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.
On February 10, 2023, we entered into a non-binding letter of intent for a
potential initial business combination with another company, as a result of
which the date by which we must complete a business combination was extended to
June 8, 2023. We expect to announce additional details regarding the potential
initial business combination if and when a definitive agreement is executed. No
assurances can be made that we will successfully negotiate and enter into a
definitive agreement with respect to the potential initial business combination,
or that it will be consummated on the terms or timeframe currently contemplated,
or at all. Any transaction is subject to board and equity holder approval of
both companies, regulatory approvals and other customary conditions. If we are
unable to complete the potential initial business combination by June 8, 2023
(27 months from the closing of the IPO), and our stockholders have not amended
the certificate of incorporation to extend such period, we will (i) cease all
operations except for the purpose of winding up; (ii) as promptly as reasonably
possible but no more than ten business days thereafter subject to lawfully
available funds therefor, redeem the public shares, at a per-share price,
payable in cash, equal to the aggregate amount then on deposit in the Trust
Account, including interest earned on the funds held in the Trust Account and
not previously released to us to pay our taxes as well as expenses relating to
the administration of the Trust Account (less up to $100,000 of interest to pay
dissolution expenses) divided by the number of the then outstanding public
shares, which redemption will completely extinguish public stockholders' rights
as stockholders (including the right to receive further liquidation
distributions, if any), subject to applicable law; and (iii) as promptly as
reasonably possible following such redemption, subject to the approval of the
remaining stockholders and the board of directors, liquidate and dissolve,
subject in each case to our obligations under Delaware law to provide for claims
of creditors and the requirements of other applicable law.
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 continued to search for a potential
initial business combination target thereafter. 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 from January 15, 2021 (inception) through December 31, 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 year ended December 31, 2022, we had a loss from operations of
$2,250,380, which consisted of $2,050,380 in general and administrative
expenses, and $200,000 in franchise tax expenses, offset by a change in fair
value of the Class K founder share derivative liabilities of $150,000, gains on
marketable securities (net), dividends and interest, held in the trust account
of $5,056,968, income tax expenses of $1,082,963, resulting in a net income of
$1,873,625.
For the period from January 15, 2021 (inception) through December 31, 2021, we
had a loss from operations of $5,565,939, which consisted of $30,000 in
formation costs, $3,986,443 in incomplete Valo Health business combination
expenses, $1,349,496 in general and administrative expenses, and $200,000 in
franchise tax expenses. We also incurred $12,137,500 in financing expenses on
derivative classified instruments, offset by a change in fair value of the
Class K founder share derivative liabilities of $12,000,000 and gains on
marketable securities (net), dividends and interest, held in the trust account
of $17,029, resulting in a net loss of $5,686,410.
Liquidity and Capital Resources
As of December 31, 2022, the Company had $0 in its operating bank account,
$350,073,997 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 $6,559,542. As of December 31, 2022,
$5,056,968 of the amount on deposit in the trust account represented interest
income, which is available for payment of income and franchise taxes and other
expenses in connection with the liquidation of the trust account.
If the Company is unable to raise additional capital, it may be required to take
additional measures to conserve liquidity, which could include, but not
necessarily be limited to, suspending the pursuit of a business combination. The
Company cannot provide any assurance that new financing will be available to it
on commercially acceptable terms, if at all.
As a result of the above, in connection with the Company's assessment of going
concern considerations in accordance with Accounting Standards Update ("ASU")
2014-15, "Disclosures of Uncertainties about an Entity's Ability to Continue as
a Going Concern," management has determined that the liquidity conditions raise
substantial doubt about the Company's ability to continue as a going concern
through approximately one year from the date of filing. These financial
statements do not include any adjustments relating to the recovery of the
recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities.
The underwriters are entitled to a deferred underwriting fee of $0.35 per public
share, or $12,075,000 in the aggregate. The deferred underwriting fees 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 initial 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 statements of changes in
common stock subject to possible redemption and stockholder's deficit against
accumulated deficit.
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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 Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting estimates other than
the following.
Class K Founder Shares Derivative Liabilities
Class K founder shares are accounted for as a liability in accordance with ASC
Topic 815, "Derivatives and Hedging", and presented as derivative liabilities on
the December 31, 2022 balance sheet. The derivative liabilities were measured at
fair value at inception and on a recurring basis, which changes in fair value
presented within change in fair value of derivative liabilities in the
statements of operations. In order to capture the market conditions associated
with the Class K founder shares derivative liabilities, the Company applied an
approach that incorporated a Monte Carlo simulation, which involved random
iterations of future stock-price paths over the contractual life of the Class K
founder shares. Based on assumptions regarding potential changes in control of
the Company, and the probability distribution of outcomes, the payoff to the
holder was determined based on the achievement of the various market thresholds
within each simulated path. The present value of the payoff in each simulated
trial is calculated, and the fair value of the liability is determined by taking
the average of all present values.
The key inputs used as of December 31, 2022 were as follow: risk free rate:
3.90%; term to business combination: 0.6 years; expected volatility: de minimis
and stock price: $9.98.
The key inputs used as of December 31, 2021 were as follow: risk free rate:
1.54%; term to business combination: 0.5 years; expected volatility: 10.5% and
stock price: $9.70.
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.
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