A common stock at a price of $11.50 per share, subject to adjustment (see Note 7).
NOTE 4. PRIVATE PLACEMENT
Simultaneously with the closing of the
Initial Public Offering, the Sponsor purchased an aggregate of 665,000 Placement Units at a price of $10.00 per Placement Unit,
for an aggregate purchase price of $6,650,000. Each Placement Unit consists of one share of Class A common stock (“Placement
Share” or, collectively, “Placement Shares”) and one-half of one redeemable warrant (each, a “Placement
Warrant” or collectively, “Placement Warrants”). Each whole Placement Warrant is exercisable to purchase one
share of Class A common stock at a price of $11.50 per share. A portion of the proceeds from the Placement Units were added to
the proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination
within the Combination Period, the proceeds from the sale of the Placement Units will be used to fund the redemption of the Public
Shares (subject to the requirements of applicable law), and the Placement Units and all underlying securities will expire worthless.
NOTE 5. RELATED PARTY TRANSACTIONS
Founder Shares
On August 9, 2019, the Sponsor purchased
5,750,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000.
The Founder Shares will automatically convert into Class A common stock upon consummation of a Business Combination on a one-for-one
basis, subject to certain adjustments, as described in Note 7.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
On October 31, 2019, the Company effected
a 1.1 for 1 stock dividend for each share of Class B common stock outstanding, resulting in the Sponsor holding an aggregate of
6,325,000 Founder Shares. The 6,325,000 Founder Shares included an aggregate of up to 825,000 shares subject to forfeiture to the
extent that the underwriters’ over-allotment option was not exercised in full or in part, so that the Sponsor would own,
on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming
the Sponsor did not purchase any Public Shares in the Initial Public Offering and excluding the Placement Shares). In connection
with the underwriters’ partial exercise of the over-allotment option and the forfeiture of the remaining over-allotment option,
75,000 Founder Shares were forfeited and 750,000 Founder Shares are no longer subject to forfeiture resulting in an aggregate of
6,250,000 Founder Shares outstanding at December 31, 2019.
The Sponsor has agreed, subject to limited
exceptions, not to transfer, assign or sell any of its Founder Shares until the earlier to occur of: (A) one year after the completion
of a Business Combination or (B) subsequent to a Business Combination, (x) if the last sale price of the 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 a Business Combination, or (y) the date
on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of
the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.
Advances from Related Party
The Sponsor advanced the Company funds
to cover expenses related to the Initial Public Offering. These advances were non-interest bearing and payable upon demand. Advances
totaling $230,350 were repaid upon the consummation of the Initial Public Offering on November 5, 2019.
Related Party Loans
On August 9, 2019, the Sponsor agreed to
loan the Company an aggregate of up to $300,000 to cover expenses related to the Initial Public Offering pursuant to a promissory
note (the “Promissory Note”). The Promissory Note was non-interest bearing and payable on the earlier of March 30,
2020 or the completion of the Initial Public Offering. The borrowings outstanding under the Promissory Note of $282,244 were repaid
upon the consummation of the Initial Public Offering on November 5, 2019.
In addition, in order to finance transaction
costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s
officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”).
If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust
Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust
Account. In the event that a Business Combination does not close, the Company may use a portion of 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. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements
exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination,
without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into
units upon consummation of the Business Combination at a price of $10.00 per unit. The units would be identical to the Placement
Units.
Administrative Support Agreement
The Company entered into an agreement whereby,
commencing on November 5, 2019 through the earlier of the Company’s consummation of a Business Combination and its liquidation,
the Company will pay the Sponsor a total of $10,000 per month for office space, utilities and secretarial and administrative support.
For the three and nine months ended September 30, 2020, the Company incurred $30,000 and $90,000, respectively, in fees for these
services, of which $397 and $18,387 are included in accounts payable and accrued expenses in the accompanying condensed balance
sheets at September 30, 2020 and December 31, 2019, respectively.
Consulting Agreement
The Company entered into a consulting agreement
with a related party, pursuant to which the consultant will provide the Company, among other services, assistance in finding a
potential target for a Business Combination, as well as supervising and performing due diligence on such targets. The Company will
pay the consultant a fee of $10,000 per month, up to a maximum of $150,000. On May 15, 2020, the Company amended the consulting
agreement whereby the monthly fee was reduced to $7,500, commencing on June 1, 2020. For the three and nine months ended September
30, 2020, the Company incurred $15,000 and $80,000, respectively, in such fees. At September 30, 2020 and December 31, 2019, $10,000
of such fees was recorded in accounts payable and accrued expenses in the accompanying condensed balance sheets. On October 1,
2020 the Company further amended the agreement to increase the fee back to $10,000 per month.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
NOTE 6. COMMITMENTS
Risks and Uncertainties
Management continues 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 and/or search for a target company, the specific impact is 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.
Registration Rights
Pursuant to a registration rights agreement
entered into on November 5, 2019, the holders of the Founder Shares, Placement Units (including securities contained therein) and
Units (including securities contained therein) that may be issued upon conversion of Working Capital Loans, and any shares of Class
A common stock issuable upon the exercise of the Placement Warrants and any shares of Class A common stock and warrants (and underlying
Class A common stock) that may be issued upon conversion of units issued as part of the Working Capital Loans and Class A common
stock issuable upon conversion of the Founder Shares, will be entitled to registration rights requiring the Company to register
such securities for resale (in the case of the Founder Shares, only after conversion to Class A common stock). The holders of the
majority of these securities are entitled to make up to three demands, excluding short form demands, that the Company register
such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration
statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale
such securities pursuant to Rule 415 under the Securities Act. The Company will bear the expenses incurred in connection with the
filing of any such registration statements.
Underwriting Agreement
The underwriters were paid a cash underwriting
discount of $4,400,000, or $0.20 per Unit of the gross proceeds of the initial 22,000,000 Units sold in the Initial Public Offering,
in the aggregate. In addition, the underwriters are entitled to a deferred fee of (i) $0.35 per Unit of the gross proceeds of the
initial 22,000,000 Units sold in the Initial Public Offering, or $7,700,000, and (ii) $0.55 per Unit of the gross proceeds from
the 3,000,000 Units sold pursuant to the over-allotment option, or $1,650,000, aggregating to a deferred fee of $9,350,000. The
deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company
completes an Initial Business Combination, subject to the terms of the underwriting agreement.
NOTE 7. STOCKHOLDERS’ EQUITY
Preferred Stock — The Company
is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designations, voting
and other rights and preferences as may be determined from time to time by the Company’s board of directors. At September
30, 2020 and December 31, 2019, there were no shares of preferred stock issued or outstanding.
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. Holders of Class
A common stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 1,861,256 and 1,894,891
shares of Class A common stock issued or outstanding, excluding 23,803,744 and 23,770,019 shares of Class A common stock subject
to possible redemption, respectively.
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. Holders of Class
B common stock are entitled to one vote for each share. At September 30, 2020 and December 31, 2019, there were 6,250,000 shares
of Class B common stock issued and outstanding.
Holders of Class A common stock and Class
B common stock will vote together as a single class on all other matters submitted to a vote of stockholders except as required
by law.
The shares of Class B common stock will
automatically convert into shares of Class A common stock at the time of a Business Combination on a one-for-one basis, subject
to adjustment. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued
in excess of the amounts offered in the Initial Public Offering and related to the closing of a Business Combination, the ratio
at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders
of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance
or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common
stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock
outstanding upon the completion of the Initial Public Offering (not including the shares of Class A common stock underlying the
Placement Units) plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with
a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination,
any private placement-equivalent warrants issued, or to be issued, to any seller in a Business Combination, any private placement
equivalent securities issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
Warrants — Public Warrants
may only be exercised for a whole number of shares. No fractional warrants will be issued upon separation of the Units and only
whole 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. The Public Warrants will expire five years after
the completion of a Business Combination or earlier upon redemption or liquidation.
The Company will not be obligated to deliver
any shares of Class A common stock pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise
unless a registration statement under the Securities Act with respect to the shares of Class A common stock underlying the warrants
is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect
to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of Class A common stock upon
exercise of a warrant unless Class A common stock issuable upon such warrant exercise has been registered, qualified or deemed
to be exempt under the securities laws of the state of residence of the registered holder of the warrants.
The Company has agreed that as soon as
practicable, but in no event later than 15 business days after the closing of a Business Combination, the Company will use its
best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of
the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares
of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement
covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business
day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement
and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a
“cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. Notwithstanding the
foregoing, if a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effective
within a specified period following the consummation of a Business Combination, warrant holders may, until such time as there is
an effective registration statement and during any period when the Company shall have failed to maintain an effective registration
statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided
that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise
their warrants on a cashless basis.
Once the warrants become exercisable, the
Company may redeem the Public Warrants:
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in whole and not in part;
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at a price of $0.01 per warrant;
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upon not less than 30 days’ prior written notice
of redemption given after the warrants become exercisable; and
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if, and only if, the reported last sale price of the
Company’s Class A common stock equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period
commencing once the warrants become exercisable and ending three business days before the Company sends the notice of redemption
to the warrant holders.
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If and when the warrants become redeemable
by the Company, the Company may not exercise its redemption right if the issuance of shares of common stock upon exercise of the
warrants is not exempt from registration or qualification under applicable state blue sky laws or the Company is unable to effect
such registration or qualification.
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. The exercise price and number of shares of Class A 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. However, the warrants will not be adjusted for issuance of Class
A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the
warrants. If the Company is unable to complete a 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 the respect to such warrants.
Accordingly, the warrants may expire worthless.
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 a Business Combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (with
such issue price or effective issue price to be determined in good faith by the Company’s board of directors and, 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) (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 a
Business Combination on the date of the consummation of a Business Combination (net of redemptions), and (z) the volume weighted
average trading price of the shares of Class A common stock during the 20 trading day period starting on the trading day prior
to the day on which the Company consummates a 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 will be adjusted (to the nearest cent) to be
equal to 180% of the higher of the Market Value and the Newly Issued Price.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2020
(Unaudited)
The Placement Warrants are identical to
the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Placement Warrants and the Class
A common stock issuable upon the exercise of the Placement Warrants will not be transferable, assignable or saleable until 30 days
after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Placement Warrants will
be exercisable on a cashless basis and be non-redeemable so long as they are held by the initial purchasers or their permitted
transferees. If the Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the
Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.
NOTE 8. FAIR VALUE MEASUREMENTS
The fair value of the Company’s financial
assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize
the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal
assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify
assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
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Level 1:
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Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
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Level 2:
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Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
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Level 3:
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Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
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The following table presents information
about the Company’s assets that are measured at fair value on a recurring basis at September 30, 2020 and December 31, 2019
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description
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Level
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September 30,
2020
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December 31,
2019
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Assets:
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Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund
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1
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$
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251,276,227
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$
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250,567,358
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NOTE 9. SUBSEQUENT EVENTS
The Company evaluated subsequent
events and transactions that occurred after the balance sheet date up November 12, 2020, the date that the condensed
financial statements were issued. Based upon this review, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the condensed financial statements.
ITEM 2. MANAGEMENT’S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
References in this report (the “Quarterly
Report”) to “we,” “us” or the “Company” refer to FinServ Acquisition Corp. References
to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor”
refer to FinServ Holdings LLC. The following discussion and analysis of the Company’s financial condition and results of
operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly
Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve
risks and uncertainties.
Special Note Regarding Forward-Looking
Statements
This Quarterly Report on Form 10-Q includes
“forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from
those expected and projected. All statements other than statements of historical fact included in this Form 10-Q including statements
in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the
Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking
statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,”
“seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such
forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based
on information currently available. A number of factors could cause actual events, performance or results to differ materially
from the events, performance and results discussed in the forward-looking statements. For information identifying important factors
that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to
the Risk Factors section of the Company’s Annual Report on Form 10-K for the year ending December 31, 2019 filed with the
SEC on March 27, 2020 and the Risk Factors section in this Form 10-Q. The Company’s securities filings can be accessed on
the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company
disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information,
future events or otherwise.
Overview
We are a 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 intend to focus our search for prospects within
the financial services and FinTech industry with an equity value of approximately $500 million to $2,000 million. We
have not selected any specific 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 Initial Public Offering and the private placement of the Placement Units, the proceeds of the
sale of our shares in connection with our initial Business Combination (pursuant to backstop agreements we may enter into), shares
issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing.
The issuance of additional shares in connection
with an initial Business Combination to the owners of the target or other investors:
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may significantly dilute the equity interest of investors in our Initial Public Offering, which dilution would increase if the anti-dilution provisions in the Class B common stock resulted in the issuance of Class A shares on a greater than one-to-one basis upon conversion of the Class B common stock;
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may subordinate the rights of holders of our common stock if preferred stock is issued with rights senior to those afforded our common stock;
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could cause a change in control if a substantial number of shares of our common stock is issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors;
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may have the effect of delaying or preventing a change of control of us by diluting the stock ownership or voting rights of a person seeking to obtain control of us; and
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may adversely affect prevailing market prices for our Class A common stock and/or warrants.
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Similarly, if we issue debt securities
or otherwise incur significant debt to bank or other lenders or the owners of a target, it could result in:
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default and foreclosure on our assets if our operating revenues after an initial Business Combination are insufficient to repay our debt obligations;
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acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant;
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our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;
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our inability to obtain necessary additional financing if the debt security contains covenants restricting our ability to obtain such financing while the debt security is outstanding;
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our inability to pay dividends on our common stock;
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using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our common stock if declared, our ability to pay expenses, make capital expenditures and acquisitions, and fund other general corporate purposes;
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limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;
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increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;
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limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, and execution of our strategy; and
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other purposes and other disadvantages compared to our competitors who have less debt.
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We expect to continue to incur significant
costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to complete our initial Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations
nor generated any revenues to date. Our only activities since inception have been organizational activities and those necessary
to prepare for our Initial Public Offering and identifying a target for our initial Business Combination. We do not expect to generate
any operating revenues until after completion of our initial Business Combination. We generate non-operating income in the
form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company
(for legal, financial reporting, accounting and auditing compliance), as well as expenses as we conduct due diligence on prospective
Business Combination candidates.
For the three months ended September 30,
2020, we had a net loss of $151,912, which consists of operating costs of $176,390, offset by interest income on marketable securities
held in the Trust Account of $9,760, interest income on our money market account of $6,269 and an income tax benefit of $8,449.
For the nine months ended September 30,
2020, we had a net income of $337,250, which consists of interest income on marketable securities held in the Trust Account of
$1,114,757 and interest income on our money market account of $9,919, offset by operating costs of $584,826 and a provision for
income taxes of $584,826.
For the period from August 9, 2019 (inception)
through September 30, 2019, we had net loss $1,000, which consisted of formation and operating costs.
Liquidity and Capital Resources
On November 5, 2019, we consummated our
Initial Public Offering of 25,000,000 Units, which included the partial exercise by the underwriters of the over-allotment option
to purchase an additional 3,000,000 Units, at $10.00 per Unit, generating gross proceeds of $250,000,000. Simultaneously with the
closing of our Initial Public Offering, we consummated the sale of 665,500 Placement Units to the Sponsor at a price of $10.00
per Placement Unit, generating gross proceeds of $6,650,000.
Following our Initial Public Offering,
the exercise of the over-allotment option and the sale of the Placement Units, a total of $250,000,000 was placed in the Trust
Account. We incurred $14,267,762 in transaction costs, including $4,400,000 of underwriting fees, $9,350,000 of deferred underwriting
fees and $517,762 of other offering costs.
For the nine months ended September 30,
2020, cash used in operating activities was $804,080. Net income of $337,250 was affected by interest earned on marketable securities
held in the Trust Account of $1,114,757 and changes in operating assets and liabilities, which used $26,573 of cash from operating
activities.
As of September 30, 2020, we had cash and
marketable securities of $251,276,227 held in the Trust Account. 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 deferred underwriting commissions) to complete
our initial Business Combination. We may withdraw interest to pay taxes. During the nine months ended September 30, 2020, we withdrew
approximately $406,000 of interest earned on the Trust Account to pay for our franchise and income 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.
As of September 30, 2020, we had cash of
$1,179,883 outside of the Trust Account. We intend to use the funds held outside the Trust Account primarily to identify and evaluate
target businesses, perform business due diligence on prospective target businesses, travel to and from the offices, plants or similar
locations of prospective target businesses or their representatives or owners, review corporate documents and material agreements
of prospective target businesses, and structure, negotiate and complete our initial Business Combination.
In order to fund working capital deficiencies
or finance transaction costs in connection with our initial Business Combination, our Sponsor or an affiliate of our Sponsor or
certain of our officers and directors may, but are not obligated to, loan us funds as may be required. If we complete our initial
Business Combination, we would repay such loaned amounts. 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 units identical to the Placement
Units, at a price of $10.00 per unit at the option of the lender.
We do not currently believe we will need
to raise additional funds in order to meet the expenditures required for operating our business. However, if our estimate of the
costs of identifying a target business, undertaking in-depth due diligence and negotiating our 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 consummation of our initial Business Combination,
in which case we may issue additional securities or incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing simultaneously with the completion of our initial 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.
In connection with our assessment of going
concern considerations in accordance with Financial Accounting Standard Board's Accounting Standards Update (“ASU”)
2014-15, “Disclosures of Uncertainties about an Entity's Ability to Continue as a Going Concern,” we have until November
5, 2021 to consummate a Business Combination. It is uncertain that we will be able to consummate a Business Combination by this
time. If a Business Combination is not consummated by this date, there will be a mandatory liquidation and subsequent dissolution.
Management has determined that the mandatory liquidation, should a Business Combination not occur, and potential subsequent dissolution,
raises substantial doubt about our ability to continue as a going concern. No adjustments have been made to the carrying amounts
of assets or liabilities should we be required to liquidate after November 5, 2021.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities,
which would be considered off-balance sheet arrangements as of September 30, 2020. We do not participate in transactions that create
relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would
have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance
sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or
purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital
lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay an affiliate of the Sponsor
a monthly fee of $10,000 for office space, utilities and secretarial and administrative support to the Company. We began incurring
these fees on November 5, 2019 and will continue to incur these fees monthly until the earlier of the completion of the Business
Combination and the Company’s liquidation.
The underwriters are entitled to a deferred
fee of (i) $0.35 per Unit of the gross proceeds of the initial 22,000,000 Units sold in the Initial Public Offering, or $7,700,000,
and (ii) $0.55 per Unit of the gross proceeds from the 3,000,000 Units sold pursuant to the over-allotment option, or $1,650,000,
aggregating to a deferred fee of $9,350,000.
We entered into a consulting agreement
with a related party, pursuant to which the consultant will provide us, among other services, assistance in finding a potential
target for a Business Combination, as well as supervising and performing due diligence on such targets. We will pay the consultant
a fee of $10,000 per month, up to a maximum of $150,000. On May 15, 2020, we amended the consulting agreement whereby the monthly
fee was reduced to $7,500, commencing on June 1, 2020.
Critical Accounting Policies
The preparation of condensed financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements, and income and expenses during the periods reported.
Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
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.” 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 features 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 common stock features certain redemption
rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, the
common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section
of our condensed balance sheets.
Net Loss Per Common Share
We apply the two-class method in calculating
earnings per share. Net income per common share, basic and diluted for Class A redeemable common stock is calculated by dividing
the interest income earned on the Trust Account, net of applicable taxes, by the weighted average number of shares of Class A
redeemable common stock outstanding for the periods. Net loss per common share, basic and diluted for Class A and Class B
non-redeemable common stock is calculated by dividing net income less income attributable to Class A redeemable common stock, by
the weighted average number of shares of Class A and Class B non-redeemable common stock outstanding for the periods presented.
Recent Accounting Standards
Management does not believe that any recently
issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our condensed financial
statements.