KHOSLA VENTURES ACQUISITION CO. References in this report (the "Quarterly Report") to "we," "us" or the "Company" refer toKhosla Ventures Acquisition Co. References to our "management" or our "management team" refer to our officers and directors, references to the "Sponsor" refer toKhosla 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 theU.S. Securities and Exchange Commission (the "SEC"). The Company's securities filings can be accessed on the EDGAR section of theSEC'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 theState of Delaware onJanuary 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 isKhosla Ventures SPAC Sponsor LLC , aDelaware limited liability company. The registration statement for our Initial Public Offering was declared effective onMarch 3, 2021 . OnMarch 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 inthe United States withContinental Stock Transfer & Trust Company acting as trustee, and invested only inUnited 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 directU.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. 16 -------------------------------------------------------------------------------- Table of Contents 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 underDelaware law to provide for claims of creditors and the requirements of other applicable law. OnJune 9, 2021 , the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") withValo Health, Inc. , aDelaware corporation ("Valo"),Valo Health, LLC , aDelaware limited liability company ("Valo Holdco" and, together with Valo, the "Valo Parties") andKillington Merger Sub Inc. , aDelaware corporation and a direct wholly-owned subsidiary of the Company ("Merger Sub"). OnJune 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, thePIPE 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 "). OnJuly 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, thePIPE 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 andPIPE II Investment are each expected to be consummated substantially concurrently with the Closing. Liquidity and Capital Resources As ofJune 30, 2021 , the Company had$787,378 in its operating bank accounts,$345,005,244 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$552,204 . As ofJune 30, 2021 ,$5,244 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 IPO, 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 in promissory note payable to the Sponsor. Subsequent to the consummation of the IPO, 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 inMarch 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 ofJune 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 fromJanuary 15, 2021 (inception) throughJune 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. 17 -------------------------------------------------------------------------------- Table of Contents For the period fromJanuary 15, 2021 (inception) throughJune 30, 2021 , we had a net loss of$4,651,699 , which consisted of$2,239,443 in general and administrative expenses,$30,000 in formation costs and$100,000 of franchise tax expense, offset by$5,244 in interest income on funds held in the Trust Account,$12,137,500 in financing expenses on Class K Founder Shares liability, and$9,850,000 in change in fair value of Class K Founder Shares liability. For the three months endedJune 30, 2021 , we had a net loss of$1,317,641 which consisted of$2,122,885 in general and administrative expenses and$50,000 of franchise tax expense, offset by$5,244 in interest income on funds held in the Trust Account and$850,000 in change in fair value of Class K Founder Shares liability. Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as ofJune 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. OnMarch 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 inthe 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 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 accompanyingMarch 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 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 ofJune 30, 2021 was as follow: risk free rate: 1.47%; term to business combination: 0.4 years; expected volatility: 15.5% and stock price:$9.89 . 18 -------------------------------------------------------------------------------- Table of Contents 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.
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