References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Khosla Ventures Acquisition Co. References to our
"management" or our "management team" refer to our officers and directors,
references to the "Sponsor" refer to Khosla Ventures SPAC Sponsor LLC. The
following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this Quarterly Report.
Certain information contained in the discussion and analysis set forth below
includes forward-looking statements that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") that are not historical facts, and involve risks and
uncertainties that could cause actual results to differ materially from those
expected and projected. All statements, other than statements of historical fact
included in this Form 10-Q including, without limitation, statements in this
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" regarding the Company's financial position, business strategy and
the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward- looking statements, please refer to the Risk Factors section of the
Company's final prospectus for its initial public offering ("IPO") filed with
the U.S. Securities and Exchange Commission (the "SEC"). The Company's
securities filings can be accessed on the EDGAR section of the SEC's website at
www.sec.gov. Except as expressly required by applicable securities law, the
Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future events
or otherwise.
Overview
We are a blank check company formed under the laws of the State of Delaware on
January 15, 2021 for the purpose of effecting a merger, capital stock exchange,
asset acquisition, stock purchase, reorganization or other similar Business
Combination with one or more businesses. We intend to effectuate our initial
Business Combination using cash from the proceeds of the IPO and the sale of the
private placement shares and forward-purchase shares, our capital stock, debt or
a combination of cash, stock and debt. We are an emerging growth company and, as
such, we are subject to all of the risks associated with emerging growth
companies.
Our sponsor is Khosla Ventures SPAC Sponsor LLC, a Delaware limited liability
company. The registration statement for our IPO was declared effective on
March 3, 2021. On March 8, 2021, we consummated our IPO of 34,500,000 Public
Shares at $10.00 per share, generating gross proceeds of $345,000,000, and
incurring offering costs of $19,660,260, inclusive of $12,075,000 in deferred
underwriting fees payable.
Simultaneously with the closing of the IPO, we consummated the private placement
of 990,000 private placement shares at a price of $10.00 per private placement
share to the sponsor, generating proceeds of $9,900,000.
Upon the closing of the IPO and the private placement, the $345,000,000 of net
proceeds from the IPO and certain of the proceeds of the private placement were
placed in a Trust Account ("Trust Account") located in the United States with
Continental Stock Transfer & Trust Company acting as trustee, and invested only
in United States "government securities" within the meaning of Section 2(a)(16)
of the Investment Company Act having a maturity of 180 days or less or in money
market funds meeting certain conditions under Rule 2a-7 promulgated under the
Investment Company Act that invest only in direct U.S. government treasury
obligations, as determined by us, until the earlier of: (i) the completion of a
Business Combination and (ii) the distribution of the Trust Account.
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If we are unable to complete a Business Combination by March 8, 2023 (24 months
from the closing of the IPO), or June 8, 2023 (27 months from the closing of the
IPO), if we have executed a letter of intent, agreement in principle or
definitive agreement for an initial Business Combination by March 8, 2023, and
our stockholders have not amended the certificate of incorporation to extend
such period, we will (i) cease all operations except for the purpose of winding
up; (ii) as promptly as reasonably possible but no more than ten business days
thereafter subject to lawfully available funds therefor, redeem the public
shares, at a per-share price, payable in cash, equal to the aggregate amount
then on deposit in the Trust Account, including interest earned on the funds
held in the Trust Account and not previously released to us to pay our taxes as
well as expenses relating to the administration of the Trust Account (less up to
$100,000 of interest to pay dissolution expenses) divided by the number of the
then outstanding public shares, which redemption will completely extinguish
public stockholders' rights as stockholders (including the right to receive
further liquidation distributions, if any), subject to applicable law; and
(iii) as promptly as reasonably possible following such redemption, subject to
the approval of the remaining stockholders and the board of directors, liquidate
and dissolve, subject in each case to our obligations under Delaware law to
provide for claims of creditors and the requirements of other applicable law.
On June 9, 2021, we entered into an agreement for a proposed initial Business
Combination with Valo Health, a technology company using human- centric data and
artificial intelligence (AI) powered computation to transform the drug discovery
and development process. Concurrently with such an agreement, we also entered
into subscription agreements (the "PIPE I Subscription Agreements") with certain
investors (collectively, the "PIPE I Investors"), pursuant to, and on the terms
and subject to the conditions of which, the PIPE I Investors collectively
subscribed for 16,855,000 shares of Class A common stock for an aggregate
purchase price equal to $168,550,000 (the "PIPE I Investment"). On July 30,
2021, we entered into additional subscription agreements (the "PIPE II
Subscription Agreements") with certain investors (collectively, the "PIPE II
Investors"), pursuant to, and on the terms and subject to the conditions of
which, the PIPE II Investors collectively subscribed for an additional 3,231,250
shares of KVSA Common Stock for an aggregate purchase price equal to $32,312,500
(the "PIPE II Investment").
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On November 15, 2021, we and Valo Health mutually agreed to terminate the
proposed initial Business Combination based on market conditions, particularly
in the biotechnology area. As such, we continue to search for a potential
initial Business Combination target. The PIPE I Investment and PIPE II
Investment were also both terminated upon the termination of the proposed
initial Business Combination with Valo Health.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations (other than searching for a Business
Combination after our IPO) nor generated any revenues to date. Our only
activities through September 30, 2022 were organizational activities and those
necessary to prepare for the IPO and the proposed initial Business Combination.
We do not expect to generate any operating revenues until after the completion
of our Business Combination. We expect to generate non-operating income in the
form of interest income on marketable securities held after the IPO. We incur
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses.
For the three months ended September 30, 2022, we had a loss from operations of
$578,988, which consisted of $528,988 of general and administrative expenses and
$50,000 in franchise tax expense. Of the $528,988 of general and administrative
expenses, $167,358 was related to the amortization of Directors' and Officers'
liability insurance, $231,189 was related to legal expense and $130,441 was
related to other professional services. We also incurred a $1,560,060 gain on
marketable securities held in Trust Account and $317,113 in income tax expense,
resulting in net income of $663,959 for the three months ended September 30,
2022.
For the three months ended September 30, 2021, we had a loss from operations of
$898,503, which consisted of $848,503 of general and administrative expenses and
$50,000 in franchise tax expense. Of the $848,503 of general and administrative
expenses, $167,358 was related to the amortization of Directors' and Officers'
liability insurance, $512,781 was related to legal expense and $168,364 was
related to other professional services. We also incurred a $1,750,000 gain on
the change in fair value of derivative liabilities, and a $5,301 gain on
marketable securities held in Trust Account, resulting in a net income of
$856,798 for the three months ended September 30, 2021.
For the nine months ended September 30, 2022, we had a loss from operations of
$1,394,343, which consisted of $1,244,343 of general and administrative
expenses, and $150,000 in franchise tax expenses. Of the $1,244,343 of general
and administrative expenses, $496,617 was related to the amortization of
Directors' and Officers' liability insurance, $263,221 was related to legal
expense and $484,505 was related to other professional services. We also
incurred a $150,000 gain on the change in fair value of derivative liabilities,
a $2,078,237 gain on marketable securities held in Trust Account and $366,506 in
income tax expense, resulting in net income of $467,388 for the nine months
ended September 30, 2022.
For the period from January 15, 2021 (inception) through September 30, 2021, we
had a loss from operations of $3,267,946, which consisted of $30,000 in
formation costs, $3,087,946 in general and administrative expenses, and $150,000
in franchise tax expenses. Of the $3,087,946 of general and administrative
expenses, $383,832 was related to the amortization of Directors' and Officers'
liability insurance, $2,272,115 was related to legal expense and $431,999 was
related to other professional services. We also incurred $12,137,500 in
financing expenses on derivative classified instrument, offset by the change in
fair value of derivative liabilities of $11,600,000, and a $10,545 gain on
marketable securities held in Trust Account resulting in a net loss of
$3,794,901 for the period from January 15, 2021 (inception) through
September 30, 2021.
Liquidity and Capital Resources
As of September 30, 2022, the Company had $0 in its operating bank account,
$296,018 in prepaid expenses, $347,095,266 in marketable securities held in the
Trust Account to be used for a Business Combination or to repurchase or redeem
its common stock in connection therewith and a working capital deficit of
$4,987,048. As of September 30, 2022, $2,095,266 of the amount on deposit in the
Trust Account represented interest income, which is available for payment of
franchise taxes and expenses in connection with the liquidation of the Trust
Account. In addition, the Working Capital Loan and advances from related parties
are available to the Company to fund operations.
If the Company is unable to raise additional capital, it may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, suspending the pursuit of a Business Combination. The
Company cannot provide any assurance that new financing will be available to it
on commercially acceptable terms, if at all.
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As a result of the above, in connection with the Company's assessment of going
concern considerations in accordance with Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," management has determined that the liquidity conditions raise
substantial doubt about the Company's ability to continue as a going concern
through approximately one year from the date of filing. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred fee of $0.35 per public share, or
$12,075,000 in the aggregate. The deferred fee will be waived by the
underwriters in the event that the Company does not complete a Business
Combination, subject to the terms of the underwriting agreement.
On September 21, 2022, the Company received an executed deferred underwriting
fees waiver letter from Goldman Sachs & Co. LLC, informing the Company of its
decision to waive any entitlement it may have to its deferred underwriting fees
payable held in the Trust Account in respect of any Business Combination. The
waiver does not cover deferred underwriting fees payable to Piper Sandler & Co.
(representing 10% of the total deferred underwriting fees payable). The waiver
is recorded in the Company's condensed statements of changes in common stock
subject to possible redemption and stockholder's deficit against accumulated
deficit.
On March 3, 2021, we entered into a forward-purchase agreement pursuant to which
the sponsor (together with any permitted transferees under the forward-purchase
agreement, the "Khosla Entities") have agreed to purchase an aggregate of up to
2,500,000 forward-purchase shares for $10.00 per share, or an aggregate maximum
amount of $25,000,000, in a private placement that will close simultaneously
with the closing of the initial Business Combination. The Khosla Entities will
purchase a number of forward-purchase shares that will result in gross proceeds
to us necessary to enable us to consummate our initial Business Combination and
pay related fees and expenses, after first applying amounts available to us from
the Trust Account (after paying the underwriting fees payable and giving effect
to any redemptions of Public Shares) and any other financing source obtained by
us for such purpose at or prior to the consummation of our initial Business
Combination, plus any additional amounts mutually agreed by us and the Khosla
Entities to be retained by the post-Business Combination company for working
capital or other purposes. The Khosla Entities' obligation to purchase
forward-purchase shares will, among other things, be conditioned on the Business
Combination (including the target assets or business, and the terms of the
Business Combination) being reasonably acceptable to the Khosla Entities and on
a requirement that such initial Business Combination is approved by a unanimous
vote of our board of directors. In determining whether a target is reasonably
acceptable to the Khosla Entities, we expect that the Khosla Entities would
consider many of the same criteria as we will consider but will also consider
whether the investment is an appropriate investment for the Khosla Entities.
Critical Accounting Estimate
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting estimate other than
the following.
Class K Founder Shares Derivative Liabilities
Please refer to additional information in filed 10- K for the fiscal year ended
December 31, 2021 within Financial Statements Note 4 and Note 7.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
financial statements.
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