Note 1 — Description of Organization and Business Operations

Organization and General

Future Health ESG Corp. (the “Company”) is a blank check company incorporated in Delaware on February 25, 2021. The Company was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses (the “Business Combination”). The Company is an “emerging growth company”, and as such, the Company is subject to all the risks associated with emerging growth companies.

As of June 30, 2022, the Company had not commenced any operations. All activity for the period from February 25, 2021 (inception) through June 30, 2022 relates to the Company’s formation, the initial public offering described below, the search for a target business for a Business Combination subsequent to the initial public offering and, subsequent to signing the Business Combination Agreement with Excelera described in Note 5, consummating this proposed transaction. The Company will not generate any operating revenues until after the completion of its initial Business Combination, at the earliest. The Company will generate non-operating income in the form of interest income on cash and cash equivalents held in the trust and operating accounts. The Company has selected December 31 as its fiscal year end.

On September 9, 2021, (the “Company”) consummated its initial public offering (the “IPO”) of  i 20,000,000 units (the “Units”). Each Unit consists of  i one share of common stock and one-half of one redeemable warrant of the Company. Each whole warrant entitles the holder thereof to purchase  i one share of common stock for $ i 11.50 per share, subject to adjustment. The Units were sold at a price of $ i 10.00 per Unit, generating gross proceeds to the Company of $ i 200,000,000, as further described in Note 3.

Simultaneously with the closing of the Initial Public Offering, the Company completed the private sale of  i 7,375,000 warrants (the “Private Placement Warrants”) at a purchase price of $ i 1.00 per Private Placement Warrant (the “Private Placement”) to Future Health ESG Associates 1, LLC (the “Sponsor”) and Cantor Fitzgerald & Co, generating gross proceeds to the Company of up to $ i 7,375,000, as further described in Note 4.

Transaction costs amounted to $ i 21,881,745, including $ i 9,000,000 in deferred underwriting and advisory fees payable, $ i 4,019,555 in upfront underwriting fees, $ i 8,163,891 in offering costs allocated to the fair value of the common shares offered to anchor investors by certain related parties (see Note 3), and $ i 698,299 in other offering costs related to the Initial Public Offering.

A total of $ i 201,000,000 ($ i 10.05 per redeemable share sold in the IPO), comprised of proceeds from the IPO and the sale of the Private Placement Warrants, was placed in a U.S.-based trust account at J.P. Morgan Chase Bank, N.A., maintained by Continental Stock Transfer & Trust Company, acting as trustee. Except with respect to interest earned on the funds held in the trust account that may be released to the Company to pay its taxes, if any, the funds held in the trust account will not be released from the trust account until the earliest of: (1) the completion of the Company’s initial business combination; (2) the redemption of any public shares properly submitted in connection with a stockholder vote to amend the Company’s amended and restated certificate of incorporation (A) to modify the substance or timing of the Company’s obligation to allow redemptions in connection with its initial business combination or to redeem  i 100% of its public shares if the Company does not complete its initial business combination within  i 15 months from the closing of the IPO (by December 14, 2022) or (B) with respect to any other provision relating to stockholders’ rights or pre-initial business combination activity; and (3) the redemption of all of the Company’s public shares if it has not completed its initial business combination within  i 15 months from the closing of the IPO, subject to applicable law.

Note 2 — Summary of Significant Accounting Policies

Use of Estimates

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

Making estimates requires management to exercise significant judgement. 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 unaudited financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates.

Net Loss Per Share of Common Stock

Earnings or loss per share of common stock is computed by dividing net loss by the weighted average number of shares issued and outstanding during the period. Earnings and losses are allocated to redeemable and non-redeemable common stock based on weighted-average shares outstanding. The Company has not considered the effect of warrants sold in the Initial Public Offering and private placement to purchase common stock in the calculation of diluted (loss) per share, since the exercise of the warrants are contingent upon the occurrence of future events.

The Company’s statement of operations includes a presentation of loss per share of common stock subject to possible redemption in a manner similar to the two-class method of loss per share. As of June 30, 2022 and 2021, the Company did not have any other dilutive securities and other contracts that could, potentially, be exercised or converted into common shares and then share in the earnings of the Company. As a result, diluted loss per share is the same as basic loss per share for the periods presented. Remeasurement adjustment on redeemable common stock is not considered in the calculation because redemption value closely approximates fair value.

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Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times, may exceed the Federal Depository Insurance Coverage limit of $ i 250,000. As of the date of this quarterly report, the Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.

Fair Value of Financial Instruments

The Company applies ASC 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability and are to be developed based on the best information available in the circumstances.

The valuation hierarchy is composed of three levels. The classification within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement. The levels within the valuation hierarchy are described below:

Level 1 – Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement are observable inputs, such as quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 – Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when little or no market data exists for the assets or liabilities.

The Company’s marketable securities held in trust of $ i 201,163,373 as of June 30, 2022, and $ i 201,004,349 as of December 31, 2021 are deemed cash and cash equivalents which are considered level 1 classified. There were no transfers to and from Levels 1, 2, and 3 during the six months ended June 30, 2022, or the period from February 25, 2021 (inception) through June 30, 2021.

Offering Costs

Offering costs consist of legal, accounting, and other costs incurred through the balance sheet date that are directly related to the Initial Public Offering and were allocated to temporary equity or stockholders' deficit upon the completion of the Initial Public Offering. Offering costs were $ i 21,881,745. The Company complies with the requirements of the ASC 340-10-S99-1.

Warrants

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 ASC 480 and 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 shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, 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.

ASC 480-10-S99 addresses concerns raised by the SEC regarding the financial statement classification and measurement of securities subject to mandatory redemption requirements or whose redemption is outside the control of the issuer. If the stock subject to mandatory redemption provisions represents the only shares in the reporting entity, it must report instruments in the liabilities section of its statement of financial position. The Company must then present them as shares subject to mandatory redemption, so as to distinguish the instruments from other financial statement liabilities. The Company concludes that the Company’s warrants defined in Note 6 do not exhibit any of the above characteristics and, therefore are outside the scope of ASC 480.

Income Taxes

The Company complies with the accounting and reporting requirements of ASC, 740, “Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts, based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The effective tax rate differs from the statutory rate of  i  i  i  i 21 /  /  / % for the six months ended June 30, 2022 and the period from February 25, 2021 (Inception) through June 30, 2021 due to the valuation allowance recorded against the deferred tax benefit relating to the Company’s net operating losses and temporary differences.

There were  i  i no /  unrecognized tax benefits as of June 30, 2022 or December 31, 2021. ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.  i  i No /  amounts were accrued for the payment of interest and penalties at 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 is subject to income tax examinations by major taxing authorities since inception.

Recent Accounting Pronouncements

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) (“ASU 2020- 06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if-converted method for all convertible instruments. ASU 2020-06 is effective for public companies for fiscal years beginning after December 15, 2021 and should be applied on a full or modified retrospective basis, with early adoption permitted beginning on January 1, 2021. The Company early adopted ASU 2020-06 effective upon inception on February 25, 2021. The adoption of ASU 2020-06 did not have an impact on the Company’s unaudited financial statements.

The Company’s management does not believe that any other recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material effect on the accompanying unaudited financial statements.

Cash and Cash Equivalents

The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company had $ i 962,015 and $ i 1,446,482 in cash (and  i  i no /  cash equivalents) as of June 30, 2022 and December 31, 2021, respectively.

Marketable Securities Held in Trust Account

As of the date of this quarterly report, the assets held in the Trust Account were held in investments in money market funds. During the three months ended June 30, 2022, $ i 142,781 was withdrawn from the Trust Account to pay taxes. The Company has the right to make further withdrawals from the Trust Account to pay additional taxes. Management expects the future interest earnings on the Trust Account to exceed any future tax withdrawals.

Common Stock Subject to Possible Redemption

The Company accounts for its common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of common stock subject to mandatory redemption is classified as a liability instrument and measured at fair value. Conditionally redeemable common stock (including shares of common stock that features redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) is classified as temporary equity. At all other times, common stock is classified as stockholders’ deficit. The Company’s common stock represented by Public Shares features certain redemption rights that are considered to be outside of the Company’s control and subject to occurrence of uncertain future events. Accordingly, all common stock subject to possible redemption is presented at redemption value as temporary equity, outside of the stockholders’ deficit section of the Company’s balance sheet. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Immediately upon the closing of the IPO, the Company recognized the remeasurement of initial book value to redemption amount value. The change in the carrying value of redeemable common stock resulted in charges against additional paid-in capital, to the extent available, and accumulated deficit. For the three months ended June 30, 2022, a remeasurement adjustment of $ i 163,373 was recognized for accretion of redeemable common stock to redemption value, with a corresponding addition to accumulated deficit to reflect gain on marketable securities (net), dividends and interest held in the Trust Account, net of amounts withdrawn to pay taxes.

Note 3 — Public Offering

Pursuant to the Initial Public Offering, the Company sold  i 20,000,000 Units at a purchase price of $ i 10.00 per Unit. Each Unit consists of  i one share of common stock and one-half of one Public Warrant. Each whole Public Warrant entitles the holder to purchase  i one share of common stock at an exercise price of $ i 11.50 per share.

Twelve anchor investors, none of whom is affiliated with any member of our management team, purchased an aggregate of  i 19,480,000 of the units sold in the Initial Public Offering. Further, each such anchor investor purchased a pro-rata portion of  i 1,229,798 Founder Shares (defined below) from MB Equity, LLC, an affiliate of Bradley Bostic, the Company’s Chief Executive Officer and a director, and Travis Morgan, the Company’s Chief Financial Officer, and a director, at a price of $ i 0.0058 per share.

The Company has determined the excess fair value of the Founder Shares sold to the anchor investors to be $ i 8,163,891. To estimate the fair value, management considered the probability and timing of IPO completion, business combination completion, and an appropriate discount for lack of marketability, all Level 3 Inputs under ASC 820. The excess of the fair value of the Founder Shares was determined to be an offering cost in accordance with Staff Accounting Bulletin Topic 5A and was charged to common stock subject to possible redemption upon completion of the Initial Public Offering. In accordance with Staff Accounting Bulletin Topic 5T, a capital contribution from the founders was recorded in additional paid-in capital.

The underwriter did not exercise their overallotment option to purchase an additional  i 3,000,000 private warrants within the  i 45 day limit. Management determined the fair value of this option to be immaterial, therefore, the unaudited financial statements do not include any adjustments relating to the expiration of the overallotment option.

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Note 4 — Related Party Transactions

Founder Shares

On March 3, 2021, entities affiliated with our executive officers acquired  i 4,312,500 founder shares, up to  i 562,500 of which were subject to forfeiture (the “Founder Shares”), for an aggregate purchase price of $ i 25,000. Prior to the initial investment in the Company

Note 5 — Commitments and Contingencies

Registration Rights

The holders of Founder Shares, Private Placement Warrants and warrants that may be issued upon conversion of Working Capital Loans, if any (and any shares of common stock issuable upon the exercise of the Private Placement Warrants or warrants issued upon conversion of the Working Capital Loans), are entitled to registration rights pursuant to a registration rights agreement. These holders are entitled to certain demand and “piggyback” registration rights. However, the registration rights agreement provides that we will not be required to effect or permit any registration or cause any registration statement to become effective until termination of the applicable lock-up period. The Company will bear the expenses incurred in connection with the filing of any such registration statements.

Underwriting Agreement and Advisory Fees

The Company paid an underwriting discount of  i 2.0% of the per Unit offering price to Cantor Fitzgerald & Co at the closing of the Initial Public Offering, with an additional fee of  i 4.5% of the gross offering proceeds payable only upon the Company’s completion of its Initial Business Combination, of which $ i 8,700,000 will be paid to Cantor Fitzgerald & Co and $ i 300,000 will be paid to Roth Capital Partners, LLC, an independent financial advisor to the Company. On June 13, 2022, the Company and Cantor Fitzgerald & Co entered into an amendment whereby Cantor will accept  i 272,727 unrestricted shares of common stock (the “Deferred Stock Consideration”) in exchange for reducing the cash portion of deferred underwriting fees to $ i 5,700,000. In the event the Company is unable to issue such unrestricted shares of Common Stock, Cantor Fitzgerald (together with any of its affiliates or accounts over which it and/or its affiliates have discretionary authority, the “Cantor Parties”) may elect (in its sole discretion) to purchase shares of Common Stock in the open market from stockholders of the Company who cancel their previously delivered notice of redemption after the applicable redemption deadline (“Purchased Shares”) and continue to hold such Purchased Shares through the closing of the Excelera Transaction, then the number of Deferred Fee Shares to be issued to Cantor Fitzgerald will be reduced by the number of shares of Common Stock so purchased and held by Cantor Parties. If Cantor Parties make any such purchases, the Company shall pay cash to Cantor Fitzgerald in an amount equal to the aggregate amount of each Purchased Share multiplied by the purchase price paid by the Cantor Parties for such Purchased Share; provided that in no event shall the Company pay more than $ i 10.05 per Purchased Share to Cantor Fitzgerald. Management expects to issue all  i 272,727 unrestricted Deferred Fee Shares, and that there will be no Purchased Shares or cash payment by the Company therefore. The Company recognized a reduction of accrued underwriting fees and a decrease in accumulated deficit by $ i 302,730 during the three months ended June 30, 2022 to reflect the difference between the fair value of the Deferred Stock Consideration at June 30,2022, as compared to the $ i 3,000,000 deferred underwriting fees expected to be satisfied by issuance of the Stock Consideration rather than cash. The Company will remeasure the fair value of the Deferred Stock Consideration as of each subsequent quarterly period end date.