References to the "Company," "our," "us" or "we" refer to FinServ Acquisition
Corp. II. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
unaudited condensed financial statements and the notes thereto contained
elsewhere in this report. Certain information contained in the discussion and
analysis set forth below includes forward-looking statements that involve risks
and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
All statements other than statements of historical fact included in this report
including, without limitation, statements under this "Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding our 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 our 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. All subsequent written
or oral forward-looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited condensed financial
statements and the notes thereto contained elsewhere in this Report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Overview
We are a blank check company incorporated in Delaware on November 23, 2020 for
the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more
businesses in the FinTech and financial services industries. Our Sponsor is
FinServ Holdings II LLC, a Delaware limited liability company.
The registration statement for our IPO ("IPO Registration Statement") was
declared effective on February 17, 2021. On February 22, 2021, we consummated
the IPO of 30,000,000 Units, at $10.00 per Unit, generating gross proceeds of
$300.0 million, and incurring offering costs of approximately $16.8 million,
inclusive of $10.5 million in deferred underwriting commissions.
Simultaneously with the closing of the IPO, we consummated the private placement
("Private Placement") of 800,000 Units at a price of $10.00 per Unit to the
Sponsor, generating gross proceeds of approximately $8.0 million.
Upon the closing of the IPO and the Private Placement on February 22, 2021,
$300.0 million ($10.00 per Unit) of the net proceeds of the sale of the Units in
the IPO and the Private Placement were placed in a Trust Account located in the
United States with Continental Stock Transfer & Trust Company acting as trustee,
and invested only in U.S. "government securities," within the meaning of Section
2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment
Company Act"), having a maturity of 185 days or less or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment
Company Act, which invest only in direct U.S. government treasury obligations,
as determined by us, until the earlier of: (i) the completion of a Business
Combination and (ii) the distribution of the Trust Account as described below.
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If we have not completed an initial Business Combination by February 22, 2023,
24 months from the closing of the IPO, we 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 us to pay its taxes (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), and (iii) as promptly as reasonably possible following
such redemption, subject to the approval of the remaining stockholders and our
board of directors, liquidate and dissolve, subject in each case to our
obligations under Delaware law to provide for claims of creditors and the
requirements of other applicable law.
Results of Operations
For the three months ended June 30, 2022, we had a net income of $1,370,643,
which included a loss from operations of $203,663, loss on investment in mutual
funds of $15,035, and provision for income taxes of $23,735, offset by a gain
from the change in fair value of warrant liabilities of $1,232,000 and interest
earned on cash and marketable securities held in the Trust Account of $381,076.
For the six months ended June 30, 2022, we had a net income of $3,493,249, which
included a loss from operations of $400,610, loss on investment in mutual funds
of $32,228, and provision for income taxes of $23,735, offset by a gain from the
change in fair value of warrant liabilities of $3,542,000 and interest earned on
cash and marketable securities held in the Trust Account of $407,822.
For the three months ended June 30, 2021, we had a net loss of $4,067,879, which
included a loss from operations of $227,360, loss from the change in fair value
of warrant liabilities of $3,848,000, offset by interest earned on the Trust
account of $7,481.
For the six months ended June 30, 2021, we had a net loss of $1,553,661, which
included a loss from operations of $263,583, offering cost expense allocated to
warrants of $457,600, loss from the change in fair value of warrant liabilities
of $843,000, offset by interest earned on the Trust account of $10,522.
Our business activities from inception to June 30, 2022 consisted primarily of
our formation and completing our IPO, and since the offering, our activity has
been limited to identifying and evaluating prospective acquisition targets for a
Business Combination.
Liquidity and Going Concern
As of June 30, 2022, we had approximately $0.5 million in our operating bank
account and money market funds and working capital of approximately $0.6
million.
Our liquidity needs up to February 22, 2021 had been satisfied through a capital
contribution from the Sponsor of $25,000 for the founder shares and the loan
under an unsecured promissory note from the Sponsor which was paid in full on
February 22, 2021 from the IPO proceeds. Subsequent to the consummation of the
IPO, our liquidity needs have been satisfied through the net proceeds from the
consummation of the Private Placement not held in the Trust Account. In
addition, in order to finance transaction costs in connection with an initial
Business Combination, our sponsor or an affiliate of our sponsor, or certain of
our officers and directors may, but are not obligated to, provide us Working
Capital Loans. As of June 30, 2022, there were no amounts outstanding under any
Working Capital Loan.
We have until February 22, 2023 to complete our initial Business Combination as
described in our final prospectus filed with the SEC on February 19, 2021. If we
do not complete our initial Business Combination by February 22, 2023, we will
begin mandatory liquidation proceedings, including the cessation of all
operations and redemption of the Public Shares, unless the term is extended and
subject to stockholder approval.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity to meet our needs through the earlier of the
consummation of an initial Business Combination or one year from this filing.
Over this time period, we will be using these funds held outside of the Trust
Account for paying existing accounts payable, identifying and evaluating
prospective initial business combination candidates, performing due diligence on
prospective target businesses, paying for travel expenditures, selecting the
target business to merge with or acquire, and structuring, negotiating and
consummating the Business Combination. However, in light of the mandatory
liquidation that could potentially occur within one year from the date of this
filing, management believes there is substantial doubt as to our ability to
continue as a going concern if we do not consummate our initial Business
Combination before February 22, 2023.
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Administrative Services Agreement
We entered into an agreement whereby, commencing on April 1, 2021 through the
earlier of the consummation of an initial Business Combination or our
liquidation, we will pay the sponsor a monthly fee of up to $10,000 for office
space, utilities and administrative support. Upon completion of an initial
Business Combination or our liquidation, we will cease paying these monthly
fees. For three and six months ended June 30, 2022, we did not incur fees for
these services.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed financial statements, which
have been prepared in accordance with U.S. GAAP. The preparation of these
unaudited condensed financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and
expenses and the disclosure of contingent assets and liabilities in our
unaudited condensed financial statements. On an ongoing basis, we evaluate our
estimates and judgments, including those related to fair value of financial
instruments and accrued expenses. We base our estimates on historical
experience, known trends and events and various other factors that we believe to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.
Except as set forth below, there have been no significant changes in our
critical accounting policies as discussed in the Annual Report on Form 10-K/A
filed by us with the SEC on April 1, 2022.
Class A Common Stock Subject to Possible Redemption
All of the Public Shares sold as part of the Units in the IPO contain a
redemption feature which allows for the redemption of such Public Shares in
connection with our liquidation, if there is a stockholder vote or tender offer
in connection with the Business Combination and in connection with certain
amendments to our second amended and restated certificate of incorporation. In
accordance with SEC and its staff's guidance on redeemable equity instruments,
which has been codified in ASC 480-10-S99, redemption provisions not solely
within our control require common stock subject to redemption to be classified
outside of permanent equity. Ordinary liquidation events, which involve the
redemption and liquidation of all of the entity's equity instruments, are
excluded from the provisions of ASC 480. Accordingly, at June 30, 2022 and
December 31, 2021, all shares of Class A common stock subject to possible
redemption are presented as temporary equity, outside of the stockholders'
deficit section of our condensed balance sheets.
We recognize any subsequent changes in redemption value immediately as they
occur and adjust the carrying value of redeemable Class A common stock to the
redemption value at the end of each reporting period. Immediately upon the
closing of the IPO, we recognized the accretion from initial book value to
redemption amount value of redeemable Class A common stock. This method would
view the end of the reporting period as if it were also the redemption date for
the security. The change in the carrying value of redeemable Class A common
stock also resulted in charges against Additional paid-in capital and
Accumulated deficit.
Warrants Liability
We evaluated the Warrants in accordance with ASC 815-40, "Derivatives and
Hedging - Contracts in Entity's Own Equity", and concluded that a provision in
the Warrant Agreement related to certain tender or exchange offers as well as
provisions that provided for potential changes to the settlement amounts
dependent upon the characteristics of the holder of the warrant, precludes the
Warrants from being accounted for as components of equity. As the Warrants meet
the definition of a derivative as contemplated in ASC 815 and are not eligible
for an exception from derivative accounting, the Warrants are recorded as
derivative liabilities on the condensed Balance Sheets and measured at fair
value at inception (on the date of the IPO) and at each reporting date in
accordance with ASC 820, "Fair Value Measurement", with changes in fair value
recognized in the condensed Statements of Operations in the period of change.
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Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income (loss) per share is computed
by dividing net income by the weighted average number of shares outstanding
during the period, excluding shares subject to forfeiture. We have not
considered the effect of the warrants sold in the IPO and the Private Placement
to purchase an aggregate of 7,700,000 shares of our 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. As a result,
diluted net income (loss) per share is the same as basic net income (loss) per
share for the period presented.
Recent Accounting Pronouncements
Our management does not believe that any recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying unaudited condensed financial statements.
JOBS Act
On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains
provisions that, among other things, relax certain reporting requirements for
qualifying public companies. We qualify as an "emerging growth company" under
the JOBS Act and are allowed to comply with new or revised accounting
pronouncements based on the effective date for private (not publicly traded)
companies. We elected to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required
for non-emerging growth companies. As a result, our financial statements may not
be comparable to companies that comply with new or revised accounting
pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things, (i)
provide an auditor's attestation report on our system of internal controls over
financial reporting pursuant to Section 404, (ii) provide all of the
compensation disclosure that may be required of non-emerging growth public
companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act,
(iii) comply with any requirement that may be adopted by the PCAOB regarding
mandatory audit firm rotation or a supplement to the auditor's report providing
additional information about the audit and the financial statements (auditor
discussion and analysis), and (iv) disclose certain executive compensation
related items such as the correlation between executive compensation and
performance and comparisons of the CEO's compensation to median employee
compensation. These exemptions will apply for a period of five years following
the completion of our IPO or until we are no longer an "emerging growth
company," whichever is earlier.
Off-Balance Sheet Arrangements
As of June 30, 2022 and December 31, 2021, we
did not have any off-balance sheet arrangements.
Factors That May Adversely Affect Our Results of Operations
Our results of operations and our ability to complete an initial Business
Combination may be adversely affected by various factors that could cause
economic uncertainty and volatility in the financial markets, many of which are
beyond our control. Our business could be impacted by, among other things,
downturns in the financial markets or in economic conditions, increases in oil
prices, inflation, increases in interest rates, supply chain disruptions,
declines in consumer confidence and spending, the ongoing effects of the
COVID-19 pandemic, including resurgences and the emergence of new variants, and
geopolitical instability, such as the military conflict in the Ukraine. We
cannot at this time fully predict the likelihood of one or more of the above
events, their duration or magnitude or the extent to which they may negatively
impact our business and our ability to complete an initial Business Combination.
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