Overview
We are a blank check company formed under the laws of the State of Delaware on
January 29, 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 III LLC, a Delaware limited
liability company. The registration statement for our IPO was declared effective
on March 23, 2021. On March 26, 2021, we consummated our IPO of 56,330,222
Public Shares at $10.00 per share, generating gross proceeds of $563,302,226,
and incurring offering costs of $31,705,310, inclusive of $19,715,578 in
deferred underwriting discounts and commissions.
Simultaneously with the closing of the IPO, we consummated the private placement
of 1,426,605 private placement shares at a price of $10.00 per private placement
share to the sponsor, generating net proceeds of $14,266,050.
Upon the closing of the IPO and the private placement, the $563,302,226 of net
proceeds from the IPO and certain of the proceeds of the private placement were
placed in a 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, classified as trading
securities. Trading securities are presented on the balance sheet at fair value
at the end of each reporting period. Gains and losses resulting from the change
in fair value of these securities is included in gain on marketable securities,
dividends and interest held in the trust account in the accompanying statements
of operations. The fair value for trading securities is determined using quoted
market prices in active markets.
If we are unable to complete a business combination by March 26, 2023 (24 months
from the closing of the IPO), or June 26, 2023 (27 months from the closing of
our IPO), if we have executed a letter of intent, agreement in principle or
definitive agreement for an initial business combination by March 26, 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.
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 from January 29, 2021 (inception) through December 31, 2021 were
organizational activities and those necessary to prepare for the IPO. 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.
60
--------------------------------------------------------------------------------
Table of Contents
For the period from January 29, 2021 (inception) through December 31, 2021, we
had a loss from operations of $1,283,381, which consisted of $25,000 in
formation costs, $1,058,381 in general and administrative expenses, and $200,000
in franchise tax expenses. We also incurred $47,887,500 in financing expenses on
derivative classified instruments, offset by $27,896 in interest income on funds
held in the trust account and a $41,650,000 change in fair value of Class K
founder shares derivative liability, resulting in a net loss of $7,492,985 for
the period from January 29, 2021 (inception) through December 31, 2021.
Liquidity and Capital Resources
As of December 31, 2021, the Company had $239,105 in its operating bank
accounts, $563,330,122 in 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 working capital of $828,407. As of December 31, 2021, $27,896 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.
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.
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
$19,715,578 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 March 23, 2021, we entered into a forward-purchase agreement pursuant to
which the Khosla Entities have agreed to purchase an aggregate of up to
1,000,000 forward-purchase shares for $10.00 per share, or an aggregate maximum
amount of $10,000,000, 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 deferred underwriting discount and
commissions 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.
61
--------------------------------------------------------------------------------
Table of Contents
Critical Accounting Policies
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 policies other than
the following.
Class K Founder Shares Derivative Liabilities
Class K founder shares are accounted for as a liability in accordance with
Accounting Standards Codification ("ASC") Topic 815, "Derivatives and Hedging",
and presented as derivative liability on the December 31, 2021 balance sheet.
The derivative liability was measured at fair value at inception and on a
recurring basis, which changes in fair value presented within change in fair
value of derivative liability in the statements of operations. In order to
capture the market conditions associated with the Class K founder shares
derivative liabilities, the Company applied an approach that incorporated a
Monte Carlo simulation, which involved random iterations of future stock-price
paths over the contractual life of the Class K founder shares. Based on
assumptions regarding potential changes in control of the Company, and the
probability distribution of outcomes, the payoff to the holder was determined
based on the achievement of the various market thresholds within each simulated
path. The present value of the payoff in each simulated trial is calculated, and
the fair value of the liability is determined by taking the average of all
present values.
The inputs used as of December 31, 2021 were as follow: risk free rate: 1.54%;
term to business combination: 0.5 years; expected volatility: 11.0% and stock
price: $9.76.
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. See Note 2 in the footnotes to the financial statements.
© Edgar Online, source Glimpses