References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Eucrates Biomedical Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Eucrates LLC. 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 Quarterly Report. Certain information contained in
the discussion and analysis set forth below includes forward-looking statements
that involve risks and uncertainties.
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Exchange Act that are not historical facts and involve
risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of
historical fact included in this Form 10-Q including, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Annual report on Form 10-K/A filed with the U.S. Securities and
Exchange Commission (the "SEC"). The Company's securities filings can be
accessed on the EDGAR section of the SEC's website at www.sec.gov. Except as
expressly required by applicable securities law, the Company disclaims any
intention or obligation to update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations has been amended and restated to give effect to the restatement of
our financial statements as of March 31, 2021 and June 30, 2021. Management
identified errors made in its historical financial statements where, at the
closing of our Initial Public Offering, we improperly valued our ordinary shares
subject to possible redemption. We previously determined the ordinary shares
subject to possible redemption to be equal to the redemption value of $10.00 per
share of ordinary share while also taking into consideration a redemption cannot
result in net tangible assets being less than $5,000,001. Management determined
that the ordinary shares issued during the Initial Public Offering can be
redeemed or become redeemable subject to the occurrence of future events
considered outside of the Company's control. Therefore, management concluded
that the redemption value should include all ordinary shares subject to possible
redemption, resulting in the ordinary shares subject to possible redemption
being equal to their redemption value. As a result, management has noted a
reclassification error related to temporary equity and permanent equity. This
resulted in a restatement to the initial carrying value of the ordinary shares
subject to possible redemption with the offset recorded to additional paid-in
capital (to the extent available), accumulated deficit and ordinary shares.
Overview
We are a blank check company incorporated in the British Virgin Islands on
August 21, 2020 formed for the purpose of effecting a merger, amalgamation,
share exchange, asset acquisition, share purchase, reorganization or other
similar Business Combination with one or more businesses. We intend to
effectuate our Business Combination using cash derived from the proceeds of the
Initial Public Offering and the sale of the Private Units, our shares, debt or a
combination of cash, shares and debt.
We expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete a Business
Combination will be successful.
Results of Operations
We have neither engaged in any operations (other than searching for a Business
Combination after our Initial Public Offering) nor generated any operating
revenues to date. Our only activities from inception through September 30, 2021
were organizational activities,
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those necessary to prepare for the Initial Public Offering, described below,
and, subsequent to the Initial Public Offering, identifying a target company for
a Business Combination. We do not expect to generate any operating revenues
until after the completion of our initial Business Combination. We expect to
generate non-operating income in the form of interest income on marketable
securities held after the Initial Public Offering. We expect that we will 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 in connection with searching for, and completing, a Business
Combination.
For the three months ended September 30, 2021, we had a net income of $950,222,
which consisted of change in fair value of derivative liability of $1,193,513
and interest earned on marketable securities held in Trust Account of $7,205 and
unrealized gain on marketable securities held in Trust Account of $9,363, offset
by formation and operational costs of $259,859.
For the nine months ended September 30, 2021, we had a net income of $3,574,952,
which consisted of change in fair value of derivative liability of $4,057,430
and interest earned on marketable securities held in Trust Account of $28,110,
offset by formation and operational costs of $509,632 and unrealized loss on
marketable securities held in Trust Account of $956.
Liquidity and Capital Resources
Until the consummation of the Initial Public Offering, our only source of
liquidity was an initial purchase of ordinary shares by the Sponsor and loans
from our Sponsor.
On October 27, 2020, we consummated the Initial Public Offering of 10,000,000
units at a price of $10.00 per Unit, generating gross proceeds of $100,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated
the sale of 350,000 Private Units to the Sponsor at a price of $10.00 per
Private Unit generating gross proceeds of $3,500,000.
On November 24, 2020, the Company sold an additional 479,626 Units for total
gross proceeds of $4,796,260 in connection with the underwriters' partial
exercise of their over-allotment option. Simultaneously with the partial closing
of the over-allotment option, we also consummated the sale of an additional
9,592 Private Units at $10.00 per Private Unit, generating total proceeds of
$95,925.
Following the Initial Public Offering, the partial exercise of the
over-allotment option, and the sale of the Private Units, a total of
$104,796,260 was placed in the Trust Account. We incurred $6,168,976 in
transaction costs, including $2,095,925 of underwriting fees, $3,667,869 of
deferred underwriting fees and $405,182 of other costs.
For the nine months ended September 30, 2021, net cash used in operating
activities was $345,045. Net income of $3,574,952 was impacted by interest
earned on marketable securities held in Trust Account of $28,110 and change in
fair value of derivative liability of $4,057,430, offset by unrealized loss on
marketable securities held in Trust Account of $956. Changes in operating assets
and liabilities provided $164,587 of cash from operating activities.
At September 30, 2021, we had investments held in the Trust Account of
$104,832,690. We intend to use substantially all of the funds held in the Trust
Account, including any amounts representing interest earned on the Trust
Account, which interest shall be net of taxes payable and excluding deferred
underwriting commissions, to complete our Business Combination. We may withdraw
interest from the Trust Account to pay taxes, if any. To the extent that our
share capital or debt is used, in whole or in part, as consideration to complete
a Business Combination, the remaining proceeds held in the Trust Account will be
used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
At September 30, 2021, we held $206,219 of cash outside of the Trust Account. We
intend to use the funds held outside the Trust Account primarily to identify and
evaluate target businesses, perform business due diligence on prospective target
businesses, travel to and from the offices, plants or similar locations of
prospective target businesses or their representatives or owners, review
corporate documents and material agreements of prospective target businesses,
structure, negotiate and complete a Business Combination.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to repay
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such loaned amounts, but no proceeds from our Trust Account would be used for
such repayment. Up to $1,500,000 of such loans may be convertible into
additional Private Units, at a price of $10.00 per Unit, at the option of the
lender.
On October 29, 2021, the Sponsor agreed to provide loans of up to an aggregate
$400,000 to the Company through October 27, 2022 if funds are needed by the
Company upon request. These loans will be non-interest bearing, unsecured and
will be repaid upon the consummation of a business combination. The Sponsor
understands that if the Company does not consummate a business combination (as
described in the Company's prospectus, dated October 23, 2020), all amounts
loaned to the Company hereunder will be forgiven except to the extent that the
Company has funds available to it outside of its trust account established in
connection with the Company's initial public offering.
Off-Balance Sheet Financing Arrangements
We have no obligations, assets or liabilities, which would be considered
off-balance sheet arrangements as of September 30, 2021. We do not participate
in transactions that create relationships with unconsolidated entities or
financial partnerships, often referred to as variable interest entities, which
would have been established for the purpose of facilitating off-balance sheet
arrangements. We have not entered into any off-balance sheet financing
arrangements, established any special purpose entities, guaranteed any debt or
commitments of other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below.
The underwriter is entitled to a deferred fee of $0.35 per Unit, or $3,667,869
in the aggregate. The deferred fee will become payable to the underwriters from
the amounts held in the Trust Account solely in the event that we complete a
Business Combination, subject to the terms of the underwriting agreement.
Critical Accounting Policies
The preparation of condensed 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 condensed 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.
Warrant Liabilities
We account for the Warrants in accordance with the guidance contained in ASC
815-40 under which the Warrants do not meet the criteria for equity treatment
and must be recorded as liabilities. Accordingly, we classify the Warrants as
liabilities at their fair value and adjust the Warrants to fair value at each
reporting period. This liability is subject to re-measurement at each balance
sheets date until exercised, and any change in fair value is recognized in our
statements of operations. The Private Placement Warrants and the Public Warrants
for periods where no observable traded price was available are valued using a
binomial lattice model. For periods subsequent to the detachment of the Public
Warrants from the Units, the Public Warrant quoted market price was used as the
fair value as of each relevant date, except for 12/31/20 when the Public
Warrants price was derived as the difference between the price of the Units and
the price of the ordinary shares due to a lack of quoted prices for the public
warrants.
Ordinary Shares Subject to Possible Redemption
We account for our ordinary shares subject to possible redemption in accordance
with the guidance in Accounting Standards Codification ("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
features 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) is classified as temporary equity. At all other times, ordinary
shares are classified as shareholders' equity. Our ordinary shares feature
certain redemption rights that are considered to be outside of our control and
subject to occurrence of uncertain future
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events. Accordingly, ordinary shares subject to possible redemption is presented
as temporary equity, outside of the shareholders' equity section of our balance
sheets.
Net Income (Loss) per Ordinary Share
Net loss per ordinary share is computed by dividing net loss by the weighted
average number of ordinary shares outstanding during the period. We apply the
two-class method in calculating earnings per share. Accretion associated with
the redeemable shares of ordinary shares is excluded from earnings per share as
the redemption value approximates fair value.
Recent Accounting Standards
Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on our
condensed financial statements.
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