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 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 Business
Combination using cash from the proceeds of the Initial Public Offering 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 Initial Public Offering was declared
effective on March 3, 2021. On March 8, 2021, we consummated its Initial Public
Offering of 34,500,000 Public Shares, including 4,500,000 Over-Allotment 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
commissions.
Simultaneously with the closing of the Initial Public Offering, 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 Initial Public Offering and the Private Placement,
$345,000,000 ($10.00 per share) of the net proceeds of the Initial Public
Offering and certain of the proceeds of the Private Placement was held 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 which 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 within 24 months from the
closing of the Initial Public Offering, March 8, 2023, or 27 months from the
closing of this offering, June 8, 2023, 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"), and our stockholders have not amended the Certificate of Incorporation
to extend such Combination 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, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Valo Health, Inc., a Delaware corporation ("Valo"),
Valo Health, LLC, a Delaware limited liability company ("Valo Holdco" and,
together with Valo, the "Valo Parties") and Killington Merger Sub Inc., a
Delaware corporation and a direct wholly-owned subsidiary of the Company
("Merger Sub"). On June 9, 2021, concurrently with the execution of the Merger
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 have collectively subscribed for 16,855,000 shares
of Class A common stock, par value $0.0001 per share ("KVSA 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 have 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"). The PIPE I Investment and PIPE
II Investment are each expected to be consummated substantially concurrently
with the Closing.
Liquidity and Capital Resources
As of September 30, 2021, the Company had $633,837 in its operating bank
accounts, $345,010,545 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 $1,283,349. As of September 30, 2021,
$10,545 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.
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 condition and date for
mandatory liquidation and dissolution 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.
Results of Operations
We have neither engaged in any operations (other than searching for a Business
Combination after our Initial Public Offering) nor generated any revenues to
date. Our only activities from January 15, 2021 (inception) through September
30, 2021 were organizational activities and those necessary to prepare for the
Initial Public Offering and the Transaction, described in Note 1 to the
financial statements. 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
Initial Public Offering. We incur expenses as a result of being a public company
(for legal, financial reporting, accounting and auditing compliance), as well as
for due diligence expenses.

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For the period from January 29, 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 administrative expenses, and $150,000 in
franchise tax expenses. We also incurred $12,137,500 in financing expenses on
derivative classified instrument, offset the change in fair value of derivative
liabilities of $11,600,000 and gains on marketable securities (net), dividends
and interest, held in Trust Account of $10,545, resulting in a net loss of
$3,794,901 for the period from January 29, 2021 (inception) through September
30, 2021.
For the three months ended September 30, 2021, we had a loss from operations of
$898,503, which consisted of $848,503 in general and administrative expenses,
and $50,000 in franchise tax expenses. The loss from operations was offset by
income from a change in fair value of derivative liabilities of $1,750,000 and
gains on marketable securities (net), dividends and interest, held in Trust
Account of $5,301, resulting in net income of $856,798 for the three months
ended September 30, 2021.
Off-Balance
Sheet Arrangements
We did not have any
off-balance
sheet arrangements as of September 30, 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, 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 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 deferred underwriting discount and giving
effect to any redemptions of Public Shares) and any other financing source
obtained by us for such purpose at or prior to the consummation of our initial
Business Combination, plus any additional amounts mutually agreed by us and the
Khosla Entities to be retained by the post-Business Combination company for
working capital or other purposes. The Khosla Entities' obligation to purchase
forward-purchase shares will, among other things, be conditioned on the Business
Combination (including the target assets or business, and the terms of the
Business Combination) being reasonably acceptable to the Khosla Entities and on
a requirement that such initial Business Combination is approved by a unanimous
vote of our board of directors. In determining whether a target is reasonably
acceptable to the Khosla Entities, we expect that the Khosla Entities would
consider many of the same criteria as we will consider but will also consider
whether the investment is an appropriate investment for the Khosla Entities.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have not identified any critical accounting policies other than
the following.
Class K Founder Shares Derivative Liabilities
Class K Founder Shares is accounted for as a liability in accordance with ASC
Topic 815 and presented as derivative liability on the accompanying March 31,
2021, balance sheet. The derivative liability was measured at fair value at
inception and on a recurring basis, which 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 inputs used as of September 30, 2021 was as follow: risk free rate: 1.52%;
term to business combination: 0.1 years; expected volatility: 12.5% and stock
price: $9.87.

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Recent Accounting Pronouncements
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
As of September 30, 2021 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 statement of operations.
The fair value for trading securities is determined using quoted market prices
in active markets.
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, 2021, 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 the
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 Initial
Public Offering 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 Initial Public Offering. 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.

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Table of Contents Changes in Internal Control over Financial Reporting During the quarter ended September 30, 2021, 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 weakness 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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