References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer to Khosla Ventures Acquisition Co. III. References to our "management" or our "management team" refer to our officers and directors, references to the "Sponsor" refer to Khosla Ventures SPAC Sponsor III 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 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 fees payable.

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 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.


                                       17

--------------------------------------------------------------------------------

Table of Contents


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
the 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 through March 31, 2022 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.

For the three months ended March 31, 2022, we had a loss from operations of $543,220, which consisted of $508,512 of general and administrative expenses, and $34,708 in franchise tax expenses. We also incurred a change in fair value of derivative liabilities of $6,210,000 and a gain on marketable securities of $45,975, resulting in net income of $5,712,755 for the three months ended March 31, 2022.

For the period from January 29, 2021 (inception) through March 31, 2021, we had a loss from operations of $95,802, which consisted of $25,000 in formation costs, $20,802 in general and administrative expenses, and $50,000 in franchise tax expenses. We also incurred $47,887,500 in financing expenses on derivative classified instruments, offset by a $30,750,000 change in fair value of derivative liabilities, resulting in a net loss of $17,233,302 for the period from January 29, 2021 (inception) through March 31, 2021.

Liquidity and Capital Resources

As of March 31, 2022, the Company had $0 in its operating bank account, $563,376,097 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 $474,716. As of March 31, 2022, $45,975 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.

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.


                                       18

--------------------------------------------------------------------------------

Table of Contents

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 sponsor (together with any permitted transferees under the forward-purchase agreement, 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 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 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

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. See Note 2 in the footnotes to the financial statements.


                                       19

--------------------------------------------------------------------------------

Table of Contents

© Edgar Online, source Glimpses