Common use of Accounting for the Merger Clause in Contracts

Accounting for the Merger. The merger will be accounted for as a reverse recapitalization, in accordance with GAAP. Under this method of accounting, although ▇▇▇▇▇▇▇ will issue shares for outstanding equity interests of Katapult in the merger, FinServ will be treated as the “acquired” company for financial reporting purposes. Accordingly, the merger will be treated as the equivalent of Katapult issuing stock for the net assets of FinServ, accompanied by a recapitalization. The net assets of FinServ will be stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the merger will be those of Katapult. Katapult has been determined to be the accounting acquirer based on the evaluation of the following facts and circumstances under both the no and maximum redemption scenarios: • The former owners of Katapult hold the majority of voting rights in the combined company; • Katapult and its former owners have the right to appoint a majority of the directors in the combined company; • Katapult’s existing senior management team will comprise senior management of the combined company; • The operations of the combined company will represent the operations of Katapult; and • The combined company will assume ▇▇▇▇▇▇▇▇’s name and headquarters.