UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 20212022

OR

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

For the transition period from ______ to ______

Supernova Partners Acquisition Company, Inc.Commission File Number: 001-39641

img221706120_0.jpg 

Offerpad Solutions Inc.

(Exact nameName of registrantRegistrant as specifiedSpecified in its charter)Charter)

Delaware

001-39641

85-2800538

(State or other jurisdiction

of incorporation)incorporation or organization)

(Commission

File Number)

(I.R.S. Employer

Identification No.)

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

85286

(Address of principal executive offices)

(Zip Code)

4301 50th Street NW

Suite 300, PMB 1044

Washington, D.C.

20016
(Address of Principal Executive Offices)(Zip Code)

(202) 918-7050

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

Not Applicable

(Former name or former address, if changed since last report)

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

Title of each class

Trading

Symbol(s)

Name of each exchange

on which registered

Units, each consisting of one share of

Class A common stock, $0.0001 par value and one-third of one warrant to purchase one Class A common stockper share

SPNV.U

OPAD

The New York Stock Exchange

Class A common stock, par value $0.0001 per shareSPNVThe New York Stock Exchange

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

SPNV WS

OPADWS

The New York Stock Exchange

Indicate by check mark whether the registrant (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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ☐ No

Indicate by check mark whether the registrant 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 registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 24, 2021, 40,250,000April 27, 2022, there were 230,434,419 shares of Offerpad’s Class A common stock par value $0.0001 per share, and 10,062,500outstanding and 14,816,236 shares of Offerpad’s Class B common stock par value $0.0001 per share, were issued and outstanding, respectively.outstanding.


 

OFFERPAD SOLUTIONS INC.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.FORM 10-Q

Form 10-QFOR THE QUARTER ENDED MARCH 31, 2022

For the Quarter Ended March 31, 2021TABLE OF CONTENTS

Table of Contents

Page

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)1

Page

Cautionary Note Regarding Forward-Looking Statements

3

PART I.

FINANCIAL INFORMATION

4

Item 1.

Financial Statements

4

Condensed Consolidated Balance Sheets as of March 31, 2021 (Unaudited) and December 31, 2020

1

4

Condensed Consolidated Statements of Operations

5

Unaudited Condensed Statement of Operations for the three months ended March 31, 2021

2
Unaudited Condensed StatementConsolidated Statements of Changes in Temporary Equity and Stockholders’ Equity for the three months ended March 31, 2021(Deficit)

3

6

Unaudited Condensed StatementConsolidated Statements of Cash Flows for the three months ended March 31, 2021

4

7

Notes to Condensed Consolidated Financial Statements

8

Notes to Unaudited Condensed Financial Statements5

Item 2.

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

20

26

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

38

Item 4.

Controls and Procedures

26

38

PART II. OTHER INFORMATION

PART II.

OTHER INFORMATION

39

Item 1.

Legal Proceedings

27

39

Item 1A.

Risk Factors

39

Item 1A.Risk Factors27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds from Registered Securities

27

39

Item 3.

Defaults Upon Senior Securities

39

Item 4.

Mine Safety Disclosures

39

Item 5.

Other Information

39

Item 6.

Exhibits

Exhibits

40

SIGNATURES

28

41


Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q includes statements that express Offerpad Solutions Inc.’s (the “Company,” “Offerpad,” “we,” “us,” or “our”) 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.” These forward-looking statements can generally be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “seeks,” “projects,” “intends,” “plans,” “may” or “should” or, in each 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 places throughout this Quarterly Report on Form 10-Q, including Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our future results of operations, financial condition and liquidity; our prospects, growth, strategies and the markets in which Offerpad operates.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to:

our ability to respond to general economic conditions;
the health of the U.S. residential real estate industry;
our ability to grow market share in our existing markets or any new markets we may enter;
the impact of the COVID-19 pandemic;
our ability to manage our growth effectively;
our ability to accurately value and manage inventory, and to maintain an adequate and desirable supply of inventory;
our ability to successfully launch new product and service offerings, and to manage, develop and refine our technology platform;
our ability to maintain and enhance our products and brand, and to attract customers;
our ability to achieve and maintain profitability in the future; and
the success of strategic relationships with third parties.

The foregoing list of factors is not exhaustive. You should carefully consider the foregoing factors and other risks and uncertainties discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q 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 forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 3


PART I. I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)Statements.

SUPERNOVA PARTNERS ACQUISITION COMPANY,OFFERPAD SOLUTIONS INC.

CONDENSED BALANCE SHEETSCondensed Consolidated Balance Sheets

   March 31, 2021  December 31, 2020 
   (unaudited)    

Assets:

   

Current assets:

   

Cash

  $760,543  $1,079,633 

Due from related party

   19,148   —   

Prepaid expenses

   339,049   405,522 
  

 

 

  

 

 

 

Total current assets

   1,118,740   1,485,155 

Investments held in Trust Account

   402,674,662   402,578,522 
  

 

 

  

 

 

 

Total Assets

  $403,793,402  $404,063,677 
  

 

 

  

 

 

 

Liabilities and Stockholders’ Equity:

   

Current liabilities:

   

Accounts payable

  $82,160  $38,915 

Accrued expenses

   3,158,353   215,097 

Due to related party

   69   —   

Income tax payable

   17,620   4,749 

Franchise tax payable

   49,365   61,264 
  

 

 

  

 

 

 

Total current liabilities

   3,307,567   320,025 

Deferred legal fees

   100,000   100,000 

Deferred underwriting commissions

   14,087,500   14,087,500 

Derivative liabilities

   41,251,830   49,674,170 
  

 

 

  

 

 

 

Total Liabilities

   58,746,897   64,181,695 
  

 

 

  

 

 

 

Commitments and Contingencies

   

Class A common stock, $0.0001 par value; 34,004,650 and 33,488,198 shares subject to possible redemption at $10.00 per share as of March 31, 2021 and December 31, 2020, respectively

   340,046,500   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; 6,245,350 and 6,761,802 shares issued and outstanding (excluding 34,004,650 and 33,488,198 shares subject to possible redemption) as of March 31, 2021 and December 31, 2020, respectively

   625   676 

Class B common stock, $0.0001 par value; 20,000,000 shares authorized; 10,062,500 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively

   1,006   1,006 

Additional paid-in capital

   25,214,729   30,379,198 

Accumulated deficit

   (20,216,355  (25,380,878
  

 

 

  

 

 

 

Total stockholders’ equity

   5,000,005   5,000,002 
  

 

 

  

 

 

 

Total Liabilities and Stockholders’ Equity

  $403,793,402  $404,063,677 
  

 

 

  

 

 

 

 

 

 

 

March 31,

 

 

December 31,

 

(in thousands, except par value per share) (Unaudited)

 

 

 

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

$

198,167

 

 

$

169,817

 

Restricted cash

 

 

 

 

37,591

 

 

 

24,616

 

Accounts receivable

 

 

 

 

21,796

 

 

 

6,165

 

Inventory

 

 

 

 

871,511

 

 

 

1,132,571

 

Prepaid expenses and other current assets

 

 

 

 

10,004

 

 

 

9,808

 

Total current assets

 

 

 

 

1,139,069

 

 

 

1,342,977

 

Property and equipment, net

 

 

 

 

5,408

 

 

 

5,146

 

Other non-current assets

 

 

 

 

5,918

 

 

 

4,959

 

TOTAL ASSETS

 

(1)

 

$

1,150,395

 

 

$

1,353,082

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

 

 

$

8,637

 

 

$

6,399

 

Accrued and other current liabilities

 

 

 

 

29,917

 

 

 

35,027

 

Secured credit facilities and notes payable, net

 

 

 

 

725,809

 

 

 

861,762

 

Secured credit facilities and notes payable - related party

 

 

 

 

59,742

 

 

 

164,434

 

Total current liabilities

 

 

 

 

824,105

 

 

 

1,067,622

 

Warrant liabilities

 

 

 

 

18,397

 

 

 

24,061

 

Other long-term liabilities

 

 

 

 

4,466

 

 

 

3,830

 

Total liabilities

 

(2)

 

 

846,968

 

 

 

1,095,513

 

Commitments and contingencies (Note 17)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Class A common stock, $0.0001 par value; 2,000,000 shares authorized; 229,977 and 224,154 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively

 

 

 

 

23

 

 

 

22

 

Class B common stock, $0.0001; 20,000 shares authorized; 14,816 shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

2

 

 

 

2

 

Additional paid in capital

 

 

 

 

394,470

 

 

 

389,601

 

Accumulated deficit

 

 

 

 

(91,068

)

 

 

(132,056

)

Total stockholders’ equity

 

 

 

 

303,427

 

 

 

257,569

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

$

1,150,395

 

 

$

1,353,082

 

________________

(1)
Our consolidated assets as of March 31, 2022 and December 31, 2021 include the following assets of certain variable interest entities (“VIEs”) that can only be used to settle the liabilities of those VIEs: Restricted cash, $37,591 and $24,616; Accounts receivable, $19,909 and $4,845; Inventory, $871,511 and $1,132,571; Prepaid expenses and other current assets, $3,482 and $2,871; Total assets of $932,493 and $1,164,903, respectively.
(2)
Our consolidated liabilities as of March 31, 2022 and December 31, 2021 include the following liabilities for which the VIE creditors do not have recourse to Offerpad: Accounts payable, $5,199 and $2,810; Accrued and other current liabilities, $2,606 and $3,537; Secured credit facilities and notes payable, net, $785,551 and $1,026,196; Total liabilities, $793,356 and $1,032,543, respectively.

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 4


 

1

OFFERPAD SOLUTIONS INC.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.Condensed Consolidated Statements of Operations

UNAUDITED CONDENSED STATEMENT OF OPERATIONS

 

 

Three Months Ended

 

 

 

March 31,

 

(in thousands, except per share data) (Unaudited)

 

2022

 

 

2021

 

Revenue

 

$

1,373,837

 

 

$

283,972

 

Cost of revenue

 

 

1,241,695

 

 

 

250,435

 

Gross profit

 

 

132,142

 

 

 

33,537

 

Operating expenses:

 

 

 

 

 

 

Sales, marketing and operating

 

 

69,888

 

 

 

25,076

 

General and administrative

 

 

14,657

 

 

 

4,734

 

Technology and development

 

 

3,182

 

 

 

2,283

 

Total operating expenses

 

 

87,727

 

 

 

32,093

 

Income from operations

 

 

44,415

 

 

 

1,444

 

Other income (expense):

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

5,664

 

 

 

0

 

Interest expense

 

 

(7,196

)

 

 

(1,918

)

Other income, net

 

 

4

 

 

 

241

 

Total other expense

 

 

(1,528

)

 

 

(1,677

)

Income (loss) before income taxes

 

 

42,887

 

 

 

(233

)

Income tax expense

 

 

(1,899

)

 

 

0

 

Net income (loss)

 

$

40,988

 

 

$

(233

)

Net income (loss) per share, basic

 

$

0.17

 

 

$

(0.00

)

Net income (loss) per share, diluted

 

$

0.16

 

 

$

(0.00

)

Weighted average common shares outstanding, basic

 

 

240,120

 

 

 

58,567

 

Weighted average common shares outstanding, diluted

 

 

259,607

 

 

 

58,567

 

FOR THE THREE MONTHS ENDED MARCH 31, 2021

General and administrative expenses

  $3,291,721 

Franchise tax expenses

   49,365 
  

 

 

 

Total operating expenses

   (3,341,086

Other income

  

Change in fair value of derivative liabilities

   8,422,340 

Net gain on investments held in Trust Account

   96,140 
  

 

 

 

Income before income tax expense

   5,177,394 

Income tax expense

   12,871 
  

 

 

 

Net income

  $5,164,523 
  

 

 

 

Weighted average shares outstanding of Class A common stock subject to redemption, basic and diluted

   33,493,936 
  

 

 

 

Basic and diluted net income per share, Class A common stock subject to redemption

  $0.00 
  

 

 

 

Weighted average shares outstanding of non redeemable Class A and Class B common stock, basic and diluted

   16,818,564 
  

 

 

 

Basic and diluted net income per share, non redeemable Class A and Class B common stock

  $0.31 
  

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 5


 

2

OFFERPAD SOLUTIONS INC.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.Condensed Consolidated Statements of Changes in Temporary Equity and Stockholders’ Equity (Deficit)

UNAUDITED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

 

 

Common Stock

 

Additional
Paid in

 

Accumulated

 

Total
Stockholders’

 

(in thousands) (Unaudited)

 

Shares

 

Amount

 

Capital

 

Deficit

 

Equity

 

Balance at December 31, 2021

 

 

238,970

 

$

24

 

$

389,601

 

$

(132,056

)

$

257,569

 

Issuance of common stock upon exercise of stock options

 

 

5,823

 

 

1

 

 

3,241

 

 

 

 

3,242

 

Stock-based compensation expense

 

 

 

 

 

 

1,628

 

 

 

 

1,628

 

Net income

 

 

 

 

 

 

 

 

40,988

 

 

40,988

 

Balance at March 31, 2022

 

 

244,793

 

$

25

 

$

394,470

 

$

(91,068

)

$

303,427

 

FOR THE THREE MONTHS ENDED MARCH 31, 2021

 

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) (Unaudited)

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Shares

 

Amount

 

Equity

 

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Shares

 

Amount

 

Equity

 

Balance at December 31, 2020

 

2,775

 

$

14,921

 

 

1,448

 

$

7,470

 

 

1,105

 

$

7,463

 

 

7,751

 

$

49,845

 

 

5,308

 

$

104,424

 

$

184,123

 

 

 

 

 

7,682

 

$

0

 

$

5,908

 

$

(138,516

)

 

636

 

$

(10,650

)

$

(143,258

)

Retroactive conversion of shares due to Business Combination

 

18,132

 

 

 

 

9,457

 

 

 

 

7,217

 

 

 

 

50,639

 

 

 

 

34,677

 

 

 

 

 

 

 

 

 

50,183

 

 

 

 

 

 

 

 

4,158

 

 

 

 

 

Balance at December 31, 2020, as converted

 

20,907

 

 

14,921

 

 

10,905

 

 

7,470

 

 

8,322

 

 

7,463

 

 

58,390

 

 

49,845

 

 

39,985

 

 

104,424

 

 

184,123

 

 

 

 

 

57,865

 

 

0

 

 

5,908

 

 

(138,516

)

 

4,794

 

 

(10,650

)

 

(143,258

)

Issuance of common stock upon exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,025

 

 

0

 

 

201

 

 

 

 

 

 

 

 

201

 

Issuance of common stock upon early exercise of stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

211

 

 

 

 

 

 

 

 

 

 

 

 

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43

 

 

 

 

 

 

 

 

43

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

614

 

 

 

 

 

 

 

 

614

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(233

)

 

 

 

 

 

(233

)

Balance at March 31, 2021

 

20,907

 

$

14,921

 

 

10,905

 

$

7,470

 

 

8,322

 

$

7,463

 

 

58,390

 

$

49,845

 

 

39,985

 

$

104,424

 

$

184,123

 

 

 

 

 

59,101

 

$

0

 

$

6,766

 

$

(138,749

)

 

4,794

 

$

(10,650

)

$

(142,633

)

   Common Stock         Total
Stockholders’
Equity
 
   Class A  Class B   Additional
Paid-In

Capital
  Accumulated
Deficit
 
   Shares  Amount  Shares   Amount 

Balance - December 31, 2020

   6,761,802  $676   10,062,500   $1,006   $30,379,198  $(25,380,878 $5,000,002 

Common stock subject to possible redemption

   (516,452  (51  —      —      (5,164,469  —     (5,164,520

Net income

   —     —     —      —      —     5,164,523   5,164,523 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

Balance - March 31, 2021

   6,245,350  $625   10,062,500   $1,006   $25,214,729  $(20,216,355 $5,000,005 
  

 

 

  

 

 

  

 

 

   

 

 

   

 

 

  

 

 

  

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 6


 

3

OFFERPAD SOLUTIONS INC.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.Condensed Consolidated Statements of Cash Flows

UNAUDITED CONDENSED STATEMENT OF CASH FLOWS

 

 

Three Months Ended

 

 

 

March 31,

 

($ in thousands) (Unaudited)

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$

40,988

 

 

$

(233

)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Depreciation

 

 

119

 

 

 

130

 

Gain on sale of property and equipment

 

 

0

 

 

 

(246

)

Amortization of debt financing costs

 

 

717

 

 

 

88

 

Impairment of inventory

 

 

981

 

 

 

130

 

Stock-based compensation

 

 

1,628

 

 

 

614

 

Change in fair value of warrant liabilities

 

 

(5,664

)

 

 

0

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(15,631

)

 

 

(219

)

Inventory

 

 

260,079

 

 

 

(48,775

)

Prepaid expenses and other assets

 

 

(2,488

)

 

 

(4,216

)

Accounts payable

 

 

2,238

 

 

 

359

 

Accrued and other liabilities

 

 

(3,140

)

 

 

4,256

 

Net cash provided by (used in) operating activities

 

 

279,827

 

 

 

(48,112

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(381

)

 

 

(990

)

Proceeds from sales of property and equipment

 

 

0

 

 

 

2,032

 

Net cash (used in) provided by investing activities

 

 

(381

)

 

 

1,042

 

Cash flows from financing activities:

 

 

 

 

 

 

Borrowings from credit facilities and notes payable

 

 

892,836

 

 

 

281,066

 

Repayments of credit facilities and notes payable

 

 

(1,134,164

)

 

 

(255,962

)

Payment of debt financing costs

 

 

(35

)

 

 

(175

)

Proceeds from exercise of stock options

 

 

3,242

 

 

 

459

 

Net cash (used in) provided by financing activities

 

 

(238,121

)

 

 

25,388

 

Net change in cash, cash equivalents and restricted cash

 

 

41,325

 

 

 

(21,682

)

Cash, cash equivalents and restricted cash, beginning of period

 

 

194,433

 

 

 

50,742

 

Cash, cash equivalents and restricted cash, end of period

 

$

235,758

 

 

$

29,060

 

Reconciliation of cash, cash equivalents and restricted cash to the condensed consolidated balance sheet:

 

 

 

 

 

 

Cash and cash equivalents

 

$

198,167

 

 

$

26,411

 

Restricted cash

 

 

37,591

 

 

 

2,649

 

Total cash, cash equivalents and restricted cash

 

$

235,758

 

 

$

29,060

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

Cash payments for interest

 

$

10,537

 

 

$

2,863

 

FOR THE THREE MONTHS ENDED MARCH 31, 2021

Cash Flows from Operating Activities:

  

Net income

  $5,164,523 

Adjustments to reconcile net income to net cash used in operating activities:

  

Change in fair value of derivative warrant liabilities

   (8,422,340

Net gain from investments held in the Trust Account

   (96,140

Changes in operating assets and liabilities:

  

Prepaid expenses

   66,473 

Due from related party

   (19,148

Accounts payable

   43,245 

Accrued expenses

   2,943,256 

Due to related party

   69 

Income tax payable

   12,871 

Franchise tax payable

   (11,899
  

 

 

 

Net cash used in operating activities

   (319,090
  

 

 

 

Net change in cash

   (319,090

Cash - beginning of the period

   1,079,633 
  

 

 

 

Cash - end of the period

  $760,543 
  

 

 

 

Supplemental disclosure of noncash activities:

  

Change in value of common stock subject to possible redemption

  $(5,164,520

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 7


OFFERPAD SOLUTIONS INC.


Notes to Condensed Consolidated Financial Statements

(Unaudited)

SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.NOTE 1. BUSINESS ACTIVITY

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 1—DescriptionOn September 1, 2021 (the “Closing Date”), we consummated the transactions contemplated by the Agreement and Plan of OrganizationMerger, dated March 17, 2021 (the “Merger Agreement”), by and Business Operations

Organization and General

among OfferPad, Inc. (“Old Offerpad”), Supernova Partners Acquisition Company, Inc. (the “Company”) is a blank check company incorporated in Delaware on August 31, 2020. The Company was 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 (the “Business Combination”). The Company is an emerging growth company and, as such, the Company is subject to all of the risks associated with emerging growth companies.

As of March 31, 2021, the Company had not commenced any operations. All activity for the period from August 31, 2020 (inception) through March 31, 2021 relates to the Company’s formation and the initial public offering (the “Initial Public Offering”) described below, and since the closing of the Initial Public Offering, the search for a target for its initial Business Combination. 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 and placed in the Trust Account (as defined below).

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”corporation (“Supernova”), 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 5).

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 4).

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”).

5


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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 4) 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.

6


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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 5) 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

On March 17, 2021, the Company entered into the Merger Agreement by and among Supernova, 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 newly formed direct, wholly owned subsidiary of Supernova (“First Merger Sub”), Orchids Merger Sub, LLC, a Delaware limited liability company(the “Business Combination” and, direct, wholly owned subsidiary of Supernova (“Second Merger Sub”), and OfferPad, Inc., a Delaware corporation (“Offerpad”).

Pursuant tocollectively with the other transactions described in the Merger Agreement, the parties will enter into a business combination transaction (the “Business Combination”“Transactions”) by which (i) First Merger Sub will merge with. On the Closing Date, and into Offerpad,in connection 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 changed its name to Offerpad Solutions Inc. (“Offerpad Solutions”). Unless the “Closing”). context otherwise requires, references in this Quarterly Report on Form 10-Q to the “Company,” “Offerpad,” “we,” “us,” or “our” refer to the business of Old Offerpad, which became the business of Offerpad Solutions and its subsidiaries following the Closing.

Offerpad was founded in 2015 and together with its subsidiaries, is a customer-centric, home buying and selling platform that provides customers with the ultimate home transaction experience, offering convenience, control, certainty, and value. The Company is headquartered in Chandler, Arizona and operated in over 1,700 cities and towns in 24 metropolitan markets across 16 states as of March 31, 2022.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Impact of Business Combination

We accounted for the September 1, 2021 Business Combination as a reverse recapitalization whereby Old Offerpad was determined as the accounting acquirer and Supernova as the accounting acquiree. This determination was primarily based on:

former Offerpad stockholders having the largest voting interest in Offerpad Solutions;
the board of directors of Offerpad Solutions having 7 members, and Offerpad’s former stockholders having the ability to nominate the majority of the members of the board of directors;
Offerpad management continuing to hold executive management roles for the post-combination company and being responsible for the day-to-day operations;
the post-combination company assuming the Offerpad name;
Offerpad Solutions maintaining the pre-existing Offerpad headquarters; and
the intended strategy of Offerpad Solutions being a continuation of Offerpad’s strategy.

Accordingly, the Business Combination was treated as the equivalent of Old Offerpad issuing stock for the net assets of Supernova, accompanied by a recapitalization. The net assets of Supernova are stated at historical cost, with no goodwill or other intangible assets recorded.

While Supernova was the legal acquirer in the Business Combination, because Old Offerpad was determined as the accounting acquirer, the historical financial statements of Old Offerpad became the historical financial statements of the combined company, upon the consummation of the Business Combination. As a result, the financial statements included in the accompanying unaudited interim condensed consolidated financial statements reflect (i) the historical operating results of Old Offerpad prior to the Business Combination; (ii) the combined results of the Company and Old Offerpad following the closing of the Business Combination; (iii) the assets and liabilities of Old Offerpad at their historical cost; and (iv) the Company’s equity structure for all periods presented.

In connection with the Closing, Supernova will change its name to “Offerpad Solutions, Inc.”

The value ofBusiness Combination transaction, we have converted the aggregate equity consideration to be paid to Offerpad’s stockholders and optionholders instructure for 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 immediatelyperiods prior to the effective time ofBusiness Combination to reflect 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 Supernovathe Company’s common stock equalissued to an exchange ratio determined by dividing the Equity Value by the “Aggregate Fully Diluted Company Common Stock” (as defined in the Merger Agreement).

7


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

At the Closing, each option to purchaseOld 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.

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 Supernova 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 connection with the execution of the Merger Agreement, the Company entered into a sponsor support agreement (the “Sponsor Support Agreement”) with 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 all of their shares of the Company’s capital stock in favor of the approval of the Transactions. In addition, the Sponsor has agreed that 20% of its shares of Class B common stock issueds stockholders in connection with the initial public offering (the “Sponsor Shares”) will be unvestedrecapitalization transaction. As such, the shares, corresponding capital amounts and subjectearnings per share, as applicable, related to forfeiture as of the ClosingOld Offerpad convertible preferred stock and will only vest if, during the five year period following the Closing, (i) the volume weighted average price of the Company’s Class A common stock equals or exceeds $12.00 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 afterprior to 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.

The proposed Business Combination is expected to be consummated after receipt ofhave been retroactively converted by applying the required approvals byexchange ratio established in 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 Going Concern

As of March 31, 2021, the Company had approximately $0.8 million in its operating bank accounts and a working capital deficit of approximately $2.1 million (not taking into account approximately $67,000 of taxes that may be paid using investment income from the Trust Account). The Company has incurred and expects to incur significant costs in pursuit of its financing and acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans to consummate a Business Combination or raise additional funds will be successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

8Combination.


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 2—Summary of Significant Accounting Policies

Basis of Presentation and Interim Financial Information

The accompanying unaudited interim condensed consolidated 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 SEC.U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures required for annual financial statements have been condensed or excluded pursuant to GAAP and SEC rules and regulations. Accordingly, theythe unaudited interim condensed consolidated financial statements do not include all of the information and footnotes note disclosures

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 8


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

required by GAAP. In the opinion of management, the unaudited condensedGAAP for complete financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected through December 31, 2021.

The accompanying unaudited condensed financial statementsstatements. Therefore, this information should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2021 included in the Company’s 2021 Annual Report on Form 10-K/A10-K as filed by the Company with the SEC on May 25, 2021.March 7, 2022.

Emerging Growth Company

The Company is an “emerging growth company,” as definedaccompanying financial information reflects all adjustments which are, in Section 2(a)the opinion of the Securities Act, as modified by the Jumpstart Our Business Startups ActCompany’s management, of 2012 (the “JOBS Act”),a normal recurring nature 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 404necessary for a fair presentation of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensationCompany’s financial position, results of operations and cash flows for the interim periods. Any reference in its periodic reportsthese notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

Further, Section 102(b)(1)Accounting Standards Update (“ASU”) 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.Financial Accounting Standards Board (“FASB”).

Use of Estimates

The preparation of unauditedthe Company’s condensed consolidated 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 unaudited condensed consolidated financial statementsstatements. Significant estimates include those related to the net realizable value of inventory and the reported amounts 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 unaudited condensed financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events.warrant liabilities, among others. Actual results could differ from those estimates.

Principles of Consolidation

CashThe Company’s condensed consolidated financial statements include the assets, liabilities, revenues and Cash Equivalentsexpenses 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.

Inventory

Inventory consists of acquired homes and are stated at the lower of cost or net realizable value, with cost 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 listing date, are expensed as incurred and included in sales, marketing and operating expenses.

The Company considersreviews 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 reviews inventory for indicators that net realizable value is lower than cost. 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 homes under contract to sell, if the carrying value exceeds the contract price less expected selling costs, the carrying value of these homes are adjusted to the contract price less expected selling costs. For all short-term investments with an original maturityother 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 Company’s pricing assumptions may lead to a change in the outcome of the Company’s impairment analysis, and actual results may also differ from the Company’s assumptions. The Company recorded inventory impairments of $1.0 million and $0.1 million during the three months or less when purchased to be cash equivalents.ended March 31, 2022 and 2021, respectively.

Stock-Based Compensation

Stock-based compensation awards consist of stock options, restricted stock units and performance-based restricted stock units. The Company had no cash equivalentsmeasures 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.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 9


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Stock Options

The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock option awards as of March 31, 2021 and December 31, 2020.

Concentration of Credit Risk

Financial instruments that potentially subjectthe grant date. The Black-Scholes-Merton option pricing model requires the Company to concentrationestimate 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 credit risk consistthe options.
Risk-free interest rate – The Company estimates the risk-free interest rate using the rate of cash accountsreturn 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 a financial institution which, at times, may exceed the Federal depository insurance coverage of $250,000, and investments held in Trust Account.foreseeable future.
Stock price – The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts. The Company’s investments held in the Trust Account as of March 31, 2021 are comprised of investments in U.S. Treasury securitiesissued stock options with an original maturity of 185 days or less or investments in a money market funds that comprise only U.S. treasury securities money market funds.

9


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Investments Held in 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 condensed balance sheets at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of these securities is included in net gain on investments held in Trust Account in the accompanying unaudited condensed statement of operations. The estimated fair values of investments held in the Trust Account 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 quotedexercise 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:

Level 1, defined as observable inputs such as quoted prices for identical instruments in active markets;

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

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 inputs 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 significantequal to the fair value measurement.

As of March 31, 2021 and 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 dueunderlying stock price. Prior to the short-term naturecompletion of the instruments. TheBusiness Combination and listing of the Company’s portfolio of investments held incommon stock on the Trust Account is comprised of investments in U.S. Treasury securities 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. Thepublic stock exchange, the fair value forof 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 securities isof the Company’s common stock, the fair value of Old Offerpad common stock was typically determined using quoted market prices in active markets. Thewith assistance of periodic valuation analyses from an independent third-party valuation firm. Subsequent to the Business Combination, the fair value of the Public Warrants issued in connection withCompany’s common stock is based on the Public Offering and Private Placement Warrants were initially measured atclosing 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 listed market priceaverage historical volatility of such warrants.

Offering Costs Associated with the Initial Public Offering

similar publicly traded companies. The Company complies withestimates the requirementsrisk-free interest rate using the rate of return on U.S. treasury notes equal to the contractual term of the ASC 340-10-S99-1award. The expected dividend yield assumption considers that the Company has not historically paid dividends and SEC Staffdoes 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.

New Accounting Bulletin Topic 5A – “Expenses of Offering.” Offering costs consist of legal, accounting, underwriting feesPronouncements Recently Issued Not Yet Adopted

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) (“ASU 2020-04”), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other costs directly relatedtransactions 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. This guidance is effective from March 12, 2020 through December 31, 2022. Entities may elect to adopt the amendments for contract modifications as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the Initial Public Offering

date that the financial statements are available to be issued. The classificationCompany may elect to take advantage of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed atthis optional guidance in its transition away from LIBOR within certain debt contracts. While the end of each reporting period. In accordance with ASC 825-10 “Financial Instruments”, offering costs attributable to the issuancegoal of the derivative liabilities have been allocated based on their relative fair value of total proceeds and are recognized in the unaudited condensed 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.

10


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Class A Common Stock Subject to Possible Redemption

The Company accountsreference rate reform transition is 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 consideredit to be outside ofeconomically neutral to entities, the Company’s controlCompany is currently evaluating the effect that the new guidance will have on its condensed consolidated financial statements and subjectdisclosures.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 10


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 3. BUSINESS COMBINATION

On September 1, 2021, Old Offerpad and Supernova consummated the occurrence of uncertain future events. Accordingly, as of March 31, 2021 and December 31, 2020, 34,004,650 and 33,488,198 sharestransactions contemplated by the Merger Agreement. At the Closing, each share of common stock subjectand preferred stock of Old Offerpad that was issued and outstanding immediately prior to possible redemption are presented as temporary equity, outsidethe effective time of the stockholders’ equity sectionMerger (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’s condensed balance sheets, respectively.Company, are Class B shares.

Net Income (Loss) Per Common Share

Net income (loss) perAt the Closing, each option to purchase Old Offerpad’s common share is computed by dividing net income (loss) by the weighted-averagestock, whether vested or unvested, was assumed and converted into an option to purchase a 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 income (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 unaudited condensed statement of operations includes a presentation of income (loss) per common share for Class A common stock 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.

11


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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 Three Months Ended
March 31, 2021
 

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

  $81,219 

Less: Company’s portion available to be withdrawn to pay taxes

  $(52,577
  

 

 

 

Net income attributable to Class A common stock subject to possible redemption

  $28,642 
  

 

 

 

Denominator: Weighted average Class A common stock subject to possible redemption

  

Basic and diluted weighted average shares outstanding

   33,493,936 
  

 

 

 

Basic and diluted net income per share

  $0.00 
  

 

 

 

Non-redeemable common stock

  

Numerator: Net income minus net earnings

  

Net income

  $5,164,523 

Net income allocable to Class A common stock subject to possible redemption

   28,642 
  

 

 

 

Non-redeemable net income

  $5,193,165 
  

 

 

 

Denominator: Weighted average non-redeemable common stock

  

Basic and diluted weighted average shares outstanding, non-redeemable common stock

   16,818,564 
  

 

 

 

Basic and diluted net income per share, non-redeemable common stock

  $0.31 
  

 

 

 

Derivative Liabilities

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its 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.

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. Accordingly, the Company recognizes 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 the Company’s unaudited condensed statement of operations. 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.

12


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

In connection with the closing of our initial public offering, the Company entered into forward purchase agreements to which its Sponsors committed to purchase the Company’sOfferpad 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 one share$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 one-thirdan aggregate of one warrant, in a private placement that is conditioned upon, and will be consummated concurrently with, the Closing. The forward1,666,667 warrants to purchase agreements are recognized as derivative liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the forward purchase agreements as liabilities at fair value and adjusts 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 agreements.

Income Taxes

The Company uses the asset and liability method of accounting 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 recognized in the accompanying unaudited condensed financial statements. The Company is required to file tax returns in the U.S. federal jurisdiction and in the state of District of Columbia. 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 accrued as of March 31, 2021 and December 31, 2020.

Recent Accounting Pronouncements

The Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying unaudited condensed financial statements.

Note 3—Initial Public Offering

On October 23, 2020, the Company consummated its Initial Public Offering of 40,250,000 Units, including 5,250,000 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.

Each Unit consists of 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 redeemablewarrant (each, a “Public Warrant”). Each Public Warrant entitles the holder to purchase one share of Offerpad Solutions Class A common stock (“Forward Purchase Agreements”). Offerpad Solutions received the funds under the Forward Purchase Agreements upon the Closing.

We accounted for the Business Combination as a reverse recapitalization whereby Old Offerpad was determined as the accounting acquirer and Supernova as the accounting acquiree. Refer to Note 2, Summary of Significant Accounting Policies, for further details. Accordingly, the Business Combination was treated as the equivalent of Old Offerpad issuing stock for the net assets 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 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.

NOTE 4. INVENTORY

The components of inventory, net of applicable lower of cost or net realizable value adjustments, consist of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Homes preparing for and under renovation

 

$

304,495

 

 

$

327,455

 

Homes listed for sale

 

 

202,602

 

 

 

400,308

 

Homes under contract to sell

 

 

364,414

 

 

 

404,808

 

Inventory

 

$

871,511

 

 

$

1,132,571

 

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 11


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 5. PROPERTY AND EQUIPMENT

Property and equipment consist of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Rooftop solar panel systems

 

$

5,075

 

 

$

5,075

 

Leasehold improvements

 

 

996

 

 

 

797

 

Software systems

 

 

318

 

 

 

318

 

Computers and equipment

 

 

265

 

 

 

265

 

Office equipment and furniture

 

 

160

 

 

 

160

 

Construction in progress

 

 

182

 

 

 

0

 

Property and equipment, gross

 

 

6,996

 

 

 

6,615

 

Less: accumulated depreciation

 

 

(1,588

)

 

 

(1,469

)

Property and equipment, net

 

$

5,408

 

 

$

5,146

 

Depreciation expense totaled $0.1 million during each of the three months ended March 31, 2022 and 2021, respectively.

NOTE 6. 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 does not have any finance lease arrangements.

The Company’s operating lease costs are included in operating expenses in the accompanying condensed consolidated statements of operations. During the three months ended March 31, 2022 and 2021, operating lease cost was $0.4 million and $0.3 million, respectively, and variable and short-term lease costs were $0.1 million and $0.1 million, respectively.

Cash payments for amounts included in the measurement of operating lease liabilities was $0.4 million during each of the three months ended March 31, 2022 and 2021. Right-of-use assets obtained in exchange for new or acquired operating lease liabilities was $1.3 million during the three months ended March 31, 2022. There were no right-of-use assets obtained in exchange for new or acquired operating lease liabilities during the three months ended March 31, 2021.

As of March 31, 2022 and December 31, 2021, the Company’s operating leases had a weighted-average remaining lease term of 3.4 years and 3.5 years, respectively, and a weighted-average discount rate of 4.0% and 4.1%, respectively.

The Company’s operating lease liability maturities as of March 31, 2022 are as follows:

($ in thousands)

 

 

 

Remainder of 2022

 

$

1,431

 

2023

 

 

2,015

 

2024

 

 

1,981

 

2025

 

 

854

 

2026

 

 

269

 

2027

 

 

79

 

Thereafter

 

 

0

 

Total future lease payments

 

 

6,629

 

Less: Imputed interest

 

 

(435

)

Total lease liabilities

 

$

6,194

 

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 12


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 the respective period ends:

($ in thousands)

 

Financial Statement Line Items

 

March 31, 2022

 

 

December 31, 2021

 

Right-of-use assets

 

Other non-current assets

 

$

5,730

 

 

$

4,784

 

Lease liabilities:

 

 

 

 

 

 

 

 

Current liabilities

 

Accrued and other current liabilities

 

 

1,728

 

 

 

1,345

 

Non-current liabilities

 

Other long-term liabilities

 

 

4,466

 

 

 

3,830

 

Total lease liabilities

 

 

 

$

6,194

 

 

$

5,175

 

NOTE 7. ACCRUED AND OTHER LIABILITIES

Accrued and other current liabilities consist of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Home renovation

 

$

8,385

 

 

$

8,540

 

Payroll and other employee related expenses

 

 

7,755

 

 

 

12,836

 

Marketing

 

 

7,483

 

 

 

5,795

 

Interest

 

 

2,606

 

 

 

3,537

 

Operating lease liabilities

 

 

1,728

 

 

 

1,345

 

Legal and professional obligations

 

 

1,261

 

 

 

1,743

 

Other

 

 

699

 

 

 

1,231

 

Accrued and other current liabilities

 

$

29,917

 

 

$

35,027

 

The Company incurred advertising expenses of $14.7 million and $7.4 million during the three months ended March 31, 2022 and 2021, respectively.

Other long-term liabilities as of March 31, 2022 and December 31, 2021 consist of the non-current portion of our operating lease liabilities.

NOTE 8. CREDIT FACILITIES AND NOTES PAYABLE

The carrying value of the Company’s credit facilities, notes payable and other debt consists of the following as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Credit facilities and notes payable, net

 

 

 

 

 

 

Senior secured credit facilities with financial institutions

 

$

629,093

 

 

$

747,514

 

Senior secured credit facility with a related party

 

 

21,477

 

 

 

81,926

 

Senior secured debt - other

 

 

6,474

 

 

 

33,320

 

Mezzanine secured credit facilities with third-party lenders

 

 

96,483

 

 

 

87,851

 

Mezzanine secured credit facilities with a related party

 

 

38,265

 

 

 

82,508

 

Debt issuance costs

 

 

(6,241

)

 

 

(6,923

)

Total credit facilities and notes payable, net

 

 

785,551

 

 

 

1,026,196

 

Current portion - credit facilities and notes payable, net

 

 

 

 

 

 

Total credit facilities, other debt and notes payable, net

 

 

725,809

 

 

 

861,762

 

Total credit facilities and notes payable - related party

 

 

59,742

 

 

 

164,434

 

Total credit facilities and notes payable, net

 

$

785,551

 

 

$

1,026,196

 

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 13


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Senior Secured Credit Facilities

The Company utilizes senior secured credit facilities to provide financing for the Company’s real estate inventory purchases and renovation. The senior secured credit facilities are classified as current liabilities on the accompanying condensed consolidated balance sheets as amounts drawn to purchase and renovate homes are due as homes are sold, which is expected to be within 12 months. The following summarizes certain details related to the Company’s senior secured credit facilities (in thousands, except interest rates):

As of March 31, 2022

Borrowing
Capacity

 

Outstanding
Amount

 

Weighted-
Average
Interest Rate

 

End of
Revolving / Withdrawal
Period

 

Final
Maturity
Date

Facility with financial institution 1

$

400,000

 

$

205,752

 

 

2.70

%

August 2022

 

August 2022

Facility with financial institution 2

 

400,000

 

 

213,841

 

 

2.64

%

September 2023

 

March 2024

Facility with financial institution 3

 

500,000

 

 

209,500

 

 

2.80

%

December 2023

 

December 2024

Facility with a related party

 

85,000

 

 

21,477

 

 

6.00

%

December 2022

 

December 2022

Senior secured credit facilities

$

1,385,000

 

$

650,570

 

 

 

 

 

 

As of December 31, 2021

Borrowing
Capacity

 

Outstanding
Amount

 

Weighted-
Average
Interest Rate

 

 

 

Facility with financial institution 1

$

400,000

 

$

365,392

 

 

2.60

%

 

 

Facility with financial institution 2

 

400,000

 

 

375,063

 

 

2.60

%

 

 

Facility with financial institution 3

 

500,000

 

 

7,059

 

 

2.60

%

 

 

Facility with a related party

 

85,000

 

 

81,926

 

 

4.10

%

 

 

Senior secured credit facilities

$

1,385,000

 

$

829,440

 

 

 

 

 

As of March 31, 2022, the Company had 4 senior secured credit facilities, 3 with separate financial institutions and 1 with a related party, which holds more than 5% of our Class A common stock.

Senior Secured Credit Facility with Financial Institution 1
As of March 31, 2022, the borrowing capacity on the senior secured credit facility with financial institution 1 is $400.0 million ($100.0 million of which is uncommitted). Borrowings on the senior secured credit facility with financial institution 1 accrue interest at a rate based on a LIBOR reference rate plus a margin of 2.5%.
Senior Secured Credit Facility with Financial Institution 2
As of March 31, 2022, the committed borrowing capacity on the senior secured credit facility with financial institution 2 is $400.0 million. Borrowings on the senior secured credit facility with financial institution 2 accrue interest at a rate based on a LIBOR reference rate plus a margin of 2.5%.
Senior Secured Credit Facility with Financial Institution 3
As of March 31, 2022, the borrowing capacity on the senior secured credit facility with financial institution 3 is $500.0 million ($200.0 million of which is uncommitted). Borrowings on the senior secured credit facility with financial institution 3 accrue interest at a rate based on a LIBOR reference rate plus a margin of 2.5%.
Senior Secured Credit Facility with a Related Party
As of March 31, 2022, the borrowing capacity on the senior secured credit facility with a related party is $85.0 million and the Company has the option to borrow above the fully committed borrowing capacity, subject to the lender’s discretion. Effective January 1, 2022, borrowings on the senior secured credit facility with a related party accrue interest at a rate based on a LIBOR reference rate plus a margin of 4.0%, with a minimum interest rate of 6.0%.

The Company may also pay fees on its senior 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 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 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. When the Company

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 14


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

resells a home, the proceeds are used to reduce the corresponding outstanding balance under both the related senior secured credit facility and the mezzanine secured credit facility.

Mezzanine Secured Credit Facilities

The Company utilizes mezzanine secured credit facilities to provide financing for the Company’s real estate inventory purchases and renovation. The mezzanine secured credit facilities are classified as current liabilities on the accompanying condensed consolidated balance sheets as amounts drawn to purchase and renovate homes are due as homes are sold, which is expected to be within 12 months. These facilities are structurally and contractually subordinated to the related senior secured credit facilities. The following summarizes certain details related to the Company’s mezzanine secured credit facilities (in thousands, except interest rates):

As of March 31, 2022

Borrowing
Capacity

 

Outstanding
Amount

 

Weighted-
Average
Interest Rate

 

End of
Revolving / Withdrawal
Period

 

Final
Maturity
Date

Facility 1 with a related party

$

65,000

 

$

34,417

 

 

11.00

%

August 2022

 

August 2022

Facility with third-party lender 1

 

90,000

 

 

49,346

 

 

9.50

%

September 2023

 

March 2024

Facility with third-party lender 2

 

112,500

 

 

47,137

 

 

9.50

%

December 2023

 

December 2024

Facility 2 with a related party

 

14,000

 

 

3,848

 

 

11.00

%

December 2022

 

December 2022

Mezzanine secured credit facilities

$

281,500

 

$

134,748

 

 

 

 

 

 

As of December 31, 2021

Borrowing
Capacity

 

Outstanding
Amount

 

Weighted-
Average
Interest Rate

 

 

 

Facility 1 with a related party

$

65,000

 

$

58,767

 

 

13.00

%

 

 

Facility with third-party lender 1

 

90,000

 

 

86,262

 

 

9.50

%

 

 

Facility with third-party lender 2

 

112,500

 

 

1,588

 

 

9.50

%

 

 

Facility 2 with a related party

 

14,000

 

 

23,742

 

 

13.00

%

 

 

Mezzanine secured credit facilities

$

281,500

 

$

170,359

 

 

 

 

 

As of March 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.

Mezzanine Secured Credit Facility 1 with a Related Party
As of March 31, 2022, the committed borrowing capacity on the mezzanine secured credit facility 1 with a related party is $65.0 million. Effective January 1, 2022, borrowings on the mezzanine secured credit facility 1 with a related party accrue interest at a fixed rate of 11.0%.
Mezzanine Secured Credit Facility with Third-Party Lender 1
As of March 31, 2022, the committed borrowing capacity on the mezzanine secured credit facility with third-party lender 1 is $90.0 million. Borrowings on the mezzanine secured credit facility with third-party lender 1 accrue interest at a fixed rate of 9.5%.
Mezzanine Secured Credit Facility with Third-Party Lender 2
As of March 31, 2022, the borrowing capacity on the mezzanine secured credit facility with third-party lender 2 is $112.5 million ($45.0 million of which is uncommitted). Borrowings on the mezzanine secured credit facility with third-party lender 2 accrue interest at a fixed rate of 9.5%.
Mezzanine Secured Credit Facility 2 with a Related Party
As of March 31, 2022, the borrowing capacity on the mezzanine secured credit facility 2 with a related party is $14.0 million and the Company has the option to borrow above the fully committed borrowing capacity, subject to the lender’s discretion. Effective January 1, 2022, borrowings on the mezzanine secured credit facility 2 with a related party accrue interest at a fixed rate of 11.0%.

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

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 15


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

not have general recourse to Offerpad with limited exceptions. When the Company resells a home, the proceeds are used to reduce the outstanding balance under both the related senior secured credit facility and the mezzanine secured credit facility.

Maturities

As of March 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 condensed 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 and an assessment of the current lending environment. The Company believes cash on hand, together with proceeds from the resale of homes and cash from future borrowings available under each of the Company’s existing credit facilities or the entry into new financing arrangements 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 condensed 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 March 31, 2022, the Company was in compliance with all covenants.

NOTE 9. WARRANT LIABILITIES

In connection with the Business Combination, the Company assumed 13,416,637 public warrants and 6,700,000 private placement warrants, both of which were previously issued by Supernova. Further, upon the closing of the Business Combination, an additional 1,666,667 private placement warrants were issued. As such, as of September 1, 2021, the Company had outstanding warrants to purchase an aggregate of up to 21,783,304 shares of Offerpad Solutions Class A common stock that will become exercisable securities in the future after certain requirements have been met.

NaN warrants have been exercised since the closing of the Business Combination on September 1, 2021 through March 31, 2022. Accordingly, as of March 31, 2022, the Company had 13,416,637 public warrants and 8,366,667 private placement warrants outstanding.

Public Warrants

Each public warrant entitles the registered holder to acquire 1 share of the Company’s Class A common stock at a price of $11.50$11.50 per share, subject to adjustment (see Note 6).

Note 4—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.

13


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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 had 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 March 31, 2021 and 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 the Company’s Class A common stock in an aggregate amount equal to 5,000,000 shares of 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.

14


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 5—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 unaudited condensed financial statements. The unaudited condensed financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Note 6—Derivative Liabilities

As of March 31, 2021 and December 31, 2020, the Company 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.

15


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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’ 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.

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.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 16


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Redemption of thewarrants for shares of Class A common stock issuable upon exercise of the warrants is then effective and a current prospectus relating 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.

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;

stock (as defined below) except as otherwise described below;

16


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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).

In no event willPrivate Placement Warrants

The 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 7—Stockholders’ Equity

Preferred Stock— The Company is authorized to issue 1,000,000 shares of preferred stock, par value $0.0001 per share, with such designations, votingSupernova Sponsor and otherits permitted transferees has certain registration rights and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2021 and December 31, 2020, there were no shares of preferred stock issued or outstanding.

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 March 31, 2021 and December 31, 2020, there were 40,250,000 shares of Class A common stock issued or outstanding including 34,004,650 and 33,488,198 shares subject to possible redemption that were classified as temporary equity in the accompanying condensed balance sheets, respectively.

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 shares 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 of 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 and 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

17


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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 public warrants. If the private placement warrants are held by holders other than the Supernova Sponsor or 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 10. FAIR VALUE MEASUREMENTS

The fair values of cash and cash equivalents, restricted cash, accounts receivable, accounts payable, and certain prepaid and other current assets and accrued expenses approximate carrying values because of their short-term nature. The Company’s officers or director. Ascredit facilities are carried at amortized cost and the carrying value approximates fair value because of March 31, 2021 and December 31, 2020, there were 10,062,500 shares of Class B common stock issued and outstanding.their short-term nature.

Note 8—Fair Value Measurements

The following tables present information about the Company’s assetsliabilities that are measured at fair value on a recurring basis and indicateconsist of the following (in thousands):

As of March 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

 

$

10,867

 

 

$

0

 

 

$

0

 

Private placement warrant liabilities

 

$

0

 

 

$

0

 

 

$

7,530

 

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

 

 

$

0

 

 

$

0

 

Private placement warrant liabilities

 

$

0

 

 

$

0

 

 

$

9,705

 

Public Warrants

The public warrants were initially recognized as a liability in connection with the Business Combination on September 1, 2021. The fair value hierarchy of the public warrants is estimated based on the quoted market price of such warrants on the valuation techniques thatdate. The $3.5 million change in fair value of the Company utilized to determine such fair value.

public warrants between December 31, 2021 and March 31, 2021

Description

  Quoted Prices in Active
Markets
(Level 1)
   Significant Other
Observable Inputs
(Level 2)
   Significant Other
Unobservable Inputs
(Level 3)
 

Assets:

      

Investments held in Trust Account

  $402,674,662   $—     $—   

Liabilities:

      

Derivative liabilities - Public Warrants

  $24,820,830   $—     $—   

Derivative liabilities - Private Placement Warrants

  $—     $—     $12,931,000 

Derivative liabilities - Forward Purchase Agreements

  $—     $—     $3,500,000 

December 31, 2020

Description

  Quoted Prices in Active
Markets
(Level 1)
   Significant Other
Observable Inputs
(Level 2)
   Significant Other
Unobservable Inputs
(Level 3)
 

Assets:

      

Investments held in Trust Account

  $402,578,522   $—     $—   

Liabilities:

      

Derivative liabilities - Public Warrants

  $27,504,170   $—     $—   

Derivative liabilities - Private Placement Warrants

      $14,070,000 

Derivative liabilities - Forward Purchase Agreements

  $—     $—     $8,100,000 

Transfers to/from Levels 1, 2, and 3 are recognized at the beginning2022 is recorded in Change in fair value of the reporting period. There were no transfers to/from Levels 1,2, and 3 forwarrant liabilities in our Condensed Consolidated Statements of Operations during the three months ended March 31, 2021.2022.

Level

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 17


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Private Placement Warrants

The private placement warrants were initially recognized as a liability in connection with the Business Combination on September 1, instruments include investments2021. The following summarizes the changes in mutual funds invested in government securities and Public Warrants. Thethe Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers or brokers, and other similar sources to determine thes private placement warrant liabilities, which are measured at fair value of its investments.on a recurring basis using significant unobservable inputs (Level 3) during the respective periods:

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2022

 

 

2021

 

Beginning balance

 

$

9,705

 

 

$

0

 

Change in fair value of private placement warrants included in net income

 

 

(2,175

)

 

 

0

 

Ending balance

 

$

7,530

 

 

$

0

 

The fair value of the Public Warrants issued in connection withprivate placement warrants is estimated using the Public OfferingBlack-Scholes-Merton option-pricing model based on the following key assumptions and Private Placement Warrants were initially and subsequently measured at fair valuesignificant inputs as of the March 31, 2022 valuation date:

Volatility

 

 

47.00

%

Stock price

 

$

5.03

 

Expected life of the options to convert

 

 

4.419

 

Risk-free rate

 

 

2.43

%

Dividend yield

 

 

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 three months ended March 31, 2021, the Company recognized a non-cash gain resulting from a decrease in the fair value of liabilities of approximately $8.4 million presented as change in fair value of derivative liabilities on the accompanying unaudited condensed 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

18


SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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.term.

Risk-Free Interest Rate: The dividendrisk-free interest rate is estimated based on the historical rate,U.S. Treasury zero-coupon yield curve on the valuation date for a maturity similar to the expected remaining life of the warrants.

Expected Dividend Yield: The expected dividend yield assumption considers that we have not historically paid dividends and we do not expect to pay dividends in the foreseeable future.

There were 0 transfers between Levels 1, 2, and 3 during the three months ended March 31, 2022 and 2021.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 18


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 11. 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 Business Combination, our Class A common stock and warrants began trading on the New York Stock Exchange (“NYSE”) under the symbols “OPAD” and “OPAD WS,” respectively. Pursuant to the Company’s charter, the Company anticipates remainingis authorized to issue 2,000,000,000 shares of Class A common stock, par value $0.0001 per share. As of March 31, 2022, we had 229,976,830 shares of Class A common stock issued and outstanding.

Prior to the Business Combination, Old Offerpad had outstanding shares of Series A, Series A-1, Series A-2, Series B and Series C convertible preferred stock (collectively, “Preferred Stock”). Upon the Closing of the Business Combination, each share of Old Offerpad’s Preferred Stock and common stock that was issued and outstanding immediately prior to the effective time of the Merger was cancelled and converted into Offerpad Solutions Inc. Class A common stock with the application of the Exchange Ratio as discussed in Note 3, Business Combination.

Additionally, we have outstanding warrants to purchase 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 9, Warrant Liabilities.

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 March 31, 2022, we had 14,816,236 million shares of Class B common stock issued and outstanding.

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 March 31, 2022, there were 0 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 each 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 March 31, 2022, there were 0 shares of preferred stock issued and outstanding.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 19


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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 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 zero.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.

NOTE 12. STOCK-BASED AWARDS

2016 Stock Plan

Prior 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 the Business Combination, whether vested or unvested, was assumed and converted into an option to purchase a number of shares of Class A common stock (rounded down to the nearest whole share) equal to the product of (i) the number of shares of Old Offerpad common stock subject to such Old Offerpad option immediately prior to the Business Combination and (ii) the Exchange Ratio, at an exercise price per share (rounded up to the nearest whole cent) equal to the quotient obtained by dividing (A) the exercise price per share of such Old Offerpad option immediately prior to the consummation of the Business Combination by (B) the Exchange Ratio. Stock option activity prior to the Business Combination was retroactively adjusted to reflect this conversion.

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 become available for issuance under the 2021 Plan.

In connection with the completion of the Business Combination and the adoption of the 2021 Plan, no additional awards will be granted under the 2016 Plan.

2021 Equity Incentive Plans

In connection with the Business 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 were 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 lesser of (i) a number of shares such that the aggregate number of shares of Class A common stock available for grant under the 2021 Plan immediately following such increase shall be equal to 5% of the number of fully-diluted shares on the final day of the immediately preceding calendar year and (ii) such smaller number of shares of Class A common stock as is determined by the Company’s board of directors. As of March 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 close of the Business Combination, the Company’s board of directors approved the Offerpad Solutions Inc. 2021 Employee Stock Purchase Plan (“ESPP”). There are 2,633,322 shares of Class A common stock initially reserved for issuance under the ESPP. The number of shares of the Company’s Class A common stock available 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 lesser of (a) a number of shares such that the aggregate number of shares of Class A 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 March 31, 2022, 0 shares have been issued under the ESPP.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 20


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Stock Options

The following table provides quantitative information regarding Level 3summarizes stock option activity during the three months ended March 31, 2022:

 

 

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, 2021

 

 

25,576

 

 

$

0.73

 

 

 

6.82

 

 

$

137,170

 

Granted

 

 

949

 

 

 

5.11

 

 

 

 

 

 

 

Exercised

 

 

(5,823

)

 

 

0.50

 

 

 

 

 

 

 

Forfeited, canceled or expired

 

 

(265

)

 

 

1.17

 

 

 

 

 

 

 

Outstanding as of March 31, 2022

 

 

20,437

 

 

 

1.00

 

 

 

6.63

 

 

 

82,470

 

Exercisable as of March 31, 2022

 

 

14,023

 

 

 

0.68

 

 

 

5.83

 

 

 

60,983

 

Vested and expected to vest as of March 31, 2022

 

 

20,437

 

 

 

1.00

 

 

 

6.63

 

 

 

82,470

 

The Company granted stock option awards during the three months ended March 31, 2022 with a service vesting condition that is generally four years. The assumptions used in the Black-Scholes-Merton option pricing model to determine the fair value measurements inputs at their measurement datesof stock option awards granted during the three months ended March 31, 2022 are as follows:

Expected term (in years)

6.25

Risk-free interest rate

1.63%

Expected volatility

57.8%

Dividend yield

0

Fair value on grant date

$5.11

As of March 31, 2022, the Company had $5.4 million of unrecognized stock-based compensation expense related to unvested stock options.

Restricted Stock Units

The Company granted RSUs with service vesting conditions during the three months ended March 31, 2022 to employees and non-employee members of our board of directors. The vesting period for RSUs granted to employees is generally three years and the warrants: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.

   As of December 31, 2020  As of March 31, 2021 

Volatility

   21.75  24.25

Stock price

  $11.00  $10.11 

Expected life of the options to convert

   5.647   5.297 

Risk-free rate

   0.469  0.980

Dividend yield

   0.00  0.00

The following table provides quantitative Level 3 fair value measurement inputs at their measurement datessummarizes RSU award activity during the three months ended March 31, 2022:

 

Number of
RSUs
(in thousands)

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2021

 

203

 

$

7.88

 

Granted

 

1,537

 

 

5.11

 

Vested and settled

 

0

 

 

0

 

Forfeited

 

0

 

 

0

 

Outstanding as of March 31, 2022

 

1,740

 

 

5.43

 

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 21


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

As of March 31, 2022, 29,235 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 March 31, 2022, the forward purchase agreements:Company had $8.4 million of unrecognized stock-based compensation expense related to unvested RSUs.

Performance-Based Restricted Stock Units

   As of December 31, 2020  As of March 31, 2021 

Risk-free rate

   0.093  0.037

Term

   0.647   0.297 

The changeCompany granted PSUs during the three months ended March 31, 2022, which include both a service vesting condition and a performance vesting condition that is associated with the share price of the Company’s Class A common stock. Subject to the employee’s continued employment or service through the end of the performance period, the PSUs will vest based on the achievement of pre-determined price per share goals over the performance period calculated based on the average price per share over any 60 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 three years. If the average price per share does not meet the minimum price per share goal as of the last day of the performance period, the PSUs automatically will be forfeited and terminated without consideration.

The assumptions used in the Monte Carlo simulation model to determine the fair value of the derivativePSU awards granted during the three months ended March 31, 2022 are as follows:

Risk-free interest rate

1.47%

Expected volatility

60.0%

Dividend yield

0

Fair value on grant date

$5.11

The following summarizes PSU award activity during the three months ended March 31, 2022:

 

Number of
PSUs
(in thousands)

 

Weighted
Average
Grant Date
Fair Value

 

Outstanding as of December 31, 2021

 

0

 

$

0

 

Granted

 

2,115

 

 

4.72

 

Vested

 

0

 

 

0

 

Forfeited

 

0

 

 

0

 

Outstanding as of March 31, 2022

 

2,115

 

 

4.72

 

As of March 31, 2022, the Company had $9.7 million of unrecognized stock-based compensation expense related to unvested PSUs.

Stock-based Compensation Expense

The following details stock-based compensation expense for the respective periods:

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2022

 

 

2021

 

Sales, marketing and operating

 

$

348

 

 

$

172

 

General and administrative

 

 

1,139

 

 

 

319

 

Technology and development

 

 

141

 

 

 

123

 

Stock-based compensation expense

 

$

1,628

 

 

$

614

 

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 22


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 13. 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 a 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 Company is the primary beneficiary as it has the power to control the activities that most significantly impact the SPEs’ economic performance and the obligation 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 condensed consolidated financial statements.

The following summarizes the assets and liabilities utilizing Level 3 measurementsrelated to the VIEs as of the respective period ends:

 

 

March 31,

 

 

December 31,

 

($ in thousands)

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Restricted cash

 

$

37,591

 

 

$

24,616

 

Accounts receivable

 

 

19,909

 

 

 

4,845

 

Inventory

 

 

871,511

 

 

 

1,132,571

 

Prepaid expenses and other current assets

 

 

3,482

 

 

 

2,871

 

Total assets

 

$

932,493

 

 

$

1,164,903

 

Liabilities

 

 

 

 

 

 

Accounts payable

 

$

5,199

 

 

$

2,810

 

Accrued and other current liabilities

 

 

2,606

 

 

 

3,537

 

Secured credit facilities and notes payable, net - current portion

 

 

785,551

 

 

 

1,026,196

 

Total liabilities

 

$

793,356

 

 

$

1,032,543

 

NOTE 14. 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:

 

 

Three Months Ended March 31,

 

(In thousands, except per share data)

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

40,988

 

 

$

(233

)

Denominator:

 

 

 

 

 

 

Weighted average common shares outstanding, basic

 

 

240,120

 

 

 

58,567

 

Dilutive effect of stock options (1)

 

 

19,487

 

 

 

0

 

Dilutive effect of warrants (1)

 

 

0

 

 

 

0

 

Dilutive effect of preferred stock (1)

 

 

0

 

 

 

0

 

Weighted average common shares outstanding, diluted

 

 

259,607

 

 

 

58,567

 

Net income (loss) per share, basic

 

$

0.17

 

 

$

(0.00

)

Net income (loss) per share, diluted

 

$

0.16

 

 

$

(0.00

)

Anti-dilutive securities excluded from diluted income (loss) per share:

 

 

 

 

 

 

Anti-dilutive stock options (1)

 

 

949

 

 

 

27,913

 

Anti-dilutive restricted stock units

 

 

1,710

 

 

 

0

 

Anti-dilutive performance-based restricted stock units

 

 

2,115

 

 

 

0

 

Anti-dilutive warrants (1)

 

 

21,783

 

 

 

1,887

 

Anti-dilutive preferred stock (1)

 

 

0

 

 

 

138,612

 

________________

(1)
Due to the net loss during the three months ended March 31, 2021, 0 dilutive securities were included in the calculation of diluted loss per share because they would have been anti-dilutive.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 23


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

NOTE 15. INCOME TAXES

The Company determines its interim tax provision by applying the estimated effective income tax rate expected to be applicable for the full fiscal year to its income (loss) before income taxes for the period. The Company’s effective tax rate is dependent on several factors, such as tax rates in state jurisdictions and the relative amount of income the Company earns in the respective jurisdiction.

The Company’s effective tax rate was 4.4% and (5.0)% for the three months ended March 31, 2022 and 2021, respectively. The Company’s effective tax rate during the three months ended March 31, 2022 differed from the federal statutory rate of 21% primarily due to net operating loss carryforwards, stock-based compensation, changes in the fair value of warrant liabilities and state taxes. The valuation allowance recorded against our net deferred tax assets was $33.3 million as of March 31, 2022.

As of March 31, 2022, we continue to have a full valuation allowance recorded against all deferred tax assets and will continue to evaluate our valuation allowance in future periods for any change in circumstances that causes a change in judgment about the realizability of the deferred tax assets. The amount of the deferred tax assets considered realizable, however, could be adjusted in future periods if estimates of future taxable income during the carryforward period are increased, if objective negative evidence in the form of cumulative losses is summarizedno longer present, and if we employ tax planning strategies in the future.

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 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.

NOTE 16. RELATED-PARTY TRANSACTIONS

LL Credit Facilities

As of March 31, 2022, we have 1 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 March 31, 2022

 

 

As of December 31, 2021

 

($ in thousands)

 

Borrowing
Capacity

 

 

Outstanding
Amount

 

 

Borrowing
Capacity

 

 

Outstanding
Amount

 

Senior secured credit facility with a related party

 

$

85,000

 

 

$

21,477

 

 

$

85,000

 

 

$

81,926

 

Mezzanine secured credit facilities with a related party

 

$

79,000

 

 

$

38,265

 

 

$

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 line of $85.0 million and $14.0 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 8, Credit Facilities and Notes Payable, 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 $65.0 million. Refer to Note 8, Credit Facilities and Notes Payable, for further details about the mezzanine facility under the LL Mezz Loan Agreement.

We paid interest for borrowings under the LL facilities of $3.0 million and $1.7 million during the three months ended March 31, 2022 and 2021, respectively.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 24


OFFERPAD SOLUTIONS INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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. We use First American’s services in the ordinary course of our home-buying and home-selling activities. We paid First American $5.7 million and $1.7 million during the three months ended March 31, 2022 and 2021, respectively, for its services, inclusive of the fees for property data services.

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:

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2022

 

 

2021

 

Mr. Bair’s brother 1

 

$

303

 

 

$

240

 

Mr. Bair’s brother 2

 

 

286

 

 

 

226

 

Mr. Bair’s sister-in-law

 

 

30

 

 

 

32

 

 

 

$

619

 

 

$

498

 

During the three months ended March 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

 

 

 

0

 

Mr. Bair’s brother 2

 

 

79,404

 

 

 

119,107

 

 

 

0

 

Mr. Bair’s sister-in-law

 

 

3,000

 

 

 

0

 

 

 

6,000

 

 

 

 

166,771

 

 

 

245,658

 

 

 

6,000

 

NOTE 17. COMMITMENTS AND CONTINGENCIES

Derivative liabilities at Level 3 at December 31, 2020

  $22,170,000 

Change in fair value of derivative liabilities

   (5,739,000
  

 

 

 

Derivative liabilities at Level 3 at March 31, 2021

  $16,431,000 
  

 

 

 

Note 9—Subsequent EventsHomes Purchase Commitments

On April 21, 2021 a stockholder complaintAs of March 31, 2022, the Company was filedunder contract to purchase 2,975 homes for an aggregate purchase price of $1,005.4 million.

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 Supreme Court of the State of New York against us and the individual members of our Board, captioned Muir v. Supernova Partners AcquisitionUnited States. Refer to Note 6, Leases, for further details.

NOTE 18. SUBSEQUENT EVENTS

The Company Inc., et al. (the “Muir Complaint”). The complaint assertshas determined that the individual members of our Board breached their fiduciary duties, andthere have been no events that we aided and abetted that breach of fiduciary duties, by allegedly failing to disclose material information and disclosing materially misleading information in the Proxy Statement, including allegations relating to the background of the Merger, financial projections, and analyses of financial advisors. We have also received certain demands from stockholders making similar allegations. We believe that the estimated loss associated with the Muir Complaint is not reasonably probable or estimable.

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 eventsoccurred that would require recognition in the condensed consolidated financial statements or additional disclosure have been recognized or disclosed.herein.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 25

19


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

References in this report (the “Quarterly Report”) to the “Company,” “Supernova Partners Acquisition Company, Inc.,” “Supernova,” “our,” “us” or “we” refer to Supernova Partners Acquisition Company, Inc. The following discussion and analysis provides information that Offerpad’s management believes is relevant to an assessment and understanding of the Company’s financial condition andOfferpad’s consolidated results of operations and financial condition. The discussion should be read in conjunctiontogether with the unaudited interim condensed consolidated financial statements and theaccompanying notes thereto contained elsewhereincluded in Part I, Item 1 of this Quarterly Report. Certain information containedReport on Form 10-Q and our audited consolidated financial statements and accompanying notes included in Item 8 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 7, 2022.

This discussion and analysis set forth below includesmay contain forward-looking statements based upon current expectations that involve risks and uncertainties.

Cautionary See “Cautionary Note Regarding Forward-Looking Statements

This QuarterlyStatements” in this Form 10-Q. 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 Part I, Item 1A of Offerpad’s Annual Report on Form 10-Q includes “forward-looking statements” within10-K for the meaningfiscal year ended December 31, 2021.

Unless the context otherwise requires, references to “we”, “our” and “the Company” refer to the business and operations of Section 27AOfferPad, Inc. and its consolidated subsidiaries prior to the Business Combination (as defined below) and to Offerpad Solutions Inc. and its consolidated subsidiaries, following the consummation of the Securities ActBusiness Combination.

Overview

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” offering, sellers can access our website or mobile app 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” 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 “Express” cash offer to the seller, thereby providing optionality of 1933,process and certainty of outcome. Our platform provides home buyers the opportunity to browse and tour homes online 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 amended (the “Securities Act”),well as access to mortgage services through one of our preferred providers. We believe by offering both “Express” and Section 21E“Flex” 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 the Securities Exchange Act of 1934, as amended (the “Exchange Act”). modern consumers.

We have based these forward-looking statementscreated a pioneering iBuying company and leading on-demand real estate marketplace that has transacted on homes representing approximately $6.8 billion of aggregate revenue since inception in 2015 through March 31, 2022. Our significant growth relative to our current expectationslimited capital invested is testament to our efficiency and projections about future events. These forward-looking statements are subjectresults driven culture, increasing our total contribution margin after interest (per home sold) from approximately $4,900 in 2019 to knownapproximately $9,000 in 2020 and unknown risks, uncertaintiesapproximately $22,900 in 2021. 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 assumptions about us that may causerefine our actual results, levelsvaluation automation and logistical operations before we scale into additional markets. Our contribution margin after interest across markets, which was approximately 7% company-wide in 2021, is a testament to our understanding of activity, performance or achievementshow to be materially different from any future results, levelsgrow efficiently and enter into new markets, improve unit economics and increase operating leverage.

As of activity, performance or achievements expressed or implied by such forward-looking statements. All statements, other than statementsMarch 31, 2022, Offerpad operated in over 1,700 cities and towns in 24 metropolitan markets across 16 states.

As we expand further into our existing markets, launch new markets, and develop a wide range of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussionnew ancillary services, we look forward to bringing our mission of providing your best way to buy and Analysis of Financial Conditionsell a home to even more homeowners and Results of Operations” regardingprospective home purchasers across the Company’s financial position, business strategy and the plans and objectives of management for future operations, are 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 SEC filings.country.

OverviewThe Business Combination

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 entitiesOn September 1, 2021 (the “Business Combination”“Closing Date”).

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 offeringtransactions contemplated by the Agreement and Plan of 40,250,000 unitsMerger, dated March 17, 2021 (the “Units”“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 respect toand into Old Offerpad, with Old Offerpad becoming a wholly owned subsidiary of Supernova (the “Business Combination” and, collectively with the Class A common stock includedother transactions described in the Units being offered,Merger Agreement, the “Public Shares”“Transactions”), 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,.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 26


On the Closing Date, and incurring offering costs of approximately $22.8 million, inclusive of approximately $14.1 million in deferred underwriting commissions.

Simultaneouslyconnection with the closing of the initial public offering, we consummatedTransactions, Supernova changed its name to Offerpad Solutions Inc. (“Offerpad Solutions”).

We accounted for the 6,700,000 private placement warrants atBusiness Combination as a pricereverse recapitalization whereby Old Offerpad was determined as the accounting acquirer and Supernova as the accounting acquiree. While Supernova was the legal acquirer in the Business Combination, because Old Offerpad was determined as the accounting acquirer, the historical financial statements of $1.50 per private placement warrant toOld Offerpad became the Sponsor, generating proceedshistorical financial statements of approximately $10.1 million.the combined company, upon the consummation of the Business Combination. Accordingly, Offerpad Solutions, as the parent company of the combined business, is the successor SEC registrant, meaning that our financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC.

The Business Combination had a significant impact on our reported financial position and results as a result of the reverse recapitalization. One of the most significant changes in our reported financial position and results was an increase in cash and cash equivalents. Upon the closing of the initial public offeringBusiness Combination, 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 in proceeds from the private placement $402.5(“PIPE Investment”) and $50.0 million ($10.00 per Unit)in proceeds from the execution of the net proceedsforward purchase agreements pursuant to which certain affiliates 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 unableSupernova agreed to complete a Business Combination within 24 months frompurchase, upon the closing of the Initial Public Offering, or October 23, 2022 (as such period may be extended pursuant to the CertificateTransactions, an aggregate of Incorporation, the “Combination Period”), we will (1) cease all operations except for the purpose5,000,000 shares 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,

20


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

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 ofOfferpad Solutions Class A common stock and an aggregate of 1,666,667 warrants to be issued pursuantpurchase 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 to purchase one share of Offerpad Solutions Class A common stock (“Forward Purchase Agreements”). This was partially offset by transaction costs for the PIPE Subscription Agreements have not been registered underBusiness Combination of approximately $51.2 million, which principally consisted of advisory, legal and other professional fees, and $63.4 million of cumulative debt repayments, inclusive of accrued but unpaid interest, that were paid in conjunction with the Securities Act and will be issued in reliance onclosing of the availability of an exemption from such registration.Business Combination.

In addition,Additionally, in connection with the executionBusiness Combination, we recognized a $26.5 million warrant liability on our condensed consolidated balance sheet for the fair value of the Merger Agreement we entered into a Sponsor Support Agreement with our sponsor, Offerpadpublic warrants and our directorsprivate placement warrants that were previously issued by Supernova and officers.

The proposedassumed in the Business Combination, is expected to be consummated after receipt ofalong with 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 March 31, 2021 related to our formation, the preparation for the initial public offering, and sinceadditional private placement warrants that were issued upon 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 three months ended March 31, 2021, we had a net income of approximately $5.2 million, which consisted of a gain of approximately $8.4 million from changes in fair value of derivative liabilities and approximately $96,000 in investment income on the Trust Account, offset by approximately $3.3 million in general and administrative expenses, approximately $49,000 in franchise tax expenses, and approximately $13,000 in income tax expenses.

As a result of the restatements to the financial statements described in the Form 10-K/A, we classify the warrants and forward purchasing agreements issued in connection with our Initial Public Offering and Private Placement as derivative liabilities at their fair value and adjust the instrumentswarrants to fair value at each reporting period. TheseThe warrant liabilities are subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our unaudited condensed statementconsolidated statements of operations. As a result of the recurring fair value measurement, our future financial statements and results of operations may fluctuate quarterly, based on factors that are outside of our control. Due to the recurring fair value measurement, we expect that we will recognize non-cash gains or losses on the warrants each reporting period and that the amount of such gains or losses could be material.

As a result of the Business Combination, we became an SEC-registered and NYSE listed company, which has required us to hire additional personnel and implement procedures and processes to address public 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.

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. The “Express” cash offer is the 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 Offerpad “Flex”, 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 Offerpad “Flex”, our customers essentially dual track a sale by utilizing both our personalized listing services while also having our initial cash offer as a backup option, typically for up to 60 days.

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 we purchase through our “Express” cash offer are our primary source of revenue; however, we expect greater contribution from our “Flex” offering as we drive expansion of this offering and from ancillary services in the future as our full product offering expands and matures.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 27


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 app 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 Offerpad Flex, once a customer sells a home directly to a buyer using Flex, we earn a service fee, typically as a percentage of the sales price of the home.

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 increase 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

Market Penetration in Existing Markets

Residential real estate is one of the largest industries with roughly $2.5 trillion in value of homes transacted in 2021 and is highly fragmented with over 100,000 brokerages, according to the National Association of Realtors (NAR) as of 2020. In 2021, we estimate that we captured roughly 0.9% market share across our then active 21 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 the first quarter of 2022, we expanded into three additional markets, bringing our total markets served to 24 as of March 31, 2022.

Our 24 markets covered roughly 25% of the 6.9 million homes sold in 2021 in the United States. Given this current coverage, we believe there is significant opportunity to both increase market penetration in our existing markets and to grow our business

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 28


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 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 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.

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” offering 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” offering, 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 solutions through a brokerage model working with third-party lending partners.
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 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 business alongside the Express business, optimizing customer engagement and increasing conversion of requests for home purchases; and
Introducing and scaling additional ancillary services to complement our core Express and Flex 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.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 29


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

General 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.

The COVID-19 pandemic yielded an unprecedented environment that significantly impacted residential real estate transaction volume. In response to the in-person activity limitations that were imposed by governmental authorities, we paused purchasing homes in March 2020. Once we became comfortable with our ability to purchase homes safely and had a better understanding of the impact of shelter-in-place orders, we resumed purchasing homes in May 2020 across all of our markets and increased our acquisition pace in subsequent periods. After experiencing sequential, quarter-over-quarter declines in revenue in the second and third quarters of 2020, we generated sequential, quarter-over-quarter increases in revenue in the fourth quarter of 2020, during each quarter in 2021, and during the first quarter of 2022, reflective of our ability to manage our inventory portfolio through the pandemic and resume purchasing effectively, as well as strong levels of consumer demand in the residential real estate market. Although we experienced strong financial and operational performance during 2021, and during the first quarter of 2022,the duration and magnitude of the impact of the COVID-19 pandemic remains unknown, and could adversely affect our business in future periods.

Further, the residential real estate market is also impacted by a variety of other economic factors, including uncertainty around the interest rate environment. 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. While mortgage interest rates have recently increased during the first quarter of 2022, mortgage interest rates remain low when compared to most historical periods. If mortgage financing otherwise is less available to home buyers due to an increase in interest rates, it could result in a decline in the demand for our homes and the services offered by our platform.

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.

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 software engineering and data science teams focus on underwriting accuracy, portfolio health, and workflow optimization. This allows us to properly 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.

We are 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 have increased our scale and improved our workflow optimization, combined with favorable housing market conditions across our markets during 2021, our average inventory holding period of homes sold improved from 138 days in 2016 to 95 days in both 2019 and 2020, and 76 days in 2021, reducing our pricing risk from holding aged inventory.
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 limits pricing exposure to homes previously acquired and not under contract to be resold. Typically, a large portion of our inventory is under contract to be sold at any given time.
Our listed homes are in market-ready and move-in ready condition following the repairs and renovations we conduct.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 30


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 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 historically is primarily comprised of net income to us from the investment related to our OPHL operations. 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.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 31


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.

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:

 

 

Three Months Ended March 31,

 

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

 

2022

 

 

2021

 

Gross profit (GAAP)

 

$

132,142

 

 

$

33,537

 

Gross margin

 

 

9.6

%

 

 

11.8

%

Homes sold

 

 

3,602

 

 

 

1,018

 

Gross profit per home sold

 

$

36.7

 

 

$

32.9

 

Adjustments:

 

 

 

 

 

 

Inventory impairment - current period (1)

 

 

434

 

 

 

104

 

Inventory impairment - prior period (2)

 

 

(1,114

)

 

 

(138

)

Interest expense capitalized (3)

 

 

4,278

 

 

 

606

 

Adjusted gross profit

 

$

135,740

 

 

$

34,109

 

Adjusted gross margin

 

 

9.9

%

 

 

12.0

%

Adjustments:

 

 

 

 

 

 

Direct selling costs (4)

 

 

(31,854

)

 

 

(8,036

)

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

 

 

(1,991

)

 

 

(461

)

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

 

 

(819

)

 

 

(193

)

Other income (8)

 

 

4

 

 

 

241

 

Contribution profit

 

$

101,080

 

 

$

25,660

 

Contribution margin

 

 

7.4

%

 

 

9.0

%

Homes sold

 

 

3,602

 

 

 

1,018

 

Contribution profit per home sold

 

$

28.1

 

 

$

25.2

 

Adjustments:

 

 

 

 

 

 

Interest expense capitalized (3)

 

 

(4,278

)

 

 

(606

)

Interest expense on homes sold - current period (9)

 

 

(5,312

)

 

 

(1,117

)

Interest expense on homes sold - prior period (10)

 

 

(3,443

)

 

 

(446

)

Contribution profit after interest

 

$

88,047

 

 

$

23,491

 

Contribution margin after interest

 

 

6.4

%

 

 

8.3

%

Homes sold

 

 

3,602

 

 

 

1,018

 

Contribution profit after interest per home sold

 

$

24.4

 

 

$

23.1

 

(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 Condensed 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 Condensed Consolidated Statements of Operations.
(8)
Other income principally represents income earned from the sale of certain fixed assets.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 32


(9)
Represents both senior and mezzanine interest expense incurred on homes sold in the period presented and expensed to interest expense on the Condensed 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 Condensed 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.

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:

 

 

Three Months Ended March 31,

 

(in thousands, except percentages, unaudited)

 

2022

 

 

2021

 

Net income (loss) (GAAP)

 

$

40,988

 

 

$

(233

)

Change in fair value of warrant liabilities

 

 

(5,664

)

 

 

 

Adjusted net income (loss)

 

$

35,324

 

 

$

(233

)

Adjusted net income (loss) margin

 

 

2.6

%

 

 

(0.1

)%

Adjustments:

 

 

 

 

 

 

Interest expense

 

 

7,196

 

 

 

1,918

 

Amortization of capitalized interest (1)

 

 

4,278

 

 

 

606

 

Income tax expense

 

 

1,899

 

 

 

 

Depreciation and amortization

 

 

119

 

 

 

130

 

Amortization of stock-based compensation

 

 

1,628

 

 

 

613

 

Adjusted EBITDA

 

$

50,444

 

 

$

3,034

 

Adjusted EBITDA margin

 

 

3.7

%

 

 

1.1

%

(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.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 33


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 three months ended March 31, 2022 compared to the three months ended March 31, 2021:

 

 

Three Months Ended March 31,

 

 

(in thousands, except percentages)

 

2022

 

 

2021

 

 

$ Change

 

 

% Change

 

 

Revenue

 

$

1,373,837

 

 

$

283,972

 

 

$

1,089,865

 

 

 

383.8

%

 

Cost of revenue

 

 

1,241,695

 

 

 

250,435

 

 

 

991,260

 

 

 

395.8

%

 

Gross profit

 

 

132,142

 

 

 

33,537

 

 

 

98,605

 

 

 

294.0

%

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, marketing and operating

 

 

69,888

 

 

 

25,076

 

 

 

44,812

 

 

 

178.7

%

 

General and administrative

 

 

14,657

 

 

 

4,734

 

 

 

9,923

 

 

 

209.6

%

 

Technology and development

 

 

3,182

 

 

 

2,283

 

 

 

899

 

 

 

39.4

%

 

Total operating expenses

 

 

87,727

 

 

 

32,093

 

 

 

55,634

 

 

 

173.4

%

 

Income (loss) from operations

 

 

44,415

 

 

 

1,444

 

 

 

42,971

 

 

N.A.

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liabilities

 

 

5,664

 

 

 

 

 

 

5,664

 

 

 

100.0

%

 

Interest expense

 

 

(7,196

)

 

 

(1,918

)

 

 

(5,278

)

 

 

275.2

%

 

Other income, net

 

 

4

 

 

 

241

 

 

 

(237

)

 

 

(98.3

)%

 

Total other expense

 

 

(1,528

)

 

 

(1,677

)

 

 

149

 

 

 

(8.9

)%

 

Income (loss) before income taxes

 

 

42,887

 

 

 

(233

)

 

 

43,120

 

 

N.A.

 

 

Income tax expense

 

 

(1,899

)

 

 

 

 

 

(1,899

)

 

 

100.0

%

 

Net income (loss)

 

$

40,988

 

 

$

(233

)

 

$

41,221

 

 

N.A.

 

 

Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021

Revenue

Revenue increased by $1,089.9 million, or 383.8%, to $1,373.8 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to higher sales volumes, and a higher average sales price. We sold 3,602 homes during the three months ended March 31, 2022 compared to 1,018 homes during the three months ended March 31, 2021, representing an increase of 254%. Additionally, the average resale home price increased by 37% from $278,000 in the three months ended March 31, 2021 to $381,000 in the three months ended March 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 strong consumer demand across our markets in the three months ended March 31, 2022.

Cost of Revenue and Gross Profit

Cost of revenue increased by $991.3 million, or 395.8%, to $1,241.7 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. This increase was primarily attributable to higher sales volumes, and a higher average home acquisition price.

Gross profit margins decreased to 9.6% for the three months ended March 31, 2022 compared to 11.8% for the three months ended March 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 three months ended March 31, 2022 compared to the three months ended March 31, 2021. This decrease was primarily due to the impact of our risk mitigation efforts in response to the COVID-19 pandemic in 2020, which resulted in more conservative acquisition underwriting through the first half of 2021 to account for the increased market uncertainty.

Sales, Marketing and Operating

Sales, marketing and operating expense increased by $44.8 million, or 178.7%, to $69.9 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to higher real estate agent commissions paid to home buyers’ agents driven by the significant increase in homes sold, and higher employee compensation costs associated with increased employee headcount. This increase was also due to a $7.3 million increase in advertising expense due to an increase in the number of markets due to our strategic market expansion plans.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 34


General and Administrative

General and administrative expense increased by $9.9 million, or 209.6%, to $14.7 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to higher employee compensation costs associated with increased employee headcount as a result of the current and expected future growth in the business. The increase was also due to additional expenses incurred as a public company, including costs associated with obtaining directors’ and officers’ liability insurance as a result of the Business Combination on September 1, 2021.

Technology and Development

Technology and development expense increased by $0.9 million, or 39.4%, to $3.2 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to higher employee compensation costs associated with increased employee headcount as a result of the current and expected future growth in the business.

Change in Fair Value of Warrant Liabilities

Change in fair value of warrant liabilities for the three months ended March 31, 2022 represents a $5.7 million gain that was recorded as a result of the fair value adjustment of the warrant liabilities that were assumed in connection with the Business Combination.

Interest Expense

Interest expense increased by $5.3 million, or 275.2%, to $7.2 million for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The increase was primarily attributable to an increase in the average outstanding balance of our senior secured credit facilities due to an increase in real estate inventory funded by the facilities, which was partially offset by a reduction in the weighted average interest rate associated with these secured facilities.

Other Income, Net

Other income, net was nominal during the three months ended March 31, 2022. Other income, net during the three months ended March 31, 2021 principally represents a gain from the disposal of fixed assets.

Income Tax Expense

Our effective tax rate was 4.4% and (5.0)% for the three months ended March 31, 2022 and 2021, respectively. Our effective tax rate during the three months ended March 31, 2022 differed from the federal statutory rate of 21% primarily due to changes in the valuation allowance, stock-based compensation, changes in the fair value of warrant liabilities and state taxes.

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 March 31, 2022, we had cash and cash equivalents of $198.2 million and had a total undrawn borrowing capacity of $881.2 million, consisting of $734.4 million under our senior secured credit facilities and $146.8 million under our mezzanine secured credit facilities (as described further below).

We generated net income during the three months ended March 31, 2022 and during the year ended December 31, 2021. However, we have incurred losses each year from inception through December 31, 2020 and may incur additional losses in the future. We continue 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 expand into new markets.

We expect our working capital requirements to continue to increase in the immediate future, 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 arrangements, will be sufficient to meet our short-term and long-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 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 and rising interest rates 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, or may require us to agree to unfavorable terms, and our existing stockholders may experience significant dilution.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 35


Financing Activities

Our financing activities include borrowing under our senior secured credit facilities, mezzanine secured credit facilities and new issuances of equity. 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 primarily 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. Some of our 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.

Senior Secured Credit Facilities

The following summarizes certain details related to our senior secured credit facilities (in thousands, except interest rates):

As of March 31, 2022

Borrowing
Capacity

 

Outstanding
Amount

 

Weighted-
Average
Interest Rate

 

End of
Revolving / Withdrawal
Period

 

Final
Maturity
Date

Facility with financial institution 1

$

400,000

 

$

205,752

 

 

2.70

%

August 2022

 

August 2022

Facility with financial institution 2

 

400,000

 

 

213,841

 

 

2.64

%

September 2023

 

March 2024

Facility with financial institution 3

 

500,000

 

 

209,500

 

 

2.80

%

December 2023

 

December 2024

Facility with a related party

 

85,000

 

 

21,477

 

 

6.00

%

December 2022

 

December 2022

Senior secured credit facilities

$

1,385,000

 

$

650,570

 

 

 

 

 

 

As of March 31, 2022, we had four senior secured credit facilities that we use to fund the purchase of homes and build our inventory, three with separate financial institutions and one with a related party, which holds more than 5% of our Class A common stock. Borrowings on the senior secured credit facilities with financial institutions accrue interest at a rate based on a LIBOR reference rate plus a margin of 2.50%. Borrowings on the senior secured credit facility with a related party accrue interest at a rate based on a LIBOR reference rate plus a margin of 4.00%, with a minimum interest rate of 6.00%. The senior secured credit facility with a related party provides increased flexibility regarding property eligibility and greater funding operation efficiencies.

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 both the related senior secured credit facility and the mezzanine secured credit facility.

Mezzanine Secured Credit Facilities

In addition to the senior secured credit facilities, we have utilized mezzanine secured credit facilities which are structurally and contractually subordinated to the related senior secured credit facilities. The following table summarizes certain details related to our mezzanine secured credit facilities (in thousands, except interest rates):

As of March 31, 2022

Borrowing
Capacity

 

Outstanding
Amount

 

Weighted-
Average
Interest Rate

 

End of
Revolving / Withdrawal
Period

 

Final
Maturity
Date

Facility 1 with a related party

$

65,000

 

$

34,417

 

 

11.00

%

August 2022

 

August 2022

Facility with third-party lender 1

 

90,000

 

 

49,346

 

 

9.50

%

September 2023

 

March 2024

Facility with third-party lender 2

 

112,500

 

 

47,137

 

 

9.50

%

December 2023

 

December 2024

Facility 2 with a related party

 

14,000

 

 

3,848

 

 

11.00

%

December 2022

 

December 2022

Mezzanine secured credit facilities

$

281,500

 

$

134,748

 

 

 

 

 

 

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 36


As of March 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 on the mezzanine secured credit facilities with third-party lenders accrue interest at a fixed rate of 9.50%. Borrowings on the mezzanine secured credit facilities with a related party accrue interest at a fixed rate of 11.00%. The mezzanine secured credit facilities with a related party provide increased flexibility regarding property eligibility and greater funding operation efficiencies.

Borrowings under our mezzanine secured credit facilities are collateralized by a second lien on the real estate inventory financed by the relevant 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. When we resell a home, the proceeds are used to reduce the corresponding outstanding balance under both the related senior secured credit facility and the mezzanine secured credit facility.

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 us 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 March 31, 2022, we were in compliance with all covenants.

Cash Flows

The following summarizes our cash flows for the three months ended March 31, 2022 and 2021:

 

 

Three Months Ended March 31,

 

($ in thousands)

 

2022

 

 

2021

 

Net cash provided by (used in) operating activities

 

$

279,827

 

 

$

(48,112

)

Net cash (used in) provided by investing activities

 

 

(381

)

 

 

1,042

 

Net cash (used in) provided by financing activities

 

 

(238,121

)

 

 

25,388

 

Net change in cash, cash equivalents and restricted cash

 

$

41,325

 

 

$

(21,682

)

Operating Activities

Net cash provided by (used in) operating activities was $279.8 million and $(48.1) million for the three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022, net cash provided by operating activities was primarily due to a $260.1 million decrease in real estate inventory as a result of sales volumes increasing at a higher rate compared to home acquisitions, as well as net income of $41.0 million. This was partially offset by a $15.6 million increase in accounts receivable due to an increased number of home sales pending receipt of cash from the title company as of March 31, 2022.

For the three months ended March 31, 2021, net cash used in operating activities was primarily due to a $48.8 million increase in real estate inventory as a result of the changeexecution of our growth plan, as well as favorable housing market conditions across our markets.

Investing Activities

Net cash (used in) provided by investing activities was $(0.4) million and $1.0 million during the three months ended March 31, 2022 and 2021, respectively. Net cash used in fair valueinvesting activities during the three months ended March 31, 2022 represents purchases of derivative liabilities was a decrease of approximately $8.4 million.property and equipment.

Liquidity and Going Concern

As ofNet cash provided by investing activities during the three months ended March 31, 2021 we had approximately $0.8 million in cash and a working capital deficit of approximately $2.1 million (not taking into account approximately $67,000 of taxes that may be paid using investment income from the Trust Account). The Company has incurred and expects to incur significant costs in pursuit of its financing and acquisition plans. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued. There is no assurance that the Company’s plans to consummate a Business Combination or raise additional funds will be successful within the Combination Period. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

21


Our 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 unaudited condensed financial statements. The unaudited condensed 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 11,500,000 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 split 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 full by the underwriters, so that the Founder Shares would represent 20.0% of our 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 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: (i) one year after the completion of the initial Business Combination or earlier if, subsequent to the initial Business Combination, the closing price of the Class A common stock equals or exceeds $12.00 per share (as adjusted 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 Class A common stock for cash, securities or other property.

Private Placement Warrants

Simultaneously with the closing 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 our Sponsor, generating proceeds of approximately $10.1 million.

Each whole private placement warrant is exercisable for one whole share of Class A common stock at a price of $11.50 per share. A portion of therepresents proceeds from sales of property and equipment of $2.0 million, which was partially offset by purchases of property and equipment of $1.0 million.

Financing Activities

Net cash (used in) provided by financing activities was $(238.1) million and $25.4 million during the salethree months ended March 31, 2022 and 2021, respectively. Net cash used in financing activities during the three months ended March 31, 2022 primarily consisted of the private placement warrants to our Sponsor$1,134.2 million of repayments of credit facilities and notes payable, which was added to the proceedspartially offset by $892.8 million of borrowings from the initial public offering heldcredit facilities and notes payable. This net decrease in the Trust Account. If we do 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 as described below) and exercisable on a cashless basis so long as they are held by our Sponsor or its permitted transferees.

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

22


Forward Purchase Agreements

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 (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, our Sponsor, a related party, agreed to loan us an aggregate of up to $300,000 to cover expenses$241.4 million was directly related to the initial public offering pursuant to a promissory note (the “Note”). This loan is non-interest bearing and payable upondecrease in inventory during the completion ofperiod.

Net cash provided by financing activities during the initial public offering. We had 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, 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 (“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. As ofthree months ended March 31, 2021 primarily consisted of $281.1 million of borrowings from credit facilities and notes payable, which was partially offset by $256.0 million of repayments of credit facilities and notes payable. This net increase in credit facility funding of $25.1 million was directly related to financing the increase in inventory during the period.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 37


Contractual Obligations and Commitments

Information regarding our contractual obligations and commitments is provided in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, we had2021.

There have been no borrowings under the Working Capital Loans.material changes in our contractual obligations and commitments since December 31, 2021 through March 31, 2022.

CommitmentsCritical Accounting Policies and ContingenciesEstimates

Registration Rights

The holders of Founder Shares, private placement warrants and warrants that may be issued upon conversion of Working Capital Loans (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), 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 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, 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 we complete a Business Combination, subject to the terms of the underwriting agreement.

Risks and Uncertainties

Our 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 onprepare our financial position, results of our operations and/or search for a target company, the specific impact is not readily determinable as of the date of these unaudited condensed financial statements. The unaudited condensedconsolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

23


Critical Accounting Policies

The preparation of unaudited condensed financial statements and related disclosures in conformityaccordance with accounting principles generally accepted in the United States requires our management toGAAP. In doing so, we must make estimates and assumptions that affect theour reported amounts of assets, liabilities, revenue and liabilities, disclosureexpenses, as well as related disclosures of contingent assets and liabilities atliabilities. To the dateextent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected. We base our estimates on experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis.

There have been no material changes to the critical accounting policies and estimates included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Our significant accounting policies and methods used in the preparation of our condensed consolidated financial statements are described in Note 2, “Summary of Significant Accounting Policies” of the unaudited condensed financial statements,Notes to Condensed Consolidated Financial Statements in Part I, Item 1, of this Quarterly Report on Form 10-Q and in the reported amountsNotes to Consolidated Financial Statements in Part II, Item 8, of income and expenses duringour Annual Report on Form 10-K for the periods reported. Actual results could materially differ from those estimates. We have identified the following as our criticalfiscal year ended December 31, 2021.

Recent Accounting Pronouncements

For a discussion of recent accounting policies:

Class A Common Stock Subject to Possible Redemption

We account for 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 controlpronouncements, see Note 2, “Summary of Significant Accounting Policies” of the holder or subjectNotes to redemption upon the occurrenceCondensed Consolidated Financial Statements in Part I, Item 1, 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 outside of our control and subject to the occurrence of uncertain future events. Accordingly, as of March 31, 2021 and December 31, 2020, 34,004,650 and 33,488,198 shares of common stock subject to possible redemption are presented as temporary equity outside of the stockholders’ equity section of the condensed balance sheets, respectively.

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 lossthis Quarterly Report 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.Form 10-Q.

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 our 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 unaudited condensed 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.

24


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 agreements as liabilities 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 agreements.

Off-Balance Sheet Arrangements

As of March 31, 2021, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

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 unaudited condensed 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 unaudited condensed 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 unaudited condensed financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market RiskRisk.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not requiredThere have been no material changes to provide the information otherwise required under this item. As of March 31, 2021, we were not subject to any market or interest rate risk. The net proceeds of the Initial Public Offering, including amounts in the Trust Account, will be invested in U.S. government securities with a maturity of 185 days or less or in money market funds that meet certain conditions under Rule 2a-7 under the Investment Company Act of 1940, as amended, that invest only in direct U.S. government treasury obligations. Due to the short-term nature of these investments, we believe there will be no associated materialour exposure to interest rate risk.

25


We have not engaged in any hedging activities since our inception, and we do not expect to engage in any hedging activities with respect to the market risk since December 31, 2021. For a discussion of our exposure to which we are exposed.market risk, refer to our market risk disclosures set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Item 4. Controls and ProceduresProcedures.

EvaluationLimitations on Effectiveness of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized,In designing and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), the effectiveness ofevaluating our disclosure controls and procedures, as of the end of the fiscal quarter ended March 31, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based uponmanagement recognizes that evaluation and in light of the SEC Staff Statement, our Certifying Officers concluded that, solely due to our misapplication of the accounting for our warrants and forward purchase agreements as liabilities, our disclosure controls and procedures were not effective as of March 31, 2021.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosureany controls and procedures, no matter how well conceiveddesigned and operated, can provide only reasonable not absolute, assurance thatof achieving the objectives of the disclosure controls and procedures are met. Further,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 must be consideredof possible controls and procedures relative to their costs. Because

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 inherent limitations in allend of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures no(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 March 31, 2022, our disclosure controls and procedures can provide absolutewere effective at the reasonable assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.level.

Restatement of Previously Issued Financial Statements

On May 25, 2021, we revised our prior position on accounting for warrants and forward purchase agreements, and restated our December 31, 2020 financial statements to reclassify the Company’s warrant and forward purchase agreements. These non-cash adjustments to the financial statements do not impact the amounts previously reported for our cash and cash equivalents or total assets.

Changes in Internal Control over Financial Reporting

There waswere no changechanges 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 fiscal quarterthree months ended March 31, 2021 covered by this Quarterly Report on Form 10-Q2022 that hashave materially affected, or isare reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the restatement of our December 31, 2020 financial statements had not yet been identified. Our plans at this time include increasing 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.reporting.

26

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 38


PART II - II—OTHER INFORMATION

None.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 currently 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 cash flows.

The outcome of litigation is inherently uncertain. If one or more legal matters were resolved against us in a reporting period for amounts above management’s expectations, our financial condition, results of operations or cash flows for that reporting period could be adversely impacted, perhaps materially.

Item 1A. Risk Factors.

The Company’s risk factors are described in Part I, Item 1A, “Risk Factors”, of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021. There have been no material changes fromto the Company’s risk factors previously disclosed insince the Company’s Annual Report on Form 10-K/A final prospectus 10-K for the Initial Public Offering as filed with the SEC on May 25,fiscal year ended December 31, 2021.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On September 9, 2020,Sales of Unregistered Equity Securities

None.

Purchase of Equity Securities

We did not repurchase shares of 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. Such securities were issued pursuant toClass A common stock during the exemption from registration contained in Section 4(a)(2) of the Securities Act. 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. 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.three months ended March 31, 2022.

On October 23, 2020, we consummated the Initial Public Offering of 40,250,000 Units, including 5,250,000 Over-Allotment Units. The Units sold were sold at an offering price of $10.00 per unit, generating total gross proceeds of $402.5 million. J.P. Morgan Securities LLC and Jefferies LLC acted as representatives for the several underwriters. The securities in the offering were registered under the Securities Act on a registration statement on Form S-1 (No. 333-249053). The Securities and Exchange Commission declared the registration statement effective on October 20, 2020.

Simultaneous with the consummation of the Initial Public Offering and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 6,700,000 warrants at a price of $1.50 per Private Placement Warrant, generating total proceeds of approximately $10.1 million. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

Of the gross proceeds received from the Initial Public Offering, the full exercise of the over-allotment option and the sale of the Private Placement Warrants, $402.5 million was placed in the Trust Account.

We paid a total of $14.1 million in underwriting discounts and commissions and $22.8 million for other offering costs related to the Initial Public Offering.

For a description of the use of the proceeds generated in our Initial Public Offering, the sale of the Private Placement Warrants and the sale of the Founder Shares, see Part I, Item 2 of this Quarterly Report.

Item 3. Defaults Upon Senior Securities.

NoneNot applicable.

Item 4. Mine Safety Disclosures.

NoneNot applicable.

Item 5. Other Information.

NoneNone.

27

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 39


Item 6.

Exhibits.

Exhibit

Number

Description

  2.1Agreement 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. (1)
10.1Form of Registration Rights Agreement. (1)
10.2Form of PIPE Subscription Agreement. (1)
10.3Sponsor Support Agreement, dated as of March 17, 2021, by and among Supernova Partners Acquisition Company, Inc., OfferPad, Inc., Supernova Partners LLC and certain other parties thereto. (1)
10.4OfferPad Holders Support Agreement, dated as of March 17, 2021, by and among Supernova Partners Acquisition Company, Inc., OfferPad, Inc. and certain other parties thereto. (1)
31.1*Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*Certification of Chief Executive Officer (Principal Executive Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*Certification of Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section  906 of the Sarbanes-Oxley Act of 2002.
101.INSXBRL Instance Document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document

*

These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.

28Item 6. Exhibits.

 

 

 

 

Incorporated by Reference

 

 

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

 

Filing

Date

 

Filed/

Furnished

Herewith

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

 

 

10.1

 

Employment Agreement, dated March 1, 2022, by and between Brian Bair and Offerpad Solutions Inc.

 

8-K

 

001-39641

 

10.1

 

3/4/22

 

 

10.2

 

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

 

 

10.3

 

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

 

 

10.4

 

Form of Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

8-K

 

001-39641

 

10.4

 

3/4/22

 

 

10.5

 

Form of Performance-Based Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

8-K

 

001-39641

 

10.5

 

3/4/22

 

 

10.6

 

Form of Director Deferred Cash Fee Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

 

 

 

 

 

 

 

 

*

10.7

 

Form of Director Deferred Restricted Stock Unit Award Agreement (under 2021 Incentive Award Plan)

 

 

 

 

 

 

 

 

 

*

10.8

 

Form of Option Award Agreement (under 2021 Incentive Award Plan)

 

 

 

 

 

 

 

 

 

*

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.


SIGNATURE** Furnished herewith.

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 40


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Reportreport to be signed on its behalf by the undersigned hereuntothereunto duly authorized.

Dated: May 27, 2021SUPERNOVA PARTNERS ACQUISITION COMPANY, INC.
By:

/s/ Robert D. Reid

OFFERPAD SOLUTIONS INC.

Name:Robert D. Reid

Date: May 4, 2022

By:

/s/ Brian Bair

Title:

Brian Bair

Chief Executive Officer and

Chairman of the Board

(Principal Executive Officer)

Date: May 4, 2022

By:

/s/ Michael Burnett

Michael Burnett

Chief Financial Officer

(Principal Financial Officer and

Principal Accounting Officer)

29

Offerpad Solutions Inc. | First Quarter 2022 Form 10-Q | 41