References to the "Company," "our," "us" or "we" refer to 8i Acquisition 2 Corp.
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this report. Certain
information contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Exchange Act. We have based these forward-looking statements on our
current expectations and projections about future events. These forward-looking
statements are subject to known and unknown risks, uncertainties and assumptions
about us that may cause our actual results, levels of activity, performance or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by such
forward-looking statements. In some cases, you can identify forward-looking
statements by terminology such as "may," "should," "could," "would," "expect,"
"plan," "anticipate," "believe," "estimate," "continue," or the negative of such
terms or other similar expressions. Factors that might cause or contribute to
such a discrepancy include, but are not limited to, those described in our other
SEC filings.
Overview
We are a blank check company incorporated on January 21, 2021 as a British
Virgin Islands corporation and formed for the purpose of effect a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or
similar business combination with one or more businesses.
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Our sponsor is 8i Holdings 2 Pte Ltd., a Singapore Limited Liability Company
(the "Sponsor"). The registration statement for our initial public offering was
declared effective on November 22, 2021. On November 24, 2021, we consummated
our initial public offering (the "Initial Public Offering") of 8,625,000 Units,
including the full exercise of the underwriters' over-allotment option to
purchase 1,125,000 units, at a purchase price of $10.00 per Unit. Transaction
costs amounted to $5,876,815 consisting of $1,725,000 of underwriting fees,
$3,018,750 of deferred underwriting fees, $483,477 excess of fair value of
representative's purchase option and $649,588 of other offering costs, and was
all charged to shareholders' equity.
Upon the closing of the IPO and the private placement, $86,250,000 was placed in
a trust account (the "Trust Account") with American Stock Transfer & Trust
Company, LLC acting as trustee.
The funds held in the Trust Account will be invested only in United States
government treasury bills, bonds or notes having a maturity of 180 days or less,
or in money market funds meeting the applicable conditions under Rule 2a-7
promulgated under the Investment Company Act of 1940 and that invest solely in
United States government treasuries. Except with respect to interest earned on
the funds held in the Trust Account that may be released to the Company to pay
its income or other tax obligations, the proceeds will not be released from the
Trust Account until the earlier of the completion of a business combination or
the Company's liquidation.
We will have 12 months from the closing of the IPO (or up to 18 months, with
extension of two times by an additional three months each time) to consummate a
business combination (the "Combination Period"). If the Company fails to
consummate a business combination within the Combination Period, it will trigger
its automatic winding up, liquidation and subsequent dissolution pursuant to the
terms of our amended and restated memorandum and articles of association. As a
result, this has the same effect as if we had formally gone through a voluntary
liquidation procedure under the Companies Law. Accordingly, no vote would be
required from our shareholders to commence such a voluntary winding up,
liquidation and subsequent dissolution.
Recent Developments
On April 11, 2022, we entered into a Share Purchase Agreement (the "SPA") with
EUDA Health Limited, a British Virgin Islands business company ("EUDA Health"),
Watermark Developments Limited, a British Virgin Islands business company (the
"Seller") and Kwong Yeow Liew, acting as Representative of the Indemnified
Parties (the "Indemnified Party Representative"). Pursuant to the terms of the
SPA, a business combination between us and EUDA Health will be effected through
the purchase by us of all of the issued and outstanding shares of EUDA Health
from the Seller (the "Share Purchase"). On May 30, 2022, the parties amended the
SPA to extend the time for LAX to complete its financial, operational and legal
due diligence review of EUDA Health from May 31, 2022 to June 15, 2022. On June
10, 2022, the parties to the SPA, as amended, entered into a second amendment of
the SPA, pursuant to which parties agreed to (i) reduce the initial
consideration to be paid at closing of the Share Purchase; and (ii) reduce the
earnout payments.
At the time the SPA was signed, Mr .Tan owned 10% equity interests in the Seller
through one of his wholly-owned companies. We received a fairness opinion from
EverEdge Global to the effect that the purchase price to be paid by us for the
shares of EUDA Health pursuant to the SPA is fair to us from a financial point
of view (the "Fairness Opinion").
Our Board of Directors has (i) approved and declared advisable the SPA, the
Share Purchase and the other transactions contemplated thereby, and (ii)
resolved to recommend approval of the SPA and related transactions by our
shareholders.
On August 16, 2022, through his two wholly-owned companies, 8i Enterprises Ltd.
and 8i Capital Limited, Mr. Tan purchased additional equity interests in the
Seller for $400,000, resulting in his current 33.3% equity ownership of the
Seller. Through his 33.3% ownership stake in the Seller, Mr. Tan will have
pecuniary interests in 4,666,666 ordinary shares (not including earnout shares)
of the Combined Company (as defined in the SPA), valued at approximately $46.4
million (based on $9.94 per share closing price of 8i Ordinary Shares as of
August 16, 2022) upon consummation of the Business Combination pursuant to the
SPA.
In connection with the closing of the transactions under the SPA the current
officers and directors of EUDA Health will become our officers and directors.
Our sponsor, 8i Holdings 2 Pte. Ltd. (the "Sponsor"), will have the right to
nominate one director to serve as an independent director on the post-closing
board of director.
Results of Operations
As of July 31, 2022 and 2021, we had not commenced any operations. All activity
for the period from January 21, 2021 (inception) through July 31, 2022 relates
to our organizational activities and the IPO. We have neither engaged in any
operations nor generated any revenues to date. We will not generate any
operating revenues until after the completion of our initial business
combination, at the earliest. We will generate non-operating income in the form
of dividend and interest income on cash and cash equivalents from the proceeds
derived from the IPO. We expect to incur increased expenses as a result of being
a public company (for legal, financial reporting, accounting and auditing
compliance), as well as for due diligence expenses.
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For the year ended July 31, 2022, we had net loss of $1,762,838, which consisted
of formation and operating costs of $1,985,750 offset by $222,912 of dividends
earned on marketable securities held in the Trust Account.
For the period from January 21, 2021 (inception) through July 31, 2021, we had a
net loss of $8,377 consisting of formation and operating costs.
Liquidity and Capital Resources
At July 31, 2022 and 2021, we had $193,546 and $0 in cash and working deficit of
$1,408,615 and $218,797 (excluding deferred underwriting commissions and
deferred offering costs), respectively.
The registration statement for our IPO was declared effective on November 22,
2021. On November 24, 2021, we consummated the IPO of 8,625,000 units (include
the exercise of the over-allotment option by the underwriters in the IPO) at
$10.00 per unit (the "Public Units'), generating gross proceeds of $86,250,000.
Each Unit consists of one ordinary share, one redeemable warrant, and one right
to receive one-tenth of an ordinary share upon the consummation of an initial
business combination.
Simultaneously with the IPO, we sold to Mr. Meng Dong (James) Tan 292,250 units
at $10.00 per unit in a private placement generating total gross proceeds of
$2,922,500.
Offering costs amounted to $5,876,815 consisting of $1,725,000 of underwriting
fees, $3,018,750 of deferred underwriting fees, $649,588 of other offering costs
and an excess of fair value of representative's purchase option of $483,477.
Except for the $100 for the Unit Purchase Option and $25,000 of subscription of
ordinary shares, we received net proceeds of $87,114,830 from the IPO and the
private placement.
On January 21, 2021 and February 5, 2021, we issued an aggregate of 1,437,500
ordinary shares to 8i Holding Limited, which have been subsequently sold to our
Sponsor for an aggregate purchase price of $25,000, or approximately $0.017 per
share. On June 14, 2021, our Sponsor transferred 15,000 founder shares in the
aggregate to the directors for nominal consideration. On October 25, 2021, we
issued an additional 718,750 ordinary shares which were purchased by our Sponsor
for $12,500, resulting in an aggregate of 2,156,250 ordinary shares outstanding.
On January 12, 2022, Mr. Meng Dong (James) Tan, our Chief Executive Officer,
agreed to loan us up to $300,000 to cover expenses related to the IPO pursuant
to a promissory note (the "January Note"). On March 18, 2022, Mr. Tan entered
into a promissory note with us for $500,000 (the "March Note"). On August 16,
2022, the Company entered into a promissory note with Mr. Tan for $200,000 (the
"August Note," together with the January Note and the March Note, collectively,
the "Promissory Notes"). The Promissory Notes were non-interest bearing and
payable promptly after the date on which we consummate an initial business
combination. As of the date of this Annual report and July 31, 2022, the total
amount borrowed under the Promissory Notes was $1,000,000 and $800,000,
respectively.
Mr. Meng Dong (James) Tan has the right, but not the obligation, to convert this
Note, in whole or in part, into our private units (the "Units") containing the
same securities as issued in our IPO and by providing us with written notice of
its intention to convert this Note at least one business day prior to the
closing of a business combination. The number of Units to be received by the
Payee in connection with such conversion shall be an amount determined by
dividing (x) the sum of the outstanding principal amount payable to Mr. Meng
Dong (James) Tan, by (y) $10.00.
Until consummation of the business combination, we will be using the funds not
held in the Trust Account, and any additional funding that may be loaned to us
by our Sponsor, for identifying and evaluating prospective acquisition
candidates, performing business due diligence on prospective target businesses,
traveling to and from the offices, plants or similar locations of prospective
target businesses, reviewing corporate documents and material agreements of
prospective target businesses, selecting the target business to acquire and
structuring, negotiating and consummating the business combination.
If our estimates of the costs of undertaking in-depth due diligence and
negotiating business combination are more than the actual amount necessary to do
so, we may have insufficient funds available to operate its business prior to
the business combination and will need to raise additional capital. In this
event, our officers, directors or their affiliates may, but are not obligated
to, loan us funds as may be required.
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Moreover, we may need to obtain additional financing either to consummate our
initial business combination or because we become obligated to redeem a
significant number of our public shares upon consummation of our initial
business combination, in which case we may issue additional securities or incur
debt in connection with such business combination. Subject to compliance with
applicable securities laws, we would only consummate such financing
simultaneously with the consummation of our initial business combination.
Following our initial business combination, if cash on hand is insufficient, we
may need to obtain additional financing in order to meet our obligations.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of July 31, 2022 and
July 31, 2021.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the
industry and has concluded that while it is reasonably possible that the virus
could have a negative effect on the company's financial position, results of its
operations and/or search for a target company, the specific impact is not
readily determinable as of the date of these financial statements. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
Contractual Obligations
We do not have any long-term debt obligations, capital lease obligations,
operating lease obligations, purchase obligations or long-term liabilities.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires 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 financial statements, and income and expenses
during the periods reported. Actual results could materially differ from those
estimates. We have identified the following critical accounting policies and
estimates:
Ordinary Shares Subject to Possible Redemption
We account for out ordinary shares subject to possible redemption in accordance
with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Ordinary shares subject to mandatory redemption is classified as a liability
instrument and is measured at fair value. Conditionally redeemable ordinary
shares (including ordinary shares that feature redemption rights that is either
within the control of the holder or subject to redemption upon the occurrence of
uncertain events not solely within our control) are classified as temporary
equity. At all other times, ordinary shares are classified as shareholders'
equity. Our ordinary shares features certain redemption rights that are
considered to be outside of our control and subject to occurrence of uncertain
future events. Accordingly, ordinary shares subject to possible redemption are
presented at redemption value (plus any interest earned and/or dividends accrued
on the Trust Account) as temporary equity, outside of the shareholders' equity
section of our balance sheets.
Net Loss Per Ordinary Shares
We comply with accounting and disclosure requirements of FASB ASC 260, Earnings
Per Share. The statements of operations include a presentation of income (loss)
per redeemable ordinary share and income (loss) per non-redeemable share
following the two-class method of income (loss) per share. In order to determine
the net income (loss) attributable to both the redeemable ordinary shares and
the non-redeemable shares, we first considered the total income (loss) allocable
to both sets of shares. This is calculated using the total net income (loss)
less any dividends paid. For purposes of calculating net income (loss) per
share, any remeasurement of the accretion to redemption value of the ordinary
shares subject to possible redemption was considered to be dividends paid to the
public shareholders.
Offering Costs
We comply with the requirements of the FASB ASC 340-10-S99-1 and SEC Staff
Accounting Bulletin Topic 5A -"Expenses of Offering." Offering costs consist of
costs incurred in connection with formation and preparation for the IPO.
Offering costs are allocated to the Public Warrants, Public Rights and Public
Shares issued in the IPO based on its fair value at inception compared to the
total IPO proceeds received. Offering costs associated with the ordinary shares
are allocated between permanent equity and temporary equity.
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Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board issued Accounting
Standards Update ("ASU") 2020-06, Debt - Debt with Conversion and Other Options
(Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity
(Subtopic 815-40) ("ASU 2020-06") to simplify accounting for certain financial
instruments. ASU 2020-06 eliminates the current models that require separation
of beneficial conversion and cash conversion features from convertible
instruments and simplifies the derivative scope exception guidance pertaining to
equity classification of contracts in an entity's own equity. The new standard
also introduces additional disclosures for convertible debt and freestanding
instruments that are indexed to and settled in an entity's own equity. ASU
2020-06 amends the diluted earnings per share guidance, including the
requirement to use the if-converted method for all convertible instruments. ASU
2020-06 is effective on August 1, 2024 and should be applied on a full or
modified retrospective basis, with early adoption permitted beginning on August
1, 2021. We have determined not to early adopt.
Management does not believe that this and any other recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have an effect
on our financial statements.
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