| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 001-40247 | |||
(State or other jurisdiction of | (Commission File Number) | (I.R.S. Employer Identification No.) |
2128 Sand Hill Road Menlo Park, California | 94025 | |
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A common stock, par value $0.0001 per share | KVSC | The NASDAQ Stock Market LLC |
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |||
| Emerging growth company | ☒ | |||||
KHOSLA VENTURES ACQUISITION CO. III
Quarterly Report
Table of Contents
| 1 | ||||||
| 1 | ||||||
| 18 | ||||||
| 24 | ||||||
| 25 | ||||||
i
ASSETS | ||||
Cash and cash equivalent | $ | 1,304,417 | ||
Prepaid expenses | 823,990 | |||
Total current assets | 2,128,407 | |||
Cash held in trust account | 563,302,226 | |||
Other assets | 844,791 | |||
Total assets | $ | 566,275,424 | ||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||
Current liabilities: | ||||
Accounts payable | $ | 514,567 | ||
Franchise tax payable | 50,000 | |||
Accrued offering and formation costs | 43,338 | |||
| Advances from related party | 154,483 | |||
Total current liabilities | 762,388 | |||
Deferred underwriting fees payable | 17,500,000 | |||
Total liabilities | 18,262,388 | |||
Commitments and Contingencies (Note 5) | 0 | |||
Class A common | 543,013,030 | |||
Stockholder Equity: | ||||
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; NaN issued and outstanding | $ | 0 | ||
Class A common share, $0.0001 par value, 200,000,000 shares authorized; 54,301,303 | 203 | |||
Class B common stock, $0.0001 par value; 30,000,000 shares authorized; 5,000,000 shares issued and outstanding | 500 | |||
Class K common stock, $0.0001 par value; 30,000,000 shares authorized; 5,000,000 shares issued and outstanding | 500 | |||
Additional paid-in capital | 5,094,605 | |||
Accumulated Deficit | (95,802 | ) | ||
Total stockholders’ equity | 5,000,006 | |||
Total Liabilities and Stockholders’ Equity | $ | 566,275,424 | ||
SEPTEMBER 30, 2022 | DECEMBER 31, 2021 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash | $ | — | $ | 239,105 | ||||
Prepaid expenses | 423,424 | 843,640 | ||||||
Total current assets | 423,424 | 1,082,745 | ||||||
Marketable securities held in Trust Account | 566,723,383 | 563,330,122 | ||||||
Other non-current assets | — | 189,529 | ||||||
Total Assets | $ | 567,146,807 | $ | 564,602,396 | ||||
LIABILITIES, COMMON STOCK SUBJECT TO POSSIBLE REDEMPTION, AND STOCKHOLDERS’ DEFICIT | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 26,375 | $ | 39,897 | ||||
Due to related party | 394,401 | 5,300 | ||||||
Income tax payable | 648,154 | — | ||||||
Franchise tax payable | 150,000 | 200,000 | ||||||
Accrued expenses | 249,637 | 9,141 | ||||||
Total current liabilities | 1,468,567 | 254,338 | ||||||
Deferred underwriting fees payable | 9,857,789 | 19,715,578 | ||||||
Class K Founder Shares derivative liabilities | — | 6,250,000 | ||||||
Total liabilities | 11,326,356 | 26,219,916 | ||||||
Commitments and Contingencies (Note 5) | ||||||||
Class A common stock subject to possible redemption, 56,330,222 shares at $10.00 per share | 566,723,383 | 563,330,122 | ||||||
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; 1,426,605 issued or outstanding (excluding 56,330,222 shares subject to possible redemption) | 143 | 143 | ||||||
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 | (10,903,575 | ) | (24,948,285 | ) | ||||
Total stockholders’ deficit | (10,902,932 | ) | (24,947,642 | ) | ||||
Total Liabilities, Common Stock Subject to Possible Redemption, and Stockholders’ Deficit | $ | 567,146,807 | $ | 564,602,396 | ||||
FROM JANUARY 29, 2021 (INCEPTION) THROUGH MARCH 31, 2021 | ||||
Formation costs | $ | 25,000 | ||
General and administrative expenses | 20,802 | |||
Franchise tax expense | 50,000 | |||
Net loss | $ | (95,802 | ) | |
Weighted average Class A outstanding, redeemable common stock, basic and diluted | 50,116,776 | |||
Basic and diluted net income per share, Class A common stock subject to possible redemption | $ | 0.00 | ||
Weighted average Class A and B shares outstanding, non-redeemable common stock, basic and diluted | 7,014,399 | |||
Basic and diluted net loss per common stock, non-redeemable common stock | $ | (0.01 | ) | |
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 29, 2021 (Inception) Through September 30, 2021 | |||||||||||||
Formation costs | $ | — | $ | — | $ | — | $ | 25,000 | ||||||||
General and administrative expenses | 328,616 | 352,100 | 1,280,217 | 668,108 | ||||||||||||
Franchise tax expenses | 50,000 | 50,000 | 134,708 | 150,000 | ||||||||||||
Loss from operations | (378,616 | ) | (402,100 | ) | (1,414,925 | ) | (843,108 | ) | ||||||||
Financing expenses on derivative classified instrument | — | — | — | (47,887,500 | ) | |||||||||||
Change in fair value of derivative liabilities | — | 9,900,000 | 6,250,000 | 36,600,000 | ||||||||||||
Gain on marketable securities (net), dividends and interest, held in Trust Account | 2,547,203 | 8,654 | 3,393,261 | 17,214 | ||||||||||||
Income (loss) before income tax expense | 2,168,587 | 9,506,554 | 8,228,336 | (12,113,394 | ) | |||||||||||
Income tax expense | 524,412 | — | 648,154 | — | ||||||||||||
Net income (loss) | $ | 1,644,175 | $ | 9,506,554 | $ | 7,580,182 | $ | (12,113,394 | ) | |||||||
Weighted average shares outstanding of Class A common stock subject to possible redemption, basic and diluted | 56,330,222 | 56,330,222 | 56,330,222 | 43,325,554 | ||||||||||||
Basic and diluted net income (loss) per share, Class A subject to possible redemption | $ | 0.03 | $ | 0.15 | $ | 0.13 | $ | (0.24 | ) | |||||||
Weighted average shares outstanding of Class A non-redeemable common stock, basic and diluted | 1,426,605 | 1,426,605 | 1,426,605 | 1,097,940 | ||||||||||||
Basic and diluted net income (loss) per share, Class A non-redeemable common stock | $ | (0.01 | ) | $ | 0.15 | $ | 0.07 | $ | (0.30 | ) | ||||||
Weighted average shares outstanding of Class B non-redeemable common stock, basic and diluted | 5,000,000 | 5,000,000 | 5,000,000 | 4,938,776 | ||||||||||||
Basic and diluted net income (loss) per share, Class B non-redeemable common stock | $ | (0.01 | ) | $ | 0.15 | $ | 0.07 | $ | (0.24 | ) | ||||||
Class A Common Stock | Class B Common Stock | Class K Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||||||||||||||||||
Balance, January 29, 2021 (inception) | 0 | $ | 0 | 0 | $ | 0 | 0 | $ | 0 | $ | 0 | $ | 0 | $ | 0 | |||||||||||||||||||||
Issuance of Class B ordinary shares to Sponsor | — | — | 5,000,000 | 500 | — | — | 12,000 | — | 12,500 | |||||||||||||||||||||||||||
Issuance of Class K ordinary shares to Sponsor(1) | — | — | — | — | 5,000,000 | 500 | 12,000 | — | 12,500 | |||||||||||||||||||||||||||
| Sale of Public Shares | 56,330,222 | 5,633 | — | — | — | — | 563,296,893 | — | 563,302,526 | |||||||||||||||||||||||||||
Underwriting discounts | (10,000,000 | ) | (10,000,000 | ) | ||||||||||||||||||||||||||||||||
Deferred underwriting fee payable | (17,500,000 | ) | (17,500,000 | ) | ||||||||||||||||||||||||||||||||
Offering costs | (718,688 | ) | (718,688 | ) | ||||||||||||||||||||||||||||||||
Sale of Private Placement Shares | — | — | — | — | — | — | 13,000,000 | — | 13,000,000 | |||||||||||||||||||||||||||
Common stock subject to possible redemption | (54.301,303 | ) | (5,431 | ) | — | — | — | — | (543,007,600 | ) | — | (543,013,030 | ) | |||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (95,802 | ) | (95,802 | ) | |||||||||||||||||||||||||
Balance, March 31, 2021 (unaudited) | 2,028,919 | $ | 203 | 5,000,000 | $ | 500 | 5,000,000 | $ | 500 | $ | 5,094,605 | $ | (95,802 | ) | $ | 5,000,006 | ||||||||||||||||||||
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 1, 2022 (audited) | 56,330,223 | $ | 563,330,122 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (24,948,285 | ) | $ | (24,947,642 | ) | |||||||||||||||||||||
Accretion of Class A common stock to redemption value | — | 45,975 | — | — | — | — | — | (45,975 | ) | (45,975 | ) | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 5,712,755 | 5,712,755 | |||||||||||||||||||||||||||||
Balance as of March 31, 2022 (unaudited) | 56,330,223 | $ | 563,376,097 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (19,281,505 | ) | $ | (19,280,862 | ) | |||||||||||||||||||||
Accretion of Class A common stock to redemption value | — | 800,083 | — | — | — | — | — | (800,083 | ) | (800,083 | ) | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 223,252 | 223,252 | |||||||||||||||||||||||||||||
Balance as of June 30, 2022 (unaudited) | 56,330,223 | $ | 564,176,180 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (19,858,336 | ) | $ | (19,857,693 | ) | |||||||||||||||||||||
Deferred underwriting fees waiver | — | — | — | — | — | — | — | 9,857,789 | 9,857,789 | |||||||||||||||||||||||||||||
Accretion of Class A common stock to redemption value | — | 2,547,203 | — | — | — | — | — | (2,547,203 | ) | (2,547,203 | ) | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 1,644,175 | 1,644,175 | |||||||||||||||||||||||||||||
Balance as of September 30, 2022 (unaudited) | 56,330,223 | $ | 566,723,383 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (10,903,575 | ) | $ | (10,902,932 | ) | |||||||||||||||||||||
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 29, 2021 (inception) | — | $ | — | — | $ | — | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||
Issuance of common stock to Sponsor | — | — | — | — | 5,000,000 | 500 | 12,000 | — | 12,500 | |||||||||||||||||||||||||||||
Sale of Class A common stock, net of $31,705,310 issuance costs | 56,330,222 | 531,596,916 | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Sale of Private Placement Shares | — | — | 1,426,605 | 143 | — | — | 14,265,907 | — | 14,266,050 | |||||||||||||||||||||||||||||
Accretion of Class A common stock to redemption value | — | 31,705,310 | — | — | — | — | (14,277,907 | ) | (17,427,403 | ) | (31,705,310 | ) | ||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (17,233,302 | ) | (17,233,302 | ) | |||||||||||||||||||||||||||
Balance as of March 31, 2021 (unaudited) | 56,330,222 | $ | 563,302,226 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (34,660,705 | ) | $ | (34,660,062 | ) | |||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (4,386,646 | ) | (4,386,646 | ) | |||||||||||||||||||||||||||
Balance as of June 30, 2021 (unaudited) | 56,330,222 | $ | 563,302,226 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (39,047,351 | ) | $ | (39,046,708 | ) | |||||||||||||||||||||
Accretion of Class A common stock to redemption value | — | 17,214 | — | — | — | — | — | (17,214 | ) | (17,214 | ) | |||||||||||||||||||||||||||
Net income | — | — | — | — | — | — | — | 9,506,554 | 9,506,554 | |||||||||||||||||||||||||||||
Balance as of September 30, 2021 (unaudited) | 56,330,222 | $ | 563,319,440 | 1,426,605 | $ | 143 | 5,000,000 | $ | 500 | $ | — | $ | (29,558,011 | ) | $ | (29,557,368 | ) | |||||||||||||||||||||
FOR THE PERIOD FROM JANUARY 29, 2021 (INCEPTION) THROUGH MARCH 31, 2021 | ||||
Cash Flows from Operating Activities | ||||
Net Loss | $ | (95,802 | ) | |
Adjustments to reconcile net loss to net cash used in operating activities | ||||
Amortization of prepaid expenses | 20,802 | |||
Changes in operating assets and liabilities | ||||
Prepaid expenses | (844,792 | ) | ||
Other assets | (844,791 | ) | ||
Accounts payable | 25,000 | |||
Franchise tax payable | 50,000 | |||
Net cash used in operating activities | (1,689,583 | ) | ||
Cash Flows from Investing Activities: | ||||
Investment of cash into Trust Account | (563,302,226 | ) | ||
Net cash used in Investing Activities: | (563,302,226 | ) | ||
Cash Flows from Financing Activities | ||||
Proceeds from sale of Units , net of deferred underwriting discounts paid | 553,302,226 | |||
Proceeds from Private Placement shares | 13,000,000 | |||
Proceeds from Sponsor for class B and K shares | 25,000 | |||
| Proceeds from share transfer | 300 | |||
Payment of offering costs | (31,300 | ) | ||
Net cash provided by financing activities | 566,296,226 | |||
Net increase in cash | 1,304,417 | |||
Cash - beginning of period | 0 | |||
Cash - end of period | $ | 1,304,417 | ||
Supplemental disclosure of noncash investing and financing activities: | ||||
Initial classification of Class A common stock subject to possible redemption | $ | 479,860,050 | ||
Change in initial classification s of Class A common stock subject to possible redemption | $ | 63,152,980 | ||
Deferred offering costs included in accrued offering costs | $ | 43,338 | ||
| Deferred offering costs included in accounts payable | $ | 489,567 | ||
Deferred offering costs paid through promissory note - related party | $ | 154,483 | ||
Deferred underwriting fees payable | $ | 17,500,000 | ||
For The Nine Months Ended September 30, 2022 | For The Period From January 29, 2021 (Inception) Through September 30, 2021 | |||||||
Cash Flows from Operating Activities | ||||||||
Net income (loss) | $ | 7,580,182 | $ | (12,113,394 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Financing expenses on derivative classified instrument | — | 47,887,500 | ||||||
Gain on marketable securities (net), dividends and interest, held in Trust Account | (3,393,261 | ) | (17,214 | ) | ||||
Change in fair value of derivative liabilities | (6,250,000 | ) | (36,600,000 | ) | ||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other non-current assets | 609,745 | (1,245,814 | ) | |||||
Accounts payable and accrued expenses (including franchise tax payable and income tax payable) | 825,128 | 268,398 | ||||||
Net cash used in operating activities | (628,206 | ) | (1,820,524 | ) | ||||
Cash Flows from Investing Activities | ||||||||
Investment in marketable securities held in Trust Account | — | (563,302,226 | ) | |||||
Net cash used in investing activities | — | (563,302,226 | ) | |||||
Cash Flows from Financing Activities | ||||||||
Proceeds from issuance of Class B and Class K common stock to Sponsor | — | 25,000 | ||||||
Advances from related party | 389,101 | 5,300 | ||||||
Proceeds from sale of Public Shares, net of transaction costs | — | 551,312,494 | ||||||
Proceeds from sale of Private Placement Shares | — | 14,266,050 | ||||||
Net cash provided by financing activities | 389,101 | 565,608,844 | ||||||
Net (decrease) increase in cash | (239,105 | ) | 486,094 | |||||
Cash - beginning of period | 239,105 | — | ||||||
Cash - end of period | $ | — | $ | 486,094 | ||||
Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Accretion of Class A common stock to redemption value | $ | 3,393,261 | $ | 17,214 | ||||
Deferred underwriting fees payable | — | $ | 19,715,578 | |||||
Waiver of deferred underwriting fees payable | $ | 9,857,789 | $ | — | ||||
| For The Nine Months Ended September 30, 2022 (Unaudited) | For The Period From January 29, 2021 (Inception) Through September 30, 2021 (Unaudited) | |||||||
Net income (loss) | $ | 7,580,182 | $ | (12,113,394 | ) | |||
Accretion of temporary equity in excess of fair value | (3,393,261 | ) | (2,270,429 | ) | ||||
Net income (loss) including accretion of temporary equity in excess of fair value | $ | 4,186,921 | $ | (14,383,823 | ) | |||
| For The Three Months Ended September 30, 2022 | For The Three Months Ended September 30, 2021 | |||||||
Net income | $ | 1,644,175 | $ | 9,506,554 | ||||
Accretion of temporary equity in excess of fair value | (2,547,203 | ) | (17,214 | ) | ||||
Net income (loss) including accretion of temporary equity in excess of fair value | $ | (903,028 | ) | $ | 9,489,340 | |||
| For The Nine Months Ended September 30, 2022 | ||||||||||||
| 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 | $ | 3,758,160 | $ | 95,178 | $ | 333,583 | ||||||
Deemed dividend for accretion of temporary equity in excess of fair value | 3,393,261 | — | — | |||||||||
Allocation of net income and deemed dividend | $ | 7,151,421 | $ | 95,178 | $ | 333,583 | ||||||
Denominator | ||||||||||||
Weighted average shares outstanding, basic and diluted | 56,330,222 | 1,426,605 | 5,000,000 | |||||||||
Basic and diluted net income per share | $ | 0.13 | $ | 0.07 | $ | 0.07 | ||||||
| For The Period from January 29, 2021 (Inception) Through September 30, 2021 | ||||||||||||
Class A-t (Temporary) | Class A-p (Permanent) | Class B | ||||||||||
Basic and diluted net income (loss) per share | ||||||||||||
Numerator | ||||||||||||
Allocation of net income (loss) including accretion of temporary equity in excess of fair value | $ | (12,876,808 | ) | $ | (326,115 | ) | $ | (1,180,899 | ) | |||
Deemed dividend for accretion of temporary equity in excess of fair value | 2,270,429 | — | — | |||||||||
Allocation of net income (loss) and deemed dividend | $ | (10,606,379 | ) | $ | (326,115 | ) | $ | (1,180,899 | ) | |||
Denominator | ||||||||||||
Weighted average shares outstanding, basic and diluted | 43,325,554 | 1,097,940 | 4,938,776 | |||||||||
Basic and diluted net income (loss) per share | $ | (0.24 | ) | $ | (0.30 | ) | $ | (0.24 | ) | |||
Three Months Ended March 31, 2021 | ||||
Redeemable Class A Common Stock | ||||
Numerator: Earnings allocable to Redeemable Class A common stock | ||||
Interest income earned on Trust Account | $ | 0 | ||
Less: Applicable franchise and income taxes | 0 | |||
Net loss attributable to Redeemable Class A common stock | $ | 0 | ||
Denominator: Weighted Average Stock Outstanding, Redeemable Class A | ||||
Basic and diluted weighted average shares outstanding, Redeemable Class A | 50,116,776 | |||
Basic and diluted net loss per share, Redeemable Class A | $ | 0.00 | ||
Non-Redeemable Class A and Class B Common Stock | ||||
Numerator: Net loss minus net loss allocable to Redeemable Class A common stock | ||||
Net loss | $ | (95,802 | ) | |
Less: Net loss allocable to Redeemable Class A common stock - | 0 | |||
Net loss attributable to Non-Redeemable Class A and Class B common stock shareholders | $ | (95,802 | ) | |
Denominator: Weighted Average Stock Outstanding, Non-Redeemable Class A and Class B | ||||
Basic and diluted weighted average shares outstanding, Non-Redeemable Class A and Class B | 7,014,399 | |||
Basic and diluted net loss per share, Non-Redeemable Class A and Class B | $ | (0.01 | ) | |
| For The Three Months Ended September 30, 2022 | ||||||||||||
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 | $ | (810,554 | ) | $ | (20,528 | ) | $ | (71,947 | ) | |||
Deemed dividend for accretion of temporary equity in excess of fair value | 2,547,203 | — | — | |||||||||
Allocation of net income (loss) and deemed dividend | $ | 1,736,649 | $ | (20,528 | ) | $ | (71,947 | ) | ||||
Denominator | ||||||||||||
Weighted average shares outstanding, basic and diluted | 56,330,222 | 1,426,605 | 5,000,000 | |||||||||
Basic and diluted net income (loss) per share | $ | 0.03 | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| 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 | $ | 8,517,585 | $ | 215,714 | $ | 756,040 | ||||||
Deemed dividend for accretion of temporary equity in excess of fair value | 17,214 | — | — | |||||||||
Allocation of net income and deemed dividend | $ | 8,534,799 | $ | 215,714 | $ | 756,040 | ||||||
Denominator | ||||||||||||
Weighted average shares outstanding, basic and diluted | 56,330,222 | 1,426,605 | 5,000,000 | |||||||||
Basic and diluted net income per share | $ | 0.15 | $ | 0.15 | $ | 0.15 | ||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable securities held in Trust Account | $ | 566,723,383 | $ | — | $ | — | $ | 566,723,383 | ||||||||
Liabilities: | ||||||||||||||||
Class K Founder Shares derivative liabilities | — | — | — | — | ||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: | ||||||||||||||||
Marketable securities held in Trust Account | $ | 563,330,122 | $ | — | $ | — | $ | 563,330,122 | ||||||||
Liabilities: | ||||||||||||||||
Class K Founder Shares derivative liabilities | — | — | $ | 6,250,000 | $ | 6,250,000 | ||||||||||
Input | December 31, 2021 | |||
Input Risk-free interest rate | 1.54 | % | ||
Term to Business Combination | 0.5 years | |||
Expected volatility | 11.00 | % | ||
Stock price | $ | 9.76 | ||
Dividend yield | 0.00 | % | ||
| Class K Founder Shares Derivative Liabilities | ||||
Fair value as of January 1, 2022 | $ | 6,250,000 | ||
Change in fair value | 6,210,000 | |||
Fair value as of March 31, 2022 | $ | 40,000 | ||
Change in fair value | 40,000 | |||
Fair value as of June 30, 2022 | $ | — | ||
Change in fair value | — | |||
Fair value as of September 30, 2022 | $ | — | ||
| Class K Founder Shares Derivative Liabilities | ||||
Fair value at January 29, 2021 (inception) | $ | 47,900,000 | ||
Change in fair value | (30,750,000 | ) | ||
Fair value as of March 31, 2021 | $ | 17,150,000 | ||
Change in fair value | 4,050,000 | |||
Fair value as of June 30, 2021 | $ | 21,200,000 | ||
Change in fair value | (9,900,000 | ) | ||
Fair value as of September 30, 2021 | $ | 11,300,000 | ||
There were no transfers to and from Levels 1, 2, and 3 for the three months ended September 30, 2021 and for the period from January 29, 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 expense of $524,412 and $648,154 for the three months and nine months ended September 30, 2022, respectively. The effective income tax rate for the nine months ended September 30, 2022 was 7.88%. The 7.88% 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 $496,356 and $263,652 as of September 30, 2022 and December 31, 2021.
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.
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. III. References to our “management” or our “management team” refer to our officers and directors, references to the “Sponsor” refer to Khosla Ventures SPAC Sponsor III LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed 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
Overview
We are a blank check company formed under the laws of the State of Delaware on January 29, 2021, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar Business Combination with one or more businesses. We intend to effectuate our initial Business Combination using cash from the proceeds of the Initial Public OfferingIPO and the sale of the Private Placement Shares,private placement shares and forward purchaseforward-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.
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Our Sponsorsponsor is Khosla Ventures SPAC Sponsor III LLC, a Delaware limited liability company. The registration statement for our Initial Public OfferingIPO was declared effective on March 23, 2021. On March 26, 2021, we consummated its Initial Public Offeringour IPO of 50,000,00056,330,222 Public Shares at $10.00 per share, generating gross proceeds of $500.0 million,$563,302,226, and incurring offering costs of approximately $29.5 million,$31,705,310, inclusive of $17.5 million$19,715,578 in deferred underwriting commissions.
Simultaneously with the closing of the Initial Public Offering,IPO, we consummated the Private Placementprivate placement of 1,300,000 Private Placement Shares1,426,605 private placement shares at a price of $10.00 per Private Placement Shareprivate placement share to the Sponsor,sponsor, generating proceeds of $13.0 million.
Upon the closing of the Initial Public Offering, the partial exercise of the over-allotment optionIPO and the Private Placement, $563,302,220 ($10.00 per share)private placement, the $563,302,226 of the net proceeds offrom the Initial Public OfferingIPO and certain of the proceeds of the Private Placement was heldprivate 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, orclassified 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 moneyfair 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 funds meeting certain conditions under
If we are unable to complete a Business Combination within 24by March 26, 2023 (24 months from the closing of the Initial Public Offering, March 23,IPO), or June 26, 2023 or 27(27 months from the closing of this offering, June 23, 2023,the IPO), if we have executed a letter of intent, agreement in principle or definitive agreement for an initial Business Combination within 24 months from the closing of this offering (the “Combination Period”),by March 26, 2023, and our stockholders have not amended the Certificatecertificate of Incorporationincorporation to extend such Combination Period,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,public shares, at a
Results of Operations
We have neither engaged in any operations (other than searching for a Business Combination after our Initial Public Offering)IPO) nor generated any revenues to date. Our only activities from January 29, 2021 (inception) through March 31, 2021September 30, 2022 were organizational activities and those necessary to prepare for the Initial Public Offering, described below.IPO. We do not expect to generate any operating revenues until after the completion of our Business Combination. We expect to generate
For the three months ended September 30, 2022, we had a loss from operations of $378,616, which consisted of $328,616 of general and administrative expenses, and $50,000 in franchise tax expenses. Of the $328,616 of general and administrative expenses, $212,642 was related to the amortization of Directors’ and Officers’ liability insurance, $39,230 was related to legal expense and $76,744 was related to professional services. We also incurred a gain on marketable securities of $2,547,203 and $524,412 of income tax expense, resulting in net income of $1,644,175 for the three months ended September 30, 2022.
For the three months ended September 30, 2021, we had a loss from operations of $402,100, which consisted of $352,100 of general and administrative expenses, and $50,000 in franchise tax expenses. Of the $352,100 of general and administrative expenses, $212,642 was related to the amortization of Directors’ and Officers’ liability insurance, and $8,434 was related to legal expense and $131,024 was related to professional services. We also incurred a change in fair value of derivative liabilities of $9,900,000 and a gain on marketable securities of $8,654, resulting in net income of $9,506,554 for the three months ended September 30, 2021.
For the nine months ended September 30, 2022, we had a loss from operations of $1,414,925, which consisted of $1,280,217 in general and administrative expenses, and $134,708 in franchise tax expenses. Of the $1,280,217 of general and administrative expenses, $630,993 was related to the amortization of Directors’ and Officers’ liability insurance, $238,525 was related to legal expense and $410,699 was related to professional services. We also incurred a $6,250,000 change in fair value of derivative liabilities, a $3,393,261 gain on marketable securities, and $648,154 of income tax expense, resulting in net income of $7,580,182 for the nine months ended September 30, 2022.
For the period from January 29, 2021 (inception) through March 31,September 30, 2021, we had a net loss from operations of $95,802,$843,108, which consisted of $20,802$25,000 in formation costs, $668,108 in general and administrative expenses, and $50,000$150,000 in franchise tax expenses. Of the $668,108 of general and administrative expenses, $422,973 was related to the amortization of Directors’ and Officers’ liability insurance, $8,434 was related to legal expense and $236,701 was related to professional services. We also incurred $47,887,500 in financing expenses on derivative classified instruments, offset by a $36,600,000 change in fair value of derivative liabilities, and a $17,214 gain on marketable securities, resulting in a net loss of $12,113,394 for the period from January 29, 2021 (inception) through September 30, 2021.
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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 havenecessarily be limited to, suspending the pursuit of a Business Combination. The Company cannot provide any
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 March 31, 2021.
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,public share, or $19,715,577.70$19,715,578 in the aggregate. The deferred fee will be waived by the underwriters in the event that the Company does not complete a Business Combination, subject to the terms of the underwriting agreement.
On September 21, 2022, the Company received an executed deferred underwriting fees waiver letter from Goldman Sachs & Co. LLC, informing the Company of its decision to waive any entitlement it may have to its deferred underwriting fees payable held in the Trust Account in respect of any Business Combination. The waiver does not cover deferred underwriting fees payable to Citigroup Global Markets Inc. (representing 50% of the total deferred underwriting fees payable). The waiver is recorded in the Company’s condensed statements of change in common stock subject to possible redemption and stockholder’s deficit against accumulated deficit.
On March 23, 2021, we entered into a forward purchaseforward-purchase agreement pursuant to which the sponsor (together with any permitted transferees under the forward purchaseforward-purchase agreement, the “Khosla Entities”) have agreed to purchase an aggregate of up to 1,000,000 forward purchaseforward-purchase shares for $10.00 per share, or an aggregate maximum amount of $10,000,000, in a private placement that will close simultaneously with the closing of the initial Business Combination. The Khosla Entities will purchase a number of forward-purchase shares that will result in gross proceeds to us necessary to enable us to consummate our initial Business Combination and pay related fees and expenses, after first applying amounts available to us from the trust accountTrust Account (after paying the deferred underwriting discountfees payable and giving effect to any redemptions of Public Shares) and any other financing source obtained by us for such purpose at or prior to the consummation of our initial Business Combination, plus any additional amounts mutually agreed by us and the Khosla Entities to be retained by the post-Business Combination company for working capital or other purposes. The Khosla Entities’ obligation to purchase forward-purchase shares will, among other things, be conditioned on the Business Combination (including the target assets or business, and the terms of the Business Combination) being reasonably acceptable to the Khosla Entities and on a requirement that such initial Business Combination is approved by a unanimous vote of our board of directors. In determining whether a target is reasonably acceptable to the Khosla Entities, we expect that the Khosla Entities would consider many of the same criteria as we will consider but will also consider whether the investment is an appropriate investment for the Khosla Entities.
Critical Accounting Policies
The preparation of unaudited condensed 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 unaudited condensed financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have not identified any critical accounting policies.estimates other than the following.
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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 unaudited condensed financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of these investments, we believe there will be no associated material exposurethe Exchange Act and are not required to interest rate risk.
provide the information otherwise required under this item. Item 4. |
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 March 31, 2021,September 30, 2022, as such term is defined in Rules
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 Controlinternal control over Financial Reporting
During the quarter ended September 30, 2022, there has been no change in our internal control over financial reporting that occurred during the fiscal quarter of 2021 covered by this Quarterly Report on Form
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PART II - OTHERII-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 final prospectus filed withAnnual Report on Form 10-K for the SEC on March 25,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 final prospectus filedAnnual 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 the SEC.
On March 30, 2021,2022, 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 underwriters’ election to partially exercise their over-allotment option, we sold an additional 6,330,222 Public Shares to cover over-allotments. The Public Shares were sold at an offering price of $10.00 per share, generating total gross proceeds of $563,302,220. Goldman Sachs & Co. LLC and Citigroup Global Markets Inc. acted as joint book-running managers forBusiness Combination, extension or otherwise, (ii) the offering. The securities in the offering were registered under the Securities Act on a registration statement on Form
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 2 of this Quarterly Report.
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
| * | 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. III | ||||||
Date: | By: | /s/ Peter Buckland | ||||
| Name: | Peter Buckland | |||||
Title: | Chief Financial Officer | |||||
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