EUDA Health Holdings Limited (formerly 8i Acquisition 2 Corp.) — Form 10-Q
Reporting period: Three months ended October 31, 2022. The filing reports the pre-combination SPAC, not EUDA Health’s operating results. EUDA Health became a wholly owned subsidiary and the registrant changed its name on November 17, 2022.
Financial results and liquidity
| Metric | Three months ended Oct. 31, 2022 | Prior-year comparable period |
|---|---|---|
| Operating revenue | None | None |
| Formation and operating costs | $298,331 | $45,587 |
| Trust-account investment income | $499,343 | None |
| Net income (loss) | $201,012 | $(45,587) |
| Net cash used in operating activities | $(123,800) | $0 |
- At October 31, cash was $265,852, versus $193,546 at July 31. Trust-account investments were $86.97 million, versus $86.47 million.
- Current liabilities were $5.02 million, including a $1.0 million non-interest-bearing related-party note and $3.02 million of deferred underwriting commissions. The filing reports a $1.71 million working-capital deficit, excluding trust investments and deferred underwriting commissions.
- Shareholders’ deficit was $4.02 million. No operating margin is available because the company had no operating revenue; no conventional profit margin is meaningful for this pre-combination SPAC.
- Net income reflected trust-account dividends, not business operations. The $499,343 income was offset by a $499,343 accretion to the redemption value of shares in the shareholders’ deficit statement.
Changes and transaction developments
- Compared with the prior-year quarter, operating costs increased by $252,744, while reported net income improved by $246,599, primarily because of trust-account investment income.
- After quarter-end, 6,033,455 public shares were tendered for redemption at $10.0837 per share, for total redemption value of approximately $60.8 million.
- The November 17 business combination acquired all EUDA Health shares. The stated initial consideration was $140 million in 14 million shares, with 1.4 million shares held in escrow for indemnification. Up to 4 million additional shares may be issued under market-price and financial-performance earnout conditions.
- The trust funds were released upon closing. The filing does not provide a clear post-redemption, post-closing cash or debt balance for the combined company.
Outlook, risks and unusual items
- Before closing, management said the company had not begun operations and would not generate operating revenue until after a business combination. It expected higher public-company compliance and due-diligence costs.
- Management identified substantial doubt about the pre-combination SPAC’s ability to continue as a going concern if it failed to complete a business combination by the deadline. The combination closed before that deadline; the filing does not establish the combined company’s subsequent liquidity outlook.
- SPA closing conditions were waived, including lender-consent requirements and the condition that EUDA have at least $10 million in cash immediately before closing. These waivers merit review alongside the combined company’s actual liquidity and financing needs.
- Post-closing disclosures describe vendor and related-party notes, including a $2.11 million vendor convertible note, a $700,000 note to former CEO and Chairman James Tan, and other notes. Several mature in November 2023 and may convert to shares if unpaid; one $170,000 note matures February 15, 2023 and bears 15% interest if overdue.
- The filing states COVID-19 could adversely affect the company, but the impact was not quantifiable. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting. No legal proceedings were reported.
Key facts for investors to verify
- Combined-company cash, debt, working capital and post-redemption share count after the November 17 closing.
- EUDA Health’s standalone operating performance and whether it can meet the earnout revenue and net-income thresholds.
- Amounts, terms, repayment status and potential dilution from post-closing vendor and related-party notes.
- Effects of waived lender consents and the waived $10 million pre-closing cash condition, including any resulting defaults or funding constraints.
- The impact of redemptions, escrowed shares, earnout shares, warrants and registration rights on ownership and dilution.