References to the "Company," "Omnichannel Acquisition Corp.," "Omnichannel,"
"our," "us" or "we" refer to Omnichannel 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 9, 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 (the "Business Combination"). We are an emerging growth
company and, as such, the Company is subject to all of the risks associated with
emerging growth companies.
Our sponsor is Omnichannel Sponsor LLC, a Delaware limited liability company
(the "Sponsor"). The registration statement for our initial public offering
("Initial Public Offering") was declared effective November 19, 2020. On
November 24, 2020, we consummated our Initial Public Offering of 20,000,000
units (the "Units") at $10.00 per Unit, generating gross proceeds of $200.0
million, and incurring offering costs of approximately $11.6 million, inclusive
of approximately $7.0 million in deferred underwriting commissions. We granted
the underwriters in the Initial Public Offering (the "Underwriters") a 45-day
option to purchase up to 3,000,000 additional units to cover over-allotments, if
any. The Underwriters partially exercised the over-allotment option and on
November 30, 2020, the underwriters purchased an additional 650,000 Units (the
"Over-Allotment Units"), generating gross proceeds of $6.5 million, and incurred
additional offering costs of $357,500 in underwriting fees (inclusive of
$227,500 in deferred underwriting fees) (the "Over-Allotment").
Simultaneously with the closing of the Initial Public Offering, we consummated
the private placement ("Private Placement") of 6,000,000 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 $6.0 million. Simultaneously with the closing of the Over-Allotment
on November 30, 2020, the Company consummated the second closing of the Private
Placement, resulting in the purchase of an aggregate of an additional 130,000
Private Placement Warrants by the Sponsor, generating gross proceeds to us of
$130,000.
Upon the closing of the Initial Public Offering, the Over-Allotment and the
Private Placement, $206.5 million ($10.00 per Unit) of the net proceeds of the
sale of the Units in the Initial Public Offering, the Over-Allotment and of the
Private Placement Warrants in the Private Placement were 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
treasury bills with a maturity of 185 days or less or in money market funds
investing solely in U.S. Treasuries and meeting certain conditions under Rule
2a-7 under the Investment Company Act of 1940, as amended (the "Investment
Company Act"), as determined by us, until the earlier of (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account as described
below.
19
Our management has broad discretion with respect to the specific application of
the net proceeds of the Initial Public Offering and the sale of the 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 we will be able to complete a Business Combination successfully.
We 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
net of amounts disbursed to management for working capital purposes, if
permitted, and excluding the amount of any deferred underwriting commissions) at
the time of the agreement to enter into the initial Business Combination.
However, we will only complete a Business Combination if the post-business
combination company owns or acquires 50% or more of the voting securities of the
target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment
Company Act.
If we are unable to complete a Business Combination within 18 months from the
closing of the Initial Public Offering, or May 24, 2022 (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 us 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 our obligations
under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
Termination of Proposed Business Combination
On July 19, 2021, we entered into a business combination agreement with
Omnichannel Merger Sub, Inc., a wholly owned subsidiary of Omnichannel ("Merger
Sub"), and Kin Insurance, Inc., a Delaware corporation ("Kin") (the "Kin
Business Combination Agreement").
On January 26, 2022, we entered into a Termination of the Business Combination
Agreement (the "Termination Agreement") with Merger Sub and Kin, pursuant to
which the parties agreed to mutually terminate the Kin Business Combination
Agreement. The termination of the Kin Business Combination Agreement was
effective as of January 26, 2022.
For additional information regarding the agreement, see our Current Reports on
Form 8-K filed by us on July 19, 2021, January 26, 2022 and January 27, 2022 for
more information.
Going Concern Consideration
As of March 31, 2022, we had approximately $15,000 in cash and a working capital
deficit of approximately $3.0 million (not including franchise tax obligations
of approximately $50,000 that may be paid using interest income on the proceeds
held in the Trust Account).
Our liquidity needs have been satisfied through a capital contribution of
$25,000 from the Sponsor to purchase the Founder Shares, the loan under the Note
from the Sponsor of approximately $105,000 to us prior to the consummation of
the Initial Public Offering, and the net proceeds from the consummation of the
Private Placement not held in the Trust Account. We fully repaid the Note on
November 24, 2020. In addition, in order to finance transaction costs in
connection with a Business Combination, our officers and directors may, but are
not obligated to, provide us Working Capital Loans.
On September 10, 2021, the Sponsor agreed to provide up to $300,000 in Working
Capital Loans to the Company, and, on November 11, 2021, the Sponsor committed
to provide up to an additional $700,000 in Working Capital Loans to the Company
for an aggregate amount of up to $1.0 million in Working Capital Loans, in each
case in order to finance our working capital needs (including transaction costs
in connection with a Business Combination) (the foregoing, the "Sponsor Loan
Commitment"). As described above, up to $1.0 million of the Sponsor Loan
Commitment may be convertible into warrants to purchase our Class A common stock
at a conversion price of $1.00 per warrant. As of March 31, 2022, we borrowed
from the Sponsor the amount of $790,000 under the Sponsor Loan Commitment, which
amount remains outstanding.
20
In connection with our assessment of going concern considerations in accordance
with FASB ASC Topic 205-40, "Presentation of Financial Statements - Going
Concern," management has determined that the liquidity condition, mandatory
liquidation date and subsequent dissolution raise substantial doubt about our
ability to continue as a going concern. If we are unable to complete a business
combination by May 24, 2022, then we will cease all operations except for the
purpose of liquidating. No adjustments have been made to the carrying amounts of
assets or liabilities should we be required to liquidate after May 24, 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 unaudited condensed consolidated financial statements. The unaudited
condensed consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Results of Operations
Our entire activity since inception up to March 31, 2022 was in preparation for
our formation, the Initial Public Offering, and since such offering, the search
for a target for a Business Combination. We will not be generating any operating
revenues until the closing and completion of our initial Business Combination.
We generate non-operating income in the form of interest income on investments
from the proceeds held in Trust Account.
For the three months ended March 31, 2022, we had a net income of approximately
$6.4 million, which consisted of an approximately $6.7 million change in fair
value of derivative warrant liabilities and approximately $44,000 of income from
our investments held in the Trust Account, which were partially offset by
approximately $374,000 in general and administrative expenses, $12,000 in
general and administrative expenses - related party and approximately $50,000 in
franchise tax expenses.
For the three months ended March 31, 2021, we had a net income of approximately
$8.1 million, which consisted of an approximately $8.1 million change in fair
value of derivative warrant liabilities and approximately $69,000 of income from
our investments held in the Trust Account, which were partially offset by
approximately $1.0 million in general and administrative expenses, $12,000 in
general and administrative expenses - related party and approximately $50,000 in
franchise tax expenses.
Contractual Obligations
Registration and Stockholder 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), are entitled to registration rights pursuant to a registration rights
agreement. The holders of these securities are entitled to make up to three
demands, excluding short form demands, that we register such securities. In
addition, the holders have certain "piggy-back" registration rights with respect
to registration statements filed subsequent to the completion of the initial
Business Combination. We will bear the expenses incurred in connection with the
filing of any such registration statements.
Administrative Services Agreement
We entered into an agreement that provided that, commencing on the effective
date of the prospectus through the earlier of consummation of the initial
Business Combination and our liquidation, we shall pay the Sponsor a total of
$4,000 per month for office space, secretarial, expense for period and
administrative services provided to members of our management team. We incurred
$12,000 in expenses in connection with such services for each of the three
months ended March 31, 2022 and 2021, which are included in administrative
expenses - related party on the accompanying unaudited condensed consolidated
statements of operations. As of March 31, 2022 and December 31, 2021, there were
outstanding balances of approximately $13,000 and $9,000 for such fees,
respectively, in "Accounts payable - related party," as reflected in the
accompanying condensed consolidated balance sheets.
21
Underwriting Agreement
The underwriters were entitled to an underwriting discount of $0.20 per Unit, or
$4.0 million in the aggregate, paid upon the closing of the Public Offering. In
addition, in connection with the Public Offering, the underwriters are entitled
to a deferred fee of $0.35 per Unit, or approximately $7.0 million in the
aggregate. 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.
In connection with the consummation of the Over-Allotment on November 30, 2020,
the underwriters were entitled to an additional fee of $130,000 paid upon
closing, and $227,500 in deferred underwriting commissions.
Critical Accounting Policies
This management's discussion and analysis of our financial condition and results
of operations is based on our unaudited condensed consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America ("GAAP"). The preparation of
these unaudited condensed consolidated financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and the disclosure of contingent assets and liabilities in
our unaudited condensed consolidated financial statements. On an ongoing basis,
we evaluate our estimates and judgments, including those related to fair value
of financial instruments and accrued expenses. We base our estimates on
historical experience, known trends and events and various other factors that we
believe to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. We have identified
the following as our critical accounting policies:
Investments Held in the Trust Account
Our portfolio of investments held in the Trust Account is comprised 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. Our investments held in the Trust Account are classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these investments are included in interest earned from
investments held in Trust Account in the statement of operations. The estimated
fair values of investments held in the Trust Account are determined using
available market information, other than for investments in open-ended money
market funds with published daily net asset values ("NAV"), in which case the
Company uses NAV as a practical expedient to fair value. The NAV on these
investments is typically held constant at $1.00 per unit.
Derivative Warrant Liabilities
We do not use derivative instruments to hedge our exposure to cash flow, market
or foreign currency risks. We evaluate all of our financial instruments,
including issued warrants to purchase its Class A common stock, 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"). 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 10,325,000 warrants issued in connection with the Public Offering (the
"Public Warrants") and the 6,130,000 Private Placement Warrants are recognized
as derivative liabilities in accordance with ASC 815. 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 the statement of operations. The fair value of
Public Warrants and Private Warrants was measured by reference to the listed
price in an active market for the Public Warrants, the closing price of the
warrants on NYSE as of March 31, 2022 and December 31, 2021. The determination
of the fair value of the warrant liability may be subject to change as more
current information becomes available and accordingly the actual results could
differ significantly. Derivative warrant liabilities are classified as
non-current liabilities as their liquidation is not reasonably expected to
require the use of current assets or require the creation of current
liabilities.
22
Class A Common Stock Subject to Possible Redemption
We account for our Class A common stock subject to possible redemption in
accordance with the guidance in ASC Topic 480, "Distinguishing Liabilities from
Equity." Class A common stock subject to mandatory redemption (if any) is
classified as liability instruments and is measured at fair value. Conditionally
redeemable Class A common stock (including Class A common stock that features
redemption rights that is 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, Class A common
stock is classified as stockholders' equity. Our Class A 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, 2022 and December 31, 2021, 20,650,000 shares of Class A common stock
subject to possible redemption are presented at redemption value as temporary
equity, outside of the stockholders' deficit section of our condensed
consolidated balance sheets.
We recognize changes in redemption value immediately as they occur and adjust
the carrying value of the Class A common stock subject to possible redemption to
equal the redemption value at the end of each reporting period. Effective with
the closing of the Public Offering (including exercise of the over-allotment
option), we recognized the accretion from initial book value to redemption
amount, which resulted in charges against additional paid-in capital (to the
extent available) and accumulated deficit.
Net Income per Common Share
We comply with accounting and disclosure requirements of FASB ASC Topic 260,
"Earnings Per Share." We have two classes of shares: 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 share is computed by dividing net
income by the weighted-average number of common stock outstanding during the
periods. We do not consider the effect warrants sold in the Public Offering and
the Private Placement, an aggregate of 16,455,000 warrants, would have on
diluted net income per share if exercised to purchase the Company's Class A
common stock because their exercise is contingent upon future events and their
inclusion would be anti-dilutive under the treasury stock method. As a result,
diluted net income per share is the same as basic net income per share for the
three months ended March 31, 2022 and 2021. Accretion associated with the
Class A common stock subject to possible redemption is excluded from earnings
per share as the redemption value approximates fair value.
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective,
accounting standards updates, if currently adopted, would have a material effect
on the accompanying financial statements.
Off-Balance Sheet Arrangements
As of March 31, 2022, 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 consolidated 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 consolidated 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 Public Offering or until we are no longer an
"emerging growth company," whichever is earlier.
23
© Edgar Online, source Glimpses