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.
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.
We may enter into a non-binding letter of intent for a potential initial
business combination with another company by March 26, 2023, as a result of
which the date by which we must complete a business combination will be extended
to June 26, 2023. No assurances can be made as to our being able to enter into a
non-binding letter of intent prior to March 26, 2023 for, our ability to
successfully negotiate and enter into a definitive agreement with respect to, or
as to the terms or timeframe as to which we may be able to consummate, if at
all, a potential initial business combination. Any transaction is subject to
board and equity holder approval of both companies, regulatory approvals and
other customary conditions. If we do not enter into a letter of intent,
agreement in principle or definitive agreement for an initial business
combination by March 26, 2023 (24 months from the closing of our IPO), or if we
do so enter into a letter of intent, agreement in principle or definitive
agreement by March 26, 2023 and are unable to complete the potential business
combination by June 26, 2023 (27 months from the closing of our IPO), 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 December 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.
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For the year ended December 31, 2022, we had a loss from operations of
$1,802,250, which consisted of $1,617,542 in general and administrative
expenses, and $184,708 in franchise tax expenses, offset by $8,256,815 in gain
on marketable securities (net), dividends and interest, held in the trust
account and a $6,250,000 change in Class K founder shares derivative
liabilities, income tax expense of $1,695,142 resulting in a net income of
$11,009,423.
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 gain on marketable
securities (net), dividends and interest, held in the trust account and a
$41,650,000 change in Class K founder shares derivative liabilities, resulting
in a net loss of $7,492,985.
Liquidity and Capital Resources
As of December 31, 2022, the Company had $0 in its operating bank account,
$571,586,937 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 working capital deficit of $2,479,456. As of December 31, 2022,
$8,256,815 of the amount on gain on marketable securities (net), dividends and
interest, held in trust account, 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 underwriting fee of $0.35 per public
share, or $19,715,578 in the aggregate. The deferred underwriting 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 Citigroup Global
Markets Inc. (representing 50% of the total deferred underwriting fees payable).
The waiver is recorded in the Company's statements of change in common stock
subject to possible redemption and stockholder's deficit against accumulated
deficit.
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 fees 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.
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Critical Accounting Estimates
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 estimates 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 liabilities on the December 31, 2022 and 2021
balance sheets. The derivative liabilities were measured at fair value at
inception and on a recurring basis, which changes in fair value presented within
change in fair value of derivative liabilities 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 key inputs used as of December 31, 2022 were as follow: risk free rate:
3.90%; term to business combination: 0.6 years; expected volatility: de minimis
and stock price: $9.96.
The key 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.
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KHOSLA VENTURES ACQUISITION CO. III 
