UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(MARK ONE)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended ~~March 31,~~June 30, 2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-39962

EQ HEALTH ACQUISITION CORP.

(Exact Name of Registrant as Specified in Its Charter)

Delaware

85-2877347

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

4611 Bee Cave Road, Ste. 213

Austin, TX 78746

(Address of principal executive offices)

(512) 329-6977

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Units, each consisting of one share of Class A Common Stock, $0.0001 par value, and one-half of one redeemable warrant	EQHA.U	The New York Stock Exchange
Class A Common Stock, $0.0001 par value	EQHA	The New York Stock Exchange
Redeemable warrants	EQHA.WS	The New York Stock Exchange

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☐ Yes No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☒ No ☐

As of ~~May 16,~~August 12, 2022, there were 21,999,960 shares of Class A common stock, $0.0001 par value, and 5,499,990 shares of Class B common stock, $0.0001 par value, issued and outstanding.

Table of Contents

EQ HEALTH ACQUISITION CORP.

FORM 10-Q FOR THE QUARTER ENDED ~~MARCH 31,~~JUNE 30, 2022

TABLE OF CONTENTS


	Page
Part I. Financial Information	3
Item 1. Financial Statements ~~(Unaudited)~~	3
Condensed Balance Sheets as of ~~March 31,~~June 30, 2022 (Unaudited) and December 31, 2021	3
Condensed Statements of Operations for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 (Unaudited)	4
Condensed Statements of Changes in Stockholders’ ~~(Deficit) Equity~~Deficit for the three and six months ended ~~March 31,~~June 30, 2022 and 2021 (Unaudited)	5
Condensed ~~Statement~~Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2022 and 2021 (Unaudited)	6
Notes to Unaudited Condensed Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk	2325
Item 4. Controls and Procedures	2325
Part II. Other Information	2527
Item 1. Legal Proceedings	2527
Item 1A. Risk Factors	2527
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	2527
Item 6. Exhibits	2629
Part III. Signatures	2730

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Interim Financial Statements.

EQ HEALTH ACQUISITION CORP.

CONDENSED BALANCE SHEETS

March 31,

December 31,


2022

2021

(Unaudited)

ASSETS



Current assets

Cash

$
268,255

$
50,039
Prepaid expenses

205,067

236,915
Total Current Assets

473,322

286,954

Non-current prepaid expenses

—

19,673
Marketable securities held in Trust Account

220,172,032

220,085,699
TOTAL ASSETS

$
220,645,354

$
220,392,326

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities

Accrued expenses

$
1,901,363

$
1,995,342
Accrued offering costs

—

35,000
Promissory note — related party

500,000

—
Total Current Liabilities

2,401,363

2,030,342

Warrant liabilities

6,032,604

9,048,270
Deferred underwriting fee payable

7,699,986

7,699,986
TOTAL LIABILITIES

16,133,953

18,778,598

Commitments and Contingencies

Class A common stock subject to possible redemption 21,999,960 shares at redemption value at March 31, 2022 and December 31, 2021

219,999,600

219,999,600

Stockholders’ Deficit

Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding

—

—
Class A common stock, $0.0001 par value; 100,000,000 shares authorized

—

—
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,499,990 shares issued and outstanding, at March 31, 2022 and December 31, 2021

550

550
Additional paid-in capital

—

—
Accumulated deficit

(15,488,749)

(18,386,422)
Total Stockholders’ Deficit

(15,488,199)

(18,385,872)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

$
220,645,354

$
220,392,326


	June 30,		December 31,
	2022		2021
	(Unaudited)
ASSETS
Current assets
Cash	$	105,359	$	50,039
Prepaid expenses		186,047		236,915
Total Current Assets		291,406		286,954

Non-current prepaid expenses		—		19,673
Marketable securities held in Trust Account		220,250,778		220,085,699
TOTAL ASSETS	$	220,542,184	$	220,392,326

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accrued expenses	$	1,749,668	$	1,995,342
Accrued offering costs		—		35,000
Income taxes payable		1,527		—
Promissory note — related party		500,000		—
Total Current Liabilities		2,251,195		2,030,342

Warrant liabilities		1,642,967		9,048,270
Deferred underwriting fee payable		7,699,986		7,699,986
TOTAL LIABILITIES		11,594,148		18,778,598

Commitments and Contingencies (Note 6)

Class A common stock subject to possible redemption 21,999,960 shares at redemption value at June 30, 2022 and December 31, 2021		219,999,600		219,999,600

Stockholders’ Deficit
Preferred stock, $0.0001 par value; 1,000,000 shares authorized; 0 shares issued and outstanding		—		—
Class A common stock, $0.0001 par value; 100,000,000 shares authorized		—		—
Class B common stock, $0.0001 par value; 10,000,000 shares authorized; 5,499,990 shares issued and outstanding, at June 30, 2022 and December 31, 2021		550		550
Additional paid-in capital		—		—
Accumulated deficit		(11,052,114)		(18,386,422)
Total Stockholders’ Deficit		(11,051,564)		(18,385,872)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	220,542,184	$	220,392,326

The accompanying notes are an integral part of the unaudited condensed financial statements.

Table of Contents

EQ HEALTH ACQUISITION CORP.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

For the Three

For the Three

Months Ended

Months Ended

March 31,

March 31,


2022


2021
Operating and formation costs

$
204,326

$
300,361
Loss from operations

(204,326)

(300,361)

Other income:

Interest earned on marketable securities held in Trust Account

86,333

25,252
Change in fair value of warrant liabilities

3,015,666

12,701,979
Transaction costs allocated to warrant liabilities

—

(794,263)
Loss on initial issuance of Private Placement Warrants

—

(1,471,998)
Total other income, net

3,101,999

10,460,970

Net income

$
2,897,673

$
10,160,609

Weighted average shares outstanding of Class A common stock

21,999,960

13,933,308
Basic and diluted net income per share, Class A common stock

$
0.11

$
0.53
Weighted average shares outstanding of Class B common stock

5,499,990

5,236,947
Basic and diluted net income per share, Class B common stock

$
0.11

$
0.53


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2022		2021			2022	2021
Operating and formation costs	$	229,721	$	1,823,709	$	434,047	$	2,124,070
Loss from operations		(229,721)		(1,823,709)		(434,047)		(2,124,070)

Other income (expense):
Interest earned (expense) on marketable securities held in Trust Account		278,247		(3,649)		364,579		9,976
Unrealized gain on marketable securities held in Trust Account		—		12,884		—		24,511
Change in fair value of warrant liabilities		4,389,637		(3,653,994)		7,405,303		9,047,985
Transaction costs allocated to warrant liabilities		—		—		—		(794,263)
Loss on initial issuance of Private Placement Warrants		—		—		—		(1,471,998)
Other income (expense), net		4,667,884		(3,644,759)		7,769,882		6,816,211

Income (loss) before provision for income taxes		4,438,163		(5,468,468)		7,335,835		4,692,141
Provision for income taxes		(1,527)		—		(1,527)		—
Net income (loss)	$	4,436,636	$	(5,468,468)	$	7,334,308	$	4,692,141

Weighted average shares outstanding of Class A common stock		21,999,960		21,999,960		21,999,960		17,988,918
Basic and diluted net income (loss) per share, Class A common stock	$	0.16	$	(0.20)	$	0.27	$	0.20
Weighted average shares outstanding of Class B common stock		5,499,990		5,499,990		5,499,990		5,369,195
Basic and diluted net income (loss) per share, Class B common stock	$	0.16	$	(0.20)	$	0.27	$	0.20

The accompanying notes are an integral part of the unaudited condensed financial statements.

Table of Contents

EQ HEALTH ACQUISITION CORP.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ ~~(DEFICIT) EQUITY~~DEFICIT

(UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2022

Additional

Total

Class A Common Stock

Class B Common Stock

Paid-in

Accumulated

Stockholders'


Shares

Amount

Shares

Amount

Capital

(Deficit)

Deficit
Balance - January 1, 2022

—

$
—

5,499,990

$
550

$
—

$
(18,386,422)

$
(18,385,872)

Net income

—

—

—

—

—

2,897,673

2,897,673

Balance - March 31, 2022

—

$
—

5,499,990

$
550

$
—

$
(15,488,749)

$
(15,488,199)


							Additional				Total
	Class A Common Stock			Class B Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		(Deficit)		Deficit
Balance - January 1, 2022	0	$	0	5,499,990	$	550	$	0	$	(18,386,422)	$	(18,385,872)

Net income	—		—	—		—		—		2,897,673		2,897,673

Balance - March 31, 2022	—	$	—	5,499,990	$	550	$	—	$	(15,488,749)	$	(15,488,199)

Net income	—		—	—		—		—		4,436,636		4,436,636

Balance – June 30, 2022	—	$	—	5,499,990	$	550	$	—	$	(11,052,114)	$	(11,051,564)

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2021

Class A

Class B

Additional

Total

Common Stock

Common Stock

Paid-in

Accumulated

Stockholders’


Shares

Amount

Shares

Amount

Capital

(Deficit)

Equity (Deficit)
Balance — January 1, 2021

0

0

5,499,990

550

24,450

(1,000)

24,000

Accretion of Class A Common Stock Subject to Possible Redemption

—

—

—

—

(24,450)

(25,341,365)

(25,365,815)

Net income

—

—

—

—

—

10,160,609

10,160,609

Balance — March 31, 2021

—

$
—

5,499,990

$
550

$
—

$
(15,181,756)

$
(15,181,206)


	Class A			Class B			Additional				Total
	Common Stock			Common Stock			Paid-in		Accumulated		Stockholders’
	Shares	Amount		Shares	Amount		Capital		(Deficit)		Equity (Deficit)
Balance — January 1, 2021	0		0	5,499,990		550		24,450		(1,000)		24,000

Accretion of Class A Common Stock Subject to Possible Redemption	—		—	—		—		(24,450)		(25,341,365)		(25,365,815)

Net income	—		—	—		—		—		10,160,609		10,160,609

Balance — March 31, 2021	—	$	—	5,499,990	$	550	$	—	$	(15,181,756)	$	(15,181,206)

Net loss	—		—	—		—		—		(5,468,468)		(5,468,468)

Balance — June 30, 2021	—	$	—	5,499,990	$	550	$	—	$	(20,650,224)	$	(20,649,674)

The accompanying notes are an integral part of the unaudited condensed financial statements.

Table of Contents

EQ HEALTH ACQUISITION CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

For the Three Months Ended

For the Three Months Ended

March 31,

March 31,


2022

2021
Cash Flows from Operating Activities:



Net income

$
2,897,673

$
10,160,609
Adjustments to reconcile net income to net cash used in operating activities:

Change in fair value of warrant liabilities

(3,015,666)

(12,701,979)
Loss on initial issuance of Private Placement Warrants

—

1,471,998
Interest earned on marketable securities held in Trust Account

(86,333)

(25,252)
Transaction costs allocated to warrant liabilities

—

794,263
Changes in operating assets and liabilities:

Prepaid expenses

51,521

(22,171)
Accounts payable and accrued expenses

(128,979)

109,653
Net cash used in operating activities

(281,784)

(212,879)

Cash Flows from Investing Activities:

Investment of cash in Trust Account

—

(219,999,592)
Net cash used in investing activities

—

(219,999,592)

Cash Flows from Financing Activities:

Proceeds from sale of Units, net of underwriting discounts paid

—

215,599,607
Proceeds from sale of Private Placement Warrants

—

6,399,992
Proceeds from promissory note - related party

500,000

40,000
Repayment of promissory note - related party

—

(90,000)
Payment of offering costs

—

(427,024)
Net cash provided by financing activities

500,000

221,522,575

Net Change in Cash

218,216

1,310,104
Cash - Beginning of period

50,039

21,900
Cash - End of period

$
268,255

$
1,332,004

Non-Cash investing and financing activities:

Offering costs included in accrued offering costs

$
—

$
50,000
Accretion of Class A common stock subject to possible redemption

$
—

25,365,815
Deferred underwriting fee payable

$
—

7,699,986


	For the Six Months Ended		For the Six Months Ended
	June 30,		June 30,
	2022		2021
Cash Flows from Operating Activities:
Net income	$	7,334,308	$	4,692,141
Adjustments to reconcile net income to net cash used in operating activities:
Change in fair value of warrant liabilities		(7,405,303)		(9,047,985)
Loss on initial issuance of Private Placement Warrants		—		1,471,998
Interest earned on marketable securities held in Trust Account		(364,579)		(9,976)
Unrealized gain on marketable securities held in Trust Account		—		(24,511)
Transaction costs allocated to warrant liabilities		—		794,263
Changes in operating assets and liabilities:
Prepaid expenses		70,541		(14,449)
Accounts payable and accrued expenses		(280,674)		1,649,248
Income taxes payable		1,527		—
Net cash used in operating activities		(644,180)		(489,271)

Cash Flows from Investing Activities:
Investment of cash in Trust Account		—		(219,999,592)
Cash withdrawn from Trust Account to pay franchise and income taxes		199,500		—
Net cash provided by (used in) investing activities		199,500		(219,999,592)

Cash Flows from Financing Activities:
Proceeds from sale of Units, net of underwriting discounts paid		—		215,599,607
Proceeds from sale of Private Placement Warrants		—		6,399,992
Proceeds from promissory note - related party		500,000		40,000
Repayment of promissory note - related party		—		(90,000)
Payment of offering costs		—		(427,024)
Net cash provided by financing activities		500,000		221,522,575

Net Change in Cash		55,320		1,033,712
Cash - Beginning of period		50,039		21,900
Cash - End of period	$	105,359	$	1,055,612

Non-Cash investing and financing activities:
Offering costs included in accrued offering costs	$	—	$	50,000
Accretion of Class A common stock subject to possible redemption	$	—		25,365,815
Deferred underwriting fee payable	$	—		7,699,986

The accompanying notes are an integral part of the unaudited condensed financial statements

Table of Contents

EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~MARCH 31,~~JUNE 30, 2022

(Unaudited)

NOTE 1—DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS

EQ Health Acquisition Corp. (the “Company”) is a blank check company incorporated in Delaware on September 2, 2020. The Company was formed for the purpose of effectuating a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses (the “Business Combination”). The Company is an early stage and emerging growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.

As of ~~March 31,~~June 30, 2022, the Company had not commenced any operations. All activity for the period September 2, 2020 (inception) through ~~March 31,~~June 30, 2022 relates to the Company’s formation, its initial public offering (the “Initial Public Offering”), as described below, and identifying a target company for a Business Combination.

The registration statements for the Company’s Initial Public Offering became effective on January 28, 2021 (the “Registration Statement”). On February 2, 2021, the Company consummated the Initial Public Offering of 21,999,960 units (the “Units” and, with respect to the shares of Class A common stock included in the Units sold, the “Public Shares”), which includes the full exercise by the underwriter of its over-allotment option in the amount of 2,869,560 Units, at $10.00 per Unit, generating gross proceeds of $219,999,600, which is described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company consummated the sale of 6,399,992 warrants (each, a “Private Placement Warrant” and, collectively, the “Private Placement Warrants”) at a price of $1.00 per Private Placement Warrant in a private placement to EQ Health Sponsor Group, LLC, an affiliate of the Company’s officers and chairman (the “Sponsor”), generating gross proceeds of $6,399,992, which is described in Note 4.

Transaction costs amounted to $12,630,102, consisting of $4,399,992 of underwriting fees, $7,699,986 of deferred underwriting fees and $530,124 of other offering costs.

Following the closing of the Initial Public Offering on February 2, 2021, an amount of $219,999,600 ($10.00 per Unit) from the net proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Placement Warrants was placed in a trust account (the “Trust Account”), and 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 185 days or less, or in any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders, as described below.

The Company’s management has broad discretion with respect to the specific application of the net proceeds of the Initial Public Offering and the sale of the Private Placement Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. NASDAQ rules provide that the Business Combination must be with one or more target businesses that together have a fair market value equal to at least 80% of the balance in the Trust Account (less any deferred underwriting commissions and taxes payable on interest earned on the Trust Account) at the time of the signing a definitive agreement to enter a Business Combination. The Company will only complete a Business Combination if the post-Business Combination company owns or acquires 50% or more of the outstanding 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. There is no assurance that the Company will be able to successfully effect a Business Combination.

The Company will provide its holders of the outstanding Public Shares (the “public stockholders”) with the opportunity to redeem all or a portion of their Public Shares upon the completion of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or conduct a tender offer will be made by the Company, solely in its discretion. The public stockholders will be entitled to redeem their Public Shares for a pro rata portion of the amount then in the Trust Account (initially $10.00 per Public Share, plus any pro rata interest earned on the funds held in the Trust Account and not previously released to the

Table of Contents

EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

Company to pay its tax obligations). There will be no redemption rights upon the completion of a Business Combination with respect to the Company’s warrants.

~~Table of Contents~~

~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

The Company will proceed with a Business Combination only if the Company has net tangible assets of at least $5,000,001 either prior to or upon such consummation of a Business Combination and, if the Company seeks stockholder approval, a majority of the shares voted are voted in favor of the Business Combination. If a stockholder vote is not required by law and the Company does not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Amended and Restated Certificate of Incorporation (the “Amended and Restated Certificate of Incorporation”), conduct the redemptions pursuant to the tender offer rules of the U.S. Securities and Exchange Commission (“SEC”) and file tender offer documents with the SEC prior to completing a Business Combination. If, however, stockholder approval of the transaction is required by law, or the Company decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection with a Business Combination, the holders of the Company’s shares prior to the Initial Public Offering (the “Initial Stockholders”) have agreed to vote their Founder Shares (as defined in Note 5) and any Public Shares purchased during or after the Initial Public Offering in favor of approving a Business Combination. Additionally, each public stockholder may elect to redeem their Public Shares irrespective of whether they vote for or against the proposed transaction or don’t vote at all.

Notwithstanding the above, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant to the tender offer rules, the Amended and Restated Certificate of Incorporation provides that a public stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming its shares with respect to more than an aggregate of 15% or more of the Public Shares, without the prior consent of the Company.

The Initial Stockholders have agreed (a) to waive their redemption rights with respect to their Founder Shares and Public Shares held by them in connection with the completion of a Business Combination, (b) to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination by February 2, 2023 and (c) not to propose an amendment to the Amended and Restated Certificate of Incorporation (i) to modify the substance or timing of the Company’s obligation to allow redemption in connection with the Company’s initial Business Combination or to redeem 100% of its Public Shares if the Company does not complete a Business Combination or (ii) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity, unless the Company provides the public stockholders with the opportunity to redeem their Public Shares in conjunction with any such amendment

The Company will have until February 2, 2023 to complete a Business Combination (the “Combination Period”). If the Company does not complete a Business Combination within the Combination Period, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, 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 tax obligations (less up to $100,000 of interest to pay dissolution expenses), divided by the number of then outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the Company’s remaining stockholders and the Company’s board of directors, dissolve and liquidate, subject in each case to the Company’s obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. There will be no redemption rights or liquidating distributions with respect to the Company’s warrants, which will expire worthless if the Company fails to complete a Business Combination within the Combination Period.

The Initial Stockholders have agreed to waive their liquidation rights with respect to the Founder Shares if the Company fails to complete a Business Combination within the Combination Period. However, if the Initial Stockholders acquire Public Shares in or after the Initial Public Offering, such Public Shares will be entitled to liquidating distributions from the Trust Account if the Company fails to complete a Business Combination within the Combination Period. The underwriters have agreed to waive their rights to their deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a Business Combination within the Combination Period and, in such event, such amounts will be included with the other funds held in the Trust Account that

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share value of the assets remaining available for distribution will be less than the Initial Public Offering price per Unit ($10.00).

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~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

In order to protect the amounts held in the Trust Account, the Sponsor has agreed to 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 discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account to below (1) $10.00 per Public Share or (2) the actual amount per Public Share held in the Trust Account as of the date of the liquidation of the Trust Account due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay our taxes. This liability will not apply with respect to any claims by a third party who executed a waiver of any and all rights to seek access to the Trust Account and except as to any claims under the Company’s indemnity of the underwriters of the Initial Public Offering against certain liabilities, including liabilities under the Securities Act of 1933, as amended (the “Securities Act”). Moreover, in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent of any liability for such third-party claims. The Company will seek to reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all vendors, service providers (except the Company’s independent registered public accounting firm), prospective target businesses or other entities with which the Company does business, execute agreements with the Company waiving any right, title, interest or claim of any kind in or to monies held in the Trust Account.

Going Concern

As of ~~March 31,~~June 30, 2022, the Company had ~~$268,255~~$105,359 in its operating bank accounts and a working capital deficit of ~~$1,755,609~~$1,857,024 (excluding ~~$172,432~~$102,765 of trust earnings that can be used for reimbursement and payment of franchise and income taxes).

Prior to the completion of the Initial Public Offering, the Company’s liquidity needs had been satisfied through a contribution of $25,000 from Sponsor to cover for certain offering costs in exchange for the issuance of the Founder Shares, the loan of up to $150,000 from the Sponsor pursuant to the Note (see Note 5), and the proceeds from the consummation of the Private Placement not held in the Trust Account. The Note was repaid on February 2, 2021. In addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working Capital Loans up to $1,500,000 (see Note 5). As of ~~March 31,~~June 30, 2022, there were 0 amounts outstanding under the Working Capital Loan.

On July 23, 2021 and October 26, 2021, the Company’s founders committed to provide the Company with an aggregate of $2,500,000 in loans. The loans, if issued, will be non-interest bearing, unsecured and will be repaid upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, all amounts loaned to the Company will be forgiven except to the extent that the Company has funds available outside of the Trust Account to repay such loans.

On February 25, 2022, the Company entered into a non-interest bearing Promissory Note with the Sponsor for a principal of $500,000 (see Note 5).

Based on the foregoing, management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or ~~one year from this filing.~~its liquidation. Over this time period, the Company will be using these funds for paying existing accounts payable, identifying and evaluating prospective initial Business Combination candidates, performing due diligence on prospective target businesses, paying for travel expenditures, selecting the target business to merge with or acquire, and structuring, negotiating and consummating the Business Combination.

In connection with the ~~Company's~~Company’s assessment of going concern considerations in accordance with Financial Accounting Standard ~~Board's~~Board’s Accounting Standards Codification Subtopic 205-40, ~~"Presentation~~“Presentation of Financial Statements - Going Concern,"” the Company has until February 3, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur and an extension is not requested by the Sponsor, and potential

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NOTES TO CONDENSED FINANCIAL STATEMENTS

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(Unaudited)

subsequent dissolution raises substantial doubt about the ~~Company's~~Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 3, 2023.

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~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

Risks and Uncertainties

Management continues to evaluate the impact of the COVID-19 pandemic and has concluded that while it is reasonably possible that the virus 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 the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.

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 (“U.S. 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 U.S. 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 condensed balance sheet at December 31, 2021 has been derived from audited financial statements, however, it does not include all of the information and notes required by U.S. GAAP for complete financial statements.

The accompanying unaudited condensed financial statements should be read in conjunction with the Company’s Annual report on Form 10-K, as filed with the SEC on ~~March 31,~~June 30, 2022. The interim results for the three and six months ended ~~March 31,~~June 30, 2022 are not necessarily indicative of the results to be expected for period ended December 31, 2022 or for any future periods.

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 of 2002, 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 stockholder approval of any golden parachute payments not previously approved.

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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 a 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 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 which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Use of Estimates

The preparation of condensed financial statements in conformity with U.S. GAAP requires the ~~Company's~~Company’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting periods.

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~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. One of the more significant accounting estimates included in these condensed financial statements is the determination of the fair value of the warrant liabilities. 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 did ~~not~~0t have any cash equivalents as of ~~March 31,~~June 30, 2022 and December 31, 2021.

Marketable Securities Held in Trust Account

At ~~March 31,~~June 30, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in U.S. Treasury securities. The Company’s investments held in the Trust Account are classified as trading securities. Trading securities are presented on the balance sheet at fair value at the end of each reporting period. Gains and losses resulting from the change in fair value of investments held in Trust Account are included in interest earned on marketable securities held in Trust Account in the accompanying condensed statements of operations. The estimated fair values of investments held in Trust Account are determined using available market information.

Warrant Liabilities

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

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JUNE 30, 2022

(Unaudited)

Both the Private Placement Warrants and Public Warrants include a tender offer provision that in the event of a tender or exchange offer made to and accepted by holders of more than 50% of the outstanding shares of the Company’s common stock, all holders of the warrants (both the Public Warrants and Private Placement Warrants) would be entitled to receive cash for their warrants. In other words, in the event of a qualifying cash tender offer (which could be outside of the Company’s control), all warrant holders would be entitled to cash, while only certain of the holders of the Company’s common stock would be entitled to cash. As such, the tender offer provision fails the ‘classified in stockholders’ equity’ criteria in ASC 815-40-25. This requires that both the Public Warrants and Private Placement Warrants be classified as liabilities measured at fair value, with changes in fair value reported each period in earnings.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The fair value of the Public Warrants were initially estimated using a Monte Carlo simulation approach. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The fair value of the Private Placement Warrants were valued using a Modified Black Scholes Option Pricing Model.

Offering Costs

The Company complies with the requirements of the ASC 340-10-S99-1 and SEC Staff Accounting Bulletin ~~("SAB"~~(“SAB”) Topic 5A ~~- "Expenses~~– “Expenses of ~~Offering"~~Offering”. Accordingly, offering costs totaling $12,630,102 (consisting of $4,399,992 in underwriting fees, $7,699,986 in deferred ~~underwriters'~~underwriters’ discount, and $530,124 other offering expenses) have been allocated to the separable financial instruments issued

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~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

in the Initial Public Offering based on a relative fair value basis compared to total proceeds received. Offering costs associated with warrant liabilities of $794,263 have been expensed and presented as non-operating expenses in the statements of operations and offering costs of $11,835,839 associated with the Class A common stock and Private Placement Warrants were initially charged to temporary equity and then accreted to Class A common stock subject to redemption upon the completion of the Initial Public Offering.

Class A Common Stock Subject to Possible Redemption

The Company accounts for its Class A common stock subject to possible redemption in accordance with the guidance in ASC Topic 480 “Distinguishing Liabilities from Equity.” Shares of Class A common stock subject to mandatory redemption are classified as a liability instrument and is measured at redemption value. Conditionally redeemable common stock (including common stock that features redemption rights that is either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ equity. The Company’s Class A 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, Class A common stock subject to possible redemption is presented as temporary equity, outside of the stockholders’ equity (deficit) section of the Company’s condensed balance sheets.

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. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid-in capital and accumulated deficit.

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NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

At ~~March 31,~~June 30, 2022 and December 31, 2021, the Class A common stock subject to possible redemption reflected in the condensed balance ~~sheet~~sheets is reconciled in the following table:


Gross proceeds	$	219,999,600
Less:
Proceeds allocated to Public Warrants		(13,529,975)
Class A common stock issuance costs		(11,835,840)
Plus:
Accretion of carrying value to redemption value		25,365,815
Class A common stock subject to possible redemption	$	219,999,600

Income Taxes

The Company ~~follows the asset and liability method of accounting~~accounts for income taxes under ASC 740, “Income Taxes.” ~~Deferred tax assets and liabilities are recognized for~~ASC 740, Income Taxes, requires the ~~estimated future tax consequences attributable to differences between the financial statements carrying amounts~~recognition of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities for both the expected impact of differences between the unaudited condensed financial statements 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 ~~change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are~~valuation allowance to be established when ~~necessary, to reduce~~it is more likely than not that all or a portion of deferred tax assets ~~to the amount expected to~~will not be realized. As of June 30, 2022 and December 31, 2021, the Company’s deferred tax asset had a full valuation allowance recorded against it. Our effective tax rate was 0.03% and 0.00% for the three months ended June 30, 2022 and 2021, respectively, and 0.02% and 0.00% for the six months ended June 30, 2022 and 2021, respectively. The effective tax rate differs from the statutory tax rate of 21% for the three and six months ended June 30, 2022 and 2021, due to changes in fair value in warrant liability and the valuation allowance on the deferred tax assets.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and a measurement ~~attribute~~process for ~~the~~ financial statement recognition and measurement of a tax ~~positions~~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~~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 0 unrecognized tax benefits and 0 amounts accrued for interest and penalties as of ~~March 31,~~June 30, 2022 and December 31, 2021. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position.

The Company has identified the United States as its only “major” tax jurisdiction. The Company is subject to income ~~tax examinations~~taxation by major taxing authorities since inception.

~~Table~~ These examinations may include questioning the timing and amount of ~~Contents~~deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.

~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

Net Income (Loss) Per Common Share

The Company complies with accounting and disclosure requirements of FASB ASC Topic 260, “Earnings Per Share”. Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding for the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.

The calculation of diluted income (loss) per common share does not consider the effect of the warrants issued in connection with the (i) Initial Public Offering, and (ii) the private placement since the exercise of the warrants is contingent upon the occurrence of future events. The warrants are exercisable to purchase 17,399,972 shares of Class A common stock in the aggregate. As of ~~March 31,~~June 30, 2022 and 2021, the Company did not have any dilutive securities or other contracts that could, potentially, be exercised or converted into common

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(Unaudited)

stock and then share in the earnings of the Company , except for the 717,390 founder shares in ~~March 31,~~June 30, 2021 which are no longer subject to forfeiture and thus included for dilutive purposes.

The following table reflects the calculation of basic and diluted net income (loss) per common share (in dollars, except per share amounts):


	For the Three Months Ended				For the Three Months Ended				Three Months Ended				Three Months Ended				Six Months Ended					Six Months Ended
	March 31,				March 31,				June 30,				June 30,				June 30,				June 30,
	2022				2021				2022				2021				2022				2021
	Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B		Class A		Class B
Basic and diluted net income per common share
Basic and diluted net income (loss) per common share
Numerator:
Allocation of net income, as adjusted	$	2,318,138	$	579,535	$	7,384,925	$	2,775,684
Allocation of net income (loss), as adjusted									$	3,549,309	$	887,327	$	(4,374,774)		(1,093,694)	$	5,867,447	$	1,466,862	$	3,613,586	$	1,078,555
Denominator:
Weighted average shares outstanding		21,999,960		5,499,990		13,933,308		5,236,947
Basic and diluted net income per common share	$	0.11	$	0.11	$	0.53	$	0.53
Basic and diluted weighted average shares outstanding										21,999,960		5,499,990		21,999,960		5,499,990		21,999,960		5,499,990		17,988,918		5,369,195
Basic and diluted net income (loss) per common share									$	0.16	$	0.16	$	(0.20)	$	(0.20)	$	0.27	$	0.27	$	0.20	$	0.20

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of a cash account in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company had not experienced losses on this account and management believes the Company is not exposed to significant risks on such account.

Fair Value of Financial Instruments

The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC 820, “Fair Value Measurement,” approximates the carrying amounts represented in the condensed balance sheets, primarily due to their short-term nature, except for warrant liabilities (see Note 9).

Recent Accounting Standards

In August 2020, the FASB issued Accounting Standards Update No. 2020-06, ~~"Debt-Debt~~“Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in ~~Entity's~~Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an ~~Entity's~~Entity’s Own ~~Equity" ("~~Equity” (“ASU ~~2020-06"~~2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, with early adoption permitted. The Company adopted ASU 2020-06 effective as of January 1, 2021. The adoption of ASU 2020-06 did not have an impact on the ~~Company's~~Company’s financial statements.

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the accompanying condensed financial statements.

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~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

NOTE 3—INITIAL PUBLIC OFFERING

Pursuant to the Initial Public Offering, the Company sold 21,999,960 Units which includes the full exercise by the underwriters of their over-allotment option in the amount of 2,869,560 Units at a purchase price of $10.00 per Unit. Each Unit consists of 1 share of the Company’s Class A common stock and one-half of one redeemable warrant (“Public Warrant”). Each Public Warrant entitles the holder to purchase 1 share of Class A common stock at an exercise price of $11.50 per whole share (see Note 8).

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(Unaudited)

NOTE 4—PRIVATE PLACEMENT

Simultaneously with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 6,399,992 Private Placement Warrants at a price of $1.00 per Private Placement Warrant ($6,399,992 in the aggregate), each exercisable to purchase 1 share of Class A common stock at a price of $11.50 per share, in a private placement. The proceeds from the sale of the Private Placement Warrants were added to the net proceeds from the Initial Public Offering held in the Trust Account. If the Company does not complete a Business Combination within the Combination Period, the proceeds from the sale of the Private Placement Warrants will be used to fund the redemption of the Public Shares (subject to the requirements of applicable law) and the Private Placement Warrants will expire worthless. As a result of the difference in fair value of $1.23 per share of the Private Placement Warrants (see Note 9) and the purchase of $1.00 per share, the Company recorded a charge of approximately $1.5 million as of the date of the Private Placement which is included in the condensed statement of operations for the period ended ~~March 31,~~June 30, 2021.

NOTE 5—RELATED PARTY TRANSACTIONS

Founder Shares

On September 23, 2020, the Initial Stockholders purchased 4,600,000 shares (the “Founder Shares”) of the Company’s Class B common stock for an aggregate price of $25,000. On January 28, 2021, the Company effected a 1.19565:1 stock split of its Founder Shares, resulting in 5,499,990 Founder Shares outstanding. The Founder Shares included an aggregate of up to 717,390 shares subject to forfeiture by the Initial Stockholders to the extent that the underwriters’ over-allotment was not exercised in full or in part, so that the Initial Stockholders will collectively own, on an as-converted basis, 20% of the Company’s issued and outstanding shares after the Initial Public Offering (assuming the Initial Stockholders does not purchase any Public Shares in the Initial Public Offering). As a result of the underwriters’ election to fully exercise their over-allotment option, 0 Founder Shares are currently subject to forfeiture.

The Initial Stockholders have agreed, subject to certain limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earlier to occur of: (1) one year after the completion of a Business Combination or (B) subsequent to a Business Combination, (x) if the last reported sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after a Business Combination, or (y) the date on which the Company completes a liquidation, merger, capital stock exchange or other similar transaction that results in all of the Company’s stockholders having the right to exchange their shares of common stock for cash, securities or other property.

Administrative Services Agreement

The Company agreed, commencing on January 28, 2021 through the earlier of the consummation of a Business Combination or the Company’s liquidation, to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities, secretarial and administrative services. For the three and six months ended ~~March 31,~~June 30, 2022, the Company incurred and paid $30,000 and $60,000 of such fees, respectively. For the three and six months ended June 30, 2021, the Company incurred and paid $30,000 and ~~$20,000~~$50,000 of such fees, respectively.

Promissory Note—Related Party

On September 23, 2020, the Sponsor agreed to loan the Company an aggregate of up to $150,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “Promissory Note”). The Promissory Note is non-interest bearing and is payable on the earlier of June 30, 2021 or the completion of the Initial Public Offering. The outstanding balance under the Promissory

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~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

Note of $90,000 was repaid at the closing of the Initial Public Offering on February 2, 2021. Borrowings under the Promissory Note are no longer available.

On February 25, 2022, the Company entered into a non-interest bearing Promissory Note with the Sponsor for a principal of $500,000. The Promissory Note is payable on the earlier of (i) January 28, 2023 and (ii) the consummation of a Business Combination. The principal balance may be prepaid at any time.

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

Related Party Loans

In order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor or certain of the Company’s directors and officers may, but are not obligated to, loan the Company funds as may be required (“Working Capital Loans”). If the Company completes a Business Combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the event that a Business Combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the Working Capital Loans, but 0 proceeds held in the Trust Account would be used to repay the Working Capital Loans. Except for the foregoing, the terms of such Working Capital Loans, if any, have not been determined and no written agreements exist with respect to such loans. The Working Capital Loans would either be repaid upon consummation of a Business Combination, without interest, or, at the lender’s discretion, up to $1,500,000 of such Working Capital Loans may be convertible into warrants of the post-Business Combination entity at a price of $1.00 per warrant. The warrants would be identical to the Private Placement Warrants. As of ~~March 31,~~June 30, 2022 and December 31, 2021, there were 0 Working Capital Loans outstanding.

NOTE 6—COMMITMENTS AND CONTINGENCIES

Registration Rights

Pursuant to a registration rights agreement entered into on January 28, 2021, the holders of the Founder Shares, Private Placement Warrants and any warrants that may be issued upon conversion of the Working Capital Loans (and any shares of Class A common stock issuable upon the exercise of the Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) will be entitled to registration rights requiring the Company to register such securities for resale (in the case of the Founder Shares, only after conversion to our Class A common stock). The holders of the majority of these securities are entitled to make up to ~~three~~3 demands, excluding short form demands, that the Company register such securities. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of a Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the Securities Act. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement

The underwriters are entitled to a deferred fee of $0.35 per Unit, or $7,699,986 in the aggregate. The deferred fee will become payable to the underwriters from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject to the terms of the underwriting agreement.

NOTE 7—~~STOCKHOLDER’S EQUITY (DEFICIT)~~STOCKHOLDERS’ DEFICIT

Preferred Stock — The Company is authorized to issue 1,000,000 shares of $0.0001 par value preferred stock. At ~~March 31,~~June 30, 2022 and December 31, 2021, there were 0 shares of preferred stock issued or outstanding.

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~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

Class A Common Stock — The Company is authorized to issue up to 100,000,000 shares of Class A, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to ~~one~~1 vote for each share. At ~~March 31,~~June 30, 2022 and December 31, 2021, there were 21,999,960 shares of Class A common stock issued and outstanding, which are subject to possible redemption and presented as temporary equity.

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

Class B Common Stock — The Company is authorized to issue up to 10,000,000 shares of Class B, $0.0001 par value common stock. Holders of the Company’s common stock are entitled to ~~one~~1 vote for each share. At ~~March 31,~~June 30, 2022 and December 31, 2021, there were 5,499,990 shares of Class B common stock issued and outstanding.

Holders of Class A common stock and Class B common stock will vote together as a single class on all other matters submitted to a vote of stockholders, except as required by law.

The shares of Class B common stock will automatically convert into shares of Class A common stock at the time of a Business Combination on a 1-for-one basis (subject to adjustment). In the case that additional shares of Class A common stock, or equity-linked securities, are issued or deemed issued in excess of the amounts offered in this prospectus and related to the closing of a Business Combination, the ratio at which shares of Class B common stock shall convert into shares of Class A common stock will be adjusted (unless the holders of a majority of the outstanding shares of Class B common stock agree to waive such adjustment with respect to any such issuance or deemed issuance) so that the number of shares of Class A common stock issuable upon conversion of all shares of Class B common stock will equal, in the aggregate, on an as-converted basis, 20% of the sum of the total number of all shares of common stock outstanding upon completion of the Initial Public Offering plus all shares of Class A common stock and equity-linked securities issued or deemed issued in connection with a Business Combination (excluding any shares or equity-linked securities issued, or to be issued, to any seller in a Business Combination, and any private placement-equivalent warrants issued to the Sponsor or its affiliates upon conversion of loans made to the Company).

NOTE 8—WARRANTS

As of ~~March 31,~~June 30, 2022 and December 31, 2021, there were 10,999,980 Public Warrants and 6,399,992 Private Placement Warrants outstanding.

Public Warrants may only be exercised for a whole number of shares. No fractional shares will be issued upon exercise of the Public Warrants. The Public Warrants will become exercisable on the later of (a) 30 days after the consummation of a Business Combination or (b) 12 months from the closing of the Initial Public Offering. The Public Warrants will expire five years from the consummation of a Business Combination or earlier upon redemption or liquidation.

The Company will not be obligated to deliver any Class A common stock pursuant to the exercise of a Public Warrant and will have no obligation to settle such Public Warrant exercise unless a registration statement under the Securities Act covering the issuance of the Class A common stock issuable upon exercise of the Public Warrants is then effective and a prospectus relating thereto is current, subject to the Company satisfying its obligations with respect to registration. No warrant will be exercisable and the Company will not be obligated to issue shares of ~~Class��~~Class A common stock upon exercise of a warrant unless Class A common stock 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.

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~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

The Company has agreed that as soon as practicable, but in no event later than 15 business days after the closing of a Business Combination, it will use its best efforts to file with the SEC a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants, to cause such registration statement to become effective and to maintain a current prospectus relating to those shares of Class A common stock until the warrants expire or are redeemed, as specified in the warrant agreement. If a registration statement covering the shares of Class A common stock issuable upon exercise of the warrants is not effective by the 60th business day after the closing of a Business Combination, warrant holders may, until such time as there is an effective registration statement and during any period when the Company will have failed to maintain an effective registration statement, exercise warrants on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act or another exemption. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis.

Once the warrants become exercisable, the Company may redeem the outstanding Public Warrants:

●

in whole and not in part;

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

●

at a price of $0.01 per Public Warrant;

●

upon not less than 30 days’ prior written notice of redemption to each warrant holder; and

●

if, and only if, the reported last sale price of the shares of Class A common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period ending three business days before we send the notice of redemption to the warrant holders.

If and when the warrants become redeemable by the Company, the Company may exercise its redemption right even if it is unable to register or qualify the underlying securities for sale under all applicable state securities laws.

The exercise price and number of Class A common stock issuable upon exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of Class A common stock at a price below its exercise price. Additionally, in no event will the Company be required to net cash settle the Public Warrants. If the Company does not complete a Business Combination within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of Public Warrants will not receive any of such funds with respect to their Public Warrants, nor will they receive any distribution from the Company’s assets held outside of the Trust Account with respect to such Public Warrants. Accordingly, the Public Warrants may expire worthless.

In addition, if (x) the Company issues additional shares of Class A common stock 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 $9.20 per share of Class A common stock (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 Initial Stockholders or their affiliates, without taking into account any Founder Shares held by the Initial Stockholders or such affiliates, as applicable, 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 Company’s initial Business Combination on the date of the consummation of such initial Business Combination (net of redemptions), and (z) the volume weighted average trading price of the Company’s common stock during the 20 trading day period starting on the trading day prior to the day on which the Company consummates its initial Business Combination (such price, the “Market Value”) is below $9.20 per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to 115% of the higher of the Market Value and the Newly Issued Price and the $18.00 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 180% of the higher of the Market Value and the Newly Issued Price.

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~~EQ HEALTH ACQUISITION CORP.~~

~~NOTES TO CONDENSED FINANCIAL STATEMENTS~~

~~MARCH 31, 2022~~

~~(Unaudited)~~

The Private Placement Warrants are identical to the Public Warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants will and the common shares issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions. Additionally, the Private Placement Warrants will be exercisable on a cashless basis and will be non-redeemable so long as they are held by the initial purchasers or their permitted transferees. If the Private Placement Warrants are held by someone other than the initial purchasers or their permitted transferees, the Private Placement Warrants will be redeemable by the Company and exercisable by such holders on the same basis as the Public Warrants.

NOTE 9—FAIR VALUE MEASUREMENTS

The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.

The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:

Level 1:

Quoted prices in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2:

Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active.

Level 3:

Unobservable inputs based on our assessment of the assumptions that market participants would use in pricing the asset or liability.

At ~~March 31,~~June 30, 2022 and December 31, 2021, assets held in the Trust Account were comprised of ~~$709~~$4,027 and $384 in cash, and ~~$220,171,323~~$220,246,751 and $220,085,315 in U.S. Treasury Securities, respectively. Through ~~March 31,~~June 30, 2022, ~~and December 31, 2021,~~ the Company has ~~not~~ withdrawn ~~any~~$199,500 of interest earned on the Trust Account.

The following table presents information about the Company’s assets and liabilities that are measured at fair value on a recurring basis at ~~March 31,~~June 30, 2022 and December 31, 2021 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.


Description	Level	March 31, 2022		December 31, 2021		Level	June 30, 2022		December 31, 2021
Assets:
Marketable securities held in Trust Account	1	$	220,172,032	$	220,085,699	1	$	220,250,778	$	220,085,699

Liabilities:
Warrant Liabilities – Public Warrants	1		3,780,693		5,719,000	1		1,035,098		5,719,000
Warrant Liabilities – Private Placement Warrants	3		2,251,911		3,329,270	3		607,869		3,329,270

The warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities in the accompanying condensed balance sheets. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed statements of operations.

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~MARCH 31,~~JUNE 30, 2022

(Unaudited)

The Private Placement Warrants were initially valued using a Modified Black Scholes Option Pricing Model, which is considered to be a Level 3 fair value measurement. The Modified Black Scholes model’s primary unobservable input utilized in determining the fair value of the Private Placement Warrants is the expected volatility of the common stock. The expected volatility as of the Initial Public Offering date was derived from observable Public Warrant pricing on comparable ‘blank-check’ companies without an identified target. The expected volatility as of subsequent valuation dates was implied from the Company’s own Public Warrant pricing. A Monte Carlo simulation methodology was used in estimating the fair value of the Public Warrants for periods where no observable traded price was available, using the same expected volatility as was used in measuring the fair value of the Private Placement Warrants. For periods subsequent to the detachment of the warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The measurement of the Public Warrants after the detachment of the Public Warrants from the Units is classified as Level 1 due to the use of an observable market quote in an active market.

The following assumptions were used to determine the Level 3 fair value measurements:


							Initial									Initial
							Measurement									Measurement
	March 31,			December 31,			February 2,			June 30,			December 31,			February 2,
	2022			2021			2021			2022			2021			2021
Risk-free interest rate		2.42	%		1.31	%		0.62	%		3.01	%		1.31	%		0.62	%
Time to expiration, in Years		5.42			5.54			6.00			5.29			5.54			6.00
Expected volatility		5.3	%		10.3	%		14.0 - 23.0	%		0.9	%		10.3	%		14.0 - 23.0	%
Dividend yield		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%		0.00	%
Exercise price	$	11.50		$	11.50		$	11.50		$	11.50		$	11.50		$	11.50
Stock Price	$	9.80		$	9.71		$	10.00		$	9.83		$	9.71		$	10.00

The following table presents the changes in the fair value of Level 3 warrant liabilities:


	Private Placement
	₍₁₎		Public	Warrant Liabilities	Private Placement		Public	Warrant Liabilities
Fair value as of January 1, 2021	$	—	—	—	$	0	0	0
Initial measurement on February 2, 2021		7,871,990	13,529,975	21,401,965		7,871,990	13,529,975	21,401,965
Change in fair value		(4,671,994)	(8,029,985)	(12,701,979)		(4,671,994)	(8,029,985)	(12,701,979)
Fair value as of March 31, 2021		3,199,996	5,499,990	8,699,986		3,199,996	5,499,990	8,699,986
Change in fair value		129,274	—	129,274		129,274	—	129,274
Transfer to Level 1		—	(5,499,990)	(5,499,990)		—	(5,499,990)	(5,499,990)
Fair value as of December 31, 2021		3,329,270	—	3,329,270		3,329,270	—	3,329,270
Change in fair value		(1,077,359)	—	(1,077,359)		(1,077,359)	—	(1,077,359)
Fair value as of March 31, 2022	$	2,251,911	—	2,251,911	$	2,251,911	—	2,251,911
Change in fair value						(1,644,042)	—	(1,644,042)
Fair value as of June 30, 2022					$	607,869	—	607,869

(1)

As a result of the difference in fair value of $1.23 per share of the Private Placement Warrants and the purchase of $1.00 per share (see Note 4), the Company recorded a charge of approximately $1.5 million as of the date of the private placement which is included in the private placement liability initial measurement within this table but is reported as part of the change in the statement of operations.

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EQ HEALTH ACQUISITION CORP.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 2022

(Unaudited)

Transfers to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology occurs. The estimated fair value of the Public Warrants transferred from a Level 3 measurement to a Level 1 fair value measurement during the year ended December 31, 2021 was $5,499,990. There were 0 transfer during the three and six months ended ~~March 31,~~June 30, 2022.

NOTE 10. SUBSEQUENT EVENTS

The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. The Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.

1921

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to EQ Health Acquisition Corp. References to our “management” or our “management team” refer to our officers and directors, and references to the “Sponsor” refer to EQ Health Sponsor Group LLC. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Special Note Regarding Forward-Looking Statements

This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Exchange Act that are not historical facts and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Form 10-Q including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “expect,” “believe,” “anticipate,” “intend,” “estimate,” “seek” and variations and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of the Company’s Annual report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission (the “SEC”). The Company’s securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, the Company disclaims any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

Overview

We are a blank check company formed under the laws of the State of Delaware on September 2, 2020, for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses. We intend to effectuate our Business Combination using cash from the proceeds of the Initial Public Offering and the sales of the Private Placement Warrants, our capital stock, debt or a combination of cash, stock and debt.

We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to raise capital or to complete our initial Business Combination will be successful.

Results of Operations

We have neither engaged in any operations nor generated any operating revenues to date. Our only activities through ~~March 31,~~June 30, 2022 were organizational activities, those necessary to prepare for the Initial Public Offering, described below, and identifying a target company for a Business Combination. We do not expect to generate any operating revenues until after the completion of our initial Business Combination. We generate non-operating income in the form of interest income on marketable securities held in the Trust Account. We incur expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with searching for, and completing, a Business Combination.

For the three months ended ~~March 31,~~June 30, 2022, we had net income of ~~$2,897,673,~~$4,436,636, which consisted of a change in fair value of warrant liabilities of ~~$3,015,666~~$4,389,637 and interest earned on marketable securities held in the Trust Account of ~~$86,333~~$278,247 offset by operating and formation costs of ~~$204,326.~~$229,721 and provision for income taxes of $1,527.

For the ~~three~~six months ended ~~March 31, 2021,~~June 30, 2022, we had net income of ~~$10,160,609,~~$7,334,308, which consisted of a change in fair value of warrant liabilities of ~~$12,701,979~~$7,405,303 and interest earned on marketable securities held in the Trust Account of ~~$25,252~~$364,579 offset by operating and formation costs of ~~$300,361,~~$434,047 and provision for income taxes of $1,527.

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For the three months ended June 30, 2021, we had net loss of $5,468,468, which consisted of operating and formational costs of $1,823,709, interest expense on marketable securities held in Trust Account of $3,649, and a change in fair value of warrant liabilities of $3,653,994, offset by unrealized gain on marketable securities held in the Trust Account of $12,884.

For the six months ended June 30, 2021, we had net income of $4,692,141, which consisted of a change in fair value of warrant liabilities of $9,047,985, interest earned on marketable securities held in the Trust Account of $9,976, and unrealized gain on marketable securities held in the Trust Account of $24,511, offset by operating and formation costs of $2,124,070, transaction costs allocated to warrant liabilities of $794,263, and a loss on initial issuance of Private Placement Warrants of $1,471,998.

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Liquidity and Capital Resources

On February 2, 2021, we consummated the Initial Public Offering of 21,999,960 Units, at a price of $10.00 per Unit, which included the full exercise by the underwriters of their over-allotment option in the amount of 2,869,560 Units, generating gross proceeds of $219,999,600. Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 6,399,992 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant generating gross proceeds of $6,399,992.

Following the Initial Public Offering, the full exercise of the over-allotment option, and the sale of the Private Placement Warrants, a total of $219,999,600 was placed in the Trust Account, and we had $1,517,076 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $12,630,102 in transaction costs, including $4,399,992 of underwriting fees, $7,699,986 of deferred underwriting fees and $530,124 of other offering costs.

For the ~~three~~six months ended ~~March 31,~~June 30, 2022, cash used in operating activities was ~~$281,784.~~$644,180. Net income of ~~$2,897,673~~$7,334,308 was affected by the change in fair value of warrant liabilities of ~~$3,015,666~~$7,405,303 and interest earned on marketable securities held in the Trust Account of ~~$86,333.~~$364,579. Changes in operating assets and liabilities provided ~~$77,458~~$208,606 of cash for operating activities.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, cash used in operating activities was ~~$218,879.~~$489,271. Net income of ~~$10,160,609~~$4,629,141 was affected by the change in fair value of warrant liabilities of ~~$12,701,979,~~$9,047,985, a loss on initial issuance of Private Placement Warrants of $1,471,998, transaction costs allocated to warrant liabilities of $794,263, ~~and~~ interest earned on marketable securities held in the Trust Account of ~~$25,252.~~$9,976 and unrealized gain on marketable securities held in the Trust Account of $24,511. Changes in operating assets and liabilities provided ~~$87,482~~$1,634,799 of cash for operating activities.

As of ~~March 31,~~June 30, 2022, we had cash and marketable securities held in the Trust Account of ~~$220,172,032.~~$220,250,778. 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 commissions 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 ~~March 31,~~June 30, 2022, we had cash of ~~$268,255.~~$105,359. 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.

On July 23, 2021 and October 26, 2021, the Company’s founders committed to provide us with an aggregate of $2,500,000 in loans. The loans, if issued, will be non-interest bearing, unsecured and will be repaid upon the consummation of a Business Combination. If the Company does not consummate a Business Combination, all amounts loaned to the Company will be forgiven except to the extent that we have funds available outside of the Trust Account to repay such loans.

On February 25, 2022, the Company entered into a non-interest bearing promissory note with the sponsor for a principal of $500,000 “the Sponsor Loan.” The promissory note under the Sponsor Loan is payable on the earlier of (i) January 28, 2023 and (ii) the consummation of a Business Combination. The principal balance may be prepaid at any time.

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 (except as described above), 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

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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 $1,500,000 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.

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, then notwithstanding the Sponsor Loan, 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.

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Subject to compliance with applicable securities laws, we would only complete such financing simultaneously with the completion of our Business Combination. Management believes that the Company will have sufficient working capital and borrowing capacity to meet its needs through the earlier of the consummation of a Business Combination or its liquidation. If we are unable to complete our Business Combination because we do not have sufficient funds available to us, 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

In connection with the Company’s assessment of going concern considerations in accordance with Financial Accounting Standard Board’s Accounting Standards Codification Subtopic 205-40, “Presentation of Financial Statements – Going Concern,” the Company has until February 3, 2023 to consummate a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by this time. If a Business Combination is not consummated by this date and an extension not requested by the Sponsor, there will be a mandatory liquidation and subsequent dissolution of the Company. Management has determined that the mandatory liquidation, should a Business Combination not occur, and an extension is not requested by the Sponsor, and potential subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities should the Company be required to liquidate after February 3, 2023.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities, which would be considered off-balance sheet arrangements as of ~~March 31,~~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, purchase obligations, or long-term liabilities, other than i) the Sponsor Loan, and ii) an agreement to pay an affiliate of the Sponsor a monthly fee of $10,000 for office space, utilities, secretarial and administrative support services. We began incurring these fees on January 28, 2021 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.

Critical Accounting Policies

The preparation of condensed financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and income and expenses during the

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periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies.

Warrant Liabilities

We account for the warrants issued in connection with our Initial Public Offering in accordance with the guidance contained in ASC 815 under which the warrants do not meet the criteria for equity treatment and must be recorded as liabilities. Accordingly, we classify the warrants as liabilities at their fair value and adjust the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in our statements of operations. The fair value of the Public Warrants were initially estimated using a Monte Carlo simulation approach. For periods subsequent to the detachment of the Public Warrants from the Units, the close price of the Public Warrant price was used as the fair value as of each relevant date. The fair value of the Private Placement Warrants were valued using a Modified Black Scholes Option Pricing Model.

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Class A Common Stock Subject to Possible Redemption

We account for our Class A common stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification ~~("ASC"~~(“ASC”) Topic 480 ~~"Distinguishing~~“Distinguishing Liabilities from Equity."” Shares of Class A common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including 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 our control) is classified as temporary equity. At all other times, common stock is classified as ~~stockholders'~~stockholders’ equity. Our Class A common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. Accordingly, Class A common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the ~~stockholders'~~stockholders’ equity (deficit) section of our condensed balance sheets.

Net Income (Loss) per Common Share

Net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the period. Accretion associated with the redeemable shares of Class A common stock is excluded from income (loss) per common share as the redemption value approximates fair value.

Recent Accounting Standards

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required for a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such

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information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of ~~March 31,~~June 30, 2022. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective, due solely to the material weakness in our internal control over financial reporting related to the Company’s accounting for complex financial instruments. As a result, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the periods presented.

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Management intends to implement remediation steps to improve our disclosure controls and procedures and our internal control over financial reporting. Specifically, we intend to expand and improve our review process for complex securities and related accounting standards. We have improved this process by enhancing access to accounting literature, identification of third-party professionals with whom to consult regarding complex accounting applications and consideration of additional staff with the requisite experience and training to supplement existing accounting professionals.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

Factors that could cause our actual results to differ materially from those in this Quarterly Report include the risk factors described in the Annual Report on Form 10-K filed with the SEC. As of the date of this Quarterly Report, we do not believe there have been noany material changes to the risk factors disclosed in our Annual Report on Form 10-K filed with the ~~SEC.~~SEC, except as follows:

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability, an ongoing military conflict between Russia and Ukraine, and record inflation. Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine, geopolitical tensions, or record inflation.

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. In February 2022, a full-scale military invasion of Ukraine by Russian troops began. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has led to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions, which has contributed to record inflation globally. We are continuing to monitor inflation, the situation in Ukraine and global capital markets and assessing its potential impact on our business.

Although, to date, our business has not been materially impacted by the ongoing military conflict between Russian and Ukraine, geopolitical tensions, or record inflation, it is impossible to predict the extent to which our operations will be impacted in the short and long term, or the ways in which such matters may impact our business. The extent and duration of the conflict in Ukraine, geopolitical tensions, record inflation and resulting market disruptions are impossible to predict but could be substantial. Any such disruptions may also magnify the impact of other risks described in our Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

On February 2, 2021, we consummated the Initial Public Offering of 21,999,960 Units, which includes the full exercise by the underwriter of its over-allotment option in the amount of 2,869,560 Units, at $10.00 per Unit, generating gross proceeds of $219,999,600. Jefferies LLC acted as the book-running manager of the Initial Public Offering. The securities in the offering were registered under the Securities Act on registration statements on Form S-1 (No. 333-252080 and 333-252527). The Securities and Exchange Commission declared the registration statements effective on January 28, 2021.

Simultaneous with the consummation of the Initial Public Offering, and the full exercise of the over-allotment option, we consummated the private placement of an aggregate of 6,399,992 Private Placement Warrants to the Sponsor at a price of $1.00 per Private Placement Warrant, generating total proceeds of $6,399,992. The issuance was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act.

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The Private Placement Warrants are identical to the warrants underlying the Units sold in the Initial Public Offering, except that the Private Placement Warrants are not transferable, assignable or salable until 30 days after the completion of a Business Combination, subject to certain limited exceptions.

We paid a total of $4,399,992 in underwriting discounts and commission and $530,124 for other costs and expenses related to the Initial Public Offering. In addition, the underwriters agreed to defer up to $7,699,986 in underwriting discounts and commissions.

Of the gross proceeds received from the Initial Public Offering including the over-allotment option, and the Private Placement Warrants, $219,999,600 was placed in the Trust Account and shall be invested 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 any open-ended investment company that holds itself out as a money market fund meeting the conditions of Rule 2a-7 of the Investment Company Act, as determined by the Company, until the earlier of: (i) the consummation of a Business Combination or (ii) the distribution of the funds in the Trust Account to the Company’s stockholders. For a description of the use of the proceeds generated in our Initial Public Offering, see Part I, Item 2 of this Form 10-Q.

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Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.


No.		Description of Exhibit
31.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*		XBRL Taxonomy Extension Schema Document
101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document
104		Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

*	Filed herewith.

**	Furnished.

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	EQ HEALTH ACQUISITION CORP.

Date: ~~May 16,~~August 12, 2022	By:	/s/ Scott Ellyson
	Name:	Scott Ellyson
	Title:	Chief Executive Officer, President and Chief Financial Officer
		(Principal Executive Officer and Principal Financial and Accounting Officer)

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	For the Three		For the Three
	Months Ended		Months Ended
	March 31,		March 31,
	2022		2021
Operating and formation costs	$	204,326	$	300,361
Loss from operations		(204,326)		(300,361)

Other income:
Interest earned on marketable securities held in Trust Account		86,333		25,252
Change in fair value of warrant liabilities		3,015,666		12,701,979
Transaction costs allocated to warrant liabilities		—		(794,263)
Loss on initial issuance of Private Placement Warrants		—		(1,471,998)
Total other income, net		3,101,999		10,460,970

Net income	$	2,897,673	$	10,160,609

Weighted average shares outstanding of Class A common stock		21,999,960		13,933,308
Basic and diluted net income per share, Class A common stock	$	0.11	$	0.53
Weighted average shares outstanding of Class B common stock		5,499,990		5,236,947
Basic and diluted net income per share, Class B common stock	$	0.11	$	0.53