EUDA Health Holdings Ltd current report, 10 June 2022

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Business Context and Reporting Period

Filing: Form 8-K filed June 10, 2022 by 8i Acquisition 2 Corp. (LAX), relating to its proposed business combination with EUDA Health Limited. EUDA Health Holdings Ltd. is the referenced target business; the filing registrant is 8i Acquisition 2 Corp.

The filing reports execution of the second amendment to the April 11, 2022 Share Purchase Agreement, under which LAX would acquire all outstanding shares of EUDA Health from Watermark Developments Limited. The amendment was executed June 10, 2022. A prior amendment had extended the due-diligence period through June 15, 2022.

Key Financial and Transaction Metrics

  • Initial consideration: $140.0 million, payable in LAX ordinary shares valued at $10.00 per share.
  • Indemnification escrow: 1.4 million purchaser shares will be withheld at closing and placed in escrow to secure the seller’s indemnification obligations.
  • Potential earnout: Up to 4.0 million additional purchaser shares.
  • 2023 earnout condition: 1.0 million shares if EUDA Health achieves at least $20.1 million of revenue and $3.6 million of net income attributable to EUDA Health for fiscal 2023.
  • 2024 earnout condition: 1.0 million shares if EUDA Health achieves at least $40.1 million of revenue and $10.1 million of net income attributable to EUDA Health for fiscal 2024.
  • Share-price earnouts: 1.0 million shares for each of two price thresholds: $15.00 during the period from closing through the first anniversary, and $20.00 during the first-to-second anniversary period, subject to the specified 20-trading-day measurement conditions.
  • The filing does not provide historical revenue, profit, cash flow, margins, debt, cash balances, or liquidity figures for EUDA Health.

Material Changes Versus the Prior Comparable Period

  • The transaction consideration was adjusted to $140.0 million in purchaser shares.
  • The second amendment added or expanded seller indemnification obligations and revised the indemnification basket for certain claims from $2.5 million to $636,636.
  • The amendment established the detailed four-part earnout structure, consisting of two share-price hurdles and two operating-performance hurdles.

Outlook, Risks, Contingencies, and Unusual Items

  • Seller indemnification was expanded to cover, among other matters, a potential failure by PT Bumi Lestori Melimpah to pay Singapore Dollars $5.15 million to an EUDA subsidiary under termination-related agreements.
  • Indemnification also covers specified insurance obligations relating to Kent Ridge Healthcare Singapore, compliance with Singapore employment law, and potential breaches of a May 23, 2022 settlement agreement involving Kent Ridge Healthcare Singapore and Melana International.
  • Closing remains subject to transaction conditions, including LAX shareholder approval, required regulatory approvals, completion of due diligence, minimum cash requirements after shareholder redemptions, and completion by the applicable deadline or an approved extension.
  • Risks identified include failure or delay of the business combination, inability to maintain Nasdaq listing, transaction costs, legal proceedings, EUDA Health’s limited operating history and history of net losses, execution and growth risks, market acceptance, acquisition integration, intellectual-property disputes, and general economic conditions.
  • The stated 2023 and 2024 revenue and net-income thresholds are contractual earnout targets, not reported historical results or management guidance. The filing does not clearly provide separate formal operating guidance.
  • The press release and investor presentation were furnished under Regulation FD and were not deemed filed for purposes of Section 18 liability, except where specifically incorporated by reference.

Important Facts for Investors to Verify

  1. Whether the proposed Share Purchase received LAX shareholder approval and satisfied all closing conditions.
  2. The final number of shares issued at closing, including escrowed shares and any dilution from earnout shares.
  3. EUDA Health’s audited historical financial statements, including revenue, net income, cash flow, debt, and liquidity.
  4. Whether the $5.15 million receivable and the specified insurance, employment-law, and settlement obligations were resolved or remain subject to indemnification claims.
  5. Whether EUDA Health ultimately achieved the contractual 2023 and 2024 earnout thresholds.
  6. The applicable transaction deadline, any extension, required regulatory approvals, and the effect of potential shareholder redemptions on minimum cash.