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Item 2.01
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Completion of Acquisition or Disposition of Assets
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The disclosure set forth
in the “Introductory Note” above is incorporated into this Item 2.01 by reference.
The Merger was approved
by FinServ’s stockholders at a special meeting of FinServ’s stockholders held on June 7, 2021 (the “Special Meeting”).
At the Special Meeting, 25,070,617 shares of FinServ Common Stock were voted in favor of the proposal to approve the Merger, 1,873 shares
of FinServ Common Stock were voted against the proposal and 1,875 shares of FinServ Common Stock abstained from voting on the proposal.
In connection with the Closing, 6,338 shares of FinServ Common Stock were redeemed at a per share price of approximately $10.05. The Merger
was completed on June 9, 2021.
In connection with the
consummation of the Merger, all of the 6,250,000 outstanding shares of FinServ Class B Common Stock (the “Founder Shares”),
were converted into shares of Common Stock on a one-for-one basis.
Pursuant to the Merger
Agreement, at the Closing, holders of the outstanding shares of Katapult Common Stock and the outstanding Katapult options received on
a pro rata basis the Earnout Shares, which will vest upon the achievement of certain thresholds prior to the sixth anniversary of the
Closing (as further described in the section entitled “The Merger Agreement” on page 144 of the Proxy Statement/Prospectus).
As of the Closing Date
and following the completion of the Merger and the sale of the PIPE Shares, the Company had the following outstanding securities:
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approximately
96,821,615 shares of Common Stock (of which 7,499,997 were Earnout Shares); and
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●
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approximately 12,500,000 public warrants and 332,500 private placement warrants,
each exercisable for one share of Common Stock at a price of $11.50 per share.
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FORM 10 INFORMATION
Prior to the Closing,
the Company was a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) with no operations, formed as a vehicle to effect a business combination with one or more operating businesses. After the
Closing, the Company became a holding company whose only assets consist of equity interests in Katapult Intermediate Holdings, LLC (formerly
Keys Merger Sub II, LLC), whose only assets consist of equity interests in Katapult Group, Inc.
Cautionary Note Regarding Forward-Looking Statements
The Company makes forward-looking
statements in this Current Report on Form 8-K. All statements, other than statements of present or historical fact included
in or incorporated by reference in this Current Report on Form 8-K, regarding the Company’s future financial performance,
as well as the Company’s strategy, future operations, financial position, estimated revenues, and losses, projected costs, prospects,
plans and objectives of management are forward-looking statements. When used in this Current Report on Form 8-K, the words “could,”
“should,” “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,”
“expect,” “project,” the negative of such terms and other similar expressions are intended to identify forward-looking
statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on
management’s current expectations and assumptions about future events and are based on currently available information as to the
outcome and timing of future events. The Company cautions you that these forward-looking statements are subject to all of the risks and
uncertainties, most of which are difficult to predict and many of which are beyond the control of the Company, incident to its business.
These forward-looking
statements are based on information available as of the date of this Current Report on Form 8-K, and current expectations, forecasts
and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as
representing the Company’s views as of any subsequent date, and the Company does not undertake any obligation to update forward-looking
statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or
otherwise, except as may be required under applicable securities laws.
As a result of a number
of known and unknown risks and uncertainties, the Company’s actual results or performance may be materially different from those
expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:
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the Company’s ability to recognize the anticipated benefits of the
Transactions, which may be affected by, among other things, competition and the ability of the Company to grow and management growth profitability
following the Closing;
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the future financial performance of the Company following the Transactions;
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●
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risks related to disruption of management’s time from ongoing business
operations due to the Transactions;
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litigation, complaints, product liability claims and/or adverse publicity;
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the impact of changes in consumer spending patterns, consumer preferences,
local, regional and national economic conditions, crime, weather, demographic trends and employee availability;
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●
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privacy and data protection laws, privacy or data breaches, or the loss of
data;
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the impact of the COVID-19 pandemic and its effect on business and financial
conditions of the Company; and
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other risks and uncertainties set forth in the Proxy Statement/Prospectus
in the section titled “Risk Factors” beginning on page 23 of the Proxy Statement/Prospectus, which is incorporated herein
by reference.
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Business
The business
and properties of FinServ and Katapult prior to the Merger are described in the Proxy Statement/Prospectus in the sections titled “Information
About FinServ” beginning on page 70 and “Information About Katapult” beginning on page 85, which are incorporated herein
by reference.
Properties
Katapult leases its corporate headquarters located
at 5204 Tennyson Parkway, Suite 500, Plano, TX where it occupies approximately 11,500 square feet of office space pursuant to a lease
that expires in September 2023. Katapult also leases office space at 27 West 24th Street, Suite 1101, New York, NY 10010 pursuant
to a lease that expires in June 2025. Katapult believes that its current facilities are suitable and adequate to meet its current needs.
Legal Proceedings
Except as set forth below, the
Company and its subsidiaries are not a party to, and their properties are not the subject of, any material pending legal proceedings.
DCA Litigation
On April 9, 2021, Daiwa Corporate Advisory
LLC (formerly known as DCS Advisory LLC) (“DCA”), a financial advisory firm, served Katapult Group, Inc. with a summons and
a complaint filed in the Supreme Court of the State of New York, New York County, in a matter bearing the index number 652164/2021. The
complaint relates to a March 22, 2018 letter agreement (the “Letter Agreement”) entered into by DCS Advisory LLC and
Cognical Inc. (now known as Katapult Group, Inc.). Among other things, DCA alleges that the Letter Agreement confers upon DCA (i) a right
to act as the “exclusive financial advisor” with respect to certain transactions defined in the Letter Agreement, (ii) a right
to a “Placement Fee” and/or “mutually-agreed upon fees” in connection with such advisory roles, and (iii)
a right to a $100,000 termination fee payable in certain circumstances by Katapult Group, Inc. in the event that Katapult Group, Inc.
terminated the Letter Agreement. For its first cause of action, DCA alleges that Katapult Group, Inc. “breached the Letter Agreement
by failing and/or refusing to extend to DCA the opportunity to exercise its right of first refusal in connection with” the Transactions
and the PIPE Investment. DCA seeks “damages in an amount to be determined at trial” with respect to this first cause of action.
For its second cause of action, DCA alleges that, assuming Katapult Group, Inc. properly terminated the Letter Agreement in April 2019
(which DCA disputes), Katapult Group, Inc. “also breached the Letter Agreement by failing to pay DCA a termination fee when it terminated
the Letter Agreement.” DCA seeks “damages in an amount to be determined at trial, but no less than $100,000,” with respect
to this second cause of action. With respect to both causes of action, DCA also seeks attorneys’ fees and costs pursuant to the
Letter Agreement, an award of pre- and post-judgment interest, and such other and further relief as the Court deems just and proper.”
On May 24, 2021, Katapult Group, Inc. filed its
answer to the complaint and also asserted counterclaims against DCA for breach of contract and for breach of the duty of good faith and
fair dealing. In connection with its counterclaims, Katapult Group, Inc. is seeking damages in the amount of approximately $10.6 million,
as well as attorneys’ fees and costs. Katapult Group, Inc. disputes the allegations in DCA’s complaint and intends to vigorously
defend against the claims.
Risk Factors
The risks
associated with the Company’s business are described in the Proxy Statement/Prospectus in the section titled “Risk Factors”
beginning on page 23, which is incorporated herein by reference.
Financial Information
Selected Historical Financial Information
The selected historical
financial information of Katapult for the years ended December 31, 2020 and December 31, 2019 are included in the Proxy Statement/Prospectus
in the section titled “Selected Historical Consolidated Financial Information of Katapult” beginning on page 14, which are
incorporated herein by reference.
Unaudited Condensed Financial Statements
The unaudited condensed
consolidated financial statements as of and for the three months ended March 31, 2021 and 2020 of Katapult have been prepared in accordance
with accounting principles generally accepted in the United States and pursuant to the regulations of the SEC and are included in in Exhibit
99.1, which are incorporated herein by reference.
These unaudited condensed
consolidated financial statements should be read in conjunction with the historical audited consolidated financial statements of Katapult
as of and for the years ended December 31, 2020 and 2019 and the related notes included in the Proxy Statement/Prospectus beginning on
page F-27 of the Proxy Statement/Prospectus, which are incorporated herein by reference.
Unaudited Pro Forma Condensed Combined
Financial Information
The unaudited pro forma
condensed combined financial information of the Company as of and for the three months ended March 31, 2021 and for the year ended December
31, 2020 is set forth in Exhibit 99.2 hereto and is incorporated herein by reference.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
Katapult’s
management’s discussion and analysis of financial condition and results of operations as of and for the three months ended March
31, 2021, included in Exhibit 99.3 and incorporated herein by reference.
Management’s discussion
and analysis of the financial condition and results of operation prior to the Merger is included in the Proxy Statement/Prospectus in
the sections titled “FinServ’s Management’s Discussion and Analysis of Financial Condition and Results of Operations”
beginning on page 79 and “Katapult’s Management’s Discussion and Analysis of Financial Condition and Results of Operations”
beginning on page 105, which are incorporated herein by reference.
Security Ownership of Certain Beneficial Owners and Management
The following
table sets forth information known to the Company regarding the beneficial ownership of the Company’s common stock as of June 9,
2021, after giving effect to the Closing, by:
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each person who is known by the Company to be the beneficial owner of more
than five percent (5%) of the outstanding shares of any class of the Company’s common stock;
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each current executive officer and director of the Company; and
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all current executive officers and directors of the Company, as a group.
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Beneficial ownership for the purposes of the following
table is determined in accordance with the rules and regulations of the SEC. A person is a “beneficial owner” of a security
if that person has or shares “voting power,” which includes the power to vote or to direct the voting of the security, or
“investment power”, which includes the power to dispose of or to direct the disposition of the security or has the right to
acquire such powers within 60 days.
The beneficial ownership percentages set forth
in the table below are based on 98,365,365 shares of Common Stock issued and outstanding as of June 9, 2021 and do not take into account
the issuance of any shares of Common Stock upon the exercise of warrants to purchase up to 12,832,500 shares of Common Stock that remain
outstanding.
Unless otherwise noted in the footnotes to the
following table, and subject to applicable community property laws, the persons and entities named in the table have sole voting and investment
power with respect to their beneficially owned common stock.
Name of Beneficial Owners(1)
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Number of
Shares of
Common
Stock
Beneficially
Owned
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|
Percentage
of
Outstanding
Common
Stock
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5% Stockholders:
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CURO Financial Technologies Corp. (2)
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21,892,864
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22.3
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%
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Blumberg Capital III, L.P. (3)
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6,465,834
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6.6
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%
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FinServ Holdings LLC (4)
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8,458,750
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8.6
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%
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Executive Officers and Directors:
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Lee Einbinder (4)
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8,458,750
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8.6
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%
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Orlando Zayas (5)
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5,761,683
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5.6
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%
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Karissa Cupito (6)
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1,775,250
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1.8
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%
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Derek Medlin (7)
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1,345,325
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1.4
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%
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Bruce Taragin (3)
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6,465,834
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6.6
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%
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Brian Hirsch (8)
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4,608,069
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4.7
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%
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Don Gayhardt (9)
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21,892,864
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22.3
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%
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Chris Masto (9)
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21,892,864
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22.3
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%
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Joanne Bradford
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--
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--
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All directors and executive officers as a group (9 individuals)
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50,307,775
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51.1
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%
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*
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Indicates less than 1 percent
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(1)
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Unless otherwise noted, the business address of those listed in the table above is 5204 Tennyson Parkway, Suite 500, Plano, TX 75024.
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(2)
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Includes 2,990,305 Earnout Shares. The business address of CURO Financial
Technologies Corp. is 3527 North Ridge Road, Wichita, KS 67205.
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(3)
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Includes 853,847 Earnout Shares. Shares are held by Blumberg Capital
III, L.P. The business address of Blumberg Capital III, L.P. is 432 Bryant Street, San Francisco, CA 94107.
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(4)
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FinServ Holdings LLC, the sponsor of FinServ Acquisition Corp. (the
“Sponsor”), is the record holder of the shares reported herein. Lee Einbinder, former Chief Executive Officer of FinServ Acquisition
Corp. is a managing member of the Sponsor and has voting and investment discretion with respect to the common stock held by the Sponsor.
As such, he may be deemed to have beneficial ownership of the common stock held directly by the Sponsor. Mr. Einbinder disclaims any beneficial
ownership of the reported shares other than to the extent of any pecuniary interest he may have therein, directly or indirectly.
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(5)
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Includes 511,679 Earnout Shares and options to acquire 4,248,432 shares of Common Stock that have vested or will vest within 60 days
of the Closing.
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(6)
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Includes 180,437 Earnout Shares and options to acquire 1,513,447 shares of Common Stock that have vested or will vest within 60 days
of the Closing.
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(7)
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Includes 143,496 Earnout Shares and options to acquire 1,081,843 shares of Common Stock that have vested or will vest within 60 days
of the Closing.
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(8)
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Includes 603,225 Earnout Shares. Includes shares held by Tribeca Venture Fund I (NY), L.P., Tribeca Venture Fund I, L.P. and Tribeca
Annex Fund, of which Mr. Hirsch is the Managing Partner. Mr. Hirsch disclaims any beneficial ownership of the reported shares other than
to the extent of any pecuniary interest they may have therein, directly or indirectly. The business address of Mr. Hirsch is 99 Hudson
Street, 15th Floor, New York, NY 10013.
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(9)
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Includes 2,990,305 Earnout Shares. Includes shares held by CURO Financial
Technologies Corp. (“CURO”). Mr. Gayhardt is a director and Chief Executive Officer and Mr. Masto is a director of CURO Group
Holdings Corp., the parent company of CURO, and may share voting or dispositive power over such shares. Mr. Gayhardt and Mr. Masto disclaim
any beneficial ownership of the reported shares other than to the extent of any pecuniary interest they may have therein, directly or
indirectly. The business address of Mr. Gayhardt and Mr. Masto is 3527 North Ridge Road, Wichita, KS 67205.
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Executive Compensation
The information
related to executive and director compensation of Katapult is included in the Proxy Statement/Prospectus in the section titled “Executive
and Director Compensation of Katapult” beginning on page 94 and is incorporated by reference herein. The description of the compensation
of the Company’s executive officers is qualified in its entirety by the full text of the employment agreements of Messrs. Zayas
and Medlin and Ms. Cupito, copies of which are attached hereto as Exhibits 10.6, 10.8 and 10.7, respectively, and incorporated herein
by reference.
Directors and Executive Officers
Information with respect
to the Company’s directors and executive officers immediately following the Closing is set forth in the Proxy Statement/Prospectus
in the section titled “Management of Katapult After the Merger” beginning on page 123 of the Proxy Statement/Prospectus, which
is incorporated herein by reference.
Director Independence
An “independent director” is defined
generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship
which, in the opinion of the company’s board, would interfere with such director’s exercise of independent judgment in carrying
out the responsibilities of a director. The Company’s Board has determined that Brian Hirsch, Bruce Taragin, Chris Masto, Don Gayhardt,
and Joanne Bradford are independent under the rules and regulations of the SEC and the Nasdaq Stock Market.
Committees of the Board of Directors
Information with respect to the composition of
the Board immediately after the Closing is set forth in the Proxy Statement/Prospectus in the section titled “Board Committees”
beginning on page 125 of the Proxy Statement/Prospectus and that information is incorporated herein by reference.
Certain Relationships and Related Party Transactions
The certain relationships and related party transactions
of the Company are described in the Proxy Statement/Prospectus in the section titled “Certain Relationships and Related Party Transactions”
beginning on page 193 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
The disclosure set forth under “Director
Independence” and “Committees of the Board of Directors” above is incorporated herein by reference.
Market Price of and Dividends on the Registrant’s Common Equity
and Related Stockholder Matters
Market Information and Holders
The Company’s Common
Stock and warrants were historically quoted on the Nasdaq under the symbols “FSRV” and “FSRVW,” respectively.
On June 10, 2021, the Company’s Common Stock and warrants were listed on the Nasdaq under the new trading symbols of “KPLT”
and “KPLTW,” respectively.
As of the Closing
Date and following the completion of the Merger, the Company had approximately 98,365,365 shares (of which 7,499,997 were Earnout
Shares) of Common Stock issued and outstanding held of record by 108 holders, and approximately 12,832,500 warrants outstanding held
of record by 2 holders.
Dividends
The Company has not paid any cash dividends on
the Common Stock to date. The Company may retain future earnings, if any, for future operations, expansion and debt repayment and has
no current plans to pay cash dividends for the foreseeable future. Any decision to declare and pay dividends in the future will be made
at the discretion of the Board and will depend on, among other things, the Company’s results of operations, financial condition,
cash requirements, contractual restrictions and other factors that the Board may deem relevant. In addition, the Company’s ability
to pay dividends may be limited by covenants of any existing and future outstanding indebtedness the Company or its subsidiaries incur.
The Company does not anticipate declaring any cash dividends to holders of the Common Stock in the foreseeable future.
Recent Sales of Unregistered Securities
The disclosure set forth in the “Introductory
Note” above is incorporated herein by reference.
The PIPE Shares issued in connection with the
Subscription Agreements have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), in reliance
on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Description of Registrant’s Securities to be Registered
Common Stock
A description of the
Company’s Common Stock is included in the Proxy Statement/Prospectus in the section titled “Description of New Katapult Capital
Stock—Common Stock” beginning on page 185 of the Proxy Statement/Prospectus, which is incorporated herein by reference.
Warrants
A description of the
Company’s warrants is included in the Company’s Proxy Statement/Prospectus in the section titled “Description of New
Katapult Capital Stock—Redeemable Warrants” beginning on page 185 of the Proxy Statement/Prospectus, which is incorporated
herein by reference.
Indemnification of Directors and Officers
The information
set forth under Item 1.01 of this Current Report on Form 8-K is incorporated herein by reference.
Financial Statements and Supplementary Data
The information
set forth under Item 9.01 of this Current Report on Form 8-K is incorporated herein by reference.