What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-03-04 · 662 added, 616 removed, 892 unchanged (59% of the section changed)

12 unchanged sentences

We have audited the accompanying consolidated balance sheets of Opendoor Technologies Inc.

and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, changes in temporary equity and shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive loss, changes in temporary equity and shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 24, 2022, expressed an unqualified opinion on the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Stock-Based Compensation and Share Based Awards – Refer to Notes 1 and 14 to the consolidated financial statements

Critical Audit Matter Description

During the year ended December 31, 2020, the Company granted restricted stock unit awards (RSUs) to certain executives, which contain service, performance and market conditions (the “market condition RSUs”).

These conditions include vesting upon achieving a liquidity event and achieving share price milestones.

The Company determined the grant-date fair value of the market condition RSUs utilizing Monte Carlo simulations, which incorporate various assumptions including expected stock price volatility, contractual term, dividend yield, and stock price at grant date.

The grant date fair value of the market condition RSUs was $357.4 million, which will be recognized over a requisite service period ranging from 6 months to 3.5 years.

The Company recognized $19.9 million of compensation expense related to these market condition RSUs for the year ended December 31, 2020.

We identified the accounting and valuation of the market condition RSUs as a critical audit matter because of the significant degree of auditor judgment and increased audit effort to evaluate and assess the valuation model and assumptions used by management to determine the grant date fair value, as well as to evaluate the service periods used to recognize the resulting stock-based compensation expense.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to accounting and valuation of the Company’s market condition RSUs included, among others:

• We inspected the offer letters and/or board of director approvals to evaluate the key terms and conditions of awards granted.

• We tested the accuracy and completeness of the amounts and inputs used in the valuation model by agreeing the terms to the offer letters and/or board approvals.

• With the assistance of fair value specialists, we evaluated the valuation model and assumptions used by the Company to determine the grant date fair value and then developed independent estimates of the grant date fair value and the derived service periods, and compared those estimates to the Company’s.

• With the assistance of professionals in our firm having expertise in accounting for stock-based compensation, we evaluated whether the Company appropriately applied FASB’s Accounting Standard Codification (ASC) 718, Compensation—Stock Compensation to the market condition RSUs, where each market-based condition is treated as an accounting unit, including the features of the market condition RSUs that would impact the grant date fair value, the requisite service periods, and the resulting expense recognition.

Business Combinations – Refer to Note 2 to the consolidated financial statements

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sponsor Warrants – Refer to Notes 1, 8, 13, and 15 to the financial statements

Critical Audit Matter Description

Opendoor Labs, Inc.

(“Opendoor Labs”) entered into a merger agreement (the “Merger Agreement”) with Social Capital Hedosophia Holdings Corp.

II, (“SCH”) on September 15, 2020, which was consummated on December 18, 2020.

Upon consummation of the transactions contemplated by the terms of the Merger Agreement, Opendoor Labs became a wholly owned subsidiary of SCH, which domesticated from the Cayman Islands to Delaware and changed its name to Opendoor Technologies Inc.

The merger and the domestication transactions are collectively referred to as the “Business Combination.”

The Business Combination was accounted for as a reverse recapitalization whereby SCH was accounted for as the accounting acquiree and Opendoor Labs as the accounting acquirer.

This accounting treatment is equivalent to Opendoor Labs issuing stock for the net assets of SCH, accompanied by a recapitalization whereby no goodwill or intangible assets were recorded.

Operations prior to the Business Combination are those of Opendoor Labs.

At the close of the Business Combination, the Company received consideration of $376.6 million in cash as a result of the reverse recapitalization.

We identified the accounting for the Business Combination as a critical audit matter because of the significant audit effort necessary to evaluate the Company’s conclusions, including the Company’s assessment of which entity represented the accounting acquirer and the resulting characterization and overall basis of presentation of the Company’s consolidated financial statements and disclosures.

As described in Notes 1, 8, 13, and 15 to the financial statements, the Company recorded Sponsor Warrants as liabilities on the balance sheet at fair value.

Subsequent changes in the fair value of the warrants are recognized in the consolidated statement of operations at each reporting period.

The Company recognized $12 million of expense related to the fair value adjustment of the Sponsor Warrants for the year ended December 31, 2021.

As the Company completed the redemption of all of its outstanding Sponsor Warrants on July 9, 2021, there is no remaining balance related to the Sponsor Warrants as of December 31, 2021.

We identified the assessment of the accounting and classification of the Sponsor Warrants as a critical audit matter due to the complexity in assessing the exercise and settlement features unique to the Sponsor Warrants.

Auditing these elements required a

significant degree of auditor judgment and increased audit effort, including specialized skills and knowledge, due to the complexity of the application of the accounting guidance to the warrant features to determine the appropriate accounting and classification of the Sponsor Warrants.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the Company’s accounting for the Business Combination included, among others:

• We inspected the Merger Agreement and other relevant information to evaluate the key terms of the Business Combination.

• We evaluated the Company’s analysis of the Business Combination and the accuracy of the information used in the analysis and the judgments made by management.

• With the assistance of professionals in our firm having expertise in accounting for Business Combinations, we evaluated management’s conclusion regarding which entity represented the accounting acquirer and the resulting characterization and overall basis of presentation which reflects the Business Combination as a reverse capitalization transaction.

• We evaluated the financial statement presentation and disclosures regarding the Business Combination with the accounting conclusions reached and disclosure requirements for a reverse recapitalization.

Our audit procedures related to the Sponsor Warrants included the following, among others:

• We tested the effectiveness of controls over management’s accounting for the Sponsor Warrants, including those over the completeness and accuracy of the technical accounting analysis for significant and unusual transactions.

• We evaluated the Company’s analysis of the accounting for the Sponsor Warrants, including the completeness and accuracy of the information used in the analysis and the judgments made by management by utilizing the assistance of professionals in our firm with specialized skill and knowledge.

We consulted on management’s conclusion regarding the accounting for the Sponsor Warrants, including the classification of the Sponsor Warrants as liabilities and the treatment of subsequent changes in the fair value of the Sponsor Warrants.

• We evaluated the financial statement presentation and disclosures regarding the accounting conclusions reached, including the classification of the Sponsor Warrants.

/s/ DELOITTE & TOUCHE LLP

San Francisco, California

March 4, 2021

February 24, 2022

We have served as the Company’s auditor since 2015.

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CONSOLIDATED BALANCE SHEETS

(In thousands, except s hare data)

As of December 31,

(In millions, except s hare data)

CURRENT ASSETS:

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Marketable securities 484 48

Mortgage loans held for sale pledged under agreements to repurchase 7,529 2,116

Escrow receivable 84 1

Mortgage loans held for sale pledged under agreements to repurchase 7 8

Real estate inventory, net 6,096 466

Other current assets ($ 4 and $ — carried at fair value)

24,987 30,879

Total current assets 9,340 2,053

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INTANGIBLES – Net 12 9

OTHER ASSETS 4,097 5,394

OTHER ASSETS ($ 5 and $ — carried at fair value)

TOTAL ASSETS (1)

$ 9,506 $ 2,176

LIABILITIES, TEMPORARY EQUITY, AND SHAREHOLDERS’ DEFICIT

LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable and other accrued liabilities $ 137 $ 25

Current portion of credit facilities and other secured borrowings 346,322 1,074,125

Non-recourse asset-backed debt - current portion 4,240 339

Other secured borrowings 7 7

Interest payable 12 1

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Total current liabilities 4,400 393

CREDIT FACILITIES – Net of current portion 135,467 221,929

CONVERTIBLE NOTES — 140,096

DERIVATIVE AND WARRANT LIABILITIES — 46,235

NON-RECOURSE ASSET-BACKED DEBT – Net of current portion 1,862 136

CONVERTIBLE SENIOR NOTES 954 —

WARRANT LIABILITIES — 47

LEASE LIABILITIES – Net of current portion 42 47

OTHER LIABILITIES 94 208

Total liabilities (2)

575,575 1,583,285

COMMITMENTS AND CONTINGENCIES (See Note 19)

TEMPORARY EQUITY:

Series A convertible preferred stock, zero and 40,089,513 shares authorized, respectively;

zero and 40,089,513 shares issued and outstanding, respectively;

liquidation preference of $ 0 and $ 9,807 , respectively

Series B convertible preferred stock, zero and 23,840,816 shares authorized, respectively;

zero and 23,840,816 shares issued and outstanding, respectively;

liquidation preference of $ 0 and $ 20,182 , respectively

Series C convertible preferred stock, zero and 29,070,700 shares authorized, respectively;

zero and 29,070,700 shares issued and outstanding, respectively;

liquidation preference of $ 0 and $ 77,160 , respectively

Series D convertible preferred stock, zero and 63,956,147 shares authorized, respectively;

zero and 63,470,884 shares issued and outstanding, respectively;

liquidation preference of $ 0 and $ 248,333 , respectively

Series E convertible preferred stock, zero and 165,941,619 shares authorized, respectively;

zero and 157,952,523 shares issued and outstanding, respectively;

liquidation preference of $ 0 and $ 1,011,319 , respectively

Total temporary equity — 1,381,502

SHAREHOLDERS’ EQUITY (DEFICIT):

Common stock, $ 0.0001 and $ 0.00001 par value, respectively;

3,000,000,000 and 485,262,910 shares authorized, respectively;

540,714,692 and 83,748,443 shares issued and outstanding, respectively

SHAREHOLDERS’ EQUITY:

Common stock, $ 0.0001 par value;

3,000,000,000 shares authorized;

616,026,565 and 540,714,692 shares issued, respectively;

616,026,565 and 540,714,692 shares outstanding, respectively

Additional paid-in capital 3,955 2,596

Accumulated deficit ( 1,705 ) ( 1,043 )

Accumulated other comprehensive income 41 18

Total shareholders’ equity (deficit) 1,600,007 ( 733,103 )

TOTAL LIABILITIES, TEMPORARY EQUITY, AND SHAREHOLDERS’ EQUITY (DEFICIT) $ 2,175,582 $ 2,231,684

Accumulated other comprehensive (loss) income ( 2 ) —

Total shareholders’ equity 2,248 1,553

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 9,506 $ 2,176

________________

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Interest payable, $ 11 and $ 1 ;

Current portion of credit facilities and other secured borrowings, $ 339,173 and $ 1,042,984 ;

Credit facilities, net of current portion, $ 135,467 and $ 221,929 ;

Current portion of non-recourse asset-backed debt, $ 4,240 and $ 339 ;

Non-recourse asset-backed debt, net of current portion, $ 1,862 and $ 136 ;

and Total liabilities, $ 6,172 and $ 478 , respectively.

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CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(In millions, except share amounts which are presented in thousands, and per share amounts)

Year Ended December 31,

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LESS NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

— 1,847 1,362

NET LOSS ATTRIBUTABLE TO OPENDOOR TECHNOLOGIES INC.

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands)

(In millions)

Year Ended December 31,

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NET LOSS $ ( 662 ) $ ( 253 ) $ ( 339 )

OTHER COMPREHENSIVE INCOME:

OTHER COMPREHENSIVE (LOSS) INCOME:

Unrealized gains on marketable securities ( 2 ) — —

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EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)

(In thousands, except number of shares)

(In millions, except number of shares)

Temporary Equity Shareholders’ Equity (Deficit)

14 unchanged sentences

BALANCE-December 31, 2018 40,089,513 $ 10 23,840,816 $ 20 29,070,700 $ 81 54,865,494 $ 223 123,623,684 $ 731 77,863,856 $ — $ 31 $ ( 446 ) $ — $ 1 $ ( 414 )

Retroactive Conversion of shares due to Business Combination 15,733,178 — 9,281,576 — 11,098,566 — 20,957,901 — — — 27,600,509 — — — — — —

BALANCE-December 31, 2017, as converted 41,210,234 10,037 24,311,422 20,448 29,070,700 80,519 54,895,457 223,072 — — 72,294,575 — 10,702 ( 161,434 ) ( 27 ) 129 ( 150,630 )

Issuance of Series E-2 preferred stock — — — — — — — — 34,328,839 282 — — — — — — —

Issuance of Series E-1 preferred stock

— — — — — — — — 4,022,117 23,816 — — — — — — —

Issuance of common stock in connection with acquisition — — — — — — — — — — 2,666,809 — 7,922 — — — 7,922

Vesting of restricted stock — — — — — — — — — — 4,133,158 — 2,388 — — — 2,388

Exercise of stock options — — — — — — — — — — 8,366,487 — 5,201 — — — 5,201

Repurchase of common stock — — — — — — — — — — ( 9,597,173 ) — ( 9,986 ) ( 36,106 ) — — ( 46,092 )

Repurchase of Series A preferred stock ( 1,120,721 ) ( 274 ) — — — — — — — — — — — ( 5,269 ) — — ( 5,269 )

Repurchase of Series B preferred stock — — ( 470,606 ) ( 399 ) — — — — — — — — — ( 1,930 ) — — ( 1,930 )

Repurchase of Series D preferred stock — — — — — — ( 29,963 ) ( 121 ) — — — — — ( 26 ) — — ( 26 )

Stock-based compensation — — — — — — — — — — — — 14,974 — — — 14,974

Other comprehensive income — — — — — — — — — — — — — — 25 — 25

Net income (loss) — — — — — — — — — — — — — ( 241,291 ) — 1,362 ( 239,929 )

BALANCE–December 31, 2018 40,089,513 $ 9,763 23,840,816 $ 20,049 29,070,700 $ 80,519 54,865,494 $ 222,951 123,623,684 730,582 77,863,856 $ — $ 31,201 $ ( 446,056 ) $ ( 2 ) $ 1,491 $ ( 413,366 )

Issuance of Series E-2 preferred stock — — — — — — — — 34,328,839 282,638 — — — — — — —

Issuance of Series D preferred stock — — — — — — 8,605,390 35 — — — — 7 — — — 7

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Capital distribution of non-controlling interests — — — — — — — — — — — — — — — ( 3 ) ( 3 )

Other comprehensive income — — — — — — — — — — — — — — 20 — 20

Net income (loss) — — — — — — — — — — — — — ( 341,017 ) — 1,847 ( 339,170 )

Net loss — — — — — — — — — — — — — ( 341 ) — 2 ( 339 )

BALANCE–December 31, 2019 40,089,513 $ 10 23,840,816 $ 20 29,070,700 $ 81 63,470,884 $ 258 157,952,523 $ 1,013 83,748,443 $ — $ 57 $ ( 790 ) $ — $ — $ ( 733 )

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Issuance of Series E preferred stock — — — — — — — — 364,070 2 — — 1 — — — 1

— — — — — — — — 364,070 2,156 — — 1,460 — — — 1,460

Issuance of issuer stock rights in extinguishment of convertible notes — — — — — — — — — — — — 212,940 — — — 212,940

OPENDOOR TECHNOLOGIES INC.

Issuance of issuer stock rights in extinguishment of the 2019 Convertible Notes — — — — — — — — — — — — 213 — — — 213

Issuance of common stock in exchange for issuer stock rights — — — — — — — — — — 21,460,401 — — — — — —

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Stock-based compensation — — — — — — — — — — — — 38 — — — 38

Other comprehensive income — — — — — — — — — — — — — — 23 — 23

Net loss — — — — — — — — — — — — — ( 253 ) — — ( 253 )

BALANCE–December 31, 2020 — $ — — $ — — $ — — $ — — $ — 540,714,692 $ — $ 2,596 $ ( 1,043 ) $ — $ — $ 1,553

OPENDOOR TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY

EQUITY AND SHAREHOLDERS’ EQUITY (DEFICIT)

(In millions, except number of shares)

Shareholders’ Equity (Deficit)

Common Stock Additional

Capital Accumulated

Deficit Accumulated

Comprehensive

Income (Loss) Non-

interests Total

Shareholders’

Equity (Deficit)

Shares Amount

BALANCE–December 31, 2020 540,714,692 $ — $ 2,596 $ ( 1,043 ) $ — $ — $ 1,553

Issuance of common stock in connection with the February 2021 Offering 32,817,421 — 857 — — — 857

Vesting of restricted stock 1,370,447 — — — — — —

Vesting of restricted stock units 24,004,565 — — — — — —

Common stock issued upon exercise of warrants 8,200,151 — 58 — — — 58

Exercise of stock options 8,919,289 — 15 — — — 15

Purchases of Capped Calls related to the 2026 Notes — — ( 119 ) — — — ( 119 )

Stock-based compensation — — 548 — — — 548

Other comprehensive loss — — — — ( 2 ) — ( 2 )

Net loss — — — ( 662 ) — — ( 662 )

BALANCE–December 31, 2021 616,026,565 $ — $ 3,955 $ ( 1,705 ) $ ( 2 ) $ — $ 2,248

See accompanying notes to consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In t housands)

(In millions)

Year Ended December 31,

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Net loss $ ( 662 ) $ ( 253 ) $ ( 339 )

Adjustments to reconcile net loss to cash, cash equivalents, and restricted cash provided by (used in) operating activities:

Depreciation and amortization – net of accretion 38,604 27,372 12,781

Adjustments to reconcile net loss to cash, cash equivalents, and restricted cash (used in) provided by operating activities:

Depreciation and amortization 47 39 27

Amortization of right of use asset 8 24 12

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Warrant fair value adjustment ( 12 ) ( 31 ) ( 6 )

Gain on settlement of lease liabilities ( 5 ) — —

Inventory valuation adjustment 56 8 32

Changes in fair value of derivative instruments — 23 1

Changes in fair value of equity securities ( 35 ) — —

Payment-in-kind interest — 4 2

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Lease liabilities ( 13 ) ( 7 ) ( 14 )

Net cash provided by (used in) operating activities 681,911 ( 272,050 ) ( 1,179,637 )

Net cash (used in) provided by operating activities ( 5,794 ) 682 ( 272 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment ( 33 ) ( 17 ) ( 28 )

Purchase of intangible assets ( 1 ) — —

Purchase of marketable securities ( 486 ) ( 175 ) ( 79 )

Proceeds from sales, maturities, redemptions and paydowns of marketable securities

170,005 45,025 40,373

Purchase of non-marketable equity securities ( 15 ) — —

Acquisitions, net of cash acquired ( 33 ) — ( 33 )

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Proceeds from issuance of Series E preferred stock — 2 —

Issuance cost of Series E preferred stock — — ( 1,434 )

Proceeds from issuance of Series E-2 preferred stock — — 283

Issuance cost of Series E-2 preferred stock — ( 237 ) —

Proceeds from issuance of common stock 82 — —

Proceeds from issuance of convertible notes — 178,200 20,000

Proceeds from issuance of convertible senior notes, net of issuance costs 953 — 178

Purchase of capped calls related to convertible senior notes ( 119 ) — —

Proceeds from exercise of stock options 15 8 3

Proceeds from warrant exercise 22 — —

Proceeds from Business Combination and PIPE offering — 1,014 —

Proceeds from February 2021 Offering 886 — —

Issuance cost of common stock ( 29 ) ( 43 ) —

Capital distributions of non-controlling interest — — ( 3 )

Proceeds from credit facilities and other secured borrowings 1,433,798 3,664,217 1,994,088

Principal payments on credit facilities and other secured borrowings ( 2,250,192 ) ( 3,495,411 ) ( 1,176,541 )

Proceeds from non-recourse asset-backed debt 11,499 1,309 3,641

Principal payments on non-recourse asset-backed debt ( 5,838 ) ( 2,130 ) ( 3,475 )

Proceeds from other secured borrowings 192 125 23

Principal payment on other secured borrowings ( 192 ) ( 121 ) ( 21 )

Payment of loan origination fees and debt issuance costs ( 47 ) ( 3 ) ( 15 )

Repurchase of common stock at fair value — — ( 3 )

Repurchase of Series A preferred stock — — ( 5,543 )

Repurchase of Series B preferred stock — — ( 2,329 )

Repurchase of Series D preferred stock — — ( 147 )

Net cash provided by financing activities 7,342 161 646

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OPENDOOR TECHNOLOGIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION – Cash paid during the period for interest $ 122 $ 57 $ 86

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Conversion of preferred stock to common stock $ — $ 1,386 $ —

Issuance of issuer stock rights in extinguishment convertible notes 212,940 — —

Vesting of early exercised stock options 124 1,060 2,388

Conversion of convertible notes to Series E-1 preferred stock — — 23,816

Issuance of issuer stock rights in extinguishment of the 2019 Convertible Notes $ — $ 213 $ —

Noncash financing, issuance of common stock for acquisition

— 6,650 ( 6,152 )

Recognition of warrant liability $ — $ 81 $ —

Issuance of common stock in extinguishment of warrant liabilities $ ( 35 ) $ — $ —

RECONCILIATION TO CONSOLIDATED BALANCE SHEETS:

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Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

DESCRIPTION OF BUSINESS AND ACCOUNTING POLICIES

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Opendoor Technologies Inc.

(the “Company” and “Opendoor”) including its consolidated subsidiaries and certain variable interest entities (“VIEs”), is a leading digital platform for buying and selling homes.

Opendoor streamlines the home selling and buying transaction and creates an end-to-end experience online.

As of December 31, 2020, the Company had completed over 80,000 home transactions in 21 markets across the United States.

(the “Company” and “Opendoor”) including its consolidated subsidiaries and certain variable interest entities (“VIEs”), is a leading digital platform for residential real estate.

By leveraging software, data science, product design and operations, Opendoor has rebuilt the service model for real estate and have made buying and selling possible on a mobile device.

The Company was incorporated in Delaware on December 30, 2013.

Correction of Prior Period Amounts

On April 12, 2021, subsequent to the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, the Acting Director of the Division of Corporation Finance and the Acting Chief Accountant of the SEC issued a Staff Statement (the “Staff Statement”) on Accounting and Reporting Considerations for Warrants Issued by Special Purpose Acquisition Companies (“SPACs”).

The Company took into consideration the guidance in the Staff Statement and Accounting Standards Codification 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity ("ASC 815-40") and evaluated the Public and Sponsor Warrants (each as defined herein and collectively the "Warrants").

The Warrants were issued in a private placement simultaneously with the closing of the initial public offering of Social Capital Hedosophia Holdings Corp.

II (“SCH”), assumed by the Company through the Business Combination (as defined herein) on December 18, 2020, and classified in shareholders' equity as of and for the year ended December 31, 2020.

While the Company concluded the Public Warrants meet the criteria to continue to be classified in shareholders' equity, the Company concluded the Sponsor Warrants do not meet the scope exception from derivative accounting prescribed by ASC 815-40 and should therefore be recorded as a liability on the Company’s consolidated balance sheet at fair value as of the closing of the Business Combination, with subsequent changes in their fair value recognized in the Company’s consolidated statement of operations at each reporting date.

The accounting for the Sponsor Warrants does not impact the Company’s financial statements in any reporting periods prior to the Business Combination, as the Company assumed the Warrants through the Business Combination which was accounted for as a reverse recapitalization.

The fair value of the Sponsor Warrants as of the Closing Date on December 18, 2020 and December 31, 2020 amounted to $ 81 million and $ 47 million, respectively.

The change in fair value from the Closing Date through December 31, 2020 amounted to a gain of $ 34 million.

The impact of the misstatement as of December 31, 2020 resulted in an understatement of the warrant liability of $ 47 million, and an overstatement of accumulated deficit and additional paid-in capital of $ 34 million and $ 81 million respectively.

The Company evaluated the impact of error related to the accounting treatment of Sponsor Warrants with respect to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 and determined, based on consideration of quantitative and qualitative factors, that the error had an immaterial impact, individually and in aggregate.

The Company corrected its accounting for Sponsor Warrants in this Annual Report on Form 10-K for the year ended December 31, 2021.

The following table provides the impact of the correction on the Company's consolidated balance sheet as of December 31, 2020, as presented herein (in millions):

December 31, 2020

Previously Stated Adjustments As Corrected

WARRANT LIABILITIES $ — 47 $ 47

Total liabilities $ 576 47 $ 623

Additional paid-in capital $ 2,677 ( 81 ) $ 2,596

Accumulated deficit ( 1,077 ) 34 ( 1,043 )

Total shareholders' equity $ 1,600 ( 47 ) $ 1,553

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The following table provides the impact of the correction on the Company's consolidated statement of operations for the year ended December 31, 2020 (in millions):

Year Ended December 31, 2020

Previously Stated Adjustments As Corrected

DERIVATIVE AND WARRANT FAIR VALUE ADJUSTMENT $ ( 26 ) 34 $ 8

LOSS BEFORE INCOME TAXES $ ( 287 ) 34 $ ( 253 )

NET LOSS $ ( 287 ) 34 $ ( 253 )

Net loss per share attributable to common shareholders:

Basic $ ( 2.62 ) $ 0.31 $ ( 2.31 )

Diluted $ ( 2.62 ) $ 0.31 $ ( 2.31 )

Other than the changes made to reflect the impact of the recognition of the fair value of the Sponsor Warrants liability at the Closing Date to additional paid-in capital and the subsequent remeasurement of the fair value of the warrant liability at December 31, 2020 to accumulated deficit, there have been no changes to the Company's consolidated statement of temporary equity and shareholders’ equity (deficit) (in millions).

Year Ended December 31, 2020

Previously Stated Adjustments As Corrected

Additional paid-in capital $ 2,677 ( 81 ) $ 2,596

Accumulated deficit ( 1,077 ) 34 ( 1,043 )

Total shareholders' equity $ 1,600 ( 47 ) $ 1,553

The following table provides the impact of the correction on the Company's consolidated statement of cash flows for the year ended December 31, 2020 (in millions):

Year Ended December 31, 2020

Previously Stated Adjustments As Corrected

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 287 ) 34 $ ( 253 )

Adjustments to reconcile net loss to cash, cash equivalents, and restricted cash provided by (used in) operating activities:

Warrant fair value adjustment $ 3 ( 34 ) $ ( 31 )

DISCLOSURES OF NONCASH FINANCING ACTIVITIES:

Recognition of warrant liability $ — 81 $ 81

Basis of Presentation and Principles of Consolidation

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The consolidated financial statements as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020 and 2019 include the accounts of Opendoor, its wholly owned subsidiaries and VIEs where the Company is the primary beneficiary.

The accompanying consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the periods presented .

All significant intercompany accounts and transactions have been eliminated in the consolidated financial statements herein.

Certain prior period amounts in the consolidated financial statements and accompanying notes have been reclassified to conform to the current period’s presentation.

Certain prior period amounts have been reclassified to conform to the current period’s presentation.

As a result of the Business Combination completed on December 18, 2020, prior period share and per share amounts presented in the accompanying consolidated financial statements and these related notes have been retroactively converted.

See “ Note 2— Business Combination” for additional information.

Use of Estimates

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Actual results may differ materially from such estimates.

Significant estimates, assumptions and judgments made by management include, among others, the determination of the fair value of common stock, share-based awards, warrants, derivatives, convertible notes, and inventory impairment (“real estate inventory valuation adjustment”).

Significant estimates, assumptions and judgments made by management include, among others,

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

the determination of the fair value of common stock, share-based awards, warrants, derivatives, and inventory valuation adjustment.

Management believes that the estimates and judgments upon which they rely are reasonable based upon information available to them at the time that these estimates and judgments are made.

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its rates of revenue growth;

its ability to manage advertising inventory or pricing;

its ability to manage inventory;

engagement and usage of its products;

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and intellectual property infringement and other claims, among other things.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

On March 11, 2020, the World Health Organization characterized the outbreak of a novel strain of coronavirus (COVID-19) as a pandemic.

Since that time, this outbreak has spread throughout the United States inclusive of all of the states in which the Company operates.

In response to the developments of COVID-19, the Company paused making new offers to purchase homes beginning in March and significantly reduced the Company’s home inventory balance during the second and third quarters of 2020.

The Company relaunched offers to purchase homes in select markets in May 2020 and resumed operations across all of its markets by the end of August 2020.

The extent to which COVID-19 will impact our operations will depend on further developments, which are highly uncertain and cannot be predicted at this time.

See “Note 20 — Restructuring” for further discussion.

Concentrations of Credit Risk

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The Company places cash and cash equivalents and investments with major financial institutions, which management assesses to be of high credit quality, in order to limit exposure of the Company’s investments.

Similarly, the Company’s credit risk on mortgage loans held for sale is mitigated due to a large number of customers.

Similarly, the Company’s credit risk on mortgage loans held for sale is mitigated due to having a large number of customers.

Further, the Company’s credit risk on mortgage loans held for sale is mitigated by the fact that the Company typically sells mortgages on the secondary market within a relatively short period of time after which the Company’s exposure is limited to borrower defaults within the initial few months of the mortgage.

Reclassifications

In 2020, the Company changed its presentation of Mortgage loans held for sale pledged under agreements to repurchase on its Consolidated Balance Sheets as of December 31, 2019, by reclassifying the $ 2.1 million balance from Other current assets to Mortgage loans held for sale pledged under agreements to repurchase.

These changes had no effect on previously reported total assets and total liabilities, net loss or to the classifications of cash flow activities.

The Company has modified its disclosures, including comparative disclosures, for MLHFS and related mortgage activity.

Segment Reporting

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Restricted cash consists primarily of funds held in operating, collection, disbursement and reserve accounts related to the Company’s credit facilities and entities established for such credit facilities.

The restricted cash balance related to the Company’s credit facilities are constrained by contract to purchasing real estate inventory and certain related activities.

In addition, the Company is required to maintain letters of credit and a time deposit account for certain of the Company’s office leases.

See “Note 7 — Credit Facilities and Long-Term Debt” for further discussion.

Marketable Securities

The Company’s investments in marketable securities consist of debt securities classified as available-for-sale and measured at fair value with unrealized gains and losses included in accumulated other comprehensive income (loss) in

The use of the restricted cash balance related to the Company’s credit facilities are constrained by contract to purchasing real estate inventory and certain related activities.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

shareholders’ equity and realized gains and losses included in earnings.

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

addition, the Company is required to maintain letters of credit and a time deposit account for certain of the Company’s office leases.

See “Note 7 — Credit Facilities and Long-Term Debt” for further discussion.

Marketable Securities

The Company’s investments in marketable securities consist of debt securities classified as available-for-sale as well as marketable equity securities.

The Company’s available-for-sale debt securities are measured at fair value with unrealized gains and losses included in Accumulated other comprehensive income (loss) in shareholders’ equity and realized gains and losses included in Other income.

None of the Company’s investments in marketable securities were impaired for the years ended December 31, 2021, 2020 and 2019.

The Company’s marketable equity securities are measured at fair value with changes in fair value recognized in Other income.

See “Note 4 — Cash, Cash Equivalents, and Marketable Securities” for further discussion.

Real Estate Inventory

Real estate inventory is carried at the lower of cost or net realizable value.

Real estate inventory cost includes but is not limited to the property purchase price, acquisition costs and direct costs to renovate or repair the home, less real estate inventory valuation adjustments, if any.

Real estate inventory is carried at the lower of cost or net realizable value and the Company applies the specific identification method whereby each property constitutes the unit of account.

Real estate inventory cost includes but is not limited to the property purchase price, acquisition costs and direct costs to renovate or repair the home, less inventory valuation adjustments, if any.

Work-in-progress inventory includes homes undergoing updates and finished goods inventory includes homes ready for resale.

Real estate inventory is reviewed for impairment at least quarterly and as events or changes in circumstances indicate that the carrying value may not be recoverable.

If the carrying amount or basis is not expected to be recovered, a real estate inventory valuation adjustment is recorded to cost of revenue and the related assets are adjusted to their net realizable value.

Real estate inventory is reviewed for valuation adjustments at least quarterly.

If the carrying amount or basis is not expected to be recovered, an inventory valuation adjustment is recorded to cost of revenue and the related assets are adjusted to their net realizable value.

Mortgage Loans Held for Sale Pledged under Agreements to Repurchase

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Interest income on MLHFS is calculated based upon the note rate of the loan and recorded in Interest income.

Convertible Senior Notes

The 0.25 % convertible senior notes due in 2026 (the "2026 Notes") issued by the Company in August 2021 are accounted for wholly as debt.

The 2026 Notes have an initial carrying value equal to the net proceeds from issuance.

Issuance costs associated with the 2026 Notes are amortized over the term using the effective interest method.

Conversions are settled through payment of cash or a combination of cash and stock, at the Company's option.

Upon conversion, the carrying amount of the 2026 Notes, including any unamortized debt issuance costs, is reduced by cash paid, with any difference being reflected as a change in equity.

There will not be any gains or losses recognized upon a conversion.

The Company purchased certain capped calls in connection with the issuance of the 2026 Notes which it expects to reduce potential dilution from conversions of the 2026 Notes.

The capped calls were determined to be freestanding financial instruments that meet the criteria for classification in equity;

as such, the capped calls were recorded as a reduction of Additional paid-in capital within shareholders' equity and will not be subsequently remeasured.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Derivative Instruments

The Company’s derivative instruments are comprised of interest rate caps, interest rate lock commitments (“IRLCs”), and embedded conversion options related to the convertible notes.

The Company’s derivative instruments are comprised of interest rate caps, interest rate lock commitments (“IRLCs”), and embedded conversion options related to the convertible notes issued in 2019 (the “2019 Convertible Notes”).

The Company’s derivative instruments are freestanding in nature and some are utilized as economic hedges.

These derivative instruments are recorded at fair value with changes recognized as a gain or loss to operations.

See “Note 5 — Derivative Instruments” for further discussion.

Beginning in 2021, the Company changed the fair value classification of IRLCs from Level 2 to Level 3 as the Company began to adjust for the estimated pull-through rate, a Company specific input that is unobservable to market participants.

See “Note 5 — Derivative Instruments” and “Note 8—Fair Value Disclosures” for further discussion.

Escrow Receivable

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The Company reviews the need for an allowance for credit losses quarterly based on historical collections experience, among other factors.

As of December 31, 2020 and 2019, the Company did not have any material write-offs and did not record an allowance for credit losses.

As of December 31, 2021 and 2020, the Company did not record an allowance for credit losses and for the years ended December 31, 2021, 2020 and 2019, the Company did not have any material write-offs.

No customers accounted for 10% or more of the Company’s Escrow Receivable as of December 31, 2021 or 2020, respectively.

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The estimated useful lives of the Company’s property and equipment are as follows:

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Internally developed software 2 years

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Variable lease payments are excluded from the measurement of right-of-use assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

As the rates implicit on the Company’s leases for which it is the lessee are not readily determinable, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of lease payments.

When determining the incremental borrowing rate, the Company assesses multiple variables such as lease term, collateral, economic conditions, and creditworthiness.

When determining the incremental borrowing rate, the Company assesses multiple variables such as lease term, collateral, economic conditions, and its creditworthiness.

For operating leases, the Company recognizes straight-line rent expense.

For finance leases, the Company recognizes interest expense associated with the lease liability and amortization expense associated with the right-of-use asset.

For right-of-use assets held under finance leases and leasehold improvements, the estimated useful lives are limited to the shorter of the useful life of the asset or the term of the lease.

The Company’s lease arrangements may include options to extend or early terminate a lease, which it does not include in expected lease terms unless they are reasonably certain to be exercised.

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As a lessee, the Company has elected to apply the practical expedient to combine lease and related non-lease components, for all classes of underlying assets, and shall account for the combined component as a lease component.

Occasionally, as a lessor, the Company enters into contracts accounted for as leases.

As a lessor, the Company elected to apply the practical expedient to combine lease and non-lease components for all classes of underlying assets.

Internally Developed Software

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Amortization expense is recognized on a straight-line basis into technology and development expense.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Goodwill represents the difference between the purchase price and the fair value of assets acquired and liabilities assumed in a business combination.

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Intangible assets are amortized based on their estimated economic lives, ranging from 1 to 5 years.

Non-marketable Equity Securities

The Company's non-marketable equity securities are strategic investments in privately held companies.

Non-marketable equity securities are investments that do not have a readily determinable fair value, which are measured at cost minus impairment, if any, adjusted for changes resulting from observable price changes in orderly transactions for an identical or similar investment in the same issuer (the “Measurement Alternative”).

All gains and losses on these investments, realized and unrealized, are recorded in Other income-net on the Company's consolidated statements of operations.

The Company assesses whether an impairment loss on its non-marketable equity securities has occurred due to declines in fair value or other market conditions.

If any impairment is identified for non-marketable equity securities, the Company writes down the investment to its fair value.

Non-marketable equity securities are reported in “Other assets” on the Company’s Consolidated Balance Sheets.

Impairment of Long-Lived Assets

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If circumstances require a long-lived asset or asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying amount.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized to the extent the carrying amount of the underlying asset exceeds its fair value.

No impairment loss was recognized for the years ended December 31, 2020, 2019, and 2018.

If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment loss is

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

recognized to the extent the carrying amount of the underlying asset exceeds its fair value.

The impairment loss recognized for the years ended December 31, 2021 and 2020 is related to abandonment of property and equipment, impairment and abandonment of certain internally developed software projects, and sublease of certain right of use assets.

The impairment loss recognized during the periods presented are as follows (in millions):

Year Ended December 31,

2021 2020 2019

General and administrative $ 1 $ 1 $ —

Technology and development 3 1 —

Total impairment loss $ 4 $ 2 $ —

Revenue Recognition

11 unchanged sentences

Cost of Revenue

Cost of revenue includes the property purchase price, acquisition costs, direct costs to renovate or repair the home and real estate inventory valuation adjustments, if any.

Cost of revenue includes the property purchase price, acquisition costs, direct costs to renovate or repair the home and inventory valuation adjustments, if any.

These costs are accumulated in real estate inventory during the property holding period and charged to cost of revenue under the specific identification method when the property is sold.

Additionally, for the

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Company’s revenues other than home sales revenue, cost of revenue consists of any costs incurred in delivering the service including associated headcount expenses such as salaries, benefits, and stock-based compensation.

Additionally, for the Company’s revenues other than home sales revenue, cost of revenue consists of any costs incurred in delivering the service including associated headcount expenses such as salaries, benefits, and stock-based compensation.

Sales, Marketing and Operations Expense

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For the years ended December 31, 2021, 2020, and 2019, expenses attributable to advertising totaled $ 123 million, $ 33 million, and $ 75 million, respectively.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Technology and Development

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The Company records stock-based compensation expense for service-based stock options on a straight-line basis over the requisite service period, which is generally the option’s vesting period.

These amounts are reduced by forfeitures as the forfeitures occur.

These amounts are reduced by forfeitures as they occur.

The Company uses the Black-Scholes-Merton option-pricing model to determine the fair value as of the grant date for stock options.

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Compensation expense is recognized on an accelerated attribution basis over the requisite service period of the awards subject to the achievement of the liquidity event.

After the Company became listed, the RSUs granted are generally only subject to a service condition to vest and typically vest over four years .

Compensation expense is recognized on a straight-line basis subject to a floor of the vested number of shares for each award.

Market Condition RSUs

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As the Company had no history of dividend payments and had not declared any prospective dividends, a 0% dividend yield was assumed.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

For stock-based compensation, each market-based condition is treated as an accounting unit and expense is recognized over the requisite service period with respect to each unit and only if performance-based conditions are considered probable to be satisfied.

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The fair value of the Restricted Shares is equal to the estimated fair value of the Company’s common stock on the grant date.

The Company recognizes compensation expense for the shares on a straight-line basis over the requisite service period of the awards.

The Company recognizes compensation expense for the shares on a straight-line basis over the requisite service period of

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The fair value of these shares will be recognized into common stock and additional paid-in-capital as the shares vest.

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The Company assesses whether or not the Company is the primary beneficiary of a VIE on an ongoing basis.

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In September 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which amends guidance on reporting credit losses for assets held at amortized cost basis and available-for-sale debt securities.

The FASB also issued subsequent amendments to the initial guidance, ASU 2019-04, ASU 2019-05, ASU 2019-11, and ASU 2020-03 (collectively, “Topic 326”).

Public and Sponsor Warrants

On April 30, 2020, SCH consummated its IPO of 41,400,000 units, consisting of one share of Class A common stock and one third of one warrant exercisable for Class A common stock, at a price of $ 10.00 per unit.

Each whole warrant entitled the holder to purchase one share of Class A common stock at an exercise price of $ 11.50 per share (the “Public Warrants”).

Simultaneously with the closing of the IPO, SCH completed the private sale of 6,133,333 warrants to SCH’s sponsor at a price of $ 1.50 per warrant (the “Sponsor Warrants”).

Each Sponsor Warrant allowed the sponsor to purchase one share of Class A common stock at $ 11.50 per share.

The Sponsor Warrants and shares of common stock issuable upon the exercise of Sponsor Warrants were not able to be transferred, assigned, or sold until 30 days after the completion of a Business Combination.

Additionally, the Sponsor Warrants were eligible for cash and cashless exercises, at the holder’s option, and were redeemable only if the reference value, as defined in the Warrant Agreement, was less than $ 18.00 per share.

If the Sponsor Warrants were held by someone other than the sponsors and certain permitted transferees, the Sponsor Warrants would have been redeemable and exercisable on the same basis as the Public Warrants.

The Company evaluated the Public and Sponsor Warrants under ASC 815-40, Derivatives and Hedging-Contracts in Entity’s Own Equity , and concluded that the Sponsor Warrants did not meet the criteria to be classified in shareholders’ equity.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

The effective date and transition methodology for the amendments in Topic 326 are the same as in ASU 2016-13.

For assets held at amortized cost basis, Topic 326 eliminates the probable initial recognition threshold in current GAAP and, instead, requires an entity to reflect its current estimate of all expected credit losses.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected.

For available-for-sale debt securities, credit losses should be measured in a manner similar to current GAAP, however Topic 326 requires that credit losses be presented as an allowance rather than as a write-down.

The amendments affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash.

The Company adopted this ASU as of January 1, 2020 and the adoption of this ASU did not have a material impact to the Company’s consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15 Intangibles — Goodwill and Other — Internal-Use Software (Subtopic 350-40).

ASU 2018-15 amends a customer’s accounting for implementation costs incurred in hosting arrangements.

The guidance aligns the requirements for capitalizing implementation costs incurred in cloud computing arrangements with the requirements for capitalizing costs to develop or obtain internal-use software.

This ASU is effective for annual reporting periods beginning after December 15, 2019 and early adoption is permitted.

The Company adopted this ASU as of January 1, 2020 and the adoption of this ASU did not have a material impact to the Company’s consolidated financial statements under the prospective transition method.

Recently Issued Accounting Standards Not Yet Adopted

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Specifically, the exercise and settlement features for the Sponsor Warrants precluded them from being considered indexed to the Company’s own stock, given that a change in the holder of the Sponsor Warrants may alter the settlement of the Sponsor Warrants.

Since the holder of the instrument is not an input to a standard option pricing model (a consideration with respect to the indexation guidance), the fact that a change in the holder could impact the value of the Sponsor Warrants means the Sponsor Warrants were not indexed to the Company’s own stock.

Since the Sponsor Warrants meet the definition of a derivative under ASC 815, the Company recorded these warrants as liabilities on the balance sheet at fair value upon the consummation of the Business Combination, with subsequent changes in their respective fair values recognized in the consolidated statement of operations at each reporting period.

The Company concluded that the Public Warrants, which did not have the same exercise and settlement features as the Sponsor Warrants, meet the criteria to be classified in shareholders' equity.

On June 9, 2021, the Company filed a notice of redemption of all outstanding Public Warrants and Sponsor Warrants.

The end of the redemption period was July 9, 2021, at which time the Company redeemed all unexercised warrants at a price of $ 0.10 per Warrant.

Recently Issued Accounting Standards

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740).

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This guidance is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

Early adoption is permitted.

The Company does not believe that the new guidance will have a material effect given that the Company has a full valuation allowance and the scenarios for which the guidance offer simplification are not significant for the Company..

The Company adopted this ASU as of January 1, 2021 and the adoption of this ASU did not have a material impact to the Company’s consolidated financial statements given that the Company has a full valuation allowance and the scenarios for which the guidance offer simplification are not significant for the Company.

In March 2020, the FASB issued ASU 2020-04 which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Inter-Bank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform.

This guidance is optional for a limited period of time to ease the potential burden in accounting for, or recognizing the effects of, reference rate reform on financial reporting.

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 date that the financial statements are available to be issued.

The Company may elect to take advantage of this optional guidance in its transition away from LIBOR within certain debt contracts.

While the goal of the reference rate reform transition is for it to be economically neutral to entities, the Company has not yet adopted this standard nor has the Company determined the impact the adoption of this guidance will have on the Company’s financial position, results of operations or cash flows.

The Company adopted this ASU as of January 1, 2021 and has elected to take advantage of this optional guidance in its transition away from LIBOR with certain debt contracts.

The Company’s existing LIBOR based debt arrangements generally include provisions that contemplate the transition from LIBOR, but certain arrangements may have such provisions added or modified as the transition becomes more imminent.

The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements as the transition from LIBOR has not occurred.

In August 2020, the FASB issued ASU 2020-06, to simplify accounting for certain financial instruments.

This guidance eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity.

The standard also amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments.

The Company adopted this ASU as of January 1, 2021 using the modified retrospective method.

The adoption of this ASU did not have a material impact to the Company’s consolidated financial statements.

BUSINESS COMBINATIONS

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survived the merger and became a wholly owned subsidiary of SCH.

On December 18, 2020, SCH also filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which SCH was domesticated as a Delaware corporation, changing its name from “Social Capital Hedosophia Holdings Corp.

II” to “Opendoor Technologies Inc.” These transactions are collectively referred to as the “Business Combination.”

On December 18, 2020, SCH also filed a notice of deregistration with the Cayman Islands Registrar of Companies, together with

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

the necessary accompanying documents, and filed a certificate of incorporation and a certificate of corporate domestication with the Secretary of State of the State of Delaware, under which SCH was domesticated as a Delaware corporation, changing its name from “Social Capital Hedosophia Holdings Corp.

II” to “Opendoor Technologies Inc.” These transactions are collectively referred to as the “Business Combination.”

The Business Combination was accounted for as a reverse recapitalization whereby SCH was determined as the accounting acquiree and Opendoor Labs Inc.

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As a result of this business combination, the Company became more vertically integrated with the ability to offer its customers OSN products and create a more seamless home buying experience while reducing its cost structure with respect to real estate transactions.

The acquisition-date fair value of the consideration transferred consisted of the following (in thousands):

The acquisition-date fair value of the consideration transferred consisted of the following (in millions):

Cash consideration $ 34

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The Company amortizes these acquired intangible assets over 5 years.

Open Listings acquisition

On September 10, 2018, the Company acquired 100 % of the outstanding equity of Open Listings Co.

(now known as OD Homes Brokerage Inc.) (“Open Listings”).

Open Listings, a Los Angeles based company, is an online platform that connects self-directed buyers with partner buying agents in an effort to reshape the home buying experience and deliver a lower buyer agent commission by refunding a portion of the agent commission to the buyer.

The Company acquired Open Listings with the intent of integrating the Open Listings business model into its business of buying and selling homes.

The Open Listings service product has been fully integrated to Opendoor’s services offering under Buy with Opendoor.

Other Acquisitions

On September 3, 2021, the Company acquired 100 % of the outstanding equity of Services Labs, Inc., including its consolidated subsidiaries (“Pro.com”), in exchange for $ 22 million in cash consideration.

The Company acquired Pro.com, a construction project platform, for its technology and talent.

Acquired intangible assets consist of developed technology valued at $ 4 million which will be amortized over one year .

Goodwill attributed to the Pro.com acquisition was $ 16 million.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

The acquisition-date fair value of the consideration transferred consisted of the following (in thousands):

Cash consideration $ 9,370

Equity consideration 6,150

Total consideration transferred $ 15,520

Acquired intangible assets consist of trademarks, non-competition agreements, customer relationships and developed technology valued at $ 0.3 million, $ 0.1 million, $ 0.9 million, and $ 2.9 million, respectively.

The Company amortizes these acquired intangible assets over 2 years.

Pro forma financial information

The results of operations for OSN that have been included in the Company’s consolidated financial statements from the September 4, 2019 acquisition date through December 31, 2019 includes revenue of $ 12.8 million and net loss of $ 4.2 million.

The results of operations for Open Listings that have been included in the Company’s consolidated financial statements from the September 10, 2018 acquisition date through December 31, 2018 includes revenue of $ 2.0 million and net loss of $ 2.3 million.

The following unaudited pro forma results of operations have been prepared as though the OSN acquisition and the Open Listings acquisition were completed on January 1, 2018 (in thousands).

Pro forma amounts are based on the purchase price allocation of the acquisition and are not necessarily indicative of results that may be reported in the future.

Non-recurring pro forma adjustments including acquisition-related costs directly attributable to the business combination transactions are included within the reported pro forma revenue and net loss.

Year Ended December 31,

(unaudited) 2019 2018

Revenue $ 4,763,716 $ 1,883,129

Net loss ( 340,667 ) ( 231,865 )

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

On November 3, 2021, the Company acquired the assets of RedDoor HQ Inc.

as part of a business combination in exchange for $ 15 million in cash consideration, of which $ 2 million is to be paid out one year following the date of closing.

The Company acquired the processes, systems and talent of RedDoor, which previously operated an online mortgage brokerage platform.

Acquired intangible assets consist of developed technology valued at $ 3 million, which will be amortized over one year .

Goodwill attributed to the RedDoor acquisition was $ 13 million.

REAL ESTATE INVENTORY

The following table presents the components of inventory, net of applicable real estate inventory valuation adjustments, as of the dates presented (in thousands):

The following table presents the components of inventory, net of applicable inventory valuation adjustments, as of the dates presented (in millions):

December 31, 2021 December 31, 2020

2 unchanged sentences

Total real estate inventory $ 6,096 $ 466

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES

The amortized cost, gross unrealized gains and losses, and fair value of cash, cash equivalents, and marketable securities as of December 31, 2020 and 2019, are as follows (in thousands):

CASH, CASH EQUIVALENTS, AND INVESTMENTS

The amortized cost, gross unrealized gains and losses, and fair value of cash, cash equivalents, and marketable securities as of December 31, 2021 and 2020, are as follows (in millions):

December 31, 2021

2 unchanged sentences

Money market funds 1,350 — — 1,350 1,350 —

Commercial paper 81,037 1 — 81,038 81,038 —

Time deposit 300 — — 300 300 —

Corporate debt securities 208 — ( 1 ) 207 — 207

Mutual fund 200 — — 200 — 200

Equity securities 46 — — 46 — 46

Commercial paper 15 — — 15 — 15

Asset-backed securities 7 — — 7 — 7

agency securities 6,993 2 — 6,995 — 6,995

Treasury securities 1,700 — — 1,700 — 1,700

Certificates of deposit 5 — — 5 — 5

Sovereign bonds 4 — — 4 — 4

Total $ 2,216 $ — $ ( 1 ) $ 2,215 $ 1,731 $ 484

8 unchanged sentences

Treasury securities 2 — — 2 — 2

securities 700 — — 700 — 700

Total $ 1,461 $ — $ — $ 1,461 $ 1,413 $ 48

1 unchanged sentence

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

A summary of debt securities with unrealized losses aggregated by period of continuous unrealized loss is as follows (in thousands):

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

A summary of debt securities with unrealized losses aggregated by period of continuous unrealized loss is as follows (in millions):

Less than 12 Months 12 Months or Greater Total

December 31, 2021 Fair Value Unrealized

Commercial paper $ 19,296 $ — $ — $ — $ 19,296 $ —

Money market funds $ 259 $ — $ — $ — $ 259 $ —

Corporate debt securities 207 ( 1 ) — — 207 ( 1 )

Commercial paper 15 — — — 15 —

Asset-backed securities 7 — — — 7 —

Certificates of deposit 5 — — — 5 —

Sovereign bonds 4 — — — 4 —

Total $ 497 $ ( 1 ) $ — $ — $ 497 $ ( 1 )

4 unchanged sentences

Asset-backed securities 5 — — — 5 —

securities 700 — — — 700 —

Total $ 31 $ — $ — $ — $ 31 $ —

The scheduled contractual maturities of debt securities as of December 31, 2020 are as follows (in thousands):

The scheduled contractual maturities of debt securities as of December 31, 2021 are as follows (in millions):

December 31, 2021 Fair Value Within

Commercial paper $ 81,038 $ 81,038 $ —

Corporate-debt securities $ 207 $ 71 $ 136

Commercial paper 15 15 —

Asset-backed securities 7 7 —

agency securities 6,995 6,995 —

Treasury securities 1,700 1,700 —

Certificates of deposit 5 5 —

Sovereign bonds 4 4 —

Total $ 238 $ 102 $ 136

As of December 31, 2021, the Company had $ 5 million of non-marketable equity securities measured using the Measurement Alternative.

The Company did no t record any adjustments to the carrying value of its non-marketable equity securities.

As of December 31, 2020, the Company had no non-marketable equity securities.

During the year ended December 31, 2021, the Company recognized $ 35 million of unrealized gains in the consolidated statements of operations related to equity securities still held as of December 31, 2021 .

DERIVATIVE INSTRUMENTS

2 unchanged sentences

The notional amount is generally not exchanged, but is used only as the basis on which interest and other payments are determined.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Interest Rate Caps

The Company uses free-standing derivative instruments in the normal course of business as economic hedges to manage interest rate risks with respect to its variable senior revolving credit facilities.

The interest rate caps are carried at fair value in Other current assets with changes in fair value included in Other income.

The Company uses free-standing derivative instruments in the normal course of business as economic hedges to manage interest rate risks with respect to its variable asset-backed senior revolving credit facilities.

The interest rate caps were carried at fair value in Other current assets with changes in fair value included in Other income.

The Company’s interest rate cap position expired in November 2020.

1 unchanged sentence

In originating mortgage loans, the Company enters into IRLCs with prospective borrowers which are freestanding derivative instruments.

IRLCs are a commitment that binds the Company, subject to loan underwriting and approval process, to

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

fund the loan at a specified interest rate, regardless of fluctuations in the market interest rates between commitment date and funding date.

IRLCs are a commitment that binds the Company, subject to loan underwriting and approval process, to fund the loan at a specified interest rate, regardless of fluctuations in the market interest rates between commitment date and funding date.

The interest rate risk associated with the fluctuations in market interest rates between commitment date and funding date with respect to IRLCs is mitigated as the Company operates under the best effort basis whereby at the time of commitment, the Company enters into a sales commitment with a third-party for the same prospective loan.

2 unchanged sentences

Embedded Conversion Options

In connection with the Company’s issuance of convertible notes in 2019 (the “Convertible Notes”), the Company bifurcated the embedded conversion features associated with the Convertible Notes.

The Convertible Notes and the related bifurcated embedded conversion options were extinguished in September 2020 as discussed in Note 7 — Credit Facilities and Long-Term Debt.

Prior to extinguishment, the embedded conversion options were measured at fair value in accordance with the methodology described in Note 8 — Fair Value Disclosures and were presented in Derivative and warrant liabilities.

The Company bifurcated the embedded conversion features associated with the 2019 Convertible Notes.

The 2019 Convertible Notes and the related bifurcated embedded conversion options were extinguished in September 2020.

Prior to extinguishment, the embedded conversion options were measured at fair value and were presented in Derivative and warrant liabilities.

The change in fair value of the embedded conversion options is a component of Derivative and warrant fair value adjustment.

The following table presents the total notional amounts and fair values for the Company’s derivatives (in thousands):

The following table presents the total notional amounts and fair values for the Company’s derivatives (in millions):

Fair Value Derivatives

As of December 31, 2020 Asset Liability

December 31, 2021 Asset Liability

Interest rate lock commitments $ 21 $ — $ —

Fair Value Derivatives

As of December 31, 2019 Asset Liability

Interest rate caps $ 100,000 $ 4 $ —

December 31, 2020 Asset Liability

Interest rate lock commitments $ 15 $ — $ —

Embedded conversion options $ 180,252 $ — $ 41,697

The following table presents the net gains and losses recognized on derivatives within the respective line items in the statement of operations for the periods indicated (in thousands):

The following table presents the net gains and losses recognized on derivatives within the respective line items in the statement of operations for the periods indicated (in millions):

Year Ended December 31,

2021 2020 2019

Revenue $ 278 $ 95 $ —

Derivative and warrant fair value adjustment $ — $ ( 23 ) $ —

1 unchanged sentence

VARIABLE INTEREST ENTITIES

The Company utilizes VIEs in the normal course of business to support the Company’s financing needs (“Credit Facility Vehicles”) and to conduct the Company’s title business (“Title Companies”).

The Company determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with the VIE and reconsider that conclusion on an on-going basis.

The Company utilizes VIEs in the normal course of business to support the Company’s financing needs.

The Company determines whether the Company is the primary beneficiary of a VIE at the time it becomes involved with the VIE and reconsiders that conclusion on an on-going basis.

See “Note 1 — Description of Business and Accounting Policies” for further discussion of the Company’s “Consolidation of Variable Interest Entities” policy.

Credit Facility Vehicles

The Company established certain special purpose entities (“SPEs”) for the purpose of financing the Company’s purchase and renovation of real estate inventory through the issuance of senior revolving credit facility debt and mezzanine term debt.

The Company is the primary beneficiary of the various VIEs within these financing structures and consolidates these VIEs.

The Company is determined to be the primary beneficiary based on its power to direct the activities that most significantly impact the economic outcomes of the SPEs through its role in designing the SPEs and managing the real estate inventory they purchase

The Company is the primary beneficiary of

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

the various VIEs within these financing structures and consolidates these VIEs.

The Company has a potentially significant variable interest in the entities based upon the equity interest the Company holds in the VIEs.

The following table summarizes the assets and liabilities related to the VIEs consolidated by the Company from the Company’s Credit Facility Vehicles as of December 31, 2020 and December 31, 2019 (in thousands):

The following table summarizes the assets and liabilities related to the VIEs consolidated by the Company as of December 31, 2021 and 2020 (in millions):

December 31, 2021 December 31, 2020

3 unchanged sentences

Total assets $ 7,006 $ 565

Credit facilities $ 474,640 $ 1,264,913

Non-recourse asset-backed debt $ 6,102 $ 475

Total liabilities $ 6,172 $ 478

3 unchanged sentences

The creditors of the VIEs generally do not have recourse to the Company’s general credit solely by virtue of being creditors of the VIEs, with the exception of limited guarantees provided by an Opendoor subsidiary for credit facilities.

See “Note 7 — Credit Facilities and Long-Term Debt” for further discussion of the recourse obligations with respect to the Credit Facility Vehicles.

CREDIT FACILITIES AND LONG-TERM DEBT

Non-Recourse Asset-backed Financing Facilities

The Company utilizes inventory financing facilities consisting of asset-backed senior revolving credit facilities and asset-backed mezzanine term debt facilities to provide financing for the Company’s real estate inventory purchases and renovation.

Each SPE is a consolidated subsidiary of Opendoor and a separate legal entity.

Neither the assets nor credit of any such SPE are generally available to satisfy the debts and other obligations of any other Opendoor entities, except to the extent other Opendoor entities are also a party to the financing arrangements.

The credit facilities are secured by the assets and equity of one or more SPEs.

These facilities are non-recourse to Opendoor and, with limited exceptions, non-recourse to other Opendoor subsidiaries.

These SPEs are variable interest entities and Opendoor is determined to be the primary beneficiary based on its power to direct the activities that most significantly impact the economic outcomes of the entities through its role in designing the entities and managing the real estate inventory purchased and sold by the entities.

The Company has potentially significant variable interest in the entities based upon the equity interest the Company holds in the VIEs.

Asset-backed Senior Revolving Credit Facilities

The Company classifies the senior revolving credit facilities as current liabilities on the Company’s consolidated balance sheets as amounts drawn to acquire and renovate homes are required to be repaid as the related real estate inventory is sold, which the Company expects to occur within 12 months.

The following table summarizes certain details related to the Company’s credit facilities outstanding as of December 31, 2020 and 2019 (in thousands, except interest rates):

See “Note 7 — Credit Facilities and Long-Term Debt” for further discussion of the recourse obligations with respect to the VIEs.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

As of December 31, 2020 Borrowing

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

CREDIT FACILITIES AND LONG-TERM DEBT

The following tables summarize certain details related to the Company's credit facilities and long-term debt as of December 31, 2021 and 2020 (in millions, except interest rates):

Outstanding Amount

December 31, 2021 Borrowing

Current Non-Current Weighted

Interest Rate

Revolving Facility 2018-1 $ 250,000 $ — 4.28 % February 10, 2021 May 10, 2021

End of Revolving / Withdrawal Period

Final Maturity

Non-Recourse Asset-backed Debt:

Asset-backed Senior Revolving Credit Facilities

Revolving Facility 2018-2 $ 1,250 $ 759 $ — 2.84 % September 23, 2022 December 23, 2022

Revolving Facility 2018-3 750 673 — 2.39 % May 26, 2024 May 26, 2024

Revolving Facility 2019-1 900 648 — 2.84 % June 30, 2023 June 30, 2023

Revolving Facility 2019-1 300,000 32,535 3.58 % March 4, 2022 March 4, 2022

Revolving Facility 2019-2 1,850 1,149 — 2.52 % July 8, 2023 July 8, 2024

Revolving Facility 2019-3 925 886 — 3.25 % August 22, 2022 August 21, 2023

Revolving Facility 2021-1 125 125 — 2.15 % October 31, 2022 October 31, 2022

Asset-backed Senior Term Debt Facilities

Term Debt Facility 2021-S1 400 — 400 3.48 % April 1, 2024 April 1, 2025

Term Debt Facility 2021-S2 600 — 500 3.20 % September 10, 2024 September 10, 2025

Term Debt Facility 2021-S3 1,000 — — 3.75 % 5 Years from Initial Draw Date

5 Years, 6 Months from Initial Draw Date

Total $ 7,800 $ 4,240 $ 900

As of December 31, 2019 Outstanding

Weighted Average

Issuance Costs ( 3 )

Carrying Value $ 897

Asset-backed Mezzanine Term Debt Facilities

Term Debt Facility 2020-M1 $ 3,000 $ — $ 1,000 10.00 % April 1, 2025 April 1, 2026

Total $ 3,000 $ — $ 1,000

Issuance Costs ( 35 )

Carrying Value $ 965

Total Non-Recourse Asset-backed Debt $ 10,800 $ 4,240 $ 1,862

Recourse Debt - Other Secured Borrowings:

Mortgage Financing

Repo Facility 2019-R1 $ 100 $ 7 $ — 1.84 % May 26, 2022 May 26, 2022

Total Recourse Debt $ 100 $ 7 $ —

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Outstanding Amount

December 31, 2020 Current Non-Current Weighted

Interest Rate

Revolving Facility 2016-1 $ 39,346 6.17 %

Revolving Facility 2017-1 25,758 7.00 %

Non-Recourse Asset-backed Debt:

Asset-backed Senior Revolving Credit Facilities

Revolving Facility 2018-1 $ — $ — 4.28 %

5 unchanged sentences

Total $ 339 $ —

As of December 31, 2020, the Company had multiple senior revolving credit facilities with various financial institutions with a total borrowing capacity of $ 2,905 million.

Undrawn borrowing capacity amounts under the senior revolving credit facilities as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2020, the Company had fully committed borrowing capacity with respect to the Company’s senior revolving credit facilities of $ 1,483 million.

These facilities are typically structured with an initial 12 to 24 month revolving period during which time amounts can be borrowed, repaid and borrowed again.

Asset-backed Mezzanine Term Debt Facilities

Term Debt Facility 2016-M1 $ — $ 40 10.00 %

Term Debt Facility 2020-M1 — 100 10.00 %

Total $ — $ 140

Issuance Costs ( 5 )

Carrying Value $ 135

Total Non-Recourse Asset-backed Debt $ 339 $ 135

Recourse Debt - Other Secured Borrowings:

Mortgage Financing

Repo Facility 2019-R1 $ 7 $ — 1.94 %

Total Recourse Debt $ 7 $ —

Non-Recourse Asset-backed Debt

The Company utilizes inventory financing facilities consisting of asset-backed senior debt facilities and asset-backed mezzanine term debt facilities to provide financing for the Company’s real estate inventory purchases and renovation.

The credit facilities are secured by the assets and equity of one or more SPEs.

Each SPE is a consolidated subsidiary of Opendoor and a separate legal entity.

These facilities are non-recourse to Opendoor and, with limited exceptions, non-recourse to other Opendoor subsidiaries.

As of December 31, 2021, the Company had total borrowing capacity with respect to the Company’s non-recourse asset backed debt of $ 10.8 billion.

Borrowing capacity amounts under non-recourse asset backed debt as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s non-recourse asset backed debt of $ 7.8 billion.

Asset-backed Senior Revolving Credit Facilities

Borrowing capacity amounts under the senior revolving credit facilities as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s senior revolving credit facilities of $ 3.9 billion.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The senior revolving credit facilities are typically structured with an initial revolving period of up to 24 months during which time amounts can be borrowed, repaid and borrowed again.

The borrowing capacity is generally available until the end of the applicable revolving period as reflected in the table above.

1 unchanged sentence

The final maturity dates and revolving period end dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company.

The Company’s senior revolving credit facilities may also have extensions subject to lender discretion that are not reflected in the table above.

Borrowings accrue interest at a rate based on a LIBOR reference rate plus a margin that varies by facility.

These facilities may also have extensions subject to lender discretion that are not reflected in the table above.

Borrowings under the senior revolving credit facilities accrue interest at a rate based on a LIBOR reference rate plus a margin that varies by facility.

The Company may also pay fees on certain unused portions of the committed borrowing capacity, as defined in the respective credit agreements.

1 unchanged sentence

These facilities are generally fully prepayable at any time without penalty other than customary LIBOR breakage costs.

These borrowings are collateralized by cash, equity in the real estate owning SPEs, and the real estate inventory funded by the relevant revolving credit facility.

These borrowings are collateralized by cash, equity in the real estate owning SPEs, and the real estate inventory funded by the relevant facility.

The lenders have legal recourse only to the real estate-owning SPE borrowers, certain SPE guarantors, and the assets securing the debt, and do not have general recourse to the Company.

The senior revolving credit facilities have aggregated borrowing bases, which increase or decrease based on the cost and value of the properties financed under a given facility and the time that those properties are in the Company’s possession.

When the Company resells a home, the proceeds are used to reduce the outstanding balance under the related revolving senior credit

When the Company resells a home, the proceeds are used to reduce the outstanding balance under the related senior revolving credit facility.

The borrowing base for a given facility may be reduced as properties age beyond certain thresholds and any borrowing base deficiencies may be satisfied through contributions of additional properties or partial repayment of the facility.

Asset-backed Senior Term Debt Facilities

The Company classifies its senior term debt facilities as non-current liabilities on the Company's consolidated balance sheets because its borrowings under these facilities are generally not required to be repaid until the final maturity date.

Borrowing capacity amounts under the senior term debt facilities as reflected in the table above are in some cases not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

Any amounts repaid reduce total borrowing capacity as repaid amounts are not available to be reborrowed.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s senior term debt facilities of $ 1.7 billion.

The total outstanding amount presented above includes $ 900 million of non-current liabilities;

the carrying value of the non-current liabilities is reduced by issuance costs of $ 3 million.

The senior term debt facilities are typically structured with an initial withdrawal period of up to 60 months during which the outstanding principal amounts are generally not required to be repaid when homes financed through those facilities are sold and instead are intended to remain outstanding until final maturity for each facility.

Outstanding amounts drawn under each senior term debt facility are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default or other mandatory repayment event.

The final maturity dates and withdrawal period end dates reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company.

These facilities may also have extensions subject to lender discretion that are not reflected in the table above.

Borrowings under the senior term debt facilities accrue interest at a fixed rate.

The Company's senior term debt facilities may include upfront issuance costs that are capitalized as part of the facilities' respective carrying values.

These facilities are fully prepayable at any time but may be subject to certain customary prepayment penalties.

These borrowings are collateralized by cash, equity in the real estate owning SPEs, and the real estate inventory funded by the relevant facility.

The lenders have legal recourse only to the real estate-owning SPE borrowers, certain SPE guarantors, and the assets securing the debt, and do not have general recourse to the Company.

The senior term debt facilities have aggregated property borrowing bases, which increase or decrease based on the cost and the value of the properties financed under a given facility, the time that those properties are in the Company’s possession and the amount of cash collateral pledged by the SPE borrowers.

The borrowing bases for a given facility may be reduced as

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

properties age beyond certain thresholds and any borrowing base deficiencies may be satisfied through contributions of additional properties, cash or through partial repayment of the facility.

Asset-backed Mezzanine Term Debt Facilities

The Company classifies its mezzanine term debt facilities as long-term liabilities on the Company’s consolidated balance sheets because its borrowings under these facilities are generally not required to be repaid until the applicable final maturity date.

These facilities are structurally and contractually subordinated to the related senior revolving credit facilities.

The following table summarizes certain details related to the Company’s mezzanine term debt facilities as of December 31, 2020 (in thousands, except interest rates):

As of December 31, 2020 Borrowing

Term Debt Facility 2016-M1 $ 149,000 $ 40,000 10.00 % October 31, 2022 April 30, 2024

Term Debt Facility 2020-M1 300,000 100,000 10.00 % January 23, 2023 January 23, 2026

Total $ 449,000 $ 140,000

Issuance Costs ( 4,533 )

Carrying Value $ 135,467

As of December 31, 2020, the Company had $ 140 million in total principal outstanding under multiple mezzanine term debt facilities with various financial institutions.

Undrawn amounts under the mezzanine term debt facilities of $ 309 million as reflected in the table above are fully committed and generally may be drawn at any time during the draw period;

however, any amounts repaid reduce total borrowing capacity as repaid amounts are not available to be reborrowed.

The final maturity dates as reflected in the table above are inclusive of any extensions at the sole discretion of the Company.

The Company’s mezzanine term debt facilities may also have extensions subject to lender discretion that are not reflected in the table above.

These facilities are structurally and contractually subordinated to the related asset-backed senior debt facilities.

Borrowing capacity under the mezzanine term debt facilities as reflected in the table above are not fully committed and any borrowings above the fully committed amounts are subject to the applicable lender’s discretion.

Any amounts repaid reduce total borrowing capacity as repaid amounts are not available to be reborrowed.

As of December 31, 2021, the Company had fully committed borrowing capacity with respect to the Company’s mezzanine term debt facilities of $ 2.3 billion.

The total outstanding amount presented above includes $ 1.0 billion of non-current liabilities;

the carrying value of the non-current liabilities is reduced by issuance costs of $ 35 million.

The mezzanine term debt facilities have been structured with an initial 42 month withdrawal period during which the outstanding principal amounts are generally not required to be repaid when homes financed through those facilities are sold and instead are intended to remain outstanding until final maturity.

Outstanding amounts drawn under the mezzanine term debt facilities are required to be repaid on the facility maturity date or earlier if accelerated due to an event of default or other mandatory repayment event.

The final maturity date and withdrawal period end date reflected in the table above are inclusive of any extensions that are at the sole discretion of the Company.

These facilities may also have extensions subject to lender discretion that are not reflected in the table above.

Borrowings under a given term debt facility accrue interest at a fixed rate.

The Company’s mezzanine term debt facility arrangements may include upfront issuance costs that are capitalized as part of the facilities’ respective carrying values.

The mezzanine term debt facilities include upfront issuance costs that are capitalized as part of the facilities’ respective carrying values.

These facilities are fully prepayable at any time but may be subject to certain prepayment penalties.

1 unchanged sentence

The lenders generally have legal recourse only to the applicable borrowers of the debt and their assets securing the debt and do not have recourse to Opendoor and, with limited exceptions, do not have recourse to other Opendoor subsidiaries.

The facilities have aggregated property borrowing bases, which increase or decrease based on the cost and the value of the properties financed under a given facility and time in the Company’s possession of those properties and the amount of cash collateral pledged by the relevant SPE borrower.

The mezzanine term debt facilities have aggregated property borrowing bases, which increase or decrease based on the cost and the value of the properties financed under a given facility and time in the Company’s possession of those properties and the amount of cash collateral pledged by the relevant SPE borrower.

1 unchanged sentence

Financed properties are subject to customary eligibility criteria and concentration limits.

The terms of these facilities and related financing documents require Opendoor 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 equity).

The terms of these inventory financing facilities and related financing documents require Opendoor 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 equity).

As of December 31, 2021, the Company was in compliance with all financial covenants and no event of default had occurred.

Mortgage Financing

To provide capital for Opendoor Home Loans, the Company utilizes a master repurchase agreement (the “Repurchase Agreement”) which is classified as a current liability on its consolidated balance sheets.

In March 2019, the Company entered into the Repurchase Agreement with a lender to provide short-term funding for mortgage loans originated by Opendoor Home Loans.

The facility provides short-term financing between the issuance of a mortgage loan and when Opendoor Home Loans

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Convertible Notes

In July through November 2019, the Company issued Convertible Notes at par for a total of $ 178.2 million in proceeds, net of $ 0.5 million in debt issuance costs.

The Convertible Notes had an initial maturity date of July 2026, which the Company could have elected to extend by one year if a material financial market disruption (as defined in the notes) were to exist at initial maturity.

The Convertible Notes accrued interest at a rate of 3 % per annum, which was compounded semi-annually and payable by increasing the principal amounts of the Convertible Notes.

The Convertible Notes were a hybrid instrument with several features that could accelerate the settlement of the Convertible Notes in such a way that the holder would receive a substantial premium on accrued principal and interest owed.

The Company determined these features should be bifurcated and separately accounted for as a derivative and recorded its initial fair value of $ 41.7 million as a discount on the Convertible Notes’ face amount.

Refer to Note 5 — Derivative Instruments for further information on the embedded conversion options and Note 8 — Fair Value Disclosures for the fair value methodology.

The debt discount is amortized to interest expense at an effective interest rate of 3.8 %.

The Company amortizes the discount over the period until the initial maturity date of the respective note.

The Convertible Notes are carried on the consolidated balance sheets at their original issuance value in addition to paid-in kind interest, net of unamortized debt discount and issuance costs.

On September 14, 2020, the Company entered into a Convertible Notes Exchange Agreement (the “Exchange Agreement”) with the Convertible Note holders.

Under the terms of the Exchange Agreement, the Convertible Note holders received rights to 21.5 million shares of the Company’s common stock (“Issuer Stock Rights”) upon the earlier of (i) immediately prior to the consummation of the Business Combination as stipulated in the Merger Agreement and (ii) March 13, 2021.

The Issuer Stock Rights were received in full satisfaction of the outstanding principal and accrued interest on the Convertible Notes and such notes were cancelled and of no further force or effect.

With the issuance of the Issuer Stock Rights, which the Company has assessed to be an equity classified instrument with a fair value of $ 212.9 million, the convertible notes, including the unamortized debt discount and debt issuance costs, and the related bifurcated embedded conversion options were extinguished.

Mortgage Financing

The following tables summarize certain details related to the Company’s mortgage financing (in thousands, except interest rates):

As of December 31, 2020 Borrowing

Weighted Average Interest Rate

End of Revolving Period

Repo Facility 2019-R1 $ 50,000 $ 7,149 1.94 % April 29, 2021 April 29, 2021

As of December 31, 2019 Outstanding Amount

Weighted Average Interest Rate

Repo Facility 2019-R1 $ 2,021 3.98 %

To provide capital for Opendoor Home Loans, we utilize a master repurchase agreement (the “Repurchase Agreement”) which is classified as a current liability on our balance sheets.

In March 2019, we entered into the Repurchase Agreement with a lender to provide short-term funding for mortgage loans originated by Opendoor Home Loans.

The facility provides short-term financing between the issuance of a mortgage loan and when Opendoor Home Loans sells the loan to an investor.

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

sells the loan to an investor.

In accordance with the Repurchase Agreement, the lender agrees to pay Opendoor Home Loans a negotiated purchase price for eligible loans and Opendoor Home Loans simultaneously agrees to repurchase such loans from the lender within a specified timeframe and at an agreed upon price that includes interest.

2 unchanged sentences

As of December 31, 2021, the Repurchase Agreement has a borrowing capacity of $ 100 million, of which $ 20 million is fully committed.

The Repurchase Agreement includes customary representations and warranties, covenants and

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

provisions regarding events of default.

The Repurchase Agreement includes customary representations and warranties, covenants and provisions regarding events of default.

As of December 31, 2021, $ 7 million in mortgage loans were financed under the facility, and Opendoor was in compliance with all financial covenants and no event of default had occurred.

2 unchanged sentences

The Repurchase Agreement is recourse to Opendoor Labs Inc.

Convertible Senior Notes

In August 2021, the Company issued the 2026 Notes with an aggregate principal amount of $ 978 million.

The tables below summarizes certain details related to the 2026 Notes (in millions, except interest rates):

December 31, 2021 Aggregate Principal Amount

Unamortized Debt Issuance Costs Net Carrying Amount

2026 Notes $ 978 $ ( 24 ) $ 954

December 31, 2021 Maturity Date Stated Cash Interest Rate Effective Interest Rate Semi-Annual Interest Payment Dates Conversion Rate Conversion Price

2026 Notes August 15, 2026 0.25 % 0.77 % February 15;

August 15 51.9926 $ 19.23

The 2026 Notes will be convertible at the option of the holders before February 15, 2026 only upon the occurrence of certain events.

Beginning on August 20, 2024, the Company has the option to redeem the 2026 Notes upon meeting certain conditions related to price of the Company's common stock.

Beginning on February 15, 2026 and until the close of business on the second scheduled trading day immediately preceding the maturity date, the 2026 Notes are convertible at any time at election of each holder.

The conversion rate and conversion price are subject to customary adjustments under certain circumstances.

In addition, if certain corporate events that constitute a make-whole fundamental change occur, then the conversion rate will be adjusted in accordance with the make-whole table within the Indenture.

Upon conversion, the Company may satisfy its conversion obligation by paying cash or providing a combination of cash and the Company's common stock, at the Company's election, based on the applicable conversion rate.

For the year ended December 31, 2021, total interest expense on the Company's convertible senior notes was $ 3 million, with coupon interest of $ 1 million and amortization of debt issuance costs of $ 2 million.

In August 2021, in connection with the issuance of the 2026 Notes, the Company purchased capped calls (the "Capped Calls") from certain financial institutions at a cost of $ 119 million.

The Capped Calls cover, subject to customary adjustments, the number of shares of the Company's common stock underlying the 2026 Notes.

By entering into the Capped Calls, the Company expects to reduce the potential dilution to its common stock (or, in the event of a conversion of the 2026 Notes settled in cash, to reduce its cash payment obligation) in the event that at the time of conversion of the 2026 Notes its common stock

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

price exceeds the conversion price.

The Capped Calls have an initial strike price of $ 19.23 per share and an initial cap price of $ 29.59 per share or a cap price premium of 100 %.

FAIR VALUE DISCLOSURES

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Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Estimation of Fair Value

3 unchanged sentences

Cash and cash equivalents Carrying value is a reasonable estimate of fair value based on short-term nature of the instruments.

Estimated fair value classified as Level 1

Level 1 estimated fair value measurement.

Restricted cash Carrying value is a reasonable estimate of fair value based on short-term nature of the instruments.

Estimated fair value classified as Level 1

Marketable securities Prices obtained from third-party vendors that compile prices from various sources and often apply matrix pricing for similar securities when no price is observable.

Level 1 estimated fair value measurement.

Marketable securities

Debt securities Prices obtained from third-party vendors that compile prices from various sources and often apply matrix pricing for similar securities when no price is observable.

Level 2 recurring fair value measurement.

Other current assets

Interest rate caps Prices obtained from derivative broker that compiles prices for identical or similar instruments, when available.

Mutual fund Price is quoted given the security is traded on an exchange.

Level 1 recurring fair value measurement.

Equity securities Price is quoted given the securities traded on an exchange.

Level 1 recurring fair value measurement.

Mortgage loans held for sale pledged under agreements to repurchase Fair value is estimated based on observable market data including quoted market prices, deal price quotes, and sale commitments.

Level 2 recurring fair value measurement.

Credit facilities and other secured borrowings

Other current assets

Mortgage loans held for sale Fair value is estimated based on observable market data including quoted market prices and deal price quotes.

Level 2 recurring fair value measurement.

Interest rate lock commitments Fair value of the underlying loan based on observable quoted market prices in the secondary market and sale commitments, with adjustments for the estimated pull-through rate.

Level 2 recurring fair value measurement for fair value based on observable inputs.

Level 3 recurring fair value measurement for fair value with unobservable inputs.

Non-marketable equity securities Fair value is estimated using the observable transaction price.

Level 2 non-recurring fair value measurement for fair value based on transaction price.

Non-recourse asset-backed debt

Credit facilities Fair value is estimated using discounted cash flows based on current lending rates for similar credit facilities with similar terms and remaining time to maturity.

Carried at amortized cost.

Estimated fair value classified as Level 2.

Level 2 estimated fair value measurement.

Other secured borrowings

Loans sold under agreements to repurchase Fair value is estimated using discounted cash flows based on current lending rates for similar asset-backed financing facilities with similar terms and remaining time to maturity.

Carried at amortized cost.

Estimated fair value classified as Level 2.

Convertible notes Fair value is estimated using discounted cash flows based on current lending rates for term notes with similar remaining time to maturity.

Level 2 estimated fair value measurement.

Convertible senior notes Fair value is estimated using broker quotes and other observable market inputs.

Carried at amortized cost.

Estimated fair value classified as Level 2

Level 2 estimated fair value measurement.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Derivative and warrant liabilities

Warrant liabilities Fair value is estimated using the Black-Scholes-Merton option pricing model with inputs and assumptions including the Company’s equity valuation, expected volatility, expected duration of the warrants, and associated risk-free rate.

Sponsor Warrants Fair value is estimated using the price of the Public Warrants or their settlement value.

Level 2 recurring fair value measurement.

Warrants Fair value is estimated using the Black-Scholes-Merton option pricing model with inputs and assumptions including the Company’s equity valuation, expected volatility, expected duration of the warrants, and associated risk-free rate.

Level 3 recurring fair value measurement.

Embedded conversion options Fair value is estimated using a lattice model incorporating the probabilities of various conversion scenarios with respect to timing and conversion features under the terms of the 2019 Convertible Notes.

Level 3 recurring fair value measurement.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Assets and Liabilities Recorded at Fair Value on a Recurring Basis

The following tables present the levels of the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis (in thousands).

Fair Value as of December 31, 2020 Level 1 Level 2 Level 3

The following tables present the levels of the fair value hierarchy for the Company’s assets measured at fair value on a recurring basis (in millions).

December 31, 2021 Balance at Fair Value Level 1 Level 2 Level 3

Marketable securities:

Corporate debt securities $ 207 $ — $ 207 $ —

Mutual fund 200 200 — —

Equity securities 46 46 — —

Commercial paper 15 — 15 —

Asset-backed securities 7 — 7 —

agency securities 6,995 — 6,995 —

Treasury securities 1,700 — 1,700 —

Certificates of deposit 5 — 5 —

Sovereign bonds 4 — 4 —

Mortgage loans held for sale pledged under agreements to repurchase 7 — 7 —

Other current assets:

Interest rate lock commitments 373 373

Mortgage loans held for sale 4 — 4 —

Total assets $ 495 $ 246 $ 249 $ —

Fair Value as of December 31, 2019 Level 1 Level 2 Level 3

December 31, 2020 Balance at Fair Value Level 1 Level 2 Level 3

Marketable securities:

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Asset-backed securities 13 — 13 —

Commercial paper 12,956 — 12,956 —

securities 700 — 700 —

agency securities 7 — 7 —

Treasury securities 2 — 2 —

Mortgage loans held for sale pledged under agreements to repurchase 8 — 8 —

Other current assets:

Interest rate caps 4 — 4 —

Interest rate lock commitments 95 — 95 —

Total assets $ 56 $ — $ 56 $ —

Derivative and warrant liabilities:

Warrants 4,538 — — 4,538

Embedded conversion options 41,697 — — 41,697

Warrant liabilities:

Sponsor Warrants 47 — 47 —

Total liabilities $ 47 $ — $ 47 $ —

1 unchanged sentence

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Fair Value of Financial Instruments

The following presents the carrying value, estimated fair value and the levels of the fair value hierarchy for the Company’s financial instruments other than assets and liabilities measured at fair value on a recurring basis (in thousands).

As of December 31, 2020

December 31, 2021

Fair Value Level 1 Level 2

1 unchanged sentence

Restricted cash 847 847 847 —

Credit facilities and other secured borrowings $ 481,789 $ 486,322 $ — $ 486,322

As of December 31, 2019

Other assets:

Non-marketable equity securities 5 5 — 5

Non-recourse asset-backed debt $ 6,102 $ 6,140 $ — $ 6,140

Other secured borrowings 7 7 — 7

Convertible senior notes 954 1,019 — 1,019

December 31, 2020

Fair Value Level 1 Level 2

1 unchanged sentence

Restricted cash 93 93 93 —

Credit facilities and other secured borrowings $ 1,296,054 $ 1,296,054 $ — $ 1,296,054

Convertible notes 140,096 180,252 — 180,252

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 Fair values (in thousands):

Non-recourse asset-backed debt $ 475 $ 479 $ — $ 479

Other secured borrowings 7 7 — 7

The following table shows a reconciliation from the opening balances to the closing balances for Level 3 Fair values (in millions):

Warrants Embedded

Conversion Option

Interest Rate Lock Commitments

Balance as of December 31, 2018 $ 18 $ — $ —

Net change in fair value ( 7,413 ) —

Issuances 1 42 —

Exercise of warrants ( 7 ) — —

Balance as of December 31, 2019 4,538 41,697

Net change in fair value ( 7 ) — —

Issuances — —

Balance as of December 31, 2019 $ 5 $ 42 $ —

Settlement of 2019 Convertible Notes — ( 65 ) —

Exercise of warrants ( 7 ) — —

Net change in fair value 2 23 —

Balance as of December 31, 2020 $ — $ — $ —

Warrant Liabilities

Prior to being exercised, the Company had three different instruments within warrant liabilities, as discussed further in Note 15 — Warrants, the series D preferred warrants, the series E preferred warrants, and a commitment to issue warrants.

Prior to being exercised, the series D preferred warrants comprised of warrants with an exercise price of $ 0.01 per share.

As these series D preferred warrants are deep in the money, such that the intrinsic value approximates the option value, the key input in valuing these warrants with respect to the Black-Scholes-Merton model is the Company’s equity valuation.

With respect to the series E preferred warrants, the Black-Scholes-Merton inputs that most significantly impact the valuation of the warrants are the term and the Company’s equity valuation.

Additions — — 5

Originations/Terminations — — ( 5 )

Balance as of December 31, 2021 $ — $ — $ —

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

One of the key inputs in valuing the Company’s commitment to issue warrants is timing to a qualifying liquidity event;

this is because the warrant commitment arrangement is stipulated such that the Company no longer has an obligation to issue warrants in periods subsequent to a qualifying liquidity event.

Another key input in valuing the Company’s commitment to issue warrants is the number of warrants to be issued, which can vary based on the range prescribed in the agreement.

The valuation of the commitment to issue warrants can vary significantly based on the timing to a qualifying liquidity event and the number of warrants to be issued.

When the Company entered into the Merger Agreement, the Company updated the expected timing to a change in control and reduced the expected term of outstanding warrants to be consistent with the expected timing of consummation of the Business Combination.

As a result of the Business Combination, the Company is no longer obligated to issue warrants under the Warrant Commitment.

As of December 31, 2019, in addition to the series D preferred warrants with an exercise price of $ 0.01 per share, the Company also had outstanding warrants with exercise price of $ 6.58 per share.

With respect to the series D preferred warrants with an exercise price of $ 6.58 per share, the Black-Scholes-Merton inputs that most significantly impact the valuation of the warrants are the term and the Company’s equity valuation;

these warrants are sensitive to term as an input because the warrants have a four -year term subsequent to acceleration due to liquidity events or the Company’s sole discretion after August 17, 2019.

Embedded conversion options

Embedded conversion options, which are bifurcated embedded derivatives, originate from the convertible notes issued by the Company during 2019.

See “Note 7 — Credit Facilities and Long-Term Debt” for further information.

The fair value of the embedded conversion options is estimated using a lattice model incorporating the probabilities of various liquidity events which constituted conversion triggering events within the convertible notes.

The key input to the valuation model is timing of possible liquidity events.

Based on the structure of the convertible notes and that the Company has a redemption option, that if exercised sufficiently in advance of such conversion events, would allow the Company to redeem such notes, the Company valued the embedded conversion options with the assumption that the Company would preempt liquidity events by asserting its redemption option and thereby narrowing the valuation to terms of the redemption option.

In addition to the 3 % payment-in-kind interest, the redemption value of the convertible notes accretes with the passage of time.

Between the end of the first year to the end of the seven -year note term, accretion ranges from 5.9 % to 79.6 %.

As such, the embedded conversion options are highly sensitive to the timing of liquidity events.

As discussed in Note 7 — Credit facilities and long-term debt, the convertible notes and related bifurcated embedded conversion options have been extinguished pursuant to the Exchange Agreement on September 14, 2020 and the Company remeasured the embedded conversion options immediately prior to extinguishment based upon the fair value of the Issuer Stock Rights exchanged.

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

PROPERTY AND EQUIPMENT

Property and equipment as of December 31, 2020 and 2019, consisted of the following (in thousands):

Property and equipment as of December 31, 2021 and 2020, consisted of the following (in millions):

Internally developed software $ 71 $ 48

Computers 11 5

Security systems 10 1

Furniture and fixtures 3 3

Software implementation costs 3 2

Leasehold improvements 2 2

Office equipment 2 2

Software implementation costs 1,680 1,214

Security systems 681 4,927

Total 63,486 55,068

Accumulated depreciation and amortization ( 57 ) ( 34 )

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Depreciation and amortization expense of $ 27 million, $ 22 million, and $ 15 million was recorded for the years ended December 31, 2021, 2020 and 2019, respectively.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

The Company leases office space throughout the United States under operating and short-term lease agreements.

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The Company also leases equipment under immaterial finance lease agreements.

For the year ended December 31, 2020 operating lease cost was $ 34.3 million, variable lease cost was $ 0.4 million, short-term lease cost was $ 0.9 million, and sublease income was $ 0.1 million.

During the years ended December 31, 2019 and 2018, rent expense related to operating leases was $ 11.7 million and $ 7.4 million, respectively.

For the year ended December 31, 2020, cash paid for amounts included in the measurement of operating lease liabilities was $ 12.7 million.

For the year ended December 31, 2020, right-of-use assets obtained in exchange for new or acquired operating lease liabilities was $ 39.8 million.

Components of lease costs for the years ended the December 31, 2021, 2020, and 2019, are as follows (in millions):

Year Ended December 31,

2021 2020 2019

Operating lease cost $ 12 $ 34 $ 12

Variable lease cost 1 — 1

Short-term lease cost — 1 2

Sublease income ( 1 ) — ( 1 )

Net lease cost $ 12 $ 35 $ 14

The following table present supplemental lease information (in millions):

December 31, 2021 2020 2019

Cash paid for amounts included in the measurement of operating lease liabilities $ ( 10 ) $ ( 13 ) $ ( 11 )

Right-of-use assets obtained in exchange for new or acquired lease liabilities $ — $ 40 $ 58

There were no other material lease modifications in the year ended December 31, 2021.

For the year ended December 31, 2020, terminations of certain operating leases resulted in the reduction of right-of-use assets and lease liabilities of approximately $ 28 million.

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As the Company does not anticipate returning to the San Francisco space, the Company accelerated amortization of the right-of-use asset by $ 13 million for the one year term remaining after exercising the early termination option.

In exercising the Company’s early termination option, the Company incurred and paid $ 5.2 million in early termination fees.

In exercising the Company’s early termination option, the Company incurred $ 5 million in early termination fees for the year ended December 31, 2020.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

January 2021, the Company terminated the San Francisco lease prior to the anticipated termination date of September 30, 2021, which resulted in a $ 5 million gain recognized for the year ended December 31, 2021.

See “Note 20 — Restructuring” for further discussion.

There were no other material lease modifications for the year ended December 31, 2020.

For the year ended December 31, 2019, cash paid for amounts included in the measurement of operating lease liabilities was $ 10.8 million.

For the year ended December 31, 2019, right-of-use assets obtained in exchange for new or acquired operating lease liabilities was $ 57.9 million.

For the year ended December 31, 2019, terminations of certain operating leases resulted in the reduction of right-of-use assets and lease liabilities of approximately $ 2.9 million.

There were no other material lease modifications in the year ended December 31, 2019.

As of December 31, 2020 and 2019, for operating leases, the weighted average lease term was 6.5 years and 4.5 years, respectively, and the weighted average discount rate was 9.1 % and 7.2 %, respectively.

Maturity of operating lease liabilities as of December 31, 2020 are as follows (in thousands):

2021 $ 25,536

The weighted average lease term and the weighted average discount rate are as follows:

December 31, 2021 2020

Weighted average remaining lease term for operating leases (in years) 7.6 6.5

Weighted average discount rate for operating leases 9.8 % 9.1 %

Maturity of operating lease liabilities as of December 31, 2021 are as follows (in millions):

Thereafter 27

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GOODWILL AND INTANGIBLE ASSETS

For the year ended December 31, 2019, the carrying amount of goodwill increased by $ 21.5 million due to the acquisition of OSN (See “Note 2 — Business Combination” ).

There were no additions to goodwill for the twelve months ended December 31, 2020.

For the year ended December 31, 2021, the carrying amount of goodwill increased by $ 29 million due to the acquisition of Pro.com and RedDoor.

For further information on the acquisition, see “Note 2 — Business Combination” .

There were no additions to goodwill for the year ended December 31, 2020.

No impairment of goodwill was identified for the years ended December 31, 2021, 2020, and 2019.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Intangible assets subject to amortization consisted of the follow as of December 31, 2020 and 2019, respectively(in thousands, except years):

As of December 31, 2020 Gross

Intangible assets subject to amortization consisted of the following as of December 31, 2021 and 2020, respectively (in millions, except years):

December 31, 2021 Gross

Remaining Weighted Average Useful Life

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Trademarks 5 ( 2 ) 3 2.7

Non-competition agreements 100 ( 100 ) — 0

Intangible assets – net $ 19 $ ( 7 ) $ 12

As of December 31, 2019 Gross

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

December 31, 2020 Gross

Remaining Weighted Average Useful Life

Developed technology $ 2,921 $ ( 1,879 ) $ 1,042 0.7

Customer relationships $ 8 $ ( 3 ) $ 5 3.7

Trademarks 5 ( 1 ) 4 3.7

Non-competition agreements 100 ( 65 ) 35 0.7

Developed technology 3 ( 3 ) — 0

Intangible assets – net $ 16 $ ( 7 ) $ 9

The Company also has domain name intangible assets, which are not subject to amortization, with a carrying amount of $ 0.2 million as of both December 31, 2020 and 2019, respectively.

Amortization expense for intangible assets was $ 4 million, $ 4 million, and $ 3 million for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2020, expected amortization of intangible assets is as follows:

Fiscal Years (In thousands)

Total $ 8,526

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

As of December 31, 2021, expected amortization of intangible assets is as follows (in millions):

ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of December 31, 2020 and 2019, consisted of the following (in thousands):

Accounts payable and accrued liabilities as of December 31, 2021 and 2020, consisted of the following (in millions):

Accrued expenses due to vendors $ 66 $ 11

Accrued property and franchise taxes 24 1

Legal contingency accrual 18 4

Accrued payroll and other employee related expenses 17 6

Accounts payable due to vendors 3 3

Accrued property and franchise taxes 733 5,739

Other 5,021 1,115

Total accounts payable and other accrued liabilities $ 137 $ 25

SHAREHOLDERS’ EQUITY

On December 21, 2020, the Company’s common stock and warrants began trading on the Nasdaq Global Select Market under the ticker symbols “OPEN” and “OPENW,” respectively.

On February 9, 2021, the Company completed an underwritten public offering (the “February 2021 Offering”) in which the Company sold 32,817,421 shares of its common stock at a public offering price of $ 27.00 per share, including the exercise in full by the underwriters of their option to purchase up to 4,280,533 additional shares of common stock, which was completed on February 11, 2021.

The Company received aggregate net proceeds from the February 2021 Offering of approximately $ 859 million after deducting underwriting discounts and commissions and offering expenses payable by the Company upon closing.

The February 2021 Offering satisfied the liquidity event vesting condition of certain restricted stock units ("RSUs").

For further information on the RSUs, see “ Note 14 — Share-Based Awards”.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

On December 21, 2020, the Company’s common stock and warrants began trading on the Nasdaq Global Select Market (“Nasdaq”) under the ticker symbols “OPEN” and “OPENW,” respectively.

Pursuant to the Company’s certificate of incorporation, the Company is authorized to issue 3,000,000,000 shares of common stock with a par value of $ 0.0001 per share.

As of December 31, 2020, the Company had 540,714,692 shares of common stock issued and outstanding.

On July 9, 2021, the Company completed the redemption of all of its outstanding Public and Sponsor Warrants and in connection with the redemption, the Public Warrants stopped trading on Nasdaq.

Prior to the Business Combination, the Company had outstanding shares of Series A, Series B, Series C, Series C-1, Series D, Series D-1, Series E, Series E-1, and Series E-2 convertible preferred stock (collectively, “Preferred Stock”).

2 unchanged sentences

Upon the Closing, Opendoor Labs Inc.

common stock converted to Opendoor Technologies common stock with the application of the Exchange Ratio as discussed in Note 2 — Business Combinations.

common stock converted to Opendoor Technologies Inc.

common stock with the application of the Exchange Ratio as discussed in Note 2 — Business Combinations.

Preferred Stock

9 unchanged sentences

Our 2014 Stock Plan (the “2014 Plan”), as last amended and approved by the board of directors on February 6, 2020, allowed the Company to grant up to 106,320,623 shares of common stock to employees, directors, and non-employees pursuant to awards of stock options, restricted stock or restricted stock units (“RSUs”) granted under the 2014 Plan.

Upon the Closing,

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

the remaining unallocated share reserve under the 2014 Plan was cancelled and no new awards will be granted under the 2014 Plan.

Upon the Closing, the remaining unallocated share reserve under the 2014 Plan was cancelled and no new awards will be granted under the 2014 Plan.

Awards outstanding under the 2014 Plan were assumed by Opendoor Technologies upon the Closing and continue to be governed by the terms of the 2014 Plan.

3 unchanged sentences

The number of shares of the Company’s common stock available for issuance under the 2020 Plan automatically increases on the first day of each calendar year, beginning January 1, 2022 and ending on and including January 1, 2030, by the lesser of (a) a number equal to the excess (if any) of (1) 5 % of the aggregate number of shares of common Stock outstanding on the final day of the immediately preceding calendar year over (2) the number of shares of common Stock then reserved for issuance under the 2020 Plan as of such date, and (b) such smaller number of shares determined by the Company’s board of directors.

As of December 31, 2020, no awards have been granted under the 2020 Plan.

In connection with the close of the Business Combination, the Company’s board of directors approved the 2020 Employee Stock Purchase Plan (“ESPP”).

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

In connection with the close of the Business Combination, the Company’s board of directors approved the 2020 Employee Stock Purchase Plan (“ESPP”), which was last amended on December 6, 2021.

There are 5,438,506 shares of common stock initially reserved for issuance under the ESPP.

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Term (in years)

(in thousands)

(in millions)

Balance – December 31, 2020 24,158 $ 1.91 5.4 $ 503

Retroactive conversion of shares due to Business Combination 13,976 ( 1.15 )

Balance – December 31, 2019, as converted 36,609 $ 1.85 6.9 $ 110,481

Granted 150 15.00

Exercised ( 8,919 ) 1.65

7 unchanged sentences

There were no options granted during the year ended December 31, 2020 .

RSUs typically vest upon a service-based requirement, generally over a four year period.

Prior to 2021, certain awards also had a performance condition to vesting, which was satisfied upon completion of the February 2021 Offering and triggered the recognition of compensation expense for certain RSUs for which the time-based vesting condition had been satisfied or partially satisfied.

Subsequent to the February 2021 Offering, these RSUs are only subject to time-based vesting conditions .

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

RSUs typically vest upon both a service-based requirement, generally over a four year period, and a performance condition.

For certain awards, the performance condition is met by the completion of a Company liquidity event, which is generally defined as a change of control event or the effective date of a registration statement of the Company filed under the Securities Act for the sale of the Company’s common stock.

In February 2021, the Company completed an underwritten public offering, which met the liquidity event vesting condition and triggered the recognition of compensation expense for certain RSUs for which the time-based vesting condition had been satisfied or partially satisfied.

For further information on the February 2021 underwritten public offering, see “ Note 21 — Subsequent Events”.

If a participant terminates service, any portion of an RSU unit that has met the service-based requirement will remain outstanding and remain eligible to vest when the performance condition has been satisfied.

The vesting requirements of the RSUs typically have a maximum term of seven years from the date of grant.

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

A summary of the RSU activity for the year ended December 31, 2021, is as follows:

1 unchanged sentence

Unvested and outstanding – December 31, 2020 46,525 $ 10.88

Retroactive conversion of shares due to Business Combination 8,689 ( 2.59 )

Unvested and outstanding – December 31, 2019, as converted 22,759 $ 4.20

Granted 33,960 20.24

Vested ( 24,005 ) 10.85

Forfeited ( 3,034 ) 9.53

Unvested and outstanding – December 31, 2021 53,446 $ 17.35

Vested and outstanding – December 31, 2020 — —

The total fair value of RSUs vested for the year ended December 31, 2021 was $ 599 million.

No RSUs vested during the years ended December 31, 2020 and 2019.

Restricted Shares

We have granted Restricted Shares to certain continuing employees, primarily in connection with acquisitions.

The Company has granted Restricted Shares to certain continuing employees, primarily in connection with acquisitions.

The Restricted Shares vest upon satisfaction of a service condition, which generally ranges from three to four years .

3 unchanged sentences

Unvested – December 31, 2020 2,148 $ 3.74

Retroactive conversion of shares due to Business Combination 1,331 $ ( 2.28 )

Unvested – December 31, 2019, as converted 3,487 $ 3.70

Vested ( 1,318 ) 3.72

Forfeited ( 138 ) $ 3.02

Unvested – December 31, 2021 692 $ 3.91

Vested and outstanding – December 31, 2020 — —

The total intrinsic value of Restricted Shares vested for the years ended December 31, 2020, 2019, and 2018 was $ 8.9 million, $ 1.5 million, and $ 0.1 million respectively.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

The total fair value of Restricted Shares vested for the years ended December 31, 2021, 2020, and 2019 was $ 21 million, $ 9 million, and $ 2 million, respectively.

Stock-based compensation expense

Stock-based compensation expense is allocated based on the cost center to which the award holder belongs.

The following table summarizes total stock-based compensation expense by function as presented in the statements of operations for the years ended December 31, 2020, 2019 and 2018, as follows (in thousands):

The following table summarizes total stock-based compensation expense by function as presented in the consolidated statements of operations for the years ended December 31, 2021, 2020 and 2019, as follows (in millions):

Year Ended December 31,

2021 2020 2019

1 unchanged sentence

Sales, marketing and operations

1,203 1,767 1,905

Technology and development 60 4 5

Total stock-based compensation expense $ 536 $ 38 $ 13

During 2020, the Company issued market condition RSUs to certain executives.

The grant-date fair value for the awards is $ 357.4 million, which will be recognized over a requisite service period ranging from 6 months to 3.5 years.

The Company recognized $ 19.9 million of compensation expense in 2020 related to the executive’s awards.

As of December 31, 2020, there was $ 13.5 million of unamortized stock-based compensation costs related to unvested stock options and Restricted Shares for which vesting is not contingent on a qualifying event.

During the year ended December 31, 2021, the Company issued market condition RSUs to certain executives with a grant-date fair value of $ 22 million, which will be recognized over a requisite service period ranging from 6 months to 3 years.

The Company recognized $ 290 million and $ 20 million of compensation expense during the years ended December 31, 2021 and 2020, respectively, related to all market condition awards outstanding.

In June 2021, the market condition for two market

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

condition awards was satisfied, which resulted in the accelerated recognition of $ 2 million of stock-based compensation expense in the year ended December 31, 2021.

As of December 31, 2021, there was $ 628 million of unamortized stock-based compensation costs related to unvested RSUs, stock options, and Restricted Shares.

The unamortized compensation costs are expected to be recognized over a weighted-average period of approximately 2.9 years.

As of December 31, 2020, there was $ 503.0 million of unrecognized stock-based compensation costs relating to unvested RSUs.

Of this amount, $ 80.2 million relates to awards for which the time-based vesting condition had been satisfied or partially satisfied and will be recognized by completion of the liquidity event performance condition;

as of December 31, 2020, there were 9,201,201 RSUs which had fully satisfied the time-based vesting condition.

Valuation of options

The Black-Scholes Model used to value stock options incorporates the following assumptions:

Year Ended December 31,

Fair value $ 15.00 $ 4.22 – $ 4.29

Volatility 73 % 32 % – 45 %

Risk-free rate 1.09 % 1.63 % – 2.34 %

Expected life (in years) 7 5 – 7

Expected dividend $ — $ —

Fair Value of Common Stock

The fair value of the common stock underlying the stock option awards was determined by the board of directors.

Prior to the Company’s common stock becoming publicly traded, the fair value of the common stock underlying the stock option awards was determined by the board of directors.

Given the absence of a public trading market, the board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting at which awards were approved.

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(v) general economic conditions and (vi) the likelihood of achieving a liquidity event, such as an initial public offering or sale, given prevailing market conditions.

The expected stock price volatilities are estimated based on the historical and implied volatilities of comparable publicly traded companies as the Company does not have sufficient history of trading its common stock.

Prior to the Company’s common stock becoming publicly traded, the expected stock price volatilities were estimated based on the historical and implied volatilities of comparable publicly traded companies as the Company did not have sufficient history of trading its common stock.

Subsequent to the Company’s stock becoming publicly trade, the expected stock price volatilities were determined based on the volatilities implied by the price of the Company’s publicly traded call options in its common stock.

Risk-Free Interest Rate

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Treasury yields in effect at the grant date for notes with comparable terms as the awards.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Expected Life

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The expected dividend yield assumption is based on the Company’s current expectations about its anticipated dividend policy.

The range of assumptions used in the Black-Scholes Model for employee and non-employee stock options for 2019, and 2018 are as follows:

2019 Range 2018 Range

Fair value $ 4.22 – $ 4.29

$ 1.42 – $ 3.02

Volatility 32 % – 45 %

Risk-free rate

1.63 % – 2.34 %

2.68 % – 3.17 %

Expected life (in years) 5 – 7

Expected dividend $ — $ —

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Valuation of RSUs and Restricted Stock

Prior to the Business Combination, given the absence of a public trading market, the Company’s board of directors considered numerous objective and subjective factors to determine the fair value of common stock at each meeting at which awards were approved.

These factors include, but were not limited to, contemporaneous valuations of common stock performed by an independent valuation specialist;

developments in the Company’s business and stage of development;

These factors include, but were not limited to, (i) contemporaneous valuations of common stock performed by an independent valuation specialist;

(ii) developments in the Company’s business and stage of development;

the Company’s operational and financial performance and condition;

issuances of preferred stock and the rights and preferences of preferred stock relative to common stock;

current condition of capital markets and the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company;

and the lack of marketability of the Company’s common stock.

(iii) issuances of preferred stock and the rights and preferences of preferred stock relative to common stock;

(iv) current condition of capital markets and the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company;

and (v) the lack of marketability of the Company’s common stock.

For financial reporting purposes, the Company considers the amount of time between the valuation date and the grant date to determine whether to use the latest common stock valuation or a straight-line interpolation between the two valuation dates.

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Public and Sponsor Warrants

Prior to the Business Combination, SCH issued 6,133,333 private placement warrants (“Sponsor Warrants”) and 13,800,000 public warrants (“Public Warrants” and collectively “Warrants”).

Prior to the Business Combination, SCH issued 6,133,333 Sponsor Warrants and 13,800,000 Public Warrants (collectively “Warrants”).

Upon Closing, the Company assumed the Warrants.

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The Company may redeem the outstanding Warrants for cash at a price of $ 0.01 per warrant if the Reference Value equals or exceeds $ 18.00 per share.

The warrant holders have the right to exercise their outstanding warrants prior to the

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

scheduled redemption date during the Redemption Period at $ 11.50 per share.

The warrant holders have the right to exercise their outstanding warrants prior to the scheduled redemption date during the Redemption Period at $ 11.50 per share.

The Sponsor Warrants are exempt from redemption if the Reference Value is at or above $ 18.00 and the Sponsor Warrants continue to be held by the original warrant holder (“Sponsor") or a permitted transferee.

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This Registration Statement relates to the issuance of an aggregate of up to 19,933,333 shares of common stock issuable upon the exercise of its publicly-traded warrants.

As of December 31, 2020, there were 19,933,333 warrants outstanding and no warrants have been exercised.

On July 9, 2021, the Company completed the redemption of all of its outstanding Public and Sponsor Warrants to purchase shares of the Company's common stock, par value $ 0.0001 per share, that were issued under the Warrant Agreement, dated April 27, 2020.

Of the 13,799,947 Public Warrants that were outstanding as of the time of the Business Combination, 874,739 were exercised for cash at an exercise price of $ 11.50 per share of Common Stock and 12,521,776 were exercised on a cashless basis in exchange for an aggregate of 4,452,659 shares of Common Stock.

In addition, of the 6,133,333 Sponsor Warrants that were outstanding as of the date of the Business Combination, 1,073,333 were exercised for cash at an exercise price of $ 11.50 per share of Common Stock and 5,060,000 were exercised on a cashless basis in exchange for an aggregate of 1,799,336 shares of Common Stock.

Total cash proceeds to the Company generated from exercises of the Warrants were $ 22 million.

In connection with the redemption, the Public Warrants stopped trading on the Nasdaq on July 9, 2021.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The Company recorded a decrease to the Derivative and warrant fair value adjustment of $( 12 ) million for the change in fair value of the Sponsor Warrants for the year ended December 31, 2021.

Warrants to Purchase Series D Preferred Stock

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On November 7, 2020 the Series E Warrants were exercised and the Company issued 364,069 shares of Series E in exchange for proceeds of $ 2 million.

As of December 31, 2020 there were no Series E Warrants outstanding.

As of December 31, 2021 there were no Series E Warrants or Warrant Commitments outstanding.

The Penny Warrants, the Warrant Commitment, and the Series E Warrants have been determined to be liabilities under ASC 480 as the underlying preferred shares have certain liquidation preferences in the event of a deemed liquidation.

As of December 31, 2020, there are no warrants outstanding.

The Company recorded an increase to the warrant fair value adjustments of $ 2.6 million and $ 6.2 million in 2020 and 2019, respectively.

Income before income taxes consisted entirely of losses from domestic operations of $ 286.7 million, $ 338.9 million and $ 239.6 million for the years ended December 31, 2020, 2019, and 2018, respectively.

For the years ended December 31, 2020, 2019, and 2018, the Company did not record any federal income tax expense or benefit due to the full valuation allowance.

For the years ended December 31, 2020, 2019 and 2018, the Company incurred state income tax expense of $ 0.1 million, $ 0.3 million and $ 0.4 million, respectively.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

The following table summarizes the components of the Company’s provision for income taxes for the periods presented (in thousands):

For the Penny Warrants, the Warrant Commitment, and the Series E Warrants, the Company recorded no warrant fair value adjustment for the year ended December 31, 2021 and an increase to the warrant fair value adjustments of $ 3 million and $ 6 million for the years ended December 31, 2020 and 2019, respectively.

Income before income taxes consisted of losses from domestic operations of $ 661 million, $ 253 million, and $ 339 million for the years ended December 31, 2021, 2020, and 2019, respectively.

The following table summarizes the components of the Company’s provision for income taxes for the periods presented (in millions):

Year Ended December 31,

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Federal $ — $ — $ —

State 63 252 377

Total current income tax expense 1 — —

Deferred income tax benefit:

Federal — — —

Total deferred income tax benefit — — —

Income Tax Provision $ 1 $ — $ —

For the years ended December 31, 2021, 2020, and 2019, the Company did not record any deferred federal and state income tax expense or benefit due to the full valuation allowance.

Additionally, the Company’s foreign current and deferred expense or benefit was immaterial.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Effective Tax Rate

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For the years ended December 31, 2021, 2020 and 2019, the Company’s effective tax rate differs from the amount computed by applying the U.S.

federal statutory and state income tax rates to net loss before income tax, primarily as the result of state income taxes, loss on convertible note exchange, deduction limitation on executive compensation, and changes in the Company’s valuation allowance.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

federal statutory and state income tax rates to net loss before income tax, primarily as the result of state income taxes, deduction limitation on executive compensation, and changes in the Company’s valuation allowance.

Deferred Taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income taxes purposes.

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2020 and 2019, are as follows (in thousands):

Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2021 and 2020, are as follows (in millions):

December 31, 2021 December 31, 2020

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Due to the losses the Company generated in the current and prior years, the Company believes it is not more likely than not that all of the deferred tax assets can be realized.

Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $ 235.2 million as of December 31, 2020 and a full valuation allowance on its net deferred tax assets of $ 174.9 million as of December 31, 2019.

Accordingly, the Company established and recorded a full valuation allowance on its net deferred tax assets of $ 376 million as of December 31, 2021 and a

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

full valuation allowance on its net deferred tax assets of $ 235 million as of December 31, 2020.

The valuation allowance increased by $ 141 million and $ 60 million for 2021 and 2020, respectively primarily as a result of current year losses.

As of December 31, 2021, the Company had U.S.

federal and state net operating loss (“NOL”) carryforwards of $ 870.2 million and $ 585.9 million, respectively, which will each begin to expire in 2034 if not utilized.

federal and state net operating loss (“NOL”) carryforwards of $ 1.2 billion and $ 854 million, respectively, which will each begin to expire in 2034 if not utilized.

For NOLs arising after December 31, 2017, the Tax Cuts and Jobs Act of 2017 limits a taxpayer’s ability to utilize NOL carryforwards to 80% of taxable income and can be carried forward indefinitely (carryback is generally prohibited).

In the Company’s case this would apply to federal NOLs generated in 2020, 2019 and 2018 of $ 236.1 million, $ 350.6 million, and $ 166.9 million, respectively.

In the Company’s case, as of December 31, 2021, $ 1.1 billion of US.

federal NOLs and $ 238 million of state NOLs have an unlimited carryover period.

NOLs generated in tax years beginning before January 1, 2018 will not be subject to the taxable income limitation and will continue to have a two-year carryback and twenty-year carryforward period.

California NOLs have a carryover period of 20 taxable years following the year of the loss.

Additionally, the Company has U.S.

Additionally, as of December 31, 2021, the Company had U.S.

federal research tax credit carryforwards of $ 30 million that begin to expire in 2034.

The Company also has state research tax credit carryforwards of $ 9.4 million that have an indefinite carryforward period.

The Company also had state research tax credit carryforwards of $ 21 million that begin to expire in 2029.

Section 382 of the Internal Revenue Code (the “Code”) limits the use of net operating losses and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company.

Utilization of the net operating loss carryforwards are subject to various limitations due to the ownership change limitations provided by Internal Revenue Code (IRC) Section 382 and similar state provisions.The Company performed an ownership analysis and identified three previous ownership changes in 2014, 2016 and 2020, as defined under Section 382 and 383 of the IRC, however none of the previous ownership changes resulted in a material limitation that will reduce the total amount of net operating loss carryforwards and credits that can be utilized.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

The Company performed an ownership analysis and identified three previous ownership changes in 2014, 2016 and 2020, as defined under Section 382 and 383 of the IRC, however none of the previous ownership changes resulted in a material limitation that will reduce the total amount of net operating loss carryforwards and credits that can be utilized.

Unrecognized Tax Benefits

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in millions):

Year Ended December 31,

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Unrecognized tax benefits as of the beginning of the year $ 6 $ 5 $ 2

Increases related to prior year tax provisions 182 383 197

Decrease related to prior year tax provisions — ( 1 ) —

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federal, state and local examinations by tax authorities for all years since incorporation but as of December 31, 2021 are not currently under any audits.

The Company has not provided U.S.

income or foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2021, because it intends to permanently reinvest such earnings outside of the U.S.

If these foreign earnings were to be repatriated in the future, the related U.S.

tax liability will be immaterial, due to the participation exemption put in place under the Tax Act.

RELATED PARTIES

Prior to the Business Combination, one of the Preferred Stock investors held more than a 10 % interest in the Company and had one seat as a member of the board of directors and another seat as an observer of the board of directors.

In 2019, an executive early exercised their option to purchase 1,479,459 shares of unvested common stock at a price per share of $ 1.01 by issuing a promissory note to the Company for a total price of $ 1.5 million with an interest rate of 2.31 % per annum.

In 2018, an executive early exercised stock options to purchase 1,479,459 shares of unvested common stock at a price per share of $ 1.01 by issuing a promissory note to the Company for a total price of $ 1.5 million with an interest rate of 2.31 % per annum.

On June 29, 2021, the outstanding balance under the promissory note of $ 1.6 million was repaid in full.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

The Warrant Commitment and the subsequent Series E Warrants were issued to a counterparty that has an equity interest in the Company and a seat on the Company’s board of directors.

The board member has significant influence with respect to the counterparty to the Warrant Commitment.

The issuance of the Warrant Commitment and Series E Warrants was in exchange for on-going advisory services that the entity provided to the Company.

The issuance of the Warrant Commitment and Series E Warrants was in exchange for on-going advisory services that the counterparty provided to the Company.

See “Note 15 — Warrants” for further information.

During 2019, the Company acquired OSN.

See “Note 2 — Business Combination” for further information on the acquisition and the pro forma results of operations, reflecting OSN as if it had been acquired January 1, 2018.

See “Note 2 — Business Combination” for further information on the acquisition.

Prior to the acquisition, OSN conducted business with the Company as the noncontrolling member of the Company’s Title Companies.

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NET LOSS PER SHARE

The Company uses the two-class method to calculate basic net loss per share and apply the more dilutive of the two-class method, treasury stock method or if-converted method to calculate diluted net loss per share.

Basic net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period.

Diluted net loss per share is computed based on the weighted average number of common shares outstanding plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method.

During the periods when there is a net loss, potentially dilutive common stock equivalents have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive.

No dividends were declared or paid for the years ended December 31, 2021, 2020, or 2019.

The Company uses the two-class method to calculate net loss per share and apply the more dilutive of the two-class method, treasury stock method or if-converted method to calculate diluted net loss per share.

Undistributed earnings for each period are allocated to participating securities, including the Preferred Stock for applicable periods, based on the contractual participation rights of the security to share in the current earnings as if all current period earnings had been distributed.

As there is no contractual obligation for the

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

Preferred Stock to share in losses, the Company’s basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average shares of common stock outstanding during periods with undistributed losses.

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common shareholders for the years ended December 31, 2020, 2019, and 2018 (in thousands):

As there is no contractual obligation for the Preferred Stock to share in losses, the Company’s basic net loss per share is computed by dividing the net loss attributable to common shareholders by the weighted-average shares of common stock outstanding during periods with undistributed losses.

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common shareholders for the years ended December 31, 2021, 2020, and 2019 (in millions, except share amounts which are presented in thousands, and per share amounts):

Year Ended December 31,

2 unchanged sentences

Net loss $ ( 662 ) $ ( 253 ) $ ( 339 )

Deemed dividend — $ — 7,224

Net income attributable to noncontrolling interests — — 2

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Net loss $ ( 662 ) $ ( 253 ) $ ( 339 )

Deemed dividend — $ — 7,224

Net income attributable to noncontrolling interests — — 2

3 unchanged sentences

Diluted net loss per share $ ( 1.12 ) $ ( 2.31 ) $ ( 4.37 )

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

There were no preferred dividends declared or accumulated for the period.

13 unchanged sentences

Total anti-dilutive securities 68,688 92,821 381,643

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

COMMITMENTS AND CONTINGENCIES

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Purchase Commitments

As of December 31, 2020, the Company was in contract to purchase 1,742 homes for an aggregate purchase price of $ 466.4 million.

As of December 31, 2021, the Company was in contract to purchase 5,411 homes for an aggregate purchase price of $ 1.9 billion.

Lease Commitments

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On December 23, 2020, the Federal Trade Commission (“FTC”) notified the Company that they intend to recommend that the agency pursue an enforcement action against the Company and certain of its officers, if the Company is unable to reach a negotiated settlement acceptable to all parties.

This notice is related to an initial FTC civil investigative demand sent to the Company in August 2019 seeking documents and information relating primarily to statements in Opendoor’s advertising and website comparing selling homes to Opendoor with selling homes in a traditional manner using an agent and relating to statements that Opendoor’s offers reflect or are based on market prices.

This notice is related to an initial FTC civil investigative demand sent to the

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in millions, except share and per share amounts, ratios, or as noted)

Company in August 2019 seeking documents and information relating primarily to statements in Opendoor’s advertising and website comparing selling homes to Opendoor with selling homes in a traditional manner using an agent and relating to statements that Opendoor’s offers reflect or are based on market prices.

The Company is engaged in settlement negotiations with the FTC and has accrued an immaterial amount for this matter.

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All employee termination benefits were paid prior to December 31, 2020.

Additionally, the Company incurred $ 18.4 million of costs related to the exiting of certain non-cancelable leases with no future benefits to the Company.

Additionally, for the year ended December 31, 2020, the Company incurred $ 18 million of costs related to the exiting of certain non-cancelable leases with no future benefits to the Company.

This includes the Company’s exercise of the early termination option related to the Company’s San Francisco space as discussed in Note 10 — Leases as well as the termination of other real estate leases.

Of the restructuring charges with respect to employee termination benefits and lease modifications, the Company presented $ 1.9 million in Cost of revenue, $ 5.2 million in Sales, marketing and operations expense, $ 2.1 million in Technology and development and $ 20.6 million in General and administrative in the Company’s consolidated statement of operations.

OPENDOOR TECHNOLOGIES INC.

Notes to Consolidated Financial Statements

(Tabular amounts in thousands, except share and per share amounts, ratios, or as noted)

For the year ended December 31, 2020, of the restructuring charges with respect to employee termination benefits and lease modifications, the Company presented $ 2 million in Cost of revenue, $ 5 million in Sales, marketing and operations expense, $ 2 million in Technology and development and $ 21 million in General and administrative in the Company’s consolidated statements of operations.

SUBSEQUENT EVENTS

On February 9, 2021, the Company completed an underwritten public offering (the “Offering”) in which the Company sold 32,817,421 shares of its common stock at a public offering price of $ 27.00 per share, including the exercise in full by the underwriters of their option to purchase up to 4,280,533 additional shares of common stock, which was completed on February 11, 2021.

The Company received aggregate net proceeds from the Offering of approximately $ 859.5 million after deducting underwriting discounts and commissions and offering expenses payable by the Company.

The Offering satisfied the liquidity event vesting condition of certain RSUs.

This caused the Company to recognize $ 80.2 million in compensation expense in the first quarter of 2021 for RSUs for which the time-based vesting condition had been satisfied or partially satisfied as of December 31, 2020 .

For further information on the RSUs, see “ Note 14 — Share-Based Awards”.

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

The following tables contain selected unaudited financial information for each of the eight quarters ended December 31, 2020.

The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented.

The operating results for any quarter are not necessarily indicative of results for any future period.

Unaudited quarterly results are as follows (in thousands, except per share data):

Quarter Ended

December 31, 2020 September 30, 2020 June 30, 2020 March 31, 2020

Revenue $ 248,886 $ 338,613 $ 739,827 $ 1,255,795

Gross profit $ 38,365 $ 35,811 $ 54,574 $ 91,047

Net loss $ ( 87,792 ) $ ( 80,853 ) $ ( 55,919 ) $ ( 62,196 )

Net loss per share:

Basic $ ( 0.49 ) $ ( 0.91 ) $ ( 0.66 ) $ ( 0.74 )

Diluted $ ( 0.49 ) $ ( 0.91 ) $ ( 0.66 ) $ ( 0.74 )

Quarter Ended

December 31, 2019 September 30, 2019 June 30, 2019 March 31, 2019

Revenue $ 1,255,654 $ 1,210,645 $ 1,260,312 $ 1,013,972

Gross profit $ 73,961 $ 77,160 $ 81,547 $ 68,582

Net loss $ ( 91,722 ) $ ( 89,736 ) $ ( 75,139 ) $ ( 82,573 )

Net loss per share:

Basic $ ( 1.10 ) $ ( 1.12 ) $ ( 0.96 ) $ ( 1.07 )

Diluted $ ( 1.11 ) $ ( 1.15 ) $ ( 1.03 ) $ ( 1.08 )

The Company has evaluated the impact of events that have occurred subsequent to December 31, 2021, through the date the consolidated financial statements were filed with the SEC.

Based on this evaluation, other than as recorded or disclosed within these consolidated financial statements and related notes, the Company has determined that there are no material subsequent events that would require recognition or disclosure.

OPENDOOR TECHNOLOGIES INC.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data