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
This Quarterly Report on Form 10-Q/A includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). We have based these forward-looking statements on our current
expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Such statements include, but are not limited
to, possible business combinations and the financing thereof, and related
matters, as well as all other statements other than statements of historical
fact included in this Form 10-Q/A. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
Securities and Exchange Commission ("SEC") filings.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021 and June 30, 2021. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly valued our Class A common
stock subject to possible redemption. We previously determined the Class A
common stock subject to possible redemption to be equal to the redemption value
of $10.00 per share of Class A common stock while also taking into consideration
a redemption cannot result in net tangible assets being less than $5,000,001.
Management determined that the Class A common stock issued during the Initial
Public Offering can be redeemed or become redeemable subject to the occurrence
of future events considered outside of the Company's control. Therefore,
management concluded that the redemption value should include all Class A common
stock subject to possible redemption, resulting in the Class A common stock
subject to possible redemption being equal to their redemption value. As a
result, management has noted a reclassification error related to temporary
equity and permanent equity. This resulted in a restatement to the initial
carrying value of the Class A common stock subject to possible redemption with
the offset recorded to additional paid-in capital (to the extent available),
accumulated deficit and Class A common stock.
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 (the "Business Combination"). Our Sponsor FinServ Holdings II LLC, a
Delaware limited liability company.
The registration statement for our IPO was declared effective on February 17,
2021. On February 22, 2021, we consummated the IPO of 30,000,000, 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 ("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 the Company, 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 a Business Combination within 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 nine months ended September 30, 2021, we had a net income of $594,906,
which included a loss from operations of $510,578, offering cost expense
allocated to warrants of approximately $457,600, offset by a gain from the
change in fair value of warrant liabilities of $1,544,000, interest earned on
the Trust account of $18,084 and income from Mutual Funds of $1,000.
For the three months ended September 30, 2021, we had a net income of
$2,148,567, which included a loss from operations of $246,995, offset by a gain
from the change in fair value of warrant liabilities of $2,387,000, interest
earned on the Trust account of $7,562 and income from Mutual funds of $1,000.
Our business activities from inception to September 30, 2021 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 Capital Resources
As of September 30, 2021, the Company had approximately $0.2 million in its
operating bank account, and working capital of approximately $1.1 million.
The Company's 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, the Company's 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 a
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 September 30, 2021, there were no amounts outstanding under
any working capital loan.
Based on the foregoing, management believes that the Company will have
sufficient working capital and borrowing capacity to meet its needs through the
earlier of the consummation of a 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.
Administrative Services Agreement
The Company entered into an agreement whereby, commencing on April 1, 2021
through the earlier of the consummation of the Initial Business Combination or
the Company's liquidation, the Company will pay the Sponsor a monthly fee of up
to $10,000 for office space, utilities and administrative support. Upon
completion of the Business Combination or the Company's liquidation, the Company
will cease paying these monthly fees.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
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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 final prospectus filed by us
with the SEC on February 19, 2021.
Class A Common Stock Subject to Possible Redemption
All of the shares of Class A common stock sold as part of the Units in the
Public Offering contain a redemption feature which allows for the redemption of
such public shares in connection with the Company's liquidation, if there is a
stockholder vote or tender offer in connection with the Business Combination and
in connection with certain amendments to the Company's 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 the control of the Company
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 September 30, 2021, all shares of Class A
common stock subject to possible redemption is presented as temporary equity,
outside of the stockholders' equity section of the Company's condensed balance
sheets, respectively.
The Company recognizes any subsequent changes in redemption value immediately as
they occur and adjusts 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 Initial Public Offering, the Company 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 Balance Sheet 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
Statement of Operations in the period of change.
Net Income Per Common Share
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, Earnings Per Share. The Company has 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 per share is
computed by dividing net income by the weighted average number of shares
outstanding during the period, excluding shares subject to forfeiture. The
Company has not considered the effect of the warrants sold in the Initial Public
Offering and the Private Placement to purchase an aggregate of 7,700,000 shares
of the Company's Class A common stock in the calculation of diluted income per
share, since the exercise of the warrants are contingent upon the occurrence of
future events. As a result, diluted net income per share is the same as basic
net income 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.
Off-Balance Sheet Arrangements
As of September 30, 2021, we
did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii)
of Regulation S-K.
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