References to the "Company," "Seven Oaks Acquisition Corp.," "Seven Oaks,"
"our," "us" or "we" refer to Seven Oaks Acquisition Corp. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the unaudited interim condensed
consolidated financial statements and the notes thereto contained elsewhere in
this report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Exchange Act. We have based these forward-looking statements
on our current expectations and projections about future events. These
forward-looking statements are subject to known and unknown risks, uncertainties
and assumptions about us that may cause our actual results, levels of activity,
performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated in Delaware on September 23, 2020. We
were formed for the purpose of effecting a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses or entities (the "Business Combination").
Our sponsor is Seven Oaks Sponsor LLC, a Delaware limited liability company (the
"Sponsor"). The registration statement for the initial public offering (the
"Initial Public Offering") was declared effective on December 17, 2020. On
December 22, 2020, we consummated the Initial Public Offering of 25,875,000
units (the "Units" and, with respect to the Class A common stock included in the
Units being offered, the "Public Shares"), including 3,375,000 additional Units
to cover over-allotments (the "Over-Allotment Units"), at $10.00 per Unit,
generating gross proceeds of approximately $258.8 million, and incurring
offering costs of approximately $3.1 million.
Simultaneously with the closing of the Initial Public Offering, the Company
consummated the private placement ("Private Placement") of 5,587,500 warrants
(each, a "Private Placement Warrant" and collectively, the "Private Placement
Warrants") at a price of $1.00 per Private Placement Warrant to the Sponsor,
generating proceeds of approximately $5.6 million.
Upon the closing of the Initial Public Offering and the Private Placement,
$258.8 million ($10.00 per Unit) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was placed in a
trust account ("Trust Account"), located in the United States with Continental
Stock Transfer & Trust Company acting as trustee, and invested only in U.S.
"government securities" within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, as amended (the "Investment Company Act") having a maturity
of 185 days or less or in money market funds meeting certain conditions under
Rule 2a-7 promulgated under the Investment Company Act which invest only in
direct U.S. government treasury obligations, until the earlier of (i) the
completion of the Business Combination and (ii) the distribution of the Trust
Account as described below.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering, or December 22, 2022 (as such period may
be extended pursuant to the Certificate of Incorporation, the "Combination
Period"), we will (i) cease all operations except for the purpose of winding up,
(ii) as promptly as reasonably possible but not more than ten business days
thereafter, redeem the Public Shares, at a per-share price, payable in cash,
equal to the aggregate amount then on deposit in the Trust Account, including
interest earned on the funds held in the Trust Account and not previously
released to the Company to pay its taxes (less up to $100,000 of interest to pay
dissolution expenses), divided by the number of then outstanding Public Shares,
which redemption will completely extinguish Public Stockholders' rights as
stockholders (including the right to receive further liquidating distributions,
if any), and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the remaining stockholders and the board of
directors, liquidate and dissolve, 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.
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Results of Operations
Our entire activity since inception through September 30, 2021, related to our
formation, the preparation for the Initial Public Offering, and since the
closing of the Initial Public Offering, the search for a prospective initial
Business Combination. We have neither engaged in any operations nor generated
any revenues to date. We will not generate any operating revenues until after
completion of our initial Business Combination. We generate non-operating income
in the form of interest income on cash and cash equivalents. We expect to incur
increased expenses as a result of being a public company (for legal, financial
reporting, accounting and auditing compliance), as well as for due diligence
expenses.
For the three months ended September 30, 2021, we had net income of
approximately $6.0 million, which consisted of approximately $7.1 million in
change in fair value of warrant liabilities, approximately $3,000 of net gain
from investments held in Trust Account, partially offset by approximately $0.9
million in general and administrative expenses, $60,000 in related party
administrative fee, and approximately $78,000 in franchise tax expense.
For the nine months ended September 30, 2021, we had net income of approximately
$4.4 million, which consisted of approximately $7.6 million in change in fair
value of warrant liabilities, approximately $55,000 of net gain from investments
held in Trust Account, partially offset by approximately $2.9 million in general
and administrative expenses, $180,000 in related party administrative fee, and
approximately $150,000 in franchise tax expense.
Proposed Business Combination
As more fully described in Note 1 to the condensed consolidated financial
statements provided by Item 1 to this Form 10-Q, On June 13, 2021, we ("SVOK"),
entered into an agreement and plan of merger by and among SVOK, Blossom Merger
Sub Inc., a direct, wholly-owned subsidiary of SVOK ("Blossom Merger Sub"),
Blossom Merger Sub II, LLC, a direct, wholly-owned subsidiary of SVOK ("Blossom
Merger Sub II"), and Giddy Inc., a Delaware corporation ("Boxed") (as it may be
amended and/or restated from time to time, the "Merger Agreement").
The closing of the Business Combination is subject to certain customary
conditions, including, among other things: (i) approval by SVOK's stockholders
of the Merger Agreement, the Business Combination and certain other actions
related thereto; (ii) the expiration or termination of the waiting period (or
any extension thereof) applicable under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976; (iii) SVOK having at least $175 million of cash at the
closing of the Business Combination, consisting of cash held in its trust
account and the aggregate amount of cash actually invested in (or contributed
to) the Company pursuant to the Subscription Agreements (as defined below),
after giving effect to redemptions of public shares, if any, but before giving
effect to the consummation of the closing of the Business Combination and the
payment of Boxed's and certain of SVOK's outstanding transaction expenses as
contemplated by the Merger Agreement (the "Minimum Cash Condition"); and (iv)
the shares of Class A common stock of New Boxed to be issued in connection with
the Business Combination having been approved for listing on the Nasdaq Capital
Market ("Nasdaq") subject only to official notice of issuance thereof.
For further details on the contemplated merger, please see the Form 8-K filed
with the Securities and Exchange Commission on June 14, 2021, and our Form S-4
/A filing on October 22, 2021.
Liquidity and Capital Resources
As of September 30, 2021, the Company had approximately $536,000 in its
operating bank accounts and a negative working capital of approximately
$824,000, (not taking into account tax obligations of approximately $117,000
that may be paid using investment income earned from Trust Account).
The Company's liquidity needs prior to the consummation of the Initial Public
Offering were satisfied through the payment of $25,000 from the Sponsor and
Jones & Associates, Inc. ("Jones & Associates") to purchase Founder Shares (as
defined in Note 4), and loan proceeds from the Sponsor of $105,000 under the
Note (as defined in Note 4). The Company repaid the Note in full on December 22,
2020. Subsequent from the consummation of the Initial Public Offering, the
Company's liquidity has been satisfied through the net proceeds from the
consummation of the Initial Public Offering and the Private Placement held
outside of the Trust Account.
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In connection with the Company's assessment of going concern considerations in
accordance with Financial Accounting Standard Board's Accounting Standards
Update ("ASU") 2014-15, "Disclosures of Uncertainties about an Entity's Ability
to Continue as a Going Concern," the Company has until December 22, 2022 to
consummate the proposed Business Combination. It is uncertain that the Company
will be able to consummate the proposed Business Combination by this time.
Additionally, the Company may not have sufficient liquidity to fund the working
capital needs of the Company through one year from the issuance of these
financial statements. If a business combination is not consummated by this date,
there will be a mandatory liquidation and subsequent dissolution of the Company.
Management has determined that the liquidity condition and mandatory
liquidation, should a business combination not occur, and potential subsequent
dissolution, raises substantial doubt about the Company's ability to continue as
a going concern. No adjustments have been made to the carrying amounts of assets
or liabilities should the Company be required to liquidate after December 22,
2022. The Company intends to complete the proposed Business Combination before
the mandatory liquidation date. However, there can be no assurance that the
Company will be able to consummate its business combination described above by
December 22, 2022. In addition, the Company may need to raise additional capital
through loans or additional investments from our Sponsor, stockholders,
officers, directors or third parties. The Company's officers, directors and
Sponsor may, but are not obligated to, loan the Company funds, from time to time
or at any time, in whatever amount they deem reasonable in their sole
discretion, to meet the Company's working capital needs. Accordingly, the
Company may not be able to obtain additional financing. If the Company is unable
to raise additional capital, the Company may be required to take additional
measures to conserve liquidity, which could include, but not necessarily be
limited to, curtailing operations, suspending the pursuit of a potential
transaction, and reducing overhead expenses. The Company cannot provide any
assurance that new financing will be available to it on commercially acceptable
terms, if at all. These conditions raise substantial doubt about the Company's
ability to continue as a going concern through the liquidation date of December
22, 2022.
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 financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Related Party Transactions
Founder Shares
On October 13, 2020, our Sponsor and Jones & Associates, an affiliate of one of
our underwriters of the Initial Public Offering, purchased 4,715,000 and
1,035,000 shares of our Class B common stock, par value $0.0001 per share,
respectively, for an aggregate of 5,750,000 shares (the "Founder Shares") for a
total purchase price of $25,000. On December 17, 2020, we effected a 1.125-for-1
stock split of its Class B common stock, resulting in an aggregate of 6,468,750
shares of Class B common stock outstanding. Of the 6,468,750 Founder Shares
outstanding, up to 843,750 shares are subject to forfeiture 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 underwriters exercised their
over-allotment option in full on December 22, 2020; thus, these 843,750 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 and (ii) the date
on which we complete a liquidation, merger, capital stock exchange or other
similar transaction after the initial Business Combination that results in all
of the stockholders having the right to exchange their Class A common stock for
cash, securities or other property; except to certain permitted transferees and
under certain circumstances. Any permitted transferees will be subject to the
same restrictions and other agreements of the initial stockholders with respect
to any Founder Shares. Notwithstanding the foregoing, if (1) 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 or (2) if we consummate a
transaction after the initial Business Combination which results in the
stockholders having the right to exchange their shares for cash, securities or
other property, the Founder Shares will be released from the lock-up.
Private Placement Warrants
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 5,587,500 Private Placement Warrants at a price of
$1.00 per Private Placement Warrant to the Sponsor, generating proceeds of
approximately $5.6 million.
Each 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 the proceeds from the
sale of the Private Placement Warrants to the Sponsor was added to the proceeds
from the Initial Public Offering
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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 purchasers of the Private Placement Warrants agreed, subject to limited
exceptions, not to transfer, assign or sell any of their Private Placement
Warrants (except to permitted transferees) until 30 days after the completion of
the initial Business Combination.
Related Party Loans
On October 13, 2020, the Sponsor, a related party, agreed to loan us an
aggregate of up to $300,000 to cover expenses related to the Initial Public
Offering pursuant to a promissory note (the "Note"). This loan was non-interest
bearing and payable upon the completion of the Initial Public Offering. As of
December 15, 2020, we borrowed $105,000 from the related party under the Note
and repaid the Note in full on December 22, 2020.
In addition, in order to fund working capital deficiencies or finance
transaction costs in connection with a Business Combination, the Sponsor or an
affiliate of the Sponsor, or certain of our officers and directors may, but are
not obligated to, loan us funds as may be required ("Working Capital Loans"). If
we complete a Business Combination, we may repay the Working Capital Loans out
of the proceeds of the Trust Account released to us. Otherwise, the Working
Capital Loans could be repaid only out of funds held outside the Trust Account.
In the event that a Business Combination does not close, we may use a portion of
proceeds held outside the Trust Account to repay the Working Capital Loans but
no proceeds held in the Trust Account would be used to repay the Working Capital
Loans. The Working Capital Loans would either be repaid upon consummation of a
Business Combination or, at the lenders' discretion, up to $1.5 million of such
Working Capital Loans may be convertible into warrants of the post Business
Combination entity at a price of $1.00 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 September 30, 2021, we had no
borrowings under the Working Capital Loans.
Contractual Obligations
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
common stock issuable upon the exercise of the Private Placement Warrants or
warrants issued upon conversion of the Working Capital Loans and upon conversion
of the Founder Shares), were entitled to registration rights pursuant to a
registration rights agreement signed upon the consummation of the Initial Public
Offering. These holders will be entitled to certain demand and "piggyback"
registration rights. However, the registration rights agreement provides that we
will not be required to effect or permit any registration or cause any
registration statement to become effective until termination of the applicable
lock-up period. We will bear the expenses incurred in connection with the filing
of any such registration statements.
Business Combination Marketing Agreement
We engaged certain underwriters in connection with the Business Combination to
assist us in holding meetings with the stockholders to discuss the potential
Business Combination and the target business' attributes, introduce us to
potential investors that are interested in purchasing our securities in
connection with the initial Business Combination, assist us in obtaining
stockholder approval for the Business Combination and assist us with press
releases and public filings in connection with the Business Combination. The
scope of engagement excludes identifying and/or evaluating possible acquisition
candidates. Pursuant to the agreement with underwriters, the marketing fee
payable to the underwriters will be 3.5% of the gross proceeds of the Initial
Public Offering. The marketing 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 such agreement.
Administrative Services Agreement
We entered into an agreement to pay an affiliate of our Sponsor a total of up to
$20,000 per month for office space, secretarial and administrative services
provided to members of our management team. Upon completion of the Initial
Business Combination or our liquidation, we will cease paying these monthly
fees. For the three and nine months ended on September 30, 2021, Company
incurred and paid approximately $60,000 and $180,000 in expenses for these
services, respectively.
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Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of income and
expenses during the periods reported. Actual results could materially differ
from those estimates. We have identified the following as our critical
accounting policies:
Derivative Warrant Liabilities
We do not use derivative instruments to hedge exposures to cash flow, market, or
foreign currency risks. We evaluate 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 FASB ASC Topic 815, Derivatives and Hedging ("ASC 815"), Embedded
Derivatives ("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 account for our 18,525,000 warrants issued in connection with its Initial
Public Offering (12,937,500) and Private Placement (5,587,500) as derivative
warrant liabilities in accordance with ASC 815-40, Contracts in Entity's Own
Equity ("ASC 815-40"). Accordingly, we recognize the warrant instruments as
liabilities at fair value and adjusts the instruments to fair value at each
reporting period. The liabilities are subject to re-measurement at each balance
sheet date until exercised, and any change in fair value is recognized in our
statement of operations. At the Initial Public Offering date and December 31,
2020, the fair value of the Public Warrants and Private Placement Warrants were
estimated using a Binomial Lattice in a risk-neutral framework. Specifically,
the future stock price of our Company was modeled assuming a Geometric Brownian
Motion in a risk-neutral framework. For each modeled future price, the Warrant
payoff was calculated based on the contractual terms (incorporating any optimal
early exercise / redemption), and then discounted at the term-matched risk-free
rate. The value of the Warrants is calculated as the probability-weighted
present value over all future modeled payoffs.
As of September 30, 2021, we used market observed prices to determine fair
value. Additionally, as the transfer of Private Placement Warrants to anyone who
is not a permitted transferee would result in the Private Placement Warrants
having substantially the same terms as the Public Warrants, the Company
determined that the fair value of each Private Placement Warrant is equivalent
to that of each Public Warrant.
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 control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) is classified as temporary
equity. At all other times, common stock is classified as stockholders' equity.
Our outstanding common stock features certain redemption rights that are
considered to be outside of our control and subject to the occurrence of
uncertain future events.
Immediately upon the closing of the Initial Public Offering, we recognized the
accretion from initial book value to redemption amount value. The change in the
carrying value of the redeemable Class A common stock subject to possible
redemption resulted in charges against additional paid-in capital and
accumulated deficit.
Net Income (Loss) Per Share of Common Stock
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares, which are referred to as
Class A common stock and Class B common stock. Income and losses are shared pro
rata between the two classes of shares. Net income per common shares is
calculated by dividing the net income by the weighted common shares outstanding
for the respective period.
The calculation of diluted net income does not consider the effect of the
warrants underlying the Units sold in the Initial Public Offering and the
private placement warrants to purchase an aggregate of 18,525,000 shares of
Class A common stock in the calculation of diluted income per share, because
their inclusion would be anti-dilutive under the treasury stock method. As a
result, diluted net income (loss)
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per share is the same as basic net income (loss) per share for the three and
nine months ended September 30, 2021. Accretion associated with the redeemable
Class A common stock is excluded from earnings per share as the redemption value
approximates fair value.
Recent Accounting Pronouncements
In August 2020, the FASB issued Accounting Standards Update ("ASU") No. 2020-06,
Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for
Convertible Instruments and Contracts in an Entity's Own Equity ("ASU 2020-06"),
which simplifies accounting for convertible instruments by removing major
separation models required under current GAAP. The ASU also removes certain
settlement conditions that are required for equity-linked contracts to qualify
for the derivative scope exception, and it simplifies the diluted earnings per
share calculation in certain areas. The Company adopted ASU 2020-06 on January
1, 2021. Adoption of the ASU did not impact the Company's financial position,
results of operations or cash flows.
The Company's management does not believe that any other recently issued, but
not yet effective, accounting standards if currently adopted would have a
material effect on the accompanying condensed consolidated financial statements.
Off-Balance Sheet Arrangements
As of September 30, 2021, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
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, the 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, (ii) provide
all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis) and (iv) disclose certain executive
compensation related items such as the correlation between executive
compensation and performance and comparisons of the CEO's compensation to median
employee compensation. These exemptions will apply for a period of five years
following the completion of our Initial Public Offering or until we are no
longer an "emerging growth company," whichever is earlier.
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