10-Q 1 d409952d10q.htm 10-Q 10-Q
Table of Contents
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
FORM
10-Q
 
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from
                    
to
                    
 
 
Khosla Ventures Acquisition Co.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
001-40131
 
85-1488707
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
   
2128 Sand Hill Road
Menlo Park, California
 
94025
(Address of principal executive offices)
 
(Zip Code)
(650)
376-8500
(Registrant’s telephone number, including area code)
 
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange
on which registered
Class A common stock, par value $0.0001 per share
 
KVSA
 
The NASDAQ Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
S-T
(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated
filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule
12b-2
of the Exchange Act.
 
Large accelerated filer      Accelerated filer  
       
Non-accelerated
filer
     Smaller reporting company  
       
Emerging growth company           
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2
of the Exchange Act).    Yes      No  ☐
As of November 14, 2022, 
35,490,000 shares of Class A common stock, par value $0.0001 per share, 5,000,000 shares of Class B common stock, par value $0.0001 per share, and 5,000,000 shares of Class K common stock, par value $0.0001 per share were issued and outstanding, respectively.
 
 
 


Table of Contents


Table of Contents
PART I. FINANCIAL INFORMATION
 
Item 1.
Financial Statements
KHOSLA VENTURES ACQUISITION CO.
CONDENSED BALANCE SHEETS
 
    
SEPTEMBER 30,
2022
   
DECEMBER 31, 2021
 
    
(Unaudited)
       
ASSETS
                
Cash
   $ —       $ 202,245  
Prepaid expenses
     296,018       663,974  
    
 
 
   
 
 
 
Total current assets
     296,018       866,219  
Marketable securities held in Trust Account
     347,095,266       345,017,029  
Other
non-current
assets
     —         112,785  
    
 
 
   
 
 
 
Total Assets
  
$
347,391,284
 
 
$
345,996,033
 
    
 
 
   
 
 
 
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ DEFICIT
                
Current liabilities:
                
Accounts payable
   $ 29,326     $ 189,136  
Due to related party
     462,662       600  
Income tax payable
     366,506           
Franchise tax payable
     344,071       200,000  
Legal fee accrual
     3,081,536       2,818,315  
Accrued expenses
     998,965       997,152  
    
 
 
   
 
 
 
Total current liabilities
     5,283,066       4,205,203  
Deferred underwriting fees payable
     1,207,500       12,075,000  
Class K Founder Shares derivative liabilities
     —         150,000  
    
 
 
   
 
 
 
Total liabilities
     6,490,566       16,430,203  
    
 
 
   
 
 
 
Commitments and Contingencies (Note 5)
            
Class A common stock subject to possible redemption, 34,500,000 shares at $
10.00
per share
     347,095,266       345,017,029  
Stockholders’ deficit
                
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; none issued or outstanding
     —         —    
Class A common stock, $0.0001 par value; 200,000,000 shares authorized; 990,000 issued or outstanding (excluding 34,500,000 shares subject to possible redemption)
     99       99  
Class B common stock, $0.0001 par value; 30,000,000 shares authorized; 5,000,000 shares issued and outstanding
     500       500  
Additional
paid-in
capital
     —         —    
Accumulated deficit
     (6,195,147     (15,451,798
    
 
 
   
 
 
 
Total stockholders’ deficit
     (6,194,548     (15,451,199
    
 
 
   
 
 
 
Total Liabilities, Common Stock Subject to Possible Redemption, and Stockholders’ Deficit
  
$
347,391,284
 
 
$
345,996,033
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements
.
 
3

KHOSLA VENTURES ACQUISITION CO.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
For The
Three
Months
Ended September 30,
2022
   
For The
Three
Months
Ended September 30,
2021
   
For The Nine
Months
Ended September 30,
2022
   
For The Period
From January 15,
2021
(Inception)
Through September 30,
2021
 
Formation costs
  $ —       $ —       $ —       $ 30,000  
General and administrative expenses
    528,988       848,503       1,244,343       3,087,946  
Franchise tax expenses
    50,000       50,000       150,000       150,000  
   
 
 
   
 
 
   
 
 
   
 
 
 
Loss from operations
    (578,988     (898,503     (1,394,343     (3,267,946
Financing expenses on derivative classified instrument
    —                  —         (12,137,500
Change in fair value of derivative liabilities
             1,750,000       150,000       11,600,000  
Gain on marketable securities (net), dividends and interest, held in Trust Account
    1,560,060       5,301       2,078,237       10,545  
   
 
 
   
 
 
   
 
 
   
 
 
 
Income (loss) before income tax expense
    981,072       856,798       833,894       (3,794,901
   
 
 
   
 
 
   
 
 
   
 
 
 
Income tax expense
    317,113       —         366,506       —    
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss)
  $ 663,959     $ 856,798     $ 467,388     $ (3,794,901
   
 
 
   
 
 
   
 
 
   
 
 
 
Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted
    34,500,000       34,500,000       34,500,000       27,680,233  
Basic and diluted net income (loss) per share,
Class A subject to possible redemption
 
$
0.02
 
 
$
0.02
 
 
$
0.02
 
 
$
(0.12
Weighted average shares outstanding of Class A
non-redeemable
common stock, basic and
diluted
    990,000       990,000       990,000       794,302  
Basic and diluted net income (loss) per share, Class A
non-redeemable
common stock
 
$
(0.02
 
$
0.02
 
 
$
(0.04
 
$
(0.12
Weighted average shares outstanding of Class B
non-redeemable
common stock, basic and
diluted
    5,000,000       5,000,000       5,000,000       5,000,000  
Basic and diluted net income (loss) per share, Class B
non-redeemable
common stock
 
$
(0.02
 
$
0.02
 
 
$
(0.04
 
$
(0.10
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
4

KHOSLA VENTURES ACQUISITION CO.
CONDENSED STATEMENTS OF CHANGES IN COMMON STOCK SUBJECT TO POSSIBLE
REDEMPTION AND STOCKHOLDERS’ DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND FOR THE PERIOD FROM JANUARY 15, 2021
(INCEPTION) THROUGH SEPTEMBER 30, 2021
(Unaudited)
 
   
Common Stock Subject to
Possible Redemption
   
Common Stock
                   
   
Class A
   
Class A
   
Class B
                   
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional
Paid-In

Capital
   
Accumulated
Deficit
   
Total
Stockholders’
Deficit
 
Balance as of January 1, 2022 (audited)
    34,500,000     $ 345,017,029       990,000     $ 99       5,000,000     $ 500     $ —       $ (15,451,798   $ (15,451,199
Accretion of Class A common stock to redemption value
    —         28,158       —         —         —         —         —         (28,158     (28,158
Net loss
    —         —         —         —         —         —         —         (243,037     (243,037
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of March 31, 2022 (unaudited)
 
 
34,500,000
 
 
$
345,045,187
 
 
 
990,000
 
 
$
99
 
 
 
5,000,000
 
 
$
500
 
 
$
  
 
 
$
(15,722,993
 
$
(15,722,394
Accretion of Class A common stock to redemption value
    —         490,019       —         —         —         —         —         (490,019     (490,019
Net income
    —         —         —         —         —         —         —         46,466       46,466  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of June 30, 2022 (unaudited)
 
 
34,500,000
 
 
$
345,535,206
 
 
 
990,000
 
 
$
99
 
 
 
5,000,000
 
 
$
500
 
 
$
  
 
 
$
(16,166,546
 
$
(16,165,947
Deferred underwriting fees waiver
    —         —         —         —         —         —         —         10,867,500       10,867,500  
Accretion of Class A common stock to redemption value
    —         1,560,060       —         —         —         —         —         (1,560,060     (1,560,060
Net income
    —         —         —         —         —         —         —         663,959       663,959  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2022 (unaudited)
 
 
34,500,000
 
 
$
347,095,266
 
 
 
990,000
 
 
$
99
 
 
 
5,000,000
 
 
$
500
 
 
$
  
 
 
$
(6,195,147
 
$
(6,194,548
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
5

   
Common Stock Subject to
Possible Redemption
                                           
   
Class A
   
Class A
   
Class B
                   
   
Shares
   
Amount
   
Shares
   
Amount
   
Shares
   
Amount
   
Additional
Paid-In

Capital
   
Accumulated
Deficit
   
Total Stockholders’
Deficit
 
Balance as of January 15, 2021 (inception)
           $                 $                 $        $        $        $     
Issuance of common stock to Sponsor
    —         —         —         —         5,000,000       500       12,000       —         12,500  
Sale of Class A common stock, net of $19,660,260 issuance costs
    34,500,000       325,339,740       —         —         —         —         —         —         —    
Sale of Private Placement Shares
    —         —         990,000       99       —         —         9,899,901       —         9,900,000  
Accretion of Class A common stock to redemption value
    —         19,660,260       —         —         —         —         (9,911,901     (9,748,359     (19,660,260
Net loss
    —         —         —         —         —         —         —         (3,334,058     (3,334,058
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of March 31, 2021 (unaudited)
 
 
34,500,000
 
 
$
345,000,000
 
 
 
990,000
 
 
$
99
 
 
 
5,000,000
 
 
$
500
 
 
$
  
 
 
$
(13,082,417
 
$
(13,081,818
Net loss
    —         —         —         —         —         —         —         (1,317,641     (1,317,641
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of June 30, 2021 (unaudited)
 
 
34,500,000
 
 
$
345,000,000
 
 
 
990,000
 
 
$
99
 
 
 
5,000,000
 
 
$
500
 
 
$
  
 
 
$
(14,400,058
 
$
(14,399,459
Accretion of Class A common stock to redemption value
    —         10,545       —         —         —         —         —         (10,545     (10,545
Net income
    —         —         —         —         —         —         —         856,798       856,798  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Balance as of September 30, 2021 (unaudited)
 
 
34,500,000
 
 
$
345,010,545
 
 
 
990,000
 
 
$
99
 
 
 
5,000,000
 
 
$
500
 
 
$
  
 
 
$
(13,553,805
 
$
(13,553,206
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
6

KHOSLA VENTURES ACQUISITION CO.
STATEMENTS OF CASH FLOWS
(Unaudited)
 
    
For The Nine Months Ended
September 30, 2022
   
For The Period From January 15,
2021 (Inception) Through September 30,
2021
 
Cash Flows from Operating Activities
                
Net income (loss)
   $ 467,388     $ (3,794,901
Adjustments to reconcile net income (loss) to net cash used in operating activities:
                
Financing expenses on derivative classified instrument
              12,137,500  
Gain on marketable securities (net), dividends and interest, held in Trust Account
     (2,078,237     (10,545
Change in fair value of derivative liabilities
     (150,000     (11,600,000
Changes in operating assets and liabilities:
                
Prepaid expenses and other non-current assets
     480,741       (1,019,118
Accounts payable and accrued expenses (including franchise tax payable and income tax payable)
     615,801       2,580,561  
    
 
 
   
 
 
 
Net cash used in operating activities
     (664,307     (1,706,503
    
 
 
   
 
 
 
Cash Flows from Investing Activities
                
Investment of
m
arketable securities held in Trust Account
              (345,000,000
    
 
 
   
 
 
 
Net cash used in investing activities
              (345,000,000
    
 
 
   
 
 
 
Cash Flows from Financing Activities
                
Proceeds from issuance of Class B and Class K common stock to Sponsor
              25,000  
Advances from related party
     462,062       600  
Proceeds from sale of Class A common stock, net of transaction costs
              337,414,740  
Proceeds from sale of Private Placement Shares
              9,900,000  
    
 
 
   
 
 
 
Net cash provided by financing activities
     462,062       347,340,340  
    
 
 
   
 
 
 
Net (decrease) increase in cash
     (202,245     633,837  
Cash - beginning of period
     202,245           
    
 
 
   
 
 
 
Cash - end of period
   $        $ 633,837  
    
 
 
   
 
 
 
Supplemental disclosure of noncash investing and financing activities:
                    
Accretion of Class A common stock to redemption value
 
$
2,078,237
 
 
$
10,545
 
Deferred underwriting fees payable
   $
0
    $ 12,075,000  
Waiver of deferred underwriting fees payable
   $ 10,867,500     $ —    
The accompanying notes are an integral part of these unaudited condensed financial statements.
 
7

KHOSLA VENTURES ACQUISITION CO.
NOTES TO FINANCIAL STATEMENTS
TO FINANCIAL STATEMENTS
Note 1—Description of Organization, Business Operations and Going Concern
Khosla Ventures Acquisition Co. (the “Company”) is a blank check company formed as a Delaware corporation on January 15, 2021. The Company was incorporated for the purpose of effecting a merger, stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (“Business Combination”).
As of September 30, 2022, the Company had not commenced any operations. All activity through September 30, 2022 relates to the Company’s formation, its initial public offering (the “IPO”), and the Company’s search for a target to consummate a Business Combination, which are all described below. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company generates
non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from its initial public offering.
The Company’s sponsor is Khosla Ventures SPAC Sponsor LLC (the “Sponsor”). The Company’s ability to commence operations is contingent upon obtaining adequate financial resources. On March 8, 2021, the Company consummated its IPO of 30,000,000 shares of Class A common stock of the Company, par value $0.0001 per share (each, a “Public Share”), excluding additional Public Shares sold pursuant to the full exercise of the underwriters’ option to purchase additional Public Shares to cover over-allotments. The Public Shares were sold at a price of $10.00 per Public Share, generating gross proceeds to the Company of $300,000,000. On March 8, 2021, the Company’s underwriters exercised in full their option to purchase additional Public Shares in connection with the IPO. The underwriters exercised their option to purchase an additional 4,500,000 Public Shares from the Company at a price of $10.00 per share less the underwriting fees payable. In total, the Company sold 34,500,000 Public Shares in connection with its IPO for gross proceeds of $345,000,000. The underwriters designate March 8, 2021 as the settlement date for such additional Public Shares pursuant to the Underwriting Agreement.
Simultaneously with the closing of the IPO, the Company completed the private sale of 990,000 shares of Class A common stock of the Company, par value $0.0001 per share (the “Private Placement Shares”) at a purchase price of $10.00 per Private Placement Shares, to the Sponsor, generating aggregate gross proceeds to the Company of $9,900,000.
Following the closing of the IPO on March 8, 2021, and the full exercise of the underwriters’ overallotment option on March 8, 2021, an amount of $345,000,000 ($10.00 per Public Share) of the proceeds from the IPO, including $12,075,000 of the underwriting fees payable was placed in a U.S.- based Trust Account at Goldman Sachs, maintained by Continental Stock Transfer & Trust Company, LLC, acting as trustee (“Trust Account”), 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 which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds in the Trust Account that may be released to the Company to pay its franchise and income taxes and expenses relating to the administration of the Trust Account, the proceeds from the IPO, including proceeds from the sale of Private Placement Shares and forward purchase shares, which are held in the Trust Account will not be released until the earliest of (a) the completion of the Company’s initial Business Combination, (b) the redemption of any public shares properly tendered in connection with a stockholder vote to amend the Company’s Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of its obligation to redeem 100% of its public shares if the Company does not complete its initial Business Combination within 24 months from the closing of the IPO or (ii) with respect to any other provisions relating to stockholders’ rights or
pre-initial
Business Combination activity, and (c) the redemption of all of the Company’s public shares if it is unable to complete its Business Combination within 24 months from the closing of the IPO, subject to applicable law.
If the Company is 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 the Company has executed a letter of intent, agreement in principle or definitive agreement for an initial Business Combination by March 8, 2023, and the stockholders have not amended the certificate of incorporation to extend such period, the Company 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 pay 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.
 
8

On June 9, 2021, the Company 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, the Company 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, the Company 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”). However, on November 15, 2021, the Company and Valo Health mutually agreed to terminate the proposed initial Business Combination based on market conditions, particularly in the biotechnology area. The PIPE I Investment and PIPE II Investment were also both terminated upon the termination of the proposed initial Business Combination with Valo Health.
The Company’s management has broad discretion with respect to the specific application of the net proceeds of its IPO and the sale of Private Placement Shares, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. The Company’s initial Business Combination must be with one or more operating businesses or assets that together have an aggregate fair market value equal to at least 80% of the net assets held in the Trust Account (excluding the deferred underwriting fees payable and taxes payable on the interest earned on the Trust Account) at the time the Company signs a definitive agreement in connection with the initial Business Combination. However, the Company will only complete a Business Combination if the post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise is not required to register as an investment company under the Investment Company Act 1940, as amended (the “Investment Company Act”). There is no assurance that the Company will be able to successfully effect a Business Combination.
The Company will provide its holders of the (the “Public Stockholders”) of the Company’s issued and outstanding Class A common stock, par value $0.0001 per share, sold in the IPO (the “Public Shares”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The Public Stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially anticipated to be $10.00 per share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations). The
per-share
amount to be distributed to Public Stockholders who redeem their Public Shares will not be reduced by the deferred underwriting fees payable the Company will pay to the underwriters. These Public Shares were recorded at a redemption value and classified as temporary equity upon the completion of the IPO, in accordance with Accounting Standards Codification (“ASC”) Topic 480, “Distinguishing Liabilities from Equity.” In such case, the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation of a Business Combination and a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other legal reasons, the Company will, pursuant to the amended and restated certificate of incorporation, which was adopted by the Company upon the consummation of the IPO (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (the “SEC”), and file tender offer documents with the SEC prior to completing a Business Combination. If, however, a stockholder approval of the transactions is required by law, or the Company decides to obtain stockholder approval for business or legal reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. Additionally, each Public Stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the transaction. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Founder Shares (as defined below) prior to this IPO (the “Initial Stockholders”) have agreed to vote their Founder Shares and any Public Shares purchased during or after the IPO in favor of a Business Combination. In addition, the Initial Stockholders have agreed to waive their redemption rights with respect to their Founder Shares and Public Shares in connection with the completion of a Business Combination.
Notwithstanding the foregoing, the Company’s Amended and Restated Certificate of Incorporation provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% of the Public Shares, without the prior consent of the Company.
 
9

The holders of the Founder Shares (the “Initial Stockholders”) have agreed not to propose an amendment to the Company’s Amended and Restated Certificate of Incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemption in connection with a Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination within the Combination Period or (B) with respect to any other provision relating to stockholders’ rights or
pre-initial
Business Combination activity, unless the Company provides the Public Stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment.
If the Company is unable to complete a Business Combination within 24 months from the closing of the IPO (the “Combination Period”), the Company will (i) cease all operations except for the purpose of winding up; (ii) as promptly as reasonably possible but not more than ten business days thereafter, 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 the Company to pay its taxes, if any (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); 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 the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law.
The Initial Stockholders’ have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders should acquire Public Shares in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting fees payable held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the funds held in the Trust Account that will be available to fund the redemption of the Company’s Public Shares. In the event of such distribution, it is possible that the per share value of the residual assets remaining available for distribution (including Trust Account assets) will be only $10.00 per share initially held in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company, or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or other similar agreement or Business Combination agreement, reduce the amount of funds in the Trust Account to below the lesser of (i) $10.00 per public share and (ii) the actual amount per public share held in the Trust Account as of the date of the liquidation of the Trust Account, if less than $10.00 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in the Trust Account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the underwriters of the IPO against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). In the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.
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. 
Going Concern and Liquidity
As of September 30, 2022, the Company had $0 in its operating bank account, $296,018 in prepaid expenses, and $347,095,266 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 deficit of $4,987,048. For the nine months ended September 30, 2022, $2,078,237 of the amount on deposit in the Trust Account represented the 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. For the period from January 15, 2021 (inception) through September 30, 2021, $10,545 of the amount on the deposit in the Trust Account represented the gain on marketable securities (net), dividends and interest, held in Trust Account. In addition, the Working Capital Loan and advances from related parties are available to the Company to fund operations.
 
10

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.
Risks and Uncertainties
Management continues to evaluate the impact of the
COVID-19
pandemic and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position and results of its operations, the specific impact is not readily determinable as of the date of the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia. The conflict is expected to have further global economic consequences, including but not limited to the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and uncertainty about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and businesses. Any of the foregoing consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations and the price of our ordinary shares to be adversely affected.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form
10-Q
and Article 8 of Regulation
S-X
of the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair statement of the financial position, operating results and cash flows for the period presented.
The interim results for the period ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to
non-emerging
growth companies but any such an election to opt out is irrevocable.
 
11

The Company has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using
the
extended transition period difficult or impossible because of the potential differences in accounting standards used.
Cash and Cash Equivalents
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of September 30, 2022 and December 31, 2021.
Marketable Securities Held in Trust Account
The Company’s portfolio of investments held in the Trust Account are comprised solely of U.S. government securities, within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with 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.
Common Stock Subject to Possible Redemption
The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480, “Distinguishing Liabilities from Equity.”
Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A common stock feature contains certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption are classified as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets. Accordingly, as of September 30, 2022 and December 31, 2021, 34,500,000 shares of Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheets.
The Class A common stock subject to possible redemption are subject to the subsequent measurement guidance in ASC Topic
480-10-S99.
Under such guidance, the Company must subsequently measure the shares to their redemption amount because, as a result of the allocation of net proceeds to transaction costs, the initial carrying amount of the common stock is less than $10.00 per share. In accordance with the guidance, the Company has elected to measure the common stock subject to possible redemption to their redemption amount (i.e., $10.00 per share) immediately as if the end of the first reporting period after the IPO, March 8, 2021, was the redemption date. Such changes are reflected in additional
paid-in
capital, or in the absence of additional
paid-in
capital, in accumulated deficit. For the three months and nine months ended September 30, 2022, the Company recorded an accretion of $1,560,060 and $2,078,237, respectively, all of which was recorded in accumulated deficit. For the three months ended September 30, 2021, and for the period from January 15, 2021 (inception) through September 30, 2021, the Company recorded an accretion of $10,545 and $19,670,805, respectively, of which for the period from January 15, 2021 (inception) through September 30, 2021, $9,911,901 was recorded in additional
paid-in
capital and $9,758,904 was recorded in accumulated deficit.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentration of credit risk consist of a cash account in a financial institution which, at times may exceed the Federal depository insurance coverage. As of September 30, 2022 and December 31, 2021, the Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.
Derivative Financial Instruments
The Company accounts for derivative financial instruments in accordance with ASC Topic 815, “Derivatives and Hedging.” For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value upon issuance and remeasured at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative financial instruments is evaluated at the end of each reporting period.
 
12

Fair Value Measurements
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under the ASC Topic 820, “Fair Value Measurement,” approximates the carrying amounts represented in the balance sheets.
The fair value hierarchy is categorized into three levels based on the inputs as follows:
 
   
Level 1: Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
 
   
Level 2: Observable inputs other than Level 1 inputs. Example of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.
 
   
Level 3: Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.
The fair value of the Company’s financial assets and liabilities, approximates the carrying amounts represented in the balance sheets, primarily due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires the Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities during the reporting period. Actual results could differ from those estimates.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.
Offering Costs
Offering costs consist of legal, accounting, and other costs incurred through the balance sheet date that are directly related to the IPO and were charged to temporary equity upon the completion of the IPO.
Income Taxes
The Company complies with the accounting and reporting requirements of ASC Topic 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC Topic 740, “Income Taxes,” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be
more-likely-than-not
to be sustained upon examination by taxing authorities. The Company’s management determined that the United States is the Company’s only major tax jurisdiction.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
 
13

Net Income (Loss) Per Share of Common Stock
Net income (loss) per share is computed by dividing net income (loss) by the weighted average number of
common
stock outstanding during the period, excluding common stock shares subject to forfeiture.
Class K common stock will convert into Class A common stock after the initial Business Combination only to the extent certain triggering events occur prior to the 10
th
anniversary of the initial Business Combination, including three equal triggering events based on the Company’s stock trading at $30.00, $40.00 and $50.00 per share following the first anniversary of the closing of the initial Business Combination and also upon specified strategic transactions. The Company has not considered the effect of the Class K common stock in the calculation of diluted income (loss) per share since the conversion of Class K common stock into Class A common stock is contingent upon the occurrence of future events.
Class B Founder Shares and Private Placement Shares are included in the calculation of
non-redeemable
loss per share.
The Company’s statements of operations include a presentation of loss per share for shares of common stock subject to possible redemption in a manner similar to the
two-class
method of loss per share. With respect to the accretion of the Class A common stock subject to possible redemption and consistent with ASC Topic
480-10-S99-3A,
the Company has treated the accretion in excess of fair value in the same manner as a dividend, to the extent the redemption value exceeds the fair value, in the calculation of the net income/(loss) per common stock. As of September 30, 2022 and December 31, 2021, the Company did not have any dilutive securities and other contracts that could, potentially, be exercised or converted into common stock and then share in the earnings of the Company. As a result, diluted income (loss) per share is the same as basic loss per share for the periods presented.
A reconciliation of net loss per common stock is as follows:
 
    For The Nine Months Ended
September 30, 2022
    For The Period From January 15,
2021 (Inception) Through
September 30, 2021
 
Net income (loss)
  $ 467,388     $ (3,794,901
Accretion of temporary equity in excess of fair value
    (2,078,237     (10,545
   
 
 
   
 
 
 
Net loss including accretion of temporary equity in excess of fair value
  $ (1,610,849   $ (3,805,446
   
 
 
   
 
 
 
 
    For The Three Months Ended
September 30, 2022
    For The Three Months Ended
September 30, 2021
 
Net income
  $ 663,959     $ 856,798  
Accretion of temporary equity in excess of fair value
    (1,560,060     (10,545
   
 
 
   
 
 
 
Net income (loss) including accretion of temporary equity in excess of fair value
  $ (896,101   $ 846,253  
   
 
 
   
 
 
 
 
14

    For The Nine Months Ended September 30, 2022  
   
Class A-t (Temporary)
   
Class A-p (Permanent)
    Class B  
Basic and diluted net income (loss) per share
                       
Numerator
                       
Allocation of net loss including accretion of temporary equity in excess of fair value
  $ (1,372,544   $ (39,386   $ (198,919
Deemed dividend for accretion of temporary equity in excess of fair value
    2,078,237                    
   
 
 
   
 
 
   
 
 
 
Allocation of net income (loss) and deemed dividend
  $ 705,693     $ (39,386   $ (198,919
   
 
 
   
 
 
   
 
 
 
Denominator
                       
Weighted average shares outstanding, basic and diluted
    34,500,000       990,000       5,000,000  
Basic and diluted net income (loss) per share
  $ 0.02     $ (0.04   $ (0.04
   
    For The Period from January 15, 2021 (Inception) Through September 30, 2021  
   
Class A-t (Temporary)
   
Class A-p (Permanent)
    Class B  
Basic and diluted net loss per share
                       
Numerator
                       
Allocation of net loss including accretion of temporary equity in excess of fair value
  $ (3,210,715   $ (92,134   $ (502,597
Deemed dividend for accretion of temporary equity in excess of fair value
    10,545                    
   
 
 
   
 
 
   
 
 
 
Allocation of net loss and deemed dividend
  $ (3,200,170   $ (92,134   $ (502,597
   
 
 
   
 
 
   
 
 
 
Denominator
                       
Weighted average shares outstanding, basic and diluted
    27,680,233       794,302       5,000,000  
Basic and diluted net loss per share
  $ (0.12   $ (0.12   $ (0.10
 
    For The Three Months Ended September 30, 2022  
   
Class A-t

(Temporary)
   
Class A-p

(Permanent)
    Class B  
Basic and diluted net income (loss) per share
                       
Numerator
                       
Allocation of net income including accretion of temporary equity in excess of fair value
  $ (763,534   $ (21,910   $ (110,657
Deemed dividend for accretion of temporary equity in excess of fair value
    1,560,060                    
   
 
 
   
 
 
   
 
 
 
Allocation of net income (loss) and deemed dividend
  $ 796,526     $ (21,910   $ (110,657
   
 
 
   
 
 
   
 
 
 
Denominator
                       
Weighted average shares outstanding, basic and diluted
    34,500,000       990,000       5,000,000  
Basic and diluted net income (loss) per share
  $ 0.02     $ (0.02
  $ (0.02
 
15

    For The Three Months Ended September 30, 2021  
   
Class A-t

(Temporary)
   
Class A-p

(Permanent)
    Class B  
Basic and diluted net income per share
                       
Numerator
                       
Allocation of net income including accretion of temporary equity in excess of fair value
  $ 721,060     $ 20,692     $ 104,501  
Deemed dividend for accretion of temporary equity in excess of fair value
    10,545                    
   
 
 
   
 
 
   
 
 
 
Allocation of net income and deemed dividend
  $ 731,605     $ 20,692     $ 104,501  
   
 
 
   
 
 
   
 
 
 
Denominator
                       
Weighted average shares outstanding, basic and diluted
    34,500,000       990,000       5,000,000  
Basic and diluted net income per share
  $ 0.02     $ 0.02     $ 0.02  
Recent Accounting Pronouncements
Management does not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the accompanying financial statements.
Note 3—Initial Public Offering
Pursuant to the IPO, the Company sold 34,500,000 Public Shares at a purchase price of $10.00 per Public Share, including 4,500,000 Public Shares sold pursuant to the full exercise of the underwriters’ option to purchase additional Public Shares to cover over-allotments.
Simultaneously with the closing of the IPO, the Company completed the private sale of 990,000 shares of Class A common stock of the Company, par value $0.0001 per share (the “Private Placement Shares”) at a purchase price of $10.00 per Private Placement Shares, to the Company’s Sponsor generating aggregate gross proceeds to the Company of $9,900,000.
Note 4—Related Party Transactions
Promissory Note – Related Party
On January 19, 2021, the Company issued a promissory note (the “Promissory Note”) to the Sponsor and an affiliate of the Sponsor, pursuant to which the Company could borrow up to an aggregate principal amount of $300,000. The Promissory Note was
non-interest
bearing and payable on the earlier of (i) December 31, 2021 and (ii) the completion of the IPO. The outstanding balance under the promissory note was repaid upon consummation of the IPO. The Company can no longer borrow under the Promissory Note.
Due to Related Party
An affiliate of the Sponsor paid certain operating costs on behalf of the Company. These advances are due on demand and
non-interest
bearing. During the nine months ended September 30, 2022 and the period from January 15, 2021 (inception) through September 30, 2021, the related party paid $462,662 and $600 of operating costs on behalf of the Company, respectively. During the three months ended September 30, 2022 and 2021, the related party paid $52,648 and $25,000 of operating costs on behalf of the Company, respectively. As of September 30, 2022 and December 31, 2021, the amount due to the related party was $462,662 and $600, respectively.
Founder Shares
On January 19, 2021, the Sponsor acquired 10,000,000 Founder Shares (the “Founder Shares”) for an aggregate purchase price of $25,000, consisting of 5,000,000 Class B Founder Shares (also known as “Class B common stock”) and 5,000,000 Class K Founder Shares (also known as “Class K common stock”). Prior to the initial investment in the Company of $25,000 by the Sponsor, the Company had no assets, tangible or intangible. The per share purchase price of the Founder Shares was determined by dividing the amount of cash contributed to the Company by the aggregate number of Founder Shares issued. On February 28, 2021, the Sponsor entered into a security assignment agreement with six of the Company’s independent directors and assigned 240,000 shares of Class B Founder Shares at an aggregate price of $600.
 
16

Class B Founder Shares
The Class B Founder Shares will automatically convert into shares of Class A common stock on the first business day following the completion of our initial Business Combination, at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Class B Founder Shares will equal, in the aggregate on an
as-converted
basis, 15% of the sum of (i) the total number of all shares of Class A common stock issued and outstanding upon completion of this offering (including any over-allotment shares if the underwriters exercise their overallotment option), plus (ii) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion of the Class B Founder Shares plus (iii) unless waived, the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding (x) any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, deemed issued, or to be issued, to any seller in the initial Business Combination, (y) any shares of Class A common stock issuable upon conversion of the Class K Founder Shares and (z) any Private Placement Shares. Prior to our initial Business Combination, only holders of shares of our Class B common stock will be entitled to vote on the appointment of directors.
Class K Founder Shares
The Class K Founder Shares will convert into shares of Class A common stock after the initial Business Combination only to the extent certain triggering events occur prior to the 10
th
anniversary of the initial Business Combination, including three equal triggering events based on our stock trading at $30.00, $40.00 and $50.00 per share following the first anniversary of the closing of our initial Business Combination and also upon specified strategic transactions, in each case, as described in this prospectus. The Class K Founder Shares will be convertible into shares of Class A common stock at a ratio such that the number of shares of Class A common stock issuable upon conversion of all Founder Shares (including both Class B Founder Shares and Class K Founder Shares) will equal, in the aggregate on an
as-converted
basis, 30% of the sum of (i) the total number of all shares of Class A common stock issued and outstanding upon completion of this offering (including any over-allotment shares if the underwriters exercise their overallotment option), plus (ii) the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion of the Class B Founder Shares and Class K Founder Shares plus (iii) unless waived, the total number of shares of Class A common stock issued or deemed issued or issuable upon conversion or exercise of any equity-linked securities or rights issued or deemed issued, by the Company in connection with or in relation to the consummation of the initial Business Combination, excluding (x) any shares of Class A common stock or equity-linked securities exercisable for or convertible into shares of Class A common stock issued, deemed issued, or to be issued, to any seller in the initial Business Combination and (y) any Private Placement Shares. Prior to our initial Business Combination, only holders of shares of our Class B common stock were entitled to vote on the appointment of directors.
The Company accounts for the Class K Founder Shares as equity linked instruments. Based on the guidance in ASC Topic 815, “Derivatives and Hedging,” certain adjustments to the settlement amount of the Class K Founder Shares are based on a variable that is not an input to the fair value of a
“fixed-for-fixed”
option as defined under ASC Topic
815-40.
The Class K Founder Shares are recorded as liabilities as these shares are not considered indexed to the Company’s own stock and not eligible for an exception from derivative accounting.
Working Capital Loans
In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company will repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. To date, the Company had no borrowings under the Working Capital Loans.
Private Placement Shares
Simultaneously with the closing of the IPO, the Sponsor has purchased 990,000 Class A common stock at a price of $10.00 per share in a private placement for an aggregate purchase price of $9,900,000. The Private Placement Shares are identical to the shares of Class A common stock shares sold in this offering, subject to certain limited exceptions. The Private Placement Shares holders do not have the option to redeem their Class A common stock and as a result, the proceeds received in connection with the IPO are excluded from temporary equity. The par value of these shares and related additional paid in capital are classified as permanent equity in the Company’s financial statements.
 
17

The initial stockholders agreed, subject to limited exceptions, not to transfer, assign or sell any of their Private Placement Shares until 30 days after the completion of the initial Business Combination.
Forward Purchase Agreement
The Company has entered into a forward-purchase agreement pursuant to which the Sponsor agreed to purchase an aggregate of up to 2,500,000 shares of our Class A common stock (the “forward-purchase shares”) for $10.00 per share, or an aggregate maximum amount of $25,000,000, in a private placement that would close simultaneously with the closing of the initial Business Combination. The proceeds from the sale of these forward-purchase shares, together with the amounts available to the Company from the Trust Account (after giving effect to any redemptions of public shares) and any other equity or debt financing obtained by the Company in connection with the Business Combination, will be used to satisfy the cash requirements of the Business Combination, including funding the purchase price and paying expenses and retaining specified amounts to be used by the post-Business Combination company for working capital or other purposes. To the extent that the amounts available from the Trust Account and other financing are sufficient for such cash requirements, the sponsor (together with any permitted transferees under the forward-purchase agreement) may purchase less than 2,500,000 forward-purchase shares. The forward-purchase shares would be identical to the public shares being sold in this offering, except the forward-purchase shares would be subject to transfer restrictions and certain registration rights, as described herein. The Company performed an assessment in accordance with ASC Topic 480, “Distinguishing Liabilities from Equity,” and ASC Topic 815, “Derivatives and Hedging,” to conclude whether the forward-purchase shares constitute a liability and a derivative such that it will be fair valued separately from the Company’s common stock. The Company concludes that the forward-purchase shares should be equity-classified and its embedded features should not be bifurcated.
Note 5—Commitments & Contingencies
Registration Rights
The holders of the Founder Shares and Private Placement Shares are entitled to registration rights pursuant to the registration agreement signed prior to the consummation of the IPO. The holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that the Company will not be required to effect or permit any registration or cause any registration statements to become effective until termination of the applicable
lock-up
period.
Underwriting Agreement
The Company granted the underwriters an option to cover over-allotments and for market stabilization purposes. The over-allotment option entitled the underwriters to purchase on a pro rata basis up to 4,500,000 additional Public Shares at the IPO price, less the underwriting fees payable. On March 8, 2021, the Company’s underwriters exercised in full their option to purchase additional Public Shares in connection with the IPO. The underwriters exercised their option to purchase 4,500,000 Public Shares from the Company at a price of $10.00 per share less the underwriting fees payable. This transaction settled on March 8, 2021.
The underwriters are entitled to a deferred underwriters fee of $12,075,000. The deferred underwriters fee will be forfeited by the underwriters solely in the event that the Company fails to 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. 
Note 6—Stockholders’ Deficit
Preferred Stock - The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share. As of September 30, 2022 and December 31, 2021, there were no shares of preferred stock issued or outstanding.
Class A Common Stock - The Company is authorized to issue 200,000,000 shares of Class A common stock with a par value of $0.0001 per share. Holders of the Company’s Class A common stock are entitled to one vote for each share. As of September 30, 2022 and December 31, 2021, there were 990,000 shares of Class A common stock issued or outstanding, excluding 34,500,000 shares of common stock subject to possible redemption.
 
18

Class B Common Stock - The Company is authorized to issue 30,000,000 shares of Class B common stock with a par value of $0.0001 per share. As of September 30, 2022 and December 31, 2021 there were 5,000,000 shares of Class B common stock issued and outstanding.
Common stockholders of record are entitled to one vote for each share held on all matters to be voted on by stockholders. Holders of Class A common stock and holders of Class B common stock will vote together as a single class on all matters submitted to a vote of the stockholders except as required by law.
Note 7—Fair Value Measurements
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of September 30, 2022 including the fair value hierarchy of the valuation inputs that the Company utilized to determine such fair value.
 
     Level 1      Level 2      Level 3      Total  
Assets:
                                   
Marketable securities held in Trust Account
   $ 347,095,266      $ —        $ —        $ 347,095,266  
Liabilities:
                                   
Class K Founder Shares derivative liabilities
     —          —          —          —    
The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2021 including the fair value hierarchy of the valuation inputs that the Company utilized to determine such fair value.
 
     Level 1      Level 2      Level 3      Total  
Assets:
                                   
Marketable securities held in Trust Account
   $ 345,017,029      $ —        $ —        $ 345,017,029  
Liabilities:
                                   
Class K Founder Shares derivative liabilities
     —          —        $ 150,000      $ 150,000  
Class K Founder Shares Derivative Liabilities
Class K Founder Shares is accounted for as a liability in accordance with ASC Topic 815, “Derivatives and Hedging,” and presented as a derivative liability on the accompanying September 30, 2022 and December 31, 2021 balance sheets. The derivative liability was measured at fair value at inception and on a recurring basis, with 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 Company and its valuation advisor evaluated the Class K Founder Shares as of September 30, 2022 and concluded given that the liabilities related to the Class K Founder Shares is zero, no quarterly valuation as of September 30, 2022 is needed.
The key inputs into the Monte-Carlo simulation model for the Class K Founder Shares derivative liabilities were as follows as of December 31, 2021:
 
Input
  
December 31, 2021
 
Input Risk-free interest rate
     1.54
Term to Business Combination
     0.5 years  
Expected volatility
     10.50
Stock price
   $ 9.70  
Dividend yield
     0.00
 
19

The following table presents a summary of the changes in the fair value of the Class K Founder Shares derivative liabilities, a Level 3 liability, measured on a recurring basis, for the period from January 1, 2022 through September 30, 2022:
 
     Class K Founder
Shares Derivative
 
     Liabilities  
Fair value as of January 1, 2022
   $ 150,000  
Change in fair value
     (150,000
    
 
 
 
Fair value as of March 31, 2022
   $ —    
    
 
 
 
Change in fair value
         
Fair value as of June 30, 2022
   $     
    
 
 
 
Change in fair value
         
Fair value as of September 30, 2022
   $     
    
 
 
 
There were no transfers to and from Levels 1, 2, and 3 for the three and nine months ended September 30, 2022.
The following table presents a summary of the changes in the fair value of the Class K Founder Shares derivative liabilities, a Level 3 liability, measured on a recurring basis, for the period from January 15, 2021 (inception) through September 30, 2021:
 
     Class K Founder  
     Shares Derivative  
     Liabilities  
Fair value at January 15, 2021 (Inception)
   $ 12,150,000  
Change in fair value
     (9,000,000
    
 
 
 
Fair value at March 31, 2021
   $ 3,150,000  
Change in fair value
     (850,000
    
 
 
 
Fair value at June 30, 2021
   $ 2,300,000  
Change in fair value
     (1,750,000
    
 
 
 
Fair value as of September 30, 2021
   $ 550,000  
    
 
 
 
There were no transfers to and from Levels 1, 2, and 3 for three months ended September 30, 2021 and the period from January 15, 2021 (inception) to September 30, 2021.
Note 8—Income Taxes
The Company’s taxable income primarily consists of interest income on the Trust Account, less any franchise taxes. The Company’s formation costs are generally considered
start-up
costs and are not currently deductible.
We recorded an income tax provision of $317,113 and $366,506 for the three and nine months ended September 30, 2022, respectively. The effective income tax rate for the nine months ended September 30, 2022 was 43.95%. The 43.95% effective income tax rate differs from the federal statutory rate of 21% as a result of
non-deductible
transaction costs, and the movement of the valuation allowance against our U.S. state and federal net deferred tax assets. For the three and nine months ended September 30, 2022, the Company had $0 and $0 of U.S. federal and state net operating loss carryovers available to offset future taxable income, respectively.
In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion of all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of deferred tax assets and therefore established a full valuation allowance of $1,388,159 and $1,165,271 as of September 30, 2022, and December 31, 2021, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and is subject to examination by the various taxing authorities. There were no unrecognized tax benefits as of September 30, 2022 and December 31, 2021. No amounts were accrued for the payment of interest and penalties as of September 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since inception.
 
 
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Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.

 

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Item 4.

Controls and Procedures

Evaluation of disclosure controls and procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the fiscal quarter ended September 30, 2022, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act.

Based on this evaluation, our principal executive officer and principal financial and accounting officer have concluded that during the period covered by this report, our disclosure controls and procedures were not effective due to material weaknesses in internal controls over financial reporting related to inaccurate accounting. Management identified errors in its historical financial statements related to the accounting for the Class A common stock and the Class K founder shares. Because the Class A common stock issued in the IPO can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company’s control, the Company should have classified all of these redeemable shares in temporary equity and remeasured these redeemable shares to their redemption value (i.e., $10.00 per share) as of the end of the first reporting period after the date of the Company’s IPO. Management also concluded that it incorrectly accounted for the Class K founder shares as permanent equity versus a derivative liability.

To address these material weaknesses, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting and to provide processes and controls over the internal communications within the Company, financial advisors and independent registered public accounting firm. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. Other than this issue, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in internal control over financial reporting

During the quarter ended September 30, 2022, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, as the circumstances that led to the material weaknesses described above had not yet been identified. We are in the process of implementing changes to our internal control over financial reporting to remediate such material weaknesses, as more fully described above. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.

 

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PART II-OTHER INFORMATION

 

Item 1.

Legal Proceedings.

None.

 

Item 1A.

Risk Factors.

Factors that could cause our actual results to differ materially from those in this report include the risk factors described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021. An additional factor that could cause our actual results to differ materially from those in this report is set out below.

Risks Relating to our Search for, and Consummation of or Inability to Consummate, a Business Combination

If the SEC adopts the proposed rules and regulations relating to, among other things, enhancing disclosures in Business Combination transactions involving SPACs, our ability to complete an initial Business Combination could be adversely and materially affected, and we may be exposed to a greater risk of litigation in connection with our initial Business Combination.

On March 30, 2022, the SEC issued certain proposed rules relating to, among other items, enhancing disclosures in Business Combination transactions involving SPACs and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; increasing the liability of projections in SEC filings in connection with proposed Business Combination transactions; increasing the potential liability of certain participants in proposed Business Combination transactions; and modifying the extent to which SPACs could become subject to regulation under the Investment Company Act, including a proposed rule that would provide SPACs a safe harbor from treatment as an investment company if they satisfy certain conditions that limit a SPAC’s duration, asset composition, business purpose and activities. These rules, if adopted, whether in the form proposed or in revised form, may (i) impair our ability to engage financial and capital market advisors, to negotiate or to complete an initial Business Combination, (ii) increase the costs and time related thereto and (iii) expose us to a greater risk of litigation in connection with our initial Business Combination, which may materially and adversely affect us.

We may be subject to additional excise tax under the recently-passed Inflation Reduction Act of 2022, which could adversely affect our ability to complete an initial Business Combination.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. Any redemption or other repurchase that occurs after December 31, 2022, in connection with a Business Combination, extension vote or otherwise, may be subject to the excise tax. Whether and to what extent the Company would be subject to the excise tax in connection with a Business Combination, extension vote or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection with the Business Combination, extension or otherwise, (ii) the structure of a Business Combination, (iii) the nature and amount of any “PIPE” or other equity issuances in connection with a Business Combination (or otherwise issued not in connection with a Business Combination but issued within the same taxable year of a Business Combination) and (iv) the content of regulations and other guidance from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand to complete a Business Combination and inhibit the Company’s ability to complete a Business Combination.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

There were no sales of unregistered securities during the nine months ended September 30, 2022.

 

Item 3.

Defaults Upon Senior Securities.

None.

 

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Item 4.

Mine Safety Disclosures.

Not Applicable.

 

Item 5.

Other Information.

None.

 

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Item 6.

Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

          Incorporated by Reference      Filed/  

Exhibit
Number

  

Exhibit Description

   Form      File No.      Exhibit      Filing
Date
     Furnished
Herewith
 
    3.1    Second Amended and Restated Certificate of Incorporation, dated March 4, 2021      8-K        001-40131        3.1        3/9/21     
    3.3    Bylaws      S-1        333-253096        3.3        2/12/21     
    4.1    Specimen Class A Common Stock Certificate      S-1        333-253096        4.1        2/12/21     
  31.1    Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                  *  
  31.2    Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                  *  
  32.1    Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002                  *  
  32.2    Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes- Oxley Act of 2002                  *  
101.INS    Inline XBRL Instance Document                  *  
101.SCH    Inline XBRL Taxonomy Extension Schema Document                  *  
101.CAL    Inline XBRL Taxonomy Extension Calculation Linkbase Document                  *  
101.DEF    Inline XBRL Taxonomy Extension Definition Linkbase Document                  *  
101.LAB    Inline XBRL Taxonomy Extension Label Linkbase Document                  *  
101.PRE    Inline XBRL Taxonomy Extension Presentation Linkbase Document                  *  
104    Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)                  *  

 

*

Filed herewith.

**

Furnished herewith.

 

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

    KHOSLA VENTURES ACQUISITION CO.
Date: November 14, 2022     By:  

/s/ Peter Buckland

    Name:   Peter Buckland
    Title:   Chief Financial Officer

 

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