UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A (Amendment No.1)10-K

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF1934

For the fiscal year ended December 31, 20202022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-39641

Commission file number: 001-39641

img221734950_0.jpg 

Offerpad Solutions Inc.

SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

(Exact name of registrantRegistrant as specified in its charter)Charter)

Delaware

85-2800538

(State or other jurisdiction of

incorporation) incorporation or organization)

(I.R.S. Employer

Identification Number)

4301 50th Street NW

Suite 300, PMB 1044

Washington, D.C.

20016No.)

2150 E. Germann Road, Suite 1, Chandler, Arizona

85286

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (202) 918-7050(844) 388-4539

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class:each class

Trading Symbol(s)

Name of Each Exchangeeach exchange on Which Registered:which registered

Units, each consisting of one Class A common stock,

$0.0001 $0.0001 par value and one-third of one warrant to

purchase one Class A common stockper share

SPNV.UOPAD

The New York Stock Exchange

Class A common stock, par value $0.0001 per share

SPNV

The New York Stock Exchange

Warrants to purchase Class A common stock, at an exercise price of $11.50 per share

SPNV WSOPADWS

The New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrantRegistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YesNo

Indicate by check mark if the registrantRegistrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. YesNo

Indicate by check mark whether the registrantRegistrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesNo    No  

Indicate by check mark whether the registrantRegistrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrantRegistrant was required to submit such files). YesNo


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitionthe definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company”company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Accelerated filer

Non-accelerated filer

☒  

Smaller reporting company

☒  

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Indicate by check mark whether the registrantRegistrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  YES NO     No  

As of June 30, 2020,2022, the last business dayaggregate market value of the registrant’s most recently completed second fiscal quarter, the registrant’svoting and non-voting Class A common stock held by non-affiliates of the registrant was not publicly traded. Accordingly,approximately $200.8 million.

As of February 21, 2023, there was no market value for the registrant’swere 232,571,810 shares of Offerpad’s Class A common stock on such date.

At March 16, 2021, there were 40,250,000outstanding and 14,816,236 shares of Class A common stock, $0.0001 par value, and 10,062,500 shares ofOfferpad’s Class B common stock $0.0001 par value, issuedoutstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement relating to its 2023 Annual Meeting of Stockholders to be filed with the Securities and outstanding.Exchange Commission within 120 days after December 31, 2022 are incorporated by reference into Part III of this Annual Report on Form 10-K.


OFFERPAD SOLUTIONS INC.

FORM 10-K

FOR THE YEAR ENDED DECEMBER 31, 2022

TABLE OF CONTENTS

PAGE

Page

PART ICautionary Note Regarding Forward-Looking Statements

54

Item 1.Summary Risk Factors

Business

5

Item 1A.

Risk Factors

15

Item 1B.PART I

Unresolved Staff Comments

49

Item 2.1.

Business

Properties

496

Item 3.1A.

Risk Factors

Legal Proceedings

4913

Item 4.1B.

Unresolved Staff Comments

Mine Safety Disclosures

4938

Item 2.

Properties

38

Item 3.

PART IILegal Proceedings

5039

Item 5.4.

Mine Safety Disclosures

39

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

5040

Item 6.

[Reserved]

Selected Financial Data

5041

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion And Analysis Of Financial Condition And Results Of Operations

5142

Item 7A.

Quantitative and Qualitative Disclosures aboutAbout Market Risk

5857

Item 8.

Financial Statements and Supplementary Data

58

Item 9.

Changes in and Disagreements withWith Accountants on Accounting and Financial Disclosure.Disclosure

5888

Item 9A.

Controls and Procedures

Controls and Procedures.

5888

Item 9B.

Other Information

Other Information

5990

Item 9C.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

90

PART III

60

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

6091

Item 11.

Executive Compensation

Executive Compensation

6793

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

6793

Item 13.

Certain Relationships and Related Transactions, and Director Independence

6993

Item 14.14.

Principal Accountant Fees and Services.Services

7093

PART IV

Item 15.

Exhibits and Financial Statement Schedules

94

Item 16.

Form 10-K Summary

97

PART IVSIGNATURES

72

Item 15.

Exhibits, Financial Statements and Financial Statement Schedules

72

Item 16.

Form 10-K Summary

7298

Offerpad Solutions Inc. | 2022 Form 10-K | 3


Unless the context otherwise statedrequires, references in this annual report on Form 10-K, references to:

“we,” “us,” “company” or “our company” are to Supernova Partners Acquisition Company, Inc., a Delaware corporation;

“Board” refers to our board of directors;

“common stock” are to our Class A common stock and our Class B common stock, collectively;

“equity-linked securities” are to any securities of our company which are convertible into or exchangeable or exercisable for, common stock of our company;

“founder shares” are to shares of our Class B common stock initially purchased by our sponsor in a private placement prior to our initial public offering, and the shares of our Class A common stock issued upon the conversion thereof as provided herein;

“initial stockholders” are to our sponsor and any other holders of our founder shares prior to our initial public offering;

“management” or our “management team” refers to our officers and directors;

“private placement warrants” are to the warrants issued to our sponsor in a private placement simultaneously with the closing of our initial public offering;

“public shares” are to shares of our Class A common stock sold as part of the units in our initial public offering (whether they were purchased in the initial public offering or thereafter in the open market);


“public stockholders” are to the holders of our public shares, including our initial stockholders and members of our management team, Board to the extent any of them purchases public shares, provided that each such initial stockholder’s and individual’s status as a “public stockholder” shall only exist with respect to such public shares;

“public warrants” are to our warrants sold as part of the units in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market) and to any private placement warrants or warrants issued upon conversion of working capital loans that are sold to third parties that are not initial purchasers or officers or directors (or permitted transferees) following the consummation of our initial business combination;

“specified future issuance” are to an issuance of a class of equity or equity-linked securities to specified purchasers that we may determine to make in connection with financing our initial business combination;

“sponsor” are to Supernova Partners LLC, a Delaware limited liability company, in which certain of our officers and directors are beneficial owners;

“units” are the units sold in our initial public offering (whether they were purchased in our initial public offering or thereafter in the open market), the units sold upon the underwriter’s exercise of their over-allotment option and the forward purchase units sold to our sponsor; and

“warrants” are to our warrants, which includes the public warrants as well as the private placement warrants.


EXPLANATORY NOTE

References throughout this Amendment No. 1 to the Annual Report on Form 10-K to “Offerpad,” the “Company,” “we,” “us,” the “Company” orand “our, company” are to Supernova Partners Acquisition Company, Inc., unless the context otherwise indicates.

This Amendment No. 1 ("Amendment No. 1")” and similar references refer to the Annual Report on Form 10-K/A amendsbusiness and operations of Offerpad Solutions Inc. and its consolidated subsidiaries following the consummation of the Business Combination (as defined herein) and to OfferPad, Inc. (“Old OfferPad”) and its consolidated subsidiaries prior to the Business Combination.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K of Supernova Partners Acquisition Company, Inc.includes statements that express Offerpad’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for the fiscal year ended December 31, 2020, as filed with the Securities and Exchange Commission ("SEC") on March 31, 2021 (the "Original Filing").

On April 12, 2021, the staffforward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance on October 23, 2020, our warrants and our forward purchase agreements were accounted for as equity within our balance sheet. After discussion and evaluation, including with our registered public accounting firm and our audit committee, and taking into consideration the SEC Staff Statement, we have concluded that our warrants and our forward purchase agreements (as defined below) should be presented as liabilities with subsequent fair value remeasurement.

As a resultSection 21E of the foregoing, on May 13, 2021,Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can generally be identified by the Audit Committeeuse of forward-looking terminology, including the Company,  in consultation with its management, concluded that its previously issued Financial Statements for the periods beginning with the period from August 31, 2020 (inception) through December 31, 2020 (collectively, the “Affected Periods”) should be restated because of a misapplication in the guidance around accounting for our outstanding warrants to purchase common stock (the “Warrants”) and the forward purchase agreements, and should no longer be relied upon.

Historically, the Warrants were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement.  We reassessed our accounting for the Warrants issued on October 23, 2020 and the forward purchase agreements, in light of the SEC Staff’s published views. Based on this reassessment, we determined that the Warrants and the forward purchase agreements should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in our Statement of Operations each reporting period.  

The change in accounting for the Warrants and forward purchase agreements did not have any impact on our liquidity, cash flows, revenuesterms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or costs of operating our business, in all of the Affected Periods“should” or, in anyeach case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They may appear in a number of the periods included in Item 8, Financial Statements and Supplementary Data inplaces throughout this filing. The change in accounting for the warrants and forward purchase agreements does not impact the amounts previously reported for the Company’s cash and cash equivalents, investments held in the trust account, operating expenses or total cash flows from operations for any of these periods.

We are filing this Amendment No. 1 to amend and restate the Original Filing with modification as necessary to reflect the restatements.  The following items have been amended to reflect the restatements:

Annual Report on Form 10-K, including Part I, Item 1A. Risk1A, “Risk Factors,

” and Part II, Item 7, Management’s“Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part II, Item 8. Financial StatementsOperations” and Supplementary Data

Part II, Item 9A Controls and Procedures

In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-K/A (Exhibits 31.1, 31.2, 32.1 and 32.2).

Except as described above, no other information included in the Original Filing is being amended or updated by this Amendment No. 1 and this Amendment No. 1 does not purport to reflect any information or events subsequent to the Original Filing. This Amendment No. 1 continues to describe the conditions as of the date of the Original Filing and, except as expressly contained herein, we have not updated, modified or supplemented the disclosures contained in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing.


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some of the statements contained in this Form 10-K may constitute “forward-looking statements” for purposes of the federal securities laws. Our forward-looking statements include but are not limited to, statements regarding our intentions, beliefs or current expectations concerning, among other things, our management team’s expectations, hopes, beliefs, intentions orfuture results of operations, financial condition and liquidity; our prospects, growth, strategies, regardingmacroeconomic trends and the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements may include, for example, statements about:

our ability to complete our initial business combination, including our recently announced business combination withmarkets in which Offerpad (as defined below);

our success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination;

our ability to consummate an initial business combination due to the uncertainty resulting from the COVID-19 pandemic;

our officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination;

our potential ability to obtain additional financing to complete our initial business combination;

our pool of prospective target businesses;

the ability of our officers and directors to generate a number of potential investment opportunities;

our public securities’ potential liquidity and trading;

the lack of a market for our securities;

the use of proceeds not held in the trust account or available to us from interest income on the trust account balance;

the trust account not being subject to claims of third parties; or

Our future financial performance.

operates.

The forward-looking statements contained in this Annual Report on Form 10-K are only predictions. We have based these forward-looking statements largely on our current expectations and beliefs concerningprojections about future developmentsevents and their potential effects on us. There can be no assurance that future developments affecting us will be thosefinancial trends that we have anticipated. These forward-lookingbelieve may affect our business, financial condition and results of operations. Forward-looking statements involve a number ofknown and unknown risks, uncertainties (some of which are beyond our control) orand other assumptionsimportant factors that may cause our actual results, performance or performanceachievements to be materially different from thoseany future results, performance or achievements expressed or implied by thesethe forward-looking statements. These risks and uncertainties include,statements, including, but are not limited to, thosethe important factors described underdiscussed in Part I, Item IA. "Risk Factors." Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary1A, “Risk Factors” in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise anythis Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The forward-looking statements whether as a result of newin this Annual Report on Form 10-K are based upon information future events or otherwise, except as may be required under applicable securities laws. 


PART I

Item 1.Business

Overview

We are an early stage blank check company incorporated on August 31, 2020 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, which we referavailable to throughout this report as our initial business combination. We have neither engaged in any operations nor generated any revenue to date. We intend to partner with an advantaged growth company that benefits from thematic shifts and tech-enabled trends.

Significant Activities Since Inception

On October 23, 2020, the Company consummated its initial public offering of 40,250,000 units, including 5,250,000 additional units to cover over-allotments. Each unit consists of one share of Class A common stock, $0.0001 par value per share (“Class A common stock”), and one-third of one warrant, each whole warrant entitling the holder to purchase one share of Class A common stock at $11.50 per share. The units were sold at an offering price of $10.00 per unit, generating gross proceeds of $402,500,000. Simultaneously with the consummation of the initial public offering and the sale of the units, the Company consummated the private placement (“private placement”) of an aggregate of 6,700,000 warrants to our sponsor at a price of $1.50 per private placement warrant, generating total proceeds of $10,050,000.

A total of $402,500,0000 of the net proceeds from our initial public offering (including the over-allotment) and the private placement with the sponsor were deposited in a trust account established for the benefit of the Company’s public stockholders.

Our units began trading on October 21, 2020 on the NYSE under the symbol “SPNV.U”. On December 11, 2021, the securities comprising the units began separate trading. The common stock and warrants trade on the NYSE under the symbols “SPNV” and “SPNV WS,” respectively.

Our founders have also completed the initial public offering of Supernova Partners Acquisition Company II, Ltd. ("Supernova II") and Supernova Partners Acquisition Company III, Ltd. ("Supernova III"), each a blank check company formed for the purpose of effecting a merger, capital share exchange, asset acquisition, share purchase, reorganization or similar business combination. Neither Supernova II nor Supernova III have entered into a definitive agreement in connection with a business combinationus as of the date of this Annual Report. EachReport on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Annual Report on Form 10-K and the documents that we reference in this Annual Report on Form 10-K and have filed as exhibits to this Annual Report on Form 10-K with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our foundersforward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Annual Report on Form 10-K.

Offerpad Solutions Inc. | 2022 Form 10-K | 4


Summary Risk Factors

Our business is subject to numerous risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K. You should carefully consider these risks and uncertainties when investing in our securities. The principal risks and uncertainties affecting our business include the following:

Our business and operating results may be significantly impacted by a number of factors, including general economic conditions, local or regional conditions in the markets in which we operate, mortgage interest rates or down payment requirements or restrictions on mortgage financing availability, the health of the U.S. residential real estate industry and governmental actions that impact us, risks associated with our real estate assets and the ongoing impact of the COVID-19 pandemic;
Our limited operating history makes it difficult to evaluate our current business and future prospects and the risk of your investment;
We operate in a competitive and fragmented industry, and we may not be successful in attracting customers for our products and services or in competing effectively through management of our products or services, including home renovations, which could harm our business, results of operations and financial condition;
We have experienced rapid growth since inception, which may not be indicative of future growth, and, if we continue to grow rapidly, we may experience difficulties in managing our growth and expanding our operations and service offerings;
Our business model and growth strategy depend on our marketing efforts and ability to maintain our brand and attract customers to our platform in a cost-effective manner;
We may be unsuccessful in launching or marketing new products or services, or launching existing products and services into new markets, or may be unable to successfully integrate new offerings into our existing platform, which would result in significant expense and may not achieve desired results;
We have a history of losses since inception, and we may not achieve or maintain profitability in the future;
Our business is dependent upon our ability to acquire, accurately value and manage inventory and any decrease in availability of inventory, an ineffective pricing or portfolio management strategy, inaccurate information from prospective sellers or buyers with respect to their homes or ineffective home inspections may adversely affect our business, sales and results of operations;
Prospective sellers and buyers of homes may choose not to transact online, which could harm our growth prospects;
Our internal information technology systems may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could disrupt our business or result in the loss of critical and confidential information;
We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity;
Our ability to compete depends in part on protecting our intellectual property and other propriety information and on maintaining necessary intellectual property licenses;
We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws, rules and regulations, including licensing and conduct requirements relating to our real estate brokers and brokerage-related businesses and mortgage products;
We utilize a significant amount of indebtedness in the operation of our business, and so our cash flows and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing;
We rely on agreements with third parties to finance our business;
We face risks relating to our capital structure, including the potential impact of our multi-class structure; and
Our failure to meet the New York Stock Exchange’s continued listing standards could result in a delisting of our Class A common stock.

Offerpad Solutions Inc. | 2022 Form 10-K | 5


PART I

Item 1. Business.

Our Mission

Offerpad’s mission is to provide your best way to buy and sell a home. Period. We are a pioneer in using technology-enabled solutions across our digital platform to remake the home selling and buying experience. We aspire to be the leading on-demand real estate solutions provider that offers customers the convenience, control and certainty to solve their housing needs.

Who We Are

Offerpad was founded in 2015 to create a better residential real estate experience by combining advanced technology solutions with fundamental industry expertise. We provide streamlined, data driven iBuying and real estate solutions for the on-demand customer. Our digital Solutions Center platform gives users a holistic, customer-centric experience, enabling them to efficiently sell and buy their homes online with streamlined access to ancillary services such as mortgage and title insurance.

Our platform provides a unique dual approach to helping home sellers. In our Express cash offer service, sellers can access our website or mobile application to receive a competitive cash offer for their home within 24 hours and quickly close without the major inconveniences associated with traditional real estate selling. In our Flex listing service offering, we leverage our technology, scale and logistical expertise to renovate and list a seller’s home for sale while also typically providing a backup cash offer to the seller, thereby providing optionality of process and certainty of outcome. Our platform provides home buyers the opportunity to browse and tour homes online, get instant access to our listings in certain markets with their mobile devices and submit purchase offers online in a simple process on their own time, with or without an agent. We also offer seamless, integrated access to in-house agents to advise on the purchase of a home as well as access to mortgage services through our in-house mortgage solution, Offerpad Home Loans, or through a third-party lending partner. We believe by offering both Express cash offer and Flex listing services to sellers, and a guided yet flexible and customizable experience to buyers, we have reinvented the home selling and buying experience to meet the digital and on-demand needs of modern consumers.

Prior to the launch of Offerpad, our team had collectively spent many years buying, selling, renting, and renovating tens of thousands of homes. We created the Solutions Center because we learned through experience all the challenges people face when selling and buying a home the traditional way. Sellers are often overwhelmed by the stress of selling – making repairs, determining an appropriate listing price for their home, preparing and then vacating their home for showings, negotiating a deal, finding movers and waiting for a closing date. This process is stressful, expensive, time consuming, antiquated and inconsistent with modern consumer expectations. Buyers also experience significant friction for one of the most important purchase decisions in their lives – they often cannot access and tour homes on their own schedule, are dependent on intermediaries and have to endure lengthy offer submission and closing processes.

Since our founding in 2015 through December 31, 2022, we have transacted on homes representing approximately $9.4 billion of aggregate revenue. We believe that this revenue generation is a directortestament to how the simplicity and ease of iBuying and digital home sales resonates with our customers. We combine an innovative end-to-end technology platform with the expertise of local market teams to efficiently scale our operations while maintaining a physical presence in our markets that enables us to establish and maintain better relationships with our customers. This allows us to provide a fast and simple real estate experience that our customers value. For example, during the year ended December 31, 2022, we achieved a net promoter score of 70 and 93% Customer Satisfaction Rating based on a survey of approximately 3,400 customers who sold their home to Offerpad during 2022.

As of December 31, 2022, Offerpad operated in over 1,800 cities and towns in 28 metropolitan markets across 16 states. As we expand further into our existing markets, launch new markets, and develop a wide range of new ancillary services, we look forward to bringing our mission of providing your best way to buy and sell a home to even more homeowners and prospective home purchasers across the country.

We are continuously focused on providing a differentiated approach to our customers through various selling, buying and ancillary services in our Solutions Center.

Offerpad Solutions Inc. | 2022 Form 10-K | 6


Offerpad selling services

We offer two distinct selling services to our customers. Through our Offerpad Express cash offer service, customers complete a few simple steps and receive a competitive cash offer on their home within 24 hours. Customers choosing an Offerpad cash offer avoid the disruption of showing their homes, select their own closing date with the benefit of extended stay in case their new home is not ready, and enjoy complimentary free local moving. If the customer is represented by a third-party agent, we work directly with such agent in addition to paying the agent’s fee. Through our Offerpad Flex listing service offering, our customers essentially dual track a sale by utilizing both our personalized listing services while also typically having a backup cash offer. Customers opting to list with us enjoy the benefits of complimentary list-ready home services, home improvement advances, customized marketing, and dedicated support from our Offerpad Solutions Experts, while listing with confidence knowing they can pivot to our competitive cash offer. When a customer chooses to list their home with our Offerpad Flex listing service, our Solutions Experts represent the customer throughout the process. The customer will either sell their home directly to a buyer or we will purchase the home under our initial cash offer. If a customer sells a home directly to a buyer using our Flex listing service, we earn a service fee, typically as a percent of the sales price of the home. Our Flex listing service offering generates higher margins than our Express cash offer service, but accounted for less than 1% of our total revenue in both 2022 and 2021, although we intend to drive greater roll-out of the Flex listing service offering across our platform.

Offerpad buying services

We are also committed to removing the stress and inconvenience associated with purchasing a home. In connection with our Flex listing service offering and through our Solutions Center, prospective buyers have access to our Offerpad Solutions Experts, in-house agents who can advise on the purchase of their home, and our ability to provide access to mortgage services through our in-house mortgage solution or through a third-party lending partner, which streamlines the home loan process for our customers. Buyers are able to visit homes on their own time and utilize digital tools to complete the inspection and closing process. Our customers benefit from a home buying process designed around them, enjoying exclusive buyer benefits including early access to Offerpad homes, savings when bundling multiple Offerpad services, local experts to guide the purchasing process, a dedicated solutions coordinator, and flexibility around their move-in date.

Ancillary services

We also offer seamless access to ancillary services through our preferred providers, which currently includes title and escrow services, mortgage solutions to make it easy for buyers to finance their next home, and complimentary free local moving for sellers. The frictionless experience our customers encounter when buying and selling their homes drives customer interest in ancillary services, which provides significant further opportunities for bundling services and enhances our ability to capture additional market share.

Below is a summary of our current ancillary products and services:

Concierge Listing Service: While partnering with Offerpad, the customer will be provided with complementary list-ready services to prepare their home for market, such as carpet cleaning, landscape and pool maintenance, and handyman services. Customers also have the ability to utilize Offerpad’s renovation advance program to complete strategic upgrades to maximize the resale value of the home.
Offerpad Home Loans (“OPHL”): We provide access to mortgage services through our in-house mortgage solution, OPHL, or through a third-party lending partner.
Bundle Rewards: The Offerpad Bundle Rewards program allows customers to receive multiple discounts when selling and buying a home with Offerpad, and by obtaining their home loan with OPHL.
Title and Escrow: To deliver title and escrow closing services, we have a national relationship with a leading title and escrow company, through which we are able to leverage our size and scale to provide exceptional service with favorable economics.

Our primary goal is to be able to offer multiple services tied to the core real estate transaction, which may in the future include stand-alone remodel services, energy efficiency solutions, smart home technology, insurance, moving services and home warranty services, all with the goal of becoming a singular solution for real estate transactions. Generally, the revenue and margin profiles of our ancillary products and services are different from our Express cash offer service that accounts for the vast majority of our revenues, with most ancillary products and services having a smaller average revenue per transaction than our Express cash offer service, but a higher margin.

Our ancillary products and services represented less than 1% of our total revenue in both 2022 and 2021.

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Our Market Opportunity

In 2022, roughly $2.3 trillion in value of homes were sold in the U.S. with approximately 5.6 million homes sold for an average home value of approximately $400,000. Despite the large market size, the vast majority of U.S. residential real estate transactions are conducted offline. As digital transactions are transforming every industry, consumers turn to technology for new and improved experiences in their daily lives. Interactions in industries such as commerce, restaurants, healthcare, automotive, and insurance have been drastically altered by digital experiences that offer new levels of convenience, efficiency, and reliability. We believe that the real estate industry is primed for a similar digital transformation as buyers and sellers of homes desire the same type of digital experience they are accustomed to from other industries. Further, we believe that the vast number of real estate brokerages, combined with the fragmentation of market share, contributes to an inconsistent experience for home buyers and sellers, offering opportunities for consolidation and integration. As of 2022, there were approximately 1.6 million licensed real estate agents and more than 100,000 U.S. real estate brokerages, with a single brokerage rarely holding more than 10% in a given market. Today, we typically purchase homes with a price of up to $750,000, which represented a potential addressable market opportunity of approximately $1.3 trillion during 2022.

Separately, through a variety of ancillary service opportunities we believe we will be able to further expand our total addressable market. Vertical integration and product innovation will provide future potential opportunities including expansion of our mortgage and title solutions, as well as entry into other transaction services such as home warranty, homeowners insurance, or remodeling services.

Our Competitive Strengths

We believe the following strengths will allow us to maintain and extend our position as a leading technology-enabled real estate solutions platform.

Proprietary technology platform

The success of our business is built on the combination of our data collection capabilities, proprietary technology, and team of real estate experts. We utilize machine learning and artificial intelligence to analyze data at various stages throughout our process. Our in-house proprietary data analytics technology continuously collects and synthesizes market data with performance history from our real estate operations, forming a knowledge distillation and feedback loop along the process and enabling us to adjust to the latest market conditions and operate a highly intelligent and automated workflow.

We collect hundreds of data points per home from an array of sources including public records, real estate brokerage transaction histories, private third-party data, and internally developed proprietary data sources. Our proprietary automated valuation and renovation-modeling engine “Offercomp” uses this information to automatically value more than 100,000 properties each year and generate our cash offers based on these data points. Our real estate experts work in tandem with and enhance our technology by providing a final review of Supernova IIthe offer. Our proprietary and Supernova III.  purpose-built “Helix Go” technology streamlines the renovation process for a purchased home by automating logistics and workflows. Our “Instant access” feature enables buyers in certain markets to enter our homes with the push of a button on their mobile device. This combination of technology, automation and machine learning paired with real estate expertise enhances the accuracy in our underwriting to actual sales prices and improves our unit-level economic performance.

Operational expertise

Recent DevelopmentsWe know how to efficiently manage the logistical challenge of buying, renovating and selling thousands of homes across 28 differentiated markets. Since our inception to December 31, 2022, we have bought and sold in aggregate nearly 70,000 homes and have completed nearly 30,000 home renovations. We optimize our workforce through a mix of internal employees and external contractors and have local project managers that manage the renovation in its entirety. We maintain market-by-market standards to ensure quality, cost, and time efficiency, deploying our own field automation software to enable accurate progress reporting as well as labor and material tracking.

On March 17, 2021, we entered into an AgreementOfferpad Solutions Inc. | 2022 Form 10-K | 8


Scalable platform, with proven economics and Plan of Merger (the “Merger Agreement”) bycapital efficiency

We have a leading, scalable and among us, Orchids Merger Sub, Inc.,low-cost transaction platform. We have created a Delaware corporation and direct, wholly owned subsidiary of us (“First Merger Sub”), Orchids Merger Sub, LLC, a Delaware limited liabilitypioneering iBuying company and leading on-demand real estate marketplace. Our significant growth relative to our limited capital invested is testament to our efficiency and results driven culture. Since inception, we have focused on improving the unit economics of our model across our markets, with the added benefit of maximizing operational leverage as we scale. A foundation of our strategic approach to growth has been to prove out our business model first, control costs and refine our valuation automation and logistical operations before we scale into additional markets.

Maximizing inventory turnover and increasing returns on invested capital

In order to effectively mitigate risk and maximize efficiency of the business, we aim to turn inventory quickly while maintaining our underwritten to actual sales price accuracy. We strive to minimize the number of homes we own for a long period of time, as the holding period of the home is typically a key factor of unit level performance because increased holding costs result in a direct wholly owned subsidiarydecrease in contribution margin. As we increased our scale and improved our workflow optimization in prior years, our average inventory holding period of homes sold improved from 138 days in 2016 to 95 days in both 2019 and 2020. Our average inventory holding period of homes sold further decreased to 76 days during 2021, which was primarily due to the favorable housing market conditions across our markets in 2021.

During 2022, the residential real estate market conditions were highly volatile, with generally favorable conditions during the first half of the year, shifting to considerable softening in consumer demand for residential real estate during the second half of the year as a result of various macroeconomic factors negatively impacting housing affordability and homebuyer sentiment. Given our focus on risk management, and in response to this softening consumer demand, we adjusted our home purchase criteria through more conservative acquisition underwriting, resulting in higher expected internal rates of return based on current market conditions, and continued to adjust pricing on our inventory to reflect market level trends throughout the second half of 2022. These actions resulted in a significant reduction in our home acquisition pace to allow us to manage overall inventory growth, which led to the average holding period of homes sold increasing to 101 days during 2022, which is consistent with our expected average inventory holding period and our historical norm. As our overall inventory mix shifts and includes a lower composition of newer acquired homes, our average inventory holding period generally increases. As a result, and given our reduction in home acquisition pace, we anticipate our average inventory holding period will continue to increase in early 2023.

Customer satisfaction

Our Solutions Center was designed with the commitment to providing the best possible real estate experience. The flexibility of our offerings has enabled us to build a strong, well-respected brand in the eyes of our customers.

Proven management team with extensive digital, real-estate and finance experience

Our founder and management team have decades of experience in transactional real estate operations and property valuation, digital marketplaces, business intelligence and analytics and finance. We believe our operating success is a result of combining our detailed market-to-market real estate expertise with strong technology and data analytics experience and a keen awareness of the evolving digital demands of our customers. Our broad-based team has been able to leverage their experience at technology companies like Amazon, Doordash, GoDaddy, Intel and Zappos, real estate companies like AV Homes, Progress Residential and Taylor Morrison, and financial institutions such as Citi and Morgan Stanley.

Our Growth Strategies

We believe we have significant untapped growth potential and intend to achieve our goals through the following strategies:

Grow share in existing markets

We plan to expand our share in our existing markets. As of December 31, 2022, we offer our services in 28 markets in the United States, which tend to share median price points of less than $550,000 and are among the top 100 metropolitan statistical areas (MSAs) in terms of annual residential real estate transactions. In 2022 and 2021, the median prices of the homes we sold were approximately $350,000 and $300,000, respectively. We intend to further increase our market penetration in these markets through additional brand marketing and improving customer awareness of our offerings, which we anticipate will increase our market share. Additionally, we intend to continue to evaluate adding to our catalog of offerings in order to better support our customers and capture additional share.

Opportunistic expansion into new markets

Since our founding, we have been strategic in our approach to growing our market footprint. We focus on geographic diversification across high population growth cities with affordable median sales prices and increasing employment characteristics. Looking forward, we are applying rigorous criteria to identify which additional MSAs we plan to expand into in the future. As part of our planned expansion, we have given strategic consideration to which markets we would plan to open

Offerpad Solutions Inc. | 2022 Form 10-K | 9


first and what the resource requirements for establishing a presence in those markets would be. We assess each MSA on several factors including historical housing transactions, employment and population growth, median home sales price, housing supply and demand characteristics, seasonality, market risk rating, and competitor presence. We believe geographic proximity to our existing markets will allow us to leverage our in place physical presence and applicable local expertise, though we intend to also evaluate MSAs without geographic proximity to our existing markets. While we intend to be flexible in assessing market entry points, we will generally look to expand into new markets with qualities similar to our existing markets, including median price point, annual transaction count, as well as strong presence of new homebuilders. We believe the scale and versatility of our platform will allow us to continue to expand into new markets, with our barriers to entry primarily being access to adequate capital needed to expand our operations and the tendency of consumers in a given market to adopt our digital real estate offerings. Given the recent volatility in the residential real estate market conditions, we currently do not anticipate expanding into any new markets in the first half of 2023 and expect to re-evaluate expansion plans in the second half of the year.

Increase advertising and drive brand awareness

Even though historically our ability to invest in advertising has been limited due to our focus on capital efficiency we have a proven history of effective local advertising to drive inbound seller inquiries as well as local and national distribution of our active listings for resale. Going forward we intend to focus on increasing our local advertising efforts through a variety of channels as well as establish a broader national advertising presence to grow brand awareness and brand affinity as we scale.

Grow Offerpad Flex Listing Service Offering

While our Flex listing service offering has already enabled many customers to conveniently list with us with the confidence that they can typically take advantage of a backup cash offer, we plan to further increase awareness of this service through more product centric marketing. Our goal is to expand the number of our customers selecting this service in both our existing and our future markets, enabling us to capture more customers that want the best of both iBuying and traditional real estate.

Add ancillary services

Our product expansion strategy focuses on capitalizing on ancillary service opportunities beyond our current mortgage and title service offerings in order to offer multiple services tied to the core real estate transaction, allowing our customers to bundle and save. In the mid-term, we anticipate offering additional transaction services, including home warranty and insurance, as well as an entry into home personalization through stand-alone remodel services. Finally, in the long-term, we intend to seek to provide a personal, efficient, and hassle-free full home ownership partnership with offerings such as energy efficiency and smart home capabilities.

Expand relationships with home buyers

We continue to pursue opportunities that enable us to grow our service offerings, and have recently begun offering a program that allows cash buyers and single-family rental companies an opportunity to purchase homes directly from the homeowner, matching cash buyers with sellers. We expect this program will allow us to help more homeowners sell their home, while also expanding our ability to reach more customers.

Marketing

Our sales and marketing efforts utilize a multichannel approach, including paid advertising, earned media and partnerships, with a focus on efficiency and low-cost growth. As our market footprint has expanded, we have optimized our marketing strategy with advanced audience segmentation methodologies, improved targeting, and attribution modeling. Going forward we will focus on increasing our local advertising efforts through a variety of channels as well as establishing a broader national advertising presence to grow brand awareness and brand affinity. Additionally, we plan to start leveraging broad reach channels that allow us to responsibly scale brand awareness.

Our Competition

The U.S. residential real estate market is highly fragmented and non-integrated. As of 2022, there were over 100,000 U.S. real estate brokerages in the United States, with a single brokerage rarely holding more than 10% share in any market. Additionally, we believe the vast majority of U.S. real estate sales are still being conducted through traditional analog methods, with only a small portion of the real estate market having transitioned to the technology driven, digital method that we offer. We compete with other instant buyers, cash offer providers and online real estate platforms, as well as institutional purchasers of residential real estate; however, we primarily compete with local real estate brokerages and the traditional way of conducting home sales.

We believe that companies in our industry compete primarily on the basis of customer experience, available offerings, and price. Although we face competition through both traditional and non-traditional forms of buying and selling residential real estate, we believe our technology-enabled solutions combined with our extensive real estate expertise allows us to provide a complete solution and positive experience to one of life’s most significant transactions.

Offerpad Solutions Inc. | 2022 Form 10-K | 10


Human Capital Resources

Overview

We believe that we have a talented, motivated and dedicated team, and are committed to supporting the development of all of our team members. As of December 31, 2022, we employed approximately 900 people, nearly all on a full-time basis. None of our employees are represented by a labor union or covered by collective bargaining agreements. We believe we have strong and positive relations with our employees. We also engage numerous consultants and contractors to supplement our permanent workforce, primarily to assist with renovating our homes.

Our Culture and Core Values

Maintaining a strong company culture is critical to our team and is supported through various employee engagement activities. Our culture and passion for what we are building is reflected in the following core values:

Homes not houses. A house is property, but a home is uniquely personal – a place full of emotion and memories. We help people move freely so they can live their best lives, wherever “home” happens to be.
Freedom first. Providing home buyers and sellers freedom is our passion. No one should ever feel stuck. We provide convenience, control, and certainty in all we do.
Every day matters. We operate with urgency in pursuit of delivering the best customer experience in the industry. There’s no room for hesitation – we count the days with the goal to use less.
Results rule. We get things done. We celebrate doers. When we see a problem, we solve it.
Embrace our roots. We know homes. We understand the people in those homes at a “living room” level. We leverage our past to provide your best way to buy and sell a home.

Workplace Practices and Policies

We are committed to providing a workplace free of harassment or discrimination based on race, color, religion, sex, sexual orientation, gender identity, national origin, disability, veteran status, caste or other legally protected characteristic. We are an equal opportunity employer committed to inclusion and diversity.

Diversity, Equity, Inclusion and Belonging

We believe that each employee’s uniqueness and individuality strengthen our collective whole. By seeking out diverse perspectives and valuing individual input, we create a sense of belonging.

In fostering a diverse, equitable and inclusive environment, we are committed to hiring inclusively, providing training and development opportunities, and ensuring equitable pay for employees, and are continuing to focus on increasing diverse representation at every level of the Company.

Compensation and Employee Benefits

To attract and retain top talent, we offer our employees a broad range of company-paid benefits and highly competitive compensation packages. Our employees are eligible for medical, dental and vision insurance, a savings/retirement plan, life and disability insurance, various wellness programs and tuition reimbursement, along with other optional benefits designed to meet individual employee needs.

Health and Safety

We are committed to supporting our employees’ well-being and safety while they are at work and in their personal lives. We took a wide variety of measures to protect the health and well-being of our employees, suppliers, customers and third-party contractors and consultants during the COVID-19 pandemic and are now supporting employees in shifting to return to office and/or hybrid arrangements.

Training and Talent Development

To support our strong company culture, we offer a wide range of training and development opportunities, including new employee orientation through our Offerpad University training sessions, which cover a range of topics including company values and culture, and other training programs that support employee growth and development.

Intellectual Property

We rely on a variety of federal, state and common law rights to protect our intellectual property. We also rely on a combination of trademarks, domain names, patents, copyrights, trade secrets, contractual provisions and restrictions on access and use to establish and protect our proprietary rights.

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As of December 31, 2022, we have 15 total IP registrations and pending applications including: four registered U.S. trademarks, three foreign registered trademarks, six pending U.S. trademark applications and two U.S. issued copyright registrations. Our trademarks registrations and applications include “Offerpad” and the Offerpad logo.

We are the registered holder of a variety of domain name registrations, including “offerpad.com”.

In addition to the protection provided by our intellectual property rights, we enter into confidentiality and proprietary rights agreements with certain of our employees, consultants, contractors and business partners. Certain of our employees and contractors are also subject to invention assignment agreements. We further restrict the use of our proprietary technology and intellectual property through provisions in both our general and product-specific terms of use on our website.

Government Regulation

We operate in highly regulated businesses through a number of different channels across the United States. As a result, we are currently subject to a variety of, and may in the future become subject to additional, federal, state and local statutes and regulations in various jurisdictions (as well as judicial and administrative decisions and state common law), which are subject to change at any time, including laws regarding the real estate and mortgage industries, settlement services, insurance, mobile and internet based businesses and other businesses that rely on advertising, as well as data privacy and consumer protection laws, and employment laws.

In particular, the advertising, sale, and financing of homes is highly regulated by states in which we do business, as well as the U.S. federal government. Regulatory bodies include the Consumer Financial Protection Bureau (“Second Merger Sub”CFPB”), the Federal Trade Commission (“FTC”), the Department of Justice (“DOJ”), the Department of Housing and Urban Development (“HUD”), and OfferPad, Inc.various state licensing authorities, various state consumer protection agencies, and various state financial regulatory agencies. We are subject to compliance audits of our operations by many of these authorities. For a discussion of the various risks we face from regulation and compliance matters, see “Risk Factors—Risks Related to Our Business and Industry”.

Additionally, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the Telephone Consumer Protection Act (“TCPA”), the Telemarketing Sales Rule, the CAN-SPAM Act, and similar state consumer protection laws. Through our various subsidiaries, we buy and sell homes, provide real estate brokerage services, and provide other product offerings, which results in us receiving or facilitating transmission of personally identifiable information. This information is increasingly subject to legislation and regulation in the United States, such as the California Consumer Privacy Act. These laws, and other similar privacy laws and regulations, are generally intended to protect the privacy and security of personal information, including customer Social Security Numbers and credit card information that is collected, processed and transmitted. These laws also can restrict our use of this personal information for other commercial purposes. For a Delaware corporation (“Offerpad”).more detailed discussion of the risks we face in connection with privacy regulations, see “Risk Factors—Risks Related to Our Intellectual Property and Technology—We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity.

PursuantIn order to provide the broad range of products and services that we offer customers, certain of our subsidiaries maintain real estate brokerage licenses, and we may in the future apply for additional licenses as our business grows and develops. These entities are subject to stringent state and federal laws and regulations, including, but not limited to, the Merger Agreement,Real Estate Settlement Procedures Act (“RESPA”) and those administered by applicable state departments of real estate, banking, and consumer services, and to the parties will enter intoscrutiny of state and federal government agencies as licensed businesses as noted above. We may be subject to additional local, state and federal laws and regulations governing residential real estate transactions, including those administered by HUD, and the states and municipalities in which we transact. For certain licenses, we are required to designate individual licensed brokers of record, qualified individuals and control persons. Certain licensed entities also are subject to routine examination and monitoring by the CFPB (for mortgages) and/or state licensing authorities. As of December 31, 2022, Offerpad Brokerage, LLC, Offerpad Brokerage “FL”, LLC, and Offerpad Brokerage CA, Inc. hold real estate brokerage licenses in certain of our markets and certain other states.

We plan to continue providing mortgage services in the future, either through our in-house mortgage solution, or through a third-party lender. Mortgage products are regulated at the state level by licensing authorities and administrative agencies, with additional oversight from the CFPB and other federal agencies. These laws generally regulate the manner in which lending and lending-related activities are marketed or made available to consumers, including, but not limited to, advertising, finding and qualifying applicants, the provision of consumer disclosures, payments for services, and record keeping requirements; these laws include, at the federal level, the RESPA, the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act), the Truth in Lending Act (including the Home Ownership and Equity Protection Act of 1994), the Equal Credit Opportunity Act, the Fair Housing Act, the Gramm-Leach-Bliley Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the Federal Trade Commission Act, the Dodd

Offerpad Solutions Inc. | 2022 Form 10-K | 12


Frank Wall Street Reform and Consumer Protection Act of 2010, the Bank Secrecy Act (including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act), the TCPA, the Mortgage Acts and Practices Advertising Rule (Regulation N), the CARES Act, all implementing regulations, and various other federal, state and local laws. The CFPB also has broad authority to enforce prohibitions on practices that it deems to be unfair, deceptive or abusive. Additionally, state and local laws may restrict the amount and nature of interest and fees that may be charged by a lender or mortgage broker, impose more stringent privacy requirements and protections for servicemembers, and/or otherwise regulate the manner in which lenders or mortgage brokers operate or advertise.

Seasonality

The residential real estate market is seasonal and varies from market to market. Typically, the greatest number of transactions occur in the spring and summer, with fewer transactions occurring in the fall and winter. Our financial results, including revenue, margins, inventory, and financing costs, have historically had seasonal characteristics generally consistent with the residential real estate market, a trend we expect to continue in the future.

Corporate History and Background

Offerpad Solutions Inc. was formed on September 1, 2021 through a business combination transaction (the “Offerpad Business“Business Combination”) by which (i) First Merger Sub will merge with and into Offerpad, with Offerpad being the surviving entity in the merger (the “First Merger”), and (ii) Offerpad will merge with and into Second Merger Sub, with Second Merger Sub being the surviving entity in the merger (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions” and the closing of the Transactions, the “Closing”Supernova Partners Acquisition Company, Inc. (“Supernova”). In connection with the Closing, we will change ourclosing of the Business Combination, Supernova changed its name to “OfferpadOfferpad Solutions Inc.


The proposed Offerpad Business Combination is expected to be consummated after receipt of the required approvals by the stockholders of Supernova and Offerpad and the satisfaction or waiver of certain other customary conditions,was accounted for as summarized below.a reverse recapitalization.

Available Information

Merger Agreement

Merger Consideration

The value of the aggregate equity consideration to be paid to Offerpad’s stockholders and optionholders in the Transactions will be equal to $2,250,000,000 (the “Equity Value”). At the Closing, each share of common stock and preferred stock of Offerpad that is issued and outstanding immediately prior to the effective time of the First Merger (other than “Excluded Shares”, as defined in the Merger Agreement) will be cancelled and converted into the right to receive a number of shares of Supernova common stock equal to an exchange ratio determined by dividing the Equity Value by the “Aggregate Fully Diluted Company Common Stock” (as defined in the Merger Agreement).

At the Closing, each option to purchase Offerpad common stock, whether vested or unvested, will be assumed and converted into an option to purchase a number of shares of Supernova Class A common stock in the manner set forth in the Merger Agreement.

High Vote Shares

Immediately prior to the Closing,We file our certificate of incorporation will be amended and restated to, among other things, (i) reclassify all outstanding shares of our outstanding Class B common stock into shares of Class A common stock, and (ii) provide that each share of Class A common stock will be entitled to one vote per share and each share of Class B common stock will be entitled to ten votes per share (the “high vote”). In connection with the Transactions, the shares of our common stock received as consideration by Brian Bair, the Chief Executive Officer and Founder of Offerpad, will be Class B shares, and will entitle Mr. Bair to the high vote for so long as certain specified conditions with respect to Mr. Bair’s service to the business and ownership of shares continue to be met. Mr. Bair’s Class B shares will provide him with approximately 35% of the voting power of the outstanding common stock of the post-Transaction company, assuming no redemptions by Supernova’s stockholders.

Representations and Warranties

The Merger Agreement contains customary representations and warranties of the parties, which will terminate and be of no further force and effect as of the Closing.

Covenants

The Merger Agreement contains customary covenants of the parties, including, among others, covenants providing for (i) certain limitations on the operation of the parties’ respective businesses prior to consummation of the Transactions, (ii) the parties’ efforts to satisfy conditions to consummation of the Transactions, including by obtaining necessary approvals from governmental agencies (including U.S. federal antitrust authorities), (iii) prohibitions on the parties soliciting alternative transactions, (iv) our Company preparing and filing a registration statementAnnual Reports on Form S-410-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements and other information electronically with the Securities and Exchange Commission (the “SEC”(“SEC”) and taking certain other actions. Our SEC filings are available to obtain the requisite approval of our stockholders to vote in favor of certain matters (the “Supernova Stockholder Matters”), including the adoption of the Merger Agreement and approval of the Transactions, at a special meeting to be called therefor (the “Special Meeting”), and (v) the protection of, and access to, confidential information of the parties.


Conditions to Closing

The consummation of the Transactions is subject to customary closing conditions, including, among others: (i) approval by our and Offerpad’s respective stockholders, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) no order, statute, rule or regulation enjoining or prohibiting the consummation of the Transactions being in force, (iv) our Company having at least $5,000,001 of net tangible assets as of the Closing, (v) receipt of approval for listingpublic on the New York Stock Exchange of the shares of Supernova Class A common stock to be issued in connection with the Transactions, (vi) the effectiveness of the registration statement on Form S-4, (vii) the accuracy of the parties’ respective representations and warranties (subject to specified materiality thresholds) and the material performance of the parties’ respective covenants and other obligations and (viii) solely as relates to Offerpad’s obligation to consummate the Transactions,SEC’s website at www.sec.gov. At our Company having at least $250,000,000 of available cash at the Closing.

Termination

The Merger Agreement may be terminated at any time prior to the Closing: (i) by mutual written consent of Offerpad and us; (ii) by either our Company or Offerpad (a) if the Transactions are not consummated on or before September 17, 2021, (b) if a governmental entity has issued an order or taken any other action that is final and nonappealable and permanently enjoins or prohibits the Transactions, (c) in the event of certain uncured breaches by the other party or (d) if, at the Special Meeting, the Transactions and the other Supernova Stockholder Matters are not approved by the requisite holders of Supernova’s outstanding shares of common stock; or (iii) by us if Offerpad does not deliver approval of the Transactions by the requisite holders of its capital stock within seven days after the registration statement on Form S-4 is declared effective.

Related Agreements

Registration Rights Agreement

The Merger Agreement contemplates that, at the Closing, we, our Sponsor, our independent directors, certain former stockholders of Offerpad and the other parties thereto will enter into an amended and restated registration rights agreement (the “Registration Rights Agreement”), pursuant to which we will agree to register for resale certain shares of its common stock and other equity securities that are held by the parties thereto from time to time.

PIPE Subscription Agreements

Concurrently with the execution of the Merger Agreement, certain investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors have committed to purchase in a private placement 20,000,000 shares of our Class A common stock (the “PIPE Shares”) at a purchase price of $10.00 per share and an aggregate purchase price of $200,000,000 (the “PIPE Investment”). The purchase of the PIPE Shares is conditioned upon, among other things, the consummation of the Transactions and will be consummated concurrently with the Closing. The shares of Class A common stock to be issued pursuant to the PIPE Subscription Agreements have not been registered under the Securities Act, and will be issued in reliance on the availability of an exemption from such registration.

Forward Purchase Agreements

In connection with the closing of our initial public offering, we entered into forward purchase agreements pursuant to which Ancient 1604 LLC and 75 and Sunny LP, affiliates of Alexander M. Klabin and Spencer Rascoff, respectively, agreed to purchase our Class A common stock in an aggregate amount equal to 5,000,000 shares of our common stock, plus an aggregate of 1,666,667 warrants to purchase one share of Class A common stock at $11.50 per share, for an aggregate purchase price of $50,000,000, or $10.00 for one share of Class A common stock and one-third of one warrant, in a private placement that is conditioned upon, and will be consummated concurrently with, the Closing. The shares of Class A common stock and warrants to be issued pursuant to the Forward Purchase Agreements have not been registered under the Securities Act, and will be issued in reliance on the availability of an exemption from such registration.


Sponsor Support Agreement

In connection with the execution of the Merger Agreement, we entered into a sponsor support agreement (the “Sponsor Support Agreement”) with our Sponsor, Offerpadcorporate website, www.offerpad.com, and our directors and officers. Pursuant to the Sponsor Support Agreement, our Sponsor and our directors and officers have, among other things, agreed to vote allinvestor relations website, investor.offerpad.com, we make available free of their sharescharge a variety of our capital stock in favor of the approval of the Transactions. In addition, our Sponsor has agreed that 20% of its shares of Class B common stock issued in connection with the initial public offering (the “Sponsor Shares”) will be unvested and subject to forfeiture as of the Closing and will only vest if, during the five year period following the Closing, (i) the volume weighted average price of our Class A common stock equals or exceeds $12.00information for any twenty trading days within a period of thirty consecutive trading days or (ii) there is a change of control of Supernova. Any Sponsor Shares that remain unvested after the fifth anniversary of the Closing will be forfeited. The Sponsor Support Agreement will terminate upon the termination of the Merger Agreement if the Closing does not occur.

Offerpad Holders Support Agreement

In connection with the execution of the Merger Agreement, we entered into a support agreement (the “Offerpad Holders Support Agreement”) with Offerpad and certain stockholders of Offerpad pursuant to which such stockholders have, among other things, agreed to vote to adopt and approve, upon the registration statement on Form S-4 being declared effective, the Merger Agreement and all other documents and transactions contemplated thereby. The Offerpad Holders Support Agreement will terminate upon the termination of the Merger Agreement if the Closing does not occur.

Certain Transfer Restrictions

Additionally, Offerpad stockholders will be subject to certain restrictions on transfer with respect to the shares of Supernova common stock issued as part of the merger consideration (the “Lock-Up Shares”) pursuant to the form of bylaws to be adopted by our Company immediately prior to the Closing. Such restrictions begin at Closing and end on the date that is the earlier of (A) 180 days after the Closing and (B)(i) with respect to 33% of the Lock-Up Shares if the closing price of the Supernova common stock equals or exceeds $12.50 per share for any 20 trading days within any 30-trading day period commencing at least 30 days following the Closing and (ii) with respect to an additional 50% of the Lock-Up Shares if the closing price of the Supernova common stock equals or exceeds $15.00 per share for any 20 trading days within any 30-trading day period commencing at least 30 days following the Closing.

The foregoing descriptions of the Merger Agreement, Registration Rights Agreement, PIPE Subscription Agreements, Sponsor Support Agreement and the Offerpad Holders Support Agreement and the transactions contemplated thereunder are not complete and are qualified in their entirety by reference to the respective agreements,investors, including copies of which are respectively filed as Exhibits 2.1, 10.1, 10.2, 10.3 and 10.4 to our Current Report on Form 8-K filed on March 18, 2021. The aforementioned agreements and the foregoing descriptions thereof have been included to provide investors and stockholders with information regarding the terms of such agreements. They are not intended to provide any other factual information about the parties to the respective agreements. The respective representations, warranties and covenants contained in such agreements were made only as of specified dates for the purposes of each such agreement, were solely for the benefit of the parties to each such agreement and may be subject to qualifications and limitations agreed upon by such parties. In particular, in reviewing the respective representations, warranties and covenants contained in each such agreement and discussed in the respective foregoing description, it is important to bear in mind that such representations, warranties and covenants were negotiated with the principal purpose of allocating risk between the parties, rather than establishing matters as facts. Such representations, warranties and covenants may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC, and, with respect to the Merger Agreement, are also qualified in important part by confidential disclosure schedules delivered by the parties to each other in connection with the Merger Agreement. Investors and stockholders are not third-party beneficiaries under the Merger Agreement or other foregoing agreements except as expressly contemplated therein. Accordingly, investors and stockholders should not rely on such representations, warranties and covenants as characterizations of the actual state of facts or circumstances described therein. Information concerning the subject matter of such representations, warranties and covenants may change after the date of the Merger Agreement and each such other agreement, which subsequent information may or may not be fully reflected in the parties’ public disclosures.


Acquisition Criteria

Consistent with our acquisition process, we have identified the following general criteria and guidelines that we believe are important in evaluating prospective target businesses. We will use these criteria and guidelines as primary filters in evaluating acquisition opportunities, but we may decide to enter into our initial combination with a target business that does not meet some of these criteria and guidelines. We intend to focus on businesses with:

Large addressable market. We will focus on investing in a business that addresses a large market that creates the opportunity for attractive long-term growth prospects.

Growth. We believe that sustainable growth provides a company with access to the capital, talent and resources necessary for long-term success.

Management team. We intend to partner with a management team that has a well-defined vision for the company and the sector in which they operate. We intend to identify a management team with a proven track record in managing and scaling businesses.

Competitive differentiation. We seek a business that maintains strong and defensible competitive moats. We believe these competitive advantages over time will lead to durable and profitable growth.

Economic model. We intend to leverage our extensive experience in understanding and evaluating various business models to identify businesses with compelling unit economics that will underpin the trajectory of the business over time.

Scalability. We seek to partner with a company that will be able to significantly scale its operations to take advantage of its opportunities. We intend to leverage our experience in scaling businesses in order to help accelerate growth.

Culture. Our team’s experience has shown that the relationship a company has with its employees and other stakeholders can contribute positively to a company’s success, and we therefore intend to partner with a company that has a transparent corporate culture anchored in strong values.

Valuation. We are nimble, experienced and sophisticated investors with a keen understanding of fundamental value. We expect to complete a business combination that pairs significant upside potential with limited downside risks.

Initial Business Combination

NYSE listing rules require that our initial business combination must be with one or more target businesses that together have an aggregate fair market value equal to at least 80% of the assets held in the trust account (excluding the amount of deferred underwriting discounts held in trust and taxes payable on the income earned on the trust account) at the time of our signing a definitive agreement in connection with our initial business combination. The fair market value of the target or targets will be determined by our board of directors based upon one or more standards generally accepted by the financial community, such as discounted cash flow valuation or value of comparable businesses. If our board is not able to independently determine the fair market value of the target business or businesses, we will obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, with respect to the satisfaction of such criteria. Our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses, although we will not be permitted to effectuate our initial business combination solely with another blank check company or a similar company with nominal operations.

In any case, we will only complete an initial business combination in which we own or acquire 50% or more of the outstanding voting securities of the target or otherwise acquire a controlling interest in the target business sufficient for it not to be required to register as an investment company under the Investment Company Act. If we own or acquire less than 100% of the equity interests or assets of a target business or businesses, the portion of such business or businesses that are owned or acquired by the post-transaction company is what will be taken into account for purposes of the 80% of net assets test. There is no basis for investors in our initial public offering to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination.


To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we cannot assure you that we will properly ascertain or assess all significant risk factors.

In evaluating a prospective target business, we expect to conduct a thorough due diligence review which may encompass, among other things, meetings with incumbent management, document reviews, inspection of facilities, as well as a review of financial, operational, legal and other information that will be made available to us.

The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which our initial business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination.

Status as a Public Company

We are 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”). As such, we are eligible to 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved, If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.

In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion (as adjusted for inflation pursuant to SEC rules from time to time), or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Class A common stock that is held by non-affiliates equals or exceeds $700.0 million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of any fiscal year for so long as either (1) the market value of our Class A common stock held by non-affiliates did not equal or exceed $250.0 million as of the prior June 30, or (2) our annual revenues did not exceed $100.0 million during such completed fiscal year and the market value of our Class A common stock held by non-affiliates did not equal or exceed $700.0 million as of the prior June 30.

Effecting our Initial Business Combination

We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering, the private placements of the private placement warrants and the forward private purchase securities, our equity, debt or a combination of these as the consideration to be paid in our initial business combination. We may seek to complete our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth, which would subject us to the numerous risks inherent in such companies and businesses.


If our initial business combination is paid for using equity or debt securities, or not all of the funds released from the trust account are used for payment of the consideration in connection with our initial business combination or used for redemptions of our Class A common stock, we may apply the balance of the cash released to us from the trust account for general corporate purposes, including for maintenance or expansion of operations of the post-transaction company, the payment of principal or interest due on indebtedness incurred in completing our initial business combination, to fund the purchase of other companies or for working capital.

We may need to obtain additional financing to complete our initial business combination, either because the transaction requires more cash than is available from the proceeds held in our trust account, or because we become obligated to redeem a significant number of our public shares upon completion of the initial business combination, in which case we may issue additional securities or incur debt in connection with such business combination. There are no prohibitions on our ability to issue securities or incur debt in connection with our initial business combination. We are not currently a party to any arrangement or understanding with any third party with respect to raising any additional funds through the sale of securities, the incurrence of debt or otherwise.

Sources of Target Businesses

Our process of identifying acquisition targets will leverage our sponsor and our management team’s industry experiences, proven deal sourcing capabilities and broad and deep network of relationships in numerous industries, including executives and management teams, private equity groups and other institutional investors, large business enterprises, lenders, investment bankers and other investment market participants, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number of business combination opportunities. We expect that the collective experience, capability and network of our sponsor, our directors and officers, combined with their individual and collective reputations in the investment community, will help to create prospective business combination opportunities.

In addition, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, including investment bankers and private investment funds. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources may also introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read our public filings and know what types of businesses we are targeting. Our officers and directors, as well as their respective affiliates, may also bring to our attention target business candidates of which they become aware through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.

We also expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the trust account. In no event, however, will our sponsor or any of our existing officers or directors, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation by the company prior to, or for any services they render in order to effectuate, the completion of our initial business combination (regardless of the type of transaction that it is). None of our sponsor, executive officers or directors, or any of their respective affiliates, will be allowed to receive any compensation, finder’s fees or consulting fees from a prospective business combination target in connection with a contemplated acquisition of such target by us.

We are not prohibited from pursuing an initial business combination with a business combination target that is affiliated with our sponsor, officers or directors or from making the acquisition through a joint venture or other form of shared ownership with our sponsor, officers or directors. In the event we seek to complete our initial business combination with a business combination target that is affiliated with our sponsor, executive officers or directors, we, or a committee of independent directors, would obtain an opinion from an independent investment banking firm which is a member of FINRA or an independent accounting firm, that such an initial business combination is fair to our company from a financial point of view. We are not required to obtain such an opinion in any other context.


Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to other entities, including entities that are affiliates of our sponsor, pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor his or her fiduciary or contractual obligations to present such business combination opportunity to such entity, subject to their fiduciary duties under Delaware law.

Lack of Business Diversification

For an indefinite period of time after the completion of our initial business combination, the prospects for our success may depend entirely on the future performance of a single business. Unlike other entities that have the resources to complete business combinations with multiple entities in one or several industries, it is probable that we will not have the resources to diversify our operations and mitigate the risks of being in a single line of business. By completing our initial business combination with only a single entity, our lack of diversification may:

subject us to negative economic, competitive and regulatory developments, any or all of which may have a substantial adverse impact;

on the particular industry in which we operate after our initial business combination; and

cause us to depend on the marketing and sale of a single product or limited number of products or services.

Limited Ability to Evaluate the Target’s Management Team

Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting our initial business combination with that business, our assessment of the target business’s management may not prove to be correct. In addition, the future management may not have the necessary skills, qualifications or abilities to manage a public company. Furthermore, the future role of members of our management team, if any, in the target business cannot presently be stated with any certainty. While it is possible that one or more of our directors will remain associated in some capacity with us following our initial business combination, it is unlikely that any of them will devote their full efforts to our affairs subsequent to our initial business combination. Moreover, we cannot assure you that members of our management team will have significant experience or knowledge relating to the operations of the particular target business.

We cannot assure you that any of our key personnel will remain in senior management or advisory positions with the combined company. The determination as to whether any of our key personnel will remain with the combined company will be made at the time of our initial business combination.

Following our initial business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management.

Competition

In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, public companies and operating businesses seeking strategic acquisitions. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights may reduce the resources available to us for our initial business combination and our outstanding warrants, and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Either of these factors may place us at a competitive disadvantage in successfully negotiating an initial business combination.


Employees

We currently have four officers and do not intend to have any full-time employees prior to the completion of our initial business combination. Members of our management team are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time that any such person will devote in any time period to our company will vary based on whether a target business has been selected for our initial business combination and the current stage of the business combination process.

Periodic Reporting and Financial Information

We have registered our units, Class A common stock and warrants under the Exchange Act and have reporting obligations, including the requirement that we file annual, quarterly and current reports with the SEC. In accordance with the requirements of the Exchange Act, our annual reports will contain financial statements audited and reported on by our independent registered public accounting firm. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at: http://www.sec.gov. Our annual, quarterly and current reports, and any amendments to any of thosethese reports, that we file with the Securities and Exchange Commission are available free of charge as soon as reasonably practicable through our corporate website address at http://www.supernovaspac.com. The contents of these websites are not incorporated into this filing. Further, our referencesafter we electronically file that material with or furnish it to the uniform resource locators, or URLs, for these websites are intended to be inactive textual references only.

We will provide stockholders with audited financial statements of the prospective target business asSEC. The information found on our website is not part of the proxy solicitationthis or tender offer materials, as applicable, sent to stockholders to assist them in assessing the target business. In all likelihood, these financial statements may be required to be prepared in accordanceany other report we file with, or reconciledfurnish to, GAAP, or IFRS, depending on the circumstances, and the historical financial statements may be required to be audited in accordance with the standards of the PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such statements in time for us to disclose such statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame. We cannot assure you that any particular target business identified by us as a potential acquisition candidate will have financial statements prepared in accordance with the requirements outlined above, or that the potential target business will be able to prepare its financial statements in accordance with the requirements outlined above. To the extent that these requirements cannot be met, we may not be able to acquire the proposed target business. While this may limit the pool of potential acquisition candidates, we do not believe that this limitation will be material.SEC.

We are required to evaluate our internal control procedures for the fiscal year ending December 31, 2021. Only in the event we are deemed to be a large accelerated filer or an accelerated filer will we be required to have our internal control procedures audited. A target company may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of their internal controls. The development of the internal controls of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such acquisition.

We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act. As such, we are eligible to 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.


In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.

We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our initial public offering, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter, and (2) the date on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that year’s second fiscal quarter, and (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that year’s second fiscal quarter.


Item 1A. Risk FactorsFactors.

YouInvesting in our securities involves risks and uncertainties. Before you make a decision to buy our securities, you should carefully consider all of the specific risks described below, together with the other information contained in this report, including the financial statements.below. If any of the followingthese risks actually occur, it may materially harm our business, financial condition, or operatingliquidity and results may be materially and adversely affected. In that event,of operations. As a result, the tradingmarket price of our securities could decline, and you could lose all or part of your investment. The risk factorsAdditionally, the risks and uncertainties described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business. For risk factors related to the proposed business combination with Offerpad, see the “Risk Factors” section of the proxy statement that we will file with the SEC.

Risk Factor Summary

We are a newly incorporated company that has conducted no operations and has generated no revenues. Until we complete our initial business combination, we will have no operations and will generate no operating revenues. In making your decision whether to invest in our securities, you should take into account not only the background of our management team, but also the special risks we face as a blank check company. You should carefully consider these and the other risks set forth in the section entitled “Risk Factors” of this Annual Report on Form 10-K are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business. The following discussion should be read in conjunction with other information set forth in this Annual Report, including but not limitedPart II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and Part II, Item 8, Financial Statements and Supplementary Data.

Risks Related to Our Business and Industry

Our business and operating results may be significantly impacted by general economic conditions, the health of the U.S. residential real estate industry and risks associated with our real estate assets.

Our success depends, directly and indirectly, on general economic conditions, the health of the U.S. residential real estate industry, particularly the single-family home resale market, and risks relating to the ownership of residential real estate, many of which are beyond our control. A number of factors have in the past, and could in the future adversely affect our business, including the following:

We are a recently incorporated companydownturns in the U.S. residential real estate market — both seasonal and cyclical — in particular with norespect to the single-family home resale market and the markets in which we operate;

changes in national, regional, or local economic, demographic or real estate market conditions;
the continuing impact of the COVID-19 pandemic and any future pandemic, including with respect to buying and selling trends in the residential real estate market and potential governmental or regulatory changes or requirements;
slow economic growth or recessionary or inflationary conditions;
increased levels of unemployment or declining wages;
declines in the value of residential real estate or the pace of home appreciation, or the lack thereof;

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illiquidity in residential real estate;
overall conditions in the housing market, including macroeconomic shifts in demand, and increases in costs for homeowners such as property taxes, homeowners’ association fees and insurance costs;
low levels of consumer confidence in the economy in general or the U.S. residential real estate industry in particular;
low home inventory levels or lack of affordably priced homes;
increased mortgage interest rates or down payment requirements or restrictions on mortgage financing availability;
increases in household debt levels;
volatility and general declines in the stock market;
federal, state, or local legislative or regulatory changes that would negatively impact owners or potential purchasers of single-family homes or the residential real estate industry in general, such as the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), which limited deductions of certain mortgage interest expenses and property taxes; or
natural disasters, such as hurricanes, windstorms, tornadoes, earthquakes, wildfires, floods, hailstorms and other events that disrupt local, regional, or national real estate markets.

Our limited operating history and no revenues, and you have no basis on whichmakes it difficult to evaluate our abilitycurrent business and future prospects and the risk of your investment.

Our business model and the technology used in support thereof is still early in its adoption and is difficult to achievecompare to the business models of other market participants in the U.S. residential real estate industry. We launched our business objective.

Past performance byfirst market in 2015 and do not have a long history operating as a commercial company. Our operating results are not predictable and our management team or their respective affiliateshistorical results may not be indicative of our future results. It may be difficult for you to evaluate our potential future performance without the benefit of established long-term track records from companies implementing a similar business model. Few peer companies exist and none have yet established long-term track records that might assist us in predicting whether our business model and strategy can be implemented and sustained over an investmentextended period of time. We may encounter unanticipated problems as we continue to refine our business model and may be forced to make significant changes to our anticipated sales and revenue models to compete with our competitors’ offerings, which may adversely affect our results of operations and profitability.

We operate in us.

Our stockholdersa competitive and fragmented industry, and we may not be affordedsuccessful in attracting customers for our products and services, which could harm our business, results of operations and financial condition.

We operate in a competitive and fragmented industry, and we expect competition to continue to increase. We believe that our ability to compete depends upon many factors both within and beyond our control, including the following:

the financial competitiveness of our products for customers;
the volume of our customers;
the timing and market acceptance of our products, including iBuying, and new products offered by us or our competitors;
our selling and marketing efforts;
our customer service and support efforts;
our continued ability to develop and improve our technology to support our business model;
customer adoption of our platform as an opportunityalternative to votetraditional methods of buying and selling residential real estate; and
our brand strength relative to our competitors.

Our business model depends on our proposed initialability to continue to attract customers to our digital platform and the products and services we offer, and enhance their engagement with our products in a cost-effective manner. New entrants continue to join our market categories. Our existing and potential competitors include companies that operate, or could develop, national or local real estate businesses offering services, including real estate brokerage services, mortgage, and title insurance and escrow services, to home buyers or sellers.

Many of our competitors have well-established national reputations and may market similar products and services. Several of these companies are larger than us and have significant competitive advantages, including better name recognition, higher financial ratings, greater resources, lower cost of funds and additional access to capital, and more types of offerings than we currently do. These companies may also have higher risk tolerances or different risk assessments than we do. In addition, these competitors could devote greater financial, technical and other resources than we have available to develop, grow or improve their businesses. If we are not able to continue to attract customers to our platform, products and services and achieve greater scale in operations, our business, combination,results of operations and financial condition will be harmed.

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The COVID-19 pandemic and attempts to contain it adversely impacted our business, results of operations and financial condition, and may continue to adversely impact our business, results of operations and financial condition in the future.

The COVID-19 pandemic created significant worldwide volatility, uncertainty and disruption of the residential real estate industry and adversely impacted our business, results of operations and financial condition. Such adverse impact may continue in the future. The extent and duration of the impact of COVID-19 on our business will depend on, among other things, the emergence of new or worse strains of COVID-19 and any new limitations imposed by governmental authorities on processes and procedures attendant to residential real estate transactions, such as home inspections and appraisals and in-person showings and county recordings, as well as COVID-19’s overall impacts on the U.S. economy. We believe that consumer spending on real estate transactions has been, and may continue to be, adversely affected by a number of macroeconomic factors related to COVID-19, including but not limited to:

increased unemployment rates and stagnant or declining wages;
decreased consumer confidence in the economy and recessionary conditions;
volatility and declines in the stock market and lower yields on individuals’ investment portfolios; and
more stringent mortgage financing conditions, including increased down payment requirements.

In addition, new pandemics may emerge in the future that could have similar negative effects on the real estate industry and macroeconomic conditions generally.

We have experienced rapid growth since inception, which meansmay not be indicative of our future growth, and, if we continue to grow rapidly, we may completeexperience difficulties in managing our initialgrowth effectively and expanding our operations and service offerings.

We have experienced rapid growth and demand for our products and service offerings since inception. We expect that, in the future, even if our revenue increases, our rate of growth may decline. In any event, we will not be able to grow as fast or at all if we do not, among other things:

increase the number of customers using our platform;
acquire sufficient inventory at an attractive cost and quality to meet the increasing demand for our homes;
successfully turnover inventory in an efficient manner;
increase customer conversion;
increase our market share within existing markets and expand into new markets;
increase our brand awareness;
obtain and retain adequate availability of financing sources; and
obtain necessary capital to meet our business combination even thoughobjectives.

Furthermore, in order to preserve our market position, we intend to expand into new markets and launch new products or services in existing or new markets more quickly than we would if we did not operate in such a majorityhighly competitive industry. Expanding into new markets may prove to be challenging, as some markets may have very different characteristics than the markets we currently operate in, some of which may be unanticipated or unknown to us. These differences may result in greater pricing inaccuracies, as well as higher capital requirements, inventory hold times, repair costs and transaction costs that may result in those markets being less profitable for us than the ones in which we currently operate.

We have had a history of losses since our inception, and we may not achieve or maintain profitability in the future.

We generated net income during the year ended December 31, 2021. However, we incurred net losses during the year ended December 31, 2022 and each year from inception through December 31, 2020, and may incur additional losses in the future. We had an accumulated deficit of $280.7 million and $132.1 million as of December 31, 2022 and 2021, respectively. We expect to continue to make future investments in developing and expanding our business, including technology, recruitment and training, marketing, and pursuing strategic opportunities. These investments may not result in increased revenue or growth in our business. Additionally, we may incur significant losses in the future for a number of reasons, including:

our inability to grow market share in our existing markets or any new markets we may enter;
our expansion into new markets;
declines in U.S. residential real estate transaction volumes;
increased competition in the U.S. residential real estate industry;
changes in our fee structure or rates;
our failure to accurately price homes we acquire or changes to resale prices during the time homes are in inventory;

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our failure to realize anticipated efficiencies through our technology and business model;
costs associated with enhancements, or new offerings of our public stockholders do not support such a combination.

products and services;

Your only opportunityfailure to affectexecute our growth strategies;

increased marketing costs;
lack of access to housing market data that is used in our pricing models at reasonable cost;
hiring additional personnel to support our overall growth;
loss in value of real estate or potential impairments in the investment decision regardingvalue of our assets due to changes in market conditions in the area in which real estate or assets are located;
increases in costs associated with holding our real estate inventories, including financing costs;
the availability of debt financing and securitization funding to finance our real estate inventories; and
unforeseen expenses, difficulties, complications and delays, and other unknown factors.

Accordingly, we may not be able to achieve or maintain profitability and we may continue to incur significant losses in the future. Moreover, as we continue to invest in our business, we expect expenses to continue to increase in the near term. These investments may not result in increased revenue or growth in our business. If we fail to manage our losses or to grow our revenue sufficiently to keep pace with our investments and other expenses, our business will be harmed and it may also impact our access to funding and liquidity sources. In addition, as a potentialpublic company, we have incurred and expect to continue to incur significant legal, accounting and other expenses that we did not incur as a private company.

Because we incur substantial costs and expenses from our growth efforts before we receive any incremental revenues with respect to those investments, we may find that these efforts are more expensive than we currently anticipate or that these efforts may not result in an increase in revenues to offset these expenses, which would further increase our losses, and which could have a material adverse effect on our business combinationand financial condition.

Our business is dependent upon our ability to accurately value and manage inventory and an ineffective pricing or portfolio management strategy may have an adverse effect on our business, sales and results of operations.

We appraise and price the homes we buy and sell using in-house proprietary data analytics technology, which continuously collects and synthesizes market data with performance history from our real estate operations, forming a knowledge distillation and feedback loop along the process and enabling us to operate a highly intelligent and automated workflow. This assessment includes estimates on time of possession, market conditions, renovation and holding costs, and anticipated resale proceeds. Conversion rates and customer satisfaction may be limitednegatively impacted if valuations are too low and/or fees are too high. Additionally, following our acquisition of a home, we may need to decrease our anticipated resale price for that home if we discover defects or other conditions requiring remediation or impacting the exercisevalue of your rightthe home that were unknown to redeem your shares from us at the time of acquisition. Shortages in building supplies, supply chain disruptions, and shortages and disruptions in the availability of third-party labor can also significantly delay our ability to renovate and resell homes in a timely manner. Moreover, these risks may be heightened when we expand into new markets where we may not have similar levels of knowledge and experience as we do in the markets where we currently operate. As a result of these factors, we may be unable to acquire or sell inventory at attractive prices or to finance and manage inventory effectively, and accordingly our revenue, gross margins and results of operations would be affected, which could have a material adverse effect on our business, financial condition and results of operations.

Prospective sellers and buyers of homes may choose not to transact online, which could harm our growth prospects.

Our success depends on our ability to attract customers who have historically purchased homes through more traditional channels. The online market for cash, unlesshomes is significantly less developed than the online market for other goods and services in industries such as commerce, healthcare, insurance, books, music, travel and other consumer products and accounts for a small percentage of total annual U.S. residential real estate transactions. If this market does not gain widespread acceptance, our business will suffer. Furthermore, we seek stockholder approvalmay have to incur significantly higher and more sustained advertising and promotional expenditures or offer more incentives than we currently anticipate in order to attract consumers to our platform and convert them into sellers or buyers. If the online market for residential real estate does not continue to develop and grow, our business will not grow and our business, financial condition and results of operations would be materially and adversely affected.

Declining real estate valuations could result in recording impairment charges, and property values may decline between our offer to purchase a home and the closing of such business combination.

If we seek stockholder approval of our initial business combination, our sponsor and members of our management team have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.

The ability of our public stockholders to redeem their shares for cash may makehome, which could adversely affect our financial condition unattractiveand operating results.

We are subject to potential business combination targets, which may make it difficult for usrisks inherent to enter into a business combination with a target.

The abilitydeclines in real estate valuations. For example, home prices can be volatile, and the values of our public stockholdersinventory may fluctuate significantly. As a result, we have in the past, and may in the future, incur impairment charges due to exercise redemption rights with respect to a large numberchanges in market conditions or economic sentiment. We periodically review the value of our shares may not allow usproperties to completedetermine

Offerpad Solutions Inc. | 2022 Form 10-K | 16


whether their value, based on market factors and generally accepted accounting principles, has permanently decreased such that it is necessary or appropriate to take an impairment loss in the most desirable business combination or optimize our capital structure.

The abilityrelevant accounting period. Such a loss would cause an immediate reduction of our public stockholders to exercise redemption rights with respect to a large number of our shares could increasenet income in the probability that our initial business combinationapplicable accounting period and would be unsuccessfulreflected in a decrease in our balance sheet assets. For example, in the year ended December 31, 2022, we recognized $93.8 million of inventory impairment losses. Even if we do not determine that it is necessary or appropriate to record an impairment loss, a reduction in the intrinsic value of a property would manifest over time through reduced income from the property as evidenced by its resale value and that you would havetherefore affect our earnings and financial condition.

Additionally, the time between an offer to wait for liquidation in order to redeem your shares.

The requirement that we consummate an initial business combination within 24 months afterpurchase a home and the closing of such transaction can vary from weeks to several months, depending on the needs of our initial public offering may give potential target businesses leverage over us in negotiating a business combination and may limitcustomers. In the time we have in which to conduct due diligenceinterim period, there can be adverse impacts on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would producethe value for our stockholders.


Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected byor liquidity profile of the recent coronavirus (COVID-19) outbreak and the status of debt and equity markets.

home. We may not be able to consummate an initial business combination within 24 months after the closingor wish to renegotiate or cancel a contract because doing so would negatively impact customer satisfaction and our brand, and potentially subject us to loss of our initial public offering,earnest money deposit or litigation. In the event the value of such homes declines significantly, we could experience losses, which in which casethe aggregate could be detrimental to our business and results of operations.

Our business is dependent upon our ability to expeditiously sell inventory. Failure to expeditiously sell our inventory could have an adverse effect on our business, sales and results of operations. Holding homes in inventory exposes us to risks, such as increased holding costs and the risks of declining real estate valuations.

Our purchases of homes are based in large part on our estimates of projected demand. If actual sales are materially less than our forecasts, we would cease all operations exceptexperience an over-supply of inventory. An over-supply of home inventory will generally cause downward pressure on our liquidity, sales prices and margins and increase our average days to sale. Our inventory of homes purchased has typically represented a significant portion of total assets. Having such a large portion of our total assets in the form of non-income producing homes inventory for an extended period of time subjects us to significant holding costs, including financing expenses, maintenance and upkeep expenses, insurance expenses, property tax expenses, homeowners’ association fees, utility fees and other expenses that accompany the purposeownership of winding upresidential real property and we would redeem our public shares and liquidate.

increased risk of depreciation of value, in addition to risks related to declining real estate valuations. If we seek stockholder approvalhave excess inventory or our average days to sale increases, as occurred during the year ended December 31, 2022, our liquidity and the results of our initial business combination,operations will be adversely affected due to our sponsor, directors, executive officers, advisors or any of their affiliates may electinability to purchase public shares or warrants, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock or public warrants.

If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares,sell such shares may not be redeemed.

You willnot have any rightsor interestsin fundsfromthetrustaccount,exceptundercertainlimited circumstances.Therefore,to liquidateyour investment,you maybe forcedto sellyour publicsharesor warrants,potentiallyinventory ata loss.

The NYSEmaydelistour securitiesfromtradingon itsexchange,which couldlimitinvestors’ability to maketransactionsin our securitiesand subjectus to additionaltradingrestrictions.

You willnot be entitledto protectionsnormallyaffordedto investorsof manyotherblankcheck companies.

Ifwe seekstockholderapprovalof our initialbusinesscombinationand we do not conductredemptions pursuantto thetenderofferrules,and ifyou or a “group”of stockholdersaredeemedto hold in excess of 15% of our ClassA common stock,you willlosetheabilityto redeemallsuch sharesin excessof15% of our ClassA common stock.

Becauseof our limitedresourcesand thesignificantcompetitionforbusinesscombination opportunities,itmaybe moredifficultforus to completeour initialbusinesscombination.Ifwe have not consummatedour initialbusinesscombinationwithintherequiredtimeperiod,our public stockholdersmayreceiveonly approximately$10.00 perpublicshare,or lessin certaincircumstances, on theliquidationof our trustaccountand our warrantswillexpireworthless.

Ifthenetproceedsof our initial publicofferingand thesaleof theprivateplacementwarrantsnot beingheldin the trustaccountareinsufficientto allowus to operateforthe24 monthsfollowingtheclosingof this offering,itcouldlimittheamountavailableto fund our searchfora targetbusinessor businessesand our abilityto completeour initialbusinesscombination,and we willdepend on loansfromour sponsor, itsaffiliatesor membersof our managementteamto fund our searchand to completeour initial businesscombination.

Risks related to searching for and consummating a business combination

Our public stockholders may not be afforded an opportunity to vote on our proposed initial business combination, which means we may complete our initial business combination even though a majority of our public stockholders do not support such a combination.

We may not hold a stockholder vote to approve our initial business combination unless the business combination would require stockholder approval under applicable law or stock exchange listing requirements or if we decide to hold a stockholder vote for business or other reasons. For instance, the NYSE rules currently prices that allow us to engagemeet margin targets or to recover our costs.

Our business is concentrated in certain geographic markets, and local or regional conditions, including economic downturns, severe weather, catastrophic occurrences or other disruptions or events may materially adversely affect our financial condition and results of operations.

While our business is spread across 28 metropolitan markets in the United States as of December 31, 2022, a tender offer in lieu of a stockholder meeting but would still require us to obtain stockholder approval if we were seeking to issue more than 20%substantial amount of our outstanding shares to a target business as considerationrevenue is generated in any business combination. Therefore, if we were structuring a business combination that required us to issue more than


20%certain geographic markets. For the years ended December 31, 2022 and 2021, approximately 49% and 61% of our outstanding shares, we would seek stockholder approvalrevenue, respectively, was generated from our top five markets by revenue during 2022, which consisted of such business combination. However, except as required by applicable law or stock exchange rules, the decision as to whether we will seek stockholder approval of a proposed business combination or conduct a tender offer will be made by us, solely in our discretion,Phoenix, Atlanta, Tampa, Houston and will be based on a variety of factors such as the timing of the transaction and whether the terms of the transaction would require us to seek stockholder approval under applicable law or stock exchange listing requirement. Accordingly, we may consummate our initial business combination even if holders of a majority of the outstanding shares of our common stock do not approve of the business combination we consummate.

If we seek stockholder approval of our initial business combination, our initial stockholders, officers and directors have agreed to vote in favor of such initial business combination, regardless of how our public stockholders vote.

Our initial stockholders have agreed (and their permitted transferees will agree), pursuant to the terms of a letter agreement entered into with us, to vote their founder shares and any public shares held by them in favor of our initial business combination.Orlando. As a result of this concentration, local and regional conditions in addition to our initial stockholders’ founder shares, we would need 15,093,751, or 37.5% (assuming all outstanding shares are voted), or 2,515,626, or 6.25% (assuming only the minimum number of shares representing a quorum are voted), of the 40,250,000 public shares sold in our initial public offering to be voted in favor of our initial business combination in order to have such initial business combination approved. Our other directors and officers have also entered into the letter agreement, which imposes the same obligations on them with respect to any public shares acquired by them. We expect that our initial stockholders and their permitted transferees will own at least 20% of our outstanding shares of common stock at the time of any such stockholders vote. Accordingly, if we seek stockholders approval of our initial business combination, it is more likely that the necessary stockholders approval will be received than would be the case if such persons agreed to vote their founder shares in accordance with the majority of the votes cast by our public stockholders.

In evaluating a prospective target business for our initial business combination, our management will rely on the availability of all of the fundsthese markets – including those arising from the sale of the forward purchase securities to be used as part of the consideration to the sellersCOVID-19’s impacts – may differ significantly from prevailing conditions in the initial business combination. If the sale of the forward purchase securities fails to close for any reason, we may lack sufficient funds to complete our initial business combination.

We have entered into forward purchase agreements pursuant to which the forward purchasers have agreed to purchase the forward purchase securities in a private placement to occur concurrently with our initial business combination. The funds from the sale of forward purchase securities may be used as part of the consideration to the sellers in our initial business combination, expenses in connection with our initial business combinationUnited States or for working capital in the post-transaction company. The obligations under the forward purchase agreements do not depend on whether any public stockholders elect to redeem their shares and provide us with a minimum funding level for the initial business combination. However, if the sale of the forward purchase securities does not close for any reason, including the failure by any forward purchaser to fund the purchase price for its forward purchase securities, we may lack sufficient funds to complete our initial business combination. Additionally, the obligation of each forward purchaser to purchase the forward purchase securities is subject to termination prior to the closing of the sale of the forward purchase securities by mutual written consent of the company and such forward purchaser or, automatically upon certain events including if the initial business combination is not completed by October 23, 2022 or such later date as may be approved by our stockholders.

The obligation of the forward purchasers to purchase the forward purchase securities is subject to fulfillment of customary closing conditions and other conditions as set forth in the forward purchase agreements, including that the initial business combination shall be consummated substantially concurrent with the purchase of the forward purchase securities.

While the forward purchasers have represented to us that they will have sufficient funds to satisfy their respective obligations under the respective forward purchase agreements, we have not obligated the forward purchasers to reserve funds for such obligations. We have not independently verified that the forward purchasers, each of which are newly formed entities, will have such funds.


In the event of any such failure to fund by the forward purchasers, including as a result of any default by a forward purchaser of its obligations under the respective forward purchase agreement, or if any obligation is so terminated or any such condition is not satisfied and not waived by such forward purchaser, we may not be able to obtain additional funds to account for such shortfall on terms favorable to us or at all. Any such shortfall would also reduce the amount of funds that we have available for working capital of the post-business combination company.

Your only opportunity to affect the investment decision regarding a potential business combination will be limited to the exercise of your right to redeem your shares from us for cash, unless we seek stockholder approval of such business combination.

At the time of your investment in us, you will not be provided with an opportunity to evaluate the specific merits or risks of our initial business combination. Additionally, since our board of directors may complete a business combination without seeking stockholder approval, public stockholders may not have the right or opportunity to vote on the business combination. Accordingly, if we do not seek stockholder approval, your only opportunity to affect the investment decision regarding a potential business combination may be limited to exercising your redemption rights within the period of time (which will be at least 20 business days) set forth in our tender offer documents mailed to our public stockholders in which we describe our initial business combination.

The ability of our public stockholders to redeem their shares for cash may make our financial condition unattractive to potential business combination targets, which may make it difficult for us to enter into a business combination with a target.

We may seek to enter into a business combination transaction agreement with a prospective target that requires as a closing condition that we have a minimum net worth or a certain amount of cash. If too many public stockholders exercise their redemption rights, we would not be able to meet such closing condition and, as a result, would not be able to proceed with the business combination. Furthermore, we will only redeem our public shares so long as (after such redemptions) our net tangible assets, after payment of the deferred underwriting commissions, will be at least $5,000,001 either prior to or upon consummation of an initial business combination, after payment of the deferred underwriting commission (so that we do not then become subject to the SEC’s “penny stock” rules), or any greater net tangible asset or cash requirement which may be contained in the agreement relating to our initial business combination. Consequently, if accepting all properly submitted redemption requests would cause our net tangible assets to not be at least $5,000,001 either prior to or upon consummation of an initial business combination, after payment of the deferred underwriting commission, or such greater amount necessary to satisfy a closing condition as described above, we would not proceed with such redemption and the related business combination and may instead search for an alternate business combination. Prospective targets will be aware of these risks and, thus, may be reluctant to enter into a business combination transaction with us.

The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares may not allow us to complete the most desirable business combination or optimize our capital structure.

At the time we enter into an agreement for our initial business combination, we will not know how many stockholders may exercise their redemption rights and, therefore, we will need to structure the transaction based on our expectations as to the number of shares that will be submitted for redemption. If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price or requires us to have a minimum amount of cash at closing, we will need to reserve a portion of the cash in the trust account to meet such requirements or arrange for third-party financing. In addition, if a larger number of shares is submitted for redemption than we initially expected, we may need to restructure the transaction to reserve a greater portion of the cash in the trust account or arrange for third party financing. Raising additional third-party financing may involve dilutive equity issuances or the incurrence of indebtedness at higher than desirable levels. The above considerations may limit our ability to complete the most desirable business combination available to us or optimize our capital structure. The amount of the deferred underwriting commissions payable to the underwriters will not be adjusted for any shares that are redeemed in connection with an initial business combination. The per share amount we will distribute to stockholders who properly exercise their redemption rights will not be reduced by the deferred underwriting commissions and after such redemptions, the per share value of shares held by non-redeeming stockholders will reflect our obligation to pay the deferred underwriting commissions.


The ability of our public stockholders to exercise redemption rights with respect to a large number of our shares could increase the probability that our initial business combination would be unsuccessful and that you would have to wait for liquidation in order to redeem your stock.

If our initial business combination agreement requires us to use a portion of the cash in the trust account to pay the purchase price, or requires us to have a minimum amount of cash at closing, the probability that our initial business combination would be unsuccessful increases. If our initial business combination is unsuccessful, you would not receive your pro rata portion of the trust account until we liquidate the trust account. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time our stock may trade at a discount to the pro rata amount per share in the trust account. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with our redemption until we liquidate or you are able to sell your stock in the open market.

The requirement that we complete our initial business combination within the prescribed time frame may give potential target businesses leverage over us in negotiating a business combination and may limit the time we have in which to conduct due diligence on potential business combination targets, in particular as we approach our dissolution deadline, which could undermine our ability to complete our initial business combination on terms that would produce value for our stockholders.

Any potential target business with which we enter into negotiations concerning a business combination will be aware that we must complete our initial business combination by October 23, 2022 or during any Extension Period. Consequently, such target business may obtain leverage over us in negotiating a business combination, knowing that if we do not complete our initial business combination with that particular target business, we may be unable to complete our initial business combination with any target business. This risk will increase as we get closer to the end of the time period described above. In addition, we may have limited time to conduct due diligence and may enter into our initial business combination on terms that we would have rejected upon a more comprehensive investigation.

We may not be able to complete our initial business combination within the prescribed time frame, in which case we would cease all operations except for the purpose of winding up and we would redeem our public shares and liquidate, in which case our public stockholders may receive only $10.00 per share, or less than such amount in certain circumstances, and our warrants will expire worthless.

Our amended and restated certificate of incorporation provides that we must complete our initial business combination by October 23, 2022. We may not be able to find a suitable target business and complete our initial business combination within such time period or during any Extension Period. Our ability to complete our initial business combination may be negatively impacted by general market conditions, volatility in the capital and debt markets and the other risks described herein. For example, the outbreak of the Coronavirus Disease 2019 (“COVID-19”) continues to grow both in the U.S. and globally and, while the extent of the impact of the outbreak on us will depend on future developments, it could limit our ability to complete our initial business combination, including as a result of increased market volatility, decreased market liquidity and third-party financing being unavailable on terms acceptable to us or at all. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, or if vendors and service providers are unavailable to negotiate and consummate a transaction in a timely manner. Additionally, the outbreak of COVID-19 and other events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) may negatively impact businesses we may seek to acquire.

If we have not completed our initial business combination within such time period, we will: (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem 100% of 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 (net of taxes payable and 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 (3) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In such case, our public stockholders may receive only $10.00 per share, or less than $10.00 per share, on the redemption of their shares, and our warrants will expire worthless.

Our search for a business combination, and any target business with which we ultimately consummate a business combination, may be materially adversely affected by the COVID-19 outbreak or any future pandemic and the status of debt and equity markets.

In December 2019, a novel strain of coronavirus was reported to have surfaced, which has and is continuing to spread throughout parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of COVID-19 a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. The outbreak of COVID-19 has adversely affected, and othercountry. Any unforeseen events (such as terrorist attacks, natural disasters or a significant outbreak of other infectious diseases) could adverselycircumstances that negatively affect economies and financial markets worldwide, business operations and the conduct of commerce generally, and the business of any potential target business with which we consummate a business combination could be, or may already have been, materially and adversely affected. Furthermore, we may be unable to complete a business combination if continued concerns relating to COVID-19 restrict travel, limit the ability to have meetings with potential investors or the target company’s personnel, vendors and service providers are unavailable to negotiate and consummate a transaction in a timely manner. The extent to which COVID-19 impacts our search for and ability to consummate a business combination will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19, any future pandemic or other events (such as terrorist attacks or natural disasters) continue for an extensive period of time, including as a result of protectionist sentiments or legislation in our target markets, our ability to consummate a business combination, or the operations of a target business with which we ultimately consummate a business combination, may be materially adversely affected.

In addition, our ability to consummate a transaction may be dependent on the ability to raise equity and debt financing which may be impacted by COVID-19 and other events.

If we seek stockholder approval of our initial business combination, our sponsor, directors, officers, advisors or any of their affiliates may elect to purchase shares or warrants from public stockholders, which may influence a vote on a proposed business combination and reduce the public “float” of our Class A common stock.

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our sponsor, directors, officers, advisors or any of their affiliates may purchase shares or public warrants or a combination thereof in privately negotiated transactions or in the open market either prior to or following the completion of our initial business combination, although they are under no obligation to do so. Such a purchase may include a contractual acknowledgement that such public stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. In the event that our sponsor, directors, officers, advisors or any of their affiliates purchase shares in privately negotiated transactions from public stockholders who have already elected to exercise their redemption rights or submitted a proxy to vote against our initial business combination, such selling public stockholders would be required to revoke their prior elections to redeem their shares and any proxy to vote against our initial business combination. The price per share paid in any such transaction may be different than the amount per share a public stockholder would receive if it elected to redeem its shares in connection with our initial business combination. The purpose of such purchases could be to vote such shares in favor of the business combination and thereby increase the likelihood of obtaining stockholder


approval of our initial business combination or to satisfy a closing condition in an agreement with a target that requires us to have a minimum net worth or a certain amount of cash at the closing of our initial business combination, where it appears that such requirement would otherwise not be met. The purpose of any such purchases of public warrants could be to reduce the number of public warrants outstanding or to vote such warrants on any matters submitted to the warrant holders for approval in connection with our initial business combination. Any such purchases of our securities may result in the completion of our initial business combination that may not otherwise have been possible. We would expect any such purchases will be reported pursuant to Section 13 and Section 16 of the Exchange Act to the extent such purchasers are subject to such reporting requirements.

In addition, if such purchases are made, the public “float” of our Class A common stock and the number of beneficial holders of our securities may be reduced, possibly making it difficult to maintain or obtain the quotation, listing or trading of our securities on a national securities exchange.

If a stockholder fails to receive notice of our offer to redeem our public shares in connection with our initial business combination, or fails to comply with the procedures for tendering its shares, such shares may not be redeemed.

We will comply with the tender offer rules or proxy rules, as applicable, when conducting redemptions in connection with our initial business combination. Despite our compliance with these rules, if a stockholder fails to receive our tender offer or proxy materials, as applicable, such stockholder may not become aware of the opportunity to redeem its shares. In addition, the tender offer documents or proxy materials, as applicable, that we will furnish to holders of our public shares in connection with our initial business combination will describe the various procedures that must be complied with in order to validly tender or redeem public shares, which will include the requirement that a beneficial holder must identify itself in order to validly redeem its shares. For example, we may require our public stockholders seeking to exercise their redemption rights, whether they are record holders or hold their shares in “street name,” to either tender their certificates to our transfer agent prior to the date set forth in the tender offer documents mailed to such holders, or up to two business days prior to the scheduled vote on the proposal to approve the initial business combination in the event we distribute proxy materials, or to deliver their shares to the transfer agent electronically. In the event that a stockholder fails to comply with these or any other procedures, its shares may not be redeemed.

Although we have selected general criteria and guidelines that we believe are important in evaluating prospective target businesses, we may enter into our initial business combination with a target that does not meet such criteria and guidelines, and as a result, the target business with which we enter into our initial business combination may not have attributes entirely consistent with our general criteria and guidelines.

Although we have selected general criteria and guidelines for evaluating prospective target businesses, it is possible that a target business with which we enter into our initial business combination will not have all of these positive attributes. If we complete our initial business combination with a target that does not meet some or all of these criteria and guidelines, such combination may not be as successful as a combination with a business that does meet all of our general criteria and guidelines. In addition, if we announce a prospective business combination with a target that does not meet our general criteria and guidelines, a greater number of stockholders may exercise their redemption rights, which may make it difficult for us to meet any closing condition with a target business that requires us to have a minimum net worth or a certain amount of cash. In addition, if stockholder approval of the transaction is required by applicable law or stock exchange rules, or we decide to obtain stockholder approval for business or other reasons, it may be more difficult for us to attain stockholder approval of our initial business combination if the target business does not meet our general criteria and guidelines. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.


We may seek acquisition opportunities with an early stage company, a financially unstable business or an entity lacking an established record of revenue or earnings.

To the extent we complete our initial business combination with an early stage company, a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by numerous risks inherent in the operations of the business with which we combine. These risks include investing in a business without a proven business model and with limited historical financial data, volatile revenues or earnings, intense competition and difficulties in obtaining and retaining key personnel. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business, we may not be able to properly ascertain or assess all of the significant risk factors and we may not have adequate time to complete all appropriate due diligence. Furthermore, some of these risks may be outside of our control and leave us with no ability to control or reduce the chances that those risks will adversely impact a target business.

We are not required to obtain an opinion from an independent investment banking firm or from an independent accounting firm, and consequently, you may have no assurance from an independent source that the price we are paying for the business is fair to our company from a financial point of view.

Unless we complete our initial business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm that the price we are paying is fair to our company from a financial point of view. If no opinion is obtained, our stockholders will be relying on the judgment of our board of directors, who will determine fair market value based on standards generally accepted by the financial community. Such standards used will be disclosed in our tender offer documents or proxy solicitation materials, as applicable, related to our initial business combination.

We may issue additional shares of Class A common stock or preferred stock to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon the conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions described herein. Any such issuances would dilute the interest of our stockholders and likely present other risks.

Our amended and restated certificate of incorporation authorizes the issuance of up to 100,000,000 shares of Class A common stock, par value $0.0001 per share, and 20,000,000 shares of Class B common stock, par value $0.0001 per share, and 1,000,000 shares of undesignated preferred stock, par value $0.0001 per share. The amount of authorized but unissued shares of Class A and Class B common stock available for issuance immediately after our initial public offering does not take into account shares reserved for issuance upon exercise of outstanding warrants and the forward purchase warrants, shares issuable upon conversion of the shares of the Class B common stock or any shares issued upon the sale of the forward purchase shares. Shares of Class B common stock are automatically convertible into shares of our Class A common stock at the time of our initial business combination, initially at a one-for-one ratio but subject to adjustment as set forth herein.

We may issue a substantial number of additional shares of Class A common stock and may issue shares of preferred stock, in order to complete our initial business combination or under an employee incentive plan after completion of our initial business combination. We may also issue shares of Class A common stock upon conversion of the Class B common stock at a ratio greater than one-to-one at the time of our initial business combination as a result of the anti-dilution provisions described herein. However, our amended and restated certificate of incorporation provides, among other things, that prior to our initial business combination, we may not issue additional shares of capital stock that would entitle the holders thereof to (1) receive funds from the trust account or (2) vote as a class with our public shares (a) on any initial business combination or (b) to approve an amendment to our amended and restated certificate of incorporation to (x) extend the time we have to consummate a business combination beyond 24 months from the closing of our initial public offering or (y) amend the foregoing provisions.


The issuance of additional shares of common or preferred stock:

may significantly dilute the equity interest of investors in our initial public offering, which dilution would increase if the anti-dilution provisions in the founder shares resulted in the issuance of shares of Class A common stock on a greater than one-to-one basis upon conversion of the founder shares;

may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded our common stock;

could cause a change in control if a substantial number of 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;

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;

may adversely affect prevailing market prices for our units, Class A common stock and/or warrants; and

may not result in adjustment to the exercise price of our warrants.

Resources could be wasted in researching acquisitions that are not completed, whichareas could materially adversely affect subsequent attempts to locateour revenues and acquire or merge with another business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less than such amount in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

We anticipate that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If we decide not to complete a specific initial business combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, we may fail to complete our initial business combination for any number of reasons including those beyond our control. Any such event will result in a loss to us of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

We may have a limited ability to assess the management of a prospective target business and, as a result, may affect our initial business combination with a target business whose management may not have the skills, qualifications or abilities to manage a public company.

When evaluating the desirability of effecting our initial business combination with a prospective target business, our ability to assess the target business’s management may be limited due to a lack of time, resources or information. Our assessment of the capabilities of the target’s management, therefore, may prove to be incorrect and such management may lack the skills, qualifications or abilities we suspected. Should the target’s management not possess the skills, qualifications or abilities necessary to manage a public company, the operations and profitability of the post-combination business may be negatively impacted. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reductionprofitability. These risks include possible declines in the value of their securities. Such stockholdersreal estate; risks related to general and local economic conditions; demographic and population shifts and migration; possible lack of availability of mortgage funds; overbuilding; extended vacancies of properties; increases in competition, property taxes and operating expenses; changes in zoning laws; increased labor costs; unemployment; costs resulting from the clean-up of, and liability to third parties for damages resulting from, environmental problems; casualty or warrant holders are unlikely to have a remedy for such reduction in value.


The officerscondemnation losses; and directors of an acquisition candidate may resign upon completion of our initial business combination. The departure of a business combination target’s key personnel could negatively impact the operations and profitability of our post-combination business. The role of an acquisition candidate’s key personnel upon the completion of our initial business combination cannot be ascertained at this time. Although we contemplate that certain members of an acquisition candidate’s management team will remain associated with the acquisition candidate following our initial business combination, it is possible that members of the management of an acquisition candidate will not wish to remain in place.uninsured damages from floods, hurricanes, earthquakes or other natural disasters.

We may engage in a business combination with one or more target businesses that have relationships with entities that may be affiliated with our sponsor, officers or directors which may raise potential conflicts of interest.

In light of the involvement of our sponsor, officers and directors with other entities, we may decide to acquire one or more businesses affiliated with our sponsor, officers and directors. Our officers and directors also serve as officers and/or board members for other entities. Such entities may compete with us for business combination opportunities. Our sponsor, officers and directors are not currently aware of any specific opportunities for us to complete our initial business combination with any entities with which they are affiliated, and there have been no substantive discussions concerning a business combination with any such entity or entities. Although we will not be specifically focusing on, or targeting, any transaction with any affiliated entities, we would pursue such a transaction if we determined that such affiliated entity met our criteria for a business combination and such transaction was approved by a majority of our independent and disinterested directors. Despite our agreement to obtain an opinion from an independent investment banking firm that is a member of FINRA or from an independent accounting firm, regarding the fairness to our company from a financial point of view of a business combination with one or more domestic or international businesses affiliated with our sponsor, officers or directors, potential conflicts of interest still may exist and, as a result, the terms of the business combination may not be as advantageous to our company and our public stockholders as they would be absent any conflicts of interest.

Since our sponsor will lose its entire investment in us if our business combination is not completed and our officers and directors may have differing personal and financial interests than you, a conflict of interest may arise in determining whether a particular business combination target is appropriate for our initial business combination.

As of the date of this report, our sponsor owns an aggregate of 10,062,500 shares of Class B common stock, which it acquired for an aggregate purchase price of $25,000. In addition, our sponsor purchased an aggregatetop markets are primarily larger metropolitan areas, where home prices and transaction volumes are generally higher than other markets in the United States. To the extent people migrate outside of 6,700,000 warrants, each exercisable for one sharethese markets due to lower home prices or other factors, and this migration continues to take place over the long-term, then the relative percentage of residential housing transactions may shift away from our historical top markets where we have generated most of our Class A common stock at $11.50 per share, for a purchase price of $10,050,000 or $1.50 per whole warrant, which will also be worthless if we do not complete a business combination. Our sponsor has agreed (A) to vote any shares owned by it in favor of any proposed business combination and (B) not to redeem any founder shares in connection with a stockholder vote to approve a proposed initial business combination. In addition, we may obtain loans from our sponsor, affiliates of our sponsor or an officer or director.

The personal and financial interests of our sponsor, officers and directors may influence their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination. This risk may become more acute as the deadline for the completion of our initial business combination nears.


We may issue notes or other debt securities, or otherwise incur substantial debt, to complete a business combination, which may adversely affect our leverage and financial condition and thus negatively impact the value of our stockholders’ investment in us.

Although we have no current commitments to issue any notes or other debt securities, or to otherwise incur outstanding debt following our initial public offering, we may choose to incur substantial debt to complete our initial business combination. We have agreed that we will not incur any indebtedness unless we have obtained from the lender a waiver of any right, title, interest or claim of any kind in or to the monies held in the trust account. As such, no issuance of debt will affect the per share amount available for redemption from the trust account. Nevertheless, the incurrence of debt could have a variety of negative effects, including:

default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations;

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;

our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand;

our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding;

our inability to pay dividends on our common stock;

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, expenses, capital expenditures, acquisitions and other general corporate purposes;

limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and

limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

We may only be able to complete one business combination with the proceeds of our initial public offering and the sale of the private placement warrants, which will cause us to be solely dependent on a single business which may have a limited number of products or services. This lack of diversification may negatively impact our operations and profitability.

As of the date of this report, approximately $402,500,000 is available to complete our initial business combination (which includes $14,087,500 of deferred underwriting commissions being held in the trust account).

We may effectuate our initial business combination with a single target business or multiple target businesses simultaneously or within a short period of time. However, we may not be able to effectuate our initial business combination with more than one target business because of various factors, including the existence of complex accounting issues and the requirement that we prepare and file pro forma financial statements with the SEC that present operating results and the financial condition of several target businesses as if they had been operated on a combined basis. By completing our initial business combination with only a single entity our lack of diversification may subject us to numerous economic, competitive and regulatory risks. Further, we would not be able to diversify our operations or benefit from the possible spreading of risks or offsetting of losses, unlike other entities which may have the resources to complete several business combinations in different industries or different areas of a single industry. Accordingly, the prospects for our success may be:

solely dependent upon the performance of a single business, property or asset; or


dependent upon the development or market acceptance of a single or limited number of products, processes or services.

This lack of diversification may subject us to numerous economic, competitive and regulatory risks, any or all of which may have a substantial adverse impact upon the particular industry in which we may operate subsequent to our initial business combination.

We may attempt to simultaneously complete business combinations with multiple prospective targets, which may hinder our ability to complete our initial business combination and give rise to increased costs and risks that could negatively impact our operations and profitability.

If we determine to simultaneously acquire several businesses that are owned by different sellers, we will need for each of such sellers to agree that our purchase of its business is contingent on the simultaneous closings of the other business combinations, which may make it more difficult for us, and delay our ability, to complete our initial business combination. With multiple business combinations, we could also face additional risks, including additional burdens and costs with respect to possible multiple negotiations and due diligence investigations (if there are multiple sellers) and the additional risks associated with the subsequent assimilation of the operations and services or products of the acquired companies in a single operating business.revenue. If we are unable to adequately address these risks, it could negatively impacteffectively adapt to any shift, including failing to increase revenue from other markets, then our profitability and results of operations.financial performance may be harmed.

We may attempt to complete our initial business combination with a private company aboutbe unsuccessful in launching new product and service offerings or pursuing expansion of existing product and service offerings into new markets, which little information is available, which maycould result in a business combination with a companysignificant expense and may not achieve the desired results.

We regularly evaluate expanding our products into new markets or launching new service offerings in existing or new markets and plan to expand our markets significantly in the future. Any expansion or new offering requires significant expenses and the time of our key personnel, particularly at the outset of the process, and our new service offerings, and expansion of our Flex listing service platform may not result in the customer conversion or profitability that is not as profitablewe expect. We typically experience increased losses in new markets as we suspected, if at all.adjust to competitive environments with which we are unfamiliar and invest to build our brand presence within those markets. Our plans to expand and deepen our market share in our existing markets and expand into

In pursuing our acquisition strategy, we may seek

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additional markets are subject to effectuate our initial business combination with a privately held company. Very little public information generally exists about private companies,variety of risks and we could be required to make our decision on whether to pursue a potential initial business combination onchallenges. These risks and challenges include the basisvarying economic and demographic conditions of limited information, which may resulteach market, competition from local and regional residential brokerage firms, variations in a business combination with a company that is not as profitable as we suspected, if at all.

In order to effectuate an initial business combination, blank check companies have, in the recent past, amended various provisions of their charterstransaction dynamics, and modified governing instruments, including their warrant agreements.pricing pressures. We cannot assure you that we will be able to increase revenues and create business model efficiencies in new markets in the manner we have in our more mature existing markets.

Housing markets and housing stock in different areas can vary widely and certain markets may be more adaptable to our current business model than others. As we continue to expand, we may launch our products or services in markets that prove to be more challenging for our business model. As we expand from markets with a relatively new and homogeneous housing stock to markets with older and more diverse housing stock, we will have to adapt our business and operations to local conditions. The valuation technologies and systems that we currently use may not be as effective at accurately valuing homes in markets with older and more diverse housing stock. In addition, homes that we purchase in markets with relatively older housing stock may require more capital expenditures on improvements and repairs. We may also expand into markets with higher average home prices and fewer available homes within our target price range. If we are unable to adapt to these new markets and scale effectively, our business and results of operations may be adversely affected.

New markets and new product or service offerings may also subject us to new regulatory environments, which could increase our costs as we evaluate compliance with the new regulatory regime. Notwithstanding the expenses and time devoted to expanding an existing product or service offering into a new market or launching a new product offering, we may fail to achieve the financial and market share goals associated with the expansion. If we cannot manage our expansion efforts efficiently, our market share gains could take longer than planned and our related costs could exceed our expectations. In addition, we could incur significant costs to seek to amendexpand our amendedmarket share, and restated certificate of incorporation or governing instrumentsstill not succeed in attracting sufficient customers to offset such costs.

Our business model and growth strategy depend on our marketing efforts and ability to maintain our brand and attract customers to our platform in a mannercost-effective manner.

Our long-term success depends in part on our ability to continue to attract more buyers and sellers to our platform in each of our markets. We believe that an important component of our growth will be increased traffic to, and use of, our website and mobile application by potential customers. Our marketing efforts may not succeed for a variety of reasons, including changes to search engine algorithms, ineffective campaigns across marketing channels, limited experience in new marketing channels and any technical difficulties customers may experience using our applications. External factors beyond our control may also affect the success of our marketing initiatives, such as filtering of our targeted communications by email servers, buyers and sellers failing to respond to our marketing initiatives, and competition from third parties. Any of these factors could reduce the number of customers coming to our platform. Our business model relies on our ability to scale rapidly and to decrease incremental customer acquisition costs as we grow. If we are unable to recover our marketing costs through increases in customer traffic and in the number of transactions by users of our platform, or if our broad marketing campaigns are not successful or are terminated, it could have a material adverse effect on our growth, results of operations and financial condition.

We also believe that the brand identity that we have developed is a significant factor in the success of our business, and maintaining and enhancing the “Offerpad” brand is critical to maintaining and expanding our customer base and current and future partners. Failure to promote or maintain our brand, or incurring excessive costs in this effort, could adversely affect our business, operating results and financial condition.

Reductions in the availability of mortgage financing provided by government agencies, changes in government financing programs and an increase in mortgage interest rates has decreased and could continue to decrease our customers’ ability or desire to obtain financing and adversely affect our business or financial results.

The secondary market for mortgage loans continues to primarily desire securities backed by Fannie Mae, Freddie Mac or Ginnie Mae, and we believe the liquidity these agencies provide to the mortgage industry is important to the housing market. Any significant change regarding the long-term structure and viability of Fannie Mae and Freddie Mac could result in adjustments to the size of their loan portfolios and to guidelines for their loan products. Moreover, as we expand into higher cost markets or target higher-priced homes, home buyers, and accordingly demand for our homes and services, may be more acutely affected by these factors. Additionally, a reduction in the availability of financing provided by these institutions could adversely affect interest rates, mortgage availability and sales of new homes and mortgage loans.

During the year ended December 31, 2022, in response to inflationary pressures, the Federal Reserve Board implemented a series of increases to its benchmark interest rate. As a result, long-term mortgage interest rates rose during the year, with the average thirty-year fixed mortgage rate peaking at over 7% in late 2022, the highest level since the early 2000s. When interest rates increase, the cost of owning a home increases, which will likely reduce the number of potential home buyers who can obtain mortgage financing and affect the prices home buyers may be willing to pay for homes. During the second half of 2022, consumer demand for residential real estate softened considerably, due, in part, to the sudden and significant increase in mortgage interest rates since early 2022 and, if mortgage financing remains less available to home buyers either due to

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continued elevated interest rates or further increases in interest rates or a general tightening of credit conditions, it could result in a further decline in the demand for our homes and the services offered by our platform.

The residential real estate market is subject to seasonality, and our operating results are likely to fluctuate on a quarterly and annual basis.

We expect our revenue and results of operations to vary significantly from period to period in the future, based in part on, among other things, consumers’ home buying patterns. The residential real estate market is seasonal, with greater demand from home buyers in the spring and summer, and typically weaker demand in late fall and winter, resulting in fluctuations in the quantity, speed and price of transactions on our platform. We expect our financial results and working capital requirements to reflect seasonal variations over time, although our growth and market expansion have obscured the impact of seasonality in our historical financials to date.

If we do not innovate or provide customers with an efficient and seamless transaction experience, our business could be harmed.

The industry for residential real estate transaction services, technology, information marketplaces and advertising is dynamic, and the expectations and behaviors of customers and professionals shift constantly and rapidly. Our success depends on our continued innovation to provide new, and improve upon existing, products and services that make itreal estate transactions faster, easier and less stressful for our customers. The success of our business may also depend on our ability to successfully integrate additional ancillary services into our platform, including renovation, insurance and home warranty services. As a result, we must continually invest significant resources in research and development to improve the attractiveness and comprehensiveness of our products or services, enable smoother and more efficient real estate transactions, adapt to changes in technology and support new devices and operating systems. Changes or additions to our products or services may not attract or engage our customers, and may reduce confidence in our products or services, negatively impact the quality of our brand, upset other industry participants, expose us to completeincreased market or legal risks, subject us to new laws and regulations or otherwise harm our initialbusiness. Furthermore, if we are unable to successfully anticipate or keep pace with industry changes and provide products or services that our customers want to use, on the devices they prefer, then those customers may become dissatisfied and use our competitors instead. If we are unable to continue offering high-quality, innovative products, we may be unable to attract additional customers and real estate partners or retain our current customers and real estate partners, which could harm our business, combination that someresults of operations and financial condition.

A significant portion of our stockholders or warrant holderscosts and expenses are fixed, and we may not support.be able to adapt our cost structure to offset declines in our revenue.

InA significant portion of our expenses are fixed and do not vary proportionately with fluctuations in revenues. We need to maintain and continue to increase our transaction volumes to benefit from operating efficiencies. When we operate at less than expected capacity, fixed costs are inflated and represent a larger percentage of overall cost basis and percentage of revenue. Certain services we use, subscriptions and fees have fixed costs and are necessary for operation of the business. The other portion of fixed costs are necessary in order to effectuate an initialinvest in future growth. Given the early stage of our business, combination, blank check companies have, in the recent past, amended various provisions of their charters and modified governing instruments, including their warrant agreements. For example, blank check companies have amended the definition of business combination, increased redemption thresholds, extended the time to consummate an initial business combination and, with respect to their warrants, amended their warrant agreements to require the warrants to be exchanged for cash and/or other securities. Wewe cannot assure you that we will notbe able to rationalize our fixed costs.

Our growth depends in part on the success of our strategic relationships with third parties.

In order to grow our business, we anticipate that we will continue to depend on relationships with third parties, such as settlement service providers, lenders, real estate agents, valuation companies, vendors we use to renovate, service or repair our homes, third-party partners we rely on for referrals, such as homebuilders and online real estate websites or institutional buyers of our inventory. Identifying partners, and negotiating and documenting agreements with them, and establishing and maintaining good relationships requires significant time and resources.

In addition, we rely on our relationships with multiple-listing services providers (“MLS”) in all our markets both as key data sources for our pricing and for listing our inventory for resale. Many of our competitors and other real estate websites have similar access to MLSs and listing data and may be able to source real estate information faster or more efficiently than we can. If we lose existing relationships with MLSs and other listing providers, whether due to termination of agreements or otherwise, changes to our rights to use or timely access listing data, an inability to continue to add new listing providers or changes to the way real estate information is shared, our ability to price or list our inventory for resale could be impaired and our operating results may suffer.

If we are unsuccessful in establishing or maintaining successful relationships with third parties, our ability to compete in the marketplace or to grow our revenues could be impaired and our operating results may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our product or increased revenues.

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If the methodologies we use to assess the value and condition of homes are inaccurate, including because of the information supplied to us by prospective sellers or due to the physical inspections being ineffective, it could result in unforeseen costs and risks.

We make offers based in part on our assessment of offer requests completed by the prospective seller. While we may seek to amendconfirm or supplement the information provided in such an offer request through our charterown due diligence, including physical inspections, we may rely on the information supplied to us by prospective sellers to make offer decisions, and we cannot be certain that this information is accurate. If owner-supplied information is inaccurate, we may make poor or governing instrumentsimperfect pricing decisions and our portfolio may contain more risk than we believe. We also may conduct physical inspections of homes remotely through videos submitted to us by the sellers and this shift has been accelerated by health concerns associated with COVID-19, and this change may become permanent. It is possible that these video inspections may not be effective in identifying undisclosed issues, conditions or extenddefects that an in-person inspection might otherwise reveal, which could result in us incurring unforeseen costs during the resale process.

Our business is dependent upon an adequate and desirable supply of inventory, which is impacted by many factors. Any inability to acquire sufficient or desirable inventory may adversely affect our business, sales and results of operations.

We primarily acquire homes directly from consumers and there can be no assurance of an adequate or desirable supply of such homes on terms that are attractive to us. A reduction in the availability of or access to inventory could adversely affect our business, sales and results of operations. Additionally, we evaluate thousands of potential homes daily using our proprietary pricing model. If we fail to adjust our pricing to stay in line with broader market trends, or fail to recognize those trends, it could adversely affect our ability to acquire inventory. We remain dependent on customers to sell us homes.

Our ongoing ability to acquire homes is critical to our business model. A lack of available or desirable homes that meet our purchase criteria may affect our ability to scale. Reductions in our acquisitions of homes may have adverse effects on our ability to reach our desired inventory levels, our desired portfolio diversification and our results of operations.

During 2022, the residential real estate market conditions were highly volatile, with generally favorable conditions during the first half of the year, shifting to considerable softening in consumer demand for residential real estate during the second half of the year as a result of various macroeconomic factors negatively impacting housing affordability and homebuyer sentiment. Given our focus on risk management, and in response to this softening consumer demand, we adjusted our home purchase criteria through more conservative acquisition underwriting, resulting in higher expected internal rates of return based on current market conditions, and continued to adjust pricing on our inventory to reflect market level trends throughout the second half of 2022. These actions resulted in a significant reduction in our home acquisition pace to allow us to manage overall inventory growth, which led to the average holding period of homes sold increasing to 101 days during 2022, which is consistent with our expected average inventory holding period and our historical norm. As our overall inventory mix shifts and includes a lower composition of newer acquired homes, our average inventory holding period generally increases. As a result, and given our reduction in home acquisition pace, we anticipate our average inventory holding period will continue to increase in early 2023, causing an increase in holding costs and downward pressure on sales prices and margins.

In addition, increases in transaction costs to acquire properties, including costs of evaluating homes and making offers, title insurance and escrow service costs, changes in transfer taxes, and any other new or increased acquisition costs, would have an adverse impact on our home acquisitions and our business.

Our ability to compete effectively and execute on our strategic plan depends in part on our ability to manage home renovations.

Our business depends, in part, upon our ability to effectively manage home renovations. We typically renovate or repair homes prior to listing them for resale. We use internal employees and use third parties to renovate and repair homes before we resell them.

We or these third-party providers may not be able to complete the required renovations or repairs within the expected timeline or proposed budget. Furthermore, if the work quality of our employees or third-party providers does not meet our expectations, then we may need to engage another third-party contractor or subcontractor, which may also adversely affect the timeline or budget for completing renovations or repairs.

A longer than expected period for completing renovations or repairs could negatively impact our ability to sell a home within our anticipated timeline. This prolonged timing exposes us to factors that adversely affect the home’s resale value and may result in selling the home for a lower price than anticipated or not being able to sell the home at all. Meanwhile, incurring more than budgeted costs would adversely affect our investment return on purchased homes. Additionally, any undetected issues with a third-party provider’s work may adversely affect our reputation as a home seller.

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There are risks related to our ownership of vacant homes and the listing of those homes for resale that are not possible to fully eliminate.

The homes in our inventory generally are not occupied during the time we own them prior to consummateresale. When a home is listed for resale, prospective buyers or their agents typically can access our homes instantly through our technology without the need for an initial business combination in order to effectuate our initial business combination.

A provisionappointment or one of our warrant agreementrepresentatives being present. In certain circumstances, we also allow sellers to continue to occupy a home after we have purchased the home for a short period of time. Having visitors or short-term occupants in our homes entails risks of damage to the homes, personal injury, unauthorized activities on the properties, theft, rental scams, squatters and trespassers and other situations that may make it more difficulthave adverse impacts on us or the homes, including potential adverse reputational impacts. Additionally, all of these circumstances may involve significant costs to resolve that may not be fully covered by insurance, including legal costs associated with removing unauthorized visitors and occupants and additional holding and repair costs. If these increased costs are significant across our homes inventory, both in terms of costs per home and numbers of homes impacted, this could have an adverse impact on our results of operations that is material.

Our ability to recruit and retain a sufficient number of productive real estate agents is critical to maintaining and growing our business and providing an adequate level of service to our customers.

We have employed, and will continue to employ, internal and independent contractor real estate agents for our brokerage business. Our internal real estate agents generally earn less on a per transaction basis than traditional real estate agents who work as independent contractors at traditional brokerages. Because employing internal real estate agents is uncommon in our industry, real estate agents considering working for us as employees may not understand our compensation model or may not perceive it to consummate an initialbe more attractive than our independent contractor, commission-driven compensation model, and used by most traditional brokerages. If we are unable to attract, retain, effectively train, motivate, and utilize our real estate agents, we may be unable to grow our business combination.and we may be required to change our compensation model, which could significantly increase our real estate agent compensation or other costs.

Unlike many blank check companies, if (x)Also, when we issue additional sharesemploy internal real estate agents, we incur costs that we do not incur when we employ independent contractor real estate agents, such as base pay, employee benefits, expense reimbursement, training, and employee transactional support staff. As a result, we may have significant costs that, in the event of Classdownturns in demand in the markets we serve, may result in us being unable to adjust as rapidly as some of our competitors. In turn, such downturns may impact us more than our competitors.

If we are unable to successfully grow a sufficient base of productive independent real estate agents, we may be unable to maintain or grow revenues. A common stock or equity-linked securities (excludingvariety of factors impact our ability to attract and retain independent real estate agents, including but not limited to: intense competition from other brokerages; our ability to develop and deliver compelling products and services to independent real estate agents; our ability to generate high-quality leads to independent real estate agents; and our ability to adopt and implement commission plans (or pricing model structures) that are attractive to such agents.

If we are unable to successfully recruit and retain a sufficient number of productive internal and independent real estate agents we may be unable to maximize our revenue and market share growth.

We are subject to the forward purchase securities) for capital raising purposesrequirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses in connectionthe jurisdictions in which we do business.

Due to our brokerage business, we and our agents must comply with the closingrequirements governing the licensing and conduct of real estate brokerage and brokerage-related businesses in the markets in which we operate. Due to the geographic scope of our initialoperations, we and our real estate agents may not be in compliance with all of the required licenses at all times. Additionally, if we enter into new markets, we may become subject to additional licensing requirements. If we or our real estate agents fail to obtain or maintain the required licenses for conducting our brokerage operations or fail to strictly adhere to associated regulations, the relevant government authorities may order us to suspend relevant operations or impose fines or other penalties.

A health and safety incident relating to our operations could be costly in terms of potential liability and reputational damage.

Customers will visit homes on a regular basis through our mobile application or with a real estate agent. Due to the number of homes we own, the safety of our homes is critical to the success of our business. A failure to keep our homes safe that results in a major or significant health and safety incident could expose us to liability that could be costly. Such an incident could generate significant negative publicity and have a corresponding impact on our reputation, our relationships with relevant regulatory agencies or governmental authorities, and our ability to attract customers and employees, which in turn could have a material adverse effect on our financial results and liquidity.

Our risk management efforts may not be effective.

We could incur substantial losses and our business combination at an issue price or effective issue price of less than $9.20 per share of Class A common stock (withoperations could be disrupted if we are unable to effectively identify, manage, monitor and mitigate financial risks, such issue price or effective issue priceas pricing risk, interest rate risk, liquidity risk, and other market-related

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risks, as well as operational and legal risks related to be determined in good faith by our board of directorsbusiness, assets and liabilities. We also are subject to various laws, regulations and rules that are not industry specific, including employment laws related to employee hiring and termination practices, health and safety laws, environmental laws and other federal, state and local laws, regulations and rules in the case of any such issuancejurisdictions in which we operate. Our risk management policies, procedures, and techniques may not be sufficient to our sponsor or its affiliates, without taking into account any founder shares held by our sponsor or such affiliates, as applicable, prior to such issuance), (y) the aggregate gross


proceeds from such issuances represent more than 60%identify all of the total equity proceeds, and interest thereon, available forrisks to which we are exposed, mitigate the fundingrisks we have identified, or identify additional risks to which we may become subject in the future. Expansion of our initial business combination on the date of the consummation ofactivities may also result in our initial business combination (net of redemptions), and (z) the volume-weighted average trading price of our Class A common stock during the 10-trading day period starting on the trading day after the day onbeing exposed to risks to which we consummatehave not previously been exposed or may increase our initial business combination (such price, the “market value”) is below $9.20 per share, then the exercise price of the warrants will be adjusted (to the nearest cent)exposure 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 of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the market value and the newly issued price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the market value and the newly issued price. This may make it more difficult for us to consummate an initial business combination with a target business.

Our warrant agreement will designate the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actionsrisks, and we may not effectively identify, manage, monitor, and mitigate these risks as our business activities change or increase.

We are from time to time involved in, or may in the future be subject to, claims, suits, government investigations, and other proceedings that may be initiated by holders of our warrants, which could limitresult in adverse outcomes.

We are from time to time involved in, or may in the ability of warrant holders to obtain a favorable judicial forum for disputes with our company.

Our warrant agreement will provide that,future be subject to, applicable law, (i) any action, proceeding or claim against usclaims, suits, government investigations, and proceedings arising out of or relating in any way to the warrant agreement, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that we irrevocably submit to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. We will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any offrom our warrants shall be deemed to have notice of and to have consented to the forum provisions in our warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of our warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our warrant agreement inapplicable or unenforceablebusiness, including actions with respect to intellectual property, privacy, consumer protection, information security, mortgage lending, real estate, environmental, data protection or law enforcement matters, tax matters, labor and employment, and commercial claims, as well as actions involving content generated by our customers, shareholder derivative actions, purported class action lawsuits, and other matters. Such claims, suits, government investigations, and proceedings are inherently uncertain, and their results cannot be predicted with certainty. Regardless of the outcome, any such legal proceedings can have an adverse impact on us because of legal costs, diversion of management and other personnel, negative publicity and other factors. In addition, it is possible that a resolution of one or more of the specified types of actionssuch proceedings could result in reputational harm, liability, penalties, or proceedings, we may incur additional costs associated with resolving such matterssanctions, as well as judgments, consent decrees, or orders preventing us from offering certain features, functionalities, products, or services, or requiring a change in other jurisdictions,our business practices, products, services or technologies, which could in the future materially and adversely affect our business, operating results and financial condition.

We operate in a highly regulated industry and are subject to a wide range of federal, state and local laws, rules and regulations. Failure to comply with these laws, rules and regulations or to obtain and maintain required licenses, could adversely affect our business, financial condition and results of operationsoperations.

We operate in highly regulated businesses through a number of different channels across the United States. As a result, we are currently subject to a variety of, and resultmay in a diversion of the future become subject to additional, federal, state and local statutes and regulations in various jurisdictions (as well as judicial and administrative decisions and state common law), which are subject to change at any time, including laws regarding the real estate and mortgage industries, settlement services, insurance, mobile and internet-based businesses and other businesses that rely on advertising, as well as data privacy and consumer protection laws, and employment laws. These laws are complex and sometimes ambiguous, and can be costly to comply with, require significant management time and resourceseffort, require a substantial investment in technology, and subject us to claims, government enforcement actions, civil and criminal liability or other remedies, including suspension of business operations.

Buying and selling homes, providing real estate brokerage services, and providing other product offerings, such as mortgage brokerage services, results in us receiving or facilitating transmission of personally identifiable information. Further, in the future we may offer additional products and services, which could increase the amount of personally identifiable information we receive and transmit. This information is increasingly subject to legislation and regulation in the United States. These laws and regulations are generally intended to protect the privacy and security of personal information, including Social Security Numbers that is collected, processed and transmitted. These laws also can restrict our use of this personal information for other commercial purposes. We could be adversely affected if government regulations require us to significantly change our business practices with respect to this type of information, if penetration of network security or misuse of personal information occurs, or if the third parties that we engage with to provide processing and screening services violate applicable laws and regulations, misuse information, or experience network security breaches.

In order to provide the broad range of products and services that we offer or plan to offer customers, certain of our managementsubsidiaries are or will be required to maintain real estate brokerage and boardmortgage licenses in certain states in which we operate. These entities are subject to stringent state and federal laws and regulations and to the scrutiny of directors.state and federal government agencies as licensed businesses.

Mortgage products are regulated at the state level by licensing authorities and administrative agencies, with additional oversight from the Consumer Financial Protection Bureau and other federal agencies. These laws generally regulate the manner in which lending and lending-related activities are marketed or made available to consumers, including, but not limited to, advertising, finding and qualifying applicants, the provision of consumer disclosures, payments for services, and record keeping requirements; these laws include, at the federal level, the Real Estate Settlement Procedures Act, the Fair Credit Reporting Act (as amended by the Fair and Accurate Credit Transactions Act), the Truth in Lending Act (including the Home Ownership and Equity Protection Act of 1994), the Equal Credit Opportunity Act, the Fair Housing Act, the Gramm-Leach-Bliley Act, the Electronic Fund Transfer Act, the Servicemembers Civil Relief Act, the Military Lending Act, the Homeowners Protection Act, the Home Mortgage Disclosure Act, the Secure and Fair Enforcement for Mortgage Licensing Act of 2008, the

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Federal Trade Commission Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, the Bank Secrecy Act (including the Office of Foreign Assets Control and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act), the Telephone Consumer Protection Act, the Mortgage Acts and Practices Advertising Rule (Regulation N), the Coronavirus Aid, Relief, and Economic Security Act, all implementing regulations, and various other federal laws. The Consumer Financial Protection Bureau also has broad authority to enforce prohibitions on practices that it deems to be unfair, deceptive or abusive. Additionally, state and local laws may restrict the amount and nature of interest and fees that may be charged by a lender or mortgage broker, impose more stringent privacy requirements and protections for service members, and/or otherwise regulate the manner in which lenders or mortgage brokers operate or advertise.

As a provider of real estate brokerage services, we hold real estate brokerage licenses in multiple states and may apply for additional real estate brokerage licenses as our business grows. To maintain these licenses, we must comply with the requirements governing the licensing and conduct of real estate brokerage services and brokerage-related businesses in the markets where we operate. We may be unablesubject to obtain additional financinglocal, state and federal laws and regulations governing residential real estate transactions, including those administered by the U.S. Department of Housing and Urban Development, and the states and municipalities in which we transact. Further, due to completethe geographic scope of our initial business combination or to fund the operations and growththe nature of a target business, which could compel us to restructure or abandon a particular business combination.

Althoughthe products and services we believe that our net proceeds will be sufficient to allow us to complete our initial business combination, we cannot ascertain the capital requirements for any particular transaction. If the net proceedsprovide, certain of our initial public offeringother subsidiaries maintain real estate brokerage licenses in certain states in which we operate. Each of these licenses subjects our subsidiaries to different federal, state, and local laws and the salescrutiny of different licensing authorities, including state insurance departments. Each subsidiary must comply with different licensing statutes and regulations, as well as varied laws that govern the private placement warrantsoffering of compliant products and the forward purchase securities prove to be insufficient, either because of the size of our initial business combination, the depletion of the available net proceeds in search of a target business, the obligation to redeem for cash a significant number of shares from stockholdersservices.


who elect redemption in connection with our initial business combination or the terms of negotiated transactions to purchase shares in connection with our initial business combination,For certain licenses, we may beare required to seek additional financing designate individual licensed brokers of record, qualified individuals and control persons. Certain licensed entities also are subject to routine examination and monitoring by the federal Consumer Financial Protection Bureau (for mortgage) and/or to abandon the proposed business combination.state licensing authorities. We cannot assure you that such financingwe, or our licensed personnel, are and will be available on acceptable terms, ifremain at all. To the extent that additional financing proves to be unavailable when needed to complete our initial business combination, we would be compelled to either restructure the transaction or abandon that particular business combinationall times, in full compliance with state and seek an alternative target business candidate. In addition, even if we do not need additional financing to complete our initial business combination, we may require such financing to fund the operations or growth of the target business. The failure to secure additional financing could have a material adverse effect on the continued development or growth of the target business. None of our officers, directors or stockholders is required to provide any financing to us in connection with or after our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account,federal real estate, title insurance and our warrants will expire worthless.

If the funds not being held in the trust account are insufficient to allow us to operate until October 23, 2022,escrow, property and casualty insurance, and mortgage licensing and consumer protection laws and regulations, and we may be unablesubject to complete our initial business combination.

The funds available to us outside of the trust account may not be sufficient to allow us to operate until October 23, 2022, assuming that our initial business combination is not completed during that time. We expect to incur significant costs in pursuit of our acquisition plans. However, our affiliates are not obligated to make loans to uslitigation, government investigations and enforcement actions, fines or other penalties in the future,event of any non-compliance. As a result of findings from examinations, we also may be required to take a number of corrective actions, including modifying business practices and making refunds of fees or money earned. In addition, adverse findings in one state may be relied on by another state to conduct investigations and impose remedies. If we apply for new licenses, we will become subject to additional licensing requirements, which we may not be able to raise additional financing from unaffiliated parties necessary to fund our expenses. Any such eventin compliance with at all times. If in the future may negatively impact the analysis regarding our abilitya state agency were to continue as a going concern at such time.

We believedetermine that the funds available to us outside of the trust account, will be sufficient to allow us to operate until October 23, 2022; however, we cannot assure you that our estimate is accurate. Of the funds available to us, we could use a portion of the funds available to us to pay fees to consultants to assist us with our search for a target business. We could also use a portion of the funds as a down payment or to fund a “no-shop” provision (a provision in letters of intent or merger agreements designed to keep target businesses from “shopping” around for transactions with other companies or investors on terms more favorable to such target businesses) with respect to a particular proposed business combination, although we do not have any current intention to do so. If we entered into a letter of intent or merger agreement where we paid for the right to receive exclusivity from a target business and were subsequently required to forfeit such funds (whether as a result of our breach or otherwise), we might not have sufficient funds to continue searching for, or conduct due diligence with respect to, a target business. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

If the net proceeds not being held in the trust account are insufficient, it could limit the amount available to fund our search for a target business or businesses and complete our initial business combination and we will depend on loans from our sponsor or management team to fund our search, to pay our taxes and to complete our initial business combination.

Of the net proceeds of our initial public offering and the sale of the private placement warrants, only approximately $1.1 million is available as of December 31, 2020 to fund our working capital requirements. If we are required to seekobtain additional capital, we would need to borrow funds from our sponsor, management team or other third partieslicenses in that state in order to operate our business, or may be forced to liquidate. Neither our sponsor, members of our management team nor any of their affiliates is under any obligation to loan funds to us in such circumstances. Any such loans may be repaid only from funds held outside the trust accountif we lose or from funds released to us upon completion of our initial business combination. If we have not completed our initial business combination within the required time period because we do not have sufficient funds available to us, we will be forced to cease operations and liquidate the trust account. In such case, our public stockholders may receive only $10.00 per share,renew an existing license or less in certain circumstances, and our warrants will expire worthless.


Because of our limited resources and the significant competition for business combination opportunities, it may be more difficult for us to complete our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on our redemption of their stock, and our warrants will expire worthless.

We expect to encounter intense competition from other entities having a business objective similar to ours, including private investors (which may be individuals or investment partnerships), other blank check companies and other entities, domestic and international, competing for the types of businesses we intend to acquire. Many of these individuals and entities are well-established and have extensive experience in identifying and effecting, directly or indirectly, acquisitions of companies operating in or providing services to various industries. Many of these competitors possess greater technical, human and other resources or more local industry knowledge than we do and our financial resources will be relatively limited when contrasted with those of many of these competitors. While we believe there will be numerous target businesses we could potentially acquire with the net proceeds of our initial public offering and the sale of the private placement warrants, our ability to compete with respect to the acquisition of certain target businesses that are sizable will be limited by our available financial resources. This inherent competitive limitation gives others an advantage in pursuing the acquisition of certain target businesses. Furthermore, in the event we seek stockholder approval of our initial business combination and we are obligated to pay cash for shares of our Class A common stock, it will potentially reduce the resources available to us for our initial business combination. Any of these obligations may place us at a competitive disadvantage in successfully negotiating a business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

Because we must furnish our stockholders with target business financial statements, we may lose the ability to complete an otherwise advantageous initial business combination with some prospective target businesses.

The federal proxy rules require that a proxy statement with respect to a vote on a business combination meeting certain financial significance tests include historical and/or pro forma financial statement disclosure in periodic reports. We will include the same financial statement disclosure in connection with our tender offer documents, whether or not they are required under the tender offer rules. These financial statements may be requiredfound to be prepared in accordance with,violation of a law or be reconciled to, accounting principles generally accepted in the United States of America, or GAAP, or international financial reporting standards as issued by the International Accounting Standards Board, or IFRS, depending on the circumstances and the historical financial statements may be required to be audited in accordance with the standards of the Public Company Accounting Oversight Board (United States), or PCAOB. These financial statement requirements may limit the pool of potential target businesses we may acquire because some targets may be unable to provide such financial statements in time for us to disclose such financial statements in accordance with federal proxy rules and complete our initial business combination within the prescribed time frame.

If we are deemed to be an investment company under the Investment Company Act,regulation, we may be requiredsubject to institute burdensome compliance requirements andfines or legal penalties, lawsuits, enforcement actions, void contracts, or our activitiesbusiness operations in that state may be restricted, which may make it difficult for us to complete our initialsuspended or prohibited. Our business combination.

If we are deemed toreputation with consumers and third parties also could be an investment company under the Investment Company Act, our activities may be restricted, including:

restrictions on the nature of our investments; and

restrictions on the issuance of securities;

each of which may make it difficult for us to complete our initial business combination.


In addition, we may have imposed upon us burdensome requirements, including:

registration as an investment company with the SEC;

adoption of a specific form of corporate structure; and

reporting, record keeping, voting, proxy and disclosure requirements and compliance with other rules and regulations that we are currently not subject to.

We do not believe that our anticipated principal activities will subject us to the Investment Company Act. The proceeds held in the trust account may be invested by the trustee only in U.S. government treasury bills with a maturity of 185 days or less or in money market funds investing solely in U.S. treasuries and meeting certain conditions under Rule 2a-7 under the Investment Company Act. Because the investment of the proceeds will be restricted to these instruments, we believe we will meet the requirements for the exemption provided in Rule 3a-1 promulgated under the Investment Company Act. If we were deemed to be subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional expenses for which we have not allotted funds and may hinder our ability to consummate our initial business combination. If we have not completed our initial business combination within the required time period, our public stockholders may receive only approximately $10.00 per share, or less in certain circumstances, on the liquidation of our trust account and our warrants will expire worthless.

Changes in laws or regulations, or a failure to comply with any laws and regulations, may adversely affect our business, including our ability to negotiate and complete our initial business combination, and results of operations.

We are subject to laws and regulations enacted by national, regional and local governments. In particular, we will be required to comply with certain SEC and other legal requirements.damaged. Compliance with, and monitoring of, applicablethese laws and regulations is complicated and costly and may be difficult, time consuminginhibit our ability to innovate or grow.

If we are unable to comply with these laws or regulations in a cost-effective manner, it may require us to modify certain products and costly. Thoseservices, which could require a substantial investment and result in a loss of revenue, limit our ability to offer additional products and services, or expand existing products and services into new markets, or cease providing the impacted product or service altogether. Furthermore, laws and regulations and their interpretation and application may also change from time to time and those changes could have a material adverse effect on our products and business.

Catastrophic events may disrupt our business.

Natural disasters or other catastrophic events such as pandemics may cause damage or disruption to our operations, real estate commerce, and the global economy, and thus could harm our business. Properties located in the markets in which we operate in Florida and certain portions of North Carolina and Texas are more susceptible to certain hazards (such as floods, hurricanes or hail) than properties in other parts of the country.

In the event of a major earthquake, hurricane, windstorm, tornado, flood or catastrophic event such as pandemic, fire, flood, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure reputational harm, delays in developing our platform and solutions, breaches of data security and loss of critical data, all of which could harm our business, investments and results of operations.operations and financial condition. Furthermore, these sorts of catastrophic events may cause disruption on both the resale and acquisition side as we may not be able to transact on real estate. For example, homes that we own may be damaged and disruptions to infrastructure may mean our contractors are unable to perform the necessary home repairs in a timely manner. Closures of local recording offices or other governmental offices in charge of real property records, including tax or lien-related records, would adversely affect our ability to conduct operations in the affected geographies. Any of these delays will likely result in extended hold times, increased costs and impairments. Also, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions.

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As we grow our business, the need for business continuity planning and disaster recovery plans will grow in significance. If we are unable to develop adequate plans to ensure that our business functions continue to operate during and after a disaster, and successfully execute on those plans in the event of a disaster or emergency, our business and reputation would be harmed.

Environmentally hazardous conditions may adversely affect us.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such property. Such laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Even if more than one person may have been responsible for the contamination, each person covered by applicable environmental laws may be held responsible for all of the clean-up costs incurred. In addition, third parties may sue the owner or operator of a site for damages based on personal injury, natural resources or property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination. The presence of hazardous or toxic substances on one of our properties, or the failure to properly remediate a contaminated property, could give rise to a lien in favor of the government for costs it may incur to address the contamination or otherwise adversely affect our ability to sell the property. Environmental laws also may impose restrictions on the manner in which property may be used or businesses may be operated. A property owner who violates environmental laws may be subject to sanctions which may be enforced by governmental agencies or, in certain circumstances, private parties. In connection with the acquisition and ownership of our properties, we may be exposed to such costs. The cost of defending against environmental claims, of compliance with environmental regulatory requirements or of remediating any contaminated property could materially and adversely affect us.

Compliance with new or more stringent environmental laws or regulations or stricter interpretation of existing laws may require material expenditures by us. We may be subject to environmental laws or regulations relating to our properties, such as those concerning lead-based paint, mold, asbestos, radon, pesticides, proximity to power lines or other issues. We cannot assure you that future laws, ordinances or regulations will not impose any material environmental liability or that the current environmental condition of our properties will not be affected by existing conditions of the land, operations in the vicinity of the properties or the activities of unrelated third parties. In addition, we may be required to comply with various local, state and federal fire, health, life-safety and similar regulations. Failure to comply with applicable laws and regulations could result in fines and/or damages, suspension of personnel, civil liability or other sanctions.

Risks Related to Our Intellectual Property and Technology

Our internal information technology systems may fail or suffer security breaches, loss or leakage of data, and other disruptions, which could disrupt our business or result in the loss of critical and confidential information.

The evolution of technology systems introduces ever more complex security risks that are difficult to predict and defend against. An increasing number of companies, including those with significant online operations, have recently disclosed breaches of their security, some of which involved sophisticated tactics and techniques allegedly attributable to criminal enterprises or nation-state actors. Successful breaches, employee malfeasance, or human or technological error could result in, for example, unauthorized access to, disclosure, modification, misuse, loss, or destruction of company, customer, or other third-party data or systems; theft of sensitive, regulated, or confidential data including personal information and intellectual property; the loss of access to critical data or systems through ransomware, destructive attacks or other means; and business delays, service or system disruptions or denials of service. We experience cyber incidents and other security incidents of varying degrees from time to time, and there can be no assurance that any future incidents would not lead to costs or consequences that materially impact our operations or business. In response to these incidents, we have implemented controls and taken other preventative actions to further strengthen our systems against future incidents. However, we cannot guarantee that such measures will provide sufficient security, that we will be able to react in a timely manner, or that our remediation efforts following a cybersecurity incident will be successful.

In addition, we do not know whether our current practices will be deemed sufficient under applicable laws or whether new regulatory requirements might require us to make significant changes to our current practices. If there is a breach of our computer systems, and we know or suspect that certain personal information has been accessed, or used inappropriately, we may need to inform the affected individual (and regulatory body) and may be subject to significant fines and penalties. Further, under certain regulatory schemes, we may be liable for statutory damages on a per breached record basis, irrespective of any actual damages or harm to the individual. In the event of a breach we could face government scrutiny or consumer class actions alleging statutory damages amounting to hundreds of millions, and possibly billions of dollars.

The risk of cybersecurity incidents directed at us or our third-party partners and vendors includes uncoordinated individual attempts to gain unauthorized access to information technology systems, as well as to sophisticated and targeted measures known as advanced persistent threats. In addition, we face the risk of confidential data inadvertently leaking through human or technological errors. Cybersecurity incidents are also constantly evolving, increasing the difficulty of detecting and successfully defending against them. In the ordinary course of our business, we and our third-party partners and vendors collect

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and store personal information, as well as our proprietary business information and intellectual property and that of our customers and employees.

Additionally, we rely on third-parties and their security procedures for the secure storage, processing, maintenance, and transmission of information that is critical to our operations. Despite measures designed to prevent, detect, address, and mitigate cybersecurity incidents, such incidents may occur to us or our third-party providers and, depending on their nature and scope, could potentially result in the misappropriation, destruction, corruption or unavailability of critical data and confidential or proprietary information (our own or that of third parties, including personal information of our customers and employees) and the disruption of business operations. Any such compromises to our security, or that of our third-party partners or vendors, could cause customers to lose trust and confidence in us and stop using our website and mobile applications. In addition, we may incur significant costs for remediation that may include liability for stolen assets or information, repair of system damage, and compensation to customers, employees, and business partners. We may also be subject to government enforcement proceedings and legal claims by private parties. Actual or anticipated attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees and engage third-party experts and consultants.

Any actual or alleged security breaches or alleged violations of federal or state laws or regulations relating to privacy and data security could result in mandated user notifications, litigation, government investigations, significant fines, and expenditures; divert management’s attention from operations; deter people from using our platform; damage our brand and reputation; and materially adversely affect our business, results of operations, and financial condition. Defending against claims or litigation based on any security breach or incident, regardless of their merit, will be costly and may cause reputation harm. The successful assertion of one or more large claims against us that exceed available insurance coverage, denial of coverage as interpretedto any specific claim, or any change or cessation in our insurance policies and applied,coverages, including premium increases or the imposition of large deductible requirements, could have a material adverse effect on our business, includingresults of operations, and financial condition.

We process, store and use personal information and other data, which subjects us to governmental regulation and other legal obligations related to privacy, and any actual or perceived violation of these privacy obligations could result in a claim for damages, regulatory action, loss of business, or unfavorable publicity.

We receive, store and process personal information and other customer information, or personal information. There are numerous federal and state laws, as well as regulations and industry guidelines, regarding privacy and the storing, use, processing, and disclosure and protection of personal information, the scope of which are changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules. Additionally, laws, regulations, and standards covering marketing and advertising activities conducted by telephone, email, mobile devices, and the internet, may be applicable to our business, such as the Telephone Consumer Protection Act (the “TCPA”) (as implemented by the Telemarketing Sales Rule), the CAN-SPAM Act, and similar state consumer protection laws. We generally seek to comply with industry standards and are subject to the terms of our own privacy policies and privacy-related obligations to third parties. We strive to comply with all applicable laws, policies, legal obligations and industry codes of conduct relating to privacy and data protection to the extent possible. However, it is possible that these obligations may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or regulations, making enforcement, and thus compliance requirements, ambiguous, uncertain, and potentially inconsistent. Any failure or perceived failure by us to comply with our privacy policies, privacy-related obligations to customers or other third parties, or our privacy-related legal obligations, or any compromise of security that results in the unauthorized access to or unintended release of personally identifiable information or other customer data, may result in governmental enforcement actions, litigation, or public statements against us by consumer advocacy groups or others. Any of these events could cause us to incur significant costs in investigating and defending such claims and, if found liable, pay significant damages. Further, these proceedings and any subsequent adverse outcomes may cause our customers to lose trust in us, which could have an adverse effect on our reputation and business.

Any significant change to applicable laws, regulations or industry practices regarding the use or disclosure of personal information, or regarding the manner in which the express or implied consent of customers for the use and disclosure of personal information is obtained, could require us to modify our products and features, possibly in a material manner and subject to increased compliance costs, which may limit our ability to negotiatedevelop new products and completefeatures that make use of the personal information that our initialcustomers voluntarily share. For example, the California Consumer Privacy Act (the “CCPA”), which took effect on January 1, 2020, imposes obligations and restrictions on companies regarding their collection, use, and sharing of personal information and provides new and enhanced data privacy rights to California residents. The CCPA imposes a severe statutory damages framework. Since the enactment of the CCPA, new privacy and data security laws have been proposed in more than half of the states in the U.S. and in the U.S. Congress, including another law in California where voters approved a ballot initiative from privacy rights advocates intending to augment and expand the CCPA, the California Privacy Rights Act (the “CPRA”), on November 3, 2020, which took effect on January 1, 2023 (with a look back to data collected, on or after January 1, 2022). The CPRA significantly modifies the CCPA, including by creating a new state agency that will be

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vested with the authority to implement and enforce California’s privacy laws. Additionally, Nevada enacted a law that went into force on October 1, 2019 and requires companies to honor consumers’ requests to no longer sell their data. Violators may be subject to injunctions and civil penalties of up to $5,000 per violation. Several other states have already enacted, and are actively considering enacting privacy laws, which may impose substantial penalties for violations, impose significant costs for investigations and compliance, allow private class-action litigation and carry significant potential liability for our business. This existing and future legislation may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources to compliance programs, could impact strategies and availability of previously useful data and could result in increased compliance costs and/or changes in business combination,practices and policies, all of which we may not be able to expend resources toward. We expect that there will continue to be new proposed laws, regulations, and industry standards concerning privacy, data protection, and information security and we cannot determine the impact such future laws, regulations, and standards may have on our business. We could be subject to legal claims, government action, or harm to our reputation or incur significant remediation costs if we experience a security breach or our practices fail, or are seen as failing, to comply with our policies or with applicable laws concerning personally identifiable information.

Further, if the trend of new data privacy laws and increasing enforcement by regulators of the strict approach to the interpretation and implementation of such laws continues, this could lead to substantial costs, require significant systems changes, divert the attention of our personnel, increase costs and subject us to additional liabilities. Any of the foregoing could materially adversely affect our brand, reputation, business, results of operations, and financial condition.

The U.S. Federal Trade Commission and many state attorneys general are interpreting federal and state consumer protection laws to impose standards for the online collection, use, dissemination, and security of data. Such standards require us to publish statements that describe how we handle personal data and choices individuals may have about the way we handle their personal data. If such information that we publish is considered untrue or inaccurate, we may be subject to government claims of unfair or deceptive trade practices, which could lead to significant liabilities and consequences. State consumer protection laws provide similar causes of action for unfair or deceptive practices for alleged data privacy, data protection and data security violations

Any significant disruption in service in our computer systems and third-party networks and mobile infrastructure that we depend on could result in a loss of customers and we may be unable to maintain and scale the technology underlying our offerings.

Customers and potential customers access our products primarily through our website and mobile application. Our ability to attract, retain and serve customers depends on the reliable performance and availability of our website, mobile application, and technology infrastructure. Furthermore, we depend on the reliable performance of third-party networks and mobile infrastructure to provide our technology offerings to our customers and potential customers. The proper operation of these networks and infrastructure is beyond our control, and service interruptions or website unavailability could impact our ability to service our customers in a timely manner, and may have an adverse effect on existing and potential customer relationships.

Our information systems and technology may not be able to continue to accommodate our growth and may be subject to security risks. The cost of maintaining such systems may increase. Such a failure to accommodate growth, or an increase in costs related to such information systems, could have a material adverse effect on our business and results of operations.

Because we are neither limited to evaluating target businessesoperations and could result in a particular industry, sectorloss of customers.

Failure to protect our trade secrets, know-how, proprietary applications, business processes and other proprietary information, could adversely affect the value of our technology and products.

Our success and ability to compete depends in part on our intellectual property and our other proprietary business information. We seek to control access to our proprietary information by entering into a combination of confidentiality and proprietary rights agreements, invention assignment agreements and nondisclosure agreements with our employees, consultants and third parties with whom we have relationships. While these agreements will give us contractual remedies upon any unauthorized use or geography, nordisclosure of our proprietary information, we cannot guarantee that we will be able to detect such unauthorized activity, or if detected, that our rights under these agreements will be effective in controlling access to, or use and distribution of, our proprietary information, intellectual property or technology.

We have filed trademark and copyright applications to protect certain aspects of our intellectual property. However, we selected any specific target businesses with which to pursuecannot guarantee that we will be successful in registering our initial business combination, you willtrademarks or copyrights. We may be unable to ascertainsecure intellectual property protection for all of our technology and methodologies, or the meritssteps we take to enforce our intellectual property rights may be inadequate. Furthermore, monitoring unauthorized use of our intellectual property is difficult and costly, and we cannot guarantee that the steps we have taken to protect our proprietary technologies will be effective to enforce our rights against third parties. Third parties may knowingly or risksunknowingly infringe our proprietary rights or challenge proprietary rights held by us, and we may not be able to prevent infringement or misappropriation of our proprietary rights without incurring substantial expense. If our intellectual property rights are used or misappropriated by third parties, the value of our brand and other intangible assets may be diminished and competitors may be able to more effectively mimic our products and methods of

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operations. Any of these events would have a material adverse effect on our business, financial condition and results of operations.

In the future we may be party to intellectual property rights claims and other litigation which are expensive to support, and if resolved adversely, could have a significant impact on us.

Our competitors and other third parties may own or claim to own intellectual property relating to the real estate industry. In the future, third parties may claim that we are infringing on their intellectual property rights, and we may be found to be infringing such rights. Any claims or litigation, regardless of merit, could cause us to incur significant expenses. If any particular target business’ssuch claims are successfully asserted against us, it could require us to pay significant damages or ongoing licensing payments, prevent us from offering our products or services, or require us to comply with unfavorable terms. Even if we were to prevail, the time and resources necessary to resolve such disputes could be costly, time-consuming, and divert the attention of management and key personnel from our business operations.

We If we are not successful in defending ourselves against any potential future claims, we may seekbe required to complete apay damages and may be subject to injunctions, each of which could harm our business, combination with an operating company in any industry, sector or geography, but we will not, under our amended and restated certificate of incorporation, be permitted to effectuate our initial business combination solely with another blank check company or similar company with nominal operations. There is limited basis to evaluate the possible merits or risks of any particular target business’s operations, results of operations, financial condition and reputation.

Our services utilize third-party open source software components, which may pose particular risks to our proprietary software, technologies, products and services in a manner that could negatively affect our business.

We use open source software in our services and will continue to use open source software in the future. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide support, warranties, indemnification or other contractual protections regarding infringement claims or the quality of the code, and such open source software may not be regularly maintained and updated in order to contain and patch possible security vulnerabilities. To the extent that our services depend upon the successful operation of open source software, any undetected errors or defects in this open source software could prevent the deployment or impair the functionality of our platform, delay new solutions introductions, result in a failure of our platform, and injure our reputation.

Some open source licenses contain requirements that we make available source code for modifications or derivative works we create based upon the type of open source software we use, or grant other licenses to our intellectual property. If we combine our proprietary software with such open source software in a certain manner, we could, under certain open source licenses, be required to release or license the source code of our proprietary software to the public. Although we monitor our use of open-source software to avoid subjecting our platform to conditions we do not intend, we cannot assure that our processes for controlling our use of open-source software in our platform will be effective. From time to time, we may be subject to claims asserting ownership of, or demanding release of, our source code, the open source software or derivative works that were developed using such software, or requiring us to provide attributions of any open source software incorporated into our distributed software, or otherwise seeking to enforce the terms of the applicable open source license. These claims could also result in litigation, require us to purchase a commercial license or require us to devote additional research and development resources to re-engineer our software or change our products or services, any of which would have a negative effect on our business and results of operations. Additionally, the terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts. There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market or provide our products.

We rely on licenses to use the intellectual property rights of third parties which are incorporated into our products and services. Failure to renew or expand existing licenses may require us to modify, limit or discontinue certain offerings, which could materially affect our business, financial condition and results of operations.

We rely on products, technologies and intellectual property that we license from third parties for use in our services. We cannot assure that these third-party licenses, or support for such licensed products and technologies, will continue to be available to us on commercially reasonable terms, if at all. In the event that we cannot renew or expand existing licenses, we may be required to discontinue or limit our use of the products that include or incorporate the licensed intellectual property.

We cannot be certain that our licensors are not infringing the intellectual property rights of others or that our suppliers and licensors have sufficient rights to the technology in all jurisdictions in which we may operate. Some of our license agreements may be terminated by our licensors for convenience. If we are unable to obtain or maintain rights to any of this technology because of intellectual property infringement claims brought by third parties against our suppliers and licensors or against us, or if we are unable to continue to obtain the technology or enter into new agreements on commercially reasonable terms, our ability to develop our services containing that technology could be severely limited and our business could be harmed. Additionally, if we are unable to obtain necessary technology from third parties, we may be forced to acquire or develop alternate technology, which may require significant time and effort and may be of lower quality or performance standards. This would limit and delay our ability to provide new or competitive offerings and increase our costs. If alternate technology cannot be obtained or developed, we may not be able to offer certain functionality as part of our offerings, which could adversely affect our business, financial condition and results of operations.

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Our software is highly complex and may contain undetected errors.

The software and code underlying our platform is highly interconnected and complex and may contain undetected bugs, errors, malicious code, vulnerabilities, or other defects, some of which may remain undetected or may only be discovered after the code has been released. We release or update our software code regularly and this practice may result in the more frequent introduction of errors or vulnerabilities into the software underlying our platform, which can impact the customer experience on our platform. Additionally, due to the interconnected nature of the software underlying our platform, updates to certain parts of our code, including changes to our mobile application or website or third-party application programming interfaces on which our mobile application or website rely, could have an unintended impact on other sections of our code, which may result in errors or vulnerabilities to our platform. Any errors or vulnerabilities discovered in our code after release could impact the security of our systems or result in the inadvertent disclosure of sensitive or other regulated information, cause damage to our reputation, loss of our customers, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business.

Furthermore, our development and testing processes may not detect errors and vulnerabilities in our technology offerings prior to their implementation. Any inefficiencies, errors, technical problems or vulnerabilities arising in our technology offerings after their release could reduce the quality of our products or interfere with our customers’ access to and use of our technology and offerings.

Our fraud detection processes and information security systems may not successfully detect all fraudulent activity by third parties aimed at our employees or customers, which could adversely affect our reputation and business results.

Third-party actors have attempted in the past, and may attempt in the future, to conduct fraudulent activity by engaging with our customers, particularly in our title insurance and escrow business. We make a large number of wire transfers in connection with loan and real estate closings and process sensitive personal data in connection with these transactions. Though we have sophisticated fraud detection processes and have taken other measures to identify fraudulent activity on our mobile applications, websites and internal systems, we may not be able to detect and prevent all such activity. Similarly, the third parties we use to effectuate these transactions may fail to maintain adequate controls or systems to detect and prevent fraudulent activity. Persistent or pervasive fraudulent activity may cause customers and real estate partners to lose trust in us and decrease or terminate their usage of our products, or could result in financial loss, thereby harming our business and results of operations.

Risks Related to Our Liquidity and Capital Resources

We utilize a significant amount of indebtedness in the operation of our business, and so our cash flows liquidity,and operating results could be adversely affected by required payments of debt or related interest and other risks of our debt financing.

As of December 31, 2022, we had $666.1 million aggregate principal amount of indebtedness outstanding, including $581.7 million of loans under asset-backed senior and mezzanine secured credit facilities. Our leverage could have meaningful consequences to us, including increasing our vulnerability to economic downturns, limiting our ability to withstand competitive pressures, or reducing our flexibility to respond to changing business and economic conditions. We are also subject to general risks associated with debt financing, including (1) our cash flow may not be sufficient to satisfy required payments of principal and interest; (2) we may not be able to refinance our existing indebtedness or refinancing terms may be less favorable to us than the terms of our existing debt; (3) debt service obligations could reduce funds available for capital investment and general corporate purposes; (4) any default on our indebtedness could result in acceleration of the indebtedness and foreclosure on the homes collateralizing that indebtedness, with our attendant loss of any prospective income and equity value from such property; and (5) aged real estate may be ineligible for financing on our debt facilities potentially forcing the sale of aged real estate for prices that do not allow us to meet our margin targets or cover our costs to repay those facilities. Any of these risks could place strains on our cash flows, reduce our ability to grow and adversely affect our results of operations.

We rely on agreements with third parties to finance our business.

We have entered into debt agreements with a limited number of counterparties to provide capital for the growth and operation of our businesses, including to finance our purchase and renovation of homes. If we fail to maintain adequate relationships with potential financial conditionsources, or prospects.if we are unable to renew, refinance or extend our existing debt arrangements on favorable terms or at all, we may be unable to maintain sufficient inventory, which would adversely affect our business and results of operations. In addition, each of our secured credit facilities are not fully committed, meaning the applicable lender may not be obligated to advance new loan funds if they choose not to do so. Obtaining new or replacement funding arrangements may not be possible or may be at higher interest rates or other less favorable terms.

Our financing sources are not required to extend the maturities of our financing arrangements, and if a financing source is unable or unwilling to extend financing, and other financing sources are unable or unwilling to make or increase their financing commitments, then we will be required to repay the outstanding balance of the financing on the related maturity date. If we are unable to pay the outstanding balance of our debt obligations at maturity, the financing sources generally have the right to

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foreclose on the homes and other collateral securing that debt and to charge higher “default rates” of interest until the outstanding obligations are paid in full. If we are unable to renew or extend the terms of our existing senior and mezzanine secured credit facilities, we may not be able to terminate or prepay the secured credit facilities without incurring significant financial costs. If realized, any of these financing risks could negatively impact our results of operations and financial condition.

We intend to rely on proceeds from the sale of financed homes to repay amounts owed under our property financing facilities, but such proceeds may not be available or may be insufficient to repay the amounts when they become due.

For our senior and mezzanine secured credit facilities, we typically are required to repay amounts owed with respect to a financed home upon the sale of that home. There is no assurance such sale proceeds will fully cover the amounts owed. Our senior and mezzanine secured credit facilities commonly have initial terms of 18 to 24 months or less. It may be the case that not all homes securing these arrangements will be sold on or before the maturity dates of such financing arrangements, which would mean that sale proceeds would not be available to pay the amounts due at maturity. We may also be required to repay amounts owed with respect to a financed home prior to the sale of that home and prior to maturity of the related financing facility, typically due to the home having been held in our inventory for an extended period of time or, less commonly, if other unforeseen issues with the home arise during our holding period. In these situations, we may use cash on hand to repay the amounts owed or contribute other homes as additional collateral. To the extent we completedo not have sufficient cash or substitute collateral or are unable to draw on other financing facilities to make the required repayments, which could occur if a significant amount of our initial business combination,debt were to become due suddenly and unexpectedly, we would be in default under the related facility.

Covenants in our debt agreements may restrict our borrowing capacity or operating activities and adversely affect our financial condition.

Certain of our existing debt agreements contain, and future debt agreements may contain, various affirmative, negative, financial and collateral performance covenants. Specifically, we need to maintain a certain tangible net worth and liquidity minimums, and leverage maximums under certain of these facilities. These covenants may limit our operational flexibility or restrict our ability to engage in transactions that we believe would otherwise be in the best interests of our shareholders. If we breach these covenants, in certain cases, we could be required to repay all of the relevant debt immediately, even in the absence of a payment default. The occurrence of these events would have an adverse impact on our financial condition and results of operations and such impact could be material.

The borrowers and certain other loan parties under the debt facilities we use to finance the purchase and renovation of homes are special purpose entity (“SPE”) subsidiaries of Offerpad. While our SPEs’ lenders’ recourse in most situations following an event of default is only to the applicable SPE or its assets, we have provided limited non-recourse carve out guarantees under our senior and mezzanine secured credit facilities for certain of the SPEs’ obligations in situations involving “bad acts” by an Offerpad entity and certain other limited circumstances that are generally under our control. To the extent a guaranty obligation is triggered, we may become obligated to pay all or a portion of the amounts owed by our SPEs and other subsidiaries to their respective lenders.

Our debt facilities contain cross defaults and similar provisions that could cause us to be affected by numerous risks inherentin default under multiple debt facilities or otherwise lose access to financing for new homes and excess proceeds from sales of homes in the business operationsevent we default under a single facility.

If an event of default or similar event occurs under one of our senior or mezzanine secured credit facilities, this may trigger an event of default under another senior or mezzanine secured credit facility or result in us losing access to financing through our senior and mezzanine secured credit facilities or to excess proceeds from sales of homes that would otherwise be available to us. In addition, our senior and mezzanine secured credit facilities currently contain cross defaults to certain other indebtedness. The foregoing considerations significantly increase the likelihood that a default or similar event under one or more of our debt facilities would result in adverse consequences for our other debt facilities.

Failure to hedge effectively against interest rate changes may adversely affect our results of operations.

Borrowings under our senior secured facilities accrue interest at variable rates and expose us to interest rate risk. As interest rates increase, our debt service obligations on the variable rate indebtedness increase and our earnings and cash flows correspondingly decrease. Increased interest costs have also reduced the amount of debt financing that our homes inventory can support. Assuming no change in the outstanding borrowings on our senior secured credit facilities, we estimate that a one percentage point increase in the Secured Overnight Financing Rate would have increased our annual interest expense by $4.9 million during the year ended December 31, 2022.

In connection with whichour variable debt, we combine. For example,may seek to obtain interest rate protection in the form of swap agreements, interest rate cap contracts or similar derivatives or instruments to hedge against the possible negative effects of interest rate increases. There is no assurance that we will be able to obtain any such interest rate hedging arrangements on attractive terms or at all.

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Even if we combine with a financially unstable business or an entity lacking an established record of sales or earnings, we may be affected by the risks inherentare successful in the business and operations of a financially unstable or a development stage entity. Although our officers and directors will endeavor to evaluate the risks inherent in a particular target business,obtaining interest rate hedges, we cannot assure you that any hedging will adequately relieve the adverse effects of interest rate increases or that counterparties under these agreements will honor their obligations thereunder.

We could be subject to additional tax liabilities and our ability to use net operating loss carryforwards and other tax attributes may be limited in connection with the Business Combination or other ownership changes.

We are subject to federal and state income and non-income taxes in the United States. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating these taxes. Our effective tax rates could be affected by numerous factors, such as entry into new businesses and geographies, changes to our existing business and operations, acquisitions and investments and how they are financed, changes in our stock price, changes in our deferred tax assets and liabilities and their valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles and interpretations (such as the recent United States Inflation Reduction Act which, among other changes, introduced a 15% corporate minimum tax on certain United States corporations and a 1% excise tax on certain stock redemptions by United States corporations). We are required to take positions regarding the interpretation of complex statutory and regulatory tax rules and on valuation matters that are subject to uncertainty, and IRS or other tax authorities may challenge the positions that we take.

We generated net income during the year ended December 31, 2021. However, we incurred a net loss during the year ended December 31, 2022 and each year from inception through December 31, 2020, may not be profitable in the near future, and may never achieve long-term profitability. To the extent that we continue to generate taxable losses, unused losses will properly ascertaincarry forward to offset future taxable income, if any, until such unused losses expire, if at all. As of December 31, 2022, the Company had federal and state net operating loss (“NOL”) carryforwards of $426.5 million. Under the Tax Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), U.S. federal net operating loss carryforwards generated in taxable periods beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such net operating loss carryforwards in taxable years beginning after December 31, 2020, is limited to 80% of taxable income.

In addition, our net operating loss carryforwards are subject to review and possible adjustment by the IRS, and state tax authorities, and may be limited as a result of previous or assess allfuture changes in our ownership. Under Sections 382 and 383 of the significant risk factorsCode, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-ownership change net operating losses to offset future taxable income. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or that we will have adequate timemore stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Our existing net operating losses may be subject to complete due diligence. Furthermore, some of these riskslimitations arising from previous ownership changes, and if there is a future change in our stock ownership (which may be outside of our control and leave us with nocontrol) that results in an ownership change, our ability to controlutilize net operating losses could be further limited by Section 382 of the Code.

We will need additional capital to pursue our business objectives and respond to business opportunities, challenges or reduceunforeseen circumstances, and we cannot be sure that additional financing will be available.

We will require additional capital and debt financing to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including to increase our marketing expenditures to improve our brand awareness, build and maintain our inventory of homes, develop new products or services or further improve existing products and services (including mortgage lending), enhance our operating infrastructure and acquire complementary businesses and technologies. During economic and housing downturns, including the chancesrecent downturn, credit markets have constricted and reduced sources of liquidity.

If cash on hand and cash generated from operations are not sufficient to meet our cash and liquidity needs, we may need to seek additional capital and engage in equity or debt financings to secure funds. However, additional funds may not be available when we need them on terms that those risks will adversely impact a target business. We also cannot assure youare acceptable to us, or at all. In addition, any financing that an investment in our units will ultimately prove to be more favorable to investors than a direct investment, if such opportunity were available, in a business combination target. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reductionwe secure in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.


Compliance obligations under the Sarbanes-Oxley Actfuture could involve restrictive covenants which may make it more difficult for us to effectuateobtain additional capital and to pursue business opportunities.

Our ability to obtain financing will depend, among other things, on our initialproduct development efforts, business combination, require substantial financialplans, operating performance and management resources,condition of the capital markets and increasehousing markets at the time we seek financing. Volatility in the credit markets may also have an adverse effect on our ability to obtain debt financing. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, or may require us to agree to unfavorable terms, and costsour existing stockholders may experience significant dilution.

If new financing sources are required, but are insufficient or unavailable, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, operating results, financial condition and prospects could be adversely affected.

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We may use derivatives and other instruments to reduce our exposure to interest fluctuations and those derivatives and other instruments may not prove to be effective.

We may use derivatives or other instruments to reduce our exposure to adverse changes in interest rates. Hedging interest rate risk is a complex process, requiring sophisticated models and constant monitoring. Due to interest rate fluctuations, hedged assets and liabilities will appreciate or depreciate in market value. The effect of completing an initial business combination.

Section 404this unrealized appreciation or depreciation will generally be offset by income or loss on the derivative instruments that are linked to the hedged assets and liabilities. If we engage in derivative transactions, we will be exposed to credit and market risk. If the counterparty fails to perform, credit risk exists to the extent of the Sarbanes-Oxley Act requiresfair value gain in the derivative. Market risk exists to the extent that interest rates change in ways that are significantly different from what we expected when we entered into the derivative transaction. Our hedging activity, if any, may fail to provide adequate coverage for interest rate exposure due to market volatility, hedging instruments that do not directly correlate with the interest rate risk exposure being hedged or counterparty defaults on obligations.

Failures at financial institutions at which we deposit funds could adversely affect us.

We deposit substantial funds in various financial institutions in excess of insured deposit limits. In the event that one or more of these financial institutions fail, there is no guarantee that we evaluate and reportcould recover the deposited funds in excess of federal deposit insurance. Under these circumstances, our losses could have a material adverse effect on our systemresults of internal controls beginning withoperations or financial condition.

Risks Related to Our Capital Structure and Ownership of Our Class A Common Stock and Warrants

Future resales of common stock may cause the market price of our securities to drop significantly, even if our business is doing well.

Certain of our equityholders were in the past subject to lock-up restrictions that have expired as of the date of this Annual Report on Form 10-K for10-K. Now that these lock-up restrictions have expired, such equityholders are not restricted from selling shares of our Class A common stock held by them, other than by applicable securities laws. These sales, or the year ending December 31, 2021. Onlyperception in the event we are deemed to bemarket that the holders of a large accelerated filernumber of shares intend to sell shares, could reduce the market price of our securities. As restrictions on resale end, the sale or an accelerated filer, and no longer qualify as an emerging growth company, will we be required to comply withpossibility of sale of these shares could have the independent registered public accounting firm attestation requirement oneffect of increasing the volatility in the market price of our internal control over financial reporting. The fact that we are a blank check company makes compliance with the requirements of the Sarbanes-Oxley Act particularly burdensome on us as compared to other public companies because a target business with which we seek to complete our initial business combination may not be in compliance with the provisions of the Sarbanes-Oxley Act regarding adequacy of its internal controls. The development of the internal control of any such entity to achieve compliance with the Sarbanes-Oxley Act may increase the time and costs necessary to complete any such initial business combination.

Risks related to our securities

The NYSE may delist our securities from trading on its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Our units, Class A common stock, and warrants are listed on the NYSE. We cannot assure you that our securities will be, or will continue to be, listed on the NYSE in the future or prior to our initial business combination. In order to continue listing our securities on the NYSE prior to our initial business combination, we must maintain certain financial, distribution and stockmarket price levels. In general, we must maintain a minimum amount market capitalization (generally $50,000,000) and a minimum of 400 round lot holders. Additionally, in connection with our initial business combination, we will be required to demonstrate compliance with the NYSE’s initial listing requirements, which are more rigorous than the NYSE’s continued listing requirements, in order to continue to maintain the listing of our securities on the NYSE. For instance, our stock price would generally be required to be at least $4.00 per share, and our stockholders’ equity would generally be required to be at least $4,000,000. We cannot assure you that we will be able to meet those initial listing requirements at that time.

If the NYSE delists any of our securities from trading on its exchange and we are not able to list such securities on another national securities exchange, we expect such securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including:

a limited availability of market quotations for our securities;

reduced liquidity for our securities;

a determination that our Class A common stock could decline if the holders of currently restricted shares or other stockholders sell their shares or are perceived by the market as intending to sell them.

The provisions of our certificate of incorporation requiring exclusive forum in the Court of Chancery of the State of Delaware and the federal district courts of the United States for certain types of lawsuits may have the effect of discouraging lawsuits against our directors and officers.

Our certificate of incorporation provides that, to the fullest extent permitted by law, and unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) and any appellate court thereof will be the sole and exclusive forum for (i) any derivative action, suit or proceeding brought on our behalf, (ii) any action, suit or proceeding asserting a claim of breach of a fiduciary duty owed by any of our current or former directors, officers, stockholders or employees to us or our stockholders, (iii) any action, suit or proceeding arising pursuant to any provision of the General Corporation Law of the State of Delaware (the “DGCL”) or our bylaws or certificate of incorporation (as each may be amended from time to time), (iv) any action, suit or proceeding as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (v) any action, suit or proceeding asserting a claim against us or any current or former director, officer or stockholder governed by the internal affairs doctrine.

Notwithstanding the foregoing, our certificate of incorporation provides that the foregoing exclusive forum provision will not apply to suits brought to enforce any cause of action arising under the Securities Act, any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.

Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, both state and federal courts have jurisdiction to entertain such Securities Act claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act

These provisions may have the effect of discouraging lawsuits against our directors and officers. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any applicable action brought against us, a “penny stock” whichcourt could find the choice of forum provisions contained in our certificate of incorporation to be inapplicable or unenforceable in such action.

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We cannot predict the impact our multi-class structure may have on the stock price of our Class A common stock.

We cannot predict whether our multi-class structure will require brokers tradingresult in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences. For example, certain index providers have policies that restrict or prohibit the inclusion of companies with multiple-class share structures in certain of their indices, including the Russell 2000 and the S&P 500, S&P MidCap 400 and S&P SmallCap 600, which together make up the S&P Composite 1500. Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices; however, in October 2018, MSCI announced its decision to adhereinclude equity securities “with unequal voting structures” in its indices and to more stringent ruleslaunch a new index that specifically includes voting rights in its eligibility criteria. Under the announced policies, our multi-class capital structure will make us ineligible for inclusion in certain indices, and possiblyas a result, mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track those indices will not be investing in a reduced levelour stock. It is possible that these policies may depress the valuations of trading activity inpublicly traded companies that are excluded from the secondary trading market forindices compared to those of other similar companies that are included. Because of our securities;

a limited amountmulti-class structure, we will likely be excluded from certain of newsthese indices and analyst coverage;we cannot assure you that other stock indices will not take similar actions. Given the sustained flow of investment funds into passive strategies that seek to track certain indices, exclusion from stock indices would likely preclude investment by many of these funds and

a decreased ability to issue additional securities or obtain additional financing in the future.

The National Securities Markets Improvement Act could make shares of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.”  Our units,our Class A common stock less attractive to other investors. As a result, the market price of shares of our Class A common stock could be adversely affected.

Our founder and warrantsChief Executive Officer controls a significant percentage of our voting power and will qualifybe able to exert significant control over the direction of our business.

Brian Bair, our founder and Chief Executive Officer, holds shares of our Class B common stock that entitle him and his permitted transferees to 10 votes per share of Class B common stock until the Sunset Date, which is defined as covered securities under such statute. Althoughearlier of: (a) the states are preempted from regulatingdate that is nine months following the sale of covered securities, the federal statute does allow the states to investigate companies if theredate on which Mr. Bair (x) is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. While we are not aware of a state having used these powers to prohibit or restrict the sale of securities issued by blank check companies, other than the State of Idaho, certain state securities regulators view blank check companies unfavorably and might use these powers, or threaten to use these powers, to hinder the sale of securities of blank check companies in their states. Further, if we were no longer listed onproviding services, whether upon death, resignation, removal or otherwise, to us as a member of our senior leadership team, officer or director and (y) has not provided any such services for the NYSE,duration of such nine-month period; and (b) the date as of which Mr. Bair and his permitted transferees, in the aggregate, more than 75% of the shares of our securities would not qualifyClass B common stock that were outstanding as covered securities under such statuteof the closing of the Business Combination. As of January 31, 2023, Mr. Bair beneficially owned approximately 39.5% of the voting power of our company despite beneficially owning only 7.4% of our Class A common stock. Accordingly, for so long as Mr. Bair continues to control a significant percentage of the voting power of our company, he will be able to significantly influence the composition of our board and we would be subject to regulation in each state in which we offer our securities.


You will not be entitled to protections normally afforded to investors of many other blank check companies.

Since the net proceeds generated from our offeringmanagement and the saleapproval of the private placement warrants are intended to be used to completeactions requiring stockholder approval. The concentration of ownership could also deprive you of an initial business combination with a target business that has not been selected, we may be deemed to be a “blank check” company under the U.S. securities laws. However, because we have net tangible assets of at least $5,000,001 and we filed a Current Report on Form 8-K, including an audited balance sheet demonstrating this fact, we are exempt from rules promulgated by the SEC to protect investors in blank check companies, such as Rule 419. Accordingly, investors will not be afforded the benefits or protections of those rules. Among other things, this means our units will be immediately tradable and we will have a longer period of time to complete our initial business combination than do companies subject to Rule 419. Moreover, if we were subject to Rule 419, that rule would prohibit the release of any interest earned on funds held in the trust account to us unless and until the funds in the trust account were released to us in connection with our completion of our initial business combination.

You will not have any rights or interests in funds from the trust account, except under certain limited circumstances. To liquidate your investment, therefore, you may be forced to sell your public shares or warrants, potentially at a loss.

Our public stockholders will be entitledopportunity to receive funds from the trust account only upon the earliest to occur of: (1) the completion of our initial business combination, and then only in connection with thosea premium for your shares of Class A common stock that such stockholder properly elected to redeem, subject toas part of a sale of us and ultimately might affect the limitations described herein; (2) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (A) to modify the substance or timingmarket price of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by October 23, 2022 or during any Extension Period or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3) the redemption of all of our public shares if we have not completed our initial business combination by October 23, 2022, subject to applicableClass A common stock.

Delaware law and as further described herein. Stockholders who do not exercise their rights to the funds held in the trust account in connection with such an amendment to our certificate of incorporation would still have rights to the funds held in the trust account in connection with any other applicable amendment to our certificate of incorporation and bylaws contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

Our certificate of incorporation and bylaws and the DGCL contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a subsequent business combinationpremium for their shares. These provisions could also limit the price that investors might be willing to the extent they are then stockholders. In no other circumstances will a public stockholder have any right or interest of any kindpay in the trust account. Holdersfuture for shares of warrants willour Class A common stock, and therefore depress the trading price. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not havenominated by the incumbent members of our board of directors or taking other corporate actions, including effecting changes in our management. Among other things, our certificate of incorporation and bylaws include provisions that:

authorize Class B common stock that entitle Brian Bair, our Chief Executive Officer and founder, to 10 votes per share of such stock until the Sunset Date;
provide for a classified board of directors with staggered, three-year terms;
permit our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
following the Sunset Date, require that any right toaction of our stockholders be effected only at a meeting of stockholders and not by written consent;
following the proceeds heldSunset Date, provide that a director may be removed from office only for cause;
following the Sunset Date, provide that vacancies on our board of directors can be filled only by the vote of directors then in office;
prohibit cumulative voting in the trust accountelection of directors, which limits the ability of minority stockholders to elect director candidates;

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limit the liability of, and provide for the indemnification of, our directors and officers;
permit our board of directors to amend the bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt;
require a supermajority vote of stockholders to amend certain provisions of our certificate of incorporation and, following the Sunset Date, a supermajority vote of stockholders in order to amend the bylaws;
limit our ability to engage in business combinations with respectcertain interested stockholders without certain approvals; and
mandate advance notice procedures with which stockholders must comply in order to the warrants. Accordingly,nominate candidates to liquidate your investment, you mayour board of directors or to propose matters to be forced to sell your public shares or warrants, potentiallyacted upon at a loss.

Ourstockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may be held liable for claims by third parties against usdiscourage or deter a potential acquirer from conducting a solicitation of proxies to elect the extentacquirer’s own slate of distributions received by them upon redemption of their shares.

Under the DGCL, stockholders may be held liable for claims by third parties against a corporationdirectors or otherwise attempting to the extent of distributions received by them in a dissolution. The pro rata portionobtain control of our trust account distributed tocompany.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our public stockholders upon the redemptionboard of our public shares in the event we do not complete our initial business combination by October 23, 2022directors or during any Extension Period may be considered a liquidating distribution under Delaware law. If a corporation complies with certain procedures set forth in Section 280 of the DGCL intended to ensure that it makes reasonable provision for all claims against it, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidating distributions are made to stockholders, any liability of stockholders with respect to a liquidating distribution is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would be barred after the third anniversary of the dissolution. However, it is our intention to redeem our public shares as soon as reasonably possible following October 23, 2022 in the event we do not complete our initial business combination and, therefore, wemanagement.

We do not intend to comply with those procedures.pay cash dividends for the foreseeable future.


Because weWe currently intend to retain our future earnings, if any, to finance the further development and expansion of our business and do not intend to comply with Section 280, Section 281(b)pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of the DGCL requires us to adopt a plan, basedour board of directors and will depend on facts known to us atour financial condition, results of operations, capital requirements, restrictions contained in agreements and financing instruments, business prospects and such time that will provideother factors as our board of directors deems relevant.

Exercise of outstanding warrants for our paymentClass A common stock would increase the number of all existingshares eligible for future resale in the public market and pending claims or claims that may be potentially brought against us withinresult in dilution to our stockholders.

As of December 31, 2022, we had 21,783,284 outstanding warrants to purchase shares of our Class A common stock, which became exercisable beginning on October 23, 2021. The exercise price of these warrants is $11.50 per share, subject to adjustment as contemplated by the 10 years followingterms of our dissolution. However, because wewarrant agreement. To the extent such warrants are a blank check company, rather than an operating company, andexercised, additional shares of our operationsClass A common stock will be limited to searching for prospective target businesses to acquire, the only likely claims to arise would be from our vendors (such as lawyers, investment bankers, consultants, etc.) or prospective target businesses. If our plan of distribution complies with Section 281(b) of the DGCL, any liability of stockholders with respect to a liquidating distribution is limitedissued, which will result in dilution to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder, and any liability of the stockholder would likely be barred after the third anniversary of the dissolution. We cannot assure you that we will properly assess all claims that may be potentially brought against us. As such, our stockholders could potentially be liable for any claims to the extent of distributions received by them (but no more) and any liabilityholders of our stockholders may extend beyondcommon stock and increase the third anniversarynumber of such date. Furthermore, ifshares eligible for resale in the pro rata portionpublic market. Sales of our trust account distributed to our public stockholders upon the redemptionsubstantial numbers of our publicsuch shares in the event we do not complete our initial business combination by October 23, 2022public market or during any Extension Period is not considered a liquidating distribution under Delaware law andthe fact that such redemption distribution is deemed towarrants may be unlawful, then pursuant to Section 174 ofexercised could adversely affect the DGCL, the statute of limitations for claims of creditors could then be six years after the unlawful redemption distribution, instead of three years, as in the case of a liquidating distribution.

We may not hold an annual meeting of stockholders until after the consummation of our initial business combination and you will not be entitled to any of the corporate protections provided by such a meeting.

In accordance with NYSE corporate governance requirements, we are not required to hold an annual meeting until one year after our first year end following our listing on the NYSE. We may not hold an annual meeting of stockholders until after we consummate our initial business combination and thus may not be in compliance with Section 211(b) of the DGCL, which requires an annual meeting of stockholders be held for the purposes of electing directors in accordance with a company’s bylaws unless such election is made by written consent in lieu of such a meeting. Therefore, if our stockholders want us to hold an annual meeting prior to our consummation of our initial business combination, they may attempt to force us to hold one by submitting an application to the Delaware Court of Chancery in accordance with Section 211(c) of the DGCL. Additionally, only holders of Class B common stock will have the right to vote on the election of directors and to remove directors prior to our initial business combination, and such rights may only be amended by a resolution passed by the holders of a majoritymarket price of our Class BA common stock. However, there is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

We have not registeredThere is no guarantee that the issuance of sharespublic warrants will ever be in the money, and they may expire worthless.

The exercise price for our warrants is $11.50 per share of Class A common stock, issuable upon exercisesubject to adjustment. There is no guarantee that the public warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

Registration of the warrants under the Securities Act or any state securities laws,offer and such registrationissuance of shares of our Class A common stock may not be in place when an investor desires to exercise warrants, thus precluding such investor from being able to exercise its warrants except on a “cashless basis” and potentially causing such warrants to expire worthless.

We have not registered the issuance of shares of Class A common stock issuable upon exercise of the warrants under the Securities Act or any state securities laws. However, under the terms of the warrant agreement, we have agreed to use our commercially reasonable efforts to file a registration statement under the Securities Act covering such shares and maintain a current prospectus relating to the shares of our Class A common stock issuable upon exercise of the warrants until the expiration of the warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in themaintain an effective registration statement or prospectus,covering the financial statements contained or incorporated by reference therein are not current, complete or correct or the SEC issues a stop order.offer and issuance of shares of our Class A common stock underlying our warrants. If the issuance of the shares issuable upon exercise of the warrants areis not registered under the Securities Act, we will be required to permit holders to exercise their warrants on a cashless basis, in which case, the number of shares of Class A common stock that you will receive upon cashless exercise will be based on a formula subject to a maximum amount of shares equal to 0.361 shares of Class A common stock per warrant (subject to adjustment).basis. However, no warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from


registration is available. Notwithstanding the above, if our Class A common stock is at the time of any exercise of a warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of public warrants who exercise their warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, but we will use our commercially reasonablebest efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any warrant, or issue securities or other compensation in exchange for the warrants in the event that we are unable to register or qualify the shares underlying the warrants under applicable state securities laws and no exemption is available. If the issuance of the shares upon exercise of the warrants is not so registered or qualified or exempt from registration or qualification, the holder of such warrant shall not be entitled to exercise such warrant and such warrant may have no value and may expire worthless. In such event, holders who acquired their warrants as part of a purchase of units will have paid the full unit purchase price solely for the shares of Class A common stock included in the units. There may be a circumstance where an exemption from registration exists for holders of our private placement warrants to exercise their warrants while a corresponding exemption does not exist for holders of the warrants included as part of units sold in our initial public offering. In such an instance, our sponsor and its permitted transferees (which may include our directors and executive officers) would be able to exercise their warrants and sell the common stock underlying their warrants while holders of our public warrants would not be able to exercise their warrants and sell the underlying common stock. If and when the warrants become redeemable by us, we may

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exercise our redemption right even if we are unable to register or qualify the underlying shares of Class A common stock for sale under all applicable state securities laws. As

Our failure to meet the NYSE’s continued listing standards could result in a result, we may redeem the warrants as set forth above even if the holders are otherwise unable to exercise the warrants.

The grant of registration rights to our initial stockholders and their permitted transferees may make it more difficult to complete our initial business combination, and the future exercise of such rights may adversely affect the market pricedelisting of our Class A common stock.

Pursuant to an agreement entered into concurrentlyOn November 15, 2022, we were notified by the NYSE that we are not in compliance with the issuance and saleSection 802.01C of the securities in our initial public offering, at or after the time of our initial business combination, our initial stockholders and their permitted transferees can demand that we register the resale of their founder shares after those shares convert to shares of our Class A common stock. In addition, our sponsor and its permitted transferees can demand that we register the resale of the private placement warrants and the shares of Class A common stock issuable upon exercise of the private placement warrants, and holders of warrants that may be issued upon conversion of working capital loans may demand that we register the resale of such warrants or the Class A common stock issuable upon exercise of such warrants.

Pursuant to the forward purchase agreements, we have agreed to use our commercially reasonable efforts (i) to file within 30 days after the closing of the initial business combination a resale shelf registration statement with the SEC for a secondary offering of the forward purchase shares and the forward purchase warrants (and underlying shares of Class A common stock), (ii) to cause such registration statement to be declared effective promptly thereafter, (iii) to maintain the effectiveness of such registration statement until the earliest of (A) the date on which the forward purchasers or their assignees cease to hold the securities covered thereby, and (B) the date all of the securities covered thereby can be sold publicly without restriction or limitation under Rule 144 under the Securities Act and (iv) after such registration statement is declared effective, cause us to conduct certain underwritten offerings at the request of the forward purchasers, subject to certain limitations. In addition, the forward purchase agreements provide for certain “piggy-back” registration rights to the holders of forward purchase securities to include their securities in other registration statements filed by us.

We will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of our Class A common stock. In addition, the existence of the registration rights may make our initial business combination more costly or difficult to complete. This isNYSE Listed Company Manual because the stockholders of the target business may increase the equity stake they seek in the combined entity or ask for more cash consideration to offset the negative impact on the marketaverage closing price of our Class A common stock that is expected when the common stock owned by our initial stockholders or their permitted transferees, the private placement warrants owned by our sponsor or warrants issued in connection with working capital loans or the forward purchase securities are registered for resale.


Certain provisions of our amended and restated certificate of incorporation that relate to our pre-business combination activity (and corresponding provisions of the agreement governing the release of funds from our trust account) may be amended with the approval of holders of at least 65% of our outstanding common stock, which iswas less than $1.00 over a lower amendment threshold than that of some other blank check companies. It may be easier for us, therefore, to amend our amended and restated certificate of incorporation to facilitate the completion of an initial business combination that some of our stockholders may not support.

Some other blank check companies have a provision in their charter which prohibits the amendment of certain of its provisions, including those which relate to a company’s pre-business combination activity, without approval by holders of a certain percentage of the company’s stockholders. In those companies, amendment of these provisions typically requires approval by holders holding between 90% and 100% of the company’s public shares. Our amended and restated certificate of incorporation provide that any of its provisions related to pre-business combination activity (including the requirement to deposit proceeds of the initial public offering and the sale of the private placement warrants into the trust account and not release such amounts except in specified circumstances) may be amended if approved by holders of at least 65% of our outstanding common stock who attend and vote in a stockholder meeting, and corresponding provisions of the trust agreement governing the release of funds from our trust account may be amended if approved by holders of at least 65% of our outstanding common stock. Additionally, only holders of Class B common stock will have the right to voteconsecutive 30 trading-day period. The notice had no immediate impact on the election of directors and to remove directors prior to our initial business combination, and such rights may only be amended by a resolution passed by the holders of a majority of our Class B common stock. In all other instances, our amended and restated certificate of incorporation provides that it may be amended by holders of a majority of our common stock, subject to applicable provisions of the DGCL or applicable stock exchange rules. Our initial stockholders may participate in any vote to amend our amended and restated certificate of incorporation and/or trust agreement and have the discretion to vote in any manner they choose. As a result, we may be able to amend the provisions of our amended and restated certificate of incorporation which will govern our pre-business combination behavior more easily than some other blank check companies, and this may increase our ability to complete our initial business combination with which you do not agree.

Our sponsor, officers and directors have agreed, pursuant to a written agreement, that they will not propose any amendment to our amended and restated certificate of incorporation (A) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we do not complete our initial business combination by October 23, 2022 or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless we provide our public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the trust account, divided by the number of then outstanding public shares. These agreements are contained in a letter agreement that we have entered into with our sponsor, officers and directors. Our public stockholders are not parties to, or third-party beneficiaries of, these agreements and, as a result, will not have the ability to pursue remedies against our sponsor, officers or directors for any breach of these agreements. As a result, in the event of a breach, our public stockholders would need to pursue a stockholder derivative action, subject to applicable law.

Our initial stockholders will control the election of our board of directors until consummation of our initial business combination and will hold a substantial interest in us. As a result, they will elect all of our directors prior to the consummation of our initial business combination and may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support.

After the closing of our initial public offering, our initial stockholders owned 20% of our outstanding common stock (assuming they did not purchase any units in our initial public offering). In addition, the founder shares, all of which are held by our initial stockholders, entitle the holders to elect all of our directors prior to the consummation of our initial business combination. Holders of our public shares have no right to vote on the election of directors during such time. These provisions of our amended and restated certificate of incorporation may only be amended by a majority of our Class B common stock.


Accordingly, they may exert a substantial influence on actions requiring a stockholder vote, potentially in a manner that you do not support, including amendments to our amended and restated certificate of incorporation. If our initial stockholders purchased any units in the initial public offering or if our initial stockholders purchase any additional shares of Class A common stock in the aftermarket or in privately negotiated transactions, this would increase their control. Our sponsor has no current intention to purchase additional securities. Factors that would be considered in making such additional purchases would include consideration of the current trading price of our Class A common stock. In addition, our board of directors, whose members were elected by our sponsor, is divided into three classes, each of which will generally serve for three years with only one class of directors being elected in each year. We may not hold an annual meeting of stockholders to elect new directors prior to the completion of our business combination, in which case all of the current directors will continue in office until at least the completion of the business combination. If there is an annual meeting, as a consequence of our “staggered” board of directors, only a minority of the board of directors will be considered for election and our initial stockholders, because of their ownership position, will control the outcome, as only holders of Class B common stock will have the right to vote on the election of directors and to remove directors prior to our initial business combination. Accordingly, our initial stockholders will continue to exert control at least until the completion of our business combination.

We may amend the terms of the warrants in a manner that may be adverse to holders of public warrants with the approval by the holders of at least 65% of the then outstanding public warrants and forward purchase warrants. As a result, the exercise price of your warrants could be increased, the warrants could be converted into cash or stock, the exercise period could be shortened and the number of shareslisting of our Class A common stock, purchasable upon exercise of a warrant couldwhich will continue to be decreased, all without your approval.

Our warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent,listed and us. The warrant agreement providestraded on the NYSE during the period allowed to regain compliance, subject to our compliance with other listing standards. On November 16, 2022, we notified the NYSE that we intend to cure the termsstock price deficiency and to return to compliance with the NYSE continued listing standard. We can regain compliance at any time within the six-month period following receipt of the warrants may be amended withoutNYSE notice if on the consentlast trading day of any holder tocalendar month during the cure any ambiguity or correct any defective provision, but requires the approval by the holdersperiod our Class A common stock has a closing share price of at least 65% of the then outstanding public warrants to make any change that adversely affects the interests of the registered holders of public warrants$1.00 and forward purchase warrants. Accordingly, we may amend the terms of the public warrants and forward purchase warrants in a manner adverse to a holder if holdersan average closing share price of at least 65%$1.00 over the 30 trading-day period ending on the last trading day of that month. Under the then outstanding public warrants approveNYSE’s rules, if we determine that we will cure the stock price deficiency by taking an action that will require stockholder approval at our next annual meeting of such amendment. Although our ability to amendstockholders, the terms ofprice condition will be deemed cured if the public warrants withprice promptly exceeds $1.00 per share, and the consent ofprice remains above that level for at least 65% of the then outstanding public warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, convert the warrants into cash or stock, shorten the exercise period or decrease the number of shares of our common stock purchasable upon exercise of a warrant.following 30 trading days.

We may redeem your unexpired warrants prior to their exercise at a time that is disadvantageous to you, thereby making your warrants worthless.

We have the ability to redeem outstanding public warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales priceThe delisting of our Class A common stock equals or exceeds $18.00 per share (as adjustedfrom the NYSE may make it more difficult for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of Class A common stock and equity-linked securities as described above) for any 20 trading days within a 30 trading-day period endingus to raise capital on the third trading day prior to the date we send the notice of redemption to the warrant holders and provided that certain other conditions are met. If and when the warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. As a result, we may redeem the warrants as set forth above even if the holders are otherwise unable to exercise the warrants. Redemption of the outstanding warrants could force you to: (1) exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so; (2) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (3) accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, we expect would be substantially less than the market value of your warrants. None of the private placement warrants will be redeemable by us except as described in our prospectus so long as they are held by our sponsor or its permitted transferees.


In addition, we may redeem your warrants at any time after they become exercisable and prior to their expiration at a price of $0.10 per warrant upon a minimum of 30 days’ prior written notice of redemption provided that holders will be able to exercise their warrants prior to redemption for a number of Class A common stock determined based on the redemption date and the fair market value of our Class A common stock. Any such redemption may have similar consequences to a cash redemption described above. In addition, such redemption may occur at a time when the warrants are “out-of-the-money,” in which case you would lose any potential embedded value from a subsequent increasefavorable terms in the value of the Class A common stock had your warrants remained outstanding, and may not compensate the holders for the value of the warrants, including because the number of common stock received is capped at 0.361 shares of our Class A common stock per warrant (subject to adjustment) irrespective of the remaining life of the warrants.

Our warrants and founder shares mayfuture. Such a delisting would likely have an adversea negative effect on the market price of our Class A common stock and make it more difficultwould impair your ability to effectuate our initial business combination.

We have issued warrants tosell or purchase 13,416,667 shares of our Class A common stock at a price of $11.50 per whole share, and, simultaneously withwhen you wish to do so. Further, if we were to be delisted from the closing of our initial public offering, we issued in a private placement an aggregate of 6,700,000 private placement warrants, each exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. We also issued 1,666,667 forward purchase warrants concurrently with the closing of the sale of the forward purchase shares. Our initial stockholders currently hold 10,062,500 founder shares. The founder shares are convertible into shares of Class A common stock on a one-for-one basis, subject to adjustment. In addition, if our sponsor, an affiliate of our sponsor or certain of our officers and directors make any working capital loans, up to $1,500,000 of such loans may be converted into warrants, at the price of $1.50 per warrant at the option of the lender. Such warrants would be identical to the private placement warrants. To the extent we issue shares of Class A common stock to effectuate a business transaction, including the forward purchase shares, the potential for the issuance of a substantial number of additional shares of Class A common stock upon exercise of these warrants or conversion rights could make us a less attractive acquisition vehicle to a target business. Any such issuance will increase the number of outstanding shares ofNYSE, our Class A common stock would cease to be recognized as covered securities and reducewe would be subject to regulation in each state in which we offer our securities. Moreover, there is no assurance that any actions that we take to restore our compliance with Section 802.01C would stabilize the valuemarket price or improve the liquidity of our common stock, prevent our common stock from falling below the minimum bid price required for continued listing again or prevent future non-compliance with NYSE’s listing standards. There is also no assurance that we will maintain compliance with the other listing standards of the Class A commonNYSE. In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing standards would allow our securities to become listed again, stabilize the market price or improve the liquidity of our securities, or prevent future non-compliance with NYSE’s listing standards

General Risks Related to Offerpad

We have incurred, and expect to continue to incur, increased costs as a result of operating as a public company, and our management has devoted and will continue to devote substantial time to new compliance initiatives.

As a public company, we have incurred and expect to continue to incur significant legal, accounting and other expenses that we did not incur as a private company. As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as well as rules adopted, and to be adopted, by the SEC and the applicable stock issuedexchange. Our management and other personnel, many of whom have limited experience managing a public company, have devoted and will continue to complete the business combination. Therefore,need to devote a substantial amount of time to these compliance initiatives and we expect these rules and regulations to substantially increase our warrantslegal and founder shares mayfinancial compliance costs and make some activities more time-consuming and costly. For instance, while we have already incurred substantial expenses in obtaining director and officer liability insurance, we expect these rules and regulations to make it more difficult and more expensive for us to effectuate a business combination or increase the cost of acquiring the target business.

The private placement warrants are identical to the warrants sold as part of the units in the initial public offering except that, so long as they are held by our sponsor or its permitted transferees: (1) they will not be redeemable by us; (2) they (including the Class A common stock issuable upon exercise of these warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by our sponsor until 30 days after the completion of our initial business combination; (3) they may be exercised by the holders on a cashless basis;obtain director and (4) they (including the shares of common stock issuable upon exercise of these warrants) are entitled to registration rights. The private placement warrants will not vote on any amendments to the warrant agreement.

Because each unit contains one-third of one warrant and only a whole warrant may be exercised, the units may be worth less than units of other blank check companies.

Each unit contains one-third of one redeemable warrant. Pursuant to the warrant agreement, no fractional warrants will be issued upon separation of the units, and only whole warrants will trade. This is different from other companies similar to ours whose units include one share of Class A common stock and one whole warrant to purchase one whole share. We have established the components of the units in this way in order to reduce the dilutive effect of the warrants upon completion of a business combination since the warrants will be exercisable in the aggregate for a third of the number of shares compared to units that each contain a whole warrant to purchase one whole share, thus making us, we believe, a more attractive merger partner for target businesses. Nevertheless, this unit structure may cause our units to be worth less than if they included a warrant to purchase one whole share.


If we seek stockholder approval of our initial business combination and we do not conduct redemptions pursuant to the tender offer rules, and if you or a “group” of stockholders are deemed to hold in excess of 15% of our Class A common stock, you will lose the ability to redeem all such shares in excess of 15% of our Class A common stock.

If we seek stockholder approval of our initial business combination and we do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, our amended and restated 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 Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the shares sold in our initial public offering, without our prior consent, which we refer to as the “Excess Shares.” However, we would not be restricting our stockholders’ ability to vote all of their shares (including Excess Shares) for or against our initial business combination. Your inability to redeem the Excess Shares will reduce your influence over our ability to complete our initial business combination and you could suffer a material loss on your investment in us if you sell Excess Shares in open market transactions. Additionally, you will not receive redemption distributions with respect to the Excess Shares if we complete our initial business combination. As a result, you will continue to hold that number of shares exceeding 15% and, in order to dispose of such shares, would be required to sell your stock in open market transactions, potentially at a loss.

If third parties bring claims against us, the proceeds held in the trust account could be reduced and the per share redemption amount received by stockholders may be less than $10.00 per share.

Our placing of funds in the trust account may not protect those funds from third-party claims against us. Although we will seek to have all vendors, service providers (other than our independent registered public accounting firm), prospective target businesses and other entities with which we do business execute agreements with us waiving any right, title, interest or claim of any kind in or to any monies held in the trust account for the benefit of our public stockholders, such parties may not execute such agreements, or even if they execute such agreements they may not be prevented from bringing claims against the trust account, including, but not limited to, fraudulent inducement, breach of fiduciary responsibility or other similar claims, as well as claims challenging the enforceability of the waiver, in each case in order to gain an advantage with respect to a claim against our assets, including the funds held in the trust account. If any third party refuses to execute an agreement waiving such claims to the monies held in the trust account, our management will perform an analysis of the alternatives available to it and will only enter into an agreement with a third party that has not executed a waiver if management believes that such third party’s engagement would be significantly more beneficial to us than any alternative. Making such a request of potential target businesses may make our acquisition proposal less attractive to them and, to the extent prospective target businesses refuse to execute such a waiver, it may limit the field of potential target businesses that we might pursue. The underwriters of our initial public offering will not execute agreements with us waiving such claims to the monies held in the trust account.

Examples of possible instances where we may engage a third party that refuses to execute a waiver include the engagement of a third party consultant whose particular expertise or skills are believed by management to be significantly superior to those of other consultants that would agree to execute a waiver or in cases where we are unable to find a service provider willing to execute a waiver. In addition, there is no guarantee that such entities will agree to waive any claims they may haveofficer liability insurance in the future and we may be forced to accept reduced policy limits or incur substantially higher costs to maintain the same or similar coverage. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

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Our management has limited experience in operating a result of, or arising out of, any negotiations, contracts or agreements with us and will not seek recourse against the trust account for any reason. Upon redemptionpublic company.

Certain of our public shares, if weexecutive officers have not completed our initial business combination withinlimited experience in the required time period, or upon the exercisemanagement of a redemption rightpublicly traded company. Our management team may not successfully or effectively manage our transition to a public company that will be subject to significant regulatory oversight and reporting obligations under federal securities laws. Limited experience in connectiondealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of our initial business combination,management’s time may be devoted to these activities which will result in less time being devoted to our management and growth. We may not have adequate personnel with the appropriate level of knowledge, experience and training in the accounting policies, practices or internal control over financial reporting required of public companies in the U.S. Our management will need to continually assess our staffing and training procedures to improve our internal control over financial reporting. Further, the development, implementation, documentation and assessment of appropriate processes, in addition to the need to remediate any potential deficiencies, will require substantial time and attention from management. The development and implementation of the standards and controls necessary for us to achieve the level of accounting standards required of a public company in the U.S. may require costs greater than expected. It is possible that we will be required to provide for payment of claims of creditors that were not waived that may be brought against us within the 10 years following redemption. Accordingly, the per share redemption amount received byexpand our employee base and hire additional employees to support our operations as a public stockholders could be less than the $10.00 per share initially heldcompany which will increase its operating costs in the trust account, due to claims of such creditors.future periods.


Our sponsor has agreed that it will be liable to us if and to the extent any claims by a third party (other than our independent registered public accounting firm) for services rendered or products sold to us, or a prospective target business with which we have discussed entering into a transaction agreement, reduce the amount of funds in the trust account to below (1) $10.00 per public share or (2) such lesser amount per public share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes (net of taxes payable and less up to $100,000 of interest to pay dissolution expenses), except as to any claims by a third party who executed a waiver of any and all rights to seek access to the trust account and except as to any claims under our indemnity of the underwritersSome of our initial public offering against certain liabilities, including liabilities under the Securities Act. Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, our sponsor willpotential losses may not be responsible to the extent of any liability for such third party claims.covered by insurance. We have not independently verified whether our sponsor, which is a newly formed entity, has sufficient funds to satisfy its indemnity obligations and believe that our sponsor’s only assets are securities of our company and, therefore, our sponsor may not be able to satisfy those obligations. obtain or maintain adequate insurance coverage.

We have not askedmaintain insurance to cover costs and losses from certain risk exposures in the ordinary course of our sponsor to reserve for such obligations. As a result, if any such claims were successfully made against the trust account, the funds available foroperations, but our initial business combination and redemptions could be reduced to less than $10.00 per public share. In such event, weinsurance may not be able to complete our initial business combination, and you would receive such lesser amount per share in connection with any redemption of your public shares. None of our officers or directors will indemnify us for claims by third parties including, without limitation, claims by vendors and prospective target businesses.

The securities in which we invest the proceeds held in the trust account could bear a negative rate of interest, which could reduce the interest income available for payment of taxes or reduce the valuecover all of the assets held in trust such that the per share redemption amount received by stockholders may be less than $10.00 per share.

The net proceeds of our initial public offeringcosts and certain proceedslosses from the sale of the private placement warrants are held in the trust account. The proceeds held in the trust account may only be invested in direct U.S. government treasury obligations with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations. While short-term U.S. treasury obligations currently yield a positive rate of interest, they have briefly yielded negative interest rates in recent years. Central banks in Europe and Japan pursued interest rates below zero in recent years, and the Open Market Committee of the Federal Reserve has not ruled out the possibility that it may in the future adopt similar policies in the United States. In the event of very low or negative yields, the amount of interest income (which we are permitted to use for payment of our tax obligations, and up to $100,000 of dissolution expenses) would be reduced. In the event that we have not completed our initial business combination or make certain amendments to our amended and restated certificate of incorporation, our public stockholders are entitled to receive their pro-rata share of the proceeds held in the trust account, plus any interest income. If the balance of the trust account is reduced below $402,500,000 as a result of negative interest rates, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.00 per share.

If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and the members of our board of directors may be viewed as having breached their fiduciary duties to our creditors, thereby exposing the members of our board of directors and us to claims of punitive damages.

If, after we distribute the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover some or all amounts received by our stockholders. In addition, our board of directors may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith by paying public stockholders from the trust account prior to addressing the claims of creditors, thereby exposing itself and us to claims of punitive damages.


If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the trust account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the trust account, the per share amount that would otherwise be received by our public stockholders in connection with our liquidation would be reduced.

We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete our initial business combination with which a substantial majority of our stockholders do not agree.

Our amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that we will only redeem our public shares so long as our net tangible assets, after payment of the deferred underwriting commissions and after such redemptions, will be at least $5,000,001 (a) in the case of our initial business combination, either prior to or upon consummation of such initial business combination, after payment of the deferred underwriting commission or (b) in the case of an amendment to our amended and restated certificate of incorporation (i) to modify the substance or timing of our obligation to allow redemption in connection with our initial business combination or to redeem 100% of our public shares if we have not consummated our initial business combination by October 23, 2022 or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, upon such amendment (in each case such that we do not then become subject to the SEC’s “penny stock” rules), or any greater net tangible asset or cash requirement that may be contained in the agreement relating to our initial business combination. As a result, we may be able to complete our initial business combination even though a substantial majority of our public stockholders do not agree with the transaction and have redeemed their shares or, if we seek stockholder approval of our initial business combination and do not conduct redemptions in connection with our initial business combination pursuant to the tender offer rules, have entered into privately negotiated agreements to sell their shares to our sponsor, officers, directors, advisors or any of their affiliates. In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the proposed business combination exceed the aggregate amount of cash available to us, we will not complete the business combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

events. We are an emerging growth companyresponsible for certain retentions and a smaller reporting company within the meaning of the Securities Act, and if we take advantage of certain exemptions from disclosure requirements available to emerging growth companies or smaller reporting companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

We are an “emerging growth company” within the meaning of the Securities Act, as modifieddeductibles that vary by the JOBS Act,policy, and we may take advantagesuffer losses that exceed our insurance coverage limits by a material amount. We may also incur costs or suffer losses arising from events against which we have no insurance coverage. In addition, large-scale market trends or the occurrence 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationadverse events in our periodic reports and proxy statements, and exemptions from the requirementsbusiness may raise our cost of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, our stockholders may not have access to certain information they may deem important. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700 million as of the end of any second quarter of a fiscal year, in which case we would no longer be an emerging growth company as of the end of such fiscal year. We cannot predict whether investors will find our securities less attractive because we will rely on these exemptions. If some investors find our securities less attractive as a result of our reliance on these exemptions, the trading prices of our securities may be lower than they otherwise would be, there may be a less active trading market for our securities and the trading prices of our securities may be more volatile.


Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with newprocuring insurance 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. We have 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, we, 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 our 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.

Additionally, we are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the market value of our common stock held by non-affiliates exceeds $250 million as of the end of that fiscal year’s second fiscal quarter, and (2) our annual revenues exceeded $100 million during such completed fiscal year and the market value of our common stock held by non-affiliates exceeds $700 million as of the end of that fiscal year’s second fiscal quarter. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

Provisions in our amended and restated certificate of incorporation and Delaware law may inhibit a takeover of us, which could limit the price investors might be willing to pay in the future for our Class A common stock and could entrench management.

Our amended and restated certificateamount or type of incorporation contains provisions that may discourage unsolicited takeover proposals that stockholders may consider to be in their best interests. These provisions include a staggered board of directors and the ability of the board of directors to designate the terms of and issue new series of preferred shares, which may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

We are also subject to anti-takeover provisions under Delaware law, which could delay or prevent a change of control. Together these provisions may make more difficult the removal of management and may discourage transactions that otherwise could involve payment of a premium over prevailing market prices for our securities.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with our company or our company’s directors, officers or other employees.

Our amended and restated certificate of incorporation provides that, unlessinsurance we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for any (1) derivative action or proceeding brought on behalf of our company, (2) action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of our company to our company or our stockholders, or any claim for aiding and abetting any such alleged breach, (3) action asserting a claim against our company or any director or officer of our company arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or our bylaws, or (4) action asserting a claim against us or any director or officer of our company governed by the internal affairs doctrine except for, as to each of (1) through (4) above, any claim (a) as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (b)


which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or (c) arising under the federal securities laws, including the Securities Act, as to which the Court of Chancery and the federal district court for the District of Delaware shall concurrently be the sole and exclusive forums. Notwithstanding the foregoing, the provisions of this paragraph will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America shall be the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice of and to have consented to the forum provisions in our amended and restated certificate of incorporation. If any action the subject matter of which is within the scope the forum provisions is filed in a court other than a court located within the State of Delaware (a “foreign action”) in the name of any stockholder, such stockholder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such stockholder in any such enforcement action by service upon such stockholder’s counsel in the foreign action as agent for such stockholder.

This choice-of-forum provision may make it more costly for a stockholder to bring a claim, and it may also limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with our company or its directors, officers or other employees, which may discourage such lawsuits. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations and result in a diversion of the time and resources of our management and board of directors.

Risks related to our management, directors and employees

Past performance by our management team may not be indicative of future performance of an investment in us.

Information regarding performance by, or businesses associated with, our management team is presented for informational purposes only. Any past experience and performance of our management team and their respective affiliates is not a guarantee either: (1) that we will be able to successfully identify a suitable candidate for our initial business combination; or (2) of any results with respect to any initial business combination we may consummate. You should not rely on the historical record of our management team’s or their respective affiliate’s performance as indicative of the future performance of an investment in us or the returns we will, or are likely to, generate going forward.

Our directors may decide not to enforce the indemnification obligations of our sponsor, resulting in a reduction in the amount of funds in the trust account available for distribution to our public stockholders.

In the event that the proceeds in the trust account are reduced below the lesser of: (1) $10.00 per public share; or (2) such lesser amount per share held in the trust account as of the date of the liquidation of the trust account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes, and our sponsor asserts that it is unable to satisfy its indemnification obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in certain instances. For example, the cost of such legal action may be deemed by the independent directors to be too high relative to the amount recoverable or the independent directors may determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the trust account available for distribution to our public stockholders may be reduced below $10.00 per share.


We are dependent upon our directors and officers and their departure could adversely affect our ability to operate.

Our operations are dependent upon a relatively small group of individuals and in particular our senior management. We believe that our success depends on the continued service of our directors and officers, at least until we have completed our initial business combination. In addition, our directors and officers are not required to commit any specified amount of time to our affairs and, accordingly, will have conflicts of interest in allocating their time among various business activities, including identifying potential business combinations and monitoring the related due diligence. Moreover, certain of our directors and officers have time and attention requirements related to other obligations. We do not have an employment agreement with, or key-man insurance on the life of, any of our directors or officers. The unexpected loss of the services of one or more of our directors or officers could have a detrimental effect on us.

Our officers and directors will allocate their time to other businesses thereby causing conflicts of interest in their determination as to how much time to devote to our affairs. This conflict of interest could have a negative impact on our ability to complete our initial business combination.

Our officers and directors are not required to, and will not, commit their full time to our affairs, which may result in a conflict of interest in allocating their time between our operations and our search for a business combination and their other responsibilities. We do not intend to have any full-time employees prior to the completion of our initial business combination. Each of our officers and directors are engaged in other business endeavors for which he or she may be entitled to substantial compensation and our officers and directors are not obligated to contribute any specific number of hours per week to our affairs. Our directors may also serve as officers or board members for other entities. If our officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to our affairs which may have a negative impact on our ability to complete our initial business combination.

Our key personnel may negotiate employment or consulting agreements with a target business in connection with a particular business combination. These agreements may provide for them to receive compensation following our initial business combination and as a result, may cause them to have conflicts of interest in determining whether a particular business combination is the most advantageous.

Our key personnel may be able to remain with the company after the completion of our initial business combination only if they are able to negotiate employment or consulting agreements in connection with the business combination. Such negotiations would take place simultaneously with the negotiation of the business combination and could provide for such individuals to receive compensation in the form of cash payments and/or our securities for services they would render to us after the completion of the business combination. The personal and financial interests of such individuals may influence their motivation in identifying and selecting a target business. However, we believe the ability of such individuals to remain with us after the completion of our initial business combination will not be the determining factor in our decision as to whether or not we will proceed with any potential business combination. There is no certainty, however, that any of our key personnel will remain in senior management or advisory positions with us after the completion of our initial business combination. The determination as to whether any of our key personnel will remain with us will be made at the time of our initial business combination.

Members of our management team and affiliated companies have been, and may in the future be, involved in civil disputes or governmental investigations unrelated to our business.

Members of our management team have been involved in a wide variety of businesses. Such involvement has, and may lead to, media coverage and public awareness. As a result, members of our management team and affiliated companies have been, and may in the future be, involved in civil disputes or governmental investigations unrelated to our business. Any such claims or investigations may be detrimental to our reputation and could negatively affect our ability to identify and complete an initial business combination and may have an adverse effect on the price of our securities.


Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented.

Following the completion of our initial public offering and until we consummate our initial business combination, we intend to engage in the business of identifying and combining with one or more businesses. Certain of our officers and directors are now, and all of them may in the future become, affiliated with entities that are engaged in a similar business. Each of our officersand directorsarealsoofficersor directorsof both Supernova II and SupernovaIII.

Each of our officers and directors presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current fiduciary or contractual obligations, he or she will honor these obligations to present such business combination opportunity to such entity, and only present it to us if such entity rejects the opportunity. These conflicts may not be resolved in our favor and a potential target business may be presented to another entity prior to its presentation to us. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable for us to pursue.

In particular, our Chief Financial Officer Michael S. Clifton is party to an agreement with The Carlyle Group (“Carlyle”), which contains non-compete provisions that are currently applicable until September 2021. As a result of this obligation, Mr. Clifton is precluded, without Carlyle’s approval, from participating in the acquisition of any entity in which Carlyle or any of its affiliates was actively considering an investment as of the date of Mr. Clifton’s resignation from Carlyle. However, we do not expect this obligation to present a significant conflict of interest with our search for an initial business combination. In addition, our sponsor, officers and directors may participate in the formation of, become an officer or director of, invest in, or otherwise become associated with any other blank check company prior to completion of our initial business combination. As a result, our sponsor, officers or directors could have conflicts of interest in determining whether to present business combination opportunities to us or to any other blank check company with which they may become involved.

Our officers, directors and their respective affiliates may have competitive pecuniary interests that conflict with our interests.

secure. We have not adopted a policy that expressly prohibits our directors, officers or affiliates from having a direct or indirect pecuniary or financial interest in any investment to be acquired or disposed of by us or in any transaction to which we are a party or have an interest. In fact, we may enter into a business combination with a target business that is affiliated with our sponsor, our directors or officers. Nor do we have a policy that expressly prohibits any such persons from engaging for their own account in business activities of the types conducted by us. Accordingly, such persons or entities may have a conflict between their interests and ours.

Affiliates of our sponsor are engaged in an array of investment activities that may in the future create overlap with companies that may be a suitable business combination for us and companies that would make an attractive target for such other affiliates.


Risks related to the company after a business combination

Subsequent to our completion of our initial business combination, we may be required to subsequently take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on our financial condition, results of operations and the price of our securities, which could cause you to lose some or all of your investment.

Even if we conduct extensive due diligence on a target business with which we combine, we cannot assure you that this diligence will identify all material issues that may be present with a particular target business, that it would be possible to uncover all material issues through a customary amount of due diligence, or that factors outside of the target business and outside of our control will not later arise. As a result of these factors, we may be forced to later write-down or write-off assets, restructure our operations, or incur impairment or other charges that could result in our reporting losses. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on our liquidity, the fact that we report charges of this nature could contribute to negative market perceptions about us or our securities. In addition, charges of this nature may cause us to violate net worth or other covenants to which we may be subject as a result of assuming pre-existing debt held by a target business or by virtue of our obtaining post-combination debt financing. Accordingly, any stockholders or warrant holders who choose to remain a stockholder or warrant holder following our initial business combination could suffer a reduction in the value of their securities. Such stockholders or warrant holders are unlikely to have a remedy for such reduction in value.

Our ability to successfully effect our initial business combination and to be successful thereafter will be totally dependent upon the efforts of our key personnel, some of whom may join us following our initial business combination. The loss of key personnel could negatively impact the operations and profitability of our post-combination business.

Our ability to successfully effect our initial business combination is dependent upon the efforts of our key personnel. The role of our key personnel in the target business, however, cannot presently be ascertained. Although some of our key personnel may remain with the target business in senior management or advisory positions following our initial business combination, it is likely that some or all of the management of the target business will remain in place. While we intend to closely scrutinize any individuals we engage after our initial business combination, we cannot assure you that our assessment of these individuals will prove to be correct. These individuals may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.

Our management may not be able to maintain control of a target business after our initial business combination. We cannot provide assurance that, upon loss of control of a target business,current coverage, or obtain new management will possess the skills, qualifications or abilities necessary to profitably operate such business.

We may structure our initial business combination so that the post-transaction company in which our public stockholders own or acquire shares will own less than 100% of the equity interests or assets of a target business, but we will only complete such 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 interestcoverage in the target business sufficient for us not to be required to register as an investment company under the Investment Company Act. We will not consider any transaction that does not meet such criteria. Even if the post-transaction company ownsfuture; on commercially reasonable terms or acquires 50%at all. Incurring uninsured or more of the outstanding voting securities of the target,underinsured costs or losses could harm our stockholders prior to our initial business combination may collectively own a minority interest in the post business combination company, depending on valuations ascribed to the target and us in the initial business combination. For example, we could pursue a transaction in which we issue a substantial number of new shares of common stock in exchange for all of the outstanding capital stock of a target. In this case, we would acquire a 100% interest in the target. However, as a result of the issuance of a substantial number of new shares of common stock, our stockholders immediately prior to such transaction could own less than a majority of our outstanding shares of common stock subsequent to such transaction. In addition, other minority stockholders may subsequently combine their holdings resulting in a single person or group obtaining a larger share of the company’s stock than we initially acquired. Accordingly, this may make it more likely that our management will not be able to maintain our control of the target business.


If our management team pursues a company with operations or opportunities outside of the United States for our initial business combination, we may face additional burdens in connection with investigating, agreeing to and completing such combination, and if we effect such initial business combination, we would be subject to a variety of additional risks that may negatively impact our operations.

If our management team pursues a company with operations or opportunities outside of the United States for our initial business combination, we would be subject to risks associated with cross-border business combinations, including in connection with investigating, agreeing to and completing our initial business combination, conducting due diligence in a foreign market, having such transaction approved by any local governments, regulators or agencies and changes in the purchase price based on fluctuations in foreign exchange rates.

If we effect our initial business combination with such a company, we would be subject to any special considerations or risks associated with companies operating in an international setting, including any of the following:

costs and difficulties inherent in managing cross-border business operations and complying with commercial and legal requirements of overseas markets;

rules and regulations regarding currency redemption;

complex corporate withholding taxes on individuals;

laws governing the manner in which future business combinations may be effected;

tariffs and trade barriers;

regulations related to customs and import/export matters;

longer payment cycles;

changes in local regulations as part of a response to the COVID-19 coronavirus outbreak;

tax consequences, such as tax law changes, including termination or reduction of tax and other incentives that the applicable government provides to domestic companies, and variations in tax laws as compared to the United States;

currency fluctuations and exchange controls;

rates of inflation;

challenges in collecting accounts receivable;

cultural and language differences;

employment regulations;

crime, strikes, riots, civil disturbances, terrorist attacks, natural disasters and wars;

deterioration of political relations with the United States;

obligatory military service by personnel; and

government appropriation of assets.


We may not be able to adequately address these additional risks. If we were unable to do so, we may be unable to complete such combination or, if we complete such combination, our operations might suffer, either of which may adversely impact our results of operations and financial condition.

If our management following our initial business combination is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws, which could lead to various regulatory issues.

Following our initial business combination, any or all of our management could resign from their positions as officers of the company, and the management of the target business at the time of the business combination could remain in place. Management of the target business may not be familiar with U.S. securities laws. If new management is unfamiliar with U.S. securities laws, they may have to expend time and resources becoming familiar with such laws. This could be expensive and time-consuming and could lead to various regulatory issues which may adversely affect our operations.

Other risks

We have identified a material weakness in our internal control over financial reporting. This material weakness could continue to adversely affect our ability to report ourOur results of operations and financial condition accuratelyare subject to management’s accounting judgments and estimates, as well as changes in accounting policies.

The preparation of our financial statements requires us to make estimates and assumptions affecting the reported amounts of our assets, liabilities, revenues and expenses. If these estimates or assumptions are incorrect, it could have a timely manner.

Followingmaterial adverse effect on our results of operations or financial condition. Generally accepted accounting principles in the issuanceUnited States are subject to interpretation by the Financial Accounting Standards Board, the American Institute of Certified Public Accountants, the SEC, Staff Statementand various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on April 12, 2021, after consultation with our independent registered public accounting firm, our managementreported financial results, and our audit committee concluded that, in lightcould affect the reporting of transactions completed before the SEC Statement, it was appropriate to restate previously issued and audited financial statements asannouncement of and for the period ended December 31, 2020.a change.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Our management is likewise required on a quarterly basis, to evaluate the effectiveness of our internal controls andcontrol over financial reporting. If we are unable to disclose any changes and material weaknesses identified through such evaluation of those internal controls. A material weakness is a deficiency, or a combination of deficiencies, inmaintain effective internal control over financial reporting, such that there is a reasonable possibility that a material misstatementinvestors may lose confidence in the accuracy of our annual or interim financial statements will not be prevented or detected onreports.

As a timely basis.

As described elsewherepublic company, we are required to maintain internal control over financial reporting and to report any material weaknesses in this Amendment No. 1,such internal control. Pursuant to Section 404 of the Sarbanes-Oxley Act, we have identified a material weakness inare required to evaluate and determine the effectiveness of our internal control over financial reporting, relatedand our auditor is required, beginning with this Annual Report, to deliver an attestation report on the accounting for a significant and unusual transaction related to the warrants weeffectiveness of our internal control over financial reporting. An adverse report may be issued in connectionthe event our auditor is not satisfied with the level at which our initial public offering in October 2020. As a result of this material weakness, our management has concluded thatcontrols are documented, designed or operating.

When evaluating our internal control over financial reporting, waswe may identify material weaknesses that we may not effective as of December 31, 2020. This material weakness resultedbe able to remediate in a material misstatement of our derivative liabilities, change in fair value of derivative liabilities, Class A common stock subjecttime to possible redemption, accumulated deficit and related financial disclosuresmeet the applicable deadline imposed upon us for the Affected Periods. For a discussion of management’s consideration of the material weakness identified related to our accounting for a significant and unusual transaction related to the warrants we issued in connectioncompliance with the October 2020 initial public offering, see “Note 2—Restatementrequirements of Previously Issued Financial Statements” to the accompanying financial statements, as well as Part II, Item 9A: Controls and Procedures included in this Annual Report.

As described in Item 9A. “Controls and Procedures,” we have concluded that our internal control over financial reporting was ineffective as of December 31, 2020 because material weaknesses existed in our internal control over financial reporting. We have taken a number of measures to remediate the material weaknesses described therein; however, if we are unable to remediate our material weaknesses in a timely manner orSection 404. If we identify additional material weaknesses, we may be unable to provide required financial information in a timely and reliable manner and we may incorrectly report financial information. Likewise, if our financial statements are not filed on a timely basis, we could be subject to sanctions or investigations by the stock exchange on which our common stock is


listed, the SEC or other regulatory authorities. Failure to timely file will cause us to be ineligible to utilize short form registration statements on Form S-3 or Form S-4, which may impair our ability to obtain capital in a timely fashion to execute our business strategies of issue shares to effect an acquisition. In either case, there could result a material adverse effect on our business. The existence of material weaknesses or significant deficiencies in internal control over financial reporting could adversely affect our reputation or investor perceptions of us, which could have a negative effect on the trading price of our stock. In addition, we will incur additional costs to remediateany material weaknesses in our internal control over financial reporting as describedor are unable to comply with the requirements of Section 404 in Item 9A. “Controls and Procedures”.

Furthermore, as a result of such material weakness, the change in accounting for the warrants, and other matters raisedtimely manner or assert that may in the future be raised by the SEC, we face potential for litigation or other disputes which may include, among others, claims invoking the federal and state securities laws, contractual claims or other claims arising from the material weaknesses in our internal control over financial reporting is ineffective, or if our auditor is unable to express an opinion as to the effectiveness of our internal control over financial reporting, we could fail to meet our reporting obligations or be required to restate our financial statements for prior periods.

In addition, our internal control over financial reporting will not prevent or detect all errors and fraud. Because of the preparationinherent limitations in all control systems, no evaluation can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

If there are material weaknesses or failures in our ability to meet any of the requirements related to the maintenance and reporting of our internal control, investors may lose confidence in the accuracy and completeness of our financial statements. reports and that could cause the price of our Class A common stock to decline. In addition, we could become subject to investigations by

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the applicable stock exchange, the SEC or other regulatory authorities, which could require additional management attention and which could adversely affect our business.

We may acquire other businesses which could require significant management attention, disrupt our business, dilute stockholder value and adversely affect our operating results.

As part of our business strategy, we may make investments in or acquire other companies, products or technologies. We may not realize benefits from any acquisition that we may make in the future. If we fail to integrate successfully such acquisitions, or the businesses and technologies associated with such acquisitions, into our company, the revenue and operating results of the datecombined company could be adversely affected. Any integration process will require significant time and resources, and we may not be able to manage the process successfully. We may not successfully evaluate or utilize the acquired business or technology and accurately forecast the financial impact of an acquisition transaction, including accounting charges. We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial condition or the value of our capital stock. The sale of equity or issuance to finance any such acquisitions could result in dilution to our stockholders. The incurrence of indebtedness in connection with an acquisition would result in increased fixed obligations and could also include covenants or other restrictions that may impede our ability to manage our operations.

We are and will continue to be dependent on key personnel, and our failure to attract and retain other highly qualified personnel could harm our business.

Our success depends upon the continued service of our senior management team and successful transitions when management team members pursue other opportunities. In addition, our business depends on our ability to continue to attract, motivate and retain a large number of skilled employees across all of our product and service lines. Furthermore, much of our key technology and processes are custom-made for our business by our personnel. The loss of key personnel, including key members of management, as well as our engineering, product development, home operations, marketing, sales and support, finance and legal personnel could materially and adversely affect our ability to build on the efforts they have undertaken and to execute our business plan, and we may not be able to find adequate replacements. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees in a cost-effective manner, our business could be harmed.

We may issue additional shares of common stock or other equity securities without your approval, which would dilute your ownership interests and may depress the market price of your shares.

We may issue additional shares of common stock or other equity securities of equal or senior rank in the future in connection with, among other things, future acquisitions, repayment of outstanding indebtedness or under our incentive plan or employee stock purchase plan, without stockholder approval, in a number of circumstances.

Our issuance of additional shares of common stock or other equity securities of equal or senior rank could have the following effects:

your proportionate ownership interest in our company will decrease;
the relative voting strength of each previously outstanding share of our common stock may be diminished; or
the market price of our shares may decline.

A market for our securities may not continue, which would adversely affect the liquidity and price of our securities.

An active trading market for our securities may not be sustained. In addition, the price of our securities can vary due to general economic conditions and forecasts, our general business condition and the release of our financial reports.

In the absence of a liquid public trading market:

you may not be able to liquidate your investment in our securities;
you may not be able to resell your securities at or above the price at which you acquired them;
the market price of shares of our securities may experience significant price volatility; and
there may be less efficiency in carrying out your purchase and sale orders.

Additionally, if our securities become delisted from the NYSE for any reason, and are quoted on the OTC Bulletin Board, an inter-dealer automated quotation system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited than if our securities were quoted or listed on the NYSE or another national securities exchange. You may be unable to sell your securities unless a market can be established or sustained.

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The market price of our securities may be volatile.

The trading price of our securities has fluctuated and may continue to fluctuate substantially and may be lower than the price at which you purchase such securities. This is especially true for companies like ours with a small public float. The trading price of our Class A common stock will depend on many factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. These fluctuations could cause you to lose all or part of your investment.

Factors affecting the trading price of our securities may include:

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to ours;
changes in the market’s expectations about our operating results;
the public’s reaction to our press releases, other public announcements and filings with the SEC;
speculation in the press or investment community;
actual or anticipated developments in our business, competitors’ businesses or the competitive landscape generally;
the operating results failing to meet the expectation of securities analysts or investors in a particular period;
changes in financial estimates and recommendations by securities analysts concerning us or the market in general;
operating and stock price performance of other companies that investors deem comparable to ours;
changes in laws and regulations affecting our business;
commencement of, or involvement in, litigation involving us;
changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;
the volume of our Class A common stock available for public sale;
any major change in our board of directors or management;
sales of substantial amounts of our Class A common stock by our directors, officers or significant stockholders or the perception that such sales could occur;
general economic and political conditions such as recessions, interest rate levels, “trade wars,” pandemics (such as COVID-19) and acts of war or terrorism; and
other risk factors listed under “Risk Factors.”

Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general and the NYSE have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our securities, may not be predictable. A loss of investor confidence in the market for the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial conditions or results of operations. A decline in the market price of our securities also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.

In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies. Litigation of this Annual Report, we have no knowledgetype, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination in any such litigation or dispute. However,any amounts paid to settle any such actual or threatened litigation could require that we canmake significant payments.

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to a variety of factors, some of which are beyond our control, resulting in a decline in our stock price.

If securities or industry analysts cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations regarding our Class A common stock, then the price and trading volume of our securities could decline.

The trading market for our securities will be influenced by the research and reports that industry or securities analysts may publish about us, our business and operations, our market, or our competitors. If any of the analysts who cover us adversely change their recommendation regarding our securities, or provide no assurance that such litigationmore favorable relative recommendations about our competitors, the price of our Class A common stock and warrants would likely decline. If any analyst who may cover us were

Offerpad Solutions Inc. | 2022 Form 10-K | 37


to cease coverage of us or dispute will not arisefail to regularly publish reports on us, we could lose visibility in the future. Any such litigationfinancial markets, which could cause our stock price or dispute, whether successfultrading volume to decline.

The increasing focus on environmental sustainability and social initiatives could increase our costs, harm our reputation and adversely impact our financial results.

There has been increasing public focus by investors, customers environmental activists, the media and governmental and nongovernmental organizations on a variety of environmental, social and other sustainability matters. We may experience pressure to make commitments relating to sustainability matters that affect us, including the design and implementation of specific risk mitigation strategic initiatives relating to sustainability. If we are not effective in addressing environmental, social and other sustainability matters affecting our business, or setting and meeting relevant sustainability goals, our reputation and financial results may suffer. We may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.

In addition, this emphasis on environmental, social and other sustainability matters has resulted and may result in the adoption of new laws and regulations, including new reporting requirements. If we fail to comply with new laws, regulations or reporting requirements, our reputation and business could be adversely impacted.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We lease our corporate headquarters in Chandler, Arizona, along with field office facilities in most of the metropolitan markets in which we operate in the United States.

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From time to time, we may become involved in actions, claims, suits and other legal proceedings arising in the ordinary course of our business, including assertions by third parties relating to intellectual property infringement, breaches of contract or warranties or employment-related matters. We are not couldcurrently a party to any actions, claims, suits or other legal proceedings the outcome of which, if determined adversely to us, would individually or in the aggregate have a material adverse effect on our business, financial condition, results of operations and financial condition or our ability to complete a Business Combination.cash flows.

We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weakness identified or that any additional material weaknesses or restatementsThe outcome of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our financial statements.

Our warrants and forward purchase agreements are accounted for as derivative liabilities with changes in fair value each period included in earnings, which may have an adverse effect on the market price of our Class A common stock or may make it more difficult for us to consummate an initial business combination.

We account for our Warrants and forward purchase agreements as derivative liabilities. At each reporting period (1) the accounting treatment of the Warrants and forward purchase agreements will be re-evaluated for proper accounting treatment as a liability or equity and (2) the fair value of the liability of the public warrants and private placement warrants and the forward purchase agreements will be remeasured and the change in the fair value of the liability will be recorded as other income (expense) in our income statement. The impact of changes in fair value on earnings may have an adverse effect on the market price of our Class A common stock. In addition, potential targets may seek a special purpose acquisition company that does not have warrants and forward purchase agreements that are accounted for as a derivative liabilities, which may make it more difficult for us to consummate an initial business combination with a target business.

We are a newly incorporated company with no operating history and no revenues, and you have no basis on which to evaluate our ability to achieve our business objective.

We are a newly incorporated company with no operating results, and we commenced operations after obtaining funding through our initial public offering. Because we lack an operating history, you have no basis upon which to evaluate our ability to achieve our business objective of completing our initial business combination withlitigation is inherently uncertain. If one or more target businesses. We may be unable to completelegal matters were resolved against us in a reporting period for amounts above management’s expectations, our initial business combination. If we fail to complete our initial business combination, we will never generate any operating revenues.

An investment in us may result in uncertainfinancial condition, results of operations or adverse U.S. federal income tax consequences.

An investment in us may result in uncertain U.S. federal income tax consequences. For instance, because there are no authoritiescash flows for that directly address instruments similar to the units we issued in our initial public offering, the allocation an investor makes with respect to the purchase price of a unit between the share of Class A common stock and the one‐third of one warrant to purchase Class A common stock included in each unitreporting period could be challenged by the Internal Revenue Service (“IRS”) or the courts. Furthermore, the U.S. federal income tax consequences of a cashless exercise of a warrant included in the units is unclear under current law.


Finally, it is unclear whether the redemption rights with respect to our shares of Class A common stock suspend the running of a U.S. Holder’s holding period for purposes of determining whether any gain or loss realized by such holder on the sale or exchange of Class A common stock is long‐term capital gain or loss and for determining whether any dividend we pay would be considered “qualified dividend income” for U.S. federal income tax purposes. Prospective investors are urged to consult their tax advisors with respect to these and other tax consequences when purchasing, holding or disposing of our securities.adversely impacted, perhaps materially.

If we effect a business combination with a target company organized in another jurisdiction, we may take actions in connection with the business combination that could have adverse tax consequences.

We may effect a business combination with a target company in another jurisdiction, reincorporate in the jurisdiction in which the target company or business is located, or reincorporate in another jurisdiction. Such transactions may result in tax liability for a stockholder in the jurisdiction in which the stockholder is a tax resident (or in which its members are resident if it is a tax transparent entity), in which the target company is located, or in which we reincorporate. In the event of a reincorporation pursuant to our initial business combination, such tax liability may attach prior to the consummation of redemptions of any of our public shares properly submitted to us for redemption in connection with such business combination. We do not intend to make any cash distributions to stockholders to pay such taxes. Stockholders may be subject to withholding taxes or other taxes with respect to their ownership of us after the reincorporation.

Data privacy and security breaches, including, but not limited to, those resulting from cyber incidents or attacks, acts of vandalism or theft, computer viruses and/or misplaced or lost data, could result in information theft, data corruption, operational disruption, reputational harm, criminal liability and/or financial loss.

We will depend on digital technologies, including information systems, infrastructure and cloud applications and services, including those of third parties with which we may deal. Sophisticated and deliberate attacks on, or privacy and security breaches in, our systems or infrastructure, or the systems or infrastructure of third parties or the cloud, could lead to corruption or misappropriation of our assets, proprietary information, and sensitive or confidential data. As an early stage company without significant investments in data privacy or security protection, we may not be sufficiently protected against such occurrences and therefore could be liable for privacy and security breaches, including potentially those caused by any of our subcontractors. We may not have sufficient resources to adequately protect against, or to investigate and remediate any vulnerability to, cyber incidents or other incidents that result in a privacy or security breach. It is possible that any of these occurrences, or a combination of them, could have adverse consequences on our business and lead to reputational harm, criminal liability and/or financial loss.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

We do not own any real estate or other physical properties materially important to our operation. Our executive office is located at 4301 50th Street NW, Suite 300 PMB 1044, Washington, D.C. 20016. We consider our current office space adequate for our current operations.

Item 3. Legal Proceedings

To the knowledge of our management, there is no litigation currently pending or contemplated against us, any of our officers or directors in their capacity as such or against any of our property.

Item 4. Mine Safety DisclosuresDisclosures.

Not applicable.


PART II

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PART II

Item 5. Market for Registrant’sRegistrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesSecurities.

Market Information for Common Stock

Class A Common Stock

Our units trade on NYSE under the symbol “SPNV.U”. TheClass A common stock and warrants tradeare traded on NYSEthe New York Stock Exchange (“NYSE”) under the symbols “SPNV”“OPAD” and SPNV“OPAD WS,,” respectively.

Class B Common Stock

HoldersThere is no established public trading market for our Class B common stock.

Holders of Record

On March 26, 2021,As of February 17, 2023, there was one holder of record of our units, one holder of recordwere 43 registered holders of our Class A common stock, fiveand four registered holders of record of our Class B common stock and two holders of record of our warrants.

Securities Authorized for Issuance Under Equity Compensation Plans.

None.

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Offerings.

On October 23, 2020, we consummated our initial public offering of 40,250,000 units, including 5,250,000 additional units to cover over-allotments, at $10.00 per unit, generating gross proceeds of $402,500,000. Simultaneously with the closing of the initial public offering, we completed the private sale of 6,700,000 warrants at a purchase price of $1.50 per private placement warrant to the Sponsor, generating gross proceeds of $10,050,000. The securities sold in the initial public offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-249053) that became effective on October 22, 2020.

We paid a total of $8,050,000 in underwriting discounts and commissions and approximately $664,000 for other costs and expenses related to the initial public offering. The underwriters agreed to defer an additional $14,087,500 in underwriting discounts and commissions, payable upon consummation of our initial business combination. After deducting the underwriting discounts and commissions (excluding the deferred portion of $14,087,500 in underwriting discounts and commissions, which will be released from the trust account upon consummation of initial business combination, if consummated) and incurred offering costs, the total net proceeds from our initial public offering and the sale of the private placement warrants was approximately $404,500,000, of which $402,500,000 (or $10.00 per unit sold in the initial public offering) was placed in the trust account. We reimbursed our sponsor and certain officers and directors to cover expenses related to the initial public offering. Other than as described above, no payments were made by us to directors, officers or persons owning ten percent or more of our common stock or to their associates, or to our affiliates.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

Item 6. Selected Financial Data

As a “smaller reporting company,” we are not required to provide the information called for by this Item.


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS

References to “we”, “us”, “our” or the “Company” are to Supernova Partners Acquisition Company, Inc., except where the context requires otherwise. The following discussion should be read in conjunction with our financial statements and related notes thereto included elsewhere in this Annual Report on Form 10-K.

In this Amendment No. 1 (“Amendment No. 1”) to the Annual Report on Form 10-K of Supernova Partners Acquisition Company, Inc. (the "Company") for the fiscal year ended December 31, 2020, we are restating our audited financial statements as of December 31, 2020, and for the period from August 31, 2020 (inception) to December 31, 2020.

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance on October 23, 2020, our warrants and forward purchase agreementsthat were accounted for as equity within our balance sheet, and after discussion and evaluation, including with our independent registered public accounting firm and our audit committee, and taking into consideration the SEC Staff Statement, we have concluded that our warrants and forward purchase agreements should be presented as liabilities with subsequent fair value remeasurement.

As a result of the foregoing, on May 13, 2021, the Audit Committee of the Company,issued in consultation with its management, concluded that its previously issued Financial Statements for the periods beginning with the period from August 31, 2020 (inception) through December 31, 2020 (collectively, the “Affected Periods”) should be restated because of a misapplication in the guidance around accounting for our outstanding warrants to purchase common stock (the “Warrants”) and forward purchase agreements and should no longer be relied upon.

Historically, the Warrants and forward purchase agreements were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants and forward purchase agreements, based on our application of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreements and the Company’s application of ASC 815-40 to the warrant agreements.  We reassessed our accounting for Warrants and forward purchase agreements issued on October 23, 2020, in light of the SEC Staff’s published views.  Based on this reassessment, we determined that the Warrants and forward purchase agreements should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in our Statement of Operations each reporting period.  

Our accounting for the Warrants and forward purchase agreements as components of equity instead of as derivative liabilities did not have any effect on our previously reported revenue, operating expenses, operating income, cash flows or cash.

In connection with the restatement, our management reassessed the effectivenessBusiness Combination. Because many of our disclosure controls and procedures for the periods affected by the restatement. As a result of that reassessment, we determined that our disclosure controls and procedures for such periods were not effective with respect to the classification of the Company's warrants and forward purchase agreements as components of equity instead of as derivative liabilities.  For more information, see Item 9A included in this Annual Report on Form 10-K.

We have not amended our previously filed Quarterly Report on Form 10-Q for the period affected by the restatement. The financial information that has been previously filed or otherwise reported for these periods is superseded by the information in this Amendment No. 1, and the financial statements and related financial information contained in such previously filed reports should no longer be relied upon.

The restatement is more fully described in Note 2 of the notes to the financial statements included herein.


Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of 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. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other U.S. Securities and Exchange Commission (“SEC”) filings.

Overview

We are a blank check company incorporated in Delaware on August 31, 2020. We were 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 or entities (the “Business Combination”).

Our sponsor is Supernova Partners LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for our initial public offering was declared effective on October 20, 2020. On October 23, 2020, we consummated the initial public offering of 40,250,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 5,250,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $402.5 million, and incurring offering costs of approximately $22.8 million, inclusive of approximately $14.1 million in deferred underwriting commissions.

Simultaneously with the closing of the initial public offering, we consummated the 6,700,000 private placement warrants at a price of $1.50 per private placement warrant to the Sponsor, generating proceeds of approximately $10.1 million.

Upon the closing of the initial public offering and the private placement, $402.5 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was 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, until the earlier of (i) the completion of the Business Combination and (ii) the distribution of the Trust Account as described below.

If we are unable to complete a Business Combination within 24 months from the closing of the Initial Public Offering, or October 23, 2022 (as such period may be extended pursuant to the Certificate of Incorporation, the “Combination Period”), we will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem 100% of 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 (net of taxes payable and 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 (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.


Recent Developments

As more fully described in Item 1. Business, on March 17, 2021, we entered into the Merger Agreement by and among us, First Merger Sub, Second Merger Sub, and Offerpad.

In connection with the execution of the Merger Agreement, the PIPE Investors entered into the PIPE Subscription Agreements pursuant to which the PIPE Investors have committed to purchase the PIPE Shares at the PIPE Investment. The purchase of the PIPE Shares is conditioned upon, among other things, the consummation of the transactions and will be consummated concurrently with the closing. The shares of Class A common stock to be issued pursuant to the PIPE Subscription Agreements have not beenare held by banks, brokers and other financial institutions on behalf of shareholders, there are a greater number of shareholders represented by these registered under the Securities Act and will be issued in reliance on the availability of an exemption from such registration.holders.

In addition, in connection with the execution of the Merger Agreement we entered into a sponsor support agreement with our sponsor, Offerpad and our directors and officers.

The proposed Business Combination is expected to be consummated after receipt of the required approvals by the stockholders of Supernova and Offerpad and the satisfaction or waiver of certain other customary conditions. For full details and the filed agreements, refer to our Current Report on 8-K announcing the Merger Agreement filed on March 18, 2021.

Results of Operations

Our entire activity since inception through December 31, 2020 related to our formation, the preparation for the initial public offering, and since the closing of the initial public offering, the search for a prospective initial Business Combination. We have neither engaged in any operations nor generated any revenues to date. We will not generate any operating revenues until after completion of our initial Business Combination. We generate non-operating income in the form of interest income on cash and cash equivalents. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the period from August 31, 2020 (inception) to December 31, 2020, we had net loss of approximately $25.4 million, which consisted of a loss of approximately $24.2 million from changes in fair value of derivative liabilities, approximately $1 million in financing costs – derivative liabilities, approximately $229,000 in general and administrative expenses, approximately $61,000 in franchise tax expenses, and approximately $5,000 in income tax expenses, offset by approximately $79,000 in investment income on the Trust Account.

As a result of the restatement described in Note 2 of the notes to the financial statements included herein, we classify the warrants and forward purchase agreements issued in connection with our Initial Public Offering and Private Placement as derivative liabilities at their fair value and adjust the instruments to fair value at each reporting period. These liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. For the periods from August 31, 2020 (inception) through December 31, 2020, the change in fair value of derivative liabilities was an increase of approximately $24.2 million. We also recognized a charge of $1 million for offering costs ascribed to the derivative liabilities that was offset by an increase in additional paid-in capital.

Liquidity and Capital Resources

As of December 31, 2020, we had approximately $1.1 million in cash and working capital of approximately $1.2 million (not taking into account approximately $66,000 of taxes that may be paid using investment income from the Trust Account).

Prior to the consummation of the initial public offering on October 23, 2020, our liquidity needs were satisfied through the receipt of $25,000 from our Sponsor in exchange for the issuance of the founder shares, and the proceeds of the Note from our Sponsor. Subsequent to the consummation of the initial public offering and private placement, our liquidity needs have been satisfied with the 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 may, but is not obligated to, provide us working capital loans. 


Based on the foregoing, our management believes that we will have sufficient working capital and borrowing capacity to meet our 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 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. 

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that the specific impact is not readily determinable as of the date of the balance sheet. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Related Party Transactions

Founder Shares

On September 9, 2020, our Sponsor paid $25,000 to cover for certain offering costs on us in exchange for issuance of 11,500,000All shares of our Class B common stock par value $0.0001 per share, (the “Founder Shares”). On September 14, 2020, we effectuated an 0.75-for-1 reverse splitare owned by Brian Bair, the Chief Executive Officer and Founder of the Founder Shares, resulting in an aggregate outstanding amount of 8,625,000 Founder Shares. On October 20, 2020, we effectuated a 6-for-7 stock split of the founder shares, resulting in an aggregate outstanding amount of 10,062,500 Founder Shares. The initial stockholders agreed to forfeit, after giving effect to the stock split that occurred on October 20, 2020, up to 1,312,500 Founder Shares to the extent that the over-allotment option was not exercised in fullCompany, or entities controlled by the underwriters, so that the Founder Shares would represent 20.0% of ourMr. Bair.

There are no issued and outstanding shares after the Initial Public Offering. The underwriter exercised its over-allotment option in full on October 23, 2020; thus, these 1,312,500 Founder Shares were no longerof our Class C common stock.

Dividends

Our Class A and Class B common stock are entitled to dividends if and when any dividend is declared by our board of directors, subject to forfeiture.the rights of all classes of stock outstanding having priority rights to dividends. We have not paid any cash dividends on common stock to date. We may retain future earnings, if any, for the further development and expansion of our business and have no current plans to pay cash dividends for the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, capital requirements, restrictions contained in future agreements and financing instruments, business prospects and such other factors as our board of directors may deem relevant.

Sales of Unregistered Equity Securities

The initial stockholders agreed, subject to limited exceptions,None.

Purchase of Equity Securities

We did not to transfer, assign or sell anyrepurchase shares of the Founder Shares until the earlier to occur of: (i) one year after the completion of the initial Business Combination or earlier if, subsequent to the initial Business Combination, the closing price of theour Class A common stock equals or exceeds $12.00 per share (as adjustedduring the three months ended December 31, 2022.

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Stock Performance Graph

The following graph illustrates the total return from September 1, 2021 through December 31, 2022, for stock splits, stock capitalizations, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination, and (ii) the date following the completion of the initial Business Combination on which we complete a liquidation, merger, capital stock exchange or other similar transaction that results in all of the stockholders having the right to exchange their(i) our Class A common stock, for cash, securities or other property.

Private Placement Warrants

Simultaneously with(ii) the closingRussell 2000 Index, and (iii) the NASDAQ Real Estate and Other Financial Services Index. The graph assumes that $100 was invested on September 1, 2021 in each of the initial public offering, we consummated the private placement of 6,700,000 private placement warrants at a price of $1.50 per private placement warrant to the Sponsor, generating proceeds of approximately $10.1 million.

Each whole private placement warrant is exercisable for one whole share ofour Class A common stock, at a pricethe Russell 2000 Index, and the NASDAQ Real Estate and Other Financial Services Index, and that any dividends were reinvested. The comparisons reflected in the graph are not intended to forecast the future performance of $11.50 per share.our stock and may not be indicative of our future performance.

img221734950_1.jpg 

Item 6. [Reserved]

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis provides information that Offerpad’s management believes is relevant to an assessment and understanding of Offerpad’s consolidated results of operations and financial condition. The discussion should be read together with the consolidated financial statements and accompanying notes included in Item 8, Financial Statements and Supplementary Data, of this Annual Report on Form 10-K. This section of this Form 10-K generally discusses 2022 items and the results of our operations for the year ended December 31, 2022 compared to the year ended December 31, 2021. A portiondiscussion of the proceeds from the sale of the private placement warrantsyear ended December 31, 2021 compared to the Sponsor was added to the proceeds from the initial public offering heldyear ended December 31, 2020 has been reported previously in the Trust Account. If2021 Annual Report on Form 10-K, which was filed with the SEC on March 7, 2022, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements” in this Form 10-K. Offerpad’s actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” in Item 1A of this Form 10-K.

Overview

Our Business

Offerpad is a customer-centric, home buying and selling platform that provides customers with the ultimate home transaction experience, offering convenience, control, certainty, and value. Since our founding in 2015, we do not completehave created a pioneering iBuying company and leading on-demand real estate marketplace that has transacted on homes representing approximately $9.4 billion of aggregate revenue through December 31, 2022.

We are headquartered in Chandler, Arizona and operated in over 1,800 cities and towns in 28 metropolitan markets across 16 states as of December 31, 2022. As we expand further into our existing markets, launch new markets, and develop a wide range of new ancillary services, we look forward to bringing our mission of providing your best way to buy and sell a home to even more homeowners and prospective home purchasers across the country.

The Business Combination within

On September 1, 2021, the Combination Period, the private placement warrants will expire worthless. The private placement warrants will be non-redeemable for cash (except as described below) and exercisable onCompany was formed through a cashless basis so long as they are held by the Sponsor or its permitted transferees.

The Sponsor agreed, subject to limited exceptions, not to transfer, assign or sell the private placement warrants until 30 days after the completion of the initial Business Combination.


Forward Purchase Agreements

business combination (the “Business Combination”) with Supernova Partners Acquisition Company, Inc. (“Supernova”). In connection with the closing of the Company’s initialBusiness Combination, Supernova changed its name to Offerpad Solutions Inc. The Business Combination was accounted for as a reverse recapitalization.

As a result of the Business Combination, we became an SEC-registered and New York Stock Exchange (“NYSE”) listed company, which has required us to hire additional personnel and implement procedures and processes to address public offering,company regulatory requirements and customary practices. We have incurred and expect to continue to incur additional annual operating expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative resources.

Current Economic Conditions and Health of the U.S. Residential Real Estate Industry

Our business and operating results are impacted by the general economic conditions and the health of the U.S. residential real estate industry, particularly the single-family home resale market. Our business model depends on a high volume of residential real estate transactions throughout the markets in which we operate. This transaction volume affects all of the ways that we generate revenue, including our ability to acquire new homes and generate associated fees, and our ability to sell homes that we own.

During 2022, the residential real estate market conditions were highly volatile, with generally favorable conditions during the first half of the year, with strong consumer demand and home price appreciation, resulting from a limited supply of new and resale single-family homes on the market, low mortgage interest rates and steady employment and wage growth. However, toward the end of the second quarter of 2022 and continuing through the remainder of the year, consumer demand for residential real estate softened considerably compared to the corresponding prior year periods and much of the first half of 2022, as the combination of the sudden and significant increase in mortgage interest rates since early 2022, increased inflation in the broader economy, volatility and declines in the stock market, and various other macroeconomic conditions and geopolitical concerns impacted consumer budgets and confidence. These macroeconomic factors negatively impacted housing affordability and homebuyer sentiment, causing many prospective customers to delay their homebuying decisions.

These turbulent residential real estate market conditions during 2022 significantly impacted our operating results during the year. Our revenue increased by $1.9 billion, or 90.9%, during the year ended December 31, 2022 as compared to the year ended December 31, 2021, primarily due to the strong consumer demand and home price appreciation prevailing in the first half of 2022. However, this year-over-year increase in revenue was negatively impacted by the challenging market conditions

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during the second half of 2022, which resulted in sequential declines in our quarterly revenue in the third and fourth quarters of 2022 compared to the respective prior quarter periods. Further, during the second half of 2022, we experienced an increase in the average period of time our homes are being held in inventory, causing an increase in holding costs and downward pressure on sales prices and margins.

If these macroeconomic trends continue for an extended period of time, we expect these factors will continue to negatively impact housing affordability and homebuyer sentiment, and result in a decline in the demand for our homes and the services offered by our platform, which could materially impact our financial condition and results of operations.

New York Stock Exchange Delisting Notice

On November 15, 2022, we were notified by the NYSE that we are not in compliance with Section 802.01C of the NYSE Listed Company entered into forward purchase agreements to whichManual because the Company’s Sponsors committed to purchaseaverage closing price of our Class A common stock was less than $1.00 over a consecutive 30 trading-day period. The notice does not result in the immediate delisting of our Class A common stock from the NYSE.

On November 16, 2022, we notified the NYSE that we intend to cure the stock price deficiency and to return to compliance with the NYSE continued listing standard. We can regain compliance at any time within the six-month period following receipt of the NYSE notice if on the last trading day of any calendar month during the cure period we have a closing share price of at least $1.00 and an average closing share price of at least $1.00 over the 30 trading-day period ending on the last trading day of that month. We intend to consider available alternatives, including, but not limited to, a reverse stock split, subject to stockholder approval no later than at our next annual meeting of stockholders, if necessary to cure the stock price non-compliance. Under the NYSE’s rules, if we determine that we will cure the stock price deficiency by taking an action that will require stockholder approval at our next annual meeting of stockholders, the price condition will be deemed cured if the price promptly exceeds $1.00 per share, and the price remains above that level for at least the following 30 trading days.

Our Class A common stock will continue to be listed and trade on the NYSE during this period, subject to our compliance with other NYSE continued listing standards.

For additional information, see “Risk Factors—Risks Related to Our Capital Structure and Ownership of Our Class A Common Stock and Warrants—Our failure to meet the NYSE’s continued listing standards could result in a delisting of our Class A common stock.

Our Business Model

Revenue Model

Our mission is to provide your best way to buy and sell a home. Period. Offerpad was founded to create a better residential real estate experience by combining advanced technology solutions with fundamental industry expertise. Our Express cash offer service is our flagship offering, allowing customers to sell on their own schedule and without the hassle of showings, open houses, and aligning closing dates with the purchase date of their new home. However, this is only one of several offerings within our Solutions Center designed to meet the unique needs of our customers. With our Offerpad Flex listing service offering, customers partner with Offerpad to list their home for sale on the open market while utilizing Offerpad’s concierge and renovation services, as well as work with an Offerpad Solutions Expert to help them find their next home. Through the Offerpad Flex listing service offering, our customers essentially dual track a sale by utilizing both our personalized listing services while also typically having a backup cash offer.

We typically acquire homes directly from individual sellers. After purchasing the home, we make necessary repairs and upgrades before listing it for sale on our platforms and Multiple Listing Services (“MLS”). We resell these homes to both individual consumer and institutional investor buyers. Currently, revenues from home sales through our Express cash offer service are our primary source of revenue; however, we expect greater contribution from our Flex listing service offering as we drive expansion of this offering and from ancillary services in the future as our full product offering expands and matures.

Offers

We generate demand for our services through traditional media, digital media, organic referral, and partnership channels. Partnership channels include relationships with homebuilders, brokerages, and complementary industry partners. Interested home sellers visit our desktop or mobile website or application and fill out a short questionnaire about their home. If the home fits our eligible criteria, an Offerpad employee will reach out within 24 hours via email, phone, or text to deliver and discuss Offerpad’s cash purchase offer and review any other services that may be of interest to the customer, including our Flex listing and buyer representation services and our mortgage solutions offerings. If a customer chooses to list their home with our Offerpad Flex listing service, once a customer sells a home directly to a buyer using the Flex listing service, we earn a service fee, typically as a percentage of the sales price of the home.

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Home Acquisition and Renovation

Once the offer is received and reviewed by the customer, if they choose to proceed, a purchase contract is generated and signed. If the customer is represented by a third-party agent, we work directly with such agent in addition to paying the agent’s fee. Upon signing, an Offerpad employee and a third-party inspector visit the home (either virtually or in person) to verify the information gathered during underwriting and identify any necessary repairs. Once repairs are agreed upon (if any), the homeowner chooses the closing date that meets their needs. The ability to choose the closing date is a very important feature, as it allows the homeowner to close around buying their next home or other influential events.

If renovations were deemed necessary in the underwriting process, an Offerpad Project Manager will begin coordinating the renovation after we close on the home purchase. We utilize a mix of Offerpad employed foreman and crew members as well as third-party specialists to execute necessary renovations. Our renovation strategy is focused on maximizing return through accretive upgrades and ensuring the home is in list-ready condition and is continually refined based on market level trends. We actively manage our vendor network through quality, cost, and timeliness evaluations.

Home Resale

Post-renovation, an Offerpad employee completes a final walkthrough to ensure the renovation was performed according to plan and quality specifications. Efficiently turning over our inventory is important as we incur holding costs (including property taxes, insurance, utilities, and homeowner association dues) and financing costs while we own the home. However, we routinely make strategic decisions or offer services that are designed to generate improved returns even if resulting in an aggregateincrease in average inventory holding period. In order to minimize the sales period, we market our homes across a wide variety of websites and platforms to generate buyer demand. This includes the Offerpad website and mobile app, local MLS, and syndication across online real estate portals.

Prior to listing the home for sale, an Offerpad Asset Manager will reevaluate the current market and comparable properties using the same underwriting technology as is used in the buying process to price the home accordingly. Our acquisition and resale teams work closely to ensure market level trends are captured and anticipated in pricing decisions. The ultimate goal during the resale process is to maximize return on investment when considering pricing and holding periods.

Once a purchase offer is received on a home, we enter into negotiations with the buyer and upon agreement of price, terms and conditions, we enter into a purchase contract. If the buyer is represented by an agent, we work directly with the agent. The buyer then conducts a customary inspection of the home and takes possession of the home upon funding and closing. We pay agent commissions for home buyers out of funds received at closing.

Factors Affecting Our Performance

We believe that our performance and future success depend on a variety of factors that present significant opportunities for our business but also present risks and challenges that could adversely impact our growth and profitability, including those discussed below and in Part I, Item 1A. “Risk Factors” of this Form 10-K.

Market Penetration in Existing Markets

Residential real estate is one of the largest industries, with roughly $2.3 trillion in value of homes transacted in 2022 in the United States, and is highly fragmented with over 100,000 real estate brokerages, according to the National Association of Realtors (NAR). In 2022, we estimate that we captured roughly 0.9% market share across our then active 28 markets. Given this high degree of fragmentation, we believe that bringing a solutions-oriented approach to the market with multiple buying and selling services to meet the unique needs of customers could lead to continued market share growth and accelerated adoption of the digital model. We have demonstrated higher market share in certain markets, providing the backdrop to grow our overall market penetration as our offerings expand and evolve. By providing a consistent, transparent, and unique experience, we expect to continue to build upon our past success and further strengthen our brand and consumer adoption.

Expansion into New Markets

Since our launch in 2015, we have expanded into 21 markets as of the end of 2021, and during 2022, we expanded into seven additional markets, bringing our total markets served to 28 as of December 31, 2022.

Our 28 markets as of December 31, 2022 covered roughly 24% of the 5.6 million homes sold in the United States in 2022. Given this current coverage, we believe there is significant opportunity to both increase market penetration in our existing markets and to grow our business through new market expansion, although new market expansion typically generates lower initial margins as we begin operations that increase as we scale volumes. Also, because of our strategic approach to renovations, as well as the listing and buyer representation of our Flex listing service product, we believe a significant portion of the total addressable market is serviceable with our business model.

While we intend to be flexible in assessing market entry points, we will generally look to expand into new markets with qualities similar to our existing markets, including median price point, annual transaction count, as well as strong presence of

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new homebuilders. We believe the scale and versatility of our platform will allow us to continue to expand into new markets, with our primary barriers to entry consisting largely of capital needed to expand operations and the tendency of consumers to adopt our real estate offerings. Given the recent volatility in the residential real estate market conditions, we currently do not anticipate expanding into any new markets in the first half of 2023 and expect to re-evaluate expansion plans in the second half of the year.

Ancillary Products and Services

Core to our long-term strategy is a suite of offerings to meet the unique needs of our customers. As such, we view adding both additional products and services as well as additional product specific features as critical to supporting this strategy. We aim to deliver our offerings to customers in a smooth, efficient, digital driven platform, focused on transparency and ease of use. The primary goal is to be able to offer multiple services tied to the core real estate transaction, allowing customers to bundle and save. Although further developing these products and services will require significant investment, growing our current offerings and offering additional ancillary products and services, potentially including stand-alone remodel services, energy efficiency solutions, smart home technology, insurance, moving services, and home warranty services, we believe will strengthen our unit economics and allow us to better optimize pricing. Generally, the revenue and margin profiles of our ancillary products and services are different from our Express cash offering service that accounts for the vast majority of our revenue, with most ancillary products and services having a smaller average revenue per transaction than our Express cash offering service, but a higher margin.

Below is a summary of our current ancillary products and services:

Concierge Listing Service: While partnering with Offerpad, the customer will be provided with complementary list-ready services to prepare their home for market, such as carpet cleaning, landscape and pool maintenance, and handyman services. Customers also have the ability to utilize Offerpad’s renovation advance program to complete strategic upgrades to maximize the resale value of the home.
Offerpad Home Loans (“OPHL”): We provide access to mortgage services through our in-house mortgage solution, OPHL, or through a third-party lending partner.
Bundle Rewards: The Offerpad Bundle Rewards program allows customers to receive multiple discounts when selling and buying a home with Offerpad, and by obtaining their home loan with OPHL.
Title and Escrow: To deliver title and escrow closing services, we have a national relationship with a leading title and escrow company, through which we are able to leverage our size and scale to provide exceptional service with favorable economics.

Unit Economics

We view Contribution Margin and Contribution Margin after Interest (see “—Non-GAAP Financial Measures”) as key performance indicators for unit economic performance, which are currently primarily driven by our Express cash offer transactions. Future financial performance improvements are expected to be driven by expanding unit level margins through initiatives such as:

Continued optimization of acquisition, renovation, and resale processes, as we expand our market footprint and increase penetration in existing markets;
Effectively increasing our Flex listing service business alongside the Express cash offer business, optimizing customer engagement and increasing conversion of requests for home purchases; and
Introducing and scaling additional ancillary services to complement our core Express cash offer and Flex listing service products.

Operating Leverage

We utilize our technology and product teams to design systems and workflows to make our operations teams more efficient and able to support and scale with the business. Many positions are considered volume based, and as we continue to grow, we focus on developing more automation tools to gain additional leverage. Additionally, as we continue to grow the business, we expect to be able to gain operating leverage on portions of our cost structure that are more fixed in nature as opposed to purely variable. These types of costs include general and administrative expenses and certain marketing and information technology expenses, which grow at a slower pace than proportional to revenue growth.

Inventory Financing

Our business model requires significant capital to purchase inventory homes. Inventory financing is a key enabler to our growth and we rely on our non-recourse asset-backed financing facilities, which primarily consist of senior and mezzanine secured credit facilities to finance our home purchases. The loss of adequate access to these types of facilities, or the inability

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to maintain these types of facilities on favorable terms, would impair our performance. See “—Liquidity and Capital Resources—Financing Activities.”

Seasonality

The residential real estate market is seasonal and varies from market to market. Typically, the greatest number of transactions occur in the spring and summer, with fewer transactions occurring in the fall and winter. Our financial results, including revenue, margins, inventory, and financing costs, have historically had seasonal characteristics generally consistent with the residential real estate market, a trend we expect to continue in the future, subject to the market conditions discussed above.

Risk Management

Our business model is based upon acquiring homes at a price which will allow us to provide a competitive offer to the consumer, while being able to add value through the renovation process, and relist the home so that it sells at a profit and in a relatively short period of time. We have invested significant resources into our underwriting and asset management systems. Our real estate operations team, including our acquisitions team, together with our software engineering and data science teams are responsible for underwriting accuracy, portfolio health, and workflow optimization. Our underwriting tools are constantly updated with inputs from third-party data sources, proprietary data sources as well as internal data to adjust to the latest market conditions. This allows us to assess and adjust to changes in the local housing market conditions based on our technology, analysis and local real estate experience, in order to mitigate our risk exposure. Further, our listed homes are in market-ready and move-in ready condition following the repairs and renovations we conduct.

Historically, we have been able to manage our portfolio risk in part by our ability to manage holding periods for our inventory. Traditionally, resale housing pricing moves gradually through cycles; therefore, shorter inventory holding periods limit pricing exposure. As we increased our scale and improved our workflow optimization in prior years, our average inventory holding period of homes sold improved from 138 days in 2016 to 95 days in both 2019 and 2020. Our average inventory holding period of homes sold further decreased to 76 days during 2021, which was primarily due to the favorable housing market conditions across our markets in 2021.

During 2022, the residential real estate market conditions were highly volatile, with generally favorable conditions during the first half of the year, shifting to considerable softening in consumer demand for residential real estate during the second half of the year as a result of various macroeconomic factors negatively impacting housing affordability and homebuyer sentiment. Given our focus on risk management, and in response to this softening consumer demand, we adjusted our home purchase criteria through more conservative acquisition underwriting, resulting in higher expected internal rates of return based on current market conditions, and continued to adjust pricing on our inventory to reflect market level trends throughout the second half of 2022. These actions resulted in a significant reduction in our home acquisition pace to allow us to manage overall inventory growth, which led to the average holding period of homes sold increasing to 101 days during 2022, which is consistent with our expected average inventory holding period and our historical norm. As our overall inventory mix shifts and includes a lower composition of newer acquired homes, our average inventory holding period generally increases. As a result, and given our reduction in home acquisition pace, we anticipate our average inventory holding period will continue to increase in early 2023.

The increase in the average period of time our homes are being held in inventory has caused an increase in holding costs and downward pressure on sales prices and margins. If these macroeconomic trends continue for an extended period of time, we expect these factors will continue to negatively impact sales prices and margins.

Non-GAAP Financial Measures

In addition to our results of operations below, we report certain financial measures that are not required by, or presented in accordance with, U.S. generally accepted accounting principles (“GAAP”). These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures, including gross profit and net income. We may calculate or present our non-GAAP financial measures differently than other companies who report measures with similar titles and, as a result, the non-GAAP financial measures we report may not be comparable with those of companies in our industry or in other industries.

Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest (and related margins)

To provide investors with additional information regarding our margins, we have included Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest (and related margins), which are non-GAAP financial measures. We believe that Adjusted Gross Profit, Contribution Profit, and Contribution Profit After Interest are useful financial measures for investors as they are used by management in evaluating unit level economics and operating performance across our markets. Each of these measures is intended to present the economics related to homes sold during a given period. We do so by including revenue generated from homes sold (and ancillary services) in the period and only the expenses that are directly attributable to such home sales, even if such expenses were recognized in prior periods, and excluding expenses related to homes that remain in

Offerpad Solutions Inc. | 2022 Form 10-K | 46


inventory as of the end of the period presented. Contribution Profit provides investors a measure to assess Offerpad’s ability to generate returns on homes sold during a reporting period after considering home acquisition costs, renovation and repair costs, and adjusting for holding costs and selling costs. Contribution Profit After Interest further impacts gross profit by including interest costs (including senior and mezzanine secured credit facilities) attributable to homes sold during a reporting period. We believe these measures facilitate meaningful period over period comparisons and illustrate our ability to generate returns on assets sold after considering the costs directly related to the assets sold in a presented period.

Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest (and related margins) are supplemental measures of our operating performance and have limitations as analytical tools. For example, these measures include costs that were recorded in prior periods under GAAP and exclude, in connection with homes held in inventory at the end of the period, costs required to be recorded under GAAP in the same period.

Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. We include a reconciliation of these measures to the most directly comparable GAAP financial measure, which is gross profit.

Adjusted Gross Profit / Margin

We calculate Adjusted Gross Profit as gross profit under GAAP adjusted for (1) net inventory impairment plus (2) interest expense associated with homes sold in the presented period and recorded in cost of revenue. Net inventory impairment is calculated by adding back the inventory impairment charges recorded during the period on homes that remain in inventory at period end and subtracting the inventory impairment charges recorded in prior periods on homes sold in the current period. We define Adjusted Gross Margin as Adjusted Gross Profit as a percentage of revenue.

We view this metric as an important measure of business performance, as it captures gross margin performance isolated to homes sold in a given period and provides comparability across reporting periods. Adjusted Gross Profit helps management assess performance across the key phases of processing a home (acquisitions, renovations, and resale) for a specific resale cohort.

Contribution Profit / Margin

We calculate Contribution Profit as Adjusted Gross Profit, minus (1) direct selling costs incurred on homes sold during the presented period, minus (2) holding costs incurred in the current period on homes sold during the period recorded in sales, marketing, and operating, minus (3) holding costs incurred in prior periods on homes sold in the current period recorded in sales, marketing, and operating, plus (4) other income which is primarily comprised of interest income earned on our cash and cash equivalents and income earned from the sale of certain fixed assets. The composition of our holding costs is described in the footnotes to the reconciliation table below. We define Contribution Margin as Contribution Profit as a percentage of revenue.

We view this metric as an important measure of business performance as it captures the unit level performance isolated to homes sold in a given period and provides comparability across reporting periods. Contribution Profit helps management assess inflows and outflow directly associated with a specific resale cohort.

Contribution Profit / Margin After Interest

We define Contribution Profit After Interest as Contribution Profit, minus (1) interest expense associated with homes sold in the presented period and recorded in cost of revenue, minus (2) interest expense associated with homes sold in the presented period, recorded in costs of sales, and previously excluded from Adjusted Gross Profit, and minus (3) interest expense under our senior and mezzanine secured credit facilities incurred on homes sold during the period. This includes interest expense recorded in prior periods in which the sale occurred. Our senior and mezzanine secured credit facilities are secured by our homes in inventory and drawdowns are made on a per-home basis at the time of purchase and are required to be repaid at the time the homes are sold. See “—Liquidity and Capital Resources—Financing Activities.” We define Contribution Margin After Interest as Contribution Profit After Interest as a percentage of revenue.

We view this metric as an important measure of business performance. Contribution Profit After Interest helps management assess Contribution Margin performance, per above, when fully burdened with costs of financing.

Offerpad Solutions Inc. | 2022 Form 10-K | 47


The following table presents a reconciliation of our Adjusted Gross Profit, Contribution Profit and Contribution Profit After Interest to our gross profit, which is the most directly comparable GAAP measure, for the periods indicated:

 

 

Year Ended December 31,

 

(in thousands, except percentages and homes sold, unaudited)

 

2022

 

 

2021

 

Gross profit (GAAP)

 

$

182,422

 

 

$

207,815

 

Gross margin

 

 

4.6

%

 

 

10.0

%

Homes sold

 

 

10,635

 

 

 

6,373

 

Gross profit per home sold

 

$

17.2

 

 

$

32.6

 

Adjustments:

 

 

 

 

 

 

Inventory impairment - current period (1)

 

 

58,413

 

 

 

1,205

 

Inventory impairment - prior period (2)

 

 

(1,205

)

 

 

(160

)

Interest expense capitalized (3)

 

 

12,660

 

 

 

6,294

 

Adjusted gross profit

 

$

252,290

 

 

$

215,154

 

Adjusted gross margin

 

 

6.4

%

 

 

10.4

%

Adjustments:

 

 

 

 

 

 

Direct selling costs (4)

 

 

(97,381

)

 

 

(48,066

)

Holding costs on sales - current period (5)(6)

 

 

(8,342

)

 

 

(4,262

)

Holding costs on sales - prior period (5)(7)

 

 

(918

)

 

 

(214

)

Other income (8)

 

 

1,532

 

 

 

248

 

Contribution profit

 

$

147,181

 

 

$

162,860

 

Contribution margin

 

 

3.7

%

 

 

7.9

%

Homes sold

 

 

10,635

 

 

 

6,373

 

Contribution profit per home sold

 

$

13.8

 

 

$

25.6

 

Adjustments:

 

 

 

 

 

 

Interest expense capitalized (3)

 

 

(12,660

)

 

 

(6,294

)

Interest expense on homes sold - current period (9)

 

 

(32,022

)

 

 

(10,228

)

Interest expense on homes sold - prior period (10)

 

 

(3,737

)

 

 

(468

)

Contribution profit after interest

 

$

98,762

 

 

$

145,870

 

Contribution margin after interest

 

 

2.5

%

 

 

7.0

%

Homes sold

 

 

10,635

 

 

 

6,373

 

Contribution profit after interest per home sold

 

$

9.3

 

 

$

22.9

 

(1)
Inventory impairment – current period is the inventory valuation adjustments recorded during the period presented associated with homes that remain in inventory at period end.
(2)
Inventory impairment – prior period is the inventory valuation adjustments recorded in prior periods associated with homes that sold in the period presented.
(3)
Interest expense capitalized represents all interest related costs, including senior and mezzanine secured credit facilities, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale.
(4)
Direct selling costs represents selling costs incurred related to homes sold in the period presented. This primarily includes broker commissions and title and escrow closing fees.
(5)
Holding costs primarily include insurance, utilities, homeowners association dues, property taxes, cleaning and maintenance costs.
(6)
Represents holding costs incurred on homes sold in the period presented and expensed to Sales, marketing, and operating on the Consolidated Statements of Operations.
(7)
Represents holding costs incurred in prior periods on homes sold in the period presented and expensed to Sales, marketing, and operating on the Consolidated Statements of Operations.
(8)
Other income principally represents interest income earned on our cash and cash equivalents and income earned from the sale of certain fixed assets.
(9)
Represents both senior and mezzanine interest expense incurred on homes sold in the period presented and expensed to interest expense on the Consolidated Statements of Operations.
(10)
Represents both senior and mezzanine secured credit facilities interest expense incurred in prior periods on homes sold in the period presented and expensed to interest expense on the Consolidated Statements of Operations.

Adjusted Net Income (Loss) and Adjusted EBITDA

We also present Adjusted Net Income (Loss) and Adjusted EBITDA, which are non-GAAP financial measures, which our management team uses to assess our underlying financial performance. We believe these measures provide insight into period over period performance, adjusted for non-recurring or non-cash items.

Offerpad Solutions Inc. | 2022 Form 10-K | 48


We calculate Adjusted Net Income (Loss) as GAAP Net Income (Loss) adjusted for the change in fair value of warrant liabilities. We define Adjusted Net Income (Loss) Margin as Adjusted Net Income (Loss) as a percentage of revenue.

We calculate Adjusted EBITDA as Adjusted Net Income (Loss) adjusted for interest expense, amortization of capitalized interest, taxes, depreciation and amortization and stock-based compensation expense. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of revenue.

Adjusted Net Income (Loss) and Adjusted EBITDA are supplemental to our operating performance measures calculated in accordance with GAAP and have important limitations. For example, Adjusted Net Income (Loss) and Adjusted EBITDA exclude the impact of certain costs required to be recorded under GAAP and could differ substantially from similarly titled measures presented by other companies in our industry or companies in other industries. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.

The following table presents a reconciliation of our Adjusted Net Income (Loss) and Adjusted EBITDA to our GAAP Net Income (Loss), which is the most directly comparable GAAP measure, for the periods indicated:

 

 

Year Ended December 31,

 

(in thousands, except percentages, unaudited)

 

2022

 

 

2021

 

Net (loss) income (GAAP)

 

$

(148,613

)

 

$

6,460

 

Change in fair value of warrant liabilities

 

 

(23,522

)

 

 

(2,464

)

Adjusted net (loss) income

 

$

(172,135

)

 

$

3,996

 

Adjusted net (loss) income margin

 

 

(4.4

)%

 

 

0.2

%

Adjustments:

 

 

 

 

 

 

Interest expense

 

 

45,991

 

 

 

15,848

 

Amortization of capitalized interest (1)

 

 

12,660

 

 

 

6,294

 

Income tax expense

 

 

359

 

 

 

170

 

Depreciation and amortization

 

 

1,022

 

 

 

523

 

Amortization of stock-based compensation

 

 

8,307

 

 

 

3,079

 

Adjusted EBITDA

 

$

(103,796

)

 

$

29,910

 

Adjusted EBITDA margin

 

 

(2.6

)%

 

 

1.4

%

(1)
Amortization of capitalized interest represents all interest related costs, including senior and mezzanine secured interest related costs, incurred on homes sold in the period presented that were capitalized and expensed in cost of sales at the time of sale.

Components of Our Results of Operations

Revenue

We generate revenue primarily from the sale of homes on the open market. Home sales revenue is recognized at the time of the transaction closing when title to and possession of the property are transferred to the buyer. The amount of revenue recognized for each home sale is equal to 5,000,000 sharesthe sale price of the home net of resale concessions and credits to the buyer.

Cost of Revenue

Cost of revenue consists of the initial home purchase costs, renovation costs, holding costs and interest incurred prior to the date the home is ready for resale and real estate inventory impairments, if any. These costs are accumulated in real estate inventory during the property holding period and charged to cost of revenue under the specific identification method when the property is sold.

Operating Expenses

Sales, Marketing and Operating

Sales, marketing and operating expense consists of real estate agent commissions for home buyers, advertising, and holding costs on homes incurred after the home is ready for resale, which includes utilities, taxes, maintenance and other costs. Sales, marketing and operating expense also includes headcount expenses in support of sales, marketing, and real estate inventory operations such as salaries, benefits, and stock-based compensation. Sales, marketing and operating expenses are charged to operations as incurred.

General and Administrative

General and administrative expense consists primarily of headcount expenses, including salaries, benefits and stock-based compensation for our executive, finance, human resources, legal and administrative personnel. General and administrative expense also includes third-party professional service fees and rent expense.

Offerpad Solutions Inc. | 2022 Form 10-K | 49


Technology and Development

Technology and development expense consists of headcount expenses, including salaries, benefits and stock-based compensation expense for employees and contractors engaged in the design, development, and testing of website applications, mobile applications, and software development. Technology and development expenses are charged to operations as incurred.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities consists of the gains or losses recorded as a result of the re-measurement of the warrant liabilities to fair value at each reporting period.

Interest Expense

Interest expense consists primarily of interest on borrowings, including amortization of debt issuance costs related to our senior secured credit facilities, mezzanine secured credit facilities and other debt. Borrowings under the senior secured credit facilities accrue interest at a rate based on a SOFR reference rate plus a margin, while borrowings under the mezzanine secured credit facilities accrue interest at a fixed rate.

Other Income, Net

Other income, net consists primarily of interest income earned on our cash and cash equivalents and gains from the disposal of property and equipment.

Income Tax Expense

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in our consolidated financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the new rate is enacted.

We assess the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended December 31, 2022. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, we recorded a full valuation allowance against the net deferred tax assets as of December 31, 2022, 2021 and 2020.

The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce our provision for income taxes.

Offerpad Solutions Inc. | 2022 Form 10-K | 50


Results of Operations

The following details our consolidated results of operations and includes a discussion of our operating results and significant items explaining the material changes in our operating results during the periods presented:

 

 

Year Ended December 31,

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

% of Revenue

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

Revenue

 

$

3,952,314

 

 

$

2,070,446

 

 

$

1,881,868

 

 

 

90.9

%

 

 

100.0

%

 

 

100.0

%

Cost of revenue

 

 

3,769,892

 

 

 

1,862,631

 

 

 

1,907,261

 

 

 

102.4

%

 

 

95.4

%

 

 

90.0

%

Gross profit

 

 

182,422

 

 

 

207,815

 

 

 

(25,393

)

 

 

(12.2

)%

 

 

4.6

%

 

 

10.0

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, marketing and operating

 

 

238,931

 

 

 

146,872

 

 

 

92,059

 

 

 

62.7

%

 

 

6.0

%

 

 

7.1

%

General and administrative

 

 

58,718

 

 

 

30,317

 

 

 

28,401

 

 

 

93.7

%

 

 

1.5

%

 

 

1.5

%

Technology and development

 

 

12,090

 

 

 

10,860

 

 

 

1,230

 

 

 

11.3

%

 

 

0.3

%

 

 

0.5

%

Total operating expenses

 

 

309,739

 

 

 

188,049

 

 

 

121,690

 

 

 

64.7

%

 

 

7.8

%

 

 

9.1

%

(Loss) income from operations

 

 

(127,317

)

 

 

19,766

 

 

 

(147,083

)

 

 

(744.1

)%

 

 

(3.2

)%

 

 

0.9

%

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

23,522

 

 

 

2,464

 

 

 

21,058

 

 

 

854.6

%

 

 

0.6

%

 

 

0.1

%

Interest expense

 

 

(45,991

)

 

 

(15,848

)

 

 

(30,143

)

 

 

190.2

%

 

 

(1.2

)%

 

 

(0.7

)%

Other income, net

 

 

1,532

 

 

 

248

 

 

 

1,284

 

 

 

517.7

%

 

 

0.0

%

 

 

0.0

%

Total other expense

 

 

(20,937

)

 

 

(13,136

)

 

 

(7,801

)

 

 

59.4

%

 

 

(0.6

)%

 

 

(0.6

)%

(Loss) income before income taxes

 

 

(148,254

)

 

 

6,630

 

 

 

(154,884

)

 

*

 

 

 

(3.8

)%

 

 

0.3

%

Income tax expense

 

 

(359

)

 

 

(170

)

 

 

(189

)

 

 

111.2

%

 

 

(0.0

)%

 

 

(0.0

)%

Net (loss) income

 

$

(148,613

)

 

$

6,460

 

 

$

(155,073

)

 

*

 

 

 

(3.8

)%

 

 

0.3

%

Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenue

Revenue increased by $1,881.9 million, or 90.9%, to $3,952.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily attributable to higher sales volumes, and a higher average sales price. We sold 10,635 homes during the year ended December 31, 2022 compared to 6,373 homes during the year ended December 31, 2021, representing an increase of 67%. Additionally, the average resale home price increased by 14% from $325,000 in the year ended December 31, 2021 to $371,000 in the year ended December 31, 2022. These increases were the result of the increase in number of markets due to our strategic market expansion plans, an increase in existing market penetration, and increases in overall residential housing prices caused by limited housing supply on the market and the impact of generally strong consumer demand across our markets during the first half of 2022.

Cost of Revenue and Gross Profit

Cost of revenue increased by $1,907.3 million, or 102.4%, to $3,769.9 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This increase was primarily attributable to higher sales volumes, and a higher average home acquisition price.

Gross profit margin was 4.6% for the year ended December 31, 2022 compared to 10.0% for the year ended December 31, 2021. The decrease in gross profit margin was primarily due to a decrease in the difference between the average home resale price and the average home acquisition price during the year ended December 31, 2022 compared to the year ended December 31, 2021. This decrease was primarily due to the considerable softening in consumer demand for residential real estate during the second half of 2022, resulting from the sudden and significant increase in mortgage interest rates since early 2022, combined with elevated home prices resulting from the increased home price appreciation over the past few years. This, in turn, also resulted in an increase in the average period of time our homes are being held in inventory. Additionally, we recorded inventory impairments of $93.8 million during the year ended December 31, 2022 as a result of the softening consumer demand for residential real estate, causing the net realizable value for certain homes in inventory to be lower than their respective cost, as compared to $2.8 million of inventory impairments during the year ended December 31, 2021.

Sales, Marketing and Operating

Sales, marketing and operating expense increased by $92.1 million, or 62.7%, to $238.9 million, and improved 110 basis points to 6.0% as a percentage of revenue for the year ended December 31, 2022 compared to 7.1% for the year ended December 31, 2021. The increase in expense was primarily attributable to the increase in variable costs associated with the significant increase in homes sold, and higher employee compensation costs associated with increased average employee headcount. The improvement as a percentage of revenue was due to the overall increased cost leverage achieved from the significant increase in revenue, while effectively managing our cost structure.

Offerpad Solutions Inc. | 2022 Form 10-K | 51


General and Administrative

General and administrative expense increased by $28.4 million, or 93.7%, to $58.7 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, and remained consistent at 1.5% as a percentage of revenue for both periods. The increase in expense was primarily attributable to additional expenses incurred as a public company as a result of the Business Combination on September 1, 2021, including costs associated with obtaining directors’ and officers’ liability insurance and increased legal, accounting and financial compliance costs and professional fees. The increase in expense was also due to higher stock-based compensation expense associated with new grants of equity awards during 2022 and higher employee compensation costs associated with increased average employee headcount as a result of the growth in the business through the first half of 2022. By effectively leveraging our cost structure with the increase in revenue, we were able to absorb the incremental cost increases year over year and maintain general and administrative expenses constant as a percentage of revenue.

Technology and Development

Technology and development expense increased by $1.2 million, or 11.3%, to $12.1 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. This represented an improvement as a percentage of revenue of 20 basis points. The increase in expense was primarily attributable to higher employee compensation costs associated with increased average employee headcount as a result of the growth in the business through the first half of 2022. The improvement as a percentage of revenue was principally attributable to effectively leveraging our cost structure as revenue increased significantly.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the years ended December 31, 2022 and 2021 represents gains of $23.5 million and $2.5 million as a result of the fair value adjustment of the warrant liabilities during the respective periods.

Interest Expense

Interest expense increased by $30.1 million, or 190.2%, to $46.0 million for the year ended December 31, 2022 compared to the year ended December 31, 2021. The increase was primarily attributable to a general increase in the average outstanding balance of our secured credit facilities due to an increase in real estate inventory financed by the facilities during the first nine months of 2022 and an increase in the weighted average variable interest rates associated with these senior credit facilities.

Other Income, Net

Other income, net during the year ended December 31, 2022 principally represents interest income earned on our cash and cash equivalents. Other income, net during the year ended December 31, 2021 principally represents a gain from the disposal of fixed assets.

Income Tax Expense

We recorded income tax expense of $0.4 million and $0.2 million during the years ended December 31, 2022 and 2021, respectively, and our effective tax rate was (0.2)% and 2.6% for the respective periods. Our effective tax rate for each of the years ended December 31, 2022 and December 31, 2021 differed from the federal statutory rate of 21% primarily due to the valuation allowance recorded on our deferred tax assets, state taxes and stock-based compensation. We record a full valuation allowance on our deferred tax assets, such that our income tax expense reflects only state taxes which are revenue or commerce based.

Liquidity and Capital Resources

Overview

Cash and cash equivalents balances consist of operating cash on deposit with financial institutions. Our principal sources of liquidity have historically consisted of cash generated from our operations and financing activities. As of December 31, 2022, we had cash and cash equivalents of $97.2 million and had a total undrawn borrowing capacity of $1,345.8 million, $256.7 million of which is committed and $1,089.1 million uncommitted.

We generated net income during the year ended December 31, 2021. However, we have incurred losses during the year ended December 31, 2022 and each year from inception through December 31, 2020, and may incur additional losses in the future. We continued to invest in the development and expansion of our operations. These investments include improvements in infrastructure and a continual improvement to our software, as well as investments in sales and marketing as we expanded into new markets.

We expect our working capital requirements to continue to increase over the long term, as we seek to increase our inventory and expand into more markets across the United States. We believe our cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of our existing credit facilities or the entry into new financing

Offerpad Solutions Inc. | 2022 Form 10-K | 52


arrangements (including the Private Placement (as defined below)), will be sufficient to meet our short-term working capital and capital expenditure requirements for at least the next twelve months. However, our ability to fund our working capital and capital expenditure requirements will depend in part on the residential real estate market conditions in the markets in which we operate and in the U.S. in general, and various other general economic, financial, competitive, legislative, regulatory and other conditions that may be beyond our control. Depending on these and other market conditions, we may seek additional financing. Volatility in the credit markets, rising interest rates and softening consumer demand for residential real estate may have an adverse effect on our ability to obtain debt financing on favorable terms or at all. If we raise additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of our common stock, plusor may require us to agree to unfavorable terms, and our existing stockholders may experience significant dilution.

Private Placement

On January 31, 2023, we entered into a pre-funded warrants subscription agreement (the “Subscription Agreement”) with the investors named therein (the “Investors”) pursuant to which we sold and issued to the Investors an aggregate of 1,666,667160,742,959 pre-funded warrants (the “Pre-funded Warrants”) to purchase one shareshares (the “Pre-funded Warrant Shares”) of Class A Common Stock (the “Private Placement”). Each Pre-funded Warrant was sold at a price of $0.5599 per Pre-funded Warrant and has an initial exercise price of $0.0001 per Pre-funded Warrant, subject to certain customary anti-dilution adjustment provisions. The exercise price for the Pre-funded Warrants can be paid in cash or on a cashless basis, and the Pre-funded Warrants have no expiration date. The aggregate gross proceeds to us was approximately $90.0 million, which we intend to use for general corporate purposes, including working capital. The Investors included Brian Bair, our founder, chief executive officer and chairman of our board of directors; Roberto Sella, a member of our board of directors; First American Financial Corporation (“First American”), a holder of more than 10% of our outstanding Class A Common Stock; and Kenneth DeGiorgio, a member of our board of directors and chief executive officer of First American.

The issuance of the Pre-funded Warrant Shares upon exercise of the Pre-funded Warrants has been approved by stockholders holding stock representing more than a majority of the voting power of our common stock, and we filed a related information statement with the SEC on February 14, 2023. The Pre-funded Warrants will not be exercisable until at $11.50 per share,least 21 days after the definitive information statement is filed with the SEC or such later time as is necessary to comply with the listing requirements of the NYSE. Furthermore, under the terms of the Subscription Agreement, the Investors have agreed not to transact in or transfer any of our securities, without our prior written consent, until two trading days following the filing with the SEC of our quarterly report on Form 10-Q for the three months ending March 31, 2023.

Under the terms of the Subscription Agreement, we have agreed to file a registration statement covering the resale of the Pre-funded Warrant Shares within ninety (90) calendar days after the January 31, 2023 (the “Filing Deadline”) and to use reasonable best efforts to cause the registration statement to be declared effective (i) in the event that the SEC does not review the registration statement, thirty (30) days after the Filing Deadline, or (ii) in the event that the SEC reviews the registration statement, seventy-five (75) days after the Filing Deadline (but in any event, no later than four (4) business days following the SEC indicating that it has no further comments on the registration statement). Pursuant to the terms of our amended and restated registration rights agreement, dated September 1, 2021 (the “RRA”), any Pre-funded Warrant Shares acquired by Investors who are party to the RRA will be considered “registrable securities” for purposes of the RRA.

The Subscription Agreement and form of Pre-funded Warrant include customary representations, warranties and covenants by us and the Investors, which were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to such agreement, and may be subject to limitations agreed upon by the contracting parties.

Financing Activities

Our financing activities primarily include borrowing under our senior secured credit facilities, mezzanine secured credit facilities and new issuances of equity (including the Private Placement, as discussed above). Historically, we have required access to external financing resources in order to fund growth, expansion into new markets and strategic initiatives, and we expect this to continue in the future. Our access to capital markets can be impacted by factors outside our control, including economic conditions.

Buying and selling high-valued assets, such as single-family residential homes, is very cash intensive and has a significant impact on our liquidity and capital resources. We use non-recourse secured credit facilities, consisting of both senior secured credit facilities and mezzanine secured credit facilities, to finance a significant portion of our real estate inventory and related home renovations. Our senior and mezzanine secured credit facilities, however, are not fully committed, meaning the applicable lender may not be obligated to advance new loan funds if they choose not to do so. Our ability to obtain and maintain access to these or similar kinds of credit facilities is significant for us to operate the business.

Offerpad Solutions Inc. | 2022 Form 10-K | 53


Senior Secured Credit Facilities

The following summarizes certain details related to our senior secured credit facilities (in thousands, except interest rates):

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

End of
Revolving /
Withdrawal

 

Final
Maturity

As of December 31, 2022

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

Period

 

Date

Financial institution 1

$

300,000

 

 

$

300,000

 

 

$

600,000

 

 

$

228,823

 

 

 

4.74

%

 

June 2024

 

June 2024

Financial institution 2

 

200,000

 

 

 

200,000

 

 

 

400,000

 

 

 

123,478

 

 

 

4.11

%

 

September 2023

 

March 2024

Financial institution 3

 

125,000

 

 

 

375,000

 

 

 

500,000

 

 

 

119,559

 

 

 

4.48

%

 

December 2023

 

December 2023

Related party

 

50,000

 

 

 

25,000

 

 

 

75,000

 

 

 

17,398

 

 

 

6.46

%

 

March 2024

 

September 2024

Senior secured credit facilities

$

675,000

 

 

$

900,000

 

 

$

1,575,000

 

 

$

489,258

 

 

 

 

 

 

 

 

As of December 31, 2022, we had four senior secured credit facilities that we use to fund the purchase of homes and build our real estate inventory, three with separate financial institutions and one with a related party, which holds more than 5% of our Class A common stock. Borrowings under the senior secured credit facilities accrue interest at a rate based on a Secured Overnight Financing Rate (“SOFR”) reference rate, plus a margin which varies by facility.

Borrowings under our senior secured credit facilities are collateralized by the real estate inventory financed by the senior secured credit facility. The lenders have legal recourse only to the assets securing the debt and do not have general recourse against us with limited exceptions. We have, however, provided limited non-recourse carve-out guarantees under our senior and mezzanine secured credit facilities for certain of the SPEs’ obligations in situations involving “bad acts” by an Offerpad entity and certain other limited circumstances that are generally under our control. Each senior secured facility contains eligibility requirements that govern whether a property can be financed. When we resell a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities.

During February 2023, we amended our credit facility with financial institution 2, which, among other things, reduced the total borrowing capacity on the facility from $400.0 million to $200.0 million, $100.0 million of which is committed.

Mezzanine Secured Credit Facilities

In addition to the senior secured credit facilities, we use mezzanine secured credit facilities which are structurally and contractually subordinated to the related senior secured credit facilities. The following summarizes certain details related to our mezzanine secured credit facilities (in thousands, except interest rates):

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

End of
Revolving /
Withdrawal

 

Final
Maturity

As of December 31, 2022

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

Period

 

Date

Related party facility 1

$

65,000

 

 

$

32,500

 

 

$

97,500

 

 

$

38,937

 

 

 

11.00

%

 

June 2024

 

June 2024

Third-party lender 1

 

45,000

 

 

 

45,000

 

 

 

90,000

 

 

 

31,239

 

 

 

9.55

%

 

September 2023

 

March 2024

Third-party lender 2

 

18,387

 

 

 

94,113

 

 

 

112,500

 

 

 

18,387

 

 

 

9.50

%

 

December 2023

 

December 2023

Related party facility 2

 

35,000

 

 

 

17,500

 

 

 

52,500

 

 

 

3,841

 

 

 

11.05

%

 

March 2024

 

September 2024

Mezzanine secured credit facilities

$

163,387

 

 

$

189,113

 

 

$

352,500

 

 

$

92,404

 

 

 

 

 

 

 

 

As of December 31, 2022, we had four mezzanine secured credit facilities, two with separate third-party lenders and two with a related party, which holds more than 5% of our Class A common stock. Borrowings under the mezzanine secured credit facilities accrue interest at fixed rates, which vary by facility and range from 9.5% to 13.0%.

Borrowings under our mezzanine secured credit facilities are collateralized by a second lien on the real estate inventory financed by the relevant credit facility. The lenders have legal recourse only to the assets securing the debt, and do not have general recourse against us with limited exceptions. When we resell a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities.

During February 2023, we amended our credit facility with third-party lender 1, which, among other things, reduced the total borrowing capacity on the facility from $90.0 million to $45.0 million, $22.5 million of which is committed.

Offerpad Solutions Inc. | 2022 Form 10-K | 54


Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities

The secured credit facilities include customary representations and warranties, covenants and events of default. Financed properties are subject to customary eligibility criteria and concentration limits. The terms of these facilities and related financing documents require the Company to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth).

As of December 31, 2022, we were in compliance with all covenants and no event of default had occurred.

Senior Secured Debt - Other

As of December 31, 2022, we have borrowing arrangements with two separate third-party lenders to support purchases of real estate inventory. Borrowings under each of these arrangements accrue interest at a rate based on a SOFR reference rate, plus a margin which varies by arrangement. As of December 31, 2022 and 2021, the weighted-average interest rates under our other senior secured debt were 7.23% and 5.79%, respectively.

Cash Flows

The following summarizes our cash flows for the years ended December 31, 2022 and 2021:

 

 

Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Net cash provided by (used in) operating activities

 

$

305,402

 

 

$

(921,920

)

Net cash used in investing activities

 

 

(1,070

)

 

 

(11,655

)

Net cash (used in) provided by financing activities

 

 

(358,466

)

 

 

1,077,266

 

Net change in cash, cash equivalents and restricted cash

 

$

(54,134

)

 

$

143,691

 

Operating Activities

Net cash provided by (used in) operating activities was $305.4 million and $(921.9) million for the years ended December 31, 2022 and 2021, respectively. In 2022, net cash provided by operating activities primarily resulted from a $374.1 million decrease in real estate inventory due to an intentional reduction in inventory levels given the dramatic decline in consumer demand for residential real estate, which began toward the end of the second quarter of 2022 and continued through the remainder of the year. During this period of time, we focused on selling our existing inventory of homes acquired in the first half of the year and significantly reduced the number of new homes acquired in the second half of the year. Net cash provided by operating activities during the year ended December 31, 2022 was also impacted by the $148.6 million net loss during the year, which included a $93.8 million non-cash inventory impairment loss as a result of the softening consumer demand for residential real estate, and a $23.5 million non-cash gain as a result of the fair value adjustment of the warrant liabilities.

In 2021, net cash used in operating activities was primarily due to a $949.6 million increase in real estate inventory as a result of the execution of our growth plan, as well as favorable housing market conditions across our markets during 2021. This cash outflow related to increased inventory levels was partially offset by a $21.6 million increase in accrued and other liabilities principally attributable to increased accruals for home renovation, payroll and other employee related expenses, and marketing.

Investing Activities

Net cash used in investing activities was $1.1 million and $11.7 million for the years ended December 31, 2022 and 2021, respectively. Net cash used in investing activities during 2022 represents purchases of property and equipment.

Net cash used in investing activities during 2021 represents purchases of property and equipment of $13.7 million, which was partially offset by proceeds from sales of property and equipment of $2.0 million

Financing Activities

Net cash (used in) provided by financing activities was $(358.5) million and $1,077.3 million for the years ended December 31, 2022 and 2021, respectively. Net cash used in financing activities during 2022 primarily consisted of $3,540.5 million of repayments of credit facilities and other debt, which was partially offset by $3,178.0 million of borrowings from credit facilities and other debt. This net decrease in credit facility funding of $362.5 million was directly related to the decrease in financed inventory during 2022.

Net cash provided by financing activities during 2021 primarily consisted of $2,764.1 million of borrowings from credit facilities and other debt, which was partially offset by $1,912.8 million of repayments of credit facilities and other debt. This net increase in credit facility funding of $851.3 million was directly related to financing the increase in inventory during 2021.

Offerpad Solutions Inc. | 2022 Form 10-K | 55


Net cash provided by financing activities in 2021 also included $284.0 million of proceeds from the Business Combination, which was partially offset by issuance costs of $51.2 million.

Material Cash Requirements and Other Obligations

Our material cash requirements include the following contractual obligations and other commitments.

Credit Facilities and Other Debt

As of December 31, 2022, we had aggregate outstanding principal amounts on our senior and mezzanine secured credit facilities of $489.3 million and $92.4 million, respectively, and $89.0 million on our other senior secured debt. Estimated interest payments, which have been calculated using the applicable variable or fixed interest rate in existence at December 31, 2022 over an assumed holding period of 101 days, total $9.4 million, $2.9 million and $2.4 million under the respective facilities and other senior secured debt. Borrowings under the senior and mezzanine secured credit facilities and other senior secured debt are required to be repaid as the related real estate inventory is sold, which is expected to be within 12 months from December 31, 2022.

Home Purchase Commitments

As of December 31, 2022, we were under contract to purchase 98 homes for an aggregate purchase price of $50,000,000, or $10.00 for one share$24.9 million, all of Class A common stockwhich are expected to close within 12 months.

Other Purchase Obligations

We have other purchase obligations which principally include commitments relating to insurance, marketing, information technology and one-third of one warrant (the “Forward Purchase Warrants”), in a private placement that is conditioned upon, and will be consummated concurrently with, the Closing. The shares of Class A common stock and warrants to be issued pursuant to the Forward Purchase Agreements have not been registered under the Securities Act and will be issued in reliance on the availability of an exemption from such registration.

Related Party Loans

On September 9, 2020, the Sponsor, a related party, agreed to loan us an aggregate of up to $300,000 to cover expenses related to the initial public offering pursuant to a promissory note (the “Note”). This loan is non-interest bearing and payable upon the completion of the initial public offering. We borrowed approximately $183,000 under the Note and fully repaid the Note on October 23, 2020.

In addition, in order to fund working capital deficiencies or finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required (“Working Capital Loans”). If we complete a Business Combination, we may repay the Working Capital Loans out of the proceeds of the Trust Account released to us. Otherwise, the Working Capital Loans could be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, we 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lenders’ discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the private placement warrants. 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.administration services. As of December 31, 2020,2022, we had no borrowings under the Working Capital Loans.other purchase obligations of $6.5 million, with $5.8 million payable within 12 months.

Operating Leases

Contractual Obligations

Registration Rights

The holdersWe have operating lease arrangements consisting of Founder Shares, private placement warrantsour corporate headquarters in Chandler, Arizona and warrants that may be issued upon conversion of Working Capital Loans (and any shares of Class A common stock issuable upon the exercisefield office facilities in most of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares), if any, are entitled to registration rights pursuant to a registration rights agreement. These holders will be entitled to certain demand and “piggyback” registration rights. We will bear the expenses incurredmetropolitan markets in connection with the filing of any such registration statements.

Underwriting Agreement

The underwriters were entitled to an underwriting discount of $0.20 per unit, approximately $8.1 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $14.1 million in the aggregate, will be payable to the underwriters for deferred underwriting commissions.

The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event thatwhich we complete a Business Combination, subject to the terms of the underwriting agreement.


Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with accounting principles generally acceptedoperate in the United States requires management toStates. As of December 31, 2022, we had $6.3 million of total future payments, including imputed interest, associated with our operating lease arrangements, of which, $2.5 million is short-term.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with GAAP. In doing so, we make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities atas of the date of the financial statements, andas well as the reported amounts of incomerevenues and expenses during the periods reported. Actualpresented. Although we believe our estimates, judgments and assumptions are reasonable, actual results could materiallymay differ from those estimates.our estimates under different assumptions, judgments or conditions given the inherent uncertainty involved with such matters, which would impact our financial statements. We have identifiedbase our estimates on historical experience and various other assumptions that we believe are reasonable under the following as our criticalcircumstances, and we evaluate these estimates on an ongoing basis.

Our significant accounting policies:

Class A Common Stock Subject to Possible Redemption

We account for Class A common stock subject to possible redemptionpolicies and methods used in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and 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 outstanding common stock features certain redemption rights that are considered to be outsidepreparation of our controlconsolidated financial statements are described in Note 1. Nature of Operations and subjectSignificant Accounting Policies to the occurrence of uncertain future events. Accordingly, at December 31, 2020, 33,488,198 shares of common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the balance sheet.

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 shares of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and Private Placement to purchase an aggregate of 20,116,667 shares of our common stock in the calculation of diluted 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.

We apply the two-class method in calculating income (loss) per common share. Net income (loss) per common share, basic and diluted for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of shares of Class A common stock subject to possible redemption outstanding since original issuance.

Net income (loss) per common share, basic and diluted for non-redeemable common stock is calculated by dividing net income (loss) less income attributable to Class A shares of common stock subject to possible redemption by the weighted average number of shares of non-redeemable common stock outstanding for the period presented.

Derivative Liabilities

We do not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. We evaluate all of ourconsolidated financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and ASC 815-15.  The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

We issued 13,416,667 common stock warrants to investors in our Initial Public Offering and issued 6,700,000 Private Placement Warrants.  All of our outstanding warrants are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the warrant instruments as liabilities at fair value and adjust the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statement of operations. The fair value of warrants issued in connection with the Initial Public Offering and Private Placement were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Warrants issued in connection with our Initial Public Offering have subsequently been measured based on the listed market price of such warrants.


In connection with the closing of our initial public offering, we entered into forward purchase agreements to which our Sponsors committed to purchase our Class A common stock in an aggregate amount equal to 5,000,000 shares of our common stock, plus an aggregate of 1,666,667 warrants to purchase one share of Class A common stock at $11.50 per share, for an aggregate purchase price of $50,000,000, or $10.00 for one share of Class A common stock and one-third of one warrant,  in a private placement that is conditioned upon, and will be consummated concurrently with, the Closing. The forward purchase agreements are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, we recognize the forward purchase agreement as liability at fair value and adjust the instrument to fair value at each reporting period. The fair value of the forward purchase agreements is determined as the estimated unit value less the net present value of the forward purchase agreement.

Off-Balance Sheet Arrangements and Contractual Obligations

As of December 31, 2020, we did not have any off-balance sheet arrangements as definedstatements included in Item 303(a)(4)(ii)8 of Regulation S-K and did not have any commitments or contractual obligations.

JOBS Act

The Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify as an “emerging growth company” and under the JOBS Act are allowed to comply with new or revised accounting pronouncements based on the effective date for private (not publicly traded) companies. We are electing 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.

Additionally, we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be 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 of the Sarbanes-Oxley Act, (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 initial public offering or until we are no longer an “emerging growth company,” whichever is earlier.

Recent Accounting Pronouncements

Our management does not believe there are any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, that would have a material effect on our financial statements.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Reference is made to Pages F-1 through F-20 comprising a portionPart II of this Annual Report on Form 10-K.

Item 9. Changes Of our significant accounting policies, we believe the assumptions and judgments involved in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

 Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective as of December 31, 2020, due solely to the material weakness in our internal control over financial reportingaccounting estimates described below in “Changes in Internal Control Over Financial Reporting.” In lightare the most critical as they involve a high level of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K present fairly in all material respects our financial position, results of operations and cash flows for the period presented.

Disclosure controls and procedures are controls and other procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported withinuncertainty at the time periods specifiedthe estimate is made, and changes in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Certifying Officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Controls over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s principal executive and principal financial officer and effected by the Company’s Board, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.


Under the supervision and with the participation of our management, including our principal executive and principal financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework). Based on our evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for “emerging growth companies”.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter thatestimates have materially affected,had or are reasonably likely to materially affect,have a material impact on our consolidated financial statements.

Inventory

We review inventory for impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate that the carrying value of inventory may not be recoverable. We evaluate inventory for indicators that net realizable value is lower than cost at the individual home level. When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recognized as impairment in cost of revenue and the related inventory is adjusted to its net realizable value.

Our inventory impairment calculations contain uncertainties because they require management to make assumptions and apply judgment in determining the net realizable value for each home. Key assumptions used in estimating the net realizable value for each home include the projected home sales price and expected selling costs. Estimates of home sales prices and selling costs are based on internal control over financial reporting, as the circumstances that led to the restatement of our financial statements described in this Annual Report on Form 10-K had not yet been identified.

Our internal control over financial reporting did not resultprojections and consider multiple factors, including recent comparable home sale transactions in the proper classification of our warrants. Since issuance on October 23, 2020, our warrants were accounted for as equity within our balance sheet. On April 12, 2021,specific area where the SEC Staff issuedhome is located, forecasts about the SEC Staff Statementresidential real estate market conditions in both the local market in which the SEC Staff expressed its view that certain termshome is located and in the U.S. in general, and the impact of national, regional or local economic conditions. These

Offerpad Solutions Inc. | 2022 Form 10-K | 56


estimates are subjective and are affected by factors such as changes in economic conditions commonand changes in operating performance.

For individual homes or portfolios of homes under contract to SPAC warrants may requiresell as of the warrants to be classified as liabilities onimpairment assessment date, if the SPAC’s balance sheet as opposed to equity. After discussion and evaluation, taking into considerationcarrying value exceeds the SEC Staff Statement, including with our independent auditors, we have concluded that our Warrants and forward purchase agreements should be presented as liabilities with subsequent faircontract price less expected selling costs, the carrying value remeasurement.

To respond to this material weakness, we have devoted, and plan to continue to devote, significant effort and resourcesof these homes are adjusted to the remediationcontract price less expected selling costs. For all other homes, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sale price less expected selling costs.

We recorded inventory impairments of $93.8 million, $2.8 million and improvement of our internal control over financial reporting. While we have processes to identify$3.2 million during the years ended December 31, 2022, 2021 and appropriately apply applicable accounting requirements, we plan to enhance our system of evaluating and implementing the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. 2020, respectively.

Recent Accounting Pronouncements

For a discussion of management’s considerationrecent accounting pronouncements, refer to Note 1. Nature of the material weakness identified related to our accounting for a significantOperations and unusual transaction related to the warrants we issuedSignificant Accounting Policies in connection with the October 2020 initial public offering, see “Note 2—Restatement of Previously Issued Financial Statements” to the accompanying financial statements.

Item 9B. Other Information

None.


PART III

Item 10. Directors, Executive Officers and Corporate Governance

Directors and Executive Officers

As of the date of this report, our directors and officers are as follows:

Name

Age

Position

Spencer M. Rascoff

45

Co-Chair

Alexander M. Klabin

44

Co-Chair

Robert D. Reid

47

Chief Executive Officer and Director

Michael S. Clifton

41

Chief Financial Officer

Ken Fox

50

Director

Jim Lanzone

50

Director

Gregg Renfrew

52

Director

Rajeev Singh

52

Director

Damien Hooper-Campbell

42

Former Director

Spencer M. Rascoff has been Co-Chair of our Board since our inception. Mr. Rascoff served as CEO of Zillow from 2008 to 2018 and currently serves as chairman of dot.LA and chairman of Pacaso. Mr. Rascoff is also Co-Chair of both Supernova II and Supernova III.

During Mr. Rascoff’s tenure as Zillow’s CEO, he led the acquisition and subsequent integration of 15 businesses including the acquisition and integration of Trulia, Zillow’s then-largest direct competitor. He also led Zillow through its initial public offering, where he was instrumental in leveraging Zillow’s initial public offering as a substantial consumer branding event. During his tenure as Chief Executive Officer of Zillow, Mr. Rascoff created and maintained a corporate culture that was frequently recognized as exemplary, receiving awards from Fortune Best Places to Work, Glassdoor, The Seattle Times, and many other organizations. With a focus on diversity, equity and inclusion, Zillow created employee affinity networks and was twice named to Bloomberg’s Gender Equality Index. Prior to Zillow, Mr. Rascoff co-founded Hotwire, where he ran corporate development through the company’s launch, the aftermath of 9/11, and ultimately the sale of the business to Expedia for $685 million.

Mr. Rascoff is currently on the board of directors of Palantir. He formerly served on the board of directors of several other public and private technology companies, including Zillow Group, TripAdvisor, Zulily and Julep. Before his consumer Internet career, Mr. Rascoff worked in the Investment Banking division at Goldman Sachs and in private equity at TPG Capital. He is also a member of the Young Presidents’ Organization and has served as a Visiting Executive Professor at Harvard Business School. Mr. Rascoff graduated cum laude from Harvard University. We believe Mr. Rascoff is well qualified to serve on our Board due to his knowledge of the technology industry and extensive leadership experience in operating and advising technology companies.

Alexander M. Klabin has been Co-Chair of our Board since our inception. Mr. Klabin co-founded Senator Investment Group in early 2008 where he served as Managing Partner and Co-Chief Investment Officer until 2020 and has served as Executive Chairman of Sotheby’s Financial Services since October 2020. Mr. Klabin is also Co-Chair of both Supernova II and Supernova III.

Mr. Klabin built and scaled Senator to be a widely respected investment management firm that managed up to $10 billion in assets. During his tenure, Senator managed capital on behalf of many of the largest pensions, endowments, sovereign wealth funds, and family offices globally. Under Mr. Klabin’s leadership, Senator became known for pursuing differentiated thematic and event-driven investments in public and private securities across both credit and equity.

Prior to co-founding Senator, Mr. Klabin worked at York Capital Management and Quadrangle Group. Mr. Klabin began his career in the M&A department at Goldman Sachs. He is a member of the board of directors of Enstructure, Faherty Brand and The Nantucket Project. Additionally, he serves as a Trustee of the New York Philharmonic, The Allen-Stevenson School and is a member of the Leadership Council of The Robin Hood Foundation. Mr. Klabin received a Bachelor of Arts degree in English Literature from Princeton University. We believe Mr. Klabin is well qualified to serve on our Board due to his vast investment and corporate finance experience.


Robert D. Reid has served as our Chief Executive Officer and a Director since our inception. Mr. Reid was most recently a Partner at BDT Capital Partners and was a Senior Managing Director at Blackstone prior to July 2019, where he helped lead over 15 private equity investments representing over $40 billion in transaction value across a range of industries and geographies. In his 21 years at Blackstone, Mr. Reid sourced, evaluated and executed a range of transaction types including growth capital, buyouts and distressed opportunities. He was a member of Blackstone’s Private Equity Investment Committee and was one of the senior partners helping lead the firm’s private equity efforts in Europe from 2012 to 2016. Mr. Reid is also Chief Executive Officer and a director of both Supernova II and Supernova III.

Mr. Reid has served on a several public and private boards, including Scout24, one of the largest online classified business in Germany, SESAC, a large music performance rights organization Intelenet, a business process solutions company and Nielsen, a leading consumer and media measurement business. Prior to joining Blackstone, Mr. Reid worked in the Investment Banking division at Morgan Stanley. He earned a degree in economics and graduated magna cum laude from Princeton University. We believe Mr. Reid is well qualified to serve on our Board due to his corporate finance and prior public company experience.

Michael S. Clifton has served as our Chief Financial Officer since our inception. He was most recently a senior investment professional at The Carlyle Group from 2010 to 2020 as a member of its flagship U.S. Buyout team where he helped lead Carlyle’s investing activities in the technology and business services sectors. During his tenure he worked on transactions involving companies in multiple sectors, including enterprise software, FinTech and IT services. He has served on four private boards and has been a board observer of a public company. Mr. Clifton is also Chief Financial Officer and a director of both Supernova II and Supernova III.

Over his career, Mr. Clifton has been involved in transactions with a total value in excess of $30 billion, including multiple leveraged buyouts, growth investments, carve-outs, and turnarounds. Mr. Clifton has substantial public market experience and has helped lead the public exits of three portfolio companies, representing the sale of over $5 billion in equity. Prior to joining Carlyle, Mr. Clifton worked at two mid-market private equity firms, as well as in the M&A group of Bank of America Securities. He earned a Bachelor of Arts, cum laude, in classics from Davidson College, and an MBA with High Distinction from the Harvard Business School where he was a Baker Scholar.

Ken Fox is the founder of Stripes, LLC, a growth equity firm that primarily invests in internet, SaaS and branded consumer product companies, which he founded in 2008. Mr. Fox is actively involved with current Stripes’ portfolio companies, including Erewhon, Monday.com, Pleo, Reformation, On Running, Snooze, Blue Apron, Udemy, GoFundMe, Stella & Chewy’s, Levain Bakery, and Kareo. He was also involved with former Stripes’ portfolio companies Flatiron Health (acquired by Roche), eMarketer (acquired by Axel Springer SE), Ketra (acquired by Lutron), Seamless/Grubhub (completed initial public offering), Sandata, and TurtleBeach. Previously, Mr. Fox was the Chairman of SmartWool (acquired by VF Corp.), served on the board of NetQuote (acquired by Bankrate) and SilverSky (acquired by BAE Systems). Mr. Fox is also a director of both Supernova II and Supernova III.

Prior to forming Stripes, Mr. Fox was a Co-Founder and Managing Director with Internet Capital Group, a venture capital firm. Prior to forming Internet Capital Group, Mr. Fox was the director of West Coast operations for Safeguard Scientifics, Inc. and TL Ventures. Mr. Fox is also a co-founder of A10 Capital, a commercial mortgage lender. Mr. Fox graduated from Pennsylvania State University, with a BS in economics. We believe Mr. Fox is well qualified to serve on our Board due to his experience as an investor in the consumer and software sectors.

Jim Lanzone is the Chief Executive Officer of Tinder and has served in this capacity since July 2020. Prior to that, Mr. Lanzone served as an Executive-in-Residence at Benchmark Capital. From May 2016 to December 2019, Mr. Lanzone served as Chief Digital Officer of CBS Corporation, a leading mass media company. In addition, from January 2014 to December 2019, Mr. Lanzone was Chief Executive Officer of CBS Interactive, a top consumer Internet property and a division of CBS Corporation. Previously, Mr. Lanzone served as President of CBS Interactive from March 2011 to December 2013. At CBS Interactive, Mr. Lanzone oversaw the creation, launch and growth of streaming subscription services like CBS All Access and free, ad-supported services including CBSN, CBS Sports HQ and ET Live. From January 2009 to February 2011, Mr. Lanzone was Founder and Chief Executive Officer of Clickr Media, Inc., an Internet video search engine and navigation guide, which was acquired by CBS Corporation in 2011.Mr. Lanzone is also a director of both Supernova II and Supernova III.


Mr. Lanzone has also served as Chief Executive Officer of Ask.com (formerly Ask Jeeves), which he joined in 2001 after its acquisition of eTour.com, where he was Co-Founder and President. Mr. Lanzone is currently a board member of GoPro, Inc. and Newport Festivals Foundation. Mr. Lanzone graduated with a bachelor’s degree in political science from the University of California, Los Angeles in 1993. He also holds a dual JD/MBA degree from Emory University School of Law and Emory University Business School. We believe Mr. Lanzone is well qualified to serve on our Board due to his extensive experience in digital and social media and prior public company experience.

Gregg Renfrew is the founder and Chief Executive Officer of Beautycounter, a leading clean beauty and skincare company which she founded in 2011. The multi-channel, direct to consumer brand has been recognized as a pioneer of the clean beauty movement advocating for stricter regulations for the entire beauty industry. Beautycounter has received numerous awards including being named to CNBC 2020 Disruptor 50 list, Fast Company’s Most Innovative Companies, Allure Best of Beauty, Glamour Beauty Awards, Refinery29 Innovators List, NewBeauty Awards, WWD’s 2019 Best-Performing Beauty Company (small cap), and the CEW’s 2019 Indie Brand of the Year. Ms. Renfrew is also a director of both Supernova II and Supernova III.

Before launching Beautycounter, Ms. Renfrew sold her bridal registry company, The Wedding List, to Martha Stewart Living Omnimedia in 2001. She then led new-concept, brand, marketing, merchandising and operational consulting engagements with Bergdorf Goodman, Goldie Hawn and Kate Hudson, Intermix, Sugar Paper, and Lela Rose, among other high-profile corporate and entertainment clients.

Ms. Renfrew has spoken at Vanity Fair’s Founders Fair and Fortune’s Most Powerful Women and NextGen Summit, as well as top business schools, including Wharton (University of Pennsylvania), Tuck (Dartmouth), Stanford and Columbia. Ms. Renfrew currently serves on the board of directors for The Nantucket Project and previously served on the boards of organizations including GOOD+ Foundation, Healthy Child Healthy World and her alma mater, Miss Porter’s School, where she was the commencement speaker in 2014. We believe Ms. Renfrew is well qualified to serve on our Board due to her extensive experience in building and scaling businesses.

Rajeev Singh is currently the Chief Executive Officer of Accolade, a personalized advocacy company for employers, health plans, and health systems, which he joined in November 2015. Prior to that, Mr. Singh co-founded Concur Technologies, Inc., a business travel and expense management company, in 1993, and was most recently its president and chief operating officer until it was acquired by SAP AG in 2014. At Concur, he was responsible for all operational functions of the business ranging from sales and marketing to customer services to R&D and human resources. Prior to Concur, Mr. Singh held positions at Ford Motor Company and General Motors Corporation. Mr. Singh is also a director of both Supernova II and Supernova III.

Mr. Singh serves on the board of Avalara, a top provider of cloud-based tax compliance automation for businesses, Amperity, the world’s only Intelligent Customer Data Platform, and Seattle Children’s Hospital Foundation, a not-for-profit corporation that raises funds to help every child live the healthiest and most fulfilling life possible. Mr. Singh holds a BS from Western Michigan University. We believe Mr. Singh is qualified to serve on our board of directors due to his significant operational and strategic expertise.

Damien Hooper-Campbell resigned from his position as a member of the Board of Supernova effective March 4, 2021. Mr. Hooper-Campbell is the first Chief Diversity Officer at Zoom and has served in this capacity since June 2020. Mr. Hooper-Campbell leads the design and implementation of Zoom’s global diversity and inclusion strategy with a focus on its current and future employees and customers, its products and its communities. He is also responsible for establishing Zoom’s University Recruiting program and initiatives. Mr. Hooper Campbell is also a director of Supernova II.

Prior to joining Zoom, Mr. Hooper-Campbell was a Vice President at eBay where he served as the company’s first Chief Diversity Officer for four years. While at eBay, he led the design and implementation of eBay’s global strategy for embedding diversity and inclusion across its workforce, workplace, and marketplace. He also led eBay’s University Recruiting & Programs team and was a member of the eBay Foundation’s Board of Directors. Before eBay, Mr. Hooper-Campbell served as Uber’s first Global Head of Diversity & Inclusion and as a Diversity Strategist at Google. Prior to Google, Mr. Hooper-Campbell was a Vice President in Goldman Sachs’ Pine Street Leadership Development Group.


Mr. Hooper-Campbell has served on the Board of New Jersey Needs You and as a mentor in Morehouse College’s Executive Mentorship Program. He was selected for the California Diversity Council’s 2017 Leadership Excellence Award, the Network Journal’s 2017 40 Under Forty Achievers Award and EBONY Magazine’s 2016 Power 100 List, and has been featured in the Wall Street Journal, New York Times, Fortune, Forbes, Fast Company, TechCrunch and The Globe and Mail. Mr. Hooper-Campbell graduated with a BA in Economics from Morehouse College and an MBA from Harvard Business School, where he was both a Bert King and Morgan Stanley Fellow. We believe Mr. Hooper-Campbell was well qualified to serve on our Board due to his leadership experience in the technology sector.

Number and Terms of Office of Officers and Directors

We currently have seven directors. Our board of directors will be divided into three classes with only one class of directors being elected in each year and each class (except for those directors appointed prior to our first annual meeting of stockholders) serving a three-year term. In accordance with the NYSE corporate governance requirements, we are not required to hold an annual meeting until one year after our first fiscal year end following our listing on the NYSE. The term of office of the first class of directors, consisting of Ken Fox, will expire at our first annual meeting of stockholders. The term of office of the second class of directors, consisting of Jim Lanzone, Gregg Renfrew and Rajeev Singh will expire at the second annual meeting of stockholders. The term of office of the third class of directors, consisting of Spencer M. Rascoff, Alexander M. Klabin and Robert D. Reid will expire at the third annual meeting of stockholders. We may not hold an annual meeting of stockholders until after we consummate our initial business combination. Holders of our founder shares will have the right to elect all of our directors prior to consummation of our initial business combination and to remove directors prior to our initial business combination, and holders of our public shares will not have the right to vote on the election of directors during such time.

Our officers are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate. Our bylaws provide that our officers may consist of a Chair or Co-Chairs of the Board, a Chief Executive Officer, a President, a Chief Financial Officer, a Chief Operating Officer, a Secretary and such other offices (including without limitation, Vice Presidents, Assistant Secretaries and a Treasurer) as may be determined from time to time by the board of directors. 

Director Independence

NYSE listing standards require that a majority of our board of directors be independent. An “independent director” is defined generally as a person other than an officer or employee of the company or its subsidiaries or any other individual having a relationship, which, in the opinion of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out the responsibilities of a director. Our board has determined that each of Ken Fox, Jim Lanzone, Gregg Renfrew and Rajeev Singh are independent directors under applicable SEC and NYSE listing rules. Our independent directors will have regularly scheduled meetings at which only independent directors are present.

Committees of the Board

Our Board has three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Subject to phase-in rules, the rules of NYSE and Rule 10A-3 of the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors, and the rules of NYSE require that the compensation committee and the nominating and corporate governance committee of a listed company be comprised solely of independent directors. The charter of each committee is available on our website.

Audit Committee

We have established an audit committee of the Board. The members of our audit committee are Alexander Klabin, Rajeev Singh and Jim Lanzone. Alexander Klabin will serve as chair of the audit committee.


Each member of the audit committee is financially literate and our board of directors has determined that Alexander Klabin qualifies as an “audit committee financial expert” as defined in applicable SEC rules. Under NYSE listing standards and applicable SEC rules, we are required to have at least three members of the audit committee, all of whom must be independent. Rajeev Singh and Jim Lanzone each meet the independent director standard under the NYSE’s listing standards and under Rule 10A-3(b)(1) of the Exchange Act.

We adopted an audit committee charter, which details the principal functions of the audit committee, including:

the appointment, compensation, retention, replacement, and oversight of the work of the independent registered public accounting firm and any other independent registered public accounting firm engaged by us;

pre-approving all audit and non-audit services to be provided by the independent registered public accounting firm or any other registered public accounting firm engaged by us, and establishing pre-approval policies and procedures;

reviewing and discussing with the independent registered public accounting firm all relationships the auditors have with us in order to evaluate their continued independence;

setting clear hiring policies for employees or former employees of the independent registered public accounting firm;

setting clear policies for audit partner rotation in compliance with applicable laws and regulations;

obtaining and reviewing a report, at least annually, from the independent registered public accounting firm describing (1) the independent auditor’s internal quality-control procedures and (2) any material issues raised

by the most recent internal quality-control review, or peer review, of the audit firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years respecting one or more independent audits carried out by the firm and any steps taken to deal with such issues;

reviewing and approving any related party transaction required to be disclosed pursuant to Item 404 of Regulation S-K promulgated by the SEC prior to us entering into such transaction; and

reviewing with management, the independent registered public accounting firm, and our legal advisors, as appropriate, any legal, regulatory or compliance matters, including any correspondence with regulators or government agencies and any employee complaints or published reports that raise material issues regarding our financial statements or accounting policies and any significant changes in accounting standards or rules promulgated by the Financial Accounting Standards Board, the SEC or other regulatory authorities.

Compensation Committee

We have a compensation committee of the board of directors. The members of our Compensation Committee are Spencer Rascoff, Gregg Renfrew and Ken Fox. Spencer Rascoff serves as chair of the compensation committee. Our board of directors has determined that each of Gregg Renfrew and Ken Fox is independent under the NYSE’s listing standards. We adopted a compensation committee charter, which details the principal functions of the compensation committee, including:

reviewing and approving on an annual basis the corporate goals and objectives relevant to our Chief Executive Officer’s compensation, evaluating our Chief Executive Officer’s performance in light of such goals and objectives and determining and approving the remuneration (if any) of our Chief Executive Officer based on such evaluation;

reviewing and approving the compensation of all of our other officers;

reviewing our executive compensation policies and plans;

implementing and administering our incentive compensation equity-based remuneration plans;

assisting management in complying with our proxy statement and annual report disclosure requirements;


approving all special perquisites, special cash payments and other special compensation and benefit arrangements for our officers and employees;

producing a report on executive compensation to be included in our annual proxy statement; and

reviewing, evaluating and recommending changes, if appropriate, to the remuneration for directors.

The charter also provides that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However, before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee will consider the independence of each such adviser, including the factors required by the NYSE and the SEC.

Corporate Governance and Nominating Committee

We have established a corporate governance and nominating committee of the board of directors. The members of our corporate governance and nominating are Spencer Rascoff, Gregg Renfrew and Ken Fox. Spencer Rascoff serves as chair of the corporate governance and nominating committee. Our board of directors has determined that each of Gregg Renfrew and Ken Fox is independent under the NYSE’s listing standards. The primary function of the corporate governance committee and nominating committee include:

identifying individuals qualified to become members of the board of directors and making recommendations to the board of directors regarding nominees for election;

reviewing the independence of each directors and making a recommendation to the board of directors with respect to each director’s independence;

developing and recommending to the board of directors the corporate governance principles applicable to us and reviewing our corporate governance guidelines at least annually;

making recommendations to the board of directors with respect to the membership of the audit, compensation and corporate governance and nominating committees;

overseeing the evaluation of the performance of the board of directors and its committees on a continuing basis, including an annual self-evaluation of the performance of the corporate governance and nominating committee;

considering the adequacy of our governance structures and policies, including as they relate to our environmental sustainability and governance practices;

considering director nominees recommended by stockholders; and

reviewing our overall corporate governance and reporting to the board of directors on its findings and any recommendations.

We have not formally established any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.

Director Nominations

Our nominating and corporate governance committee will recommend to the Board candidates for nomination for election at the annual meeting of the stockholders. Prior to our initial business combination, the


Board will also consider director candidates recommended for nomination by holders of our founder shares during such times as they are seeking proposed nominees to stand for election at an annual meeting of stockholders (or, if applicable, a special meeting of stockholders). Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for nomination to our Board.

Our nominating and corporate governance committee will recommend to the Board candidates for nomination who have a high level of personal and professional integrity, strong ethics and values and the ability to make mature business judgments. In general, in identifying and evaluating nominees for director, our Board considers experience in corporate management such as serving as an officer or former officer of a publicly held company, experience as a board member of another publicly held company, professional and academic experience relevant to our business, leadership skills, experience in finance and accounting or executive compensation practices, whether candidate has the time required for preparation, participation and attendance at Board meetings and committee meetings, if applicable, independence and the ability to represent the best interests of our stockholders.

Code of Ethics

We have adopted a Code of Ethics applicable to our directors, officers and employees. The Code of Ethics is available on our website at http://www.supernovaspac.com//. We will also post any amendments to or waivers of our Code of Ethics on our website.

Corporate Governance Guidelines

Our Board has adopted corporate governance guidelines in accordance with the corporate governance rules of the NYSE that serve as a flexible framework within which our Board and its committees operate. These guidelines cover a number of areas including board membership criteria and director qualifications, director responsibilities, board agenda, roles of the Co-Chairs of the board, Chief Executive Officer and presiding director, meetings of independent directors, committee responsibilities and assignments, board member access to management and independent advisors, director communications with third parties, director compensation, director orientation and continuing education, evaluation of senior management and management succession planning. A copy of the corporate governance guidelines will be provided without charge upon request from us and is also available on our website.


Item 11. Executive Compensation

Compensation Discussion and Analysis

None of our officers or directors have received any cash compensation for services rendered to us. Our sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with our formation and initial public offering or activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, directors or our or any of their affiliates.

After the completion of our initial business combination, directors or members of our management team who remain with us may be paid consulting, management or other compensation from the combined company. All compensation will be fully disclosed to stockholders, to the extent then known, in the tender offer materials or proxy solicitation materials furnished to our stockholders in connection with a proposed business combination. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive officer and director compensation. Any compensation to be paid to our officers after the completion of our initial business combination will be determined by a compensation committee constituted solely by independent directors.

We are not party to any agreements with our officers and directors that provide for benefits upon termination of employment. The existence or terms of any such employment or consulting arrangements may influence our management’s motivation in identifying or selecting a target business, and we do not believe that the ability of our management to remain with us after the consummation of our initial business combination should be a determining factor in our decision to proceed with any potential business combination.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The following table sets forth information regarding the beneficial ownership of our common stock as of March 26, 2021 based on information obtained from the persons named below, with respect to the beneficial ownership of shares of our common stock, by:

each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

each of our officers and directors that beneficially owns shares of our common stock; and

all our officers and directors as a group.

In the table below, percentage ownership is based on 40,250,000 shares of our Class A common stock, which includes Class A common stock underlying the units sold in our initial public offering, and 10,062,500 shares of our Class B common stock outstanding as of March 26, 2021. Voting power represents the combined voting power of Class A common stock and Class B common stock owned beneficially by such person. On all matters to be voted upon, except the election of directors, the holders of the Class A common stock and the Class B common stock vote together as a single class. Currently, all of the shares of Class B common stock are convertible into shares of Class A common stock on a one-for-one basis. The table below does not include the shares of Class A common stock underlying the private placement warrants held or to be held by our officers or sponsor because these securities are not exercisable within 60 days of this report.


Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

Name of Beneficial Owner(1)

 

Number of

Shares

Owned

 

 

Percentage

Of Outstanding

Common Stock

 

 

 

 

 

Supernova Partners LLC (our sponsor)(2)(3)

 

9,861,250

 

 

19.7%

 

Spencer M. Rascoff(2)(3)

 

9,861,250

 

 

19.7%

 

Alexander M. Klabin(2)(3)

 

9,861,250

 

 

19.7%

 

Robert D. Reid(2)(3)

 

9,861,250

 

 

19.7%

 

Michael S. Clifton(2)(3)

 

9,861,250

 

 

19.7%

 

Ken Fox(2)

 

40,250

 

 

*

 

Jim Lanzone(2)

 

40,250

 

 

*

 

Gregg Renfrew(2)

 

40,250

 

 

*

 

Rajeev Singh(2)

 

40,250

 

 

*

 

Millennium Management LLC(4)

 

2,338,116

 

 

5.8%

 

Castle Creek Arbitrage, LLC (5)

 

2,100,350

 

 

5.22%

 

Empyrean Capital Partners LP(6)

 

2,767,676

 

 

6.9%

 

All directors, director nominees and executive officers as

   a group (eight individuals)

 

10,020,000

 

 

19.9%

 

*Less than one percent.

(1)

Unless otherwise noted, the business address of each of the following entities or individuals is 4301 50th Street NW, Suite 300 PMB 1044, Washington D.C. 20016.

(2)

Interests shown consist solely of founder shares. Such shares will automatically convert into shares of Class A common stock at the time of our initial business combination on a one-for-one basis, subject to adjustment, as described in the exhibit entitled “Description of Securities”.

(3)

Supernova Partners LLC, our Sponsor, is the record holder of the Class B common stock reported herein. The members of our Sponsor are Alexander M. Klabin, Spencer M. Rascoff, Robert Reid and Michael S. Clifton. The address of the entities and individuals mentioned in this footnote is 4301 50th Street NW, Suite 300, PMB 1044, Washington, D.C. 20016. Certain of our other officers and directors are indirect members of our Sponsor.

(4)

Based solely upon the Schedule 13G filed by Millennium Management LLC, a Delaware limited liability company, on January 27, 2021. According to the Schedule 13G filed on January 27, 2021, Millennium Management LLC, Millennium Group Management LLC and Israel A. Englander share voting and dispositive power over 2,338,116 shares of Supernova Partners Acquisition Company, Inc. Class A common stock, of which Riverview Group LLC shares voting and dispositive power over 800,116 shares of Supernova Partners Acquisition Company, Inc. Class A common stock, Millennium International Management LP and ICS Opportunities, Ltd. each share voting and dispositive power over 450,000 shares Supernova Partners Acquisition Company, Inc. Class A common stock and Integrated Core Strategies (US) LLC shares voting and dispositive power over 1,088,000 shares of Supernova Partners Acquisition Company, Inc. Class A common stock. The address of the business office of each of the foregoing entities is c/o Millennium Management LLC, 666 Fifth Avenue, New York, NY 10103.

(5)

Based solely upon the Schedule 13G filed by Castle Creek Arbitrage, LLC, a Delaware limited liability company, on February 16, 2021. According to the Schedule 13G filed on February 16, 2021, CC ARB West, LLC, CC Arbitrage, Ltd., Castle Creek Arbitrage, LLC and Mr. Allan Weine share voting and dispositive power over 2,100,350 shares of Supernova Partners Acquisition Company, Inc. Class A common stock, of which CC ARB West, LLC shares voting and dispositive power over 1,768,497 shares of Supernova Partners Acquisition Company, Inc. Class A common stock and CC Arbitrage, Ltd. shares voting and dispositive power over 331,853 shares of Supernova Partners Acquisition Company, Inc. Class A common stock. The address of the business office of each of the foregoing entities is 190 South LaSalle Street, Suite 3050, Chicago, Illinois 60603.


(6)

Based solely upon the Schedule 13G filed by Empyrean Capital Overseas Master Fund, Ltd., a Cayman Islands Exempted company, on January 12, 2021. According to the Schedule 13G filed on January 12, 2021, Empyrean Capital Overseas Master Fund, Ltd., Empyrean Capital Partners, LP, and Mr. Amos Meron share voting and dispositive power over 2,767,676 shares of Supernova Partners Acquisition Company, Inc. Class A common stock. The address of the business office of each of the foregoing entities is Empyrean Capital Partners, LP, 10250 Constellation Boulevard, Suite 2950, Los Angeles, CA 90067.

The table above does not include the shares of common stock underlying the private placement warrants held or to be held by our officers or sponsor because these securities are not exercisable within 60 days of this report.

Changes in Control

None.

Item 13. Certain Relationships and Related Transactions, and Director Independence

Certain Relationships and Related Transactions

On September 9, 2020, our sponsor paid $25,000 to cover for certain offering costs in exchange for 11,500,000 founder shares, or approximately $0.002 per share. On September 14, 2020, we effectuated an 0.75-for-1 reverse split of the founder shares, resulting in an aggregate outstanding amount of 8,625,000 founder shares. On September 24, 2020, the Sponsor transferred 34,500 founder shares to each of the five independent director nominees. The purchase price of the founder shares was determined by dividing the amount of cash contributed to the company by the number of founder shares issued. On October 20, 2020, we effectuated a 6-for-7 stock split of the founder shares, resulting in an aggregate outstanding amount of 10,062,500 Founder Shares. Upon the completion of our initial public offering, our initial stockholders held 10,062,500 founder shares.

Our sponsor has purchased an aggregate of 6,700,000 private placement warrants at a price of $1.50 per warrant for $10,050,000 in a private placement that will occurred simultaneously with the closing of our initial public offering. Each private placement warrant is exercisable to purchase one share of Class A common stock at a price of $11.50 per share, subject to adjustment as provided herein. Private placement warrants may be exercised only for a whole number of shares. The private placement warrants (including the Class A common stock issuable upon exercise of the private placement warrants) may not, subject to certain limited exceptions, be transferred, assigned or sold by it until 30 days after the completion of our initial business combination.

If any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has then-current fiduciary or contractual obligations, he or she may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us. Our officers and directors currently have certain relevant fiduciary duties or contractual obligations that may take priority over their duties to us.

We have entered into forward purchase agreements pursuant to which Ancient 1604 LLC and 75 and Sunny LP, affiliates of Alexander M. Klabin, and Spencer Rascoff, respectively, our Co-Chairs, have agreed to purchase Class A common stock in an aggregate share amount equal to 5,000,000 shares of our Class A common stock, plus an aggregate of 1,666,667 warrants to purchase one share of our Class A common stock at $11.50 per share, subject to adjustment, for an aggregate purchase price of $50,000,000, or $10.00 for one share of our Class A common stock and one-third of one warrant, in a private placement to occur concurrently with the closing of our initial business combination. The warrants to be issued as part of the forward purchase agreements will be identical to the warrants sold as part of the units in our initial public offering.

The proceeds from the sale of the forward purchase securities may be used as part of the consideration to the sellers in the initial business combination, expenses in connection with our initial business combination or for working capital in the post transaction company. These purchases will be required to be made regardless of whether any shares of our Class A common stock are redeemed by our public stockholders and are intended to provide us with a minimum funding level for our initial business combination.

The forward purchasers will not have any right to the funds held in the trust account except with respect to any public shares owned by them.


Our sponsor, officers and directors or any of their respective affiliates will be reimbursed for any out-of-pocket expenses incurred in connection with our formation and initial public offering or activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. Our audit committee will review on a quarterly basis all payments that were made by us to our sponsor, officers, directors or our or any of their affiliates and will determine which expenses and the amount of expenses that will be reimbursed. There is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred by such persons in connection with activities on our behalf.

Our sponsor has agreed to loan us up to $300,000 to be used for a portion of the expenses of our initial public offering. Our promissory note was repaid in full upon the closing of the initial public offering.

In addition, in order to fund working capital deficiencies or finance transaction costs in connection with an intended 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 may repay such loaned amounts out of the proceeds of the trust account released to us. Otherwise, such loans may be repaid only out of funds held outside the trust account. Up to $1,500,000 of such loans may be convertible into warrants at a price of $1.50 per warrant at the option of the lender. The warrants would be identical to the private placement warrants issued to our sponsor. The terms of such loans, if any, have not been determined and no written agreements exist with respect to such loans. Prior to our initial business combination, we do not expect to seek loans from parties other than our sponsor or an affiliate of our sponsor as we do not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in our trust account.

After our initial business combination, members of our management team who remain with us may be paid consulting, management or other fees from the combined company with any and all amounts being fully disclosed to our stockholders, to the extent then known, in the tender offer or proxy solicitation materials, as applicable, furnished to our stockholders. It is unlikely the amount of such compensation will be known at the time of distribution of such tender offer materials or at the time of a stockholder meeting held to consider our initial business combination, as applicable, as it will be up to the directors of the post-combination business to determine executive officer and director compensation.

We entered into a registration rights agreement with respect to the founder shares, private placement warrants and warrants issued upon conversion of working capital loans (if any). Pursuant to the forward purchase agreements, we have also agreed to use our commercially reasonable efforts (i) to file within 30 days after the closing of the initial business combination a resale shelf registration statement with the SEC for a secondary offering of the forward purchase shares and the forward purchase warrants (and underlying shares of Class A common stock), (ii) to cause such registration statement to be declared effective promptly thereafter, (iii) to maintain the effectiveness of such registration statement until the earliest of (A) the date on which the forward purchasers or their assignees cease to hold the securities covered thereby, and (B) the date all of the securities covered thereby can be sold publicly without restriction or limitation under Rule 144 under the Securities Act and (iv) after such registration statement is declared effective, to conduct certain underwritten offerings at the request of the forward purchasers, subject to certain limitations. In addition, the forward purchase agreements provide for certain “piggy-back” registration rights to the holders of forward purchase securities to include their securities in other registration statements filed by us.

Item 14. Principal Accountant Fees and Services.

The firm of Marcum LLP, or Marcum, acts as our independent registered public accounting firm. The following is a summary of fees paid to Marcum for services rendered.

Audit Fees.Audit fees consist of fees billed or expected to be billed for professional services rendered for the audit of the period from August 31, 2020 (inception) through December 31, 2020 financial statements, reviews of our quarterly financial statements and services that are normally provided by our independent registered public accounting firm in connection with statutory and regulatory filings. The aggregate fees billed by Marcumfor audit fees, inclusive of required filings with the SEC for period from August 31, 2020 (inception) through December 31, 2020 and of services rendered in connection with our initial public offering, totaled $61,800.


Audit-Related Fees. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to performance of the audit or review of our year-end financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultation concerning financial accounting and reporting standards. For the period from August 31, 2020 (inception) through December 31, 2020, we did not pay Marcum any audit-related fees.

Tax Fees. Tax fees consist of fees billed for professional services relating to tax compliance, tax planning and tax advice. For the period from August 31, 2020 (inception) through December 31, 2020, we did not pay Marcum any tax fees.

All Other Fees. All other fees consist of fees billed for all other services. For the period from August 31, 2020 (inception) through December 31, 2020, we did not pay Marcum any other fees.

Pre-Approval Policy

Our audit committee was formed upon the consummation of our initial public offering. As a result, the audit committee did not pre-approve all of the foregoing services, although any services rendered prior to the formation of our audit committee were approved by our Board. Since the formation of our audit committee, and on a going-forward basis, the audit committee has and will pre-approve all auditing services and permitted non-audit services to be performed for us by our auditors, including the fees and terms thereof (subject to the de minimis exceptions for non-audit services described in the Exchange Act which are approved by the audit committee prior to the completion of the audit).


PART IV

Item 15. Exhibits, 8, Financial Statements and Financial Statement SchedulesSupplementary Data.

(a)

The following documents are filed as part of this Report:

(1)

Financial Statements (As Restated)

(2)

Financial Statements Schedule

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

All financial statement schedulesWe are omitted because theyexposed to economic and other market risks, which principally includes changes in interest rates.

Interest Rate Risk

We are not applicable orsubject to market risk associated with changing interest rates within our variable rate senior secured credit facilities and other senior secured debt.

As of December 31, 2022, our exposure to changes in interest rates within these debt arrangements is principally associated with the amounts are immaterialSecured Overnight Financing Rate (“SOFR”). We had outstanding borrowings on our senior secured credit facilities and not required, or the required information is presentedother senior secured debt of $578.3 million as of December 31, 2022, of which, $489.3 million was outstanding on our senior secured credit facilities. Borrowings under our senior secured credit facilities accrue interest at a floating rate based on a SOFR reference rate plus a margin. Assuming no change in the financial statementsoutstanding borrowings on our senior secured credit facilities, we estimate that a one percentage point increase in SOFR would have increased our annual interest expense by $4.9 million during the year ended December 31, 2022.

As of December 31, 2021, our exposure to changes in interest rates within our variable rate senior secured credit facilities and notes thereto in is Item 15 of Part IV below.

(3)

Exhibits

We hereby file as part of this reportother senior secured debt was principally associated with the exhibits listedLondon Interbank Offered Rate (“LIBOR”). Assuming no change in the attached Exhibit Index. Exhibits which are incorporated hereinoutstanding borrowings on our senior secured credit facilities as of December 31, 2021, we estimate that a one percentage point increase in LIBOR would have increased our annual interest expense by reference can be obtained on$8.3 million during the SEC website at www.sec.gov.year ended December 31, 2021.

Item 16.Offerpad Solutions Inc. | 2022 Form 10-K Summary| 57


None.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

Index toItem 8. Financial Statements and Supplementary Data.

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

F-2

Financial Statements:

59

Consolidated Balance Sheet as of December 31, 2020 (As Restated)Sheets

F-361

StatementConsolidated Statements of Operations for the Period from August 31, 2020 (Inception) to December 31, 2020 (As Restated)

F-462

StatementConsolidated Statements of Changes in Temporary Equity and Stockholders’ Equity for the Period from August 31, 2020 (Inception) to December 31, 2020 (As Restated)(Deficit)

F-563

StatementConsolidated Statements of Cash Flows for the Period from August 31, 2020 (Inception) to December 31, 2020 (As Restated)

F-664

Notes to Consolidated Financial Statements (As Restated)

F-765


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Offerpad Solutions Inc. | 2022 Form 10-K | 58


Report of Independent Registered Public Accounting Firm

To the Shareholdersstockholders and the Board of Directors of Offerpad Solutions Inc.

Supernova Partners Acquisition Company, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetsheets of Supernova Partners Acquisition Company,Offerpad Solutions Inc. and subsidiaries (the “Company”) as of December 31, 2020,2022 and 2021, the related consolidated statements of operations, changes in temporary equity and stockholders’ equity (deficit), and cash flows for each of the three years in the period from August 31, 2020 (inception) throughended December 31, 2020,2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020,2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period from August 31, 2020 (inception) throughended December 31, 2020,2022, in conformity with accounting principles generally accepted in the United States of America.

RestatementWe have also audited, in accordance with the standards of 2020 Financial Statements

As discussed in Note 2 to the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial statements, the accompanying financial statementsreporting as of December 31, 20202022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and forour report dated February 28, 2023, expressed an unqualified opinion on the period from August 31, 2020 (inception) through December 31, 2020 have been restated.Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audit.audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our auditaudits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our auditaudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our auditaudits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our auditaudits provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Inventory – Valuation — Refer to Notes 1 and 3 to the financial statements

Critical Audit Matter Description

As described in Note 1 of the financial statements, the Company carries inventory of acquired homes at the lower of cost or net realizable value. Inventory is reviewed at least quarterly for impairment indicators that net realizable value may be lower than cost. If the net realizable value is lower than cost, an inventory impairment is recorded to cost of revenue and the related inventory is adjusted to its net realizable value. For homes that are not under contract, if the carrying value exceeds the expected sales price less expected selling costs, the carrying value of these homes are adjusted to the expected sales price less expected selling costs. The inventory balance of homes that are not under contract was $495.4 million as of December 31, 2022.

We identified the expected sales price estimate used in the inventory impairment analysis for homes that are not under contract to be a critical audit matter due to the subjectivity of management’s market comparables used in estimating the expected sales price. The evaluation of inventory recoverability for homes not under contract required a high degree of auditor judgment and an increased extent of effort to evaluate the reasonableness of the expected sales price estimate used in management’s impairment analysis.

Offerpad Solutions Inc. | 2022 Form 10-K | 59


How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to evaluating the expected sales price estimate included the following, among others:

We tested the design and effectiveness of the Company’s internal controls related to management’s inventory impairment analysis, including those over the determination of the expected sales price estimate.
We evaluated management’s ability to accurately estimate the expected sales price by comparing contract prices for homes that went under contract to the expected sales price estimate for these same homes used in management’s impairment analysis.
With the assistance of our internal fair value specialists, we evaluated the market comparables used by management to determine the expected sales price estimate and compared selections for testing to external market sources.
We tested the mathematical accuracy of management’s analysis.
We evaluated management’s ability to develop reasonable estimates of the expected sales price by comparing prior period estimates of expected sales price to actual selling prices for homes sold in the current period.
We evaluated external macroeconomic market sources regarding trends and changing market conditions.

/s/ Marcum llpDELOITTE & TOUCHE LLP

Tempe, Arizona

Marcum llpFebruary 28, 2023

We have served as the Company’s auditor since 2020.2019.

New York, NYOfferpad Solutions Inc. | 2022 Form 10-K | 60


MarchOFFERPAD SOLUTIONS INC.

Consolidated Balance Sheets

 

 

 

 

As of December 31,

 

(in thousands, except par value per share)

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

$

97,241

 

 

$

169,817

 

Restricted cash

 

 

 

 

43,058

 

 

 

24,616

 

Accounts receivable

 

 

 

 

2,350

 

 

 

6,165

 

Inventory

 

 

 

 

664,697

 

 

 

1,132,571

 

Prepaid expenses and other current assets

 

 

 

 

6,833

 

 

 

9,808

 

Total current assets

 

 

 

 

814,179

 

 

 

1,342,977

 

Property and equipment, net

 

 

 

 

5,194

 

 

 

5,146

 

Other non-current assets

 

 

 

 

5,696

 

 

 

4,959

 

TOTAL ASSETS

 

(1)

 

$

825,069

 

 

$

1,353,082

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

4,647

 

 

$

6,399

 

Accrued and other current liabilities

 

 

 

 

28,252

 

 

 

35,027

 

Secured credit facilities and other debt, net

 

 

 

 

605,889

 

 

 

861,762

 

Secured credit facilities and other debt - related party

 

 

 

 

60,176

 

 

 

164,434

 

Total current liabilities

 

 

 

 

698,964

 

 

 

1,067,622

 

Warrant liabilities

 

 

 

 

539

 

 

 

24,061

 

Other long-term liabilities

 

 

 

 

3,689

 

 

 

3,830

 

Total liabilities

 

(2)

 

 

703,192

 

 

 

1,095,513

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000 shares authorized; 232,379 and 224,154 shares issued and outstanding as of December 31, 2022 and 2021, respectively

 

 

 

 

23

 

 

 

22

 

Class B common stock, $0.0001 par value; 20,000 shares authorized; 14,816 shares issued and outstanding as of December 31, 2022 and 2021, respectively

 

 

 

 

2

 

 

 

2

 

Additional paid in capital

 

 

 

 

402,521

 

 

 

389,601

 

Accumulated deficit

 

 

 

 

(280,669

)

 

 

(132,056

)

Total stockholders’ equity

 

 

 

 

121,877

 

 

 

257,569

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

$

825,069

 

 

$

1,353,082

 

(1)
Our consolidated assets as of December 31, 2022 and 2021 exceptinclude the following assets of certain variable interest entities (“VIEs”) that can only be used to settle the liabilities of those VIEs: Restricted cash, $42,958 and $24,616; Accounts receivable, $1,841 and $4,845; Inventory, $664,697 and $1,132,571; Prepaid expenses and other current assets, $212 and $2,871; Total assets of $709,708 and $1,164,903, respectively.
(2)
Our consolidated liabilities as of December 31, 2022 and 2021 include the following liabilities for the effects of the restatement discussed in Notes 2 and 11 to which the date is May 25, 2021


VIE creditors do not have recourse to Offerpad: Accounts payable, $1,976 and $2,810; Accrued and other current liabilities, $4,408 and $3,537; Secured credit facilities and other debt, net, $666,065 and $1,026,196; Total liabilities, $672,449 and $1,032,543, respectively.

SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

BALANCE SHEET

As Restated - See Note 2

December 31, 2020 (Restated)

Assets:

 

 

 

 

Current assets:

 

 

 

 

Cash

 

$

1,079,633

 

Prepaid expenses

 

 

405,522

 

Total current assets

 

 

1,485,155

 

Investments held in Trust Account

 

 

402,578,522

 

Total Assets

 

$

404,063,677

 

Liabilities and Stockholders' Equity:

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

38,915

 

Accrued expenses

 

 

215,097

 

Income tax payable

 

 

4,749

 

Franchise tax payable

 

 

61,264

 

Total current liabilities

 

 

320,025

 

Deferred legal fees

 

 

100,000

 

Deferred underwriting commissions

 

 

14,087,500

 

Derivative liabilities

 

 

49,674,170

 

Total Liabilities

 

 

64,181,695

 

Commitments and Contingencies

 

 

 

 

Class A common stock, $0.0001 par value; 33,488,198 shares subject to possible redemption

   at $10.00 per share

 

 

334,881,980

 

Stockholders' Equity:

 

 

 

 

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued and

   outstanding

 

 

 

Class A common stock, $0.0001 par value; 100,000,000 shares authorized; 6,761,802 shares

   issued and outstanding (excluding 33,488,198 shares subject to possible redemption)

 

 

676

 

Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 10,062,500

   shares issued and outstanding

 

 

1,006

 

Additional paid-in capital

 

 

30,379,198

 

Accumulated deficit

 

 

(25,380,878

)

Total stockholders' equity

 

 

5,000,002

 

Total Liabilities and Stockholders' Equity

 

$

404,063,677

 

The accompanying notes are an integral part of these consolidated financial statements.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

STATEMENT OF OPERATIONS

Offerpad Solutions Inc. | 2022 Form 10-K | 61


As Restated – See Note 2OFFERPAD SOLUTIONS INC.

Consolidated Statements of Operations

For the Period From August 31, 2020 (Inception) Through December 31, 2020

 

 

Year Ended December 31,

 

(in thousands, except per share data)

 

2022

 

 

2021

 

 

2020

 

Revenue

 

$

3,952,314

 

 

$

2,070,446

 

 

$

1,064,257

 

Cost of revenue

 

 

3,769,892

 

 

 

1,862,631

 

 

 

976,478

 

Gross profit

 

 

182,422

 

 

 

207,815

 

 

 

87,779

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Sales, marketing and operating

 

 

238,931

 

 

 

146,872

 

 

 

76,786

 

General and administrative

 

 

58,718

 

 

 

30,317

 

 

 

17,481

 

Technology and development

 

 

12,090

 

 

 

10,860

 

 

 

7,270

 

Total operating expenses

 

 

309,739

 

 

 

188,049

 

 

 

101,537

 

(Loss) income from operations

 

 

(127,317

)

 

 

19,766

 

 

 

(13,758

)

Other income (expense):

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

23,522

 

 

 

2,464

 

 

 

 

Interest expense

 

 

(45,991

)

 

 

(15,848

)

 

 

(10,031

)

Other income, net

 

 

1,532

 

 

 

248

 

 

 

834

 

Total other expense

 

 

(20,937

)

 

 

(13,136

)

 

 

(9,197

)

(Loss) income before income taxes

 

 

(148,254

)

 

 

6,630

 

 

 

(22,955

)

Income tax expense

 

 

(359

)

 

 

(170

)

 

 

(163

)

Net (loss) income

 

$

(148,613

)

 

$

6,460

 

 

$

(23,118

)

Net (loss) income per share, basic

 

$

(0.61

)

 

$

0.05

 

 

$

(0.40

)

Net (loss) income per share, diluted

 

$

(0.61

)

 

$

0.05

 

 

$

(0.40

)

Weighted average common shares outstanding, basic

 

 

245,148

 

 

 

118,571

 

 

 

57,865

 

Weighted average common shares outstanding, diluted

 

 

245,148

 

 

 

143,220

 

 

 

57,865

 

General and administrative expenses

 

$

229,377

 

Franchise tax expenses

 

 

61,264

 

Total operating expenses

 

 

(290,641

)

Other income (expense)

 

 

 

 

Change in fair value of derivative liabilities

 

 

(24,193,170

)

Financing costs - derivative liabilities

 

 

(970,840

)

Net gain on investments held in Trust Account

 

 

78,522

 

Loss before income tax expense

 

 

(25,376,129

)

Income tax expense

 

 

4,749

 

Net loss

 

$

(25,380,878

)

Weighted average shares outstanding of Class A common stock subject to possible

   redemption, basic and diluted

 

 

35,891,064

 

Basic and diluted net income per share, Class A common stock subject to possible

   redemption

 

$

0.00

 

Weighted average shares outstanding of nonredeemable Class A and Class B common

   stock, basic and diluted

 

 

12,232,461

 

Basic and diluted net loss per share, nonredeemable Class A and Class B

   common stock

 

$

(2.08

)

The accompanying notes are an integral part of these consolidated financial statements.


SUPERNOVA PARTNERS ACQUISITION COMPANY,Offerpad Solutions Inc. | 2022 Form 10-K | 62


OFFERPAD SOLUTIONS INC.

STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITYConsolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit)

 

Temporary Equity

 

 

 

Stockholders’ (Deficit) Equity

 

 

Series A
Convertible
Preferred Stock

 

Series A-1
Convertible
Preferred Stock

 

Series A-2
Convertible
Preferred Stock

 

Series B
Convertible
Preferred Stock

 

Series C
Convertible
Preferred Stock

 

Total
Temporary

 

 

 

Common Stock

 

Additional
Paid in

 

Accumulated

 

Treasury Stock

 

Total
Stockholders’
(Deficit)

 

(in thousands)

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Equity

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Shares

 

Amount

 

Equity

 

Balance at December 31, 2019

 

20,907

 

$

14,921

 

 

10,905

 

$

7,470

 

 

8,322

 

$

7,463

 

 

58,390

 

$

49,845

 

 

28,358

 

$

74,601

 

$

154,300

 

 

 

 

57,865

 

$

 

$

4,545

 

$

(115,398

)

 

4,794

 

$

(10,650

)

$

(121,503

)

Issuance of Series C (extension) stock, net of offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,627

 

 

29,823

 

 

29,823

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,363

 

 

 

 

 

 

 

 

1,363

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,118

)

 

 

 

 

 

(23,118

)

Balance at December 31, 2020

 

20,907

 

$

14,921

 

 

10,905

 

$

7,470

 

 

8,322

 

$

7,463

 

 

58,390

 

$

49,845

 

 

39,985

 

$

104,424

 

$

184,123

 

 

 

 

57,865

 

$

 

$

5,908

 

$

(138,516

)

 

4,794

 

$

(10,650

)

$

(143,258

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,279

 

 

 

 

647

 

 

 

 

 

 

 

 

647

 

Issuance of common stock upon early exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

211

 

 

 

 

 

 

 

 

 

 

 

 

 

Repurchased shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

171

 

 

 

 

 

 

 

 

171

 

Conversion of preferred stock to common stock

 

(20,907

)

 

(14,921

)

 

(10,905

)

 

(7,470

)

 

(8,322

)

 

(7,463

)

 

(58,390

)

 

(49,845

)

 

(39,985

)

 

(104,424

)

 

(184,123

)

 

 

 

138,612

 

 

14

 

 

184,109

 

 

 

 

 

 

 

 

184,123

 

Issuance of Class A common stock and Class B common stock in connection with Business Combination

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,073

 

 

10

 

 

195,687

 

 

 

 

(4,794

)

 

10,650

 

 

206,347

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,079

 

 

 

 

 

 

 

 

3,079

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,460

 

 

 

 

 

 

6,460

 

Balance at December 31, 2021

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

$

 

 

 

 

238,970

 

$

24

 

$

389,601

 

$

(132,056

)

 

 

$

 

$

257,569

 

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,101

 

 

1

 

 

4,670

 

 

 

 

 

 

 

 

4,671

 

Issuance of common stock upon vesting of restricted stock units

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

124

 

 

 

 

(57

)

 

 

 

 

 

 

 

(57

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,307

 

 

 

 

 

 

 

 

8,307

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(148,613

)

 

 

 

 

 

(148,613

)

Balance at December 31, 2022

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

 

 

$

 

$

 

 

 

 

247,195

 

$

25

 

$

402,521

 

$

(280,669

)

 

 

$

 

$

121,877

 

As Restated – See Note 2

For the Period From August 31, 2020 (Inception) Through December 31, 2020

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Class A

 

 

Class B

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance - August 31, 2020 (inception)

 

 

 

 

$

 

 

 

 

 

$

 

 

$

 

 

$

 

 

$

 

Issuance of Class B common stock

   to Sponsor

 

 

 

 

 

 

 

 

10,062,500

 

 

 

1,006

 

 

 

23,994

 

 

 

 

 

 

25,000

 

Sale of units in initial public offering,

   less fair value of public warrants

 

 

40,250,000

 

 

 

4,025

 

 

 

 

 

 

 

 

 

385,590,975

 

 

 

 

 

 

385,595,000

 

Offering costs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(21,831,140

)

 

 

 

 

 

(21,831,140

)

Excess of cash received over fair value of

   private placement warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,474,000

 

 

 

 

 

 

1,474,000

 

Common stock subject to possible

   redemption

 

 

(33,488,198

)

 

 

(3,349

)

 

 

 

 

 

 

 

 

(334,878,631

)

 

 

 

 

 

(334,881,980

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,380,878

)

 

 

(25,380,878

)

Balance - December 31, 2020

 

 

6,761,802

 

 

$

676

 

 

 

10,062,500

 

 

$

1,006

 

 

$

30,379,198

 

 

$

(25,380,878

)

 

$

5,000,002

 

The accompanying notes are an integral part of these consolidated financial statements.

Offerpad Solutions Inc. | 2022 Form 10-K | 63


 


OFFERPAD SOLUTIONS INC.

SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.Consolidated Statements of Cash Flows

STATEMENT OF CASH FLOWS

 

 

Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(148,613

)

 

$

6,460

 

 

$

(23,118

)

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

 

Depreciation

 

 

1,022

 

 

 

523

 

 

 

434

 

Gain on sale of property and equipment

 

 

 

 

 

(246

)

 

 

 

Amortization of debt financing costs

 

 

2,948

 

 

 

916

 

 

 

262

 

Impairment of inventory

 

 

93,810

 

 

 

2,843

 

 

 

3,170

 

Stock-based compensation

 

 

8,307

 

 

 

3,079

 

 

 

1,363

 

Change in fair value of warrant liabilities

 

 

(23,522

)

 

 

(2,464

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,815

 

 

 

(3,845

)

 

 

937

 

Inventory

 

 

374,064

 

 

 

(949,591

)

 

 

169,079

 

Prepaid expenses and other assets

 

 

(275

)

 

 

(5,288

)

 

 

115

 

Accounts payable

 

 

(1,752

)

 

 

4,130

 

 

 

841

 

Accrued and other liabilities

 

 

(4,402

)

 

 

21,563

 

 

 

1,781

 

Net cash provided by (used in) operating activities

 

 

305,402

 

 

 

(921,920

)

 

 

154,864

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(1,070

)

 

 

(13,687

)

 

 

(2,858

)

Proceeds from sales of property and equipment

 

 

 

 

 

2,032

 

 

 

 

Net cash used in investing activities

 

 

(1,070

)

 

 

(11,655

)

 

 

(2,858

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Borrowings from credit facilities and other debt

 

 

3,178,033

 

 

 

2,764,071

 

 

 

799,997

 

Repayments of credit facilities and other debt

 

 

(3,540,466

)

 

 

(1,912,837

)

 

 

(960,510

)

Payment of debt financing costs

 

 

(646

)

 

 

(7,632

)

 

 

(457

)

Proceeds from exercise of stock options

 

 

4,898

 

 

 

902

 

 

 

 

Payments for taxes related to stock-based awards

 

 

(285

)

 

 

 

 

 

 

Proceeds from Business Combination

 

 

 

 

 

284,011

 

 

 

 

Issuance cost of common stock

 

 

 

 

 

(51,249

)

 

 

 

Proceeds from issuance of Class C preferred stock, net

 

 

 

 

 

 

 

 

29,823

 

Net cash (used in) provided by financing activities

 

 

(358,466

)

 

 

1,077,266

 

 

 

(131,147

)

Net change in cash, cash equivalents and restricted cash

 

 

(54,134

)

 

 

143,691

 

 

 

20,859

 

Cash, cash equivalents and restricted cash, beginning of period

 

 

194,433

 

 

 

50,742

 

 

 

29,883

 

Cash, cash equivalents and restricted cash, end of period

 

$

140,299

 

 

$

194,433

 

 

$

50,742

 

Reconciliation of cash, cash equivalents and restricted cash to the consolidated balance sheet:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

97,241

 

 

$

169,817

 

 

$

43,938

 

Restricted cash

 

 

43,058

 

 

 

24,616

 

 

 

6,804

 

Total cash, cash equivalents and restricted cash

 

$

140,299

 

 

$

194,433

 

 

$

50,742

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

 

 

Cash payments for interest

 

$

59,732

 

 

$

21,875

 

 

$

14,048

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

 

Transfer of property and equipment, net to inventory

 

$

 

 

$

14,464

 

 

$

 

Acquisition of warrant liabilities

 

$

 

 

$

26,525

 

 

$

 

Conversion of preferred stock to common stock

 

$

 

 

$

184,123

 

 

$

 

Conversion of treasury stock

 

$

 

 

$

10,650

 

 

$

 

As Restated – See Note 2

For the Period From August 31, 2020 (Inception) Through December 31, 2020

Cash Flows from Operating Activities:

Net loss

$

(25,380,878

)

Adjustments to reconcile net loss to net cash used in operating activities:

General and administrative expenses paid by Sponsor under note payable

4,817

Change in fair value of derivative liabilities

24,193,170

Financing costs - derivative liabilities

970,840

Net gain from investments held in the Trust Account

(78,522

)

Changes in operating assets and liabilities:

Prepaid expenses

(405,522

)

Accounts payable

31,490

Accrued expenses

106,922

Income tax payable

4,749

Franchise tax payable

61,264

Net cash used in operating activities

(491,670

)

Cash Flows from Investing Activities

Cash deposited in Trust Account

(402,500,000

)

Net cash used in investing activities

(402,500,000

)

Cash Flows from Financing Activities:

Proceeds from note payable to related party

177,840

Repayment of note payable to related party

(182,657

)

Proceeds received from initial public offering, gross

402,500,000

Proceeds received from private placement

10,050,000

Offering costs paid

(8,473,880

)

Net cash provided by financing activities

404,071,303

Net increase in cash

1,079,633

Cash - beginning of the period

Cash - end of the period

$

1,079,633

Supplemental disclosure of noncash activities:

Offering costs paid by Sponsor in exchange for issuance of Class B common stock

$

25,000

Offering costs included in accrued expenses

$

108,175

Offering costs included in accounts payable

$

7,425

Deferred underwriting commissions in connection with the initial public offering

$

14,087,500

Deferred legal fees in connection with the initial public offering

$

100,000

Initial value of common stock subject to possible redemption

$

359,258,880

Change in value of common stock subject to possible redemption

$

(24,376,900

)

The accompanying notes are an integral part of these consolidated financial statements.

Offerpad Solutions Inc. | 2022 Form 10-K | 64


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

 


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS (AS RESTATED)

Note 1—1. Nature of Operations and Significant Accounting Policies

Description of OrganizationBusiness

Offerpad was founded in 2015 and Business Operations

Organization and General

Supernova Partners Acquisition Company, Inc. (the “Company”)together with its subsidiaries, is a blank check company incorporated in Delaware on August 31, 2020. The Company was formed forcustomer-centric, home buying and selling platform that provides customers with 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”).ultimate home transaction experience, offering convenience, control, certainty, and value. The Company is an emerging growth companyheadquartered in Chandler, Arizona and operated in over 1,800 cities and towns in 28 metropolitan markets across 16 states as such, the Company is subject to all of the risks associated with emerging growth companies.

As of December 31, 2020, the Company had not commenced any operations. All activity for the period from August 31, 2020 (inception) through December 31, 2020 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below. 2022.

Basis of Presentation

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 on cash and cash equivalents from the proceeds derived from the Initial Public Offering.

Sponsor and Financing

The Company’s sponsor is Supernova Partners LLC, a Delaware limited liability company (the “Sponsor”). The registration statement for the Company’s Initial Public Offering was declared effective on October 20, 2020. On October 23, 2020, the Company consummated its Initial Public Offering of 40,250,000 units (the “Units” and, with respect to the Class A common stock included in the Units being offered, the “Public Shares”), including 5,250,000 additional Units to cover over-allotments (the “Over-Allotment Units”), at $10.00 per Unit, generating gross proceeds of $402.5 million, and incurring offering costs of approximately $22.8 million, inclusive of approximately $14.1 million in deferred underwriting commissions (Note 6).

Simultaneously with the closing of the Initial Public Offering, the Company consummated the private placement (“Private Placement”) of 6,700,000 warrants (each, a “Private Placement Warrant” and collectively, the “Private Placement Warrants”) at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $10.1 million (Note 5).

Trust Account

Upon the closing of the Initial Public Offering and the Private Placement, $402.5 million ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was held 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 with a maturity of 185 days or less or in money market funds meeting certain conditions under Rule 2a-7 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.

Initial Business Combination

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 Private Placement Warrants, 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 net assets held in the Trust Account (excluding any deferred underwriters fees and taxes payable on the income earned on the Trust Account) at the time of the agreement to enter into the initial Business Combination. However, 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 business sufficient for it not to be required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”).


The Company will provide the holders (the “Public Stockholders”) of the Company’s Public Shares per share, sold in the Initial Public Offering (the “Public Shares”) 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, subject to applicable law and stock exchange listing requirements. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then held in the Trust Account (initially anticipated to be $10.00 per Public Share). 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). These Public Shares were recorded at a redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” The Company will proceed with a Business Combination only if a majority of the shares voted are voted in favor of the Business Combination. The Company will not redeem the Public Shares in an amount that would cause its net tangible assets to be less than $5,000,001. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Second Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the 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. 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 in connection with a Business Combination, the initial stockholders (as defined below) have agreed to vote their Founder Shares (as defined below in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of a Business Combination or don’t vote at all. In addition, the initial stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.

The Certificate of Incorporation will provide 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 and the Company’s officers and directors (the “initial stockholders”) will agree not to propose an amendment to the Certificate of Incorporation to modify the substance or timing of the Company’s obligation to allow redemptions in connection with its initial Business Combination or redeem 100% of the Public Shares if the Company does not complete a Business Combination within the initial Combination Period (as defined below) or with respect to any other provisions relating to stockholders’ rights or pre-initial 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 within 24 months from the closing of the Initial Public Offering, or October 23, 2022 (as such period may be extended by the Company’s stockholders in accordance with the Certificate of Incorporation, the “Combination Period”), the Company will (1) cease all operations except for the purpose of winding up; (2) as promptly as reasonably possible but not more than 10 business days thereafter, redeem 100% of 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 (net of taxes payable and 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 (3) as promptly as reasonably possible following such redemption, subject to the approval of the remaining stockholders and the board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.


The initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within in 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 residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 or potentially less. 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 (except for the Company’s independent registered public accounting firm) for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a letter of intent, confidentiality or other similar agreement or business combination agreement (a “Target”), 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 Public Share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or Target that executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) not will it apply 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”). 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, prospective target businesses and 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.

Affiliates of the Company’s Co-Chairs (the “forward purchasers”) have entered into forward purchase agreements with our Company which provide for the purchase by the forward purchasers of shares of Class A common stock in an aggregate share amount equal to 5,000,000 shares of Class A common stock, plus an aggregate of 1,666,667 warrants exercisable to purchase one share of Class A common stock at $11.50 per share, subject to adjustment, for an aggregate purchase price of $50,000,000, or $10.00 for one share of Class A common stock and one-third of one warrant, in a private placement to occur concurrently with the closing of the initial business combination. The warrants to be issued as part of the forward purchase agreements will be identical to the warrants sold as part of the units in the initial public offering. The obligations under the forward purchase agreements do not depend on whether any shares of Class A common stock are redeemed by the Company’s public stockholders.

Proposed Business Combination

As more fully described in Note 11, on March 17, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Supernova, Orchids Merger Sub, Inc., a Delaware corporation and direct, wholly owned subsidiary of Supernova (“First Merger Sub”), Orchids Merger Sub, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Supernova (“Second Merger Sub”), and OfferPad, Inc., a Delaware corporation (“Offerpad”). In connection with the Closing, Supernova will change its name to “Offerpad Solutions, Inc.”

Also, in connection with the execution of the Merger Agreement, certain investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors have committed to purchase in a private placement 20,000,000 shares of our Class A common stock (the “PIPE Shares”) at a purchase price of $10.00 per share and an aggregate purchase price of $200,000,000 (the “PIPE Investment”). The purchase of the PIPE Shares is conditioned upon, among other things, the consummation of the transactions and will be consummated concurrently with the closing. The shares of Class A common stock to be issued pursuant to the PIPE Subscription Agreements have not been registered under the Securities Act and will be issued in reliance on the availability of an exemption from such registration.


In addition, in connection with the execution of the Merger Agreement we entered into a sponsor support agreement with our sponsor, Offerpad and our directors and officers.

The proposed Business Combination is expected to be consummated after receipt of the required approvals by the stockholders of the Company and Offerpad and the satisfaction or waiver of certain other customary conditions. For full details and the filed agreements, refer to our Current Report on 8-K announcing the Merger Agreement filed on March 18, 2021.

Liquidity and Capital Resources

As of December 31, 2020, the Company had approximately $1.1 million in its operating bank accounts and working capital of approximately $1.2 million (not taking into account approximately $66,000 of taxes that may be paid using investment income from the Trust Account).

The Company’s liquidity needs prior to the consummation of the Initial Public Offering were satisfied through the payment of $25,000 from the Sponsor to cover for certain offering costs on behalf of the Company in exchange for issuance of Founders Shares (as defined in Note 5), and loan proceeds from the Sponsor of approximately $183,000 under the Note (Note 5). The Company repaid the Note in full on October 23, 2020. Subsequent from the consummation of the Initial Public Offering, the Company’s liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account.

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, the Company will be using the 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.

Note 2 —Restatement of Previously Issued Financial Statements

On May 13 2021, the Audit Committee of the Company, in consultation with management, concluded that, because of a misapplication of the accounting guidance related to its public and private placement warrants to purchase shares of Class A common stock that the Company issued in October 2020 (the “Warrants”) and the forward purchase agreements, the Company’s previously issuedaccompanying consolidated financial statements for the Affected Periods should no longer be relied upon.  As such, the Company is restating its financial statements for the Affected Periods included in this Annual Report.

On April 12, 2021, the staff of the Securities and Exchange Commission (the “SEC Staff”) issued a public statement entitled “Staff Statement on Accounting and Reporting Considerations for Warrants issued by Special Purpose Acquisition Companies (“SPACs”)” (the “SEC Staff Statement”). In the SEC Staff Statement, the SEC Staff expressed its view that certain terms and conditions common to SPAC warrants may require the warrants to be classified as liabilities on the SPAC’s balance sheet as opposed to equity. Since issuance on October 23, 2020, the Company’s warrants and forward purchase agreements were accounted for as equity within the Company’s previously reported balance sheets. After discussion and evaluation, including with the Company’s independent registered public accounting firm and the Company’s audit committee, management concluded that the Warrants as well as the forward purchase agreements should be presented as liabilities with subsequent fair value remeasurement.

Historically, the Warrants and  forward purchase agreements were reflected as a component of equity as opposed to liabilities on the balance sheets and the statements of operations did not include the subsequent non-cash changes in estimated fair value of the Warrants, based on our application of FASB ASC Topic 815-40, Derivatives and Hedging, Contracts in Entity’s Own Equity (“ASC 815-40). The views expressed in the SEC Staff Statement were not consistent with the Company’s historical interpretation of the specific provisions within its warrant agreement and the Company’s application of ASC 815-40 to the warrant agreement. The Company reassessed its accounting for Warrants issued on October 23, 2020 and its forward purchase agreements, in light of the SEC Staff’s published


views. Based on this reassessment, management determined that the Warrants and forward purchase agreements should be classified as liabilities measured at fair value upon issuance, with subsequent changes in fair value reported in the Company’s statement of operations each reporting period.

Impact of the Restatement

The impact of the restatement on the balance sheets, statements of operations and statements of cash flows for the Affected Periods is presented below. The restatement had no impact on net cash flows from operating, investing or financing activities.

 

 

As of December 31, 2020

 

 

 

As Previously

 

 

Restatement

 

 

 

 

 

 

 

Reported

 

 

Adjustment

 

 

As Restated

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

404,063,677

 

 

$

 

 

$

404,063,677

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Total current liabilities

 

$

320,025

 

 

$

 

 

$

320,025

 

Deferred legal fees

 

 

100,000

 

 

 

 

 

 

100,000

 

Deferred underwriting commissions

 

 

14,087,500

 

 

 

 

 

 

14,087,500

 

Derivative liabilities

 

 

 

 

 

49,674,170

 

 

 

49,674,170

 

Total liabilities

 

 

14,507,525

 

 

 

49,674,170

 

 

 

64,181,695

 

Class A common stock, $0.0001 par value; shares subject

   to possible redemption

 

 

384,556,150

 

 

 

(49,674,170

)

 

 

334,881,980

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock- $0.0001 par value

 

 

 

 

 

 

 

 

 

Class A common stock - $0.0001 par value

 

 

179

 

 

 

497

 

 

 

676

 

Class B common stock - $0.0001 par value

 

 

1,006

 

 

 

 

 

 

1,006

 

Additional paid-in-capital

 

 

5,215,685

 

 

 

25,163,513

 

 

 

30,379,198

 

Accumulated deficit

 

 

(216,868

)

 

 

(25,164,010

)

 

 

(25,380,878

)

Total stockholders’ equity

 

 

5,000,002

 

 

 

 

 

 

5,000,002

 

Total liabilities and stockholders’ equity

 

$

404,063,677

 

 

$

 

 

$

404,063,677

 

 

 

Period From August 31, 2020 (Inception)

Through December 31, 2020

 

 

 

As Previously

 

 

Restatement

 

 

 

 

 

 

 

Reported

 

 

Adjustment

 

 

As Restated

 

Statement of Operations

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

$

(290,641

)

 

$

 

 

$

(290,641

)

Other (expense) income:

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

 

 

 

(24,193,170

)

 

 

(24,193,170

)

Financing costs - derivative liabilities

 

 

 

 

 

(970,840

)

 

 

(970,840

)

Net gain from investments held in Trust Account

 

 

78,522

 

 

 

 

 

 

78,522

 

Total other (expense) income

 

 

78,522

 

 

 

(25,164,010

)

 

 

(25,085,488

)

Loss before income tax expense

 

 

(212,119

)

 

 

(25,164,010

)

 

 

(25,376,129

)

Income tax expense

 

 

4,749

 

��

 

 

 

 

4,749

 

Net loss

 

$

(216,868

)

 

$

(25,164,010

)

 

$

(25,380,878

)

Basic and Diluted weighted-average Class A common shares

   subject to possible redemption outstanding

 

 

38,473,726

 

 

 

(2,582,662

)

 

 

35,891,064

 

Basic and Diluted net loss per Class A common shares

   subject to possible redemption

 

$

 

 

$

 

 

$

 

Basic and Diluted weighted-average non-redeemable

   Class A and Class B common shares outstanding

 

 

10,646,616

 

 

 

1,585,845

 

 

 

12,232,461

 

Basic and Diluted net loss per non-redeemable Class A and

   Class B common shares

 

$

(0.02

)

 

$

2.10

 

 

$

(2.08

)


 

 

Period From August 31, 2020 (Inception) Through

December 31, 2020

 

 

 

As Previously

Reported

 

 

Restatement

Adjustment

 

 

As Restated

 

Statement of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Net cash used in operating activities

 

 

(491,670

)

 

 

 

 

 

(491,670

)

Net cash used in investing activities

 

 

(402,500,000

)

 

 

 

 

 

(402,500,000

)

Net cash provided by financing activities

 

 

404,071,303

 

 

 

 

 

 

 

404,071,303

 

Net change in cash

 

$

1,079,633

 

 

$

 

 

$

1,079,633

 

In addition, the impact to the balance sheet dated October 23, 2020, filed on Form 8-K on October 29, 2020 related to the impact of accounting for the public and private warrants and forward purchase agreements as liabilities at fair value resulted in a $25.5 million increase to the derivative liabilities line item at October 23, 2020 and offsetting decrease to the Class A common stock subject to possible redemption mezzanine equity line item.  There is no change to total stockholders’ equity at the reported balance sheet date, however the accumulated paid-in-capital, accumulated deficit, and Class A common stock amounts did change for the financing costs.

Note 3—Summary of Significant Accounting Policies

Basis of Presentation

The accompanying financial statements are presented in U.S. dollarshave been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for financial information and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Offerpad Solutions Inc. was formed on September 1, 2021 through a business combination (the “Business Combination”) with Supernova Partners Acquisition Company, Inc. (“Supernova”). In connection with the closing of the Business Combination, Supernova changed its name to Offerpad Solutions Inc. The Business Combination was accounted for as a reverse recapitalization.

Use of Estimates

As described in Note 2—RestatementThe preparation of Previously Issued Financial Statements, the Company’s financial statements for the period as of  December 31, 2020, and the period from August 31, 2020 (inception) through December 31, 2020, (collectively, the “Affected Periods”), are restated in this Annual Report on Form 10-K/A (Amendment No. 1) (this “Annual Report”) to correct the misapplication of accounting guidance related to the Company’s warrants and forward purchase agreements in the Company’s previously issued audited financial statements for such periods. The restated financial statements are indicated as “Restated” in the audited and unaudited condensed financial statements and accompanying notes, as applicable. See Note 2—Restatement of Previously Issued Financial Statements for further discussion.

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 an emerging growth 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 an 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.

Use of Estimates

The preparation ofconsolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and liabilitiesexpenses and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements andstatements. Significant estimates include those related to the reported amountsnet realizable value 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 confirming events. inventory, among others. Actual results could differ from those estimates.

Principles of Consolidation

The Company’s consolidated financial statements include the assets, liabilities, revenues and expenses of the Company, its wholly owned operating subsidiaries and variable interest entities where the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated in consolidation.

Segment Reporting

Operating segments are components of an entity for which discrete financial information is available and is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources and in assessing operating performance. The Company’s CODM is its Chief Executive Officer.

The Company is not organized around specific services or geographic regions, but rather, operates in one service line, providing a home buying and selling platform. The Company’s CODM reviews the financial information presented on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance. As such, the Company has determined that it is organized and operated as one operating and reportable segment on a consolidated basis for each of the periods presented.

Cash and Cash Equivalents

The Company considers all short-termCash includes demand deposits with banks and financial institutions. Cash equivalents include only investments with an original maturitymaturities to us of three months or less when purchasedthat are highly liquid and readily convertible to beknown amounts of cash.

Restricted Cash

Restricted cash equivalents. The Company had noprimarily consists of cash equivalents asreceived from the resale of December 31, 2020.homes that is specifically designated to repay borrowings under one of the Company’s secured credit facilities and is typically released within a few days of the home sale.

ConcentrationConcentrations of Credit Risk

Financial instruments that are potentially subject the Company to concentrationconcentrations of credit risk consistare primarily cash and cash equivalents. Cash and cash equivalents are placed with major financial institutions deemed to be of cash accountshigh-credit-quality in aorder to limit credit exposure. Cash is regularly maintained in excess of federally insured limits at the financial institution which, at times, may exceed the Federal depository insurance coverage of $250,000, and investments held in Trust Account. The Company has not experienced losses on these accounts and managementinstitutions. Management believes that the Company is not exposed to any significant riskscredit risk related to cash deposits.

Offerpad Solutions Inc. | 2022 Form 10-K | 65


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Accounts Receivable

Accounts receivable are generated through the sale of a home and generally results in a one- or two-day delay in receiving cash from the title company. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Most of the Company’s transactions are processed through escrow and therefore, collectability is reasonably assured. The Company reviews accounts receivable on such accounts. a regular basis and estimates an amount of losses for uncollectible accounts based on its historical collections, age of the receivable, and any other known conditions that may affect collectability.

Inventory

Inventory consists of acquired homes and is stated at the lower of cost or net realizable value, with cost and net realizable value determined by the specific identification of each home. Costs include initial purchase costs and renovation costs, as well as holding costs and interest incurred during the renovation period, prior to the listing date. Selling costs, including commissions and holding costs incurred after the listing date, are expensed as incurred and included in sales, marketing and operating expenses.

The Company’s investments heldCompany reviews inventory for impairment on a quarterly basis, or more frequently if events or changes in circumstances indicate that the carrying value of inventory may not be recoverable. The Company evaluates inventory for indicators that net realizable value is lower than cost at the individual home level. The Company generally considers multiple factors in determining net realizable value for each home, including recent comparable home sale transactions in the Trust Accountspecific area where the home is located, the residential real estate market conditions in both the local market in which the home is located and in the U.S. in general, the impact of national, regional or local economic conditions and expected selling costs. When evidence exists that the net realizable value of inventory is lower than its cost, the difference is recognized as impairment in cost of revenue and the related inventory is adjusted to its net realizable value.

For individual homes or portfolios of homes under contract to sell as of December 31, 2020 are comprised of investments in U.S. Treasury securities with an original maturity of 185 days orthe impairment assessment date, if the carrying value exceeds the contract price less or investments in a money market funds that comprise only U.S. treasury securities money market funds.

Investments Held inexpected selling costs, the Trust Account

The Company’s portfolio of investments is comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or investments in money market funds that invest in U.S. government securities, or a combination thereof. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in faircarrying value of these securities is included in net gain on investments held in Trust Accounthomes are adjusted to the contract price less expected selling costs. For all other homes, if the carrying value exceeds the expected sale price less expected selling costs, the carrying value of these homes are adjusted to the expected sale price less expected selling costs. Changes in the accompanying statement of operations. The estimated fair values of investments heldCompany’s pricing assumptions may lead to a change in the Trust Accountoutcome of the impairment analysis, and actual results may differ from the Company’s assumptions.

The Company recorded inventory impairments of $93.8 million, $2.8 million and $3.2 million during the years ended December 31, 2022, 2021 and 2020, respectively. Refer to Note 3. Inventory, for further details.

Property and Equipment

Property and equipment is recorded at cost less accumulated depreciation, and primarily consists of rooftop solar panel systems installed on residential real estate. The Company depreciates its property and equipment using the straight-line method over the estimated useful lives of the related assets, which are determined using available market information.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. U.S. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value.


The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

follows:

Property and Equipment Category

Estimated Useful Life

Rooftop solar panel systems

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

Twenty years

Leasehold improvements

Lesser of estimated useful life or remaining lease term

Computers and equipment

Five years

Office equipment and furniture

Seven years

Software systems

Three to five years

Refer to Note 4. Property and Equipment, for further details.

Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and

Leases

Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.

In some circumstances,The Company determines if an arrangement is or contains a lease at inception of the inputsarrangement. For leases with terms greater than 12 months, the Company records the related operating or finance right-of-use asset and lease liability at the present value of the future lease payments over the lease term at the lease commencement date. The Company is generally not able to readily determine the implicit rate in its lease arrangements, and therefore, uses its incremental borrowing rate at lease commencement to determine the present value of lease payments. The incremental borrowing rate represents the Company’s estimate of the interest rate the Company would incur at lease commencement to borrow an amount similar to the lease payments on a collateralized basis over the term of a lease. Renewal and early termination options are not included in the measurement of the right-of-use asset and lease liability unless the Company is reasonably certain to exercise the option. Additionally, certain leases contain lease incentives, such as construction allowances from landlords. These incentives reduce the right-of-use asset related to the lease.

Offerpad Solutions Inc. | 2022 Form 10-K | 66


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Certain of the Company’s leases contain rent escalations over the lease term. The Company recognizes expense for operating leases on a straight-line basis over the lease term. Certain of the Company’s lease agreements also contain variable lease payments for common area maintenance, utility, and taxes. The Company has elected the practical expedient to combine lease and non-lease components for all asset categories. Therefore, the lease payments used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement.

As of December 31, 2020, the carrying values of cash, prepaid expenses, accounts payable, accrued expenses, income tax payable and franchise tax payable approximate their fair values due to the short-term nature of the instruments. The Company’s portfolio of investments held in the Trust Account is comprised of investments in U.S. Treasury securitieslease liability for these leases include fixed minimum rentals along with an original maturity of 185 days or less or investments in money market funds that invest in U.S. government securities, or a combination thereof. The fair value for trading securities is determined using quoted market prices in active markets. The fair value of the Public Warrants issued in connection with the Public Offering and Private Placement Warrants were initially measured at fair value using a Monte Carlo simulation model and subsequently, the fair value of the Private Placement Warrants have been estimated using a Monte Carlo simulation model each measurement date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measured based on the listed market price of such warrants.

Offering Costs Associated with the Initial Public Offering

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin Topic 5A – “Expenses of Offering.” Offering costs consist of legal, accounting, underwriting fees and other costs directly related to the Initial Public Offering

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. In accordance with ASC 825-10 “Financial Instruments”, offering costs attributable to the issuance of the derivative liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the statement of operations as incurred. Offering costs associated with the Public Shares were charged to stockholders’ equity upon the completion of the Initial Public Offering. Of the total offering costs of the Initial Public Offering, approximately $1.0 million is included in financing cost -derivative liabilities in the statement of operations and $21.8 million is included in stockholders’ equity.

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Common stock subject to mandatory redemption (if any) is classified as a liability instrument and 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 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 the occurrence of uncertain future events. Accordingly, at December 31, 2020, 33,488,198 shares of common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.


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 shares of common stock outstanding during the period. The Company has not considered the effect of the warrants sold in the Initial Public Offering and private placement to purchase an aggregate of 20,116,667 shares in the calculation of diluted 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.

The Company’s statement of operations includes a presentation of income (loss) per common share for Class A common shares subject to possible redemption in a manner similar to the two-class method of income (loss) per common share. Net income (loss) per common share, basic and diluted, for Class A common stock subject to possible redemption is calculated by dividing the proportionate share of income or loss on marketable securities held by the Trust Account, net of applicable franchise and income taxes, by the weighted average number of shares of Class A common stock subject to possible redemption outstanding since original issuance.

Net income (loss) per common share, basic and diluted, for non-redeemable common stock is calculated by dividing the net income (loss), adjusted for income or loss on marketable securities attributable to common stock subject to possible redemption, by the weighted average number of non-redeemable common stock outstanding for the period.

Non-redeemable common stock includes Founder Shares and non-redeemable shares of Class A common stock as these shares do not have any redemption features. Non-redeemable common stock participates in the income or loss on marketable securities based on non-redeemable shares’ proportionate interest.

The following table reflects the calculation of basic and diluted net income (loss) per common share:

 

 

For The Period From

August 31, 2020

(inception) through

December 31, 2020

(Restated)

 

Class A Common stock subject to possible redemption

 

 

 

 

Numerator: Earnings allocable to common stock subject to possible redemption

 

 

 

 

Income from investments held in Trust Account

 

$

65,330

 

Less: Company's portion available to be withdrawn to pay taxes

 

$

(54,923

)

Net income attributable to Class A common stock subject to possible redemption

 

$

10,407

 

Denominator: Weighted average Class A common stock subject to possible redemption

 

 

 

 

Basic and diluted weighted average shares outstanding

 

 

35,891,064

 

Basic and diluted net income per share

 

$

0.00

 

 

 

 

 

 

Non-Redeemable Class A and Class B Common Stock

 

 

 

 

Numerator: Net Loss minus Net Earnings

 

 

 

 

Net loss

 

$

(25,380,878

)

Net income allocable to Class A Common stock subject to possible redemption

 

 

10,407

 

Non-Redeemable Net Loss

 

$

(25,370,471

)

Denominator: Weighted average Non-redeemable Class A and Class B common Stock

 

 

 

 

Basic and diluted weighted average shares outstanding, Non-redeemable Class A and Class B common stock

 

 

12,232,461

 

Basic and diluted net loss per share, Non-redeemable Class A and Class B common stock

 

$

(2.08

)

Derivative Liabilities

non-lease component charges. The Company does not use derivative instrumentshave significant residual value guarantees or restrictive covenants in its lease portfolio.

Operating lease assets and liabilities are included on the Company’s Consolidated Balance Sheet in Other non-current assets, Accrued and other current liabilities, and Other long-term liabilities.

Refer to hedge exposuresNote 5. Leases, for further details.

Long-Lived Asset Impairments

Long-lived assets, including property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow market, or foreign currency risks. basis, an impairment loss is recognized to the extent the carrying amount of the underlying asset exceeds its fair value.

The Company recognized no impairment charges on its long-lived assets during the years ended December 31, 2022, 2021 and 2020.

Warrant Liabilities

The Company evaluates all of its financial instruments, including issued stock purchaseits outstanding warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480derivatives. The Company has outstanding public and ASC 815-15.  Theprivate warrants, both of which do not meet the criteria for equity classification of derivative instruments, including whether such instruments should be recordedand are accounted for as liabilities or as equity, is re-assessed at the end of each reporting period.


The 13,416,667 issued in connection with the Initial Public Offering (the “Public Warrants”) and the 6,700,000 Private Placement Warrants are recognized as derivative liabilities in accordance with ASC 815-40.liabilities. Accordingly, the Company recognizes the warrant instrumentswarrants as liabilities at fair value and adjustadjusts the instrumentswarrants to fair value at each reporting period. The warrant liabilities are subject to re-measurement at each balance sheet date until exercised or expired, and any change in fair value is recognized in the Company’s statementconsolidated statements of operations.

The fair value of the Public Warrantspublic warrants is estimated based on the quoted market price of such warrants on the valuation date. The fair value of the private warrants is estimated using the Black-Scholes-Merton option-pricing model. Refer to Note 8. Warrant Liabilities, for further details.

Revenue Recognition

Revenue is recognized when (or as) performance obligations are satisfied by transferring control of the promised products or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those products or services. The Company applies the following steps in determining the timing and amount of revenue to recognize: (1) identify the contract with our customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, if applicable; and (5) recognize revenue when (or as) the performance obligation is satisfied.

Revenue from the sale of homes is derived from the resale of homes on the open market. Home sales revenue is recognized at the time of the closing when title to and possession of the property are transferred to the buyer. The amount of revenue recognized for each home sale is equal to the sale price of the home net of resale concessions and credits to the buyer.

Cost of Revenue

Cost of revenue includes the initial purchase costs, renovation costs, holding costs and interest incurred during the renovation period, prior to listing date and real estate inventory valuation adjustments, if any. These costs are accumulated in real estate inventory up until the home is ready for resale, and then charged to cost of revenue under the specific identification method when the property is sold.

Sales, Marketing and Operating

Sales, marketing and operating expenses consist of real estate agent commissions, advertising, and holding costs on homes incurred during the period that homes are listed for sale, which includes utilities, taxes, maintenance, and other costs. Sales, marketing and operating expense includes any headcount expenses in support of sales, marketing, and real estate inventory operations such as salaries, benefits, and stock-based compensation. Sales, marketing and operating expenses are charged to

Offerpad Solutions Inc. | 2022 Form 10-K | 67


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

operations as incurred. The Company incurred advertising expenses of $46.5 million, $45.3 million and $11.5 million during the years ended December 31, 2022, 2021 and 2020, respectively.

Technology and Development

Technology and development expenses consist of headcount expenses, including salaries, benefits and stock-based compensation expense for employees and contractors engaged in the design, development, and testing of website applications and software development. Technology and development expenses are charged to operations as incurred.

Stock-Based Compensation

Stock-based compensation awards consist of stock options, restricted stock units and performance-based restricted stock units. The Company measures and recognizes compensation expense for all stock-based compensation awards based on their estimated fair values on the grant date. The Company records compensation expense for all stock-based compensation awards on a straight-line basis over the requisite service period of the awards, which is generally the vesting period of the award. These amounts are reduced by forfeitures in the period the forfeitures occur.

Stock Options

The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock option awards as of the grant date. The Black-Scholes-Merton option pricing model requires the Company to estimate the following key assumptions based on both historical information and management judgment regarding market factors and trends:

Expected term – The Company uses the simplified method when calculating the expected term due to insufficient historical exercise data. The expected term is estimated using the mid-point between the vesting period and the contractual term of the options.
Risk-free interest rate – The Company estimates the risk-free interest rate using the rate of return on U.S. treasury notes interpolated between the years equal to the expected term assumption.
Expected stock price volatility – As the Company’s shares were not publicly traded prior to the Business Combination, and have a limited trading history subsequent to the Business Combination, the Company estimates expected volatility for stock option awards based on the average historical volatility of similar publicly traded companies.
Expected dividend yield – The expected dividend yield assumption considers that the Company has not historically paid dividends and does not expect to pay dividends in the foreseeable future.
Stock price – The Company has issued in connectionstock options with exercise prices equal to the Public Offering and Private Placement Warrants were initially measured at fair value of the underlying stock price. Prior to the completion of the Business Combination and listing of the Company’s common stock on the public stock exchange, the fair value of Old Offerpad common stock that underlies the stock options was determined based on then-current valuation estimates at the time of grant. Because such grants occurred prior to the public trading of the Company’s common stock, the fair value of Old Offerpad common stock was typically determined with assistance of periodic valuation analyses from an independent third-party valuation firm. Subsequent to the Business Combination, the fair value of the Company’s common stock is based on the closing price of the Company’s Class A common stock on the grant date.

Restricted Stock Units

The Company determines the fair value of restricted stock units based on the closing price of the Company’s Class A common stock on the grant date.

Performance-Based Restricted Stock Units

The Company determines the fair value of performance-based restricted stock units using a Monte Carlo simulation model and subsequently,that determines the fair valueprobability of satisfying the Private Placement Warrants have been estimated using amarket condition stipulated in the award. The Monte Carlo simulation model each measurementincorporates various key assumptions, including expected stock price volatility, contractual term, risk-free interest rate, dividend yield and stock price on the grant date. The fair value of Public Warrants issued in connection with the Initial Public Offering have subsequently been measuredCompany estimates expected stock price volatility based on the listedaverage historical volatility of similar publicly traded companies. The Company estimates the risk-free interest rate using the rate of return on U.S. treasury notes equal to the contractual term of the award. The expected dividend yield assumption considers that the Company has not historically paid dividends and does not expect to pay dividends in the foreseeable future.

The Company determines the requisite service period for performance-based restricted stock units by comparing the derived service period to achieve the market-based condition and the explicit service-based period, using the longer of the two service periods as the requisite service period.

Refer to Note 11. Stock-Based Awards, for further details.

Offerpad Solutions Inc. | 2022 Form 10-K | 68


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Employee Benefit Plan

The Company offers a 401(k) plan which provides employees the opportunity to contribute a portion of their pre-tax or post-tax earnings, subject to certain restrictions as set forth in the Internal Revenue Code. Beginning January 1, 2022, the Company matches 100% of participant contributions, up to 2.5% of eligible compensation. The Company contributed $1.6 million to the 401(k) plan during the year ended December 31, 2022.

Income Taxes

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and deferred tax liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period when the new rate is enacted.

The Company records a valuation allowance to reduce deferred tax assets to the amount that it believes is more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, carryback potential if permitted under the tax laws, and results of recent operations. If the Company determines that it would be able to realize its deferred tax assets in the future in excess of their net recorded amount, the Company would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company evaluates and accounts for uncertain tax positions using a two-step approach. Recognition (step one) occurs when the Company concludes that a tax position, based solely on its technical merits, is more likely than not to be sustained upon examination. Measurement (step two) determines the amount of benefit that is greater than 50% likely to be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. Derecognition of a tax position that was previously recognized would occur when the Company subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.

Refer to Note 14. Income Taxes, for further details.

Consolidation of Variable Interest Entities

The Company is a variable interest holder in certain entities in which equity investors at risk do not have the characteristics of a controlling financial interest or where the entity does not have enough equity at risk to finance its activities without additional subordinated financial support from other parties; these entities are VIEs. The Company’s variable interest arises from contractual, ownership or other monetary interest in the entity, which fluctuates based on the VIE’s economic performance. The Company consolidates a VIE if it is the primary beneficiary. The Company is the primary beneficiary if it has a controlling financial interest, which includes both the power to direct the activities that most significantly impact the economic performance of the VIE and a variable interest that obligates the Company to absorb losses or the right to receive benefits that potentially could be significant to the VIE. The Company assesses whether it is the primary beneficiary of a VIE on an ongoing basis. Refer to Note 12. Variable Interest Entities, for further details.

Fair Value Measurements

The Company accounts for assets and liabilities in accordance with accounting standards that define fair value and establish a consistent framework for measuring fair value on either a recurring or a nonrecurring basis. Fair value is an exit price representing the amount that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market priceparticipants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability.

Accounting standards include disclosure requirements relating to the fair values used for certain financial instruments and establish a fair value hierarchy. The hierarchy prioritizes valuation inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Each fair value measurement is reported in one of three levels:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Assets or liabilities valued based on observable market data for similar instruments, such warrants.  as quoted prices for similar assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity; instruments valued based on the best available data, some of which is internally developed, and considers risk premiums that a market participant would require.

Offerpad Solutions Inc. | 2022 Form 10-K | 69


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Refer to Note 9. Fair Value Measurements, for further details.

New Accounting Standards Recently Adopted

Reference Rate Reform

In March 2020, the FASB issued a new standard which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Inter Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting. In December 2022, the FASB issued an additional standard which defers the expiration date of the reference rate reform guidance to December 31, 2024. The Company adopted the guidance related to reference rate reform during 2022 and the adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

Note 2. Business Combination

On September 1, 2021 (the “Closing Date”), we consummated the transactions contemplated by the Agreement and Plan of Merger, dated March 17, 2021 (the “Merger Agreement”), by and among OfferPad, Inc. (“Old Offerpad”), Supernova Partners Acquisition Company, Inc., a Delaware corporation (“Supernova”), and Orchids Merger Sub, Inc., a Delaware corporation (“Merger Sub”). Pursuant to these transactions, Merger Sub merged with and into Old Offerpad, with Old Offerpad becoming a wholly owned subsidiary of Supernova (the “Business Combination” and, collectively with the other transactions described in the Merger Agreement, the “Transactions”). On the Closing Date, and in connection with the closing of our initial public offering,the Transactions (the “Closing”), Supernova changed its name to Offerpad Solutions Inc. (“Offerpad Solutions”).

At the Closing, each share of common stock and preferred stock of Old Offerpad that was issued and outstanding immediately prior to the effective time of the Merger (other than excluded shares as contemplated by the Merger Agreement) was cancelled and converted into the right to receive approximately 7.533 shares (the “Exchange Ratio”) of Offerpad Solutions Inc. common stock. The shares of Offerpad Solutions Inc. common stock received as consideration by Brian Bair, the Chief Executive Officer and Founder of the Company, entered into forward purchase agreements to which its Sponsors committedare Class B shares.

At the Closing, each option to purchase the Company’sOld Offerpad’s common stock, whether vested or unvested, was assumed and converted into an option to purchase a number of shares of Offerpad Solutions Class A common stock in an aggregate amount equalthe manner set forth in the Merger Agreement.

Additionally, in connection with the execution of the Merger Agreement, Supernova entered into subscription agreements, pursuant to 5,000,000 shareswhich certain Supernova investors agreed to purchase at the closing of our common stock, plusthe Transactions an aggregate of 1,666,667 warrants to purchase one share20,000,000 shares of Offerpad Solutions Class A common stock, at $11.50for a price of $10.00 per share for an aggregate purchase price of $50,000,000, or $10.00 for$200.0 million (the “PIPE Investment”). The PIPE Investment was consummated simultaneously with the Closing.

Further, in connection with the closing of Supernova’s initial public offering, Supernova entered into forward purchase agreements pursuant to which certain affiliates of Supernova agreed to purchase, upon the closing of the Transactions, an aggregate of 5,000,000 shares of Offerpad Solutions Class A common stock and an aggregate of 1,666,667 warrants to purchase one share of Offerpad Solutions Class A common stock, for an aggregate purchase price of $50,000,000, or $10.00 per share of Offerpad Solutions Class A common stock and one-third of one warrant in a private placement that is conditionedto purchase one share of Offerpad Solutions Class A common stock (“Forward Purchase Agreements”). Offerpad Solutions received the funds under the Forward Purchase Agreements upon and will be consummated concurrently with, the Closing. The forward purchase agreements are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly,

We accounted for the Company recognizes the forward purchase agreementBusiness Combination as a liability at fair value and adjusts the instrument to fair value at each reporting period. The fair value of the forward purchase agreements isreverse recapitalization whereby Old Offerpad was determined as the estimated unit value lessaccounting acquirer and Supernova as the accounting acquiree. Accordingly, the Business Combination was treated as the equivalent of Old Offerpad issuing stock for the net present valueassets of Supernova, accompanied by a recapitalization. The net assets of Supernova are stated at historical cost, with no goodwill or other intangible assets recorded.

Upon the closing of the forward purchase agreements.Transactions, Offerpad Solutions received total gross proceeds of $284.0 million, which consisted of $34.0 million from Supernova’s trust and operating accounts, $200.0 million from the PIPE Investment and $50.0 million from the Forward Purchase Agreements. Total transaction costs were $51.2 million, which principally consisted of advisory, legal and other professional fees. Cumulative debt repayments of $63.4 million, inclusive of accrued but unpaid interest, were paid in conjunction with the close.

Offerpad Solutions Inc. | 2022 Form 10-K | 70


OFFERPAD SOLUTIONS INC.

Income TaxesNotes to Consolidated Financial Statements

Note 3. Inventory

The components of inventory, net of applicable lower of cost or net realizable value adjustments, consist of the following as of December 31:

($ in thousands)

 

2022

 

 

2021

 

Homes preparing for and under renovation

 

$

54,499

 

 

$

327,455

 

Homes listed for sale

 

 

440,862

 

 

 

400,308

 

Homes under contract to sell

 

 

169,336

 

 

 

404,808

 

Inventory

 

$

664,697

 

 

$

1,132,571

 

Note 4. Property and Equipment

Property and equipment consist of the following as of December 31:

($ in thousands)

 

2022

 

 

2021

 

Rooftop solar panel systems

 

$

5,075

 

 

$

5,075

 

Leasehold improvements

 

 

1,087

 

 

 

797

 

Office equipment and furniture

 

 

736

 

 

 

160

 

Software systems

 

 

386

 

 

 

318

 

Computers and equipment

 

 

265

 

 

 

265

 

Construction in progress

 

 

136

 

 

 

 

Property and equipment, gross

 

 

7,685

 

 

 

6,615

 

Less: accumulated depreciation

 

 

(2,491

)

 

 

(1,469

)

Property and equipment, net

 

$

5,194

 

 

$

5,146

 

Depreciation expense totaled $1.0 million, $0.5 million and $0.4 million during the years ended December 31, 2022, 2021 and 2020, respectively.

Note 5. Leases

The Company’s operating lease arrangements consist of its corporate headquarters in Chandler, Arizona and field office facilities in most of the metropolitan markets in which the Company operates in the United States. These leases typically have original lease terms of 1 year to 6 years, and some leases contain multiyear renewal options. The Company usesdoes not have any finance lease arrangements.

The Company’s operating lease costs are included in operating expenses in our consolidated statements of operations. During the assetyears ended December 31, 2022 and liability method of2021, operating lease cost was $2.1 million, and $1.4 million, respectively, and variable and short-term lease costs were $0.3 million and $0.2 million, respectively. Rent expense for operating leases, as previously reported under former lease accounting standards, was $1.4 million during the year ended December 31, 2020.

During the years ended December 31, 2022 and 2021, cash payments for deferred income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities at currently enacted tax rates. These temporary differences primarily relate to net operating loss carryforwards available to offset future taxable income. Valuation allowances are established, if necessary, to reduce a deferred tax asset to the amount that will more likely than not be realized.

The Company recognizes tax liabilities from an uncertain tax position only if it is more likely than not that the tax position will not be sustained upon examination by the taxing authorities, based on the technical merits of the tax position. There are no uncertain tax positions that have been recognizedincluded in the accompanying financial statements. The Company is requiredmeasurement of operating lease liabilities were $2.0 million and $1.4 million, respectively, and right-of-use assets obtained in exchange for new or acquired operating lease liabilities were $2.5 million and $1.6 million during the respective periods.

As of December 31, 2022 and 2021, the Company’s operating leases had a weighted-average remaining lease term of 2.7 years and 3.5 years, respectively, and a weighted-average discount rate of 4.2% and 4.1%, respectively.

Offerpad Solutions Inc. | 2022 Form 10-K | 71


OFFERPAD SOLUTIONS INC.

Notes to file tax returns in the U.S. federal jurisdiction and in the state of District of Columbia. Consolidated Financial Statements

The Company’s policy is to recognize interest and penalties related to uncertain tax benefits, if any, as part of income tax expense. No such interest and penalties have been accruedoperating lease liability maturities as of December 31, 2020.2022 are as follows:

($ in thousands)

 

 

 

2023

 

$

2,461

 

2024

 

 

2,373

 

2025

 

 

1,103

 

2026

 

 

269

 

2027

 

 

79

 

Thereafter

 

 

 

Total future lease payments

 

 

6,285

 

Less: Imputed interest

 

 

(332

)

Total lease liabilities

 

$

5,953

 

The Company’s operating lease right-of-use assets and operating lease liabilities, and the associated financial statement line items, are as follows as of December 31:

($ in thousands)

 

Financial Statement Line Items

 

2022

 

 

2021

 

Right-of-use assets

 

Other non-current assets

 

$

5,469

 

 

$

4,784

 

Lease liabilities:

 

 

 

 

 

 

 

 

Current liabilities

 

Accrued and other current liabilities

 

 

2,264

 

 

 

1,345

 

Non-current liabilities

 

Other long-term liabilities

 

 

3,689

 

 

 

3,830

 

Total lease liabilities

 

 

 

$

5,953

 

 

$

5,175

 

Note 6. Accrued and Other Liabilities

Accrued and other current liabilities consist of the following as of December 31:

($ in thousands)

 

2022

 

 

2021

 

Payroll and other employee related expenses

 

$

10,670

 

 

$

12,836

 

Interest

 

 

4,360

 

 

 

3,537

 

Marketing

 

 

4,161

 

 

 

5,795

 

Home renovation

 

 

3,168

 

 

 

8,540

 

Operating lease liabilities

 

 

2,264

 

 

 

1,345

 

Legal and professional obligations

 

 

1,035

 

 

 

1,743

 

Other

 

 

2,594

 

 

 

1,231

 

Accrued and other current liabilities

 

$

28,252

 

 

$

35,027

 

Other long-term liabilities as of December 31, 2022 consists of the non-current portion of our operating lease liabilities.

Note 7. Credit Facilities and Other Debt

The carrying value of the Company’s credit facilities and other debt consists of the following as of December 31:

($ in thousands)

2022

 

 

2021

 

Credit facilities and other debt, net

 

 

 

 

 

Senior secured credit facilities with financial institutions

$

471,860

 

 

$

747,514

 

Senior secured credit facility with a related party

 

17,398

 

 

 

81,926

 

Senior secured debt - other

 

89,024

 

 

 

33,320

 

Mezzanine secured credit facilities with third-party lenders

 

49,626

 

 

 

87,851

 

Mezzanine secured credit facilities with a related party

 

42,778

 

 

 

82,508

 

Debt issuance costs

 

(4,621

)

 

 

(6,923

)

Total credit facilities and other debt, net

 

666,065

 

 

 

1,026,196

 

Current portion - credit facilities and other debt, net

 

 

 

 

 

Total credit facilities and other debt, net

 

605,889

 

 

 

861,762

 

Total credit facilities and other debt - related party

 

60,176

 

 

 

164,434

 

Total credit facilities and other debt, net

$

666,065

 

 

$

1,026,196

 

Recent Accounting PronouncementsOfferpad Solutions Inc. | 2022 Form 10-K | 72


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have an effectThe Company utilizes inventory financing facilities consisting of senior secured credit facilities, mezzanine secured credit facilities and other senior secured borrowing arrangements to provide financing for the Company’s real estate inventory purchases and renovation. Borrowings under the Company’s credit facilities and other debt are classified as current liabilities on the Company’s financial statements.accompanying consolidated balance sheets as amounts drawn to purchase and renovate homes are required to be repaid as the related real estate inventory is sold, which is expected to be within 12 months.

Note 4—Initial Public Offering

On October 23, 2020,As of December 31, 2022, the Company consummatedhad total borrowing capacity of $1,927.5 million under its Initial Public Offeringsenior secured credit facilities and mezzanine secured credit facilities, of 40,250,000 Units,which $838.4 million was committed. Any borrowings above the committed amounts are subject to the applicable lender’s discretion.

Under the Company’s senior secured credit facilities and mezzanine secured credit facilities, amounts can be borrowed, repaid and borrowed again during the revolving period. The borrowing capacity is generally available until the end of the applicable revolving period as reflected in the tables below. Outstanding amounts drawn under each senior secured credit facility and mezzanine secured credit facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default or other mandatory repayment event.

The Company’s senior secured credit facilities and mezzanine secured credit facilities have aggregated borrowing bases, which increase or decrease based on the cost and value of the properties financed under a given facility and the time that those properties are in the Company’s possession. When the Company resells a home, the proceeds are used to reduce the corresponding outstanding balance under the related senior and mezzanine secured revolving credit facilities. The borrowing base for a given facility may be reduced as properties age beyond certain thresholds or the performance of the properties financed under that facility declines, and any borrowing base deficiencies may be satisfied through contributions of additional properties or partial repayment of the facility.

Senior Secured Credit Facilities

The following summarizes certain details related to the Company’s senior secured credit facilities (in thousands, except interest rates):

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

End of
Revolving /
Withdrawal

 

Final
Maturity

As of December 31, 2022

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

Period

 

Date

Financial institution 1

$

300,000

 

 

$

300,000

 

 

$

600,000

 

 

$

228,823

 

 

 

4.74

%

 

June 2024

 

June 2024

Financial institution 2

 

200,000

 

 

 

200,000

 

 

 

400,000

 

 

 

123,478

 

 

 

4.11

%

 

September 2023

 

March 2024

Financial institution 3

 

125,000

 

 

 

375,000

 

 

 

500,000

 

 

 

119,559

 

 

 

4.48

%

 

December 2023

 

December 2023

Related party

 

50,000

 

 

 

25,000

 

 

 

75,000

 

 

 

17,398

 

 

 

6.46

%

 

March 2024

 

September 2024

Senior secured credit facilities

$

675,000

 

 

$

900,000

 

 

$

1,575,000

 

 

$

489,258

 

 

 

 

 

 

 

 

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

 

 

 

As of December 31, 2021

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

 

 

 

Financial institution 1

$

300,000

 

 

$

100,000

 

 

$

400,000

 

 

$

365,392

 

 

 

2.60

%

 

 

 

 

Financial institution 2

 

400,000

 

 

 

 

 

 

400,000

 

 

 

375,063

 

 

 

2.60

%

 

 

 

 

Financial institution 3

 

300,000

 

 

 

200,000

 

 

 

500,000

 

 

 

7,059

 

 

 

2.60

%

 

 

 

 

Related party

 

85,000

 

 

 

 

 

 

85,000

 

 

 

81,926

 

 

 

4.10

%

 

 

 

 

Senior secured credit facilities

$

1,085,000

 

 

$

300,000

 

 

$

1,385,000

 

 

$

829,440

 

 

 

 

 

 

 

 

As of December 31, 2022, the Company had four senior secured credit facilities, three with separate financial institutions and one with a related party, which holds more than 5% of our Class A common stock. Borrowings under the senior secured credit facilities accrue interest at a rate based on a Secured Overnight Financing Rate (“SOFR”) reference rate, plus a margin which varies by facility. The Company may also pay fees on its senior secured credit facilities, including 5,250,000 Over-Allotment Units,a commitment fee and fees on certain unused portions of the committed borrowing capacity, as defined in the respective credit agreements.

Borrowings under the Company’s senior secured credit facilities are collateralized by the real estate inventory financed by the senior secured credit facility. The lenders have legal recourse only to the assets securing the debt and do not have general

Offerpad Solutions Inc. | 2022 Form 10-K | 73


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

recourse against the Company with limited exceptions. The Company has, however, provided limited non-recourse carve-out guarantees under its senior and mezzanine secured credit facilities for certain of the SPEs’ obligations in situations involving “bad acts” by an Offerpad entity and certain other limited circumstances that are generally under the Company’s control. Each senior secured facility contains eligibility requirements that govern whether a property can be financed.

During February 2023, the Company amended its credit facility with financial institution 2, which, among other things, reduced the total borrowing capacity on the facility from $400.0 million to $200.0 million, $100.0 million of which is committed.

Mezzanine Secured Credit Facilities

The following summarizes certain details related to the Company’s mezzanine secured credit facilities (in thousands, except interest rates):

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

End of
Revolving /
Withdrawal

 

Final
Maturity

As of December 31, 2022

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

Period

 

Date

Related party facility 1

$

65,000

 

 

$

32,500

 

 

$

97,500

 

 

$

38,937

 

 

 

11.00

%

 

June 2024

 

June 2024

Third-party lender 1

 

45,000

 

 

 

45,000

 

 

 

90,000

 

 

 

31,239

 

 

 

9.55

%

 

September 2023

 

March 2024

Third-party lender 2

 

18,387

 

 

 

94,113

 

 

 

112,500

 

 

 

18,387

 

 

 

9.50

%

 

December 2023

 

December 2023

Related party facility 2

 

35,000

 

 

 

17,500

 

 

 

52,500

 

 

 

3,841

 

 

 

11.05

%

 

March 2024

 

September 2024

Mezzanine secured credit facilities

$

163,387

 

 

$

189,113

 

 

$

352,500

 

 

$

92,404

 

 

 

 

 

 

 

 

 

Borrowing Capacity

 

 

Outstanding

 

 

Weighted-
Average
Interest

 

 

 

 

 

As of December 31, 2021

Committed

 

 

Uncommitted

 

 

Total

 

 

Amount

 

 

Rate

 

 

 

 

 

Related party facility 1

$

65,000

 

 

$

 

 

$

65,000

 

 

$

58,767

 

 

 

13.00

%

 

 

 

 

Third-party lender 1

 

90,000

 

 

 

 

 

 

90,000

 

 

 

86,262

 

 

 

9.50

%

 

 

 

 

Third-party lender 2

 

67,500

 

 

 

45,000

 

 

 

112,500

 

 

 

1,588

 

 

 

9.50

%

 

 

 

 

Related party facility 2

 

14,000

 

 

 

 

 

 

14,000

 

 

 

23,742

 

 

 

13.00

%

 

 

 

 

Mezzanine secured credit facilities

$

236,500

 

 

$

45,000

 

 

$

281,500

 

 

$

170,359

 

 

 

 

 

 

 

 

As of December 31, 2022, the Company had four mezzanine secured credit facilities, two with separate third-party lenders and two with a related party, which holds more than 5% of our Class A common stock. Borrowings under the Company’s mezzanine secured credit facilities accrue interest at $10.00 per Unit, generating grossfixed rates, which vary by facility and range from 9.5% to 13.0%. The Company may also pay fees on its mezzanine secured credit facilities, including a commitment fee and fees on certain unused portions of the committed borrowing capacity, as defined in the respective credit agreements.

Borrowings under the Company’s mezzanine secured credit facilities are collateralized by a second lien on the real estate inventory financed by the relevant credit facility. The lenders have legal recourse only to the assets securing the debt, and do not have general recourse to Offerpad with limited exceptions.

The Company’s mezzanine secured credit facilities are structurally and contractually subordinated to the related senior secured credit facilities.

During February 2023, the Company amended its credit facility with third-party lender 1, which, among other things, reduced the total borrowing capacity on the facility from $90.0 million to $45.0 million, $22.5 million of which is committed.

Offerpad Solutions Inc. | 2022 Form 10-K | 74


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Maturities

As of December 31, 2022, certain of the Company’s senior secured credit facilities and mezzanine secured credit facilities mature within the next twelve months following the date these consolidated financial statements are issued. The Company expects to enter into new financing arrangements or amend existing arrangements to meet its obligations as they come due, which the Company believes is probable based on its history of prior credit facility renewals. The Company believes cash on hand, together with proceeds from the resale of $402.5homes and cash from future borrowings available under each of the Company’s existing credit facilities or the entry into new financing arrangements (including the Private Placement (as defined in Note 17. Subsequent Events), will be sufficient to meet its obligations as they become due in the ordinary course of business for at least 12 months following the date these consolidated financial statements are issued.

Covenants for Senior Secured Credit Facilities and Mezzanine Secured Credit Facilities

The secured credit facilities include customary representations and warranties, covenants and events of default. Financed properties are subject to customary eligibility criteria and concentration limits. The terms of these facilities and related financing documents require the Company to comply with a number of customary financial and other covenants, such as maintaining certain levels of liquidity, tangible net worth or leverage (ratio of debt to tangible net worth).

As of December 31, 2022, the Company was in compliance with all covenants and no event of default had occurred.

Senior Secured Debt - Other

As of December 31, 2022, the Company has borrowing arrangements with two separate third-party lenders to support purchases of real estate inventory. Borrowings under each of these arrangements accrue interest at a rate based on a SOFR reference rate, plus a margin which varies by arrangement. As of December 31, 2022 and 2021, the weighted-average interest rates under the Company’s other senior secured debt were 7.23% and 5.79%, respectively.

Note 8. Warrant Liabilities

In connection with the Business Combination, the Company assumed 13.4 million public warrants and incurring offering costs6.7 million private placement warrants, both of approximately $22.8which were previously issued by Supernova. Further, upon the closing of the Business Combination, an additional 1.7 million inclusiveprivate placement warrants were issued. As such, as of approximately $14.1September 1, 2021, the Company had outstanding warrants to purchase an aggregate of up to 21.8 million in deferred underwriting commissions.

Each Unit consistsshares of one share ofOfferpad Solutions Class A common stock that will become exercisable securities in the future after certain requirements have been met.

During 2022, a private placement warrant holder elected to transfer 1.8 million private placement warrants, upon which the warrants were converted into public warrants pursuant to the terms of the Warrant Agreement. Accordingly, as of December 31, 2022, the Company had 15.2 million public warrants and one-third of one redeemable6.6 million private placement warrants outstanding.

Public Warrants

Each public warrant (each, a “Public Warrant”). Each Public Warrant entitles the registered holder to purchase acquire one share of the Company’s Class A common stock at a price of $11.50$11.50 per share, subject to adjustment (see Note 7).


Note 5—Related Party Transactions

Founder Shares

On September 9, 2020, the Sponsor paid $25,000 to cover for certain offering costs on behalf of the Company in exchange for issuance of 11,500,000 shares of the Company’s Class B common stock, par value $0.0001 per share, (the “Founder Shares”). On September 14, 2020, the Company effectuated an 0.75-for-1 reverse split of the Founder Shares, resulting in an aggregate outstanding amount of 8,625,000 Founder Shares. On October 20, 2020, the Company effectuated a 6-for-7 stock split of the founder shares, resulting in an aggregate outstanding amount of 10,062,500 Founder Shares (see Note 8). All shares and associated amounts have been adjusted to reflect the stock splits.as discussed below. The initial stockholders agreed to forfeit, after giving effect to the stock split that occurred on October 20, 2020, up to 1,312,500 Founder Shares to the extent that the over-allotment option was not exercised in full by the underwriters, so that the Founder Shares would represent 20.0% of the Company’s issued and outstanding shares after the Initial Public Offering. The underwriter exercised its over-allotment option in fullwarrants became exercisable on October 23, 2020; thus, these 1,312,500 Founder Shares were no longer subject to forfeiture.

The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (1) one year after the completion of the initial Business Combination and (2) the date on which the Company consummates a liquidation, merger, capital stock exchange, reorganization, or other similar transaction after the initial Business Combination that results in all of the stockholders having the right to exchange their shares of common stock for cash, securities or other property. Notwithstanding the foregoing, if the last reported sale price of the common stock shares 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 the initial Business Combination, the Founder Shares will be released from the lock-up.

Private Placement Warrants

Simultaneously with the closing of the Initial Public Offering, the Company consummated the Private Placement of 6,700,000 Private Placement Warrants at a price of $1.50 per Private Placement Warrant to the Sponsor, generating proceeds of approximately $10.1 million.

Each whole Private Placement Warrant is exercisable for one whole share of Class2021. A common stock at a price of $11.50 per share. A portion of the proceeds from the sale of the Private Placement Warrants to the Sponsor was added to the proceeds from the Initial Public Offering to be held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the Private Placement Warrants will expire worthless. The Private Placement Warrants will be non-redeemable for cash (except in certain limited circumstances) and exercisable on a cashless basis so long as they are held by the Sponsor orholder may exercise its permitted transferees.

The Sponsor and the Company’s officers and directors agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Warrants until 30 days after the completion of the initial Business Combination.

Related Party Loans

On September 9, 2020, 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 “Note”). This loan is non-interest bearing and payable upon the completion of the Initial Public Offering. The Company borrowed approximately $183,000 under the Note and fully repaid the Note on October 23, 2020.

In addition, in order to fund working capital deficiencies or 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 may 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. The Working Capital Loans would either be repaid upon consummation of a Business Combination or, at the lender’s discretion, up to $1.5 million of such Working Capital Loans may be convertible into warrants of the post Business Combination entity at a price of $1.50 per warrant. The warrants would be identical to the Private Placement Warrants. 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. As of December 31, 2020, the Company had no borrowings under the Working Capital Loans.

Forward Purchase Agreements

In connection with the closing of the Company’s initial public offering, the Company entered into forward purchase agreements to which the Company’s Sponsors committed to purchase our Class A common stock in an aggregate amount equal to 5,000,000 shares of our common stock, plus an aggregate of 1,666,667 warrants to purchase one share of Class A common stock at $11.50 per share, for an aggregate purchase price of $50,000,000, or $10.00 for one share of Class A common stock and one-third of one warrant, in a private placement that is conditioned upon, and will be consummated concurrently with, the Closing. The shares of Class A common stock and warrants to be issued pursuant to the Forward Purchase Agreements have not been registered under the Securities Act and will be issued in reliance on the availability of an exemption from such registration.

Note 6—Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares), are entitled to registration rights pursuant to a registration rights agreement. These holders are entitled to certain demand and “piggyback” registration rights. The Company will bear the expenses incurred in connection with the filing of any such registration statements.  

Underwriting Agreement

The underwriters were entitled to an underwriting discount of $0.20 per unit, or approximately $8.1 million in the aggregate, paid upon the closing of the Initial Public Offering. In addition, $0.35 per unit, or approximately $14.1 million in the aggregate will be payable to the underwriters for deferred underwriting commissions.

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 a Business Combination, subject to the terms of the underwriting agreement.

Risks and Uncertainties

Management continues to evaluate 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.

Note 7—Derivative Liabilities

As of December 31, 2020, the Company had 13,416,667 and 6,700,000 Public Warrants and Private Warrants outstanding, respectively.


Public Warrants may only be exercised in whole and only for a whole number of shares. No fractional Public Warrants will be issued upon separation of the Units and only whole Public Warrants will trade. The Public Warrants will become exercisable on the later of (a) 30 days after the completion of a Business Combination and (b) 12 months from the closing of the Initial Public Offering; provided in each case that the Company has an effective registration statement under the Securities Act covering the issuance of the shares of Class A common stock issuable upon exercise of the Public Warrants andstock. This means only a current prospectus relating to them is available (or the Company permits holders to exercise their Public Warrants onwhole warrant may be exercised at a cashless basis and such cashless exercise is exempt from registration under the Securities Act). The Company has agreed that as soon as practicable, but in no event later than 20 business days after the closing of the initial Business Combination, the Company will use its commercially reasonable efforts to file with the SEC and have an effective registration statement covering the shares of Class A common stock issuable upon exercise of the warrants and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed. If a registration statement covering the Class A common stock issuable upon exercise of the warrants is not effectivegiven time by the 60th business day after the closing of the initial 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 above, if the Company’s shares of Class A common stock are at the time of any exercise of a warrant not listed on a national securities exchange such that they satisfy the definition of a “covered security” under Section 18(b)(1) of the Securities Act, the Company may, at its option, require holders of Public Warrants who exercise theirholder. The public warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event the Company so elect, it will not be required to file or maintain in effect a registration statement, and in the event the Company does not so elect, it will use commercially reasonable efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. The Public Warrants will expire five years after the completion of a Business CombinationSeptember 1, 2026, or earlier upon redemption or liquidation.

The warrants have an exercise price of $11.50 per share, subject to adjustments. In addition, if (x) the Company issues additional shares of Class A common stock or equity-linked securities (excluding the potential forward purchase securities as described in the prospectus) for capital raising purposes in connection with the closing of the initial 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 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 the initial Business Combination on the date of the consummation of the initial Business Combination (net of redemptions), and (z) the volume-weighted average trading price of the Class A common stock during the 10-trading day period starting on the trading day after the day on which the Company consummated the initial business Combination (such price, the “Market Value”) is below $9.20 per share, then 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 described below under “Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00” will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price, and the $10.00 per share redemption trigger price will be adjusted (to the nearest cent) to be equal to the higher of the Market Value and the Newly Issued Price.

The Private Placement Warrants are identical to the Public Warrants, except that the Private Placement Warrants and the shares of Class A common stock issuable upon exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be non-redeemable so long as they are held by the Sponsor or its permitted transferees, except in certain limited circumstances. If the Private Placement Warrants are held by someone other than the Sponsor or its permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

Redemption of warrants when the price per share of Class A common stock equals or exceeds $18.00:for cash


Once the warrants become exercisable, theThe Company may redeemcall the outstandingpublic warrants for cash (except as described herein with respect to the Private Placement Warrants):

redemption for cash:

in whole and not in part;

at a price of $0.01$0.01 per Warrant;

warrant;

upon a minimum ofnot less than 30 days’days prior written notice of redemption;redemption to each warrant holder; and

if, and only if, the last reported sale price of the Company’s Class A common stock equals or exceeds $18.00$18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like and for certain issuances of the Company’s Class A common stock and equity-linked securities as described above)securities) for any 20 trading days within a 30-trading30-trading day period ending on the third trading day prior to the date on which the Company sends the notice of redemption to the warrant holders.

holders.

The Company will not redeemIf and when the warrants as described above unless a registration statementbecome redeemable by the Company for cash, the Company may exercise its redemption right even if the Company is unable to register or qualify the underlying securities for sale under the Securities Act covering the issuanceall applicable state securities laws.

Redemption of thewarrants for shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating

Offerpad Solutions Inc. | 2022 Form 10-K | 75


OFFERPAD SOLUTIONS INC.

Notes to those shares of common stock is available throughout the 30-day redemption period, except if the warrants may be exercised on a cashless basis and such cashless exercise is exempt from registration under the Securities Act.Consolidated Financial Statements

Redemption of warrants for when the price per share of Class A common stock equals or exceeds $10.00:

Once the warrants become exercisable, theThe Company may redeem the outstanding warrants:

warrants for shares of Class A common stock:

in whole and not in part;

at $0.10$0.10 per warrant upon a minimum of 30 days’ days prior written notice of redemption, provided that holders will be able to exercise their warrants on a cashless basis prior to redemption and receive that number of shares determined by reference to an agreed table, based on the redemption date and the “fair market value” of Class A common stock;

(as defined below) except as otherwise described below;

if, and only if, the closinglast reported sale price of the Company’s Class A common stock equals or exceeds $10.00$10.00 per share (as adjusted per stock splits, stock dividends, reorganizations, recapitalizations and the like)like and for certain issuances of the Company’s Class A common stock and equity-linked securities) on the trading day prior to the date on which the Company sends the notice of redemption to the warrant holders; and

if and only if, the Private Placement Warrantsprivate placement warrants are also concurrently called for redemption onexchanged at the same termsprice (equal to a number of shares of our Class A common stock) as the outstanding Public Warrants,public warrants, as described above.

The “fair market value” of the Class A common stock shall mean the volume-weighted average price of Class A common stockthe last reported sales price for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of warrants. In no event will the warrants be exercisable in connection with this redemption feature for more than 0.361 shares of Class A common stock per warrant (subject to adjustment).

Private Placement Warrants

In no event willThe private placement warrants are not redeemable by us so long as they are held by the Company be requiredSupernova Sponsor or its permitted transferees, except in certain limited circumstances. The Supernova Sponsor, or its permitted transferees, has the option to net cash settle any warrant. Ifexercise the Company is unable to completeprivate placement warrants on a Business Combination within the Combination Periodcashless basis 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.

Note 8—Stockholders’ Equity

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. As of December 31, 2020, there were 40,250,000 shares of Class A common stock issued or outstanding including 33,488,198 shares subject to possible redemption.


Class B Common Stock — The Company is authorized to issue 20,000,000 shares of Class B common stock with a par value of $0.0001 per share. On September 9, 2020, the Company issued 11,500,000 shares of Class B common stock. On September 14, 2020, the Company effectuated an 0.75-for-1 reverse split of the Founder Shares, resulting in an aggregate outstanding amount of 8,625,000 Founder Shares. On October 20, 2020, the Company effectuated a 6-for-7 stock split of the founder shares, resulting in an aggregate outstanding amount of 10,062,500 Founder Shares. All sharesSupernova Sponsor and associated amounts have been adjusted to reflect the stock splits. Of these, up to 1,312,500 shares of Class B common stock are subject to forfeiture, to the Company by the initial stockholders for no consideration to the extent that the underwriter’s over-allotment option is not exercised in full or in part, so that the number of shares of Class B common stock would collectively equal 20% of the Company’s issued and outstanding common stock after the Initial Public Offering. The underwriter exercised its over-allotment option in full on October 23, 2020; thus, these 1,312,500 shares of Class B common stock were no longer subject to forfeiture.

Only holders of Class B common stock will have the right to elect directors or remove directors prior to the completion of the initial Business Combination. These provisions in the amended and restated certificate of incorporation may only be amended by a resolution passed by the holders of a majority of the Class B common stock. Holders of the Class A common stock and holders of the Class B common stock of record are entitled to one vote for each share held on all other matters to be voted on by stockholders, including any vote in connection with the initial Business Combination, and vote together as a single class, except as required by law or the applicable rules of the NYSE.

The Class B common stock will automatically convert into Class A common stock at the time of the initial Business Combination on a one-for-one basis, subject to increase in respect of the issuance ofpermitted transferees has certain securities, as provided herein. In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amount issued in the Initial Public Offering andregistration rights related to the closing ofprivate placement warrants (including the initial 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%exercise of the aggregate number of all shares of common stock outstanding uponprivate placement warrants). Except as described in this section, the completion of the Initial Public Offering, plus the aggregate number of shares of Class A common stock and equity-linked securities issued or deemed issued in connection with the initial Business Combination (net of the number of shares of Class A common stock redeemed in connection with the initial Business Combination), excluding the forward purchase securities and any shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination and any private placement warrants issuedhave terms and provisions that are identical to the Sponsor, an affiliate of our sponsor or anythose of the Company’s officerspublic warrants. If the private placement warrants are held by holders other than the Supernova Sponsor or director.its permitted transferees, the private placement warrants will be redeemable by the Company and exercisable by the holders on the same basis as the public warrants.

Note 9. Fair Value Measurements

Preferred Stock — The Company is authorized to issue 1,000,000 sharesfair values of preferred stock, par value $0.0001 per share, with such designations, votingcash and cash equivalents, restricted cash, accounts receivable, accounts payable, and certain prepaid and other rightscurrent assets and preferences as may be determined from time to time byaccrued expenses approximate carrying values because of their short-term nature. The Company’s credit facilities are carried at amortized cost and the carrying value approximates fair value because of their short-term nature.

The Company’s board of directors. As of December 31, 2020, there were no shares of preferred stock issued or outstanding.

Note 9—Fair Value Measurements

The following table presents information about the Company’s assetsliabilities that are measured at fair value on a recurring basis as of December 31, 2020 and indicates the fair value hierarchyconsist of the valuation techniques thatfollowing (in thousands):

As of December 31, 2022

 

Quoted Prices in
Active Markets for
Identical Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Public warrant liabilities

 

$

343

 

 

$

 

 

$

 

Private placement warrant liabilities

 

$

 

 

$

 

 

$

196

 

As of December 31, 2021

 

Quoted Prices in
Active Markets for
Identical Liabilities
(Level 1)

 

 

Significant Other
Observable Inputs
(Level 2)

 

 

Significant
Unobservable Inputs
(Level 3)

 

Public warrant liabilities

 

$

14,356

 

 

$

 

 

$

 

Private placement warrant liabilities

 

$

 

 

$

 

 

$

9,705

 

Public Warrants

The public warrants were initially recognized as a liability in connection with the Company utilized to determine such fair value.


 

 

Quoted

Prices

 

 

Significant

Other

 

 

Significant

Other

 

 

 

in Active

Markets

 

 

Observable

Inputs

 

 

Unobservable

Inputs

 

Description

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments held in Trust Account

 

$

402,578,522

 

 

$

 

 

$

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Derivative warrant liabilities

 

$

27,504,170

 

 

$

 

 

$

14,070,000

 

Deriviative liabilities - Forward purchase agreements

 

$

 

 

$

 

 

$

8,100,000

 

Transfers to/from LevelsBusiness Combination on September 1, 2, and 3 are recognized at the beginning of the reporting period.2021. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1public warrants is estimated based on the quoted market price of such warrants on the valuation date. The Company recorded changes in the fair value measurementof the public warrants of $14.0 million and $1.8 million during the years ended December 31, 2022 and 2021, respectively. These changes are recorded in December 2020, whenChange in fair value of warrant liabilities in our consolidated statements of operations.

Offerpad Solutions Inc. | 2022 Form 10-K | 76


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Private Placement Warrants

The private placement warrants were initially recognized as a liability in connection with the Public Warrants were separately listed and traded.

LevelBusiness Combination on September 1, instruments include investments2021. The following summarizes the changes in mutual funds investedthe Company’s private placement warrant liabilities, which are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the respective periods:

 

 

Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Beginning balance

 

$

9,705

 

 

$

 

Initial fair value of private placement warrants

 

 

 

 

 

10,291

 

Change in fair value of private placement warrants included in net (loss) income

 

 

(9,509

)

 

 

(586

)

Ending balance

 

$

196

 

 

$

9,705

 

The following summarizes the range of assumptions used in government securities and Public Warrants. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sourcesthe Black-Scholes-Merton option-pricing model to determine the fair value of its investments.

The fair value of the Public Warrants issued in connection withprivate placement warrants during the Public Offering and Private Placement Warrants were initially and subsequently measured at fair valuerespective periods:

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Volatility

 

47.00% - 83.50%

 

 

25.00% - 40.50%

 

Stock price

 

$0.46 - $5.03

 

 

$6.40 - $8.80

 

Expected life of the options to convert

 

3.669 - 4.419

 

 

4.669 - 5.000

 

Risk-free rate

 

2.43% - 4.16%

 

 

0.78% - 1.22%

 

Dividend yield

 

 

0.00

%

 

 

0.00

%

Volatility: Expected volatility is estimated using a Monte Carlo simulation model. The fair value of the forward purchase agreements is determined as the estimated unit value less the net present value of the forward purchase agreements. For the period from August 31, 2020 (inception) through December 31, 2020, the Company recognized a non-cash loss resulting from an increase in the fair value of liabilities of approximately $24.2 million presented as change in fair value of derivative liabilities on the accompanying statement of operations.

The estimated fair value of the Private Placement Warrants, forward purchase agreements and the Public Warrants priormodel to being separately listed and traded, is determined using Level 3 inputs. Inherent in a Monte Carlo simulation are assumptions related to expected stock-pricedetermine volatility expected life, risk-free interest rate and dividend yield. The Company estimates the volatility of its common stock warrants based on implied volatility from the Company’s traded warrants and from historical volatility of select peer company’s common stock that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining lifetrading price of the warrants.public warrants and to reflect the probability of different outcomes.

Expected Life: The expected life of the warrants is assumed to be equivalent to their remaining contractual term.

Risk-Free Interest Rate: The dividendrisk-free interest rate is estimated based on the historical rate, whichU.S. Treasury zero-coupon yield curve on the Company anticipatesvaluation date for a maturity similar to the expected remaining at zero.life of the warrants.

Expected Dividend Yield:The following table provides quantitative information regarding Level 3 fair value measurements inputs at their measurement dates for the warrants:

 

 

As of

October 23, 2020

 

 

As of

December 31, 2020

 

Volatility

 

 

21.00

%

 

 

21.75

%

Stock price

 

$

10.00

 

 

$

11.00

 

Expected life of the options to convert

 

 

5.833

 

 

 

5.647

 

Risk-free rate

 

 

0.460

%

 

 

0.469

%

Dividend yield

 

 

0.0

%

 

 

0.0

%

The following table provides quantitative Level 3 fair value measurement inputs at their measurement dates for the forward purchase agreement:

 

 

As of

October 23, 2020

 

 

As of

December 31, 2020

 

Risk-free rate

 

 

0.117

%

 

 

0.93

%

Term

 

 

0.833

 

 

 

0.647

 


The changeexpected dividend yield assumption considers that we have not historically paid dividends and we do not expect to pay dividends in the fair valueforeseeable future.

There were no transfers between Levels 1, 2, and 3 during the years ended December 31, 2022, 2021 and 2020.

Note 10. Stockholders’ Equity

Authorized Capital Stock

The Company’s charter authorizes the issuance of 2,370,000,000 shares, which includes Class A common stock, Class B common stock, Class C common stock and preferred stock.

Class A Common Stock

Subsequent to the Closing of the derivative liabilities utilizing Level 3 measurements forBusiness Combination, our Class A common stock and warrants began trading on the period from August 31, 2020 (inception) through December 31, 2020 is summarized as follows:

Derivative liabilities at August 31, 2020 (inception)

 

$

 

Issuance of Public and Private Warrants and forward purchase agreements - Level 3

 

 

25,481,000

 

Transfer of Public Warrants to Level 1 measurement

 

 

(16,905,000

)

Change in fair value of derivative liabilities - Level 3

 

 

13,594,000

 

Derivative liabilities at Level 3, December 31, 2020

 

$

22,170,000

 

Note 10—Income Taxes

The components ofNew York Stock Exchange (“NYSE”) under the provision for income taxes are as follows:

 

 

For the Period from

August 31, 2020

(inception) Through

December 31, 2020

 

Current expense (benefit):

 

 

 

 

Federal

 

$

3,325

 

State

 

 

1,424

 

Total current expense (benefit):

 

$

4,749

 

Deferred expense (benefit):

 

 

 

 

Federal

 

$

 

State

 

 

 

Total deferred expense (benefit):

 

$

 

Total income tax expense (benefit):

 

$

4,749

 

A reconciliation of the Company’s statutory income tax ratesymbols “OPAD” and “OPAD WS,” respectively. Pursuant to the Company’s effective income tax ratecharter, the Company is as follows:

For the Period from

August 31, 2020

(inception) Through

December 31, 2020

Income at US statutory rate

21.00

%

State Taxes, net of federal benefit

0.05

%

Financing cost – derivative liabilities

(0.80)

%

Change in fair value of derivative liabilities

(20.02

)%

Change in valuation allowance

(0.25

)%

(0.02

)%

The net deferred income tax asset balance relatedauthorized to the following:

 

 

For the Period from

August 31, 2020

(inception) Through

December 31, 2020

 

Capitalized start-up costs

 

$

63,119

 

Total deferred tax assets

 

$

63,119

 

Valuation allowance

 

$

(63,119

)

Net deferred tax assets (liability)

 

$

 


Future realizationissue 2,000,000,000 shares of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period.Class A common stock, par value $0.0001 per share. As of December 31, 2020,2022, we had 232,378,752 shares of Class A common stock issued and outstanding.

Prior to the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positiveBusiness Combination, Old Offerpad had outstanding shares of Series A, Series A-1, Series A-2, Series B and negative, which includedSeries C convertible preferred stock (collectively, “Preferred Stock”). Upon the results of operations for the current and preceding years. The Company determined that it was not possible to reasonably quantify future taxable income and determined that it is more likely than not that allClosing of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2020.

The Company’s valuation allowance for the period from August 31, 2020 (inception) through December 31, 2020 is as follows:

 

 

For the Period from

August 31, 2020

(inception) Through

December 31, 2020

 

Valuation allowance at beginning of year

 

$

 

Increases recorded to income tax provision

 

$

63,119

 

Valuation allowance at end of year

 

$

(63,119

)

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which the Company operates or does business in. ASC 740-10 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

We record uncertain tax positions as liabilities in accordance with ASC 740-10 and adjust these liabilities when our judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2020, we have not recorded any uncertain tax positions in our financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations as required. As of December 31, 2020, there were no significant accrued interest or penalties.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from inception. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in the United States. The CARES Act provides numerous tax provisions and other stimulus measures, including temporary changes regarding the prior and future utilization of net operating losses, temporary suspension of certain payment requirements for the employer portion of Social Security taxes, technical corrections from prior tax legislation for tax depreciation of certain qualified improvement property, and the creation of certain refundable employee retention credits. The Company evaluated the provisions of the CARES Act and does not anticipate the associated impacts, if any, will have a material effect on the Company’s provision for income taxes for the year ended December 31, 2020.

Note 11—Subsequent Events

On March 17, 2021, the Company entered into the Merger Agreement by and among Supernova, Orchids Merger Sub, Inc., a Delaware corporation and a newly formed direct, wholly owned subsidiary of Supernova (“First Merger


Sub”), Orchids Merger Sub, LLC, a Delaware limited liability company and direct, wholly owned subsidiary of Supernova (“Second Merger Sub”), and OfferPad, Inc., a Delaware corporation (“Offerpad”).

Pursuant to the Merger Agreement, the parties will enter into a business combination transaction (the “Business Combination”) by which (i) First Merger Sub will merge with and into Offerpad, with Offerpad being the surviving entity in the merger (the “First Merger”), and (ii) Offerpad will merge with and into Second Merger Sub, with Second Merger Sub being the surviving entity in the merger (the “Second Merger” and, together with the First Merger, the “Mergers” and, together with the other transactions contemplated by the Merger Agreement, the “Transactions” and the closing of the Transactions, the “Closing”). In connection with the Closing, Supernova will change its name to “Offerpad Solutions, Inc.”

The value of the aggregate equity consideration to be paid to Offerpad’s stockholders and optionholders in the Transactions will be equal to $2,250,000,000 (the “Equity Value”). At the Closing,Business Combination, each share of Old Offerpad’s Preferred Stock and common stock and preferred stock of Offerpad that iswas issued and outstanding immediately prior to the effective time of the First Merger (other than “Excluded Shares”, as defined in the Merger Agreement) will bewas cancelled and converted into Offerpad Solutions Inc. Class A common stock with the rightapplication of the Exchange Ratio as discussed in Note 3, Business Combination.

Additionally, we have outstanding warrants to receivepurchase shares of Offerpad Solutions Class A common stock that will become exercisable securities in the future after certain requirements have been met. Refer to Note 8. Warrant Liabilities.

Offerpad Solutions Inc. | 2022 Form 10-K | 77


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Class B Common Stock

Pursuant to the Company’s charter, the Company is authorized to issue 20,000,000 shares of Class B common stock, par value $0.0001 per share.

In connection with the Closing of the Business Combination, Brian Bair, the Chief Executive Officer and Founder of the Company, or entities controlled by Mr. Bair, received Class B shares of Offerpad Solutions Inc. common stock as consideration. These Class B shares entitle Mr. Bair or his permitted transferees to 10 votes per share until the earlier of (a) the date that is nine months following the date on which Mr. Bair (x) is no longer providing services, whether upon death, resignation, removal or otherwise, to Offerpad Solutions as a member of the senior leadership team, officer or director and (y) has not provided any such services for the duration of such nine-month period; and (b) the date as of which Mr. Bair or his permitted transferees have transferred, in the aggregate, more than seventy-five (75%) of the shares of Class B common stock that were held by Mr. Bair and his permitted transferees immediately following the Closing.

As of December 31, 2022, we had 14,816,236 shares of Class B common stock issued and outstanding.

In January 2023, Mr. Bair notified the Company’s Board of Directors that he will convert all shares of Class B common stock beneficially owned by him to shares of Class A common stock immediately following the conclusion of the Company’s 2023 annual meeting of stockholders.

Class C Common Stock

Pursuant to the Company’s charter, the Company is authorized to issue 250,000,000 shares of Class C common stock, par value $0.0001 per share. Our Class C common stock will entitle its holder to have substantially the same rights as Class A common stock, except it will not have any voting rights. As of December 31, 2022, there were no shares of Class C common stock issued and outstanding.

Preferred Stock

Pursuant to the Company’s charter, the Company is authorized to issue 100,000,000 shares of preferred stock, par value $0.0001 per share. Our board of directors has the authority without action by the stockholders, to designate and issue shares of preferred stock in one or more classes or series, and the number of shares constituting any such class or series, and to fix the voting powers, designations, preferences, limitations, restrictions and relative rights of Supernovaeach class or series of preferred stock, including, without limitation, dividend rights, conversion rights, redemption privileges and liquidation preferences, which rights may be greater than the rights of the holders of the common stock. As of December 31, 2022, there were no shares of preferred stock issued and outstanding.

Dividends

Our Class A and Class B common stock equalare entitled to an exchange ratio determineddividends if and when any dividend is declared by dividingour board of directors, subject to the Equity Value byrights of all classes of stock outstanding having priority rights to dividends. We have not paid any cash dividends on common stock to date. We may retain future earnings, if any, for the “Aggregate Fully Diluted Company Common Stock” (as definedfurther development and expansion of our business and have no current plans to pay cash dividends for the foreseeable future. Any future determination to pay dividends will be made at the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, capital requirements, restrictions contained in the Merger Agreement).future agreements and financing instruments, business prospects and such other factors as our board of directors may deem relevant.

Note 11. Stock-Based Awards

2016 Stock Plan

AtPrior to the Closing of the Business Combination, the Company maintained the OfferPad 2016 Stock Option and Grant Plan (the “2016 Plan”) that allowed for granting of incentive and non-qualified stock options to employees, directors, and consultants.

In connection with the Business Combination, each option granted under the 2016 Plan that was outstanding immediately prior to purchase Offerpad common stock,the Business Combination, whether vested or unvested, will bewas assumed and converted into an option to purchase a number of shares of Supernova Class A common stock in(rounded down to the manner set forth innearest whole share) equal to the Merger Agreement.

Concurrently withproduct of (i) the executionnumber of the Merger Agreement, certain investors (the “PIPE Investors”) entered into subscription agreements (the “PIPE Subscription Agreements”) pursuant to which the PIPE Investors have committed to purchase in a private placement 20,000,000 shares of Supernova Class AOld Offerpad common stock (the “PIPE Shares”)subject to such Old Offerpad option immediately prior to the Business Combination and (ii) the Exchange Ratio, at a purchasean exercise price of $10.00 per share and an aggregate purchase(rounded up to the nearest whole cent) equal to the quotient obtained by dividing (A) the exercise price per share of $200,000,000 (the “PIPE Investment”). The purchase of the PIPE Shares is conditioned upon, among other things,such Old Offerpad option immediately prior to the consummation of the TransactionsBusiness Combination by (B) the Exchange Ratio. Stock option activity prior to the Business Combination was retroactively adjusted to reflect this conversion.

Offerpad Solutions Inc. | 2022 Form 10-K | 78


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Awards outstanding under the 2016 Plan were assumed by Offerpad Solutions upon the Closing and continue to be governed by the terms and conditions of the 2016 Plan and applicable award agreement. Shares of our common stock subject to awards granted under the 2016 Plan that expire unexercised or are cancelled, terminated, or forfeited in any manner without issuance of shares thereunder following the effective date of the 2021 Plan (as defined below), will not again become available for issuance under the 2016 Plan or the 2021 Plan.

In connection with the completion of the Business Combination and the adoption of the 2021 Plan, no additional awards will be consummated concurrentlygranted under the 2016 Plan.

2021 Equity Incentive Plans

In connection with the Closing. TheBusiness Combination, our board of directors adopted, and our stockholders approved, the Offerpad Solutions Inc. 2021 Incentive Award Plan (the “2021 Plan”) under which 26,333,222 shares of Class A common stock to be issued pursuantwere initially reserved for issuance. The 2021 Plan allows for the issuance of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock or cash based awards. The number of shares of the Company’s Class A common stock available for issuance under the 2021 Plan increases annually on the first day of each calendar year, beginning on and including January 1, 2022 and ending on and including January 1, 2031 equal to the PIPE Subscription Agreements have not been registeredlesser of (i) a number of shares such that the aggregate number of shares of Class A common stock available for grant under the Securities Act and will2021 Plan immediately following such increase shall be issued in relianceequal to 5% of the number of fully-diluted shares on the availabilityfinal day of an exemption fromthe immediately preceding calendar year and (ii) such registration.smaller number of shares of Class A common stock as is determined by the Company’s board of directors. As of December 31, 2022, the Company has granted stock options, restricted stock units (“RSUs”) and performance-based RSUs (“PSUs”) under the 2021 Plan.

In connection with the executionclose of the Merger Agreement,Business Combination, our board of directors adopted, and our stockholders approved the Company entered into a sponsor support agreement (the “Sponsor Support Agreement”Offerpad Solutions Inc. 2021 Employee Stock Purchase Plan (“ESPP”) with. There are 2,633,322 shares of Class A common stock initially reserved for issuance under the Sponsor, Offerpad and the Company’s directors and officers. Pursuant to the Sponsor Support Agreement, the Sponsor and the Company’s directors and officers have, among other things, agreed to vote allESPP. The number of their shares of the Company’s capitalClass A common stock in favoravailable for issuance under the ESPP increases annually on the first day of each calendar year, beginning on and including January 1, 2022 and ending on and including January 1, 2031, by the approvallesser of (a) a number of shares such that the Transactions. In addition, the Sponsor has agreed that 20%aggregate number of its shares of Class BA common stock available for grant under the ESPP immediately following such increase shall be equal to 1% of the number of fully-diluted shares on the final day of the immediately preceding calendar year and (b) such smaller number of shares of Class A common stock as determined by the Company’s board of directors; provided that, no more than 50,000,000 shares of Class A common stock may be issued under the ESPP. As of December 31, 2022, no shares have been issued under the ESPP.

Stock Options

During the years ended December 31, 2022, 2021 and 2020, the Company granted stock option awards with a service vesting condition that is generally four years. The range of assumptions used in connectionthe Black-Scholes-Merton option pricing model to determine the fair value of stock option awards granted during the respective years are as follows:

2022 Range

2021 Range

2020 Range

Expected term (in years)

6.25

5.97 - 6.10

5.36 - 6.11

Risk-free interest rate

1.63% - 3.37%

0.64% - 0.67%

0.38% - 0.46%

Expected stock price volatility

57.8% - 60.0%

52.5% - 52.7%

51.7% - 52.9%

Expected dividend yield

Fair value on grant date

$1.43 - $5.11

$4.49 - $4.55

$4.27 - $4.49

Offerpad Solutions Inc. | 2022 Form 10-K | 79


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

The following summarizes stock option activity during the years ended December 31, 2022, 2021 and 2020:

 

 

Number of
Shares
 
(in thousands)

 

 

Weighted-
Average
Exercise Price
Per Share

 

 

Weighted-Average
Remaining
Contractual
Term
(in years)

 

 

Aggregate
Intrinsic
Value
(in thousands)

 

Outstanding as of December 31, 2019

 

 

23,669

 

 

 

0.55

 

 

 

7.71

 

 

$

16,275

 

Granted

 

 

5,258

 

 

 

1.22

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

Forfeited or cancelled

 

 

(1,336

)

 

 

0.54

 

 

 

 

 

 

 

Outstanding as of December 31, 2020

 

 

27,591

 

 

 

0.68

 

 

 

7.40

 

 

 

14,619

 

Granted

 

 

1,559

 

 

 

1.22

 

 

 

 

 

 

 

Exercised

 

 

(2,490

)

 

 

0.36

 

 

 

 

 

 

 

Forfeited or cancelled

 

 

(1,084

)

 

 

0.85

 

 

 

 

 

 

 

Outstanding as of December 31, 2021

 

 

25,576

 

 

 

0.73

 

 

 

6.82

 

 

 

137,170

 

Granted

 

 

1,147

 

 

 

4.90

 

 

 

 

 

 

 

Exercised

 

 

(8,101

)

 

 

0.58

 

 

 

 

 

 

 

Forfeited or cancelled

 

 

(895

)

 

 

1.46

 

 

 

 

 

 

 

Outstanding as of December 31, 2022

 

 

17,727

 

 

 

1.02

 

 

 

5.82

 

 

 

953

 

Exercisable as of December 31, 2022

 

 

14,122

 

 

 

0.72

 

 

 

5.24

 

 

 

953

 

Vested and expected to vest as of December 31, 2022

 

 

17,727

 

 

 

1.02

 

 

 

5.82

 

 

 

953

 

The total intrinsic value of stock options exercised during the years ended December 31, 2022 and 2021 was $35.8 million and $10.5 million, respectively. No stock options were exercised during the year ended December 31, 2020.

The weighted-average grant date fair value per option granted during the years ended December 31, 2022, 2021 and 2020 was $2.73, $0.60 and $0.61, respectively.

As of December 31, 2022, the Company had $3.5 million of unrecognized stock-based compensation expense related to unvested stock options. This expense is expected to be recognized over a weighted average period of 1.98 years. The fair value of stock options that vested during the years ended December 31, 2022, 2021 and 2020 was $2.1 million, $2.6 million and $1.2 million, respectively.

Restricted Stock Units

The Company did not grant restricted stock unit (“RSU”) awards during the year December 31, 2020.

During the years ended December 31, 2022 and 2021, the Company granted RSUs with service vesting conditions to employees and non-employee members of our board of directors. The vesting period for RSUs granted to employees is generally three years, subject to continued employment, and the vesting period for RSUs granted to non-employee members of our board of directors generally ranges from three months to three years, subject to continued service on the board of directors.

The following summarizes RSU award activity during the years ended December 31, 2022 and 2021:

 

Number of
RSUs
(in thousands)

 

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2020

 

 

 

$

 

Granted

 

203

 

 

 

7.88

 

Vested and settled

 

 

 

 

 

Forfeited or expired

 

 

 

 

 

Outstanding as of December 31, 2021

 

203

 

 

 

7.88

 

Granted

 

2,118

 

 

 

4.50

 

Vested and settled

 

(163

)

 

 

5.33

 

Forfeited or expired

 

(193

)

 

 

5.05

 

Outstanding as of December 31, 2022

 

1,965

 

 

 

4.73

 

Offerpad Solutions Inc. | 2022 Form 10-K | 80


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

As of December 31, 2022, 351,600 RSUs have vested, but have not yet been settled in shares of the Company’s Class A common stock, pursuant to elections made by certain non-employee members of our board of directors to defer settlement thereof under the Offerpad Solutions Inc. Deferred Compensation Plan for Directors.

As of December 31, 2022, the Company had $6.2 million of unrecognized stock-based compensation expense related to unvested RSUs. This expense is expected to be recognized over a weighted average period of 1.89 years. The fair value of RSUs that vested during the years ended December 31, 2022 and 2021 was $1.6 million and $0.1 million, respectively.

Performance-Based Restricted Stock Units

The Company did not grant PSUs during the years ended December 31, 2020 and 2021, respectively.

During the year ended December 31, 2022, The Company granted PSUs which include both a service vesting condition and a performance vesting condition that is associated with the initial public offering (the “Sponsor Shares”) will be unvested and subject to forfeiture as of the Closing and will only vest if, during the five year period following the Closing, (i) the volume weighted averageshare price of the Company’s Class A common stock equalsstock. Subject to the employee’s continued employment or exceeds $12.00 forservice through the end of the performance period, the PSUs will vest based on the achievement of predetermined price per share goals over the performance period calculated based on the average price per share over any twenty trading days within a60 consecutive calendar-day period during the performance period. Shares earned under the PSU awards are transferred to the award holders upon the completion of the requisite service period of thirty consecutive trading days or (ii) there is a change of control of Supernova. Any Sponsor Shares that remain unvested afterthree years. If the fifth anniversaryaverage price per share does not meet the minimum price per share goal as of the Closinglast day of the performance period, the PSUs automatically will be forfeited. forfeited and terminated without consideration.

The Sponsor Support Agreement will terminate uponassumptions used in the terminationMonte Carlo simulation model to determine the fair value of the Merger Agreement ifPSU awards granted during the Closing does not occur.year ended December 31, 2022 are as follows:

Risk-free interest rate

1.47%

Expected stock price volatility

60.0%

Expected dividend yield

0.0%

Fair value on grant date

$5.11

The proposed Business Combinationfollowing summarizes PSU award activity during the year ended December 31, 2022:

 

Number of
PSUs
(in thousands)

 

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2021

 

 

 

$

 

Granted

 

2,115

 

 

 

4.72

 

Vested

 

 

 

 

 

Forfeited or expired

 

(175

)

 

 

4.72

 

Outstanding as of December 31, 2022

 

1,940

 

 

 

4.72

 

As of December 31, 2022, the Company had $6.6 million of unrecognized stock-based compensation expense related to unvested PSUs. This expense is expected to be consummated after receiptrecognized over a weighted average period of 2.16 years.

Stock-based Compensation Expense

The following details stock-based compensation expense for the required approvals by the stockholdersyears ended December 31:

 

 

Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

 

2020

 

Sales, marketing and operating

 

$

2,023

 

 

$

700

 

 

$

375

 

General and administrative

 

 

5,743

 

 

 

1,889

 

 

 

544

 

Technology and development

 

 

541

 

 

 

490

 

 

 

444

 

Stock-based compensation expense

 

$

8,307

 

 

$

3,079

 

 

$

1,363

 

Offerpad Solutions Inc. | 2022 Form 10-K | 81


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Note 12. Variable Interest Entities

The Company formed certain special purpose entities (each, an “SPE”) to purchase and sell residential properties. Each SPE is a wholly owned subsidiary of the Company and Offerpada separate legal entity, and neither the assets nor credit of any such SPE are available to satisfy the debts and other obligations of any affiliate or other entity. The credit facilities are secured by the assets and equity of one or more SPEs. These SPEs are variable interest entities, and the satisfaction or waiver of certain other customary conditions. For full detailsCompany is the primary beneficiary as it has the power to control the activities that most significantly impact the SPEs’ economic performance and the filedobligation to absorb losses of the SPEs or the right to receive benefits from the SPEs that could potentially be significant to the SPEs. The SPEs are consolidated within the Company’s consolidated financial statements.

The following summarizes the assets and liabilities related to the VIEs as of December 31:

($ in thousands)

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Restricted cash

 

$

42,958

 

 

$

24,616

 

Accounts receivable

 

 

1,841

 

 

 

4,845

 

Inventory

 

 

664,697

 

 

 

1,132,571

 

Prepaid expenses and other current assets

 

 

212

 

 

 

2,871

 

Total assets

 

$

709,708

 

 

$

1,164,903

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

1,976

 

 

$

2,810

 

Accrued and other current liabilities

 

 

4,408

 

 

 

3,537

 

Secured credit facilities and other debt, net - current portion

 

 

666,065

 

 

 

1,026,196

 

Total liabilities

 

$

672,449

 

 

$

1,032,543

 

Offerpad Solutions Inc. | 2022 Form 10-K | 82


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Note 13. Earnings Per Share

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated based on the weighted average number of common shares plus the incremental effect of dilutive potential common shares outstanding during the period. In periods when losses are reported, the weighted average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

The components of basic and diluted earnings per share are as follows:

 

 

Year Ended December 31,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

 

2020

 

Numerator:

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(148,613

)

 

$

6,460

 

 

$

(23,118

)

Denominator:

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

245,148

 

 

 

118,571

 

 

 

57,865

 

Dilutive effect of stock options (1)

 

 

 

 

 

24,644

 

 

 

 

Dilutive effect of restricted stock units (1)

 

 

 

 

 

5

 

 

 

 

Dilutive effect of preferred stock (1)

 

 

 

 

 

 

 

 

 

Dilutive effect of warrants (1)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding, diluted

 

 

245,148

 

 

 

143,220

 

 

 

57,865

 

Net (loss) income per share, basic

 

$

(0.61

)

 

$

0.05

 

 

$

(0.40

)

Net (loss) income per share, diluted

 

$

(0.61

)

 

$

0.05

 

 

$

(0.40

)

Anti-dilutive securities excluded from diluted (loss) income per share:

 

 

 

 

 

 

 

 

 

Anti-dilutive stock options (1)

 

 

5,520

 

 

 

 

 

 

27,591

 

Anti-dilutive restricted stock units (1)

 

 

1,748

 

 

 

 

 

 

 

Anti-dilutive performance-based restricted stock units

 

 

2,047

 

 

 

 

 

 

 

Anti-dilutive warrants (1)

 

 

21,783

 

 

 

 

 

 

1,887

 

Anti-dilutive preferred stock (1)

 

 

 

 

 

 

 

 

138,612

 

(1) Due to the net loss during each of the years ended December 31, 2022 and 2020, no dilutive securities were included in the calculation of diluted loss per share because they would have been anti-dilutive.

Note 14. Income Taxes

The Company is subject to federal and state income taxes in the United States.

(Loss) income before income taxes was $(148.3) million, $6.6 million and $(23.0) million during the years ended December 31, 2022, 2021 and 2020, respectively.

Income tax expense consisted of the following for the respective periods:

 

 

Years Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

 

2020

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

 

 

$

 

 

$

 

State

 

 

359

 

 

 

170

 

 

 

163

 

Total current

 

 

359

 

 

 

170

 

 

 

163

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

 

 

 

 

 

 

 

State

 

 

 

 

 

 

 

 

 

Total deferred

 

 

 

 

 

 

 

 

 

Income tax expense

 

$

359

 

 

$

170

 

 

$

163

 

Offerpad Solutions Inc. | 2022 Form 10-K | 83


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

The provision for income taxes differs from the tax computed using the statutory U.S. federal income tax rate as a result of the following items for the respective periods:

 

 

Years Ended December 31,

 

(In thousands, except percentages)

 

2022

 

 

2021

 

 

2020

 

(Benefit) provision at federal statutory income tax rate

 

$

(31,133

)

 

 

21.0

%

 

$

1,392

 

 

 

21.0

%

 

$

(4,821

)

 

 

21.0

%

State income taxes

 

 

(7,636

)

 

 

5.2

%

 

 

360

 

 

 

5.4

%

 

 

(446

)

 

 

1.9

%

Change in fair value of warrant liabilities

 

 

(4,940

)

 

 

3.3

%

 

 

(517

)

 

 

(7.8

)%

 

 

 

 

 

0.0

%

Return-to-provision

 

 

(2,277

)

 

 

1.5

%

 

 

221

 

 

 

3.3

%

 

 

218

 

 

 

(0.9

)%

Transaction costs

 

 

(1,874

)

 

 

1.3

%

 

 

(1,226

)

 

 

(18.5

)%

 

 

 

 

 

0.0

%

Stock-based compensation

 

 

(1,091

)

 

 

0.7

%

 

 

647

 

 

 

9.8

%

 

 

286

 

 

 

(1.2

)%

Valuation allowance

 

 

48,690

 

 

 

(32.8

)%

 

 

(675

)

 

 

(10.2

)%

 

 

4,999

 

 

 

(21.8

)%

Other

 

 

620

 

 

 

(0.4

)%

 

 

(32

)

 

 

(0.4

)%

 

 

(73

)

 

 

0.3

%

Effective income tax rate

 

$

359

 

 

 

(0.2

)%

 

$

170

 

 

 

2.6

%

 

$

163

 

 

 

(0.7

)%

Deferred tax assets and liabilities consist of the following as of December 31:

($ in thousands)

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

Federal net operating loss carryforwards

 

$

50,178

 

 

$

26,721

 

State net operating loss carryforwards

 

 

9,847

 

 

 

4,703

 

Inventory

 

 

14,771

 

 

 

341

 

Research and development expenditures

 

 

3,190

 

 

 

 

Stock-based compensation

 

 

1,852

 

 

 

 

Transaction costs

 

 

1,707

 

 

 

 

Operating lease liabilities

 

 

1,507

 

 

 

1,284

 

Other

 

 

2,117

 

 

 

2,421

 

Gross deferred tax assets

 

 

85,169

 

 

 

35,470

 

Valuation allowance

 

 

(82,026

)

 

 

(33,336

)

Deferred tax assets, net of valuation allowance

 

 

3,143

 

 

 

2,134

 

Deferred tax liabilities:

 

 

 

 

 

 

Operating lease right-of-use assets

 

 

(1,385

)

 

 

(1,187

)

Property and equipment

 

 

(739

)

 

 

(874

)

Other

 

 

(1,019

)

 

 

(73

)

Gross deferred tax liabilities

 

 

(3,143

)

 

 

(2,134

)

Net deferred income taxes

 

$

 

 

$

 

As of December 31, 2022, the Company had federal net operating loss carryforwards of $231.4 million to offset future taxable income, of which $26.0 million expires in 2036 and 2037 if not utilized, with the remaining $205.4 million having no expiration. The Company also has U.S. state net operating loss carryforwards of $195.1 million, of which $121.7 million expires at various dates ranging from 2032 through 2042 if not utilized, with the remaining $73.4 million having no expiration.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. As a result of historical cumulative losses, the Company has determined that, based on all available evidence, there was substantial uncertainty as to whether it will recover recorded net deferred taxes in future periods. Therefore, the Company recorded a full valuation allowance equal to the amount of the net deferred tax assets as of December 31, 2022 and 2021. The valuation allowance increased by $48.7 million during the year ended December 31, 2022, decreased by $0.7 million during the year ended December 31, 2021 and increased $5.0 million during the year ended December 31, 2020.

The Internal Revenue Code contains provisions that limit the utilization of net operating loss carryforwards and tax credit carryforwards if there has been an ownership change. Such ownership change, as described in Section 382 of the Internal Revenue Code, may limit the Company’s ability to utilize its net operating loss carryforwards and tax credit carryforwards on a yearly basis. To the extent that any single-year limitation is not utilized to the full amount of the limitation, such unused amounts are carried over to subsequent years until the earlier of utilization or the expiration of the relevant carryforward

Offerpad Solutions Inc. | 2022 Form 10-K | 84


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

period. The Company determined that an ownership change occurred on February 10, 2017. An analysis was performed and while utilization of net operating losses would be limited in years prior to December 31, 2020, subsequent to that date, there is no limitation on the Company’s ability to utilize its net operating losses. As such, the ownership change has no impact to the carrying value of the Company’s net operating loss carryforwards or ability to use them in future years.

Uncertain Tax Positions

During the years ended December 31, 2022, 2021 and 2020, the Company had no uncertain tax positions.

Income Tax Audits

The Company files in U.S. federal and various state income tax jurisdictions. The Company is subject to U.S. federal and state income tax examinations by authorities for all tax years beginning in 2017 due to the accumulated net operating losses that are carried forward.

Note 15. Related-Party Transactions

LL Credit Facilities

As of December 31, 2022, we have one senior secured credit facility with a related party and two mezzanine secured credit facilities with a related party. The following summarizes certain details related to these facilities as of December 31:

 

 

2022

 

 

2021

 

($ in thousands)

 

Borrowing
Capacity

 

 

Outstanding
Amount

 

 

Borrowing
Capacity

 

 

Outstanding
Amount

 

Senior secured credit facility with a related party

 

$

75,000

 

 

$

17,398

 

 

$

85,000

 

 

$

81,926

 

Mezzanine secured credit facilities with a related party

 

$

150,000

 

 

$

42,778

 

 

$

79,000

 

 

$

82,509

 

Since October 2016, we have been party to a loan and security agreement (the “LL Funds Loan Agreement”), with LL Private Lending Fund, L.P. and LL Private Lending Fund II, L.P., both of which are affiliates of LL Capital Partners I, L.P., which holds more than 5% of our Class A common stock. Additionally, Roberto Sella, who is a member of our board of directors, is the managing partner of LL Funds. The LL Funds Loan Agreement is comprised of a senior secured credit facility and a mezzanine secured credit facility, under which we may borrow funds up to a maximum principal amount of $75.0 million and $52.5 million, respectively. The LL Funds Loan Agreement also provides us with the option to borrow above the fully committed borrowing capacity, subject to the lender’s discretion. Refer to Note 7. Credit Facilities and Other Debt, for further details about the facilities under the LL Funds Loan Agreement.

Since March 2020, we have also been party to a mezzanine loan and security agreement (the “LL Mezz Loan Agreement”), with LL Private Lending Fund II, L.P., which is an affiliate of LL Capital Partners I, L.P. Under the LL Mezz Loan Agreement, we may borrow funds up to a maximum principal amount of $97.5 million. Refer to Note 7. Credit Facilities and Other Debt, for further details about the mezzanine facility under the LL Mezz Loan Agreement.

We paid interest for borrowings under the LL facilities of $9.4 million, $11.7 million and $8.2 million during the years ended December 31, 2022, 2021 and 2020, respectively.

Use of First American Financial Corporation’s Services

First American Financial Corporation (“First American”), which holds more than 5% of our Class A common stock, through its subsidiaries is a provider of title insurance and settlement services for real estate transactions and a provider of property data services. Additionally, Kenneth DeGiorgio, who is a member of the Company’s board of directors, is the chief executive officer of First American. We use First American’s services in the ordinary course of our home-buying and home-selling activities. We paid First American $18.1 million, $11.9 million and $7.1 million during the years ended December 31, 2022, 2021 and 2020, respectively, for its services, inclusive of the fees for property data services.

Private Placement

On January 31, 2023, the Company entered into a pre-funded warrants subscription agreement with the investors named therein (the “Investors”) pursuant to which the Company sold and issued to the Investors an aggregate of 160,742,959 pre-funded warrants to purchase shares of the Company’s Class A common stock. The Investors included Brian Bair, Roberto Sella, First American, and Kenneth DeGiorgio. Refer to Note 17. Subsequent Events, for further details.

Offerpad Solutions Inc. | 2022 Form 10-K | 85


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Warehouse Lending Facility with FirstFunding, Inc.

During July 2022, Offerpad Mortgage, LLC (“Offerpad Home Loans” or “OPHL”), a wholly owned subsidiary of the Company, entered into a warehouse lending facility with FirstFunding, Inc. (“FirstFunding”), a wholly owned subsidiary of First American, which holds more than 5% of our Class A common stock. Offerpad Home Loans uses the warehouse lending facility to fund mortgage loans it originates and then sells to third-party mortgage servicers. The committed amount under the facility is $15.0 million and OPHL pays certain customary and ordinary course fees to FirstFunding under the facility, including a funding fee per loan and interest. There were no amounts outstanding under the facility as of December 31, 2022 and amounts paid under the facility were immaterial during the year ended December 31, 2022.

Compensation of Immediate Family Members of Brian Bair

Offerpad employs two of Brian Bair’s brothers, along with Mr. Bair’s sister-in-law. The following details the total compensation paid to Mr. Bair’s brothers and Mr. Bair’s sister-in-law, which includes both base salary and annual performance-based cash incentives during the respective periods:

 

 

Year Ended December 31,

 

($ in thousands)

 

2022

 

 

2021

 

 

2020

 

Mr. Bair’s brother 1

 

$

631

 

 

$

572

 

 

$

260

 

Mr. Bair’s brother 2

 

 

594

 

 

 

469

 

 

 

313

 

Mr. Bair’s sister-in-law

 

 

123

 

 

 

141

 

 

 

120

 

 

 

$

1,348

 

 

$

1,182

 

 

$

693

 

During the year ended December 31, 2022, Mr. Bair’s brothers and Mr. Bair’s sister-in-law received grants of equity awards under the Offerpad Solutions Inc. 2021 Incentive Award Plan, which included awards of restricted stock units (“RSUs”), performance-based RSUs (“PSUs”) and/or stock options, as follows:

 

 

Number of
RSUs

 

 

Number of
Target PSUs

 

 

Number of
Stock Options

 

Mr. Bair’s brother 1

 

 

84,367

 

 

 

126,551

 

 

 

 

Mr. Bair’s brother 2

 

 

79,404

 

 

 

119,107

 

 

 

 

Mr. Bair’s sister-in-law

 

 

3,000

 

 

 

 

 

 

6,000

 

 

 

 

166,771

 

 

 

245,658

 

 

 

6,000

 

In June 2022, Mr. Bair’s brothers each entered into employment agreements referwith the Company with customary severance and other terms provided to similarly situated executives.

During February 2023, Mr. Bair’s brothers and Mr. Bair’s sister-in-law each received annual performance-based cash incentive payments, which totaled $0.5 million.

Note 16. Commitments and Contingencies

Homes Purchase Commitments

As of December 31, 2022, the Company was under contract to purchase 98 homes for an aggregate purchase price of $24.9 million.

Offerpad Solutions Inc. | 2022 Form 10-K | 86


OFFERPAD SOLUTIONS INC.

Notes to Consolidated Financial Statements

Other Purchase Obligations

The Company’s other purchase obligations principally include commitments relating to insurance, marketing, information technology and administration services. As of December 31, 2022, the Company had other purchase obligations of $6.5 million, with $5.8 million payable within 12 months.

Lease Commitments

The Company has entered into operating lease agreements for its corporate headquarters in Chandler, Arizona and field office facilities in most of the metropolitan markets in which the Company operates in the United States. Refer to Note 5. Leases, for further details.

Note 17. Subsequent Events

The Company has determined that there have been no events that have occurred that would require recognition in the consolidated financial statements or additional disclosure herein, except as described below and elsewhere in the notes to the consolidated financial statements.

Private Placement

On January 31, 2023, the Company entered into a pre-funded warrants subscription agreement (the “Subscription Agreement”) with the investors named therein (the “Investors”) pursuant to which the Company sold and issued to the Investors an aggregate of 160,742,959 pre-funded warrants (the “Pre-funded Warrants”) to purchase shares (the “Pre-funded Warrant Shares”) of the Company’s Class A common stock. Each Pre-funded Warrant was sold at a price of $0.5599 per Pre-funded Warrant and has an initial exercise price of $0.0001 per Pre-funded Warrant, subject to certain customary anti-dilution adjustment provisions. The exercise price for the Pre-funded Warrants can be paid in cash or on a cashless basis, and the Pre-funded Warrants have no expiration date. The aggregate gross proceeds to the Company was approximately $90.0 million. The Investors included Brian Bair, Roberto Sella, First American, and Kenneth DeGiorgio.

Class B Common Stock Conversion

In January 2023, Brian Bair notified the Company’s Board of Directors that he will convert all shares of Class B common stock beneficially owned by him to shares of Class A common stock immediately following the conclusion of the Company’s 2023 annual meeting of stockholders.

Offerpad Solutions Inc. | 2022 Form 10-K | 87


Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

The information required by this Item 9 was previously reported in our Current Report on Form 8-K/A that was filed with the Securities and Exchange Commission on September 7, 2021.

Item 9A. Controls and Procedures.

Limitations on Effectiveness of Disclosure Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of the disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated, as of the end of the period covered by this Annual Report on Form 10-K, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our principal executive officer and our principal financial officer have concluded that, as of December 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2022.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears at the end of Part II, Item 9A of this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as identified in connection with the evaluation required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that occurred during the three months ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Offerpad Solutions Inc. | 2022 Form 10-K | 88


Report of Independent Registered Public Accounting Firm

To the stockholders and the Board of Directors of Offerpad Solutions Inc.

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Offerpad Solutions Inc. and subsidiaries (the “Company”) as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2022, of the Company and our report dated February 28, 2023, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ DELOITTE & TOUCHE LLP

Tempe, Arizona

February 28, 2023

Offerpad Solutions Inc. | 2022 Form 10-K | 89


Item 9B. Other Information.

We are reporting the following information in lieu of reporting on a Current Report on Form 8-K announcingunder Item 1.01 Entry into a Material Definitive Agreement.

On February 27, 2023, Offerpad SPE Borrower A, LLC, and Offerpad Holdings LLC (collectively, the Merger“Offerpad Parties”), each a wholly owned subsidiary of the Company, and JPMorgan Chase Bank, N.A., AG Mortgage Value Partners Onshore Master Fund, L.P., AG Asset Based Credit Master Fund (B), L.P., AG TCDRS, L.P., AG Centre Street Partnership, L.P. (each, a “Lender”) entered into Amendment No. 4 to Loan and Security Agreement filed on March 18, 2021.

On Apriland Reaffirmation of Guarantees, dated as of February 27, 2023 (“Amendment No. 4”), which amends that certain Loan and Security Agreement, dated as of September 21, 2021, by and among the Offerpad Parties and the Lenders, as amended by Amendment No. 1, dated as of December 16, 2021, as further amended by Amendment No. 2, dated as of September 21, 2022, as further amended by Amendment No. 3, dated as of December 21, 2022, and as further amended by Amendment No. 4, the “Loan Agreement.”

Amendment No. 4, among other things, reduces the borrowing capacity under the Loan Agreement, including reducing the senior facility from $400.0 million to $200.0 million, $100.0 million of which is committed, and reducing the mezzanine facility from $90.0 million to $45.0 million, $22.5 million of which is committed.

The foregoing does not purport to be a stockholder complaint was filed in the Supreme Courtcomplete description of the Stateterms of New York against usAmendment No. 4 and such description is qualified in its entirety by reference to Amendment No. 4, a copy of which is filed as Exhibit 10.30 hereto and is incorporated herein by reference.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

Offerpad Solutions Inc. | 2022 Form 10-K | 90


PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information about our Directors

The following details certain information about our board of directors as of February 28, 2023:

Name

Age

Position

Brian Bair

46

Chief Executive Officer and Chairman of the Board

Katie Curnutte

43

Director

Kenneth DeGiorgio

51

Director

Alexander Klabin

46

Director

Ryan O’Hara

54

Director

Sheryl Palmer

61

Director

Roberto Sella

57

Director

Brian Bair has served as Old Offerpad’s Chief Executive Officer since he founded Offerpad in July 2015 with a mission to provide the individual membersbest way to buy and sell a home, including as the Chief Executive Officer and Chairman of our Board captioned Muir v.since September 2021. Mr. Bair has had a strong influence in the real estate industry over the past 15 years, having pioneered several successful real estate service models that aim to give sellers and buyers more certainty and control. Prior to founding Offerpad, Mr. Bair served as the founder and president at Bair Group Real Estate from April 2008 to June 2015. Additionally, Mr. Bair co-founded Lexington Financial in March 2011, and served as its managing member from March 2011 to March 2012. He also co-founded Bridgeport Financial Services in May 2008, a company that specialized in acquiring distressed homes, and served as its managing member from May 2008 to May 2011. Mr. Bair has also consulted for national companies on how to acquire, renovate and sell homes. Mr. Bair has also served as an advisory member for the Freddie Mac Housing of Tomorrow Council since January 2020.

We believe that Mr. Bair is qualified to serve as Chairman of our board of directors due to his extensive experience in the real estate industry and his history as Offerpad’s founder.

Katie Curnutte has served on our board of directors since September 2021. Ms. Curnutte is a founding partner at Kingston Marketing Group (“KMG”), a start-up focused, global marketing and communications firm founded in September 2019. At KMG, she runs communications strategy for notable companies. Before KMG, Ms. Curnutte was senior vice president of communications and public affairs at Zillow from July 2008 to August 2019. Ms. Curnutte also served on the board of directors of Supernova Partners Acquisition Company,Co II, Ltd. from March 2021 until March 2022. Ms. Curnutte graduated from the University of Illinois Urbana-Champaign with a B.S. in Journalism.

We believe Ms. Curnutte is qualified to serve on our board of directors due to her experience in communications, public affairs and scaling technology companies.

Kenneth DeGiorgio served as a member of the board of directors for Old OfferPad from February 2019 until September 2021 and on our board of directors since September 2021. Mr. DeGiorgio also serves as chief executive officer of First American Financial Corporation (“FAF”), a public company engaged in title insurance and settlement services, a position he has held since February 2022. Prior to his appointment as CEO, Mr. DeGiorgio served as FAF’s president from 2021 to 2022 and its executive vice president, overseeing FAF’s international division, trust company and various corporate functions from 2010 to 2021.

We believe Mr. DeGiorgio is qualified to serve on our board of directors due to his extensive real estate and business experience and knowledge of Offerpad’s business and operations.

Alexander M. Klabin served as a member of Supernova’s board of directors from its inception until the closing of the Business Combination in September 2021, and on our board of directors since September 2021. Mr. Klabin is Chairman and CEO of Ancient, an investment holding company based in New York. He serves as executive chairman of Sotheby’s Financial Services, a leading art-based lender, and Chairman of Solairus Aviation, the largest private aircraft management company in the United States. Prior to forming Ancient in 2022, Mr. Klabin co-founded Senator Investment Group in 2008 and served as managing partner and co-chief investment officer. Mr. Klabin has served as a member of the board of directors of Supernova Partners Acquisition Co III, Ltd. since its inception in March 2021. Mr. Klabin also served as a member of the board of directors of Supernova Partners Acquisition Co II, Ltd. from March 2021 until March 2022. He is a member of the board of directors of several private companies. Additionally, Mr. Klabin serves as a Trustee of the New York Philharmonic, The Allen-Stevenson School and is a member of the Leadership Council of The Robin Hood Foundation. Mr. Klabin received a B.A. degree in English Literature from Princeton University.

Offerpad Solutions Inc. | 2022 Form 10-K | 91


We believe Mr. Klabin is well qualified to serve on our board of directors due to his significant investment and corporate finance experience.

Ryan O’Hara has served on our board of directors since September 2021. Mr. O’Hara has served as Chief Executive Officer of Home Buyers Warranty Group, a leading home warranty company, since July 2022, and as an advisor to Apollo Global Management, a global alternative investment management firm, in the technology and media sectors since January 2020. From June 2019 to December 2019, Mr. O’Hara served as the chief executive officer of Shutterfly, Inc., et al. (the “Muir Complaint”a public image sharing company, where he also served as a member of the board of directors from June 2019 to October 2019. Prior to Shutterfly, from January 2015 to June 2019, Mr. O’Hara served as the chief executive officer of Move Inc., a real estate listing company, which operates real estate websites including Realtor.com. Mr. O’Hara has also served as a member on the board of directors of REA Group Limited from June 2017 to April 2019. Mr. O’Hara currently serves on two public company boards of directors: Thryv Holdings, Inc., a company specializing in small business management software, and TKB Critical Technologies 1, a special purpose acquisition company. Mr. O’Hara also currently serves on the advisory council for the Stanford University Center on Longevity. Mr. O’Hara holds a B.A. in Economics from Stanford University, an M.B.A. from Harvard Business School and the Director Certificate from Harvard Business School.

We believe Mr. O’Hara is qualified to serve on our board of directors because of his significant knowledge of the technology sector and his experience serving on the board of directors of both public and private companies.

Sheryl Palmer has served on our board of directors since September 2021. Ms. Palmer has served as the president, chief executive officer and a member of the board of directors of Taylor Morrison Home Corporation (“Taylor Morrison”). The complaint asserts, a public national homebuilder and developer, since August 2007. She has also served as Taylor Morrison’s chairman of the board of directors since May 2017. Ms. Palmer brings over 30 years of cross-functional building experience to her position, including leadership in land acquisition, sales and marketing, development and operations management. Ms. Palmer previously served as a member of the board of directors and the audit and compensation committees of Interface, Inc., a leading publicly traded global manufacturer of modular carpet, and as a member of the board of directors and executive committee of HomeAid America, a national non-profit that works with the individual memberslocal building industry to build and renovate multi-unit shelters for homeless families. She currently serves as chairman of the board of directors for Building Talent Foundation, and as a member of the executive committee of the Joint Center for Housing Studies at Harvard University.

We believe Ms. Palmer’s over 30 years of real estate industry experience and her role as a seasoned public company director make her a valuable member of our Board breached their fiduciary duties, and that we aided and abetted that breachboard of fiduciary duties, by allegedly failing to disclose material information and disclosing materially misleading information in the Proxy Statement, including allegations relating to the backgrounddirectors.

Roberto Sella served as a member of the Merger, financial projections,board of directors of Old OfferPad from February 2019 until September 2021, and analyseson our board of financial advisors. We have alsodirectors since September 2021. Mr. Sella is the founder of LL Funds, an alternative asset manager and private equity fund, and has served as LL Funds’ managing partner since inception in March 2009. Mr. Sella currently serves on the board of directors of several private companies. Mr. Sella received certain demandshis B.A. in Economics and Mathematics from stockholders making similar allegations. the University of Wisconsin and M.B.A. from The Wharton School, University of Pennsylvania.

We believe that the estimated loss associated with the Muir ComplaintMr. Sella is not reasonably probable or estimable.


qualified to serve on our board of directors because of his extensive investment experience, financial expertise and knowledge of Offerpad’s business and operations.

Management has evaluated subsequent events to determine if events or transactions occurring through the date the financial statements were issued required potential adjustment to or disclosure in the financial statements and has concluded that all such events that would require recognition or disclosure have been recognized or disclosed. Information about our Executive Officers

The following details certain information about our executive officers as of February 28, 2023:


EXHIBIT INDEX

Exhibit No.Name

DescriptionAge

Position

2.1Brian Bair

Agreement46

Chief Executive Officer and Plan of Merger, dated as of March 17, 2021, by and among Supernova Partners Acquisition Company, Inc., Orchids Merger Sub, Inc., Orchids Merger Sub, LLC, and OfferPad, Inc. (incorporated by reference to exhibit 2.1Chairman of the Current Report on Form 8-K filed on March 18, 2021)Board

3.1Michael Burnett

Second Amended and Restated Certificate of Incorporation, dated October 20, 2020. (1)55

Chief Financial Officer

3.2Benjamin Aronovitch

Bylaws. (2)44

Chief Legal Officer

The biography for Mr. Bair appears above under the heading “Information About Our Directors.”

Michael Burnett has served as Offerpad’s Chief Financial Officer since October 2019. Previously, Mr. Burnett served as Executive Vice President and Chief Financial Officer at AV Homes, Inc., a national homebuilder and developer, from October 2013 to October 2018. Prior to this, Mr. Burnett served as Group Vice President, Finance, Treasury and Investor Relations for JDA Software Group, Inc., a leading global software provider offering supply chain management solutions, from November 2009 to October 2013. Mr. Burnett holds a B.S. in Accounting from Miami University.

Benjamin Aronovitch has served as Offerpad’s Chief Legal Officer since October 2020. Previously, Mr. Aronovitch was Vice President and Deputy General Counsel at Taylor Morrison from September 2013 to October 2020. Prior to Taylor Morrison, Mr. Aronovitch was a corporate attorney at Paul, Weiss, Rifkind, Wharton & Garrison LLP from May 2010 to September 2013 and Cravath, Swaine & Moore LLP from October 2006 to May 2010. Mr. Aronovitch holds a B.A. in Political Science and

Offerpad Solutions Inc. | 2022 Form 10-K | 92


Economics from McGill University and law degrees from McGill and Oxford University. He is a member of the New York Bar and is admitted to practice in Arizona.

Code of Business Conduct and Ethics

We have a Code of Business Conduct and Ethics that applies to all of our executive officers, directors and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. A copy of our Code of Business Conduct and Ethics is available on our website, investor.offerpad.com. We intend to make any legally required disclosures regarding amendments to, or waivers of, provisions of our Code of Business Conduct and Ethics on our website rather than by filing a Current Report on Form 8-K.

The remaining information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

The information required by this item will be included in the 2023 Proxy Statement and is incorporated herein by reference.

Offerpad Solutions Inc. | 2022 Form 10-K | 93


PART IV

Item 15. Exhibits and Financial Statement Schedules.

The following documents are filed as part of this Annual Report on Form 10-K:

(a)(1) The following financial statements are included in Part II, Item 8 of this Annual Report on Form 10-K:

Index to Financial Statements

Page

4.1Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)

Specimen Unit Certificate. (3)59

4.2Consolidated Balance Sheets

Specimen Class A Common Stock Certificate. (3)61

4.3Consolidated Statements of Operations

Specimen Warrant Certificate. (3)62

4.4Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit)

Warrant Agreement, dated October 20, 2020, between the Company and Continental Stock Transfer & Trust Company, as warrant agent. (1)63

4.5Consolidated Statements of Cash Flows

Description of registered securities.*64

10.1Notes to Consolidated Financial Statements

Promissory Note issued in favor of Supernova Partners LLC, dated September 9, 2020. (2)

10.2

Letter Agreement, dated October 20, 2020, among the Company, its officers and directors and the Sponsor. (1)

10.3

Investment Management Trust Agreement, dated October 20, 2020, between the Company and Continental Stock Transfer & Trust Company, as trustee. (1)

10.4

Registration Rights Agreement, dated October 20, 2020, among the Company and certain security holders named therein. (1)

10.5

Indemnity Agreement, dated October 20, 2020, between the Company and Spencer Rascoff. (1)

10.6

Indemnity Agreement, dated October 20, 2020, between the Company and Robert Reid. (1)

10.7

Indemnity Agreement, dated October 20, 2020, between the Company and Michael Clifton. (1)

10.8

Indemnity Agreement, dated October 20, 2020, between the Company and Alex Klabin. (1)

10.9

Indemnity Agreement, dated October 20, 2020, between the Company and Ken Fox. (1)

10.10

Indemnity Agreement, dated October 20, 2020, between the Company and Jim Lanzone. (1)

10.11

Indemnity Agreement, dated October 20, 2020, between the Company and Rajeev Singh. (1)

10.12

Securities Subscription Agreement, dated September 9, 2020, between Supernova Partners Acquisition Company, Inc. and Supernova Partners LLC. (2)

10.13

Private Placement Warrants Purchase Agreement, dated October 20, 2020, between the Company and the Sponsor. (1)

10.14

Form of Forward Purchase Agreement, dated September 25, 2020, among the Company and each forward purchaser.(3)

31.1

Certification of the Principal Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a).*

31.2

Certification of the Principal Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a).*

32.1

Certification of the Principal Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**

32.2

Certification of the Principal Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**

101.INS

XBRL Instance Document*

101.SCH

XBRL Taxonomy Extension Schema*

101.CAL

XBRL Taxonomy Calculation Linkbase*

101.LAB

XBRL Taxonomy Label Linkbase*

101.PRE

XBRL Taxonomy Extension Presentation*

101.DEF

XBRL Definition Linkbase Document*65

*

Filed herewith

**

Furnished herewith

(1)

Incorporated by reference to the Company’s Form 8-K, filed with the SEC on October 23, 2020.

(2)

Incorporated by reference to the Company’s Form S-1, filed with the SEC on September 25, 2020.

(3)

Incorporated by reference to the Company’s Form S-1/A, filed with the SEC on October 13, 2020.

(a)(2) Financial statement schedules have been omitted since they either are not required, not applicable, or the information is otherwise included in the consolidated financial statements or the related footnotes.


SIGNATURES(a)(3) The following is a list of exhibits filed as part of this Annual Report on Form 10-K

Offerpad Solutions Inc. | 2022 Form 10-K | 94


Exhibit Index

 

 

 

 

Incorporated by Reference

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

 

Filing

Date

2.1+

 

Agreement and Plan of Merger, dated as of March 17, 2021, by and among the Registrant, Orchids Merger Sub, Inc., Orchids Merger Sub, LLC, and OfferPad, Inc.

 

 10-Q

 

 001-39641

 

 2.1

 

 11/10/21

3.1

 

Third Restated Certificate of Incorporation of Offerpad Solutions Inc.

 

8-K/A

 

001-39641

 

3.1

 

9/7/21

3.2

 

Bylaws of Offerpad Solutions Inc.

 

S-4

 

333-255079

 

3.4

 

8/9/21

4.1

 

Warrant Agreement, dated as of October 20, 2020, between the Registrant and Continental Stock Transfer & Trust Company, as warrant agent

 

S-4

 

333-255079

 

4.1

 

8/9/21

4.2

 

Specimen Class A Common Stock Certificate of Offerpad Solutions Inc.

 

S-4

 

333-255079

 

4.2

 

8/9/21

4.3

 

Specimen Warrant Certificate

 

S-4

 

333-255079

 

4.4

 

8/9/21

4.4

 

Form of Pre-Funded Warrant

 

8-K

 

001-39641

 

4.1

 

2/1/23

4.5

 

Description of Securities

 

10-K

 

001-39641

 

4.4

 

3/7/22

10.1#

 

Form of Indemnity Agreement

 

S-4

 

333-255079

 

10.24

 

8/9/21

10.2

 

Amended and Restated Registration Rights Agreement, dated September 1, 2021

 

8-K/A

 

001-39641

 

10.7

 

9/7/21

10.3#

 

Offerpad Solutions 2021 Incentive Award Plan

 

8-K/A

 

001-39641

 

10.10

 

9/7/21

10.4#

 

Offerpad Solutions 2021 Employee Stock Purchase Plan

 

8-K/A

 

001-39641

 

10.11

 

9/7/21

10.5#

 

Amended and Restated OfferPad, Inc. 2016 Stock Option and Grant Plan

 

10-K

 

001-39641

 

10.5

 

3/7/22

10.6#

 

Form of Incentive Stock Option Agreement under the OfferPad, Inc. 2016 Stock Option and Grant Plan

 

S-4

 

333-255079

 

10.23(a)

 

8/9/21

10.7#

 

Offerpad Solutions Inc. Non-Employee Director Compensation Program

 

8-K/A

 

001-39641

 

10.22

 

9/7/21

10.8#

 

Offerpad Solutions Inc. Director Deferred Compensation Plan

 

10-K

 

001-39641

 

10.8

 

3/7/22

10.9#

 

Restricted Stock Unit Agreement, dated March 1, 2022, by and between Brian Bair and Offerpad Solutions Inc.

 

8-K

 

001-39641

 

10.2

 

3/4/22

 

10.10#

 

Performance-Based Restricted Stock Unit Agreement, dated March 1, 2022, by and between Brian Bair and Offerpad Solutions Inc.

 

8-K

 

001-39641

 

10.3

 

3/4/22

 

10.11#

 

Form of Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

8-K

 

001-39641

 

10.4

 

3/4/22

 

10.12#

 

Form of Performance-Based Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

8-K

 

001-39641

 

10.5

 

3/4/22

 

10.13#

 

Form of Director Deferred Cash Fee Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

10-Q

 

001-39641

 

10.6

 

5/4/22

10.14#

 

Form of Director Deferred Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

10-Q

 

001-39641

 

10.7

 

5/4/22

10.15#

 

Form of Option Award Agreement (under 2021 Incentive Award Plan)

 

10-Q

 

001-39641

 

10.8

 

5/4/22

10.16#

 

Employment Agreement, dated March 1, 2022, by and between Brian Bair and Offerpad Solutions Inc.

 

8-K

 

001-39641

 

10.1

 

3/4/22

10.17#

 

Amended and Restated Employment Agreement, dated as of June 6, 2022, by and between Offerpad Solutions Inc. and Michael Burnett

 

8-K

 

001-39641

 

10.2

 

6/7/22

10.18#

 

Amended and Restated Employment Agreement, dated as of June 6, 2022, by and between Offerpad Solutions Inc. and Benjamin Aronovitch

 

8-K

 

001-39641

 

10.3

 

6/7/22

10.19+

 

Seventh Amended and Restated Loan and Security Agreement, dated as of December 16, 2022, by and among Offerpad (SVPBORROWER1), LLC, LL Private Lending Fund, L.P., LL Private Lending Fund II, L.P., and LL Funds, LLC

 

8-K

 

001-39641

 

10.1

 

12/22/22

10.20+

 

Second Amended and Restated Mezzanine Loan and Security Agreement, dated as of December 16, 2021, by and among OP SPE Borrower Parent, LLC, OP SPE PHX1, LLC, OP SPE TPA1, LLC and LL Private Lending Fund II, L.P.

 

8-K

 

001-39641

 

10.3

 

12/20/21

10.21

 

Amendment No. 1 to Second Amended and Restated Mezzanine Loan and Security Agreement, dated as of July 7, 2022, by and among OP SPE Borrower Parent, LLC, OP SPE PHX1, LLC, OP SPE TPA1, LLC and LL Private Lending Fund II, L.P.

 

8-K

 

001-39641

 

10.1

 

7/8/22

Offerpad Solutions Inc. | 2022 Form 10-K | 95


10.22+

 

Third Amended and Restated Master Loan and Security Agreement, dated as of June 7, 2022, by and among Citibank, N.A., OP SPE Borrower Parent, LLC, OP SPE PHX1, LLC, OP SPE TPA1, LLC and Wells Fargo Bank, N.A.

 

8-K

 

001-39641

 

10.1

 

6/7/22

10.23*

 

Amendment No. 1 dated December 8, 2022 to the Third Amended and Restated Master Loan and Security Agreement dated as of June 7, 2022, by and among Citibank, N.A., OP SPE Borrower Parent, LLC, OP SPE PHX1, LLC, OP SPE TPA1, LLC and Wells Fargo Bank, N.A.

 

 

 

 

 

 

 

 

10.24+

 

Credit Agreement, dated as of June 30, 2021, by and between OfferPad, Inc. and First American Title Insurance Company

 

S-4

 

333-255079

 

10.32

 

8/9/21

10.25

 

Amendment No. 1, dated August 12, 2021, to the Credit Agreement dated as of June 30, 2021, by and between OfferPad, Inc. and First American Title Insurance Company.

 

8-K/A

 

001-39641

 

10.24(a)

 

9/7/21

10.26+

 

Loan and Security Agreement, dated September 10, 2021, among JPMorgan Chase Bank, N.A., as Administrative Agent, the lenders party thereto, Offerpad SPE Borrower A, LLC, as initial borrower, and Wells Fargo Bank, National Association, as Paying Agent and Calculation Agent

 

8-K

 

001-39641

 

10.1

 

9/15/21

10.27+

 

Amendment No. 1 dated December 16, 2021, to the Loan and Security Agreement, dated September 10, 2021, among JPMorgan Chase Bank, N.A., as Administrative Agent, the lenders party thereto, Offerpad SPE Borrower A, LLC, as initial borrower, and Wells Fargo Bank, National Association, as Paying Agent and Calculation Agent

 

8-K

 

001-39641

 

10.1

 

12/20/21

10.28+

 

Amendment No. 2 dated September 21, 2022, to the Loan and Security Agreement, dated September 10, 2021, among JPMorgan Chase Bank, N.A., as Administrative Agent, the lenders party thereto, Offerpad SPE Borrower A, LLC, as initial borrower, and Wells Fargo Bank, National Association, as Paying Agent and Calculation Agent

 

10-Q

 

001-39641

 

10.2

 

11/2/22

10.29*+

 

Amendment No. 3 dated December 21, 2022, to the Loan and Security Agreement, dated September 10, 2021, among JPMorgan Chase Bank, N.A., as Administrative Agent, the lenders party thereto, Offerpad SPE Borrower A, LLC, as initial borrower, and Wells Fargo Bank, National Association, as Paying Agent and Calculation Agent

 

 

 

 

 

 

 

 

10.30*+

 

Amendment No. 4 dated February 27, 2023, to the Loan and Security Agreement, dated September 10, 2021, among JPMorgan Chase Bank, N.A., as Administrative Agent, the lenders party thereto, Offerpad SPE Borrower A, LLC, as initial borrower, and Wells Fargo Bank, National Association, as Paying Agent and Calculation Agent

 

 

 

 

 

 

 

 

10.31

 

Pre-Funded Warrants Subscription Agreement, dated January 31, 2023, by and among Offerpad Solutions Inc. and the purchasers named therein

 

8-K

 

001-39641

 

10.1

 

2/1/23

21.1*

 

List of Subsidiaries

 

 

 

 

 

 

 

 

23.1*

 

Consent of Deloitte & Touche LLP

 

 

 

 

 

 

 

 

31.1*

 

Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)

 

 

 

 

 

 

 

 

31.2*

 

Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)

 

 

 

 

 

 

 

 

32.1**

 

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350

 

 

 

 

 

 

 

 

32.2**

 

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350

 

 

 

 

 

 

 

 

101.INS*

 

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

 

 

 

 

 

 

 

 

101.SCH*

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

101.CAL*

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

 

 

 

101.DEF*

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

 

101.LAB*

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

 

 

 

101.PRE*

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

104*

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

 

 

 

 

 

 

 

* Filed herewith.

** Furnished herewith.

# Indicates management contract or compensatory plan.

+ Certain exhibits and schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished to the SEC upon request.

Offerpad Solutions Inc. | 2022 Form 10-K | 96


Item 16. Form 10-K Summary.

None.

Offerpad Solutions Inc. | 2022 Form 10-K | 97


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrantregistrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 25, 2021

Supernova Partners Acquisition Company, Inc.OFFERPAD SOLUTIONS INC.

Date: February 28, 2023

By:

/s/ Robert D. ReidBrian Bair

Name:

Robert D. ReidBrian Bair

Title:

Chief Executive Officer and Director

Chairman of the Board

(Principal Executive Officer)

Date: February 28, 2023

By:

/s/ Michael Burnett

Michael Burnett

Chief Financial Officer

(Principal ExecutiveFinancial Officer and

Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Reportreport has been signed below by the following persons on behalf of the registrant and in the capacities and onin the dates indicated.

SignatureSIGNATURE

TitleTITLE

DateDATE

/s/ Spencer M. Rascoff

Spencer M. RascoffBrian Bair

Co-Chair

May 25, 2021

/s/ Alexander M. Klabin

Alexander M. Klabin

Co-Chair

May 25, 2021

/s/ Robert D. Reid

Robert D. Reid

Chief Executive Officer and Director

February 28, 2023

Brian Bair

Chairman of the Board

(Principal Executive Officer)

May 25, 2021

/s/ Michael S. Clifton

Michael S. CliftonBurnett

Chief Financial Officer

(Principal Financial and Accounting Officer)

May 25, 2021February 28, 2023

Michael Burnett

(Principal Financial Officer and Principal Accounting Officer)

/s/ Jim Lanzone

Director

May 25, 2021

Jim Lanzone/s/ Katie Curnutte

Director

February 28, 2023

Katie Curnutte

/s/ Kenneth DeGiorgio

Director

February 28, 2023

Kenneth DeGiorgio

/s/ Alexander Klabin

Director

February 28, 2023

Alexander Klabin

/s/ Ryan O’Hara

Director

February 28, 2023

Ryan O’Hara

/s/ Sheryl Palmer

Director

February 28, 2023

Sheryl Palmer

/s/ Roberto Sella

Director

February 28, 2023

Roberto Sella

Offerpad Solutions Inc. | 2022 Form 10-K | 98

76