EUDA Health Holdings Ltd annual report, FY2021

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Filing summary

Entity and period: The supplied filing is the Form 10-K of 8i Acquisition 2 Corp. (a blank-check SPAC), for the fiscal year ended July 31, 2022, filed August 29, 2022. It is not a filing by EUDA Health Holdings Ltd., and the period does not match the metadata’s “2021 Q4.” The company had not completed its proposed acquisition of EUDA Health Limited by the filing date.

Financial results and liquidity

  • Revenue and operations: No operating revenue or operating business activity. The company’s activity consisted of formation, public-company and acquisition-related costs.
  • Profit/loss: FY2022 net loss was $1.763 million, compared with an $8,377 loss from inception through July 31, 2021. FY2022 formation and operating costs were $1.986 million, partly offset by $222,912 of trust-account dividends. No meaningful operating margin is reported.
  • Cash flow: Net cash used in operating activities was $1.006 million. Investing activities used $86.25 million, principally funds deposited in the trust. Financing activities provided $87.450 million. Year-end cash outside the trust was $193,546.
  • Assets and liquidity: Total assets were $86.776 million, including $86.473 million in the trust account. Current liabilities were $4.730 million. Reported working-capital deficit was $1.409 million, excluding deferred underwriting commissions and deferred offering costs.
  • Debt and obligations: The company reported an $800,000 non-interest-bearing related-party promissory note at July 31, 2022; borrowings under such notes were $1.0 million as of the report date after a subsequent $200,000 note. The notes are payable upon a business combination and may be converted into private units at $10 per unit. Deferred underwriting commissions of $3.019 million are payable upon a business combination. The filing reports no long-term debt obligations.
  • Equity and redemptions: $85.769 million of ordinary shares were classified as temporary equity subject to possible redemption. Shareholders’ equity was a deficit of $3.724 million. The reported $0.50 income per redeemable share reflects the allocation and accretion accounting for redeemable shares; non-redeemable shares had a reported $2.00 loss per share.

Material changes and business combination

  • The company completed its IPO on November 24, 2021, issuing 8.625 million units at $10 each for $86.25 million gross proceeds. It also sold 292,250 private units for $2.923 million. The trust held $86.473 million at fiscal year-end.
  • On April 11, 2022, 8i entered into a share purchase agreement to acquire all shares of EUDA Health Limited from Watermark Developments Limited. Amendments on May 30 and June 10 extended due diligence and reduced the initial consideration and earnout payments. However, the filing also describes $140 million of initial consideration payable in 14 million shares and up to 4 million earnout shares; it does not clearly give the revised amounts after amendment. Treat those stated terms as requiring verification against the amended agreement and transaction proxy.
  • The disclosed earnout terms include share-price and financial-performance triggers, including revenue and net-income thresholds for 2023 and 2024. The filing’s detailed thresholds may reflect terms before the reduction and should be checked against the amended agreement.
  • 8i CEO and Chairman Meng Dong (James) Tan held a 10% interest in the seller when the agreement was signed and acquired additional interests in August 2022, bringing his reported ownership to 33.3%. The filing estimates that stake could give him a pecuniary interest in 4,666,666 combined-company shares, valued at approximately $46.4 million using the cited August 16 share price. A fairness opinion was obtained, but the related-party interest remains material.

Outlook, risks and unusual matters

  • Going concern: The auditor highlighted substantial doubt about the company’s ability to continue as a going concern. Outside-trust cash and working capital were insufficient for planned activities, and completion depended on a business combination. The company intended to close before the mandatory deadline of November 24, 2022, but stated there was no assurance it could do so. Extensions could be available under the SPAC terms.
  • Liquidation risk: If a business combination was not completed within the permitted period, the company would be required to liquidate and redeem public shares under its governing documents.
  • Funding risk: Management warned it might need additional financing for diligence, transaction costs or the business combination. Insiders were not obligated to provide further loans.
  • Other risks: The filing cites potential COVID-19 effects whose impact was not determinable, competition from other SPACs and conflicts arising from executives’ outside roles and obligations. The company’s articles prohibit an initial combination with an entity primarily operating or headquartered in China, including Hong Kong and Macau.
  • Controls and audit: Management concluded disclosure controls were effective at July 31, 2022. The 10-K did not include management’s internal-control assessment or an auditor attestation because of the transition period for newly public companies. The auditor issued an unqualified opinion on the financial statements while emphasizing the going-concern uncertainty.

Investor verification priorities

  1. Confirm the registrant and reporting period: this is 8i Acquisition 2 Corp.’s FY2022 10-K, not an EUDA Health Holdings Ltd. 2021 Q4 filing.
  2. Review the latest amended SPA and definitive proxy for the actual consideration, escrow, earnout amounts, conditions, and closing status.
  3. Assess the CEO’s seller ownership, related-party conflicts, fairness-opinion scope, and combined-company dilution.
  4. Verify the SPAC’s extension, redemption and liquidation deadlines, trust balance, and cash available outside the trust.
  5. Confirm repayment or conversion of insider notes, deferred underwriting fees, and other transaction-related obligations.