ITEM
1. CONDENSED FINANCIAL STATEMENTS
FINSERV
ACQUISITION CORP.
CONDENSED
BALANCE SHEETS
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June 30,
2020
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December 31,
2019
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(unaudited)
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ASSETS
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Current assets
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Cash and cash equivalents
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$
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1,334,427
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$
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1,578,075
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|
Prepaid expenses and other current assets
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109,752
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|
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|
126,022
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|
Total Current Assets
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1,444,179
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1,704,097
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Marketable securities held in Trust Account
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251,561,122
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250,567,358
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Total Assets
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$
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253,005,301
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$
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252,271,455
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current liabilities
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Accounts payable and accrued expenses
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$
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152,440
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$
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118,805
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Income taxes payable
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313,499
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102,450
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Total Current Liabilities
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465,939
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221,255
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Deferred underwriting fee payable
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9,350,000
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9,350,000
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Total Liabilities
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9,815,939
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9,571,255
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Commitments
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Class A Common stock subject to possible redemption, 23,818,936 and 23,770,019, respectively, shares at redemption value at $10.00 per share at June 30, 2020 and December 31, 2019
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238,189,360
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237,700,190
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Stockholders’ Equity
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Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and outstanding
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—
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—
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Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 1,846,064 and 1,894,981 issued and outstanding (excluding 23,818,936 and 23,770,019 shares subject to possible redemption) at June 30, 2020 and December 31, 2019, respectively
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185
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189
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Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 6,250,000 shares issued and outstanding June 30, 2020 and December 31, 2019
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625
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625
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Additional paid-in capital
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4,217,068
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4,706,234
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Retained earnings
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782,124
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292,962
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Total Stockholders’ Equity
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5,000,002
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5,000,010
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Total Liabilities and Stockholders’ Equity
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$
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253,005,301
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$
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252,271,455
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The
accompanying notes are an integral part of the unaudited condensed financial statements.
FINSERV
ACQUISITION CORP.
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2020
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2020
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General and administrative expenses
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$
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184,249
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$
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408,436
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Loss from operations
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(184,249
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)
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(408,436
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)
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Other income:
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Interest earned on money market account
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42,416
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3,650
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Interest earned on marketable securities held in Trust Account
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75,084
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1,104,997
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Other income
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117,500
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1,108,647
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(Loss) income before provision for income taxes
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(66,749
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)
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700,211
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Provision for income taxes
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(5,267
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)
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(211,049
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)
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Net (loss) income
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$
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(72,016
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)
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$
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489,162
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Weighted average shares outstanding of Class A redeemable common stock
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25,000,000
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25,000,000
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Basic and diluted income per share, Class A
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$
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0.00
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$
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0.03
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Weighted average shares outstanding of Class A and Class B non-redeemable common stock
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6,915,000
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6,915,000
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Basic and diluted net loss per share, Class A and Class B
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$
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(0.02
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)
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$
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(0.04
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)
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The
accompanying notes are an integral part of the unaudited condensed financial statements.
FINSERV
ACQUISITION CORP.
CONDENSED
STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
THREE
AND SIX MONTHS ENDED JUNE 30, 2020
(Unaudited)
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Class A
Common Stock
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Class B
Common Stock
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Additional
Paid in
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Retained
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Total
Stockholders’
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Shares
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Amount
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Shares
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Amount
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Capital
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Earnings
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Equity
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Balance – January 1, 2020
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1,894,981
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$
|
189
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6,250,000
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$
|
625
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$
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4,706,234
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$
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292,962
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$
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5,000,010
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Change in value of common stock subject to possible redemption
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(56,118
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)
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(5
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)
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—
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—
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(561,175
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)
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—
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(561,180
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)
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Net income
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—
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—
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—
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—
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—
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561,178
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561,178
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Balance – March 31, 2020
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1,838,863
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184
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|
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6,250,000
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|
625
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|
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4,145,059
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854,140
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|
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5,000,008
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Change in value of common stock subject to possible redemption
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7,201
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1
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—
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—
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72,009
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—
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72,010
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Net loss
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—
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—
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—
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—
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—
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(72,016
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)
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(72,016
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)
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Balance – June 30, 2020
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1,846,064
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$
|
185
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|
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6,250,000
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$
|
625
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|
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$
|
4,217,068
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$
|
782,124
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$
|
5,000,002
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|
The
accompanying notes are an integral part of the unaudited condensed financial statements.
FINSERV
ACQUISITION CORP.
CONDENSED
STATEMENT OF CASH FLOWS
SIX
MONTHS ENDED JUNE 30, 2020
(Unaudited)
Cash Flows from Operating Activities:
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Net income
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$
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489,162
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Adjustments to reconcile net income to net cash and cash equivalents used in operating activities:
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Interest earned on marketable securities held in Trust Account
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(1,104,997
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)
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Changes in operating assets and liabilities:
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Prepaid expenses and other current assets
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16,270
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Accounts payable and accrued expenses
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33,635
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Income taxes payable
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211,049
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Net cash and cash equivalents used in operating activities
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(354,881
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)
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Cash Flows from Investing Activities:
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Interest withdrawn for franchise taxes
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111,233
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Net cash and cash equivalents provided by investing activities
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111,233
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Net Change in Cash and Cash Equivalents
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(243,648
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)
|
Cash and Cash Equivalents – Beginning of period
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|
1,578,075
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|
Cash and Cash Equivalents – End of period
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$
|
1,334,427
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|
|
|
|
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Supplemental Disclosure of Non-Cash Investing and Financing Activities:
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Change in value of common stock subject to possible redemption
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$
|
489,170
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|
The
accompanying notes are an integral part of the unaudited condensed financial statements.
FINSERV
ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 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 June 30, 2020, the Company had not commenced any operations. All activity through June 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 June 30, 2020, cash of $1,334,427 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
JUNE 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
JUNE 30, 2020
(Unaudited)
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
six months ended June 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.
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 June 30, 2020 and December 31, 2019, cash equivalents, consisting of money market funds, amounted to $1,228,539 and $1,556,055,
respectively.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
Marketable
Securities Held in Trust Account
At
June 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 six months ended June 30, 2020, the Company withdrew $111,233 of interest
earned on the Trust Account to pay for its franchise 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
June 30, 2020 and December 31, 2019, there were 23,818,936 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 June 30, 2020 and December 31, 2019, the Company had a deferred tax asset
of approximately $84,000 and $19,000, respectively, which had a full valuation allowance recorded against it of approximately
$84,000 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 six months
ended June 30, 2020, the Company recorded income tax expense of approximately $5,000 and $211,000, respectively, primarily related
to interest income earned on the Trust Account. The Company’s effective tax rate for the three and six months ended June
30, 2020 was approximately (7)% and 30%, 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 June 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.
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.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
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 $75,084 and $1,104,997 for
the three and six months ended June 30, 2020, respectively (net of applicable franchise and income taxes of approximately $55,000
and $311,000 for the three and six months ended June 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 June 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
JUNE 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 the 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 six months ended June 30, 2020, the Company incurred $30,000
and $60,000, respectively, in fees for these services, of which $73,387 and $18,387 are included in accounts payable and accrued
expenses in the accompanying condensed balance sheets at June 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 six months ended June 30,
2020, the Company incurred $27,500 and $57,500, respectively, in such fees. At June 30, 2020 and December 31, 2019, $7,500 and
$10,000, respectively, of such fees were recorded in accounts payable and accrued expenses in the accompanying condensed balance
sheets.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
NOTE
6. COMMITMENTS
Risks
and Uncertainties
Management
is currently evaluating the impact of the COVID-19 pandemic on the industry 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 June 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 June 30, 2020 and December 31, 2019, there
were 1,846,064 and 1,894,891 shares of Class A common stock issued or outstanding, excluding 23,818,936 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 June 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
JUNE 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:
|
●
|
in
whole and not in part;
|
|
●
|
at
a price of $0.01 per warrant;
|
|
●
|
upon
not less than 30 days’ prior written notice of redemption given after the warrants become exercisable; and
|
|
●
|
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.
|
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.
FINSERV ACQUISITION CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2020
(Unaudited)
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.
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:
|
Level 1:
|
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.
|
|
|
|
|
Level 2:
|
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.
|
|
|
|
|
Level 3:
|
Unobservable
inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
|
The
following table presents information about the Company’s assets that are measured at fair value on a recurring basis at
June 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
|
|
Level
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
Assets:
|
|
|
|
|
|
|
|
|
Marketable securities held in Trust Account – U.S. Treasury Securities Money Market Fund
|
|
1
|
|
$
|
251,561,122
|
|
|
$
|
250,567,358
|
|
NOTE
9. SUBSEQUENT EVENTS
The
Company evaluated subsequent events and transactions that occurred after the balance sheet date up to 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 an 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 June 30, 2020, we had a net loss of $72,016, which consists of operating costs of $184,249 and a provision
for income taxes of $5,267, offset by interest income on marketable securities held in the Trust Account of $75,084 and interest
income on our money market account of $42,416.
For
the six months ended June 30, 2020, we had a net income of $408,436, which consists of interest income on marketable securities
held in the Trust Account of $1,104,997 and interest income on our money market account of $3,650, offset by operating costs of
$408,436 and a provision for income taxes of $211,049.
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 six months ended June 30, 2020, cash used in operating activities was $354,881. Net income of $489,162 was affected by interest
earned on marketable securities held in the Trust Account of $1,104,997 and changes in operating assets and liabilities, which
provided $260,954 of cash from operating activities.
As
of June 30, 2020, we had cash and marketable securities of $251,561,122 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 six
months ended June 30, 2020, we withdrew approximately $111,000 of interest earned on the Trust Account to pay for our franchise
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 June 30, 2020, we had cash of $1,334,427 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.
Off-Balance
Sheet Financing Arrangements
We
have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of June 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.