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 September 30, 2022, the Company had not yet commenced any operations. All activity through September 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 $64,996,858 (or approximately ($10.27 per share) was released from the Trust Account to pay such shareholders.
On
August 12, 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 August 12, 2022 to February 12, 2023. In connection with the
approval of the extension, shareholders elected to redeem an aggregate of 646,617 Class A ordinary shares. As a result, an aggregate
of $6,660,150 (or approximately ($10.30 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 February 12, 2023 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 these uncertainties.
Going
Concern
As
of September 30, 2022, the Company had $3,486 in the operating bank account and working capital deficit of $2,083,545.
On
November 10, 2021, the Company issued an interest-bearing convertible promissory to the Sponsor in the amount of $900,000. As of September
30, 2022, the fair value of the note outstanding, including accrued interest, was $471,499.
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 September 30, 2022, $750,000 was drawn on the note and the fair value of the note outstanding was
$379,002.
On
August 25, 2022, the Company issued a non-interest-bearing promissory note in the aggregate principal amount of up to $202,460 to the
Sponsor. As of September 30, 2022, $67,487 was drawn on the note.
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 February 12, 2023 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 September 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 notes. 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 September 30, 2022 and December 31, 2021.
Investment
Held in Trust Account
As
of September 30, 2022 and December 31, 2021, substantially all of 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 September 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 $64,996,858 (or approximately ($10.27 per share) was released
from the Trust Account to pay such shareholders. On August 12, 2022, the Company held an extraordinary general meeting pursuant to which
the Company’s shareholders approved extending the date by which the Company has to complete a Business Combination from August
12, 2022 to February 12, 2023. In connection with the approval of the extension, shareholders elected to redeem an aggregate of 646,617
Ordinary Shares. As a result, an aggregate of $6,660,150 (or approximately $10.30 per shares) 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 notes 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 notes. 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 notes were 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 $64,996,858 (or approximately ($10.27 per share) was released from the Trust Account to pay such shareholders.
On August 12, 2022, the Company held an extraordinary general meeting pursuant to which the Company’s shareholders approved extending
the date by which the Company has to complete a Business Combination from August 12, 2022 to February 12, 2023. In connection with the
approval of the extension, shareholders elected to redeem an aggregate of 646,617 Ordinary Shares. As a result, an aggregate of $6,660,150
(or approximately $10.30 per shares) was released from the Trust Account to pay such shareholders. Accordingly, as of September 30, 2022
and December 31, 2021, 2,026,625 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 September 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 | |
Less: | |
| | |
Redemption 646,617 shares | |
| (6,660,150 | ) |
Plus: | |
| | |
Fair value adjustment of carrying value to redemption value | |
| 168,824 | |
Contingently redeemable ordinary shares at September 30, 2022 | |
$ | 21,006,552 | |
Net
Loss Per Ordinary Share
The
Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share.” Net loss per ordinary
share is computed by dividing the net 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 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 September 30, | | | Nine Months Ended September 30, | |
| | 2022 | | | 2021 | | | 2022 | | | 2021 | |
Ordinary shares subject to possible redemption | | | | | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | | | | | |
Net loss allocable to Class A ordinary shares subject to possible redemption | | $ | (104,924 | ) | | $ | (376,962 | ) | | $ | (3,685,244 | ) | | $ | (376,196 | ) |
Denominator: | | | | | | | | | | | | | | | | |
Weighted Average Redeemable Class A Ordinary shares, Basic and Diluted | | | 2,349,934 | | | | 9,000,000 | | | | 3,491,286 | | | | 9,000,000 | |
Basic and Diluted net loss per share, Redeemable Class A Ordinary shares | | $ | (0.04 | ) | | $ | (0.04 | ) | | $ | (1.06 | ) | | $ | (0.04 | ) |
| | | | | | | | | | | | | | | | |
Non-Redeemable Ordinary shares | | | | | | | | | | | | | | | | |
Numerator: | | | | | | | | | | | | | | | | |
Net loss allocable to Non-redeemable Class A and Class B ordinary shares not subject to redemption | | $ | (125,199 | ) | | $ | (117,444 | ) | | $ | (2,959,776 | ) | | $ | (117,206 | ) |
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 per share, ordinary shares | | $ | (0.04 | ) | | $ | (0.04 | ) | | $ | (1.06 | ) | | $ | (0.04 | ) |
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 September 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
In
August 2020, the 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. As a smaller reporting company, ASU 2020-06 is effective
January 1, 2024 for fiscal years beginning after December 15, 2023 and should be applied on a full or modified retrospective basis, with
early adoption permitted beginning on January 1, 2021. The Company is currently assessing the impact, if any, that ASU 2020-06 would
have on its financial position, results of operations or cash flows. The Company has not adopted this guidance as of September 30, 2022.
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 September 30, 2022 and December 31, 2021 respectively, no amounts were outstanding. Borrowings under this note
are no longer available.
On August 25, 2022, the Company issued a promissory note (the “August
2022 Note”) in the aggregate principal amount of up to $202,460 to the Sponsor, pursuant to which the Extension Funds will be deposited
into the Company’s trust account for each Class A ordinary share of the Company that was not redeemed in connection with the extension
of the Company’s termination date from August 12, 2022 to February 12, 2023. The principal amount of the August 2022 Note may
be drawn down in three equal amounts and the balance of the August 2022 Note is payable by the Company on the earlier of the consummation
of the Business Combination or the date of the liquidation of the Company. As of September 30, 2022, $67,487 was outstanding under the
August 2022 Note.
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 (the “November 2021 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 February 12, 2023 (unless such date is extended
by the Company’s board of directors). Simple interest will accrue on the unpaid principal balance of the November 2021 Note at the
rate of 4% per annum based on 365 days a year. The November 2021 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 November 2021Note being converted
divided by (y) $10.00 rounded up to the nearest whole number of units. As of September 30, 2022 and December 31, 2021, $900,000 was outstanding
under the November 2021 Note. For the three and nine months ended September 30, 2022, $9,074 and $27,028 of interest was accrued on the
November 2021 Note, respectively. As of December 31, 2021, $5,027 of interest was accrued on the November 2021 Note.
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 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 September 30, 2022, $750,000 was outstanding under the February 2022 Note.
Changes in the estimated fair value of the November 2021 Note and the February 2022 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 September 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 September 30, 2022, the fair value of the Representative’s Warrant granted to the underwriters is estimated to be $0 using
the following assumptions: (1) expected volatility of 0.1%, (2) risk-free interest rate of 4.04% and (3) expected life of 5.49
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 September
30, 2022, no limit orders were placed by our sponsor or I-Bankers.
Termination
of 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.
On August 11, 2022, the Company received written notice that Calidi Biotherapeutics, Inc. had terminated the Merger Agreement. As a result
of the termination of the Merger Agreement, the Merger Agreement will be of no further force and effect, and certain agreements entered
into in connection with the Merger Agreement, including but not limited to, the Voting Agreement and Lock-Up Agreement, were no longer
in force or effect.
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 was not consummated by May 12, 2022, then for each monthly period from May 12, 2022 until August 12, 2022
that the Business Combination had 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) were to 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 had not closed by such dates. On July 22,
2022, 225,940 more Backstop Transferred Founder Shares were transferred by the Sponsor to the Backstop investors. The Company recognized
$783,966 and $5,739,976 of finance costs, at the per share price of $10.24, for the three and nine months ended September 30, 2022 for
the transfer of shares associated with the agreement in the statements of operations of the condensed financial statements. The Backstop
Agreements expired on August 12, 2022, in accordance with their terms.
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 September 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 September 30, 2022 and December 31, 2021, there were 554,000 Class A ordinary shares issued and outstanding, excluding 2,026,625
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 September 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 September 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 September 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 September 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 | | |
September 30, 2022 | | |
Level | | |
December 31, 2021 | |
Assets: | |
| | |
| | |
| | |
| |
U.S. Money Market Funds Held in Trust Account | |
| 1 | | |
| 21,006,552 | | |
| 1 | | |
$ | 92,459,548 | |
Liabilities: | |
| | | |
| | | |
| | | |
| | |
Warrant liability—Private Warrants | |
| 3 | | |
$ | 15,644 | | |
| 3 | | |
$ | 96,059 | |
Warrant liability—Representative’s Warrants | |
| 3 | | |
$ | — | | |
| 3 | | |
$ | 107,779 | |
Convertible Promissory Note | |
| 3 | | |
$ | 850,501 | | |
| 3 | | |
$ | 975,324 | |
Investment Held in Trust Account
As of September 30, 2022 and December 31,
2021, investments in the Company’s Trust Account consisted of $21,006,552 and $92,459,548, respectively, in U.S. Money Market
funds.
There were no transfers between Levels 1, 2 or
3 during the three and nine months ended September 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 remaining at zero.
There were no transfers between Levels 1, 2 or
3 during the three and nine months ended September 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 September 30, 2022 and December 31, 2021. The Representative’s
Warrants were valued using similar information, except for strike price which is at $12.
| |
September 30, 2022 | | |
December 31, 2021 | |
Exercise price | |
$ | 11.50 | | |
$ | 11.50 | |
Share price | |
$ | 10.29 | | |
$ | 10.21 | |
Volatility | |
| 0.1 | % | |
| 6.5 | % |
Expected life | |
| 5.49 | | |
| 5.39 | |
Risk-free rate | |
| 4.06 | % | |
| 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 | |
Change in fair value (1) | |
| 795 | | |
| (4,956 | ) | |
| (4,161 | ) |
Fair value as of September 30, 2022 | |
$ | 15,644 | | |
$ | — | | |
$ | 15,644 | |
(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 notes were 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 Notes was based on the following significant inputs:
| |
September 30, 2022 | | |
December 31, 2021 | |
Risk-free interest rate | |
| 3.90 | % | |
| 0.84 | % |
Time to Expiration (in years) | |
| 0.49 | | |
| 0.39 | |
Expected volatility | |
| 5.9 | % | |
| 4.9 | % |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % |
Stock Price | |
$ | 10.29 | | |
$ | 10.82 | |
Probability of transaction | |
| 50.0 | % | |
| 90.00 | % |
The following table presents the changes in the
fair value of the Level 3 Convertible Promissory Notes:
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 | |
Proceeds received through Convertible Promissory Note | |
| 220,000 | |
Interest accrued | |
| 9,074 | |
Change in fair value | |
| (900,959 | ) |
Fair value as of September 30, 2022 | |
$ | 850,501 | |
There were no transfers in or out of Level 3
from other levels in the fair value hierarchy during the three and nine months ended September 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.
Promissory Note
On October 6, 2022, the Company issued a promissory
note in the principal amount of up to $500,000 to the Sponsor. The Note was issued in connection with advances the Sponsor may make in
the future to the Company for working capital expenses. The 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.