Katapult Holdings, Inc. current report, 09 June 2021

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Katapult Holdings, Inc. Form 8-K Summary

Business Context and Reporting Period

Filed June 15, 2021, reporting events occurring primarily on June 9, 2021. Formerly FinServ Acquisition Corp., the company completed its business combination with Katapult Holdings, Inc. and changed its name to Katapult Holdings, Inc. Katapult is a consumer lease-to-own platform. Following closing, the company became a holding company whose principal assets are equity interests in Katapult Intermediate Holdings, LLC and Katapult Group, Inc.

Transaction, Capitalization, and Key Financial Information

  • The merger was completed June 9, 2021 after approval at a June 7, 2021 special stockholder meeting. The vote was 25,070,617 shares in favor, 1,873 against, and 1,875 abstentions.
  • The company completed a private investment in public equity transaction for 15,000,000 shares at $10.00 per share, generating aggregate gross proceeds of $150.0 million. Registration rights were granted to the PIPE investors.
  • Approximately 6,338 shares were redeemed at approximately $10.05 per share.
  • As of closing, approximately 98.4 million common shares were issued and outstanding based on the ownership disclosure, including approximately 7.5 million earnout shares. The filing also reports approximately 12.8 million warrants outstanding, generally exercisable at $11.50 per share.
  • The filing text does not provide clear amounts for revenue, net income or loss, operating cash flow, margins, debt, cash balances, or liquidity. Unaudited financial statements for the quarters ended March 31, 2021 and 2020, pro forma information, and management’s discussion and analysis were filed as exhibits.
  • The company has not paid cash dividends and does not expect to pay dividends in the foreseeable future.

Material Changes Versus the Prior Comparable Period

  • The company transitioned from a shell company with no operations to the operating holding company for Katapult.
  • FinServ’s Class B founder shares converted one-for-one into common stock, and earnout shares were issued subject to performance-based vesting conditions through the sixth anniversary of closing.
  • The company’s Nasdaq symbols changed from FSRV and FSRVW to KPLT and KPLTW effective June 10, 2021.
  • Deloitte & Touche LLP replaced WithumSmith+Brown, PC as the independent registered public accounting firm. Withum reported no disagreements or reportable events, but its prior report included substantial doubt regarding FinServ’s ability to continue as a going concern if it did not complete a business combination by November 5, 2021 and noted a warrant-accounting restatement.
  • The company adopted a new certificate of incorporation, amended and restated bylaws, a new code of business conduct and ethics, and the 2021 Equity Incentive Plan.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

  • No specific financial guidance or quantified outlook is provided in the filing.
  • Management cautions that forward-looking statements are subject to risks including competition, execution of the post-merger strategy, growth and profitability, litigation, product liability, consumer spending and preferences, economic conditions, privacy and data-security matters, employee availability, and COVID-19 effects.
  • Daiwa Corporate Advisory LLC alleges breach of a 2018 advisory agreement relating to the merger and PIPE investment and seeks damages to be determined at trial, including at least $100,000 on one claim, plus fees and interest. Katapult disputes the allegations and has asserted counterclaims seeking approximately $10.6 million plus fees and costs.
  • Registration rights agreements provide demand, piggyback, and shelf registration rights and include expense reimbursement and indemnification provisions.
  • Lock-up restrictions generally apply for 180 days to founder and certain other shares and 30 days to private-placement units, subject to customary exceptions and potential early termination if the stock-price condition described in the filing is met.

Investor Verification Checklist

  • Review Exhibits 99.1 through 99.3 for March 31, 2021 financial statements, pro forma capitalization, revenue trends, profitability, cash flow, debt, liquidity, and management’s operating commentary.
  • Reconcile the reported share counts, earnout shares, options, warrants, and potential dilution.
  • Review the merger agreement, PIPE subscription agreements, registration rights agreement, and lock-up provisions for investor protections and future selling pressure.
  • Assess the potential financial exposure and timing of the Daiwa Corporate Advisory litigation and Katapult’s counterclaims.
  • Evaluate post-merger integration, competitive, consumer-credit, privacy, regulatory, and COVID-19 risks cited in the filing and incorporated proxy materials.
  • Confirm the terms of the company’s debt facilities and any covenants, as the filing text does not provide clear debt or liquidity values.