Filing Overview
Issuer: 8i Acquisition 2 Corp. (proposed business combination partner for EUDA Health Limited, expected to become EUDA Health Holdings Ltd.). Form 8-K: filed November 7, 2022, reporting events beginning November 1, 2022. The filing supplements the definitive proxy statement for the proposed Share Purchase and related business combination.
Business Context and Reporting Period
8i agreed to acquire all outstanding shares of EUDA Health from Watermark Developments Limited under an April 11, 2022 Share Purchase Agreement, as amended. The filing reports a forward share purchase arrangement with Greentree Financial Group and a November 7, 2022 waiver of certain closing conditions. Financial information is unaudited pro forma data for the six months ended June 30, 2022 and the year ended December 31, 2021.
Key Financial Metrics
| Metric | Six months ended June 30, 2022 | Year ended December 31, 2021 |
|---|---|---|
| Revenue | $5.1 million | $10.5 million |
| Gross profit | $1.9 million; approximately 37.9% gross margin | $4.2 million; approximately 40.2% gross margin |
| Operating expenses | $2.8 million | $5.8 million |
| Loss from operations | $(0.9) million; approximately (17.4%) operating margin | $(1.5) million; approximately (14.3%) operating margin |
| Net income (loss) attributable to ordinary shareholders | $(0.9) million; $(0.03) per share assuming no redemptions | $0.6 million; $0.02 per share assuming no redemptions |
| Pro forma loss or earnings per share assuming maximum redemptions | $(0.05) | $0.03 |
As of June 30, 2022, pro forma combined assets were $87.5 million assuming no redemptions and $12.4 million assuming maximum redemptions. Total liabilities were approximately $5.1 million in both scenarios. Pro forma shareholders’ equity was $82.3 million with no redemptions and $7.2 million with maximum redemptions.
The filing does not provide a pro forma cash-flow statement or a clear consolidated cash-flow measure. EUDA’s historical June 30, 2022 liabilities included approximately $233,000 of bank and private-lender short-term loans, $144,000 of third-party short-term loans, and other payables and related-party amounts. Pro forma adjustments include settlement of approximately $3.0 million of deferred underwriting commissions and an approximately $0.8 million related-party promissory note.
Material Changes and Transaction Terms
- Under the Forward Purchase Agreement, Greentree may sell up to 125,000 ordinary shares to 8i 60 days after the Share Purchase closing at $10.41 per share, implying a maximum potential purchase obligation of approximately $1.3 million.
- 8i must fund the arrangement into escrow within one business day after the Share Purchase closing. The escrow funds may remain unavailable to the combined company until shares are sold or Greentree’s purchase right expires.
- Greentree agreed not to seek redemption of covered shares. This could reduce redemptions and is intended to help satisfy Nasdaq initial listing requirements, but it may also affect the perceived strength of the transaction.
- Greentree may sell shares in the open market before the one-month anniversary of closing if the sale price exceeds $10.36 per share. Escrow releases would then be allocated between Greentree and 8i under the agreement.
- The seller and GSV Capital Partners agreed to reduce advisory compensation from up to 50,000 shares to 12,500 shares, subject to the stated conditions.
- The November 7 waiver removed or waived conditions relating to lender consents, EUDA having at least $10.0 million of cash immediately before closing, lock-up agreements for certain seller designees, and a name change for Kent Ridge Health Private Limited.
Guidance, Outlook, Risks and Unusual Items
No formal operating or financial guidance is provided. Management stated that it remained confident EUDA could raise additional financing after closing, but the filing provides no committed financing terms or quantified forecast.
- The transaction remained subject to shareholder approval and other closing conditions, with an Outside Date of November 24, 2022 unless extended under the Share Purchase Agreement.
- Maximum-redemption analysis assumes 7,487,500 shares are redeemed at approximately $10.03 per share, leaving a minimum $20.0 million market value of unrestricted publicly held shares.
- The pro forma information excludes 4.0 million EUDA earnout shares because the earnout contingency had not been met, and excludes anticipated synergies, operating efficiencies, tax savings and cost savings.
- The pro forma results are illustrative, based on significant estimates, and may differ materially from actual post-combination results. The transaction is expected to be accounted for as a reverse recapitalization, with 8i treated as the accounting acquiree.
- Key risks include failure or delay of the business combination, inability to maintain Nasdaq listing, redemption-related liquidity pressure, limited operating history and historical losses, financing needs, execution and growth risks, market acceptance, acquisition integration, litigation and intellectual-property matters.
Investor Verification Points
- Verify whether the Share Purchase closed, the final number of redemptions, and the actual post-closing cash balance.
- Confirm whether Greentree exercised its right to sell shares and the amount ultimately released from escrow.
- Review the final financing arrangements and determine whether the waived $10.0 million EUDA cash condition created additional liquidity risk.
- Reconcile final share counts, including seller consideration, earnout shares, rights and warrant-related dilution, with the pro forma assumptions.
- Review the full Forward Purchase Agreement, Waiver Agreement and subsequent filings for amendments, indemnities, liabilities and closing conditions.
- Compare actual post-combination revenue, margins, cash flow and debt with the unaudited pro forma figures, which are not forecasts or historical combined results.