References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Khosla Ventures Acquisition Co. II. References to our
"management" or our "management team" refer to our officers and directors,
references to the "Sponsor" refer to Khosla Ventures SPAC Sponsor II 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 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 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 II LLC, a Delaware limited liability
company. The registration statement for our Initial Public Offering was declared
effective on March 23, 2021. On March 26, 2021, we consummated its Initial
Public Offering of 40,000,000 Public Shares, at $10.00 per share, generating
gross proceeds of $400,000,000. On March 30, 2021, the underwriters partially
exercised their over-allotment option, resulting in an additional 1,634,412
Public Shares issued for additional proceeds of $16,344,120. Total shares sold
in connection with the Initial Public Offering are 41,634,412 Public Shares. We
incurred offering costs of $23,576,984, inclusive of $14,572,044 in deferred
underwriting fees payable.
Simultaneously with the closing of the Initial Public Offering, we consummated
the Private Placement of 1,100,000 Private Placement Shares at a price of $10.00
per Private Placement Share to the Sponsor, generating proceeds of $11,000,000.
In connection with the underwriters' partial exercise of their over-allotment
option, we also consummated the sale of an additional 32,688 Private Placement
Shares at $10.00 per Private Placement Share, generating total proceeds of
$326,880.
Following the closing of the Initial Public Offering, the partial exercise of
the over-allotment option and the Private Placement, $416,344,120 ($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.
If we are unable to complete a Business Combination within 24 months from the
closing of the Initial Public Offering (March 23, 2023) or 27 months (June 23,
2023), if we have executed a letter of intent, agreement in principle or
definitive agreement for an initial Business Combination by March 23, 2023 (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
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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 July 6, 2021, we entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Nextdoor, Inc., a Delaware corporation ("Nextdoor"), and
Lorelei Merger Sub Inc., a Delaware corporation and a direct wholly owned
subsidiary of KVSB ("Merger Sub"). We have incurred minimal transaction expenses
for the period from January 29, 2021 (inception) through June 30, 2021 in
connection with the negotiation and consummation of the transactions
contemplated by the Merger Agreement.
Liquidity and Capital Resources
As of June 30, 2021, the Company had $978,280 in its cash account, $416,350,445
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 of $1,461,803. As of June 30, 2021, $6,327 of the amount on deposit in
the Trust Account represented interest income, which is available for working
capital needs.
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.
Prior to the consummation of the Initial Public Offering, the Company's
liquidity needs have been satisfied through receipt of a $25,000 capital
contribution from the Sponsor in exchange for the issuance of the Founder Shares
to the Sponsor, and a $300,000 promissory note payable to the Sponsor.
Subsequent to the consummation of the Initial Public Offering, the Company
received the net proceeds not held in the Trust Account of approximately
$3,000,000. The Company fully repaid the note to the Sponsor in April 2021. 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
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.
The Working Capital Loans would either be repaid upon consummation of a Business
Combination, without interest, or, at the lender's discretion, up to $1,500,000
of such Working Capital Loans may be convertible into shares of the
post-transaction company at $10.00 per share at the option of the lender. As of
June 30, 2021, the Company has no borrowings under the Working Capital Loans.
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 29, 2021 (inception) through June 30,
2021 were organizational activities and those necessary to prepare for the
Initial Public Offering, described below. 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.
For the period from January 29, 2021 (inception) through June 30, 2021, we had a
loss from operations of $408,967, which consisted of $25,000 in formation costs,
$283,967 in general administrative expenses, and $100,000 in franchise tax
expenses. We also incurred $36,537,500 in financing expenses on derivative
classified instruments, and an unrealized gain on the fair value of derivative
liabilities of $20,000,000, offset by interest income and unrealized gain on
marketable securities held in the Trust Account of $6,327, resulting in an
overall net loss of $16,940,140 for the period from January 29, 2021 (inception)
through June 30, 2021.
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For the three months ended June 30, 2021, we had a net loss from operations of
$317,856, $267,856 in general administrative expenses, and $50,000 in franchise
tax expenses. We also had an unrealized loss on the change in fair value of
derivative liabilities of $2,950,000 and interest income and unrealized gain on
marketable securities held in the Trust Account of $6,327, resulting in an
overall net loss of $3,261,529 for the three months ended June 30, 2021.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of June 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
$14,572,044 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 23, 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 1,000,000 forward purchase shares for $10.00 per share, or an aggregate
maximum amount of $10,000,000, in a private placement that will close
simultaneously with the closing of the initial Business Combination. The Khosla
Entities will purchase a number of forward-purchase shares that will result in
gross proceeds to us necessary to enable us to consummate our initial Business
Combination and pay related fees and expenses, after first applying amounts
available to us from the Trust Account (after paying the deferred underwriting
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 Common Stock
Class K common stock was accounted for as a liability in accordance with ASC
Topic 815 and presented as derivative liability on the accompanying June 30,
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 common stock
liability, 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 common stock. 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 June 30, 2021 was as follow: risk free rate of 1.48%; term
in years 0.5 years; expected volatility 15% and the stock price was $9.94.
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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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