References to the "Company," "our," "us" or "we" refer toSummit Healthcare Acquisition Corp. The following discussion and analysis of the Company's financial condition and results of operations should be read in conjunction with the unaudited condensed 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 Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (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. Such statements include, but are not limited to, possible business combinations and the financing thereof, and related matters, as well as all other statements other than statements of historical fact included in this Form 10-Q.Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our otherSecurities and Exchange Commission ("SEC") filings. Overview We are a blank check company incorporated onDecember 22, 2020 as aCayman Islands exempted company for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities. We intend to effectuate our initial business combination using cash from the proceeds of our initial public offering ("Initial Public Offering") and the sale of the private placement warrants and forward purchase securities, the proceeds of the sale of our shares in connection with our initial business combination (pursuant to forward purchase agreements or backstop agreements we may enter into following the consummation of this offering or otherwise), shares issued to the owners of the target, debt issued to bank or other lenders or the owners of the target, or a combination of the foregoing or other sources. The issuance of additional ordinary shares in a Business Combination: • may significantly dilute the equity interest of investors in this offering, which dilution would increase if the anti-dilution provisions of the Class B ordinary shares resulted in the issuance of Class A ordinary shares on a greater than one-to-one basis upon conversion of the Class B ordinary shares; • may subordinate the rights of holders of Class A ordinary shares if preferred shares are issued with rights senior to those afforded our Class A ordinary shares; • could cause a change of control if a substantial number of our ordinary shares are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and could result in the resignation or removal of our present officers and directors; • may have the effect of delaying or preventing a change of control of us by diluting the share ownership or voting rights of a person seeking to obtain control of us; and 19
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Table of Contents • may adversely affect prevailing market prices for our Class A ordinary shares and/or warrants.
Similarly, if we issue debt securities, it could result in:
• default and foreclosure on our assets if our operating revenues after an initial business combination are insufficient to repay our debt obligations; • acceleration of our obligations to repay the indebtedness even if we make all principal and interest payments when due if we breach certain covenants that require the maintenance of certain financial ratios or reserves without a waiver or renegotiation of that covenant; • our immediate payment of all principal and accrued interest, if any, if the debt is payable on demand; • our inability to obtain necessary additional financing if the debt contains covenants restricting our ability to obtain such financing while the debt is outstanding; • our inability to pay dividends on our Class A ordinary shares; • using a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends on our Class A ordinary shares if declared, expenses, capital expenditures, acquisitions and other general corporate purposes; • limitations on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate; • increased vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation; and • limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less 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 nor generated any revenues to date. Our only activities from inception throughSeptember 30, 2021 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and, after 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 generate non-operating income in the form of interest income on marketable securities. We are incurring 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 completing a Business Combination. For the three months endedSeptember 30, 2021 , we had net income of$1,034,797 , which consists of operating and formation costs of$202,904 , change in fair value ofFPA $561,983 , offset by the change in fair value of warrant liabilities of$1,797,111 , and interest income on investments held in the Trust Account of$2,573 . For the nine months endedSeptember 30, 2021 , we had net loss of$3,646,267 , which consists of operating and formation costs of$246,868 , change in fair value ofFPA $2,807,021 , change in fair value of warrant liabilities of$88,010 , transaction costs allocable to warrants$507,417 , offset by interest income on investments held in the Trust Account of$3,049 . Liquidity and Capital Resources OnJune 11, 2021 , we consummated our Initial Public Offering of 20,000,000 Units, at a price of$10.00 per Unit, generating gross proceeds of$200,000,000 . Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,000,000 Private Placement Warrants to our sponsor at a price of$1.00 per warrant, generating gross proceeds of$6,000,000 . 20
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Table of Contents Following our Initial Public Offering and the sale of the Private Placement Warrants, a total of$200,000,000 was placed in the Trust Account. We incurred$11,587,941 in transaction costs, including$4,000,000 of underwriting fees,$7,000,000 of deferred underwriting fees and$587,941 of other cash offering costs. For the nine months endedSeptember 30, 2021 , cash used in operating activities was$423,286 . Net loss of$3,646,267 consists of an unrealized loss on change on fair value of warrants andFPA warrants of$2,895,031 , transaction costs allocable to warrants of$507,417 , offset by interest earned on investments held in the Trust Account of$3,049 , and changes in operating assets and liabilities, which used$(176,418) of cash from operating activities. As ofSeptember 30, 2021 , we had investments held in the Trust Account of$200,003,049 . 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. To the extent that our share capital 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. As ofSeptember 30, 2021 , we had cash of$1,075,137 of cash for working capital purpose, held in Trust Account temporarily. We intend to use the funds for working capital purpose 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 would repay such loaned amounts. 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 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 warrants, at a price of$1.00 per warrant unit at the option of the lender. The warrants would be identical to the Private Placement Warrants. If our estimate of the costs of identifying a target business, undertaking in-depth due diligence and negotiating a Business Combination are less than the actual amount necessary to do so, we may have insufficient funds available to operate our business prior to our initial Business Combination. Moreover, we may need to obtain additional financing either to complete our Business Combination or because we become obligated to redeem a significant number of our Public Shares upon completion of our Business Combination, in which case we may issue additional securities or incur debt in connection with such Business Combination. Off-balance sheet financing arrangements We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as ofSeptember 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 an agreement to pay our sponsor a monthly fee of up to$10,000 for office space, and administrative and support services, provided to the Company. We began incurring these fees onJune 8, 2021 and will continue to incur these fees monthly until the earlier of the completion of a Business Combination and the Company's liquidation. The underwriters are entitled to a deferred underwriting discount of 3.5% of the gross proceeds of our Initial Public Offering upon the completion of our initial Business Combination. 21
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Table of Contents Critical Accounting Policies The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted inthe United States of America requires our 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: Derivative Financial Instruments We evaluate our financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, "Derivatives and Hedging". For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. Warrant Liability and Forward Purchase Agreement We account for the 16,000,000 warrants issued in connection with the IPO (the 10,000,000 Public Warrants and the 6,000,000 Private Placement Warrants) and Forward Purchase Agreement ("FPA") in accordance with the guidance contained in FASB ASC 815 "Derivatives and Hedging" whereby under that provision the warrants andFPA do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we will classify warrants andFPA as liabilities at their fair value. These liabilities are subject to re-measurement at each reporting period. With such re-measurement, the changes in fair value are recognized in the Statement of Operations in the period of change. Derivative warrant liabilities andFPA are classified as non-current liabilities as their liquidation is not reasonably expected to require the use of current assets or require the creation of current liabilities. Class A Ordinary Shares Subject to Possible Redemption We account for our Class A 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 (if any) are classified as a liability instrument and measured at fair value. Conditionally redeemable ordinary shares (including ordinary shares that feature redemption rights that are 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 Class A ordinary shares feature certain redemption rights that are considered to be outside of our control and subject to the occurrence of uncertain future events. Accordingly, atSeptember 30, 2021 andDecember 31, 2020 , 20,000,000 and 0 Class A ordinary shares, respectively, subject to possible redemption are presented at redemption value as temporary equity, outside of the shareholders' (deficit) equity section of our balance sheet. Net Income (Loss) Per Share of Ordinary Shares We have two classes of shares, which are referred to as Class A Ordinary Shares and Class B Ordinary Shares. Earnings and losses are shared pro rata between the two classes of shares. The 16,000,000 potential common shares for outstanding warrants to purchase our stock were excluded from diluted earnings per share for the three and nine months endedSeptember 30, 2021 because the warrants are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per common share is the same as basic net income per common share for the periods. 22
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Table of Contents Recent Accounting Pronouncements InAugust 2020 , theFinancial Accounting Standards Board ("FASB") 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 effectiveJanuary 1, 2024 for smaller reporting companies and should be applied on a full or modified retrospective basis, with early adoption permitted beginning onJanuary 1, 2021 . We are currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows. Our management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on our financial statements. Restatement of Prior Period Financial Statements During the preparation of the unaudited condensed financial statements as of and for the quarterly period endedSeptember 30, 2021 , we concluded that we should classify all Public Shares in temporary equity. In accordance with theSEC and its staff's guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within our control require ordinary shares subject to redemption to be classified outside of permanent equity. In our previously issued financial statements, a portion of the Public Shares were classified as permanent equity to maintain net tangible assets greater than$5,000,000 on the basis that we will consummate its initial Business Combination only if we have net tangible assets of at least$5,000,001 . Thus, we have historically classified a portion of Class A common stock in permanent equity to satisfy the$5,000,000 net tangible asset requirement. Previously, we did not consider redeemable stock classified as temporary equity as part of net tangible assets. Effective with these financial statements, we revised this interpretation to include temporary equity in net tangible assets. In connection with the change in presentation for the Class A ordinary shares subject to possible redemption, we also restated its earnings per share calculation to allocate income and losses shared pro rata between the two classes of shares. This presentation contemplates a Business Combination as the most likely outcome, in which case, both classes of shares share pro rata in our income and losses. In accordance withSEC Staff Accounting Bulletin No. 99, "Materiality," andSEC Staff Accounting Bulletin No. 108, "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements," we evaluated the changes and has determined that the related impact was material to the previously issued (i) audited balance sheet as ofJune 11, 2021 , included in exhibit 99.1 to our Form 8-K filed with theSEC onJune 17, 2021 (the "Form 8-K") and (ii) unaudited interim financial statements included in our Quarterly Report on Form 10-Q for the quarterly period endedJune 30, 2021 , filed with theSEC onAugust 16, 2021 (together with the Form 8-K, the "Affected Financial Statements") and such Affected Financial Statements should no longer be relied upon. Therefore, we, in consultation with its Audit Committee, concluded that our Affected Financial Statements should be restated to report all Public Shares as temporary equity. As such we are reporting these restatements to the Affected Financial Statements in this Quarterly Report on Form 10-Q. Our accounting for the Public Shares as temporary equity instead of permanent equity and allocating income and losses pro rata for each class of its ordinary shares result in non-cash financial statement corrections and will have no impact on our current or previously reported cash position or total operating, investing or financing cash flows. Item 3. Quantitative and Qualitative Disclosures About Market Risk We are a smaller reporting company as defined by Rule 12b-2of the Exchange Act and are not required to provide the information otherwise required under this item. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in theSEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, who is our principal executive and financial officer, to allow timely decisions regarding required disclosure. Our principal executive officer and principal financial and accounting officer evaluated the effectiveness of our disclosure controls and procedures and have concluded that as ofSeptember 30, 2021 , and during the period covered by this report, our disclosure controls and procedures were not effective due to a material weakness in internal controls over financial reporting related to the failure to properly account for complex financial instruments. 23
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Table of Contents Changes in Internal Control over Financial Reporting Except as set forth below, there was no change in our internal control over financial reporting that occurred during the period fromJuly 1, 2021 throughSeptember 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Management identified errors in its historical financial statements related to the accounting for the Public Shares and earnings per share. Because the Public Shares issued in the Initial Public Offering can be redeemed or become redeemable subject to the occurrence of future events considered outside of the Company's control, the Company should have classified all of these redeemable shares in temporary equity and remeasured these redeemable shares to their redemption value (i.e.,$10.00 per share) as of the end of the first reporting period after the date of the Company's Initial Public Offering. In addition, the earnings per share calculation should have allocated income and losses pro rata between the two classes of shares. Therefore, in consultation with the audit committee of our board of directors, we concluded that our previously filed (i) balance sheet as ofJune 11, 2021 included in exhibit 99.1 to our Form 8-K filed with theSEC onJune 17, 2021 and (ii) financial statement for the quarter endedJune 30, 2021 included in the Form 10-Q filed onAugust 16, 2021 should be restated to report all Public Shares as temporary equity and earnings per share pro rata between the two classes of shares and should no longer be relied upon. As such, we have restated such financial statement in this quarterly report, as described in Note 2 of the notes to the financial statements included herein. In light of the identified material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance withU.S. generally accepted accounting principles. Accordingly, management believes that the financial statements and related financial information included in this quarterly report fairly present, in all material respects, our financial position, results of operations and cash flows as of and for the periods covered in this report. Remediation Plan To address the material weakness, management has devoted, and plans to continue to devote, significant effort and resources to the remediation and improvement of its internal control over financial reporting and to provide processes and controls over the internal communications within the Company, financial advisors and other third-party professionals. While we have processes to identify and appropriately apply applicable accounting requirements, we plan to enhance these processes to better evaluate our research and understanding of the nuances of the complex accounting standards that apply to our financial statements. We plan to include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects. Other than this issue, our disclosure controls and procedures were effective at a reasonable assurance level and, accordingly, provided reasonable assurance that the information required to be disclosed by us in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in theSEC's rules and forms. As we continue to evaluate and improve our financial reporting process, we may take additional actions to modify certain of the remediation measures described above. We cannot assure you that the measures we have taken to date, or any measures we may take in the future, will be sufficient to remediate the material weakness we have identified or avoid potential future material weaknesses. 24
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