NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
Unaudited
Note 1—Description of Organization,
Business Operations and Going Concern
EDOC Acquisition Corp. (“Edoc” or
the “Company”) was incorporated in the Cayman Islands on August 20, 2020. The Company was formed for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar Business Combination with one or more businesses
(the “Business Combination”). While the Company may pursue an acquisition opportunity in any industry or geographic region,
the Company intends to focus on businesses primarily operating in the healthcare and healthcare provider space in North America and Asia-Pacific.
As of June 30, 2022, the Company had not yet
commenced any operations. All activity through June 30, 2022, relates to the Company’s organizational activities, those necessary
to prepare for the Initial Public Offering and identifying a target company for the Business Combination. The Company will not generate
any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating
income in the form of interest income on cash and cash equivalents from the proceeds derived from the IPO.
The Company’s sponsor is American Physicians
LLC (the “Sponsor”).
Financing
The registration statement for the Company’s
initial public offering was declared effective on November 9, 2020 (the “Effective Date”). On November 12, 2020, the Company
consummated the initial public offering of 9,000,000 units (each, a “Unit” and collectively, the “Units”)
at $10.00 per Unit (the “Initial Public Offering” or “IPO”), which is discussed in Note 3.
Simultaneously with the closing of the IPO, the
Company consummated the sale of 479,000 private placement units (“Private Unit)” and collectively, the “Private Units”),
at a price of $10.00 per unit. Of the 479,000 private units, 65,000 units, or the “representative units”
were purchased by I-Banker (and/or its designees). In addition, the Sponsor agreed, pursuant to a letter agreement to purchase up to 3,750,000 of
the Company’s rights in the open market at a market price not to exceed $0.20 per right. I-Bankers also agreed to purchase
up to 1,250,000 of the Company’s rights in the open market at a market price not to exceed $0.20 per right, which
is discussed in Note 5.
Transaction costs of the IPO amounted to $3,246,381,
consisting of $1,575,000 of cash underwriting fees, the fair value of the representative’s warrants of $424,270, the fair
value of representative’s shares $ 653,250 and $593,861 of other cash offering costs.
Trust Account
Following the closing of the IPO on November
12, 2020, $91,530,000 ($10.17 per Unit) from the net proceeds of the sale of the Units in the IPO and the sale of the Private Warrants
was placed in a trust account (“Trust Account”). On November 10, 2021, $900,000 ($0.10 per share) was added to the Trust
Account for the first extension of the Company. The funds in the Trust Account are invested only in U.S. government securities, within
the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of 185 days or less, or in money market funds
meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act which invest only in direct U.S. government treasury
obligations, until the earlier of: (i) the completion of a Business Combination, (ii) the redemption of any public shares properly submitted
in connection with a shareholder vote to amend the Company’s amended and restated certificate of incorporation, and (iii) the redemption
of the Company’s public shares if the Company is unable to complete the initial Business Combination by August 12, 2022 (the “Combination
Period”), subject to applicable law. The proceeds deposited in the Trust Account could become subject to the claims of the Company’s
creditors, if any, which could have priority over the claims of the Company’s public shareholder.
On February 9, 2022, the Company held an extraordinary
general meeting pursuant to which the Company’s shareholders approved extending the date by which the Company had to complete a
Business Combination from February 12, 2022 to August 12, 2022. In connection with the approval of the extension, shareholders elected
to redeem an aggregate of 6,326,758 Class A ordinary shares. As a result, an aggregate of $64,996,857.71 (or approximately ($10.27 per
share) was released from the Trust Account to pay such shareholders.
Business Combination
The Company’s management has broad discretion
with respect to the specific application of the net proceeds of the IPO and the sale of Private Warrants, although substantially all
of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company
will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having
an aggregate fair market value of at least 80% of the net assets held in the Trust Account (as defined below) (net of amounts disbursed
to management for working capital purposes and excluding the amount of any deferred underwriting discount held in trust) at the time
of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the
post-transaction company owns or acquires 50% or more of the voting securities of the target or otherwise acquires a controlling
interest in the target sufficient for it not to be required to register as an investment company under the Investment Company Act 1940,
as amended (the “Investment Company Act”). Upon the closing of the IPO, an amount equal to at least $10.00 per Unit
sold in the Proposed Public Offering, including the proceeds from the sale of the Private Warrants to the Sponsor, was placed in a trust
account (“Trust Account”) located in the United States with Continental Stock Transfer & Trust Company acting as
trustee, and invested only in U.S. government securities,” within the meaning set forth in Section 2(a)(16) of the Investment
Company Act, with a maturity of 185 days or less, or in money market funds meeting certain conditions under Rule 2a-7 promulgated under
the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier of: (i) the completion
of a Business Combination and (ii) the distribution of the Trust Account as described below.
The Company will provide holders of the Company’s
outstanding shares of Class A ordinary shares, par value $0.0001 per share, sold in the IPO (the “Public Shareholders”) with
the opportunity to redeem all or a portion of their Public Shares (as defined below) upon the completion of the initial Business Combination
either (i) in connection with a shareholder meeting called to approve the initial Business Combination or (ii) by means of a tender offer.
The decision as to whether the Company will seek shareholder approval of a proposed initial Business Combination or conduct a tender offer
will be made by the Company, solely in its discretion. The shareholders will be entitled to redeem their shares for a pro rata portion
of the amount then on deposit in the Trust Account (initially approximately $10.17 per share, subsequently plus $0.10 per share, plus
any pro rata interest earned on the funds held in the Trust Account and not previously released to the Company to pay its tax obligations).
The ordinary shares subject to redemption will
be recorded at a redemption value and classified as temporary equity upon the completion of the Proposed Public Offering, in accordance
with Accounting Standards Codification (“ASC”) Topic 480 “Distinguishing Liabilities from Equity.” In such case,
the Company will proceed with a Business Combination if the Company has net tangible assets of at least $5,000,001 upon such consummation
of a Business Combination and, if the Company seeks shareholder approval, a majority of the issued and outstanding shares voted are voted
in favor of the Business Combination.
Unless further extended, the Company will have
until August 12, 2022 to consummate a Business Combination (the “Combination Period”). However, if the Company is unable
to complete a Business Combination within the Combination Period, the Company will redeem 100% of the outstanding public shares for a
pro rata portion of the funds held in the trust account, equal to the aggregate amount then on deposit in the trust account including
interest earned on the funds held in the trust account and not previously released to the Company to pay its franchise and income taxes,
divided by the number of then outstanding public shares, subject to applicable law and as further described in registration statement,
and then seek to dissolve and liquidate.
The Sponsor, officers and directors and Representative
(defined in Note 6) have agreed to (i) waive their redemption rights with respect to their founder shares, private shares, and public
shares in connection with the completion of the initial Business Combination, (ii) waive their redemption rights with respect to
their founder shares, private shares, and public shares in connection with a shareholder vote to approve an amendment to the Company’s
amended and restated certificate of incorporation, and (iii) waive their rights to liquidating distributions from the trust account
with respect to their founder shares and private shares if the Company fails to complete the initial Business Combination within the Combination
Period.
The Company’s Sponsor has agreed that it
will be liable to the Company if and to the extent any claims by a third party for services rendered or products sold to the Company,
or a prospective target business with which the Company has entered into a written letter of intent, confidentiality or similar agreement
or Business Combination agreement, reduce the amount of funds in the trust account to below the lesser of (i) $10.27 per public share
and (ii) the actual amount per public share held in the trust account as of the date of the liquidation of the trust account, if
less than $10.27 per share due to reductions in the value of the trust assets, less taxes payable, provided that such liability will not
apply to any claims by a third party or prospective target business who executed a waiver of any and all rights to the monies held in
the trust account (whether or not such waiver is enforceable) nor will it apply to any claims under the Company’s indemnity of the
underwriters of this offering against certain liabilities, including liabilities under the Securities Act. However, the Company has
not asked its Sponsor to reserve for such indemnification obligations, nor has the Company independently verified whether its Sponsor
has sufficient funds to satisfy its indemnity obligations and believe that the Company’s Sponsor’s only assets are securities
of the Company. Therefore, the Company cannot assure that its Sponsor would be able to satisfy those obligations.
Risks and Uncertainties
Management is currently evaluating the impact
of the COVID-19 pandemic and Russia-Ukraine war on the industry and has concluded that while it is reasonably possible that the virus
and the war 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 interim condensed financial statements. The interim
condensed financial statements do not include any adjustments that might results from the outcome of this uncertainty.
Going Concern
As of June 30, 2022, the Company had $4,103 in the
operating bank account and working capital deficit of $1,901,596.
On November 10, 2021, the Company issued an interest-bearing
convertible promissory to the Sponsor in the amount of $900,000. As of June 30, 2022, the fair market value of the note outstanding,
including accrued interest, was $967,508.
On February 13, 2022, the Company issued a non-interest-bearing
convertible promissory note in the principal amount of up to $750,000 to the Sponsor. As of June 30, 2022, $530,000 was drawn on the
note and the fair market value of the note outstanding was $554,878.
Until the consummation of a Business Combination,
the Company will be using the funds not held in the Trust Account for identifying and evaluating prospective acquisition candidates,
performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to acquire,
and structuring, negotiating and consummating the Business Combination. The Company will need to raise additional capital through loans
or additional investments from its Sponsor, shareholders, officers, directors, or third parties. The Company’s Sponsor, officers
and directors may, but are not obligated to, loan the Company funds from time to time or at any time, in whatever amount they deem reasonable
in their sole discretion, to meet the Company’s working capital needs. Accordingly, the Company may not be able to obtain additional
financing. If the Company is unable to raise additional capital, it may be required to take additional measures to conserve liquidity,
which could include, but not necessarily be limited to, curtailing operations, suspending the pursuit of a potential transaction, and
reducing overhead expenses.
In connection with the Company’s assessment
of going concern considerations in accordance with the Financial Accounting Standards Board’s (“FASB’s”) Accounting
Standards Update (“ASU”) 2014-15, “Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going
Concern,” management has determined that if the Company is unable to raise additional funds to alleviate liquidity needs as well
as complete a Business Combination by August 12, 2022 then the Company will cease all operations except for the purpose of liquidating.
The liquidity condition and the date for mandatory liquidation and subsequent dissolution raise substantial doubt about the Company’s
ability to continue as a going concern. These interim condensed financial statements do not include any adjustments relating to the recovery
of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a
going concern.
Note 2—Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying unaudited condensed financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of
the SEC. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have
been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not
include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash
flows. In the opinion of management, the accompanying unaudited condensed financial statements include all adjustments, consisting of
a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for
the periods presented.
The accompanying unaudited condensed financial
statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021
as filed with the SEC on March 4, 2022, which contains the audited financial statements and notes thereto.
Emerging Growth Company
The Company is an “emerging growth company,”
as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS
Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public
companies that are not emerging growth companies including, but not limited to, not being required to comply with the independent registered
public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory
vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act
exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies
(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered
under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that an
emerging growth company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition
period, which means that when a standard is issued or revised and it has different application dates for public or private companies,
the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised
standard.
This may make comparison of the Company’s
financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted
out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal
Depository Insurance Coverage limit of $250,000. As of June 30, 2022 and December 31, 2021, the Company had not experienced losses on
these accounts and management believes the Company is not exposed to significant risks on such accounts.
Use of Estimates
The preparation of interim condensed financial
statements in conformity with US GAAP requires the Company’s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities during the reporting period and the reported amounts
of expenses during the reporting period. One of the more significant accounting estimates included in these interim condensed financial
statements is the determination of the fair value of the warrant liabilities as well as the fair value of the convertible note. Such
estimates may be subject to change as more current information becomes available and accordingly the actual results could differ significantly
from those estimates.
Cash and Cash Equivalents
The Company considers all short-term investments
with an original maturity of three months or less when purchased to be cash equivalents. The Company had no cash equivalents as of June
30, 2022 and December 31, 2021.
Investment Held in Trust Account
As of June 30, 2022, substantially all of assets
held in the Trust Account were held in U.S Treasury Bills. As of December 31, 2021, all of the assets held in the Trust Account were held
in money market funds which are invested primarily in U.S. Treasury securities. During the period January 1, 2021 to June 30, 2022, the
Company did not withdraw any of interest income from the Trust Account to pay its tax obligations. On February 9, 2022, the Company held
an extraordinary general meeting pursuant to which the Company’s shareholders approved extending the date by which the Company had
to complete a Business Combination from February 12, 2022 to August 12, 2022. In connection with the approval of the extension, shareholders
elected to redeem an aggregate of 6,326,758 Ordinary Shares. As a result, an aggregate of $64,996,857.71 (or approximately ($10.27 per
share) was released from the Trust Account to pay such shareholders.
Fair Value Measurements
The fair value of the Company’s assets
and liabilities, which qualify as financial instruments under the Financial Accounting Standards Board (“FASB”) ASC 820,
“Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the balance sheets.
Convertible Promissory Note
The Company accounts for its convertible promissory
note under ASC 815, Derivatives and Hedging (“ASC 815”). Under 815-15-25, the election can be at the inception of a financial
instrument to account for the instrument under the fair value option under ASC 825. The Company has made such election for its convertible
promissory note. Using fair value option, the convertible promissory note is required to be recorded at its initial fair value on the
date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the note are recognized as non-cash
change in the fair value of the convertible promissory note in the statements of operations. The fair value of the conversion feature
of the note was valued utilizing the Monte Carlo model.
Derivative warrant liabilities
The Company does not use derivative instruments
to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including
issued share purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives,
pursuant to ASC 480 and ASC 815-15. The classification of derivative instruments, including whether such instruments should be recorded
as liabilities or as equity, is re-assessed at the end of each reporting period.
The Company accounts for its 479,000 Private
Warrants and 450,000 Representative’s Warrants issued in connection with its Initial Public Offering as derivative warrant
liabilities in accordance with ASC 815-40. Accordingly, the Company recognizes the warrant instruments as liabilities at fair value and
adjusts the instruments to fair value at each reporting period. The liabilities are subject to re-measurement at each balance sheet date
until exercised, and any change in fair value is recognized in the Company’s statements of operations. The fair value of warrants
issued by the Company in connection with the Public Offering and Private Placement has been estimated using Monte-Carlo simulations at
each measurement date.
Offering Costs Associated with IPO
The Company complies with the requirements of
the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - “Expenses of Offering”. Offering costs
consist principally of professional and registration fees incurred through the balance sheet date that are related to the Public Offering
and that were charged to temporary equity upon the completion of the IPO. Accordingly, on December 31, 2020, offering costs totaling
$3,246,381 have been charged to temporary equity (consisting of $1,575,000 of underwriting fee, the fair value of the representative’s
warrants of $424,270, the fair value of representative’s shares $653,250 and $593,861 of other cash offering costs).
Class A Ordinary Shares Subject to Possible
Redemption
The Company accounts for its Class A ordinary
shares subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.”
Class A ordinary shares subject to mandatory redemption (if any) are classified as a liability instrument and are 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 the Company’s control) are classified
as temporary equity. At all other times, ordinary shares are classified as shareholders’ deficit. The Company’s ordinary shares
feature certain redemption rights that are considered to be outside of the Company’s control and subject to the occurrence of uncertain
future events. On February 9, 2022, the Company held an extraordinary general meeting pursuant to which the Company’s shareholders
approved extending the date by which the Company had to complete a Business Combination from February 12, 2022 to August 12, 2022. In
connection with the approval of the extension, shareholders elected to redeem an aggregate of 6,326,758 Ordinary Shares. As a result,
an aggregate of $64,996,857.71 (or approximately ($10.27 per share) was released from the Trust Account to pay such shareholders. Accordingly,
as of June 30, 2022 and December 31, 2021, 2,673,242 and 9,000,000 shares of Class A ordinary shares subject to possible redemption,
respectively, are presented at redemption value as temporary equity outside of the shareholders’ deficit section of the Company’s
balance sheets.
As of June 30, 2022 and December 31, 2021, the
Class A ordinary shares reflected in the balance sheets are reconciled in the following table:
Gross proceeds | |
$ | 90,000,000 | |
Less: | |
| | |
Ordinary share issuance costs | |
| (3,246,381 | ) |
Plus: | |
| | |
Fair value adjustment of carrying value to redemption value | |
| 5,705,929 | |
Contingently redeemable ordinary shares at December 31, 2021 | |
$ | 92,459,548 | |
Less: | |
| | |
Redemption 6,326,758 shares | |
| (62,996,858 | ) |
Plus: | |
| | |
Fair value adjustment of carrying value to redemption value | |
| 4,144 | |
Contingently redeemable ordinary shares at March 31, 2022 | |
$ | 27,466,834 | |
Plus: | |
| | |
Fair value adjustment of carrying value to redemption value | |
| 31,044 | |
Contingently redeemable ordinary shares at June 30, 2022 | |
$ | 27,497,878 | |
Net Income (Loss) Per Ordinary Share
The Company complies with accounting and disclosure
requirements of FASB ASC Topic 260, “Earnings Per Share.” Net income (loss) per ordinary share is computed by dividing the
net income (loss) by the weighted average number of ordinary shares outstanding for each of the periods. Accretion associated with the
redeemable shares of Class A ordinary shares is excluded from earnings per share as the redemption value approximates fair value.
Changes in fair value are not considered a dividend
of the purposes of the numerator in the earnings per share calculation. The calculation of diluted income (loss) per ordinary share does
not consider the effect of the warrants and rights issued in connection with the IPO since the exercise of the warrants and rights are
contingent upon the occurrence of future events and the inclusion of such warrants would be anti-dilutive. The warrants and rights are
exercisable for 6,137,400 shares of Class A ordinary shares in the aggregate.
|
|
Three Months Ended
June 30, |
|
|
Six Months Ended
June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Ordinary shares subject to possible redemption |
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income allocable to Class A ordinary shares subject to possible redemption |
|
$ |
(903,128 |
) |
|
$ |
(477,014 |
) |
|
$ |
(3,785,344 |
) |
|
$ |
766 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Redeemable Class A Ordinary shares, Basic and Diluted |
|
|
2,673,242 |
|
|
|
9,000,000 |
|
|
|
4,036,466 |
|
|
|
9,000,000 |
|
Basic and Diluted net (loss) income per share, Redeemable Class A Ordinary shares |
|
$ |
(0.34 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.94 |
) |
|
$ |
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Redeemable Ordinary shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income allocable to Non-redeemable Class A and Class B ordinary shares not subject to redemption |
|
$ |
(947,304 |
) |
|
$ |
(148,616 |
) |
|
$ |
(2,629,553 |
) |
|
$ |
238 |
|
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Non-Redeemable Class A and Class B Ordinary shares, Basic and Diluted |
|
|
2,804,000 |
|
|
|
2,804,000 |
|
|
|
2,804,000 |
|
|
|
2,804,000 |
|
Basic and diluted net (loss) income per share, ordinary shares |
|
$ |
(0.34 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.94 |
) |
|
$ |
0.00 |
|
Income Taxes
The Company accounts for income taxes under ASC
740 Income Taxes (“ASC 740”). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected
impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit
to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when
it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also
provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.
The Company recognizes accrued interest and penalties
related to unrecognized tax benefits as income tax expense. There were no unrecognized tax benefits and no amounts accrued for interest
and penalties as of June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result
in significant payments, accruals or material deviation from its position.
There is currently no taxation imposed on income
by the Government of the Cayman Islands. In accordance with Cayman federal income tax regulations, income taxes are not levied on the
Company. Consequently, income taxes are not reflected in the Company’s interim condensed financial statements. The Company’s
management does not expect the total amount of unrecognized tax benefits will materially change over the next twelve months.
Recently Adopted Accounting Standards
The Company’s management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the
accompanying interim condensed financial statements.
Note 3—Initial Public Offering
Pursuant to the IPO, the Company sold 9,000,000 Units
at a purchase price of $10.00 per unit. Each unit consists of one share of Class A ordinary shares, one-half warrant to
purchase one share of Class A ordinary shares (“Public Warrants”), and one right (“Rights”). Each Public
Warrant will entitle the holder to purchase one share of Class A ordinary shares at a price of $11.50 per share, subject to adjustment. Each
Public Warrant will become exercisable on the later of the completion of the initial Business Combination or 12 months from the closing
of the IPO and will expire five years after the completion of the initial Business Combination, or earlier upon redemption
or liquidation (see Note 7). Each right entitles the holder to receive one-tenth (1/10) of one share of Class A ordinary shares
upon the consummation of an initial Business Combination (see Note 7).
Note 4—Private Placement
Simultaneously with the closing of the IPO, the
Sponsor and I-Bankers purchased an aggregate of 414,000 Private Units and 65,000 Private Units, respectively, for
an aggregate of 479,000 Private Units at a price of $10.00 per Private Unit, for an aggregate purchase price of $4,790,000,
in a private placement. A portion of the proceeds from the private placement was added to the proceeds from the IPO held in the Trust
Account.
Each Private Unit is identical to the Units sold
in the IPO, except that warrants that are part of the Private Placement Units (“Private Warrants”) are not redeemable by
the Company so long as they are held by the original holders or their permitted transferees. In addition, for as long as the warrants
that are part of the Private Placement Units are held by I-Bankers or its designees or affiliates, they may not be exercised after five
years from the effective date of the Registration Statement.
The Company’s Sponsor, officers, and directors
have agreed to (i) waive their redemption rights with respect to their founder shares, private shares, and public shares in connection
with the completion of the Company’s initial Business Combination, (ii) waive their redemption rights with respect to the
founder shares, private shares, and public shares in connection with a shareholder vote to approve an amendment to the Company’s
amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to redeem 100%
of its public shares if the Company does not complete its initial Business Combination within the Combination Period or (B) with
respect to any other provision relating to shareholders’ rights or pre-initial Business Combination activity and (iii) waive
their rights to liquidating distributions from the Trust Account with respect to their founder shares if the Company fails to complete
its initial Business Combination the Combination Period. In addition, the Company’s Sponsor, officers, and directors have agreed
to vote any founder shares, private shares, and public shares held by them and any public shares purchased during or after the IPO (including
in open market and privately negotiated transactions) in favor of the Company’s initial Business Combination.
Note 5—Related Party Transactions
Founder Shares
In September 2020, the Sponsor subscribed 2,875,000 shares
of the Company’s Class B ordinary shares for $25,000, or approximately $0.01 per share, in connection with formation.
On November 9, 2020, the Sponsor surrendered an aggregate of 287,500 founder shares, which were cancelled, resulting in
an aggregate of 2,587,500 founder shares outstanding and held by the Sponsor. The founder shares included an aggregate of up
to 337,500 shares subject to forfeiture if the over-allotment option was not exercised by the underwriters in full. On December
24, 2020, 337,500 shares were forfeited as the over-allotment option was not exercised by the underwriters. As a result, the
Company has 2,250,000 Founder Shares outstanding.
Promissory Note—Related Party
In September 2020, the Company issued an
unsecured promissory note to the Sponsor, pursuant to which the Company may borrow up to an aggregate principal amount of $300,000 to
be used for a portion of the expenses of the IPO. This loan is non-interest bearing, unsecured and due at the earlier of September 30,
2021 or the closing of the IPO. As of November 12, 2020, the Sponsor had loaned to the Company an aggregate of $177,591 under the
promissory note to pay for formation costs and a portion of the expenses of the IPO. The note was repaid in full in connection with the
closing of the initial public offering, and as of June 30, 2022 and December 31, 2021 respectively, no amounts were outstanding.
Convertible Promissory Notes – Related
Party Extension Loans and Working Capital Loans
On November 9, 2021, the Company’s board
of directors approved the first extension of the date by which the Company has to consummate a Business Combination from November 12,
2021, to February 12, 2022. In connection with the extension, the Sponsor deposited into the Trust Account $0.10 for each of the 9,000,000
shares issued in the Initial Public Offering, for a total of $900,000. The Company issued the Sponsor an interest bearing unsecured promissory
note in the principal amount of $900,000 which is payable by the Company upon the earlier of the consummation of the Business Combination
or the liquidation of the Company on or before August 12, 2022 (unless such date is extended by the Company’s board of directors).
Simple interest will accrue on the unpaid principal balance of the Note at the rate of 4% per annum based on 365 days a year. The Note
may be repaid in cash or convertible into units consisting of one ordinary share, one right exchangeable into one-tenth of one ordinary
share, and one warrant exercisable for one-half of one ordinary share at $11.50 per share equal to (x) the portion of the principal amount
of and accrued interest under the Note being converted divided by (y) $10.00 rounded up to the nearest whole number of units.
On February 13, 2022, the Company issued a promissory
note (the “February 2022 Note”) in the principal amount of up to $750,000 to American Physicians LLC. The February 2022 Note
was issued in connection with advances the Sponsor has made, and may make in the future, to the Company for working capital expenses.
The February 2022 Note bears no interest and is due and payable upon the earlier to occur of (i) the date on which the Company consummates
its initial Business Combination and (ii) the date that the winding up of the Company is effective. At the election of the Sponsor, up
to $600,000 of the unpaid principal amount of the February 2022 Note may be converted into units of the Company, each unit consisting
of one Class A share of the Company, one right exchangeable into one-tenth of one Class A ordinary share and one warrant exercisable for
one-half of one Class A ordinary share of the Company upon the consummation of an initial Business Combination (the “Conversion
Units”), equal to (x) the portion of the principal amount of the February 2022 Note being converted, divided by (y) $10.00 rounded
up to the nearest whole number of units. The Conversion Units are identical to the units issued by the Company to the Sponsor in a private
placement in connection with the Company’s initial public offering. The Conversion Units and their underlying securities are entitled
to the registration rights set forth in the February 2022 Note. As of June 30, 2022, $530,000 was drawn and remains outstanding under
the promissory note.
As of June 30, 2022, $1,430,000 was outstanding under the related
party loans. For the three and six months ended June 30, 2022, $3,979 and $17,954 of interest was accrued on the note, respectively. As
of December 31, 2021, $900,000 was outstanding under the related party extension loans plus $5,027 of accrued interest expense.
Changes in the estimated fair value of the note were recognized as non-cash change in the fair value of the convertible promissory note
in the statements of operations (See Note 9).
Administrative Support Agreement
The Company agreed, for a period commencing on
November 9, 2020, and ending upon completion of the Company’s Business Combination or its liquidation, to pay the Company’s
Sponsor a monthly fee of $10,000 for office space, utilities and secretarial and administrative support. Since the initial public
offering, the Company has not made any payments under the agreement and has paid for services rendered and expenses advanced by the Sponsor
on an as-needed basis. Effective March 31, 2021, the Company and Sponsor terminated the agreement and agreed to waive any accrued fees
from inception. As of June 30, 2022 and December 31, 2021, no fees were due to the Sponsor.
The Sponsor, executive officers and directors,
or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on the
Company’s behalf such as identifying potential target businesses and performing due diligence on suitable Business Combinations.
The Company’s audit committee will review on a quarterly basis expenses incurred and all payments that were made to the Sponsor,
officers, directors or their affiliates.
Note 6—Commitments and Contingencies
Registration Rights
The holders of the founder shares, Private Warrants,
and warrants that may be issued upon conversion of Working Capital Loans will have registration rights to require the Company to register
a sale of any of its securities held by them pursuant to a registration rights agreement to be signed prior to or on the effective date
of the IPO. These holders will be entitled to make up to three demands, excluding short form registration demands, that the Company registers
such securities for sale under the Securities Act. In addition, these holders will have “piggy-back” registration rights
to include their securities in other registration statements filed by the Company.
Underwriting Agreement
On November 12, 2020, the Company issued to the
underwriter (and/or its designees) (the “Representative”) 75,000 shares of Class A ordinary shares for $0.01 per
share (the “Representative Shares”). The fair value of the Representative Shares was estimated to $653,250 and were
treated as underwriters’ compensation and charged directly to shareholders’ deficit.
The underwriter (and/or its designees) agreed
(i) to waive its redemption rights with respect to such shares in connection with the completion of the initial Business Combination
and (ii) to waive its rights to liquidating distributions from the Trust Account with respect to such shares if the Company fails
to complete its initial Business Combination within the Combination Period.
In addition, the Company issued to the Representative
a warrant (“Representative’s Warrant) to purchase up to 450,000 Class A ordinary shares. Such warrants will
not be redeemable for as long as they are held by the Representative, and they may not be exercised after five years from the Effective
Date of the registration statement. Except as described above, the warrants are identical to those underlying the units offered by in
the IPO.
The Company initially estimated the fair value
of the Representative’s Warrants at $424,270 using the Monte Carlo simulation model. As of June 30, 2022, the fair value of the
Representative’s Warrant granted to the underwriters is estimated to be $4,956 using the following assumptions: (1) expected
volatility of 4.1%, (2) risk-free interest rate of 3.01% and (3) expected life of 5.32 years. The expected volatility was determined
by the Company based on the historical volatilities of a set of comparative special purpose acquisition companies (“SPAC”),
and the risk-fee interest rate was determined by reference to the U.S. Treasury yield curve in effect for time period equals to the expected
life of the Representative’s Warrant.
On November 12, 2020, the underwriters were paid
a cash underwriting discount of 1.75% of the gross proceeds of the Initial Public Offering, or $1,575,000.
Business Combination Marketing Agreement
The Company engaged the Representative as an advisor
in connection with its Business Combination to (i) assist the Company in preparing presentations for each potential Business Combination;
(ii) assist the Company in arranging meetings with its shareholders, including making calls directly to shareholders, to discuss each
potential Business Combination and each potential target’s attributes and providing regular market feedback, including written status
reports, from these meetings and participate in direct interaction with shareholders, in all cases to the extent legally permissible;
(iii) introduce the Company to potential investors to purchase the Company’s securities in connection with each potential Business
Combination; and assist the Company with the preparation of any press releases and filings related to each potential Business Combination
or target. Pursuant to the Business Combination marketing agreement, the Representative is not obligated to assist the Company in identifying
or evaluating possible acquisition candidates. Pursuant to the Company’s agreement with the Representative, an advisory fee of 2.75%
of the gross proceeds of the IPO, or $2,475,000 will be payable to the Representative at the closing of the Company’s Business
Combination.
Open Market Purchases
Our sponsor entered into an agreement in accordance
with the guidelines of Rule 10b5-1 under the Exchange Act, to place limit orders, through ED&F Man Capital Markets Inc., an independent
broker-dealer registered under Section 15 of the Exchange Act which is not affiliated with us nor part of the underwriting or selling
group, to purchase an aggregate of up to 3,750,000 of our rights in the open market at market prices, and not to exceed $0.20 per right
during the period commencing on the later of (i) December 10, 2020, the date separate trading of the rights commenced or (ii) sixty calendar
days after the end of the “restricted period” under Regulation M, continuing until the date that was the earlier of (a) November
9, 2021 and (b) the date that we announced that we had entered into a definitive agreement in connection with our initial Business Combination,
or earlier in certain circumstances as described in the limit order agreement. The limit orders required such members of our sponsor to
purchase any rights offered for sale (and not purchased by another investor) at or below a price of $0.20, until the earlier of (x) the
expiration of the buyback period or (y) the date such purchases reach 3,750,000 rights in total. Our sponsor would not have any discretion
or influence with respect to such purchases and will not be able to sell or transfer any rights purchased in the open market pursuant
to such agreements until following the consummation of a Business Combination. It was intended that the broker’s purchase obligation
would be subject to applicable law, including Regulation M under the Exchange Act, which may prohibit or limit purchases pursuant to the
limit order agreement in certain circumstances. I-Bankers also agreed to purchase up to 1,250,000 of our rights in the open market
at market prices not to exceed $0.20 per right, on substantially similar terms as our sponsor. The obligations to make any such purchases
expired on November 9, 2021, and as of June 30, 2022, no limit orders were placed by our sponsor or I-Bankers.
Merger Agreement
On February 2, 2022 the Company entered into
an Agreement and Plan of Merger with Edoc Merger Sub Inc, and Calidi Biotherapeutics, Inc. pursuant to which the Company and Calidi Biotherapeutics
Inc. will consummate the Business Combination. The Merger Agreement contains customary representations and warranties, covenants, closing
conditions, termination conditions, and other terms relating to the Merger and the other transactions contemplated thereby.
Pursuant to the Merger Agreement, subject to the terms
and conditions set forth therein, (i) upon the consummation of the transactions contemplated by the Merger Agreement (the “Closing”),
Merger Sub will merge with and into Caldi (the “Merger” and, together with the other transactions contemplated by the Merger
Agreement, the “Transactions”), with Calidi continuing as the surviving corporation in the Merger and a wholly-owned subsidiary
of Edoc. In the Merger, (i) all shares of Calidi common stock (together, “Calidi Stock”) issued and outstanding immediately
prior to the Effective Time (other than those properly exercising any applicable dissenters rights under Nevada law) will be converted
into the right to receive the Merger Consideration (as defined below); and (ii) each outstanding option to acquire shares of Calidi common
stock (whether vested or unvested) will be assumed by Edoc and automatically converted into an option to acquire shares of Edoc common
stock, with its price and number of shares equitably adjusted based on the conversion ratio of the shares of Calidi common stock into
the Merger Consideration.
The Merger Agreement also provides that, prior
to the Effective Time, Edoc shall continue out of the Cayman Islands and Into the State of Delaware so as to re-domicile as and become
a Delaware corporation (the “Conversion”). At the Closing, the Company will change its name to “Calidi Biotherapeutics,
Inc.”.
The aggregate merger consideration to be paid
pursuant to the Merger Agreement to holders of Calidi Stock as of immediately prior to the Effective Time (the “Calidi Stockholders”
and together with the holders of Calidi options immediately prior to the Effective Time, the “Calidi Security Holders”) will
be an amount initially equal to$400,000,000 and subsequently amended to $380,000,000 on May 24, 2022 as part of the Second Amendment
to the Agreement and Plan of Merger, subject to adjustments for Calidi’s closing debt, net of cash (the “Merger Consideration”).
The Merger Consideration to be paid to the Calidi Stockholders will be paid solely by the delivery of new shares of Edoc common stock,
with each share valued at $10.00 per share. The Merger Consideration will be subject to a post-closing true up after the closing.
Refer to Current Reports on Form 8-K filed on
February 2, 2022, February 7, 2022 and May 25, 2022 for further information regarding the Business Combination and other certain related
agreements entered into concurrently with the execution of the Merger Agreement, and amendments thereto.
Securities Purchase Agreement
On February 2, 2022, the Company entered into
a Securities Purchase Agreement (the “SPA”) with an institutional investor (the “PIPE Investor”)
for the purchase and sale of 20,000 shares of the Company’s Series A Convertible Preferred Stock (the “Preferred
Shares”) for $1,000 per share for an aggregate purchase price of $20 million and 500,000 shares of the
Company’s Common Stock (the “Common Stock”) for an aggregate purchase price of $5 million upon the Conversion
and concurrently with the closing of the Business Combination. The closing of the PIPE Investment is conditioned upon, among other things,
the listing of the Common Stock, Conversion Shares and Warrant Shares (as such terms are defined in the SPA) on the Nasdaq Stock Market.
All conditions precedent to the closing of the Merger set forth in the Merger Agreement, including, without limitation, the approval
Edoc’s shareholders and Calidi stockholders, shall have been satisfied or waived, as well as other customary closing conditions
and deliverables. At the closing of the PIPE Investment, the PIPE Investor will also be issued a common stock purchase warrant to purchase
up to an additional 2,500,000 shares of Edoc’s common stock at an initial exercise price equal $11.50 per share,
for a term of three years from the closing date of the PIPE Investment.
Amendment to Securities Purchase Agreement
On March 16, 2022, the Company, Calidi and the
PIPE Investor amended Sections 4(aa)(xii) and 5(e) of the SPA, Section 4(c)(ii) of the Certificate of Designation, and Section 1(c) of
the Warrant to clarify that (i) so long as the Company has provided notice to the PIPE Investor that the then effective Registration
Statement covering the applicable resale of the Conversion Shares, Common Shares and/or Warrant Shares is not available in accordance
with the requirements of the Registration Rights Agreement (at a time when such Registration Statement is not available for such applicable
securities), then damages with respect to any such “Notice Failure” (as used in such sections) with respect thereto shall
cease to accrue with respect to such Registration Statement as of the time of such notice; provided that, thereafter, if a registration
statement becomes available and later unavailable, the Company shall be required to provide an additional notice for damages with respect
to such “Notice Failure” to cease to accrue with respect thereto and (ii) the reference to 2% in Section 4(c)(ii) in the
form of Certificate of Designation shall be replaced with 1%.
In addition, the amendment provides that so long
as the PIPE Investor has the unconditional right to terminate the SPA, the Company may introduce to the PIPE Investor other investors
who may be interested in co-investing with the PIPE Investor as additional PIPE Investors on terms no less favorable than the terms set
forth in the SPA. Any such co-investor would be added to the SPA only by an amendment mutually acceptable to the PIPE Investor, the Company,
and Calidi.
Backstop Agreements
On February 2, 2022, the Company entered into
share purchase agreements (collectively, the “Forward Share Purchase Agreements”) with certain backstop arrangements with
Sea Otter Securities, Stichting Juridisch Eigendom Mint Tower Arbitrage Fund, Feis Equities LLC, Yakira Capital Management, Inc., Yakira
Enhanced Offshore Fund and Yakira Partners LP, MAP 136 Segregated Portfolio and Meteora Capital Partners, LP (collectively, the “Backstop
Investors”), pursuant to which the Backstop Investors agreed not to redeem certain Edoc shares (the “Backstop Shares”)
in connection with the Company’s shareholder meeting to approve an extension of the date by which the Company has to consummate
a Business Combination from February 12, 2022 to August 12, 2022 (the “ February 2022 Extension”) and the Business Combination.
Pursuant to the Backstop Agreements, the Backstop Investors agreed to hold such shares until the three-month anniversary of the consummation
of the Business Combination, at which time they will each have the right to sell them to the combined entity, after giving effect to the
Business Combination (the “Combined Company”) for a price of $10.42 per share, or will sell them during such time period at
a market price of at least $10.27 per share (with a premium of $0.05 per share to be paid by the Combined Company for each Backstop Share
sold by a Backstop Investor during the one-month period following the Closing of the Business Combination). The Backstop Investors’
agreements provide that, following the Closing of the Business Combination, the Company will deposit into escrow accounts the aggregate
cash amount necessary to purchase the shares held by the Backstop Investors, up to $22,924,000. As a result, these amounts deposited into
the escrow accounts will not be available to the Combined Company unless and until any of the Backstop Investors sell such shares in the
market. If the Backstop Investors sell such shares during the one-month period following the Closing of the Business Combination at a
sales price that is greater than $10.27 per share, then Combined Company shall pay to each selling investor a premium of $0.05 per share
sold. If the Backstop Investors sell shares to the Combined Company on the three-month anniversary of the Closing of the Business Combination,
the repurchase price payable by the Combined Company for such shares from the escrow accounts established for this purpose shall be $10.42
per share.
In consideration of the Backstop Investors’ agreements with regard
to Public Shares pursuant to the backstop arrangements, the Sponsor (or its designees) agreed to transfer an aggregate of 338,907 shares
of Edoc Class B ordinary shares (the “Backstop Transferred Founder Shares”) to the Backstop Investors. Additionally, if the
Business Combination has not consummated by May 12, 2022, then for each monthly period from May 12, 2022 until August 12, 2022 that the
Business Combination has not closed, Edoc shall issue to the Backstop Investors, at Edoc’s discretion, either (i) a cash amount
of $0.05 per share not redeemed by the Backstop Investors, for an aggregate of up to $0.15 per share, or (ii) or 0.034 Backstop Transferred
Founder Shares per share not redeemed by the Backstop Investors in connection with the extraordinary general meeting of Edoc shareholders
in connection with the February 2022 Extension, to be transferred by the Sponsor (or its designees), for an aggregate of up to 0.1027
Backstop Transferred Founder Shares per share. Such payment(s) will be made within five (5) business days following each of May 12, 2022,
June 12, 2022, and July 12, 2022, to the extent that the Business Combination has not closed by such dates. As of July 22, 2022, 225,940
more Backstop Transferred Founder Shares have been transferred by the Sponsor to the Backstop investors. The Company recognized $1,529,660
and $4,956,010 of finance costs, at the per share price of $10.11, $10.25 and $10.20, for the three and six months ended June 30, 2022
for the transfer of shares associated with the agreement in the statements of operations of the condensed financial statements. The Backstop
Agreements will expire on August 12, 2022, in accordance with their terms.
Common Stock Purchase Agreement
On March 16, 2022, the Company entered into a
Common Stock Purchase Agreement (the “Purchase Agreement”) with an institutional investor (the “Common Stock Investor”).
Pursuant to the Purchase Agreement, the Company
will have the right, but not the obligation, to sell to the Common Stock Investor up to $75,000,000 in shares of our Common Stock
(the “Total Commitment”), subject to certain limitations and conditions to closing set forth in the Purchase Agreement.
The Company does not have the right to commence
any sales of the Common Stock to the Common Stock Investor under the Purchase Agreement until the Commencement, which is the time when
all of the conditions to our right to commence sales of our Common Stock to the Common Stock Investor set forth in the Purchase Agreement
have been satisfied, including the closing conditions described above and that the registration statement required pursuant to the Registration
Rights Agreement has been declared effective by the SEC. From and after the Commencement, the Company will control the timing and amount
of any sales of our Common Stock to the Common Stock Investor, subject to certain conditions and the volume and beneficial ownership
limitations described in further detail below. Actual sales of shares of our Common Stock to the Common Stock Investor under the Purchase
Agreement will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the
trading price of our Common Stock and determinations by us as to the appropriate sources of funding for our company and our operations.
The purchase price of the shares of Common Stock
that the Company elects to sell to the Common Stock Investor (a “VWAP Purchase”) under the Purchase Agreement will be determined
by reference to the lowest daily volume weighted average price (“VWAP”) of the Common Stock during the three (3) consecutive
trading days beginning on the applicable VWAP Purchase Exercise Date for such VWAP Purchase, multiplied by 0.960. There is no upper limit
on the price per share that the Common Stock Investor could be obligated to pay for the Common Stock under the Purchase Agreement. For
each VWAP Purchase, the Company would be limited to a number of shares of Common Stock equal to the lesser of (i) the product obtained
by multiplying (A) the average daily trading volume in the Common Stock on the Nasdaq Capital Market (or any nationally recognized successor
thereto and collectively, the “Nasdaq”)) during the five (5) Trading Days immediately preceding the applicable VWAP Purchase
Exercise Date for such VWAP Purchase and (B) 0.30, and (ii) the quotient obtained by dividing (A) $10,000,000 by (B) the VWAP of the
Common Stock on the Nasdaq on the trading day immediately preceding the applicable VWAP Purchase Exercise Date, as defined in the Purchase
Agreement, for such VWAP Purchase.
The Purchase Agreement also prohibits the Company
from directing the Common Stock Investor to purchase any shares of our Common Stock if those shares, when aggregated with all other shares
of our Common Stock then beneficially owned by the Common Stock Investor (as calculated pursuant to Section 13(d) of the Securities
Exchange Act of 1934, as amended, and Rule 13d-3 thereunder), would result in the Common Stock Investor beneficially owning
more than 4.99% of the outstanding shares of Common Stock (the “Beneficial Ownership Cap”); provided, that, the Common
Stock Investor may, in its sole discretion, elect to increase the Beneficial Ownership Cap to permit it to beneficially own up to 9.99%
of the outstanding shares of Common Stock.
Note 7—Warrants and Rights
Warrants — Each whole warrant
entitles the holder to purchase one share of the Company’s Class A ordinary shares at a price of $11.50 per share, subject
to adjustment as discussed herein. In addition, if (x) the Company issues additional Class A ordinary shares or equity-linked
securities for capital raising purposes in connection with the closing of its initial Business Combination at an issue price or effective
issue price of less than $9.50 per share of Class A ordinary shares (with such issue price or effective issue price to be determined
in good faith by the Company’s board of directors and, in the case of any such issuance to the Company’s Sponsor or its affiliates,
without taking into account any founder shares held by the Company’s Sponsor or its affiliates, prior to such issuance) (the “Newly
Issued Price”), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds,
and interest thereon, available for the funding of the initial Business Combination on the date of the consummation of the initial Business
Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s ordinary shares during
the 20 trading day period starting on the trading day prior to the day on which the Company consummates the initial Business Combination
(such price, the “Market Value”) is below $9.50 per share, the exercise price of the warrants will be adjusted (to the nearest
cent) to be equal to 115% of the Market Value, and the $18.00 per share redemption trigger price described below under “Redemption
of warrants” will be adjusted (to the nearest cent) to be equal to 180% of the Market Value.
The warrants will become exercisable on the later
of 12 months from the closing of the IPO or upon completion of its initial Business Combination and will expire five years after
the completion of the Company’s initial Business Combination, at 5:00 p.m., Eastern Time, or earlier upon redemption or liquidation.
In no event will the Company be required to net
cash settle any warrant. If the Company is unable to complete a Business Combination within the Combination Period and the Company liquidates
the funds held in the Trust Account, holders of warrants will not receive any of such funds with respect to their warrants, nor will
they receive any distribution from the Company’s assets held outside of the Trust Account with the respect to such warrants. Accordingly,
the warrants may expire worthless.
The Company will not be obligated to deliver
any Class A ordinary shares pursuant to the exercise of a warrant and will have no obligation to settle such warrant exercise unless
a registration statement under the Securities Act with respect to the Class A ordinary shares underlying the warrants is then effective
and a prospectus is current. No warrant will be exercisable, and the Company will not be obligated to issue Class A ordinary shares
upon exercise of a warrant unless Class A ordinary shares issuable upon such warrant exercise has been registered, qualified or
deemed to be exempt under the securities laws of the state of residence of the registered holder of the warrants. In no event will the
Company be required to net cash settle any warrant. In the event that a registration statement is not effective for the exercised warrants,
the purchaser of a unit containing such warrant will have paid the full purchase Price for the unit solely for the share of Class A
ordinary shares underlying such unit.
The Company may call the warrants for redemption
(excluding the private warrants, and any outstanding Representative’s Warrants, and any warrants underlying units issued to the
Sponsor, initial shareholders, officers, directors or their affiliates in payment of Working Capital Loans made to the Company), in whole
and not in part, at a price of $0.01 per warrant:
| ● | at any time while the warrants are exercisable, |
| | |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder, |
| | |
| ● | if, and only if, the reported last sale price of the Class A ordinary shares equals or exceeds $18.00 per share (as adjusted for share splits, share dividends, reorganizations and recapitalizations), for any 20 trading days within a 30 trading day period ending on the third trading business day prior to the notice of redemption to warrant holders, and |
| | |
| ● | if, and only if, there is a current registration statement in effect with respect to the issuance of the Class A ordinary shares underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day until the date of redemption. |
If the Company calls the warrants for redemption
as described above, the management will have the option to require any holder that wishes to exercise its warrant to do so on a “cashless
basis.” If the management takes advantage of this option, all holders of warrants would pay the exercise price by surrendering
their warrants for that number of shares of Class A ordinary shares equal to the quotient obtained by dividing (x) the product
of the number of shares of Class A ordinary shares underlying the warrants, multiplied by the excess of the “fair market value”
(defined below) over the exercise price of the warrants by (y) the fair market value. The “fair market value” shall
mean the average reported last sale price of the Class A ordinary shares for the 10 trading days ending on the third trading day
prior to the date on which the notice of redemption is sent to the holders of warrants.
Rights — Except in cases
where the Company is not the surviving company in a Business Combination, each holder of a right will automatically receive one-tenth
(1/10) of a share of Class A ordinary shares upon consummation of the initial Business Combination, even if the holder of a right
converted all shares held by him, her or it in connection with the initial Business Combination or an amendment to the Company’s
memorandum and articles of association with respect to its pre-Business Combination activities. In the event that the Company will not
be the surviving company upon completion of the initial Business Combination, each holder of a right will be required to affirmatively
convert his, her or its rights in order to receive the one-tenth (1/10) of a share of Class A ordinary shares underlying each right
upon consummation of the Business Combination. No additional consideration will be required to be paid by a holder of rights in order
to receive his, her or its additional share of Class A ordinary shares upon consummation of an initial Business Combination. The
shares issuable upon exchange of the rights will be freely tradable (except to the extent held by affiliates of the Company). If the Company
enters into a definitive agreement for a Business Combination in which the Company will not be the surviving entity, the definitive agreement
will provide for the holders of rights to receive the same per share consideration the holders of share of Class A ordinary shares
will receive in the transaction on an as-converted into Class A ordinary shares basis.
The Company will not issue fractional shares
in connection with an exchange of rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed
in accordance with the applicable provisions of the Cayman Islands law. As a result, the holders of the rights must hold rights in multiples
of 10 in order to receive shares for all of the holders’ rights upon closing of a Business Combination. If the Company is unable
to complete an initial Business Combination within the required time period and the Company liquidates the funds held in the Trust Account,
holders of rights will not receive any of such funds with respect to their rights, nor will they receive any distribution from the Company’s
assets held outside of the Trust Account with respect to such rights, and the rights will expire worthless. Further, there are no contractual
penalties for failure to deliver securities to the holders of the rights upon consummation of an initial Business Combination. Additionally,
in no event will the Company be required to net cash settle the rights. Accordingly, the rights may expire worthless.
Note 8—Shareholders’ Deficit
Preferred Shares — The
Company is authorized to issue a total of 5,000,000 preferred shares at par value of $0.0001 each. On June 30, 2022 and
December 31, 2021, there were no preferred shares issued or outstanding.
Class A Ordinary Shares —
The Company is authorized to issue a total of 500,000,000 Class A ordinary shares at par value of $0.0001 each. As
of June 30, 2022 and December 31, 2021, there were 554,000 Class A ordinary shares issued and outstanding, excluding 2,673,242
and 9,000,000 Class A ordinary shares subject to possible redemption which are presented as temporary equity, respectively.
Class B Ordinary Shares —
The Company is authorized to issue a total of 50,000,000 Class B ordinary shares at par value of $0.0001 each. In
September 2020, the Sponsor subscribed 2,875,000 shares of the Company’s Class B ordinary shares for $25,000, or
approximately $0.01 per share, in connection with formation. On November 9, 2020, the founders surrendered an aggregate of 287,500 Class
B ordinary shares for no consideration, resulting in an aggregate of 2,587,500 Class B ordinary shares issued and outstanding.
On December 24, 2020, 337,500 shares were forfeited as the over-allotment option was not exercised by the underwriters, resulting
in an aggregate of 2,250,000 Class B ordinary shares issued and outstanding at June 30, 2022 and December 31, 2021.
The Company’s initial shareholders have
agreed not to transfer, assign or sell 50% its founder shares until the earlier to occur of (i) six months after the date of the
consummation of the initial Business Combination or (ii) the date on which the closing price of the Company’s Class A
ordinary shares equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing after the initial Business Combination and the remaining 50% of the
founder shares may not be transferred, assigned or sold until six months after the date of the consummation of the initial Business Combination,
or earlier, in either case, if, subsequent to the initial Business Combination, the Company consummates a subsequent liquidation, merger,
stock exchange or other similar transaction which results in all of the shareholders having the right to exchange their shares for cash,
securities or other property.
The Class B ordinary shares will automatically
convert into the Company’s Class A ordinary shares at the time of its initial Business Combination on a one-for-one basis,
subject to adjustment for stock splits, stock dividends, reorganizations, recapitalizations and the like, and subject to further adjustment
as provided herein. In the case that additional Class A ordinary shares, or equity-linked securities, are issued or deemed issued
in excess of the amounts offered in the IPO and related to the closing of the initial Business Combination, the ratio at which Class B
ordinary shares shall convert into Class A ordinary shares will be adjusted (unless the holders of a majority of the outstanding
Class B ordinary shares agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number
of Class A ordinary shares issuable upon conversion of all shares of Class B ordinary shares will equal, in the aggregate,
on an as-converted basis, 20% of the sum of the total number of ordinary shares outstanding upon the completion of the IPO plus all Class A
ordinary shares and equity-linked securities issued or deemed issued in connection with the initial Business Combination (excluding any
shares or equity-linked securities issued, or to be issued, to any seller in the initial Business Combination or any private placement-equivalent
units issued to the Sponsor or its affiliates upon conversion of loans made to the Company).
Holders of the Class A ordinary shares and
holders of the Class B ordinary shares will vote together as a single class on all matters submitted to a vote of the Company’s
shareholders, with each share of ordinary shares entitling the holder to one vote.
Note 9—Fair Value Measurements
Financial Accounting Standards Board’s
(“FASB”) Accounting Standards Codification (“ASC”) Topic 820 “Fair Value Measurements and Disclosures”
(“ASC 820”) defines fair value, the methods used to measure fair value and the expanded disclosures about fair value measurements.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between the
buyer and the seller at the measurement date. In determining fair value, the valuation techniques consistent with the market approach,
income approach and cost approach shall be used to measure fair value. ASC 820 establishes a fair value hierarchy for inputs, which represent
the assumptions used by the buyer and seller in pricing the asset or liability. These inputs are further defined as observable and unobservable
inputs. Observable inputs are those that buyer and seller would use in pricing the asset or liability based on market data obtained from
sources independent of the Company. Unobservable inputs reflect the Company’s assumptions about the inputs that the buyer and seller
would use in pricing the asset or liability developed based on the best information available in the circumstances.
The fair value hierarchy is categorized into
three levels based on the inputs as follows:
Level 1 – Valuations based on
unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation
adjustments and block discounts are not being applied. Since valuations are based on quoted prices that are readily and regularly available
in an active market, valuation of these securities does not entail a significant degree of judgment.
Level 2 – Valuations based on
(i) quoted prices in active markets for similar assets and liabilities, (ii) quoted prices in markets that are not active for identical
or similar assets, (iii) inputs other than quoted prices for the assets and liabilities, or (iv) inputs that are derived principally
from or corroborated by market through correlation or other means.
Level 3 – Valuations based on
inputs that are unobservable and significant to the overall fair value measurement.
The fair value of the Company’s certain assets
and liabilities, which qualify as financial instruments under ASC 820, approximates the carrying amounts represented in the balance sheets
as of June 30, 2022 and December 31, 2021. The fair values of cash and cash equivalents, prepaid assets, accounts payable and accrued
expenses are estimated to approximate the carrying values as of June 30, 2022, and December 31, 2021, due to the short maturities
of such instruments.
The following table presents information about
the Company’s assets and liabilities that are measured at fair value on a recurring basis at June 30, 2022 and December 31,
2021, and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description: | |
Level | |
June 30, 2022 | | |
Level | |
December 31, 2021 | |
Assets: | |
| |
| | |
| |
| |
U.S. Money Market Funds Held in Trust Account | |
1 | |
| 3,839 | | |
1 | |
$ | 92,459,548 | |
Liabilities: | |
| |
| | | |
| |
| | |
Warrant liability—Private Warrants | |
3 | |
$ | 14,849 | | |
3 | |
$ | 96,059 | |
Warrant liability—Representative’s Warrants | |
3 | |
$ | 4,956 | | |
3 | |
$ | 107,779 | |
Convertible Promissory Note | |
3 | |
$ | 1,522,386 | | |
3 | |
$ | 975,324 | |
Investment Held in Trust Account
As of June 30, 2022, investments in the Company’s Trust Account consisted
of $3,839 in money market funds and $27,494,039 in U.S. Treasury Bills maturing on July 12, 2022. The Company classifies its U.S. Treasury
Securities as held-to-maturity in accordance with FASB ASC 320 “Investments – Debt and Equity Securities.” Held-to maturity
securities are those securities which the Company has the ability and intent to hold until maturity. Held-to -maturity securities are
recorded at amortized cost and adjusted for the amortization or accretion of premiums or discounts. The Company considers all investments
with original maturities of more than three months but less than one year to be short-term investments. The carrying value approximates
the fair value due to its short-term maturity. The amortized cost, gross unrealized holding loss and fair value of held to maturity securities
on June 30, 2022, are as follows:
| |
Amortized Cost | | |
Gross Unrealized Loss | | |
Fair Value | |
U.S. Treasury Securities (mature on 7/12/2022) | |
$ | 27,494,039 | | |
$ | (2,263 | ) | |
$ | 27,491,776 | |
As of December 31, 2021, investments in the Company’s
Trust Account consisted of $92,459,548 in U.S. Money Market funds.
There were no transfers between Levels 1, 2 or 3 during the three and six
months ended June 30, 2022, or for the year ended December 31, 2021.
Level 1 instruments include investments in money
markets and Treasury securities. The Company uses inputs such as actual trade data, benchmark yields, quoted market prices from dealers
or brokers, and other similar sources to determine the fair value of its investments.
Warrant Liability
The Private Warrants and Representative’s
Warrants are accounted for as liabilities pursuant to ASC 815-40 and are measured at fair value as of each reporting period. Changes
in the fair value of the Warrants are recorded in the statements of operations each period.
The Private Warrants and Representative’s
Warrants were valued using a Montel Carlo simulation model, which is considered to be a Level 3 fair value measurement. Inherent in an
options pricing model are assumptions related to expected share-price volatility, expected life, risk-free interest rate and dividend
yield. The Company estimates the volatility of its ordinary shares based on historical volatility that matches the expected remaining
life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity
similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining
contractual term. The dividend rate is based on the historical rate, which the Company anticipates to remain at zero.
There were no transfers between Levels 1, 2 or
3 during the three and six months ended June 30, 2022 or the year ended December 31, 2021.
The following table provides quantitative information
regarding Level 3 fair value measurements for Private Warrants as of June 30, 2022 and December 31, 2021. The Representative’s
Warrants were valued using similar information, except for strike price which is at $12.
| |
June 30, 2022 | | |
December 31, 2021 | |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Share price | |
$ | 10.20 | | |
$ | 10.21 | |
Volatility | |
| 4.1 | % | |
| 6.5 | % |
Expected life | |
| 5.32 | | |
| 5.39 | |
Risk-free rate | |
| 3.01 | % | |
| 1.29 | % |
Dividend yield | |
| — | % | |
| — | % |
The following table presents a summary of the
changes in the fair value of the Private Warrants and Representative’s Warrants, a Level 3 liability, measured on a recurring basis.
| |
Private Warrants | | |
Representative’s Warrants | | |
Warrant Liability | |
Fair value as of December 31, 2021 | |
$ | 96,059 | | |
$ | 107,779 | | |
$ | 203,838 | |
Change in fair value (1) | |
| (39,161 | ) | |
| (102,716 | ) | |
| (141,877 | ) |
Fair value as of March 31, 2022 | |
$ | 56,898 | | |
$ | 5,063 | | |
$ | 61,961 | |
Change in fair value (1) | |
| (42,049 | ) | |
| (107 | ) | |
| (42,156 | ) |
Fair value as of June 30, 2022 | |
$ | 14,849 | | |
$ | 4,956 | | |
$ | 19,805 | |
(1) | Represents
the non-cash gain on change in valuation of the Private Warrants and Representative’s
Warrants and is included in Gain on change in fair value of warrant liability on the statements
of operations. |
Convertible Promissory Note
The convertible promissory note was valued using
a Montel Carlo simulation model, which is considered to be a Level 3 fair value measurement. The estimated fair value of the Convertible
Promissory Note was based on the following significant inputs:
| |
June 30, 2022 | | |
December 31, 2021 | |
Risk-free interest rate | |
| 1.94 | % | |
| 0.84 | % |
Time to Expiration (in years) | |
| 0.32 | | |
| 0.39 | |
Expected volatility | |
| 5.5 | % | |
| 4.9 | % |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Stock Price | |
$ | 10.41 | | |
$ | 10.82 | |
Probability of transaction | |
| 99.0 | % | |
| 90.00 | % |
The following table presents the changes in the
fair value of the Level 3 Convertible Promissory Note:
Fair value as of December 31, 2021 | |
$ | 975,324 | |
Proceeds received through Convertible Promissory Note | |
| 420,000 | |
Interest accrued | |
| 13,975 | |
Change in fair value | |
| 12,560 | |
Fair value as of March 31, 2022 | |
$ | 1,421,859 | |
Proceeds received through Convertible Promissory Note | |
| 110,000 | |
Interest accrued | |
| 3,979 | |
Change in fair value | |
| (13,452 | ) |
Fair value as of June 30, 2022 | |
$ | 1,522,386 | |
There were no transfers in or out of Level 3
from other levels in the fair value hierarchy during the three and six months ended June 30, 2022 or the year ended December 31, 2021
for the Convertible Promissory Note.
Note 10—Subsequent Events
The Company evaluated subsequent events and transactions
that occurred after the balance sheet date up to the date that the interim condensed financial statements were issued. Based upon this
review, other than the event disclosed below, the Company did not identify any subsequent events that would have required adjustment
or disclosure in the interim condensed financial statements.
Related Party Convertible Promissory Note
– Working Capital Loan
On July 1, 2022 and July 20, 2022, the Company
requested a drawdown under the February 2022 Note with American Physicians LLC in the principal amount of $70,000 and $150,000, respectively,
for working capital expenses. As of July 21, 2022, $750,000 was drawn and remains outstanding under the promissory note.
Shares Transferred to Backstop Investors
On July 22, 2022 the Company transferred
225,940 Backstop Transferred Founder Shares to the Backstop investors as part of the Backstop Agreement.