References to the "Company," "Future Health," "our," "us" or "we" refer to
Future Health ESG Corp. The following discussion and analysis of the Company's
financial condition and results of operations should be read in conjunction with
the unaudited financial statements and the notes thereto contained elsewhere in
this report. Certain information contained in the discussion and analysis set
forth below includes forward-looking statements that involve risks and
uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of many factors, including those
set forth under "Risk Factors".
Special Note Regarding Forward-Looking Statements
This Quarterly Report includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended (the "Securities Act")
and Section 21E of the Exchange Act that are not historical facts, and involve
risks and uncertainties that could cause actual results to differ materially
from those expected and projected. All statements, other than statements of
historical fact included in this Form 10-Q including, without limitation,
statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" regarding the Company's financial position, business
strategy and the plans and objectives of management for future operations, are
forward-looking statements. Words such as "expect," "believe," "anticipate,"
"intend," "estimate," "seek" and variations and similar words and expressions
are intended to identify such forward-looking statements. Such forward-looking
statements relate to future events or future performance, but reflect
management's current beliefs, based on information currently available. A number
of factors could cause actual events, performance, or results to differ
materially from the events, performance and results discussed in the
forward-looking statements. For information identifying important factors that
could cause actual results to differ materially from those anticipated in the
forward-looking statements, please refer to the Risk Factors section of the
Company's Form S-1 filed with the U.S. Securities and Exchange Commission (the
"SEC"), and declared effective on September 9, 2021, the Company's annual report
Form 10-K filed with the SEC on March 28, 2022, and the Company's Form S-4 filed
with the SEC on July 25, 2022. The Company's securities filings can be accessed
on the EDGAR section of the SEC's website at www.sec.gov. Except as expressly
required by applicable securities law, the Company disclaims any intention or
obligation to update or revise any forward-looking statements whether as a
result of new information, future events or otherwise.
Overview
Future Health is a blank check company incorporated in Delaware on February 25,
2021. 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").
We intend to effectuate our business combination using cash from the proceeds of
our initial public offering and the sale of the private warrants, our capital
stock, debt, or a combination of cash, stock, and debt. The Company is an
"emerging growth company", and as such, the Company is subject to all the risks
associated with emerging growth companies.
Results of Operations
As of June 30, 2022, the Company had not commenced any operations. All activity
for the period from February 25, 2021 (inception) through June 30, 2022 relates
to the Company's formation and initial public offering described below and,
since the initial public offering, the search for a target business for a
Business Combination and, subsequent to signing the Business Combination
Agreement with Excelera, consummating this proposed transaction. 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 (as defined below). The Company has
selected December 31 as its fiscal year end.
On September 9, 2021, the Company consummated its initial public offering (the
"IPO") of 20,000,000 units (the "Units"). Each Unit consists of one share of
common stock and one-half of one redeemable warrant of the Company. Each whole
warrant entitles the holder thereof to purchase one share of common stock for
$11.50 per share, subject to adjustment. The Units were sold at a price of
$10.00 per Unit, generating gross proceeds to the Company of $200,000,000.
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Simultaneously with the closing of the IPO, the Company completed the private
sale of 7,375,000 warrants (the "Private Placement Warrants") at a purchase
price of $1.00 per Private Placement Warrant (the "Private Placement"), to
Future Health ESG Associates 1, LLC (the "Sponsor") and Cantor Fitzgerald & Co,
generating gross proceeds to the Company of $7,375,000.
From the proceeds of the IPO and the Private Placement, an aggregate of
$201,000,000 was placed into a trust account for the benefit of the Company's
public stockholders to fund redemptions of the shares of common stock held by
the Company's public stockholders (the "Trust Account"), to be invested in U.S.
government securities, within the meaning set forth in Section 2(a)(16) of the
Investment Company Act of 1940, as amended (the "Investment Company Act"), with
a maturity of 180 days or less or in any open-ended investment company that
holds itself out as a money market fund selected by the Company meeting the
requirements of Rule 2(a)(7) of the Investment Company Act, until the earlier of
(i) the consummation of a business combination or (ii) the distribution of the
Trust Account.
Transaction costs amounted to $21,855,745, including $9,000,000 in deferred
underwriting and advisory fees payable, $4,019,555 in upfront underwriting fees,
$8,163,891 in offering costs allocated to anchor investors, and $698,299 in
other offering costs related to the IPO.
For the three months ended June 30, 2022, we incurred a net loss of $826,007,
which consisted of operating costs of $1,083,258 and provision for income taxes
of $29,369, partially offset by interest income on our cash balance of $1,220
and net gains on marketable securities held in our operating and trust accounts
of $285,400. The increase in operating costs during the current period relates
primarily to legal and other fees associated with the pending acquisition of
Excelera.
For the three months ended June 30, 2021, we earned net income of $7, consisting
entirely of interest income.
For the six months ended June 30, 2022, we incurred a net loss of $978,569,
which consisted of operating costs of $1,253,543 and provision for income taxes
of $29,369, partially offset by interest income on our cash balance of $2,538
and net gains on marketable securities held in our operating and trust accounts
of $301,805. The increase in operating costs during the current period relates
primarily to legal and other fees associated with the pending acquisition of
Excelera.
For the period from February 25, 2021 (inception) through June 30, 2021, we
incurred a net loss of $764, which consisted of general and administrative
expenses of $778, partially offset by interest income on our cash balance of
$14.
Liquidity and Capital Resources
On September 14, 2021, the Company consummated the IPO of 20,000,000 units. Each
Unit consists of one share of common stock and one-half of one redeemable
warrant of the Company. Each whole warrant entitles the holder thereof to
purchase one share of common stock for $11.50 per share, subject to adjustment.
The Units were sold at a price of $10.00 per Unit, generating gross proceeds to
the Company of $200,000,000. Simultaneously with the closing of the IPO, the
Company completed the Private Placement of 7,375,000 Private Placement Warrants
at a purchase price of $1.00 per Private Placement Warrant to the Sponsor and
Cantor Fitzgerald & Co, generating gross proceeds to the Company of $7,375,000.
Following the IPO and the sale of the Private Placement Warrants, $201,000,000
($10.05 per redeemable share sold in the IPO) was placed in the Trust Account.
We incurred $21,881,745 in transaction costs, including $9,000,000 in deferred
underwriting and advisory fees payable, $4,019,555 in upfront underwriting fees,
$8,163,891 in offering costs allocated to the fair value of the common shares
sold to anchor investors by certain related parties, and $698,299 of other
offering costs related to the IPO.
For the six months ended June 30, 2022, cash used in operating activities was
$627,248, comprised of a net loss of $978,569, gain on marketable securities
(net), dividends and interest held in Trust Account of $301,805, and $653,126 in
cash provided by changes in operating assets and liabilities. Cash provided by
investing activities was $142,781, representing the withdrawal of gains on
marketable securities held in the trust account to fund payment of Delaware
franchise tax obligations as permitted by the trust agreement.
For the period from February 25, 2021 (inception) through June 30, 2021, cash
used in operating activities was $185,488, comprised of a net loss of $764 and
$184,724 in cash used by changes in operating assets and liabilities. Cash
provided by financing
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activities was $211,853, comprised of $33,333 in proceeds from issuance of
common stock to the Sponsor, and $178,520 in advances from the Sponsor.
As of June 30, 2022, we had cash and marketable securities held in the Trust
Account of $201,163,373. We intend to use substantially all of the funds held in
the Trust Account, including any amounts representing interest earned on the
Trust Account (less deferred underwriting and advisory fees payable and income
taxes payable), to complete our Business Combination. To the extent that our
capital stock or debt is used, in whole or in part, as consideration to complete
our Business Combination, the remaining proceeds held in the Trust Account will
be used as working capital to finance the operations of the target business or
businesses, make other acquisitions and pursue our growth strategies.
As of June 30, 2022, we had cash of $962,015. We intend to use the funds held
outside the Trust Account primarily to identify and evaluate target businesses,
perform business due diligence on prospective target businesses, travel to and
from the offices, plants or similar locations of prospective target businesses
or their representatives or owners, review corporate documents and material
agreements of prospective target businesses, and structure, negotiate and
complete a Business Combination.
Future Health ESG Associates 1, LLC loaned us $250,000 to cover expenses related
to the IPO pursuant to two promissory notes dated March 4, 2021 and August 24,
2021. These notes were non-interest bearing and repaid in full after the closing
of the IPO on September 14, 2021.
In order to fund working capital deficiencies or finance transaction costs in
connection with a Business Combination, our Sponsor, or an affiliate of our
Sponsor or certain of our officers and directors may, but are not obligated to,
loan us funds as may be required. If we complete a Business Combination, we may
repay such loaned amounts out of the proceeds of the Trust Account released to
us. In the event that a Business Combination does not close, we may use a
portion of the working capital held outside the Trust Account to repay such
loaned amounts, but no proceeds from our Trust Account would be used for such
repayment. Up to $2,000,000 of such loans may be convertible into warrants, at a
price of $1.00 per warrant, at the option of the lender. The warrants would be
identical to the Private Placement Warrants. As of June 30, 2022, no amount had
been borrowed from the Sponsor, officers, or directors.
We do not believe we will need to raise additional funds in order to meet the
expenditures required for operating our business. However, if our estimate of
the costs of identifying a target business, undertaking in-depth due diligence,
and negotiating a Business Combination are less than the actual amount necessary
to do so, we may have insufficient funds available to operate our business prior
to our Business Combination. Moreover, we may need to obtain additional
financing either to complete our Business Combination or because we become
obligated to redeem a significant number of our public shares upon consummation
of our Business Combination, in which case we may issue additional securities or
incur debt in connection with such Business Combination. Subject to compliance
with applicable securities laws, we would only complete such financing
simultaneously with the completion of our Business Combination. If we are unable
to complete our Business Combination, we will be forced to cease operations and
liquidate the Trust Account. In addition, following our Business Combination, if
cash on hand is insufficient, we may need to obtain additional financing in
order to meet our obligations.
Going Concern
On a routine basis, we assess going concern considerations in accordance with
Financial Accounting Standards Board ("FASB") Accounting Standards Codification
("ASC") 205-40, "Presentation of Financial Statements - Going Concern". As of
June 30, 2022, we had $962,015 in our operating bank account, $340,588 of
working capital, and $201,163,373 of securities held in the Trust Account to be
used for a Business Combination or to repurchase or redeem our common stock in
connection therewith. We believe that we will have sufficient working capital
and borrowing capacity to meet our needs through the earlier of the consummation
of a Business Combination or one year from this filing, however, there is a risk
that our liquidity may not be sufficient. The Sponsor intends, but is not
obligated to, provide us with Working Capital Loans to sustain operations in the
event of a liquidity deficiency.
We have until December 14, 2022 to consummate a Business Combination. If a
Business Combination is not consummated by this date and an extension is not
requested by the Sponsor there will be a mandatory liquidation and subsequent
dissolution of the Company. While the Company has entered into a Business
Combination Agreement with Excelera, and Management expects to complete this
Business Combination prior to December 14, 2022, this date for mandatory
liquidation and subsequent dissolution
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raises substantial doubt about the Company's ability to continue as a going
concern. The unaudited financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
We have no obligations, assets, or liabilities, which would be considered
off-balance sheet arrangements as of June 30, 2022. We do not participate in
transactions that create relationships with unconsolidated entities or financial
partnerships, often referred to as variable interest entities, which would have
been established for the purpose of facilitating off-balance sheet arrangements.
We have not entered into any off-balance sheet financing arrangements,
established any special purpose entities, guaranteed any debt or commitments of
other entities, or purchased any non-financial assets.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than described below.
The underwriter of the IPO was paid $4,019,555 in underwriting discount and
expense reimbursement upon the closing of the IPO. An additional $6,000,000 of
deferred underwriting fees will be due to the underwriter only upon the closing
of an Initial Business Combination. Included in this amount is a financial
advisory fee of $300,000 that will be payable to Roth Capital Partners, LLC only
upon the closing of an Initial Business Combination. In addition, the
underwriter will receive 272,727 shares of the Company's common stock upon the
closing of an Initial Business Combination.
The Company has entered into capital markets advisory agreements with multiple
advisors pursuant to which fees will be paid in an aggregate amount of up to 2%
of the cash retained from the trust account (net of redemptions) plus any gross
proceeds raised in a financing relating to an Initial Business Combination. The
capital markets advisory fees are contingent on both the consummation and the
specific terms of an Initial Business Combination, neither of which can be
reasonably predicted at this time. Accordingly, no accrual has been made for
these arrangements in the unaudited financial statements.
Critical Accounting Estimates and Policies
The preparation of unaudited financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the unaudited financial statements, and income and
expenses during the periods reported. Actual results could materially differ
from those estimates. The Company's management has reviewed all estimates used
in the preparation of the unaudited financial statements and has determined that
none reflect both a significant level of estimation uncertainty and a reasonable
likelihood of material impact on the Company's financial condition or results of
operations.
Common Stock Subject to Possible Redemption
The Company accounts for its common Stock subject to possible redemption in
accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from
Equity." Shares of common stock subject to mandatory redemption is classified as
a liability instrument and is measured at fair value. Conditionally redeemable
common stock (including shares of common stock that features 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) is
classified as temporary equity. At all other times, common stock is classified
as stockholders' deficit. The Company's common stock features certain redemption
rights that are considered to be outside of the Company's control and subject to
occurrence of uncertain future events. Accordingly, as of June 30, 2022 and
December 31, 2021, all common stock subject to possible redemption is presented
at redemption value as temporary equity, outside of the stockholders' deficit
section of the Company's balance sheet. The Company recognizes changes in
redemption value immediately as they occur and adjusts the carrying value of
redeemable common stock to equal the redemption value at the end of each
reporting period. Immediately upon the closing of the IPO, the Company
recognized the remeasurement from initial book value to redemption value. The
change in the carrying value of redeemable common stock resulted in charges
against additional paid-in capital, to the extent available, and accumulated
deficit.
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Net Loss per Share of Common Stock
Earnings or loss per share of common stock is computed by dividing net loss by
the weighted average number of shares issued and outstanding during the period.
Earnings and losses are allocated to redeemable and non-redeemable common stock
based on weighted-average shares outstanding. The Company has not considered the
effect of warrants sold in the IPO and private placement to purchase common
stock in the calculation of diluted income (loss) per share, since the exercise
of the warrants are contingent upon the occurrence of future events. The
Company's statement of operations includes a presentation of income (loss) per
share of common stock subject to possible redemption in a manner similar to the
two-class method of income (loss) per share. As of June 30, 2022 and 2021, the
Company did not have any other dilutive securities and other contracts that
could, potentially, be exercised or converted into common shares and then share
in the earnings of the Company. As a result, diluted loss per share is the same
as basic loss per share for the periods presented. Remeasurement adjustment on
redeemable common stock is not considered in the calculation because redemption
value closely approximates fair value.
The Company's management does not believe that any recently issued, but not yet
effective, accounting pronouncements, if currently adopted, would have a
material effect on the accompanying unaudited financial statements.
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