Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations.
Special Note Regarding Forward-Looking
Statements
All statements
other than statements of historical fact included in this Report including, without limitation, statements under 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. When used
in this Report, words such as “anticipate,” “believe,” “estimate,” “expect,” “intend”
and similar expressions, as they relate to us or the Company’s management, identify forward-looking statements. Such forward-looking
statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, the
Company’s management. Actual results could differ materially from those contemplated by the forward-looking statements as
a result of certain factors detailed in our filings with the SEC.
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our audited financial statements
and the notes related thereto which are included in “Item 8. Financial Statements and Supplementary Data” of Report.
Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve
risks and uncertainties.. Our actual results may differ materially from those anticipated in these forward-looking statements
as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,”
“Risk Factors Summary”, “Item 1A. Risk Factors” and elsewhere in this Report.
50
Overview
We are a blank check
company incorporated as a Delaware corporation and formed for the purpose of effecting an initial business combination. We are
focusing our search on businesses that are providing or changing technology for traditional financial services with an equity
value of approximately $500 million to $2,000 million. 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:
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:
● our inability to pay dividends on our common stock;
51
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, such as the Katapult Business Combination, will be successful.
Recent Developments
On December 18, 2020,
we entered into the Merger Agreement with the Merger Subs, Katapult, and the other signatories thereto.
Pursuant to the terms
of the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Transaction”
and the “Closing”, respectively), a business combination between us and Katapult will be effected through the merger
of Merger Sub 1 with and into Katapult, with Katapult surviving as the surviving company and a wholly owned subsidiary of the
Company (the “First Merger”), followed immediately by the merger of the resulting company with and into Merger Sub
2, with Merger Sub 2 surviving as the surviving company and a wholly owned subsidiary of the Company (the “Second Merger”
and together with the First Merger, the “Mergers”). Once effective, all equity securities of Katapult will be converted
into the right to receive the applicable portion of merger consideration pursuant to the terms and subject to the conditions set
forth in the Merger Agreement.
Under the terms of
the Merger Agreement, the aggregate consideration to be paid in the Mergers is $833,000,000, as adjusted in accordance with the
terms of the Merger Agreement and apportioned between cash and our common stock (“FinServ Common Shares”), and which
shall be adjusted to account for the value of Assumed Options (as defined below). In addition, we will issue to the Pre-Closing
Holders an aggregate 7,500,000 restricted FinServ Common Shares.
At the effective time
of the First Merger (the “Effective Time”), each Katapult Common Share (as defined below) that is issued and outstanding
immediately prior to the Effective Time (other than dissenting shares and shares of common stock, par value $0.001 per share,
of Katapult (“Katapult Common Shares”) will be canceled and converted into the right to receive the applicable portion
of the merger consideration in accordance with an allocation schedule to be provided by Katapult (the “Allocation Schedule”)
that will set forth the allocation of the merger consideration (including the Earn-Out Shares (as defined below)) among the equityholders
of Katapult.
As of the Effective
Time, (a) certain shares of restricted stock in Katapult will vest and the holders thereof be entitled to receive the applicable
portion of the merger consideration in accordance with the Allocation Schedule and (b) certain holders of options to purchase
Katapult Common Shares will receive options to purchase FinServ Common Shares (the “Assumed Options”) and, if applicable,
Earn-Out Shares.
Earn-Out
At the Closing, we
will also issue to the Pre-Closing Holders an aggregate 7,500,000 restricted FinServ Common Shares (subject to vesting, forfeiture
and certain other restrictions (including on transfer) set forth in the Merger Agreement (the “Earn-Out Shares”)).
With respect to the Earn-Out Shares: (i) one-half (1/2) of the Earn-Out Shares will vest if the closing price of the FinServ Common
Shares is greater than or equal to $12.00 over any twenty (20) Trading Days (as defined in the Merger Agreement) within any thirty
(30) consecutive Trading Day period and (ii) one-half (1/2) of the Earn-Out Shares will vest if the closing price of the FinServ
Common Shares is greater than or equal to $14.00 over any twenty (20) Trading Days within any thirty (30) consecutive Trading
Day period, in each case, during the Earn-Out Period (as defined in the Merger Agreement) and subject to adjustments as a result
of certain recapitalization events and dividends paid prior to the expiration of the Earn-Out Period. In addition, if there is
a Change of Control Transaction (as defined in the Merger Agreement) of the Company prior to the expiration of the Earn-Out Period
that will result in the holders of FinServ Common Shares receiving a price per share equal to or in excess of the applicable price
per share thresholds described above, then Earn-Out Shares will vest in connection with such Change of Control Transaction in
the manner set forth in the Merger Agreement.
52
The Transactions will
be consummated subject to the deliverables and provisions as further described in the Merger Agreement.
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 initial business combination candidates.
For the year ended
December 31, 2020, we had a net income of $154,152, which consists of interest income on marketable securities held in the Trust
Account of $1,133,614 and interest income on our money market account of $12,294, offset by operating costs of $795,708 and a
provision for income taxes of $196,048.
For the period from August 9, 2019 (inception)
through December 31, 2019, we had a net income of $292,962, which consists of interest income on marketable securities held in
the Trust Account of $567,358, offset by operating costs of $171,946 and a provision for income taxes of $102,450.
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 year ended
December 31, 2020, cash used in operating activities was $985,959. Net loss of $154,152 was affected by interest earned on marketable
securities held in the trust account of $1,133,614 and changes in operating assets and liabilities, which used $6,497 of cash
from operating activities.
For the period from
August 9, 2019 (inception) through December 31, 2019, cash used in operating activities was $156,163. Net income of $292,962 was
impacted by interest earned on marketable securities held in the trust account of $567,358, formation costs paid by a related
party of $1,000 and changes in operating assets and liabilities, which provided $117,233 of cash from operating activities.
As of December 31,
2020, we had cash and marketable securities of $251,249,193 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 year ended December
31, 2020, we withdrew approximately $452,000 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.
53
As of December 31,
2020, we had cash of $1,043,895 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 initial
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 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” we
have until November 5, 2021 to consummate an initial business combination. It is uncertain that we will be able to consummate
an initial business combination by this time. If an initial 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 an initial
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 December 31, 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 initial business combination and the Company’s liquidation.
54
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, from June 1, 2020 through and including September 2020. The
monthly fee reverted back to $10,000 per month on October 1, 2020.
Critical Accounting Policies
The preparation of
consolidated 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
Class A common stock subject to possible redemption in accordance with the guidance in Accounting Standards Codification Topic
480 “Distinguishing Liabilities from Equity.” Shares of Class A 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 Class A 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 shares of Class A common stock subject to possible redemption is presented as temporary equity,
outside of the stockholders’ equity section of our consolidated balance sheets.
Net Income (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 consolidtaed financial statements.
Item 7A. Quantitative
and Qualitative Disclosures about Market Risk.
As of December 31,
2020, we were not subject to any market or interest rate risk. Following the consummation of our initial public offering, the
net proceeds of our initial public offering, including amounts in the trust account, have been invested in U.S. government treasury
bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S. treasuries.
Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk.
55
Item 8. Financial
Statements and Supplementary Data.
This information appears
following Item 16 of this Report and is included herein by reference.
Item 9. Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls
and Procedures.
Evaluation of Disclosure Controls and
Procedures
Disclosure controls
are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed
under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified
in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information
is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate
to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief
executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls
and procedures as of December 31, 2020, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our
Certifying Officers concluded that, as of December 31, 2020, our disclosure controls and procedures were effective.
We do not expect that
our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures,
no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure
controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are
resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all
disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we
have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also
is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions.
Management’s Report on Internal
Controls Over Financial Reporting
Our management is
responsible for establishing and maintaining adequate internal control over our financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance
regarding the reliability of financial reporting and the presentation of financial statements for external purposes in accordance
with U.S. generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures
that:
56
Because of its inherent
limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that our degree of compliance with the policies or procedures may deteriorate.
In connection with
the preparation of this Report, our management assessed the effectiveness of our internal control over financial reporting as
of December 31, 2020. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of
the Treadway Commission in Internal Control—Integrated Framework (2013 framework). Based on such assessment, our management
concluded that, as of December 31, 2020, our internal control over financial reporting was effective based on those criteria.
This report does not
include an attestation report of our independent registered public accounting firm due to a transition period established by the
rules of the SEC for newly public companies.
Changes in Internal Control over Financial
Reporting
There were no changes
in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act)
during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
Item 9B. Other
Information.
None.
57
PART III
Item 10. Directors, Executive Officers
and Corporate Governance.
Directors and Executive Officers
As of the date of this Report, our directors
and executive officers are as follows:
Name Age Position
Lee Einbinder 60 Chief Executive Officer and Director
Howard Kurz 63 President, Chief Financial Officer and Director
Robert Matza 64 Director
Diane B. Glossman 64 Director
Aris Kekedjian 54 Director
The experience of our directors and executive
officers are as follows:
Lee Einbinder,
our Chief Executive Officer and a Director since inception, has over 30 years’ experience as an M&A and capital
markets advisor to financial services and FinTech companies. Previously, until August 2019, Mr. Einbinder was a
Vice Chairman at Barclays and was responsible for senior client relationships across the financial services industry, including
Banks, Specialty Finance, Financial Technology, Asset Management and Financial Sponsors. Mr. Einbinder was at Barclays since
the acquisition of Lehman Brothers in 2008, and during that time was also co-Head of the Financial Institutions Group and
a member of the Investment Banking Operating Committee. Prior to joining Barclays, Mr. Einbinder worked at Lehman Brothers
from 1996 to 2008, where he was Head of the Specialty Finance group and founded the Financial Technology group. He previously
worked in similar capacities at CS First Boston and Salomon Brothers. Mr. Einbinder is expected to serve as a Director of
New Katapult upon the closing of the Katapult Business Combination. He received his MBA with Distinction from the Wharton School
and his BSE cum laude from Princeton University. We believe Mr. Einbinder is well qualified to serve as one of our directors
due to his extensive finance and investment experience.
Howard Kurz,
our President and Chief Financial Officer since inception, has over 30 years’ experience as a successful institutional
investor and asset manager. Mr. Kurz was the founder and has been serving as the Chief Executive Officer of Lily Pond Capital
Management LLC (“LPCM”), an alternative investment manager headquartered in New York since January 2001.
Most recently, LPCM was the investment manager of a Private Equity Fund (Lilypad Investors I) which provided early stage operating
capital and expertise to an array of alternative investment management firms. Before founding LPCM, from September 1996 to
January 2001, Mr. Kurz was Managing Director and Head of North American Financial Markets at The Royal Bank of Scotland
Plc. Additionally, he was responsible globally for Foreign Exchange, Emerging Markets, and principal investments and was a senior
member of the division’s Executive Committee. Prior to RBS, Mr. Kurz was a Managing Director at Lehman Brothers where
he headed the Multi-Markets Proprietary Trading unit. He received his BA from University of Pennsylvania. We believe Mr. Kurz
is well qualified to serve as one of our directors due to the breadth and depth of his experience in the finance, banking and
investment industries.
Robert Matza,
who has served as one of our directors since our initial public offering, retired as President, Partner and member of the Executive
Committee of GoldenTree in June 2019 after almost 14 years at the firm. Mr. Matza joined GoldenTree in January 2006
and managed GoldenTree’s business management infrastructure, which provides operational support to GoldenTree’s investment
products and client franchise. During his time at GoldenTree, Mr. Matza was part of the senior management team that oversaw
significant growth in assets under management (from approximately $7 billion to over $30 billion), long only and alternatives
(private equity and hedge funds), product lines and personnel. Prior to GoldenTree, Mr. Matza served as President and Chief
Operating Officer of Neuberger Berman, Inc., as well as a member of its Board of Directors and Executive Committee, and following
its acquisition by Lehman Brothers, a member of Lehman Brothers’ Management and Investment Committees. He joined Neuberger
Berman in April 1999 as a Principal, and led the team that successfully completed the initial public offering of Neuberger
Berman in November of that same year. Between 2000 and 2003, he negotiated and completed several acquisitions and lift outs. In
2003, Mr. Matza negotiated the $2.6 billion sale of the company to Lehman Brothers. Assets under management grew from
approximately $55 billion to over $107 billion from the time that Mr. Matza joined Neuberger Berman, until he left
at the end of 2005. Mr. Matza’s industry experience prior to 1996 includes 16 years with Lehman Brothers and its
predecessor companies, where he last served as Managing Director, Chief Financial Officer and a member of the Operating and Investment
Committees. In 1996, he joined Travelers Group as its Treasurer and became Deputy Treasurer of Citigroup after Travelers and Citicorp
merged in 1998. While at Citigroup, he served on the Finance, Investment and Merger & Acquisition Committees. He began
his professional career at Coopers and Lybrand. Mr. Matza currently serves on the Board of Managers (as well as audit and
compensation committees) of AG Artemis Holding LP, the holding company of Advisor Group Inc., a privately owned network of independent
broker-dealers that was purchased by a private equity firm for $2.3 billion in 2019. He is also serving as a Senior
Advisor to Algorand, a blockchain company focused on the commercialization of the secure blockchain to transact for global institutions.
Mr. Matza is a member of the Dean’s Advisory Board and the Board of the Center for Institutional Investment Management
of the University at Albany’s School of Business. Mr. Matza earned his bachelor’s degree from the State University
of New York at Albany, his MBA in Finance from New York University and he is a Certified Public Accountant. We believe
Mr. Matza is well qualified to serve as a Director due to his asset management, investment and mergers and acquisition experience
in the financial industry.
58
Diane B. Glossman,
who has served as one of our directors since our initial public offering, spent 25 years as a research analyst, retiring
as a Managing Director and head of U.S. bank and brokerage research at UBS. Prior to UBS, Ms. Glossman was co-head of
Global Bank Research and head of Internet Financial Services Research at Lehman Brothers, and prior to that at Salomon Brothers
for nine years where she was co-Head of U.S. Bank Stock Research. Over her sell-side research career, Ms. Glossman
specialized in money center banks, trust banks and broker dealers, covering all aspects of banking and financial services, including
banking technology and the revenue generating businesses of cash management, trade finance, and securities services. Ms. Glossman
was a multiple-time member of Institutional Investor’s All-America Research Team. During her decade on the buy-side,
she was responsible for coverage of all financials along with a variety of other industry sectors. Ms. Glossman has been
serving as a member of the Board of Directors and Audit Committee of Barclays Bank Delaware, Barclays US consumer operations,
since June 2016 and chaired the Audit Committee since December 2018. She has also been serving as a member of the advisory
board of Barclays US LLC, the U.S. intermediate holding company of Barclays PLC, since its inception in April 2015, and since
the advisory board upgrade into the Board of Directors, a member of the Board of Directors, Audit Committee Chair and member of
the Governance Committee. In addition, she has been serving as a member of the Board of Directors and its various committees of
Live Oak Bancshares, a $7 billion North Carolina-based bank, since August 2014, and assisted in its initial public
offering. She has been involved with Bucks County SPCA, a humane organization serving Bucks County, Pennsylvania, since 2003 and
currently serves as the Chair of the Finance Committee. Ms. Glossman’s previous board experience includes serving on
the Board of Directors or Board of Trustees of WMI Holding, from bankruptcy emergence in March 2012 through its merger with
Nationstar in August 2018; Ambac Assurance, a public finance insurance company, from October 2010 to February 2018
when it emerged from regulatory rehabilitation; QBE NA, the American subsidiary of the Australian insurer QBE, from February 2015
to December 2017; Powa Technologies Holdings Plc, a London-based mobile technology start-up, from July 2013 to
November, 2016; State Street Global Advisors Mutual Funds from September 2009 to April 2011; and E Charge, an internet
payment start-up company from 1999 to 2001. In addition to her directorships, Ms. Glossman has also worked as an independent
consultant with a number of banks in the U.S. and U.K. on projects relating to strategy, business execution, and investor communications.
During 2013 and 2014, she was a senior fellow at the Center of Financial Stability and was joint author of a report on bank capital.
At that time, she also wrote articles for the Cornerstone Journal of Sustainable Finance and Banking regarding the banking industry.
In 2013, she also served a member of SASB’s financial industry working group engaged in establishing sustainability reporting
metrics for commercial banks, custody banks, and asset managers. From 2003 to 2005, she was an advisor to Citigroup’s Global
Consumer Group and a member of its planning group. During much of that time, she was acting head of the International Retail Bank.
Ms. Glossman received a BS in Economics from the Wharton School of the University of Pennsylvania, with a double major in
finance and health care administration, and is a Chartered Financial Analyst. We believe Ms. Glossman is well qualified to
serve as a Director due to her strong knowledge of capital markets, institutional investors, and a variety of industries.
Aris
Kekedjian, who has served as one of our directors since our initial public offering, retired from GE in 2019 after a
30 year career with the company, most recently serving as head of Corporate Development and Chief Investment Officer
since 2016. During this time, Mr. Kekedjian led a number of notable M&A transactions, including the $30 billion
merger of GE Oil & Gas with Baker Hughes, creating a $22 billion business with operations in
120 countries, and the $11 billion merger of GE Transportation with Wabtec Corporation, creating a technology
category leader for rail equipment, services and software. Mr. Kekedjian has served as a member of the Board of Directors and
Chairman of the Audit Committee of Tuatara Capital Acquisition Corporation, a special purpose acquisition company, since
February 2021. Mr. Kekedjian is also a strategic advisor to ECN Capital, a finance company listed on the Toronto Stock
Exchange. Mr. Kekedjian was previously a Managing Director and Global head of Business Development/M&A at GE Capital
from 2010 through 2016. Mr. Kekedjian led the GE team that divested more than $200 billion of GE Capital’s
business across the world. He also led the merger of Met Life’s online bank with Synchrony Financial and a subsequent
$3 billion IPO and $20 billion stock split transaction for Synchrony Financial. He also led IPOs of both Cembra
Money Bank in Switzerland and Moneta Bank in the Czech Republic. Prior to those divestitures, Mr. Kekedjian was
responsible for creating comprehensive strategic plans for deal activities in the banking, real estate, leasing, mortgage,
credit card and commercial lending sectors. From 2008 to 2010, Mr. Kekedjian served as Managing Director, Global
Corporate Development and Chief Executive Officer for GE Capital, MEA region, responsible for company-wide strategic
partnership and alliance development with global, sovereign capital partners. Mr. Kekedjian was previously the Chief
Financial Officer of GE Banking & Consumer Finance for the EMEA region (GE Money) from 2004 to 2008, a
$10 billion net revenue business with over $100 billion in assets and operations in 25 countries. He joined
GE as a part of the Financial Management Program in 1989. Mr. Kekedjian received his BC from Concordia University in
Montréal, Canada. We believe Mr. Kekedjian is well qualified to serve as one of our directors
due to his extensive finance and investment experience.
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Number and Terms of Office of Officers
and Directors
We have five directors.
Our board of directors is divided into three classes with only one class of directors being elected in each year and each class
(except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. The term
of office of the first class of directors, consisting of Mr. Kekedjian, expired at the 2020 annual meeting, our first annual meeting
of stockholders. Mr. Kekedjian was re-elected to serve until the 2023 annual meeting of stockholders or until his successor is
elected and qualified. The term of office of the second class of directors, consisting of Mr. Matza and Ms. Glossman, will
expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Messrs.
Einbinder and Kurz, will expire at the third annual meeting of stockholders.
Our officers are appointed
by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our
board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws
provide that our officers shall be a Chief Executive Officer, a Chief Financial Officer and a Secretary, and may also consist
of a Chairman of the Board, Presidents, Vice Presidents, Assistant Secretaries and a Treasurer, and such other offices as may
be determined by the board of directors.
Committees of the Board of Directors
Our board of directors
has two standing committees: an audit committee and a compensation committee. Subject to phase-in rules and a limited exception,
Nasdaq rules and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely
of independent directors, and Nasdaq rules require that the compensation committee of a listed company be comprised solely of
independent directors. Consequently, each of the standing committees of the board of directors is comprised entirely of independent
directors.
Audit Committee
We have established
an audit committee of the board of directors. Messrs. Matza and Kekedjian and Ms. Glossman serve as members of our audit committee,
and Mr. Matza chairs the audit committee. Under the Nasdaq listing standards and applicable SEC rules, we are required to
have at least three members of the audit committee, all of whom must be independent. Each of Messrs. Matza and Kekedjian and Ms.
Glossman meet the independent director standard under Nasdaq listing standards and under Rule 10-A-3(b)(1) of the Exchange Act.
Each member of the
audit committee is financially literate and our board of directors has determined that each of the audit committee members qualifies
as an “audit committee financial expert” as defined in applicable SEC rules and has accounting or related financial
management expertise.
We have adopted an
audit committee charter, which details the principal functions of the audit committee, including:
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Compensation Committee
We have established
a compensation committee of the board of directors. Mr. Kekedjian and Ms. Glossman serve as members of our compensation committee.
Under the Nasdaq listing standards and applicable SEC rules, we are required to have at least two members of the compensation
committee, all of whom must be independent. Mr. Kekedjian and Ms. Glossman are independent and Ms. Glossman chairs the
compensation committee.
We have adopted a
compensation committee charter, which details the principal functions of the compensation committee, including:
● reviewing our executive compensation policies and plans;
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Notwithstanding the
foregoing, as indicated above, other than the payment to our sponsor of $10,000 per month, for up to 24 months, for office
space, utilities and secretarial and administrative support and reimbursement of expenses, no compensation of any kind, including
finders, consulting or other similar fees, is paid to any of our existing stockholders, officers, directors or any of their respective
affiliates, prior to, or for any services they render in order to effectuate the consummation of an initial business combination.
Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only
be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial
business combination.
The charter provides
that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel
or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser.
However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the
compensation committee will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
A copy of the compensation
committee charter is available, free of charge, from the Company by writing to the Company’s President and Chief Financial
Officer, c/o Ellenoff Grossman & Schole LLP, 1345 Avenue of the Americas, New York, New York 10105.
Director Nominations
We do not have a standing
nominating committee, though we intend to form a corporate governance and nominating committee as and when required to do so by
law or Nasdaq rules. In accordance with Rule 5605(e)(2) of the Nasdaq rules, a majority of the independent directors may
recommend a director nominee for selection by the board of directors. The board of directors believes that the independent directors
can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of
a standing nominating committee. The directors who shall participate in the consideration and recommendation of director nominees
are Mr. Kekedjian and Ms. Glossman. In accordance with Rule 5605(e)(1)(A) of the Nasdaq rules, all such directors are
independent. As there is no standing nominating committee, we do not have a nominating committee charter in place.
There have been no
material changes to the procedures by which security holders may recommend nominees to the board of directors. The
board of directors will also consider director candidates recommended for nomination by our stockholders during such times as
they are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special
meeting of stockholders). Our stockholders that wish to nominate a director for election to the board should follow the procedures
set forth in our bylaws.
We have not formally
established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general,
in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional
experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent
the best interests of our stockholders.
Code of Ethics
We have filed a copy
of our form of Code of Ethics applicable to our directors, officers and employees, our audit committee charter and our compensation
committee charter as exhibits to the registration statement filed in connection with our initial public offering. You will be
able to review these documents by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy
of the Code of Ethics will be provided without charge upon request from us. We intend to disclose any amendments to or waivers
of certain provisions of our Code of Ethics in a Current Report on Form 8-K.
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Item 11. Executive
Compensation.
Compensation Discussion and Analysis
None of our officers
has received any cash compensation for services rendered to us. We pay our sponsor a total of $10,000 per month for office space,
utilities and secretarial and administrative support. Upon completion of our initial business combination or our liquidation,
we will cease paying these monthly fees. No compensation of any kind, including any finder’s fee, reimbursement, consulting
fee or monies in respect of any payment of a loan, will be paid by us to our sponsor, officers and directors, or any affiliate
of our sponsor or officers, prior to, or in connection with any services rendered in order to effectuate, the consummation of
our initial business combination (regardless of the type of transaction that it is). However, these individuals are reimbursed
for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target
businesses and performing due diligence on suitable business combinations. Any such payments prior to an initial business combination
will be made using funds held outside the trust account. Other than audit committee review of such payments, we do not expect
to have any additional controls in place governing our reimbursement payments to our directors and executive officers for their
out-of-pocket expenses incurred in connection with identifying and consummating an initial business combination.
After the completion
of our initial business combination, directors or members of our management team who remain with us may be paid consulting or
management fees from the combined company. All of these fees will be fully disclosed to stockholders, to the extent then known,
in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed initial
business combination. We have not established any limit on the amount of such fees that may be paid by the combined company to
our directors or members of management. It is unlikely the amount of such compensation will be known at the time of the proposed
initial business combination, because the directors of the post-combination business will be responsible for determining
officer and director compensation. Any compensation to be paid to our officers will be determined, or recommended to the board
of directors for determination, either by a compensation committee constituted solely by independent directors or by a majority
of the independent directors on our board of directors.
We do not intend to
take any action to ensure that members of our management team maintain their positions with us after the consummation of our initial
business combination, although it is possible that some or all of our officers and directors may negotiate employment or consulting
arrangements to remain with us after our initial business combination. The existence or terms of any such employment or consulting
arrangements to retain their positions with us may influence our management’s motivation in identifying or selecting a target
business but we do not believe that the ability of our management to remain with us after the consummation of our initial business
combination will be a determining factor in our decision to proceed with any potential business combination. We are not party
to any agreements with our officers and directors that provide for benefits upon termination of employment.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table
sets forth information regarding the beneficial ownership of our common stock as of March 8, 2021 based on information
obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by:
● all our executive officers and directors as a group.
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Unless otherwise indicated,
we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock
beneficially owned by them.
Class A Common Stock Class B Common Stock
Robert Matza — — — —
Diane B. Glossman — — — —
Aris Kekedjian — — — —
Survetta Capital Management LLC (5) 2,100,000 8.18 % — —
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The table above does
not include the shares of common stock underlying the placement warrants or forward purchase securities held or to be held by
our sponsor because these securities are not exercisable within 60 days of this report.
Changes in Control
For more information
on the Katapult Business Combination, see “Item 1. Business”.
Item 13. Certain
Relationships and Related Transactions, and Director Independence.
In August 2019,
we issued an aggregate of 5,750,000 founder shares to our sponsor for an aggregate purchase price of $25,000 in cash, or approximately
$0.004 per share. 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 our initial public offering (assuming the sponsor did not purchase any public shares in our
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 November 5, 2019.
The founder shares
(including the Class A common stock issuable upon exercise thereof) may not, subject to certain limited exceptions, be transferred,
assigned or sold by the holder.
Our sponsor purchased
an aggregate of 665,000 placement units at a price of $10.00 per unit for an aggregate purchase price of $6,250,000. There are
no redemption rights or liquidating distributions from the trust account with respect to the founder shares, placement shares
or placement warrants, which will expire worthless if we do not consummate a business combination by November 5, 2021.
We pay our sponsor,
a total of $10,000 per month for office space, utilities and secretarial and administrative support. Upon completion of our initial
business combination or our liquidation, we will cease paying these monthly fees.
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, from June 1, 2020 through and including September 2020. The
monthly fee reverted back to $10,000 per month on October 1, 2020. For the period from August 9, 2019 (inception) through
December 31, 2020, we incurred $138,387 in such fees.
Other than the foregoing,
no compensation of any kind, including any finder’s fee, reimbursement, consulting fee or monies in respect of any payment
of a loan, is paid by us to our sponsor, officers or directors or any affiliate of our sponsor, officers or directors prior to,
or in connection with any services rendered in order to effectuate, the consummation of an initial business combination (regardless
of the type of transaction that it is). However, these individuals will be reimbursed for any out-of-pocket expenses incurred
in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable
business combinations. Our audit committee will review on a quarterly basis all payments that were made to our sponsor, officers,
directors, or our or their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There
is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities
on our behalf.
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In addition, in order
to finance transaction costs in connection with an intended initial business combination, such as the Katapult 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 an initial business combination, such as the Katapult Business Combination, we will repay such
loaned amounts. In the event that the 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, at a price of $10.00 per unit at the option of the lender, upon
consummation of our initial business combination. The units would be identical to the placement units. The terms of such loans
by our officers and directors, if any, have not been determined and no written agreements exist with respect to such loans. We