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 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 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'swebsite 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. Restatement This Management's Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our unaudited financial statements as of and for the period ended March 31, 2021(the "Restatement"). In the Quarterly Report on Form 10-Q for the period ended March 31, 2021, originally filed with the SECon June 1, 2021(the "Original Report"), certain errors were made concerning certain financial figures related to the partial exercise of the underwriters' over-allotment option and the issuance of private placement shares. This restatement corrects errors related to the calculation of amounts for shares subject to possible redemption to reflect the partial exercise of the underwriters' over-allotment option in connection with the issuance of private placement shares. The Restatement is more fully described in Note 2 to the Notes to Financial Statements entitled "Restatement and Revision of Previously Issued Financial Statements." Overview We are a blank check company formed under the laws of the State of Delawareon January 29, 2021for 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 Delawarelimited 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 $10.00per share, generating gross proceeds of $400.0 million, and incurring offering costs of approximately $23.6 million, inclusive of approximately $14.6 millionin deferred underwriting commissions. 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 $10.00per Private Placement Share to the Sponsor, generating proceeds of $11.0 million. Additional 32,688 Private Placement Shares were sold in connection with the underwriters' partial exercise of their over-allotment option for a total proceed of $326,880. On March 23, 2021, the underwriters partially exercised their over-allotment option, resulting in an additional 1,634,412 Public Shares issued for total gross proceeds of $16,344,118. 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 $10.00per Private Placement Share, generating total proceeds of $326,880. A total of $16,344,118was deposited into the Trust Account, bringing the aggregate proceeds held in the Trust Account to $416,344,118. 17 -------------------------------------------------------------------------------- Table of Contents Following the closing of the Initial Public Offering, the partial exercise of the over-allotment option and the Private Placement, $416,344,118( $10.00per 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 Stateswith Continental Stock Transfer & Trust Companyacting 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 from the closing of this offering, June 23, 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 $100,000of 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 Delawarelaw to provide for claims of creditors and the requirements of other applicable law. Liquidity and Capital Resources As of March 31, 2021, we had $1,685,423in cash, and working capital deficit of $1,606,543. Our liquidity needs prior to March 31, 2021were satisfied through the proceeds of $25,000from the sale of the Founders Shares, and loan from our Sponsor of approximately $124,986under the Note. Subsequent to March 31, 2021, our liquidity has been satisfied through the net proceeds from the consummation of the Initial Public Offering and the Private Placement held outside of the Trust Account. On April 7, 2021, we paid off a portion of the balance of the promissory note to the Sponsor in the amount of $124,686, resulting in a balance of $300remaining on the note. Based on the foregoing, management believes that we will have sufficient working capital and borrowing capacity to meet our needs through the earlier of the consummation of a Business Combination or one year from this filing. Over this time period, we will be using the funds held outside of the Trust Account for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination. 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 March 31, 2021were 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 March 31, 2021, we had a net loss of $91,111, which consisted of $16,111in general and administrative expenses, $25,000in formation costs, and $50,000in franchise tax expenses. 18 --------------------------------------------------------------------------------
Table of Contents Off-Balance Sheet Arrangements We did not have any off-balance sheet arrangements as 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 $0.35per Public Share, or $14,572,044in 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 $10.00per 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 KhoslaEntities 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 KhoslaEntities. 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 Americarequires 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. 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 As of March 31, 2021, we were not subject to any market or interest rate risk. Following the consummation of our Initial Public Offering, the net proceeds of our Initial Public Offering, including amounts in the Trust Account, have been invested in U.S.government treasury bills, notes or bonds with a maturity of 180 days or less or in certain money market funds that invest solely in U.S.treasuries. Due to the short-term nature of these investments, we believe there will be no associated material exposure to interest rate risk. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures 19 -------------------------------------------------------------------------------- Table of Contents 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'srules 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, 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 for the value of private placement shares, underwriting discounts and over-allotment public shares issued subsequent to the closing of our Initial Public Offering. To address this material weakness, 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'srules and forms. Changes in Internal Control over Financial Reporting During the quarter ended March 31, 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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