Exhibit 10.23
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
(Mark One)
For
the fiscal year ended
For the transition period from _________ to _________
Commission
file number
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S Employer Identification No.) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐
Indicate
by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 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 ☐
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).
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 the 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 | ☐ |
| ☒ | 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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate
by check mark whether any of those error corrections are restatements that require a recovery analysis of incentive-based compensation
received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D(b).
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
The
aggregate market value of the outstanding shares of the registrant’s common stock, other than shares held by persons who may be
deemed affiliates of the registrant, computed by reference to the closing price for the common stock on June 30, 2022, as reported on
the Nasdaq Capital Market, was $
As of February 21, 2024, there were shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding.
EXPLANATORY NOTE
In connection with the preparation of the March 10-Q, management identified that the total legal fees owed to the Company’s primary law firm were incorrect as of and for the year ended December 31, 2022. This inaccurate information resulted in an overstatement of $250,000 in accrued costs and expenses in the consolidated balance sheets, consolidated statements of changes in stockholders’ deficit, and the consolidated statements of cash flows as of December 31, 2022, and an overstatement of $250,000 in Professional fees and Net (loss) income in the consolidated statements of operations for the year ended December 31, 2022.
Management concluded that the error above is consistent with the material weakness in internal control over financial reporting relating to the process of recording accounts payable, accrued expenses, and tax liabilities that existed as of December 31, 2022.
In light of this material weakness, on November 16, 2023 the Company’s management and the Audit Committee of the Company’s Board of Directors, concluded that the Company’s financial statements as of December 31, 2022 and for the year ended December 31, 2022 should no longer be relied upon and that it is appropriate to restate the Company’s financial statements for such period.
On October 5, 2023, a legal complaint was filed in Connecticut Superior Court against the Company and Suneva Medical, Inc. (“Suneva”) by ICR, LLC (“the Consultant”). The Complaint alleges that the Company and Suneva owe the Consultant unpaid fees under an October 25, 2021 consulting agreement and asserts claims for breach of contract, breach of implied contract, unjust enrichment, and quantum meruit. As of the date of this filing, this action is not pending and has not been officially docketed with the Connecticut Superior Court. The Company is continuing to assess the merits of the complaint but believes that the claims by the Consultant against the Company are without merit and the Company intends to defend the action if it is properly initiated.
In addition to the above overstatement of legal fees, management determined that there was an understatement of accrued fees relating to the agreement with the Consultant that is the subject of the above-mentioned dispute. On October 25, 2021, the Company entered into an agreement with the Consultant for investor relations and public relations services in connection with a Business Combination with Suneva. The Consulting Agreement specifically identified Suneva as the target of the Business Combination. Pursuant to the agreement, the Consultant would be paid a fee of $15,000 per month from the date of the agreement until the Business Combination with Suneva, with an additional $15,000 accruing each month until the Business Combination date. The agreement also provided for payment to the Consultant of additional fees tied to success, performance, and ongoing consulting fees for services to the combined entity upon consummation of the Suneva Business Combination. The Consultant stopped providing services in February 2023.
In its Original Financial Statements, the Company did not appropriately accrue for the fees under the agreement in its condensed consolidated financial statements as of and for the periods ended March 31, 2022, June 30, 2022, and September 30, 2022, which were filed with the SEC on June 13, 2022 (Amended September 8, 2022), August 19, 2022 (Amended September 8, 2022), and November 21, 2022, respectively. The Company did not appropriately accrue for the fees under the agreement in its consolidated financial statements as of and for the year ended December 31, 2022 which was filed with the SEC on August 24, 2022. This resulted in an understatement in Accrued costs and expenses in the consolidated balance sheets, consolidated statements of changes in stockholders’ deficit, and consolidated statements of cash flows as of December 31, 2021, March 31, 2022, June 30, 2022, September 30, 2022 and December 31, 2022, respectively, and an understatement of Professional fees and Net (loss) income in the consolidated statements of operations for the year ended December 31, 2021, three months ended March 31, 2022, three and six months ended June 30, 2022, three and nine months ended September 30, 2022 and year ended December 31, 2022, respectively.
Management concluded that the understatement error relating to the agreement with the Consultant above is consistent with the material weakness in internal control over financial reporting relating to the process of recording accounts payable, accrued expenses, and tax liabilities that existed as of December 31, 2022. Additionally, management determined that a new material weakness existed as of December 31, 2021, March 31, 2022, June 30, 2022, September 30, 2022, and December 31, 2022 related to properly evaluating and disclosing contractual arrangements and differentiating them as contractual liabilities or accounting contingencies.
In light of this material weakness, on December 29, 2023 the Company’s management and the Audit Committee of the Company’s Board of Directors, concluded that the Company’s Original Financial Statements as of December 31, 2022 and for the year ended December 31, 2022, and the condensed consolidated financial statements as of March 31, 2022 and for the three months ended March 31, 2022, as of June 30, 2022 and for the three and six months ended June 30, 2022, and as of September 30, 2022 and for the three and nine months ended September 30, 2022 should no longer be relied upon and that it is appropriate to restate the Company’s financial statements for such periods.
We are filing this Amendment No. 1 to amend and restate the Original Financial Statements with modification as necessary to reflect the restatements. The following items have been amended to reflect the restatements:
Part I, Item 1A. Risk Factors
Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Part II, Item 8. Financial Statements and Supplementary Data
Part II, Item 9A. Controls and Procedures
Part IV, Item 15. Exhibits and Financial Statement Schedules
In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this filing in connection with this Form 10-K/A (Exhibits 31.1, 31.2, 32.1 and 32.2).
Except as described above, no other information included in the Original Financial Statements is being amended or updated by this Amendment No. 1 and, other than as described herein, this Amendment No. 1 does not purport to reflect any information or events subsequent to the Original Financial Statements. This Amendment No 1 continues to describe the conditions as of the date of the Original Financial Statements and, except as expressly contained herein, we have not updated, modified or supplemented the disclosures contained in the Original Financial Statements. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Financial Statements and with our filings with the SEC subsequent to the Financial Statements.
VIVEON HEALTH ACQUISITION CORP.
TABLE OF CONTENTS
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. The statements contained in this report that are not purely historical are forward-looking statements. Our forward-looking statements include, but are not limited to, statements regarding our or our management’s expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements in this report may include, for example, statements about our:
| ● | ability to complete our initial business combination; | |
| ● | success in retaining or recruiting, or changes required in, our officers, key employees or directors following our initial business combination; | |
| ● | officers and directors allocating their time to other businesses and potentially having conflicts of interest with our business or in approving our initial business combination, as a result of which they would then receive expense reimbursements; | |
| ● | potential ability to obtain additional financing to complete our initial business combination; | |
| ● | pool of prospective target businesses; | |
| ● | the ability of our officers and directors to generate a number of potential investment opportunities; | |
| ● | potential change in control if we acquire one or more target businesses for stock; | |
| ● | the potential liquidity and trading of our securities; | |
| ● | the lack of a market for our securities; | |
| ● | use of proceeds not held in the trust account established at Continental Stock Transfer & Trust Company in connection with its initial public offering (the “Trust Account”). or available to us from interest income on the Trust Account balance; and | |
| ● | financial performance following our initial public offering. |
The forward-looking statements contained in this report are based on our current expectations and beliefs concerning future developments and their potential effects on us. There can be no assurance that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those factors described under the heading “Risk Factors.” Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws and/or if and when management knows or has a reasonable basis on which to conclude that previously disclosed projections are no longer reasonably attainable.
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PART I
ITEM 1. BUSINESS
Introduction
Viveon Health Acquisition Corp. (“Viveon,” “we,” “us,” or “our”) is a Delaware company incorporated on August 7, 2020 as a blank check company for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, with one or more target businesses.
On December 28, 2020, Viveon consummated its initial public offering (the “IPO”) of 17,500,000 units (the “Units”), each Unit consisting of one share of common stock of the Company, par value $0.0001 per share (the “Common Stock”) and one redeemable warrant (“Warrant”), entitling the holder thereof to purchase one-half of a share of Common Stock at a price of $11.50 per whole share, and one right to receive one-twentieth (1/20) of a share of Common Stock. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $175,000,000. On December 28, 2020, the underwriters of the IPO, Chardan Capital Markets, LLC (“Chardan” or the “underwriters”) exercised the over-allotment option in full, and the closing occurred on December 30, 2020 when Viveon sold 2,625,000 Over-Allotment Option Units at a price of $10.00 per unit, generating additional gross proceeds of $26,250,000.
On December 28, 2020, simultaneously with the consummation of the IPO, we consummated a private placement (“Private Placement”) with Viveon Health, LLC (the “Sponsor”) of 18,000,000 warrants (the “Private Warrants”) at a price of $0.50 per Private Warrant, generating total proceeds of $9,000,000. The Private Warrants are identical to the Warrants (as defined below) sold in the IPO except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor, or its permitted transferees. Additionally, our Sponsor agreed not to transfer, assign, or sell any of the Private Warrants or underlying securities (except in limited circumstances, as described in the Private Placement Warrants Subscription Statement) until the date we complete our initial business combination. The Sponsor was granted certain demand and piggyback registration rights in connection with the purchase of the Private Warrants.
A total of $203,262,500 of the net proceeds from the sale of Units in the IPO and the private placement were placed in a trust account (the “Trust Account”) established for the benefit of the Company’s public stockholders at J.P. Morgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as trustee. At the time of the IPO, the Company’s amended and restated certificate of incorporation provided, among other things that none of the funds held in trust will be released from the Trust Account, other than interest income to pay any tax obligations, until the earlier of (i) the consummation of the Company’s initial business combination, (ii) the Company’s failure to consummate a business combination by 15 months from the consummation of the IPO (March 18, 2022), and (iii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend Viveon’s amended and restated certificate of incorporation (a) to modify the substance or timing of the ability of holders of Viveon’s public shares to seek redemption in connection with Viveon’s initial business combination or Viveon’s obligation to redeem 100% of its public shares if Viveon does not complete its initial business combination by 15 months from the consummation of the IPO (March 28, 2022) or (b) with respect to any other provision relating to stockholders’ rights or pre-business combination activity.
Extensions of Business Combination Period and Amendment to Our Certificate of Incorporation
First Extension and First Amendment
On March 18, 2022, the Company held a stockholder meeting to seek approval to amend the Company’s amended and restated certificate of incorporation (the “First Amendment”) to extend the date by which the Company has to consummate a business combination from March 28, 2022 (the “Original Termination Date”) to June 28, 2022. The First Amendment (i) extends the date by which we have to consummate a business combination for three months, from the Original Termination Date to June 30, 2022 and (ii) allows us, without another stockholder vote, to elect to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time after June 30, 2023, upon five days’ advance notice and the deposit of $240,000 per month prior to the applicable deadline, for a total of up to nine months after the Original Termination Date, unless the closing of the proposed business combination with Suneva Medical, Inc. or any potential alternative initial business combination shall have occurred.
The stockholders approved the First Amendment at the meeting.
On March 23, 2022, we filed the First Amendment with the Delaware Secretary of State. A copy of the First Amendment, as filed, is incorporated by reference into this Annual Report as Exhibit 3.2.
As a result of the First Amendment, on March 23, 2022, we also entered into an amendment (the “IMTA Amendment”) to the Investment Management Trust Agreement, dated as of December 22, 2020, with Continental Stock Transfer & Trust Company, as trustee (the “IMTA”). This IMTA Amendment amends and restates Sections 1(i), 7(c) and 7(j) of the IMTA to reflect the changes based on the First Amendment. A copy of the IMTA Amendment, is incorporated by reference into this Annual Report as Exhibit 10.18.
In connection with the First Amendment, the Company made a deposit into the Trust Account of $720,000 on March 23, 2022 and stockholders redeemed 15,092,126 shares resulting in redemption payments out of the Trust Account to such redeeming stockholders totaling approximately $152,451,819, without taking into account additional allocation of payments to cover any tax obligation of the Company, such as franchise taxes, but not including any excise tax, since that date.
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On each of June 23, 2022, July 26, 2022, August 30, 2022, September 28, 2022, October 28, 2022 and November 25, 2022, the Company deposited $240,000 into the Trust Account to extend the date to consummate a Business Combination through July 28, 2022, August 28, 2022, September 28, 2022, October 28, 2022, November 28, 2022 and December 28, 2022, respectively.
Second Extension and Second Amendment
Viveon held its 2022 Annual Meeting of Stockholders (“Annual Meeting”) on December 23, 2022 to seek approval to, among other things, amend the Company’s amended and restated certificate of incorporation (the “Second Amendment”), to allow the Company to extend the date to consummate a business combination from December 28, 2022 until June 30, 2023 (the “Second Extended Date”). The Second Amendment allows us to elect to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time after December 28, 2022, upon three calendar days’ advance notice and the deposit of $100,000 per month prior to the applicable deadline, until June 30, 2023, unless the closing of the proposed business combination with Suneva Medical, Inc. or any potential alternative initial business combination shall have occurred. The Stockholders approved the Second Amendment at the Annual Meeting.
On December 23, 2022, we filed the Second Amendment with the Delaware Secretary of State. A copy of the Second Amendment, as filed is incorporated by reference into this Annual Report as Exhibit 3.3.
In connection with the Second Amendment stockholders redeemed 3,188,100 shares resulting in redemption payments out of the Trust Account to pay such redeeming stockholders, totaling approximately $34,004,514, without taking into account additional allocation of payments to cover any tax obligation of the Company, such as franchise taxes, but not including any excise tax, since that date.
As a result of the Second Amendment, on January 20, 2023 we also entered into an IMTA amendment that amends and restates Sections 1(i), 7(c) and 7(j) of the original IMTA to reflect the changes based on the Second Amendment. A copy of the amendment, is included as Exhibit 10.19 to this Annual Report.
In connection with the Second Amendment, on each of December 27, 2022, January 26, 2023, February 27, 2023, March 27, 2023 and April 28, 2023, the Company deposited $100,000 into the Trust Account to extend the date to consummate a Business Combination through January 31, 2023, February 28, 2023, March 31, 2023, April 30, 2023 and May 31, 2023, respectively. Viveon made a final deposit of $100,000 on May 24, 2023 for a one month extension until June 30, 2023.
Third Extension and Third Amendment
On June 22, 2023, the Company held a stockholder meeting (the “June 2023 Stockholders Meeting”) to seek approval to, among other things, to amend the Company’s amended and restated certificate of incorporation (the “Third Amendment”), to allow the Company to (i) initially extend the date by which the Company must consummate an initial business combination up to six times, each such extension for an additional one month period, until December 31, 2023, by depositing into the Trust Account, the amount of $85,000 for each one-month extension until December 31, 2023, and (ii) further extend the date by which the Company must consummate an initial business combination (without seeking additional approval from the stockholders) for up to an additional three months, from January 1, 2024 to March 31, 2024, with no additional deposits to be made into the Trust Account during such period, each such extension for an additional one month period, (the “Third Extended Date”), upon one calendar day advance notice to the Trustee, prior to the applicable monthly deadline, unless the closing of the proposed initial business combination with Clearday, Inc., or any potential alternative initial business combination shall have occurred prior to the Third Extended Date; and (B) to amend the Company’s IMTA, allowing the Company to (i) initially extend the date by which the Company must consummate an initial business combination up to six times, each such extension for an additional one month period, until December 31, 2023, by depositing into the Trust Account, the amount of $85,000 for each one-month extension until December 31, 2023, and (ii) further extend the date by which the Company must consummate an initial business combination (without seeking additional approval from the stockholders) for up to an additional three months, from January 1, 2024 to March 31, 2024, each such extension for an additional one month period, with no additional deposits to be made into the Trust Account during such period from January 1, 2024 through March 31, 2024. The Stockholders approved the Third Amendment at the June 2023 Stockholders Meeting.
On June 27, 2023, we filed the Third Amendment with the Delaware Secretary of State. A copy of the Third Amendment, as filed is incorporated by reference into this Annual Report as Exhibit 3.4.
In connection with the Third Amendment stockholders redeemed 227,359 shares resulting in redemption payments out of the Trust Account to pay such redeeming stockholders, totaling $2,498,947, without taking into account additional allocation of payments to cover any tax obligation of the Company, such as franchise taxes, but not including any excise tax, since that date.
On June 27, 2023 and July 27, 2023, the Company deposited $85,000 in the Trust Account, to extend the date by which the Company can complete an initial business combination by one month to July 31, 2023 and August 31, 2023, respectively.
As a result of the Third Amendment, we also entered into an amendment to the IMTA, dated as of July 27, 2023, that amends and restates Sections 1(i), 7(c) and 7(j) of the original IMTA to reflect the change based on the Third Amendment. A copy of the amendment, is included as Exhibit 10.20 to this Annual Report.
Following all of the prior redemptions, the Company has 1,617,415 shares of public common stock outstanding, and approximately $17,777,323 remaining in the Trust Account as of the date hereof.
Termination of Merger Agreement
As disclosed in a Current Report on Form 8-K on January 12, 2022, Viveon Health Acquisition Corp., a Delaware corporation (“Viveon”), entered into a Merger Agreement (the “Old Merger Agreement”) by and among Viveon, VHAC Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Viveon (“Old Merger Sub”), and Suneva Medical, Inc., a Delaware corporation (“Suneva”). Pursuant to the terms of the Merger Agreement, a business combination between Viveon and Suneva was proposed to be effected through the merger of Merger Sub with and into Suneva, with Suneva surviving the merger as a wholly owned subsidiary of Viveon (the “Old Merger”). At the time of the signing of the Merger Agreement, the board of directors of Viveon had (i) approved and declared advisable the Merger Agreement, the Old Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Old Merger Agreement and related transactions by the stockholders of Viveon.
On February 2, 2023, legal counsel for Viveon sent a letter informing Suneva’s legal counsel that Viveon decided, effective immediately, to unilaterally terminate the Old Merger Agreement pursuant to Sections 10.2(a) and 10.2 thereof, based upon material breaches of the Old Merger Agreement by Suneva. The termination letter was sent without prejudice and reserved all of Viveon, Old Merger Sub and Viveon Health, LLC (Viveon’s sponsor) rights, claims and remedies, specifically including those within the Old Merger Agreement, against Suneva and others associated with Suneva who participated in the merger discussions and arrangements, and waived none.
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Funding for Extension and Working Capital
On March 21, 2022, March 23, 2022, April 4, 2022, April 27, 2022, May 9, 2022, October 27, 2022, and November 25, 2022, we entered into subscription agreements with several lenders for a loan of up to $4,000,000, in the aggregate (the “Subscription Agreements”).
Pursuant to the Subscription Agreements, we issued a series of unsecured senior promissory notes in the aggregate principal amount of up to $4,000,000 (the “Notes”) to the subscribers. Of the $4,000,000 in Notes, $1,955,000 was subscribed for by several related parties affiliated with our sponsor, Viveon Health LLC, and the balance in the amount of $2,045,000 was subscribed for by parties that are not related to our sponsor.
Pursuant to the terms of the Subscription Agreements, the subscribers also received warrants to purchase one share of our common stock for every $2.00 of the funded principal amount of the Notes up to 2,000,000 shares of our common stock, in the aggregate, at an exercise price of $11.50 per share, subject to adjustment (the “Subscription Warrants”). The Subscription Warrant term commences on the Exercise Date (as hereinafter defined) for a period of 49 months. The Subscription Warrants are exercisable commencing on the date of the initial business combination (the “Exercise Date”) and have a cashless exercise feature that is available at any time on or after the Exercise Date. Commencing on the date 13 months following the Exercise Date, the subscribers have the right, but not the obligation, to put the Subscription Warrants to us at a purchase price of $5.00 per share. We have agreed to file, within thirty (30) calendar days after the consummation of an initial business combination, a registration statement with the Securities and Exchange Commission to register for resale the shares of common stock underlying the Subscription Warrants.
The Notes do not bear interest and mature upon the earlier of (i) the closing of our initial business combination, and (ii) December 31, 2022 (the “Maturity Date”). The Notes provide for a credit line up to the maximum amount of $4,000,000. We will not have the right to re-borrow any portion of any loans made under the Notes once repaid. As of December 31, 2022, a commitment fee in the amount of $400,000, equal to 10% of the maximum principal amount of the Note, had been paid to the subscribers, on a pro rata basis. In the event that we do not consummate a business combination by the Maturity Date, the Notes will be repaid only from amounts remaining outside of our Trust Account, if any. Subsequent to December 31, 2022, in connection with the Merger Agreement (as defined below) a majority of the holders of the Notes and Subscription Warrants have agreed to exchange such Notes and Subscription Warrants pursuant to the terms of an exchange agreement with Viveon dated as of May 1, 2023 (the Exchange Agreement”) for a separate series of Clearday senior convertible promissory notes (the “Clearday Senior Convertible Notes”). The Clearday Senior Convertible Notes bear 8% interest per annum and mature upon the earlier of (i) June 30, 2024, or (ii) the date of any Change in Control. Upon the consummation of the business combination and the exchange of the Subscription Agreements for the Clearday Senior Convertible Notes, the lenders will forfeit their Subscription Warrants as part of the exchange. One lender has chosen not to convert to Clearday Senior Convertible Notes. The balance owed to this lender under the Notes is considered due upon demand by the lender. As of the date of this filing of this Annual Report the lender has not requested payment of the Note.
On March 21, 2022, an initial amount of $2,700,000 was drawn down from the Notes. $720,000 of the loan proceeds was deposited into our Trust Account in connection with extending the business combination completion window from March 28, 2022 until June 28, 2022. After June 28, 2022, we elected to continue to extend such date until December 28, 2022 by making a monthly deposit of $240,000 into the Trust Account each month for each monthly period until December 28, 2022. See section titled “Extensions of Business Combination Period and Amendments to Our Certificate of Incorporation” of this Annual Report for further detail.
The entry into the Subscription Agreement and the terms of the Notes and Subscription Warrants was approved by the Audit Committee of the Board of Directors of the Company at a meeting held on March 21, 2022.
The foregoing descriptions of the Note, the Subscription Warrant and the Subscription Agreement are qualified in their entirety by reference to the full text of the Note, the Subscription Warrant and the Subscription Agreement, which are incorporated by reference into this Annual Report as Exhibit 10.15, Exhibit 10.16 and Exhibit 10.17, respectively. The foregoing description of the Exchange Agreement is qualified in its entirety by reference to the full text of the Exchange Agreement which filed as Exhibit 10.21 to this Annual Report.
Our Sponsor agreed to loan the Company an aggregate of up to $500,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “IPO Note”). This loan was non-interest bearing and payable on the earlier of March 31, 2021 or the completion of the Initial Public Offering. On January 13, 2021, we paid the $228,758 balance on the note from the proceeds of the Initial Public Offering. We no longer have the ability to borrow under the IPO Note.
Our Chief Financial Officer loaned the Company $75,000 to cover expenses related to ongoing operations, which was funded on December 27, 2022. This loan is non-interest bearing and payable upon consummation of the Company’s initial Business Combination. The loan agreement was entered into on December 27, 2022.
As of December 31, 2022, and December 31, 2021, the outstanding balance of the loan was $75,000 and $0, respectively. Subsequent to December 31, 2022, our Chief Financial Officer loaned the Company an additional $555,000 through the date of this filing. These loans will be exchanged for Clearday Senior Convertible Notes upon consummation of the Company’s initial Business Combination.
Our Chief Executive Officer of the Company loaned the Company $100,000 to cover expenses related to ongoing operations, which was funded on April 2, 2023. This loan is non-interest bearing and payable upon consummation of the Company’s initial Business Combination. The loan agreement was entered into on April 2, 2023. As of December 31, 2022, and December 31, 2021, the outstanding balance of the loan was $0, respectively.
Subsequent to December 31, 2022, three investors in our Sponsor, loaned the Company $100,000 in the aggregate, to cover expenses related to ongoing operations, funded on April 5, 2023, and April 7, 2023. These loans are non-interest bearing and payable upon consummation of the Company’s initial Business Combination. The loan agreements were entered into on April 5, 2023, and April 7, 2023. As of December 31, 2022, and December 31, 2021, the outstanding balance of the loans was $0, respectively.
On May 12, 2023, the Company entered into an unsecured promissory note with Clearday (the “Clearday Note”). The Clearday Note is non-interest bearing mature upon the earlier of (i) the first anniversary of the issuance date and (ii) December 31, 2022. Proceeds provided to us under the Clearday Note through the filing date were approximately $881,710 during fiscal year 2023. Funds in the Trust Account may not be used to repay the obligations under the Clearday Note. We used such funds for general working capital purposes. A copy of the Clearday Note is incorporated as Exhibit 10.22 of this Annual Report, and all references herein to the Clearday Note are qualified in their entirety by reference to the full text of such agreement.
Delinquent SEC Filings
As previously reported in a Form 12b-25 Notification of Late Filing filed the Company on May 16, 2022, the Company was delayed in filing with the Securities and Exchange Commission (the “SEC”) its Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 (the “Form 10-Q”) because the financial statements could not be completed in sufficient time to solicit and obtain the necessary review of the Form 10-Q in a timely fashion prior to the due date of the report.
As of May 23, 2022 the Company remained unable to file the Form 10-Q. As a result, on May 24, 2022, in accordance with standard procedures related to the delayed filing of the Form 10-Q with the SEC, the Company received a late filer notification from the New York Stock Exchange stating that the Company is not in compliance with the NYSE American’s continued listing requirements under the timely filing criteria established in the NYSE American Company Guide. Under Section 1007 of the NYSE American Company Guide, the Company could be granted up to 12 months to cure the late filer deficiency. The initial six month period to regain compliance is automatic and the additional six months is only granted upon request by the Company and approval by the NYSE. The NYSE notice has no immediate effect on the listing or trading of the Company’s securities on the NYSE American. On June 13, 2022, the Company filed its 10-Q and fully regained compliance with the NYSE American’s continued listing requirements.
On April 18, 2023, the Company received a notice letter (the “Notice”) from the NYSE Regulation Department (the “Staff”) notifying the Company that, based upon the Company’s failure to timely file its Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the “Annual Report”) by the filing due date, April 17, 2023 (the “Filing Delinquency”), it was not in compliance with the New York Stock Exchange American’s continued listing requirements. The Company is now subject to the procedures and requirements set forth in Section 1007 of the New York Stock Exchange American (“NYSE American” or the “Exchange”) Company Guide (the “Company Guide”).
As indicated in the Notice, during the six-month period from the date of the Filing Delinquency (the “Initial Cure Period”), the Exchange will monitor the Company and the status of the Delinquent Report and any subsequent delayed filings, including through contact with the Company, until the Filing Delinquency is cured. If the Company fails to cure the Filing Delinquency within the Initial Cure Period, the Exchange may, in the Exchange’s sole discretion, allow the Company’s securities to be traded for up to an additional six-month period (the “Additional Cure Period”) depending on the Company’s specific circumstances. If the Exchange determines that an Additional Cure Period is not appropriate, suspension and delisting procedures will commence in accordance with the procedures set out in Section 1010 of the Company Guide. If the Exchange determines that an Additional Cure Period of up to six months is appropriate and the Company fails to file its delinquent report and any subsequent delayed filings by the end of that period, suspension and delisting procedures will generally commence.
The NYSE American may in its sole discretion decide (i) not to afford an issuer any Initial Cure Period or Additional Cure Period, as the case may be, at all or (ii) at any time during the Initial Cure Period or Additional Cure Period, to truncate the Initial Cure Period or Additional Cure Period, as the case may be, and immediately commence suspension and delisting procedures if the issuer is subject to delisting pursuant to any other provision of the Company Guide, including if the Exchange believes, in the Exchange’s sole discretion, that continued listing and trading of an issuer’s securities on the Exchange is inadvisable or unwarranted in accordance with Sections 1001-1006 of the Company Guide.
During the Initial Cure Period and the Additional Cure Period, if applicable, the Company’s securities will continue to trade on the Exchange, subject to the Company’s compliance with other continued listing requirements, with a late filer (“.LF”) indicator. The .LF indicator will be removed when the Company has regained compliance with all applicable continued listing standards.
As previously reported by the Company in its Form 12b-25 filed with the SEC on each of March 31, 2023, May 15, 2023 and August 14, 2023, the Company required additional time to finalize its financial statements.
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Recent Developments
Merger Agreement with Clearday
On April 5, 2023, we entered into a Merger Agreement (the “Merger Agreement”), with Clearday, Inc., a Delaware corporation (“Clearday”) VHAC2 Merger Sub, Inc., a Delaware corporation (“New Merger Sub”), and our Sponsor in the capacity as the representative from and after the Effective Time (as defined in the Merger Agreement) for the stockholders of Viveon (other than the Clearday Stockholders (as defined in the Merger Agreement)) as of immediately prior to the Effective Time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement, and Clearday SR LLC, a Delaware limited liability company, in the capacity as the representative from and after the Effective Time for the holders of Clearday Preferred Stock (as defined in the Merger Agreement) as of immediately prior to the Effective Time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement. Pursuant to the terms of the Merger Agreement, a business combination between us and Clearday will be effected through the merger of New Merger Sub with and into Clearday, with Clearday surviving the merger as a wholly owned subsidiary of ours and we will change our name to “Clearday Holdings, Inc.” (the “Merger”). Our board of directors has (i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement, the Merger and related transactions by our stockholders. Capitalized terms used herein but not defined shall have the meanings ascribed thereto in the Merger Agreement.
Consideration
Merger Consideration
The total consideration to be paid at Closing (the “Merger Consideration”) by us to Clearday security holders (and holders who have the right to acquire Clearday capital stock) will be an amount equal to $250 Million (plus the aggregate exercise price for all Clearday options and warrants). The Merger Consideration will be payable in shares of common stock, par value $0.0001 per share, of our common stock, valued at $10 per share.
Earnout Payments
In addition, the holders of Clearday preferred stock will have the contingent right to earn up to 5,000,000 shares of our common stock, in the aggregate (the “Earnout Shares”), if at any time during the period beginning on the date of the Closing (the “Closing Date”) and ending on the fifth anniversary of the Closing Date (the “Earnout Eligibility Period”), the Adjusted Net Income (as defined below) for any Earnout Period is a positive number for the first time during the Earnout Eligibility Period (the “Earnout Milestone”). Under the Merger Agreement, Adjusted Net Income means for any Earnout Period, the consolidated net income or loss for such period calculated in accordance with U.S. GAAP applied on a basis consistent with past practice, of (a) for periods prior to the Closing, the Company and its subsidiaries (the “Company Group”), and (b) for periods from and after the Closing, of us and our subsidiaries (including the Company Group), in each case before adjusting for the following to the extent deducted/added in calculating consolidated net income or loss: (1) interest expense/income; (2) income tax expense/tax credits; (3) depreciation and amortization; (4) transaction expenses; (5) extraordinary items; (6) any income or loss attributable to us that accrues in accordance with U.S. GAAP on or prior to the Closing Date; and (7) all gains or losses in connection with sales or dispositions of assets and investments not in the ordinary course of business.
If, following the Closing Date and prior to end of the Earnout Eligibility Period, there is a Change of Control, then, immediately prior to such Change of Control, all the Earnout Shares not yet earned shall be earned by the Clearday Earnout Holders and shall be released from escrow and delivered to the Clearday Earnout Holders, and the Clearday Earnout Holders shall be eligible to participate in such Change of Control transaction with respect to such Earnout Shares.
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The Earnout Shares will be placed in escrow and will not be released from escrow until they are earned as a result of the occurrence of the Earnout Milestone or a Change of Control, if applicable. The Earnout Shares that are not earned on or before the expiration of the Earnout Eligibility Period shall be automatically forfeited and cancelled.
Treatment of Clearday Securities
Cancellation of Securities. Each share of Clearday capital stock, if any, that is owned by Viveon, New Merger Sub, Clearday, or any of their subsidiaries (as treasury stock or otherwise) immediately prior to the effective time of the Merger (the “Effective Time”), will automatically be cancelled and retired without any conversion or consideration.
Preferred Stock. At the Effective Time, each issued and outstanding share of Clearday’s Series F Cumulative Convertible Preferred Stock, par value $0.001 per share (“Clearday Series F Preferred Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares), will be converted into the right to receive: (A) one (1) share of Parent New Series F Preferred Stock plus (B) a number of Earnout Shares in accordance with, and subject to the contingencies, set forth in the Merger Agreement.
Each issued and outstanding share of Clearday’s Series A Convertible Preferred Stock, par value $0.001 per share (“Clearday Series A Preferred Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares), will be converted into the right to receive: (A) one (1) share of Parent New Series A Preferred Stock plus (B) a number of Earnout Shares in accordance with, and subject to the contingencies, set forth in the Merger Agreement.
Common Stock. At the Effective Time, each issued and outstanding share of Clearday’s common stock, par value $0.001 per share (“Clearday Common Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares) will be converted into the right to receive a number of shares of Viveon Common Stock equal to the Conversion Ratio. The “Conversion Ratio” as defined in the Merger Agreement means an amount equal to (a)(i) the sum of $250 Million, plus the aggregate exercise or conversion price of outstanding Clearday’s stock options and warrants (excluding unvested options and options or warrants with an exercise or conversion price of $5.00 or more), divided by (ii) the number of fully diluted Clearday capital stock (including Company Preferred Stock, warrants, stock options, convertible notes, and any other convertible securities) (excluding unvested options and options or warrants with an exercise or conversion price of $5.00 or more and assuming a conversion price of Clearday subsidiary securities as provided in the Merger Agreement); divided by (b) $10.00.
Merger Sub Securities. Each share of common stock, par value $0.0001 per share, of New Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into and become one newly issued share of common stock of the surviving corporation.
Stock Options. At the Effective Time, each outstanding option to purchase shares of Clearday Common Stock will be converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under such options prior to the Effective Time, shares of Viveon Common Stock equal to the number of shares subject to such option prior to the Effective Time multiplied by the Conversion Ratio, at an exercise price per share of Viveon Common Stock equal to the exercise price per share of Clearday Common Stock subject to such option divided by the Conversion Ratio.
Warrants. Contingent on and effective as of immediately prior to the Effective Time, each outstanding warrant to purchase shares of Clearday Preferred Stock or Clearday Common Stock will be treated in accordance with the terms thereof.
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Convertible Notes. Contingent on and effective as of immediately prior to the Effective Time, Clearday’s convertible notes outstanding as of immediately prior to the Effective Time, will be treated in accordance with the terms of the relevant agreements governing such convertible notes.
Subsidiary Capital Stock. At and as of the Effective Time, the Subsidiary Capital Stock will remain in full force and effect with the right to acquire the Company Common Stock with such adjustments noted in the terms of such Subsidiary Capital Stock.
Representations and Warranties
The Merger Agreement contains customary representations and warranties of the parties thereto with respect to, among other things, (a) corporate existence and power, (b) authorization to enter into the Merger Agreement and related transactions; subsidiaries, (c) governmental authorization, (d) non-contravention, (e) capitalization, (f) corporate records, (g) consents, (h) financial statements, (i) internal accounting controls, (j) absence of certain changes, (k) properties; title to assets, (l) litigation, (m) material contracts, (n) licenses and permits, (o) compliance with laws, (p) intellectual property, (q) privacy and data security, (r) employee matters and benefits, (s) tax matters, (t) real property, (u) environmental laws, (v) finders’ fees, (w) directors and officers, (x) anti-money laundering laws, (y) insurance, (z) related party transactions, and (aa) certain representations related to securities law and activity. Viveon has additional representations and warranties, including (a) issuance of shares, (b) trust fund, (c) listing, (d) board approval, (e) SEC documents and financial statements, (f) certain business practices, (g) expenses, indebtedness and other liabilities and (h) brokers and other advisors.
Covenants
The Merger Agreement includes customary covenants of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, access to information, cooperation in the preparation of the Registration Statement and Proxy Statement (as each such terms are defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals of each party’s respective stockholders. Viveon and Clearday have each also agreed to include in the Proxy Statement the recommendation of its respective board that its stockholders approve all of the proposals to be presented at its respective special meeting. In addition, each of Viveon and Clearday have agreed to use commercially reasonable efforts to solicit and finalize definitive documentation for a committed equity in an aggregate amount that, together with the funds in the Trust Account after giving effect to potential redemptions from Viveon’s public stockholders, together with financing programs available to Clearday after the Closing, will provide to Clearday working capital to meet its short-term commercial development goals.
Viveon has also agreed to prepare a proxy statement to seek the approval of its stockholders (the “Extension Proposal”) to amend its organizational documents to extend the period of time Viveon is afforded under its organizational documents and IPO prospectus to consummate an initial business combination for an additional three months, from June 30,2023 to September 30, 2023 (or such earlier date as Viveon and Clearday may agree in writing).
Each party’s representations, warranties and pre-Closing covenants will not survive Closing and no party has any post-Closing indemnification obligations.
Viveon Equity Incentive Plan
Viveon has agreed to approve and adopt an equity incentive plan (the “Incentive Plan”) to be effective as of the Closing and in a form mutually acceptable to Viveon and Clearday, subject to approval of the Incentive Plan by the Viveon stockholders. The Incentive Plan will provide for an initial aggregate share reserve equal to 8% of the number of shares of Viveon Common Stock issued and outstanding at the Closing and an “evergreen” provision that is mutually agreeable to Viveon and Clearday will provide for an automatic increase on the first day of each fiscal year in the number of shares available for issuance under the Incentive Plan as mutually determined by Viveon and Clearday.
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Non-Solicitation Restrictions
Each of Viveon and Clearday has agreed that from the date of the Merger Agreement to the Effective Time or, if earlier, the valid termination of the Merger Agreement in accordance with its terms, it will not initiate any negotiations with any party relating to an Alternative Transaction (as such term is defined in the Merger Agreement) or enter into any agreement relating to such a proposal, other than as expressly excluded from the definition of an Alternative Transaction. Each of Viveon and Clearday has also agreed to be responsible for any acts or omissions of any of its respective representatives that, if they were the acts or omissions of Viveon and Clearday, as applicable, would be deemed a breach of the party’s obligations with respect to these non-solicitation restrictions.
Conditions to Closing
The consummation of the Merger is conditioned upon, among other things, (i) the absence of any applicable law or order restraining, prohibiting or imposing any condition on the consummation of the Merger and related transactions, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) receipt of any consent, approval or authorization required by any Authority (as defined in the Merger Agreement), (iv) Viveon having net tangible assets of at least $5,000,001 (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act), unless Viveon’s amended and restated certificate of incorporation shall have been amended to remove such requirement prior to or concurrently with the Closing, (v) approval by Clearday’s stockholders of the Merger and related transactions, (vi) approval by Viveon’s stockholders of the Merger and related transactions, (vii) the conditional approval for listing by NYSE American (or an alternate exchange) of the shares of Viveon Common Stock to be issued in connection with the transactions contemplated by the Merger Agreement and satisfaction of initial and continued listing requirements, and (viii) the Registration Statement becoming effective in accordance with the provisions of the Securities Act of 1933, as amended (“Securities Act”).
Solely with respect to Viveon and New Merger Sub, the consummation of the Merger is conditioned upon, among other things, (i) Clearday having duly performed or complied with all of its obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of Clearday, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure would not have or reasonably be expected to have a Material Adverse Effect (as defined in the Merger Agreement) on Clearday or any of its subsidiaries, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a Material Adverse Effect on Clearday or any of its subsidiaries, (v) Clearday and its securityholders having executed and delivered to Viveon each Additional Agreement (as defined in the Merger Agreement) to which they each are a party and (vi) Clearday delivering certain certificates to Viveon.
Solely with respect to Clearday, the consummation of the Merger is conditioned upon, among other things, (i) Viveon and New Merger Sub having duly performed or complied with all of their respective obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of Viveon and New Merger Sub, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure to be true and correct would not have or reasonably be expected to have a Material Adverse Effect on Viveon or New Merger Sub and their ability to consummate the Merger and related transactions, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a Material Adverse Effect on Viveon or New Merger Sub, (v) the Amended Parent Charter (as defined in the Merger Agreement) being filed with, and declared effective by, the Delaware Secretary of State, (vi) Viveon delivering certain certificates to Clearday, (vii) the size and composition of the post-Closing board of directors of Viveon having been appointed as set forth in the Merger Agreement and (viii) Viveon, Viveon Health LLC and other stockholders, as applicable, having executed and delivered to Clearday each Additional Agreement to which they each are a party.
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Termination
The Merger Agreement may be terminated at any time prior to the Effective Time as follows:
(i) by either Viveon or Clearday, if (A) the Merger and related transactions are not consummated on or before the latest of (i) June 30, 2023, (ii) if the Extension Proposal is approved, September 30, 2023 and (iii) if one or more extensions to a date following September 30, 2023 are obtained at the election of Viveon, with Viveon stockholder vote, in accordance with the Viveon’s amended and restated certificate of incorporation, the last date for Viveon to consummate a business combination pursuant to such extensions; and (B) the material breach or violation of any representation, warranty, covenant or obligation under the Merger Agreement by the party seeking to terminate the Merger Agreement was not the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Closing Date, without liability to the other party;
(ii) by either Viveon or Clearday, if any Authority has issued any final decree, order, judgment, award, injunction, rule or consent or enacted any law, having the effect of permanently enjoining or prohibiting the consummation of the Merger, provided that, the party seeking to terminate cannot have breached its obligations under the Merger Agreement and such breach was a substantial cause of, or substantially resulted in, such action by the Authority; and
(iii) by mutual written consent of Viveon and Clearday duly authorized by each of their respective boards of directors.
The Merger Agreement and other agreements described below have been included to provide investors with information regarding their respective terms. They are not intended to provide any other factual information about Viveon, Clearday or the other parties thereto. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, are modified or qualified by information in one or more disclosure letters prepared in connection with the execution and delivery of the Merger Agreement, may be subject to a contractual standard of materiality different from what might be viewed as material to investors, or may have been used for the purpose of allocating risk between the parties. Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts about Viveon, Clearday or the other parties thereto at the time they were made or otherwise and should only be read in conjunction with the other information that Viveon or Clearday makes publicly available in reports, statements and other documents filed with the SEC. Viveon and Clearday investors and securityholders are not third-party beneficiaries under the Merger Agreement.
Certain Related Agreements
Parent Support Agreements. Concurrently with the execution of the Merger Agreement, Viveon, Clearday and the Sponsor and the officers and directors of Viveon entered into a support agreement (the “Parent Support Agreement”) pursuant to which the Sponsor and the officers and directors of Viveon have agreed to vote all shares of Viveon common stock beneficially owned by them, including any additional shares of Viveon they acquire ownership of or the power to vote: (i) in favor of the Merger and related transactions, (ii) against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions, and (iii) in favor of an extension of the period of time Viveon is afforded to consummate an initial business combination.
Company Support Agreements. Concurrently with the execution of the Merger Agreement, Viveon, Clearday and certain stockholders of Clearday entered into a support agreement (the “Company Support Agreement”), pursuant to which such Clearday stockholders have agreed to vote all common and preferred stock of Clearday beneficially owned by them, including any additional shares of Clearday they acquire ownership of or the power to vote, in favor of the Merger and related transactions and against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions.
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Lock-Up Agreements. In connection with the Closing, certain Clearday stockholders will each agree, subject to certain customary exceptions, not to (i) offer, sell contract to sell, pledge or otherwise dispose of, directly or indirectly, any Lockup Shares, (ii) enter into a transaction that would have the same effect, (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Shares or otherwise, (iv) engage in any short sales or other arrangement with respect to the Lock-Up Shares or (v) publicly announce any intention to effect any transaction specified in clause (i), (ii) or (iii) until the date that is six months after the Closing Date (the “Lock-Up Period”). The term “Lockup Shares” mean the Merger Consideration Shares and the Earnout Shares, if any, whether or not earned prior to the end of the Lock-up Period, together with any other shares of Viveon Common Stock, and including any securities convertible into, or exchangeable for, or representing the rights to receive Viveon Common Stock, if any, acquired during the Lock-up Period. If the closing price of Viveon Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period following the Closing Date, 50% of the Lock-up Shares will be released from the lock-up. The existing escrow provisions of Viveon Common Stock held by certain stockholders will remain in effect.
Amended and Restated Registration Rights Agreement. At the Closing, Viveon will enter into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with certain existing stockholders of Viveon and Clearday with respect to their shares of Viveon Common Stock acquired before or pursuant to the Merger, and including the shares issuable on conversion of the warrants issued to the Sponsor in connection with Viveon’s initial public offering and any shares issuable on conversion of loans or other convertible securities. The agreement amends and restates the registration rights agreement Viveon entered into on December 22, 2020 in connection with its initial public offering. Subject to the Lock-Up Agreements described above, the holders of a majority of the shares held by the existing Viveon stockholders, and the holders of a majority of the shares held by the Clearday stockholders will each be entitled to make one demand that the Company register such securities for resale under the Securities Act, or two demands each if Viveon is eligible to use Form S-3 or a similar short-form registration statement. In addition, the holders will have certain “piggy-back” registration rights that require Viveon to include such securities in registration statements that Viveon otherwise files. The registration rights agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering Viveon’s securities. Viveon will bear the expenses incurred in connection with the filing of any such registration statements.
The foregoing descriptions of agreements and the transactions and documents contemplated thereby are not complete and are subject to and qualified in their entirety by reference to the Merger Agreement, form of Parent Support Agreement, form of Company Support Agreement, form of Lock-Up Agreement, and form of Amended and Restated Registration Rights Agreement, copies of which were filed on April 11, 2023 with a Current Report on Form 8-K as Exhibits 2.1, 10.1, 10.2, 10.3, and 10.4, respectively, and the terms of which are incorporated by reference herein.
General
We are a Delaware blank check company formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses or entities, which we refer to throughout this Annual Report as our initial business combination. Although we are not limited to a particular industry or geographic region for purposes of consummating an initial business combination, we intend to focus on businesses that have their primary operations located in North America in the healthcare industry, and specifically in the medical technology and medical device sectors. As disclosed in our prospectus, although our management has significant experience in the orthopedic and spine marketplace, they also have extensive operating and transaction experiences in the medical technology sector as managers, investors, acquirors, and sellers and will use that experience to consider target companies in emerging growth medical technology and medical device companies that may be focused in areas outside of orthopedics and spine.
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Consistent with our strategy, we have identified the following criteria to evaluate prospective target businesses. Although we may decide to enter into our initial business combination with a target business that does not meet the criteria described below, it is our intention to acquire companies that we believe:
| ● | have a clinical or other competitive advantage in the markets in which they operate and which can benefit from access to additional capital as well as our industry relationships and expertise; | |
| ● | will likely be well received by public investors and experience substantial increase in valuation as a result of a public listing and access to the public markets; | |
| ● | are ready to be public, with strong management, corporate governance and reporting policies in place; | |
| ● | have significant embedded and/or underexploited growth opportunities that will drive value; | |
| ● | growing at or above industry market rates; | |
| ● | will offer attractive risk-adjusted equity returns for our stockholders. |
We may use other criteria as well. Any evaluation relating to the merits of a particular initial business combination may be based on these general criteria as well as other considerations, factors and criteria that our management may deem relevant.
We believe that emerging growth medical technology companies will realize a material benefit from being publicly-traded, including greater access to capital to support innovation and sales channel expansion, having available liquid securities which can be utilized for acquisitions, and increased market and customer awareness.
Many of these companies that are highly innovative and are experiencing high growth have few options to reach their full potential. While a traditional IPO could, in theory, provide a meaningful avenue for these companies to access capital and accelerate their growth, the relatively high risk and expense associated with a traditional initial public offering and the negative consequences of an unsuccessful public offering represent meaningful barriers to many companies in our target sector to pursuing a traditional IPO. Accordingly, we believe that the increased visibility and acceptance of going-public mergers with special purpose acquisition companies like us may enhance our ability to consummate an initial business combination.
We believe an acquisition by a special purpose acquisition company, like ours, can provide an efficient liquidity and capital-raising mechanism while materially reducing the risks and expenses associated with a traditional IPO. Furthermore, we believe our management team is well-known to, and respected by, the founders, management, and shareholders of private medical technology companies and that our leadership’s reputation will be a competitive advantage in attracting high quality targets for our business combination. Our management team and board of directors have an extensive operating and transaction experiences in the medical technology sector as manager, investors, acquirors, and sellers. We intend to leverage this experience and network to identify a target company and to deliver operational and economic benefit from a business combination.
Our Management Team
Jagi Gill, PhD is our Chief Executive Officer. Dr. Gill has more than 20 years of healthcare investment and general management experience. From 2017 to 2020, he served as the Vice-President of Business Development and General Manager of AcuVentures, a business unit within Acumed LLC, a Berkshire Hathaway Company. Acumed LLC is a market leader in the orthopedic sector with particular strength in the upper extremity fracture repair and trauma market segments. As the General Manager, Dr. Gill led two business units, Rib Fixation and the Soft Tissue Repair, with responsibilities for product development, sales, marketing and profitability. Under his leadership, the business units grew 2-3x faster than their market segment. In addition to general management responsibilities, Dr. Gill was involved in sourcing, closing and integrating four acquisitions within the orthopedic sector for Acumed. These transactions ranged from technology acquisitions serving as tuck-in product integrations to stand alone companies with global revenue. From 2009 to 2017, he was the Founder, Chief Executive Officer and Board Member of Tenex Health a privately held orthopedic sports medicine company. In this capacity he patented, designed and developed the initial platform technology intended to treat chronic tendon pain. Under his leadership, Tenex Health launched commercially, generated positive operating income, secured FDA regulatory approval, developed a manufacturing and operations infrastructure, and established sales channels serving the outpatient Ambulatory Surgery Centers. Before founding Tenex Health, Dr. Gill was the Founder and Chief Executive Officer of OrthoCor, a company providing non-invasive pain management technology, from 2007 to 2009, while also serving on an advisory and consulting capacity to a number of medical technology companies. OrthoCor developed and commercialized orthopedic knee braces integrating pulsed electromagnetic technology to address chronic pain associated with trauma or osteoarthritis. Prior to this, he served in executive business development roles for Boston Scientific Corporation from 2001 to 2007 where he was involved in sourcing and supporting the acquisition of private companies which collectively accounted for more than $750 million in enterprise value. While at Boston Scientific, he was involved in the investments in, and acquisition of, the following private companies: Advanced Bionics (implantable neurostimulation), Cameron Health (implantable cardiac rhythm management), Innercool (systemic hypothermia for recovery from cardiac arrest), Orqis Medical (heart failure treatment) and Kerberos (endovascular thrombectomy). Dr. Gill completed his BSc and MSc in Anatomy from McGill University and PhD in Neuroscience from Mayo Clinic College of Medicine. We believe we will be able to capitalize on Dr. Gill’s experience and accomplishments in the orthopedic and spine markets, along with his relationships among executives in the target companies, their supply chains, and their customer networks, to successfully close a business combination.
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Rom Papadopoulos, M.D. is our Chief Financial Officer. Dr. Papadopoulos has more than 25 years of healthcare investment and operational experience. From 2006 to June 2020, Dr. Papadopoulos was the Founder and Sole Proprietor of Intuitus Capital, a private equity firm actively investing in the healthcare sector. At Intuitus, he led investments in more than 30 companies with a total of more than $700 million in enterprise value. Prior to founding Intuitus Capital, Dr. Papadopoulos was Chief Financial Officer, Chief Operations Officer, Corporate Executive Vice President and Corporate Secretary of Global Energy Holdings (NYSE Amex: GNH). While at GNH, he created and executed the company’s repositioning from traditional markets to renewable energy. He was responsible for coordinating all aspects of the financial management of the company including cash management and treasury, risk management, audit functions, SEC reporting and compliance as well as HR functions and employee policies. Dr. Papadopoulos was an early investor in Tenex Health Inc., a medical device company engaged in the manufacturing and sale of minimally invasive high frequency technology used to perform percutaneous tenotomy and fasciotomy. He eventually became the interim CFO for the company until September 2013. In this capacity, he was an integral part of the team seeking and completing acquisitions for the company. From 2002 to 2006, Dr. Papadopoulos was the Managing Director and head of healthcare investment banking for Caymus Partners, a middle market investment banking firm. Dr. Papadopoulos received his medical degree (M.D.) from the Aristotelian University of Thessaloniki, Greece, Medical School in 1985 and conducted his post-graduate training in Pediatrics at Emory University in 1986. We believe that Dr. Papadopoulos is qualified to sit on our board due to his years of experience in the healthcare industry, as a clinician as well as an investor who possesses unique insight into medical technology assets, in addition to his strong financial credentials.
Demetrios (Jim) G. Logothetis, is one of our directors and served as Senior Advisor in the Department of Housing and Urban Development (HUD) Office of the Assistant Secretary and Chief Financial Officer where he led the Audit Coordination Committee for Ginnie Mae, a government corporation within HUD from May 2020 to November 2020. Mr. Logothetis retired from Ernst & Young (EY) effective in June 2019 extending three years beyond normal retirement at the request of the EY Executive Board. Throughout his forty-year career with EY, from January 1979 to June 2019, Mr. Logothetis served some of EY’s largest global clients as lead audit partner, and fulfilled senior leadership roles within the firm, from offices in Chicago, Frankfurt Germany, New York, London England, and Atlanta. As of May 2023, Mr. Logothetis has served as a member of the Board of Directors of the Republic Bank of Chicago. Mr. Logothetis has served over the years on the boards of several non-profit organizations, including The National Board of the Boys & Girls Clubs of Americas where he served on the audit committee; The Archbishop Lakovos Leadership 100 Endowment Fund where he serves as Chairman, The American College of Greece where he served as Chairman of the Board of Trustees; Global Economics where he serves as a member of the advisory board and Cross-Country Consulting where he serves as a member of the advisory board, National Hellenic Museum where he serves on the Board. Mr. Logothetis is the founder and Chairman of the Board of Trustees of the Hellenic American Academy, one of the largest Greek American schools in the United States; and founding Chairman of the Foundation for Hellenic Education and Culture. Mr. Logothetis holds an M.B.A. degree in Accounting, Finance and International Business from The University of Chicago Booth Graduate School of Business and a B.S.C degree in Accountancy from DePaul University. Mr. Logothetis is also a Certified Public Accountant and a Certified Management Accountant. Mr. Logothetis has taught many EY training programs as well as graduate accounting classes at DePaul University. Mr. Logothetis served for several years on the DePaul University, Richard H. Driehaus College of Business advisory council, and since 2017 on the board of Trustees of the University as vice-chair, and then chair of the audit committee and member of the finance committee. Mr. Logothetis has also served as a member of the Trusteeship and Finance Committees for DePaul University.
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Brian Cole MD, MBA is one of our directors, and the Managing Partner of Midwest Orthopedics at Rush in Chicago, the lead executive for this large specialty practice which is consistently ranked as one of the top orthopedic groups by US News & World Report. Dr. Cole is a Professor in the Department of Orthopedics with a conjoint appointment in the Department of Anatomy and Cell Biology at Rush University Medical Center. In 2015, he was appointed as an Associate-Chairman of the Department of Orthopedics at Rush. In 2011, he was appointed as Chairman of Surgery at Rush Oak Park Hospital. He is the Section Head of the Cartilage Research and Restoration Center at Rush specializing in the treatment of arthritis in young active patients with a focus on regenerative medicine and biologic alternatives to surgery. He also serves as the head of the Orthopedic Master’s Training Program and trains residents and fellows in sports medicine and research. He lectures nationally and internationally and holds several leadership positions in prominent sports medicine societies. Through his basic science and clinical research, he has developed several innovative techniques with several patents for the treatment of shoulder, elbow and knee conditions. He has published more than 1,000 articles and 10 widely read textbooks in orthopedics and regenerative medicine. In addition to his academic accomplishments, Dr. Cole currently serves in many senior leadership roles in organizations such as President of the Arthroscopy Association of North America, President of the Ortho-regeneration Network Foundation, and Secretary General (Presidential-line) International Cartilage Repair Society. Dr. Cole is frequently chosen as one of the “Best Doctors in America” since 2004 and as a “Top Doctor” in the Chicago metro area since 2003. In 2006, he was featured on the cover of Chicago Magazine as “Chicago’s Top Doctor” and was selected as NBA Team Physician of the Year in 2009. Orthopedics This Week has named Dr. Cole as one of the top 20 sports medicine, knee and shoulder specialists repeatedly over the last 5 years as selected by his peers. He is the head team physician for the Chicago Bulls NBA team, co-team physician for the Chicago White Sox MLB team and DePaul University in Chicago. Dr. Cole was awarded his medical degree from the University of Chicago Pritzker School of Medicine and his MBA from the University of Chicago Booth School of Business. He completed his residency in Orthopedic Surgery at the Hospital for Special Surgery — Cornell Medical Center in New York and his fellowship in Sports Medicine at the University of Pittsburgh.
Doug Craft is one of our directors, and the Chief Executive Officer of Atlanta-based Medicraft, Inc., which is one of the largest independent agents for Medtronic, the world leader in medical technology and pioneering therapies. He has devoted his entire career to the medical industry, initially concentrating in the sale of spinal implants, which he continues today. Mr. Craft has extensive relationships with health care systems, surgeons and other senior health care professionals across the nation. Over the past three decades his commercial interests have expanded to include evaluating, consulting and developing businesses in the medical field generally, including but not limited to neuro-intraoperative monitoring, biologic agents, orthopedic reconstruction implants, surgical navigation systems, regenerative kidney technology, trans-catheter cardiac valves and spinal implant device design. He has funded and started over 12 businesses in the Orthopedic, Spine and Neurological segments such as Biocraft Inc, Orthocraft Inc, Neurocraft Inc, Pharmacraft, Premier Medical Systems, and Diamond Orthopedics. Early in his career, he was one of the first agents for Danek a publicly traded spinal implant company which merged with Sofamor to become Sofamor-Danek and relisting on the NYSE. Sofamor-Danek was acquired by Medtronic in 1999 for $3.7 billion. Mr. Craft is a highly experienced entrepreneur who is continually exploring opportunities to multiply investments in medical businesses and technologies. Mr. Craft earned a B.S. degree in biomedical engineering from Mississippi State University, and is a Distinguished Fellow of the College of Engineering at Mississippi State University.
Acquisition Strategy
We believe our management team is well positioned to identify unique opportunities within the healthcare industry, and more specifically in the medical technology and medical device industry. Our selection process will leverage our relationships within the industry particularly with leading venture capitalists and growth equity funds, executives of private and public companies, as well as leading investment banking firms, which we believe should provide us with a key competitive advantage in sourcing potential business combination targets. Furthermore, members of our board of directors will augment the selection process through their robust relationships. Given our profile and dedicated industry approach, we anticipate that target business candidates may be brought to our attention from various unaffiliated sources, and in particular investors in other private and public companies in our networks.
Our strategy is to utilize the experience and relationships of our management and board to identify target businesses that are exhibiting rapid growth, technology and service innovation, and positive income that would benefit from the opportunity for substantial revenue and profit expansion.
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We believe that target companies under this indicative will experience a substantial increase in value as a result of a public listing which brings access to the public markets to capitalize innovation, achieve added public visibility that can help expand sales channels, and provide flexibility to support additional substantial acquisitions in the highly fragmented medical technology and medical device market.
We believe an acquisition by a special purpose acquisition company, like us, can provide an efficient liquidity and capital-raising mechanism while materially reducing the risks and expenses associated with a traditional IPO. Furthermore, we believe our management team is well-known to, and respected by, the founders, management, and shareholders of private medical technology companies and that our leadership’s reputations will be a competitive advantage in attracting high quality targets for our business combination. Our management team and board of directors have extensive operating and transaction experiences in the medical technology sector as manager, investors, acquirors, and sellers. We intend to leverage this experience and network to identify a target company and to deliver operational and economic benefit from a business combination.
Investment Criteria
Consistent with our strategy, we have identified the following criteria to evaluate prospective target businesses. Although we may decide to enter into our initial business combination with a target business that does not meet the criteria described below, it is our intention to acquire companies that we believe:
| ● | have a clinical or other competitive advantage in the markets in which they operate and which can benefit from access to additional capital as well as our industry relationships and expertise; | |
| ● | will likely be well received by public investors and experience substantial increase in valuation as a result of a public listing and access to the public markets; | |
| ● | are ready to be public, with strong management, corporate governance and reporting policies in place; | |
| ● | will be able to take full advantage of the use of public securities as a means to engage in further substantial acquisitions in the highly fragmented medical technology and device industry; | |
| ● | have significant embedded and/or underexploited growth opportunities that will drive value; | |
| ● | growing at or above industry market rates; and | |
| ● | will offer attractive risk-adjusted equity returns for our stockholders. |
We may use other criteria as well. Any evaluation relating to the merits of a particular initial business combination may be based on these general criteria as well as other considerations, factors and criteria that our management may deem relevant.
Industry Opportunity
We believe the healthcare industry, particularly the life sciences and medical technology sectors, represents an enormous and growing target market with a large number of potential target acquisition opportunities. In 2018, total U.S. national health expenditures exceeded $3.6 trillion, and the Center for Medicare and Medicaid Services estimated that total healthcare spending accounted for approximately 18% of total U.S. Gross Domestic Product.
While most of the companies in our target sector of medical technology companies are domiciled in the United States, many have also begun to expand their commercial footprint globally, which delivers an opportunity to further extend their commercial reach. The regional distribution of the global market is primarily divided into North America (44%), Asia/Pacific (23%), Western Europe (22%), and all other areas (11%), according to 2020 analysis by MarketResearch.com. Of these segments, the Asia/Pacific market is expected to grow most rapidly at more than 6% CAGR. The enhanced growth rate in the Asia/Pacific segment is attributed to the increase in healthcare facilities primarily in emerging markets as well as expansion by local medical technology companies serving the region that also have expansion plans to enter the North American and Western European markets. These regionally based medical technology companies will serve as targets for our business combination.
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Effecting a Business Combination
General
We are not presently engaged in, and we will not engage in, any operations for an indefinite period of time. We intend to effectuate our initial business combination using cash from the proceeds of the IPO and the private placement of the private warrants, our shares, new debt, or a combination of these, as the consideration to be paid in our initial business combination. We may seek to consummate our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth (such as a company that has begun operations but is not yet at the stage of commercial manufacturing and sales), which would subject us to the numerous risks inherent in such companies and businesses, although we will not be permitted to effectuate our initial business combination with another blank check company or a similar company with nominal operations.
If our initial business combination is paid for using shares or debt securities, or not all of the funds released from the Trust Account are used for payment of the purchase price in connection with our business combination or used for redemptions of purchases of our Common Stock, we may apply the cash released to us from the Trust Account that is not applied to the purchase price for general corporate purposes, including for maintenance or expansion of operations of acquired businesses, the payment of principal or interest due on indebtedness incurred in consummating our initial business combination, to fund the purchase of other companies or for working capital.
Since the consummation of the IPO, we have focused on identifying, doing due diligence on and speaking to management of potential target companies in a variety of markets within the medical technology sector of the healthcare industry in the United States and other developed countries. Subject to the requirement that our initial business combination must be with one or more target businesses or assets having an aggregate fair market value of at least 80% of the value of the Trust Account (excluding any taxes payable) at the time of the agreement to enter into such initial business combination, we have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses.
We may seek to raise additional funds through a private offering of debt or equity securities in connection with the consummation of our initial business combination, and we may effectuate our initial business combination using the proceeds of such offering rather than using the amounts held in the Trust Account. Subject to compliance with applicable securities laws, we would consummate such financing only simultaneously with the consummation of our business combination. In the case of an initial business combination funded with assets other than the Trust Account assets, our tender offer documents or proxy materials disclosing the business combination would disclose the terms of the financing and, only if required by law or the NYSE American stock exchange, we would seek stockholder approval of such financing. There are no prohibitions on our ability to raise funds privately or through loans in connection with our initial business combination.
Sources of Target Businesses
Our process of identifying acquisition targets leverages our management team’s unique industry experiences, proven deal sourcing capabilities and broad and deep network of relationships in numerous industries, including executives and management teams, private equity groups and other institutional investors, large business enterprises, lenders, investment bankers and other investment market participants, restructuring advisers, consultants, attorneys and accountants, which we believe should provide us with a number of business combination opportunities. We expect that the collective experience, capability and network of our founders, directors and officers, combined with their individual and collective reputations in the investment community, will help to create prospective business combination opportunities.
We anticipate that target business candidates will be brought to our attention from various unaffiliated sources, including investment bankers, venture capital funds, private equity groups, leveraged buyout funds, management buyout funds and other members of the financial community. Target businesses may be brought to our attention by such unaffiliated sources as a result of being solicited by us through calls or mailings. These sources also may introduce us to target businesses in which they think we may be interested on an unsolicited basis, since many of these sources will have read this Annual Report and know what types of businesses we are targeting. Our officers and directors, as well as their affiliates, also may bring to our attention target business candidates that they become aware of through their business contacts as a result of formal or informal inquiries or discussions they may have, as well as attending trade shows or conventions.
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In addition, we expect to receive a number of proprietary deal flow opportunities that would not otherwise necessarily be available to us as a result of the business relationships of our officers and directors. While we do not presently anticipate engaging the services of professional firms or other individuals that specialize in business acquisitions on any formal basis, we may engage these firms or other individuals in the future, in which event we may pay a finder’s fee, consulting fee or other compensation to be determined in an arm’s length negotiation based on the terms of the transaction. We will engage a finder only to the extent our management determines that the use of a finder may bring opportunities to us that may not otherwise be available to us or if finders approach us on an unsolicited basis with a potential transaction that our management determines is in our best interest to pursue. Payment of finder’s fees is customarily tied to completion of a transaction, in which case any such fee will be paid out of the funds held in the Trust Account. Although some of our officers and directors may enter into employment or consulting agreements with the acquired business following our initial business combination, the presence or absence of any such arrangements will not be used as a criterion in our selection process of an acquisition candidate.
We are not prohibited from pursuing an initial business combination with a company that is affiliated with our sponsor, officers or directors. In the event we seek to complete our initial business combination with such a company, we, or a committee of independent directors, would obtain (i) an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire that such an initial business combination is fair to our unaffiliated stockholders from a financial point of view and (ii) the approval of a majority of our disinterested and of our independent directors.
Selection of a Target Business and Structuring of a Business Combination
Subject to the requirement that our initial business combination must be with one or more target businesses or assets having an aggregate fair market value of at least 80% of the value of the Trust Account (excluding any taxes payable) at the time of the agreement to enter into such initial business combination, our management will have virtually unrestricted flexibility in identifying and selecting one or more prospective target businesses. In any case, we will only consummate an initial business combination in which we become the majority shareholder of the target (or control the target through contractual arrangements in limited circumstances for regulatory compliance purposes as discussed below) or are otherwise not required to register as an investment company under the Investment Company Act or to the extent permitted by law we may acquire interests in a variable interest entity, in which we may have less than a majority of the voting rights in such entity, but in which we are the primary beneficiary. There is no basis for our stockholders to evaluate the possible merits or risks of any target business with which we may ultimately complete our initial business combination. To the extent we effect our initial business combination with a company or business that may be financially unstable or in its early stages of development or growth (such as a company that has begun operations but is not yet at the stage of commercial manufacturing and sales), we may be affected by numerous risks inherent in such company or business. Although our management will endeavor to evaluate the risks inherent in a particular target business, we may not properly ascertain or assess all significant risk factors.
In evaluating a prospective target business, we expect to conduct a thorough due diligence review that will encompass, among other things, meetings with incumbent management and employees, document reviews, interviews of customers and suppliers, inspection of facilities, as well as a review of financial and other information which will be made available to us.
The time required to select and evaluate a target business and to structure and complete our initial business combination, and the costs associated with this process, are not currently ascertainable with any degree of certainty. Any costs incurred with respect to the identification and evaluation of a prospective target business with which a business combination is not ultimately completed will result in our incurring losses and will reduce the funds we can use to complete another business combination. We will not pay any finders or consulting fees to members of our management team, or any of their respective affiliates, for services rendered to or in connection with our initial business combination.
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Fair Market Value of Target Business or Businesses
The target business or businesses or assets with which we effect our initial business combination must have a collective fair market value equal to at least 80% of the value of the Trust Account (excluding any taxes payable) at the time of the agreement to enter into such initial business combination. If we acquire less than 100% of one or more target businesses in our initial business combination, the aggregate fair market value of the portion or portions we acquire must equal at least 80% of the value of the Trust Account (excluding taxes payable) at the time of the agreement to enter into such initial business combination. However, we will always acquire at least a controlling interest in a target business. The fair market value of a portion of a target business or assets will likely be calculated by multiplying the fair market value of the entire business by the percentage of the target we acquire. We may seek to consummate our initial business combination with an initial target business or businesses with a collective fair market value in excess of the balance in the Trust Account. In order to consummate such an initial business combination, we may issue a significant amount of debt, equity or other securities to the sellers of such business and/or seek to raise additional funds through a private offering of debt, equity or other securities. If we issue securities in order to consummate such an initial business combination, our stockholders could end up owning a minority of the combined company’s voting securities as there is no requirement that our stockholders own a certain percentage of our company (or, depending on the structure of the initial business combination, an ultimate parent company that may be formed) after our business combination. Because we have no specific business combination under consideration, we have not entered into any such arrangement to issue our debt or equity securities and have no current intention of doing so.
The fair market value of a target business or businesses or assets will be determined by our board of directors based upon standards generally accepted by the financial community, such as actual and potential gross margins, the values of comparable businesses, earnings and cash flow, book value, enterprise value and, where appropriate, upon the advice of appraisers or other professional consultants. Investors will be relying on the business judgment of our board of directors, which will have significant discretion in choosing the standard used to establish the fair market value of a particular target business. If our board of directors is not able to independently determine that the target business or assets has a sufficient fair market value to meet the threshold criterion, we will obtain an opinion from an unaffiliated, independent investment banking firm or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire with respect to the satisfaction of such criterion. Notwithstanding the foregoing, unless we consummate a business combination with an affiliated entity, we are not required to obtain an opinion from an independent investment banking firm, or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire, that the price we are paying is fair to our stockholders.
Competition
In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions. Many of these entities are well established and have significant experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, the requirement that we acquire a target business or businesses having a fair market value equal to at least 80% of the value of the Trust Account (excluding any taxes payable) at the time of the agreement to enter into the business combination, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights and the number of our outstanding warrants and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of these factors may place us at a competitive disadvantage in successfully negotiating our initial business combination.
Management Operating and Investment Experience
We believe that our executive officers possess the experience, skills and contacts necessary to source, evaluate, and execute an attractive business combination. See the section titled “Management” for complete information on the experience of our officers and directors. Notwithstanding the foregoing, our officers and directors are not required to commit their full time to our affairs and will allocate their time to other businesses. We presently expect each of our employees to devote such amount of time as they reasonably believe is necessary to our business (which could range from only a few hours a week while we are trying to locate a potential target business to a majority of their time as we move into serious negotiations with a target business for a business combination). The past successes of our executive officers and directors do not guarantee that we will successfully consummate an initial business combination.
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As more fully discussed in “Conflicts of Interest,” if any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he has pre-existing fiduciary or contractual obligations, he may be required to present such business combination opportunity to such entity, subject to his or her fiduciary duties under Delaware law, prior to presenting such business combination opportunity to us. Most of our officers and directors currently have certain pre-existing fiduciary duties or contractual obligations.
Emerging Growth Company Status and Other Information
We are an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, or the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As such, we are eligible to 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 auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. If some investors find our securities less attractive as a result, there may be a less active trading market for our securities and the prices of our securities may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We intend to take advantage of the benefits of this extended transition period.
We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of the IPO, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of the prior December 31, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period. References herein to “emerging growth company” shall have the meaning associated with it in the JOBS Act.
Employees
We currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the business combination process we are in. We do not intend to have any full time employees prior to the consummation of our initial business combination.
ITEM 1A. RISK FACTORS
As a smaller reporting company, we are not required to make disclosures under this Item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 2. PROPERTIES
We currently maintain our executive offices at 3480 Peachtree Road NE 2nd Floor - Suite #112 Atlanta, Georgia 30326. Our sponsor is making this space available to us for a monthly fee of $20,000. We consider our current office space adequate for our current operations.
ITEM 3. LEGAL PROCEEDINGS
We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not currently a party to any material litigation or other legal proceedings brought against us. We are also not aware of any legal proceeding, investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business, financial condition or results of operations.
On October 5, 2023, a legal complaint was filed in Connecticut Superior Court against the Company and Suneva Medical, Inc. (“Suneva”) by ICR, LLC (“the Consultant”). The Complaint alleges that the Company and Suneva owe the Consultant unpaid fees under an October 25, 2021 consulting agreement and asserts claims for breach of contract, breach of implied contract, unjust enrichment, and quantum meruit. As of the date of this filing, this action is not pending and has not been officially docketed with the Connecticut Superior Court. The Company is continuing to assess the merits of the complaint but believes that the claims by the Consultant against the Company are without merit and the Company intends to defend the action if it is properly initiated.
ITEM 4. MINE SAFETY DISCLOSURES
Not Applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our units began to trade on The NYSE American stock exchange, or the NYSE American, under the symbol “VHAQU” on December 23, 2020. The shares of Common Stock, warrants and rights comprising the units began separate trading on NYSE American on February 4, 2021, under the symbols “VHAQ,” “VHAQW,” and “VHAQR”, respectively.
Holders of Record
As of the date of this filing, there was an aggregate of 5,031,250 shares of Common Stock issued and outstanding held by our sponsor, Viveon Health LLC, our independent directors, and a former independent director as the only stockholders of record. The number of record holders does not include beneficial owners of shares of Common Stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies held through Cede & Co.
Dividends
We have not paid any cash dividends on our Common Stock to date and do not intend to pay cash dividends prior to the completion of an initial business combination. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition subsequent to completion of a business combination. The payment of any dividends subsequent to a business combination will be within the discretion of our board of directors at such time. It is the present intention of our board of directors to retain all earnings, if any, for use in our business operations and, accordingly, our board of directors does not anticipate declaring any dividends in the foreseeable future. In addition, our board of directors is not currently contemplating and does not anticipate declaring any share dividends in the foreseeable future. Further, if we incur any indebtedness, our ability to declare dividends may be limited by restrictive covenants we may agree to in connection therewith.
Securities Authorized for Issuance Under Equity Compensation Plans
None.
Recent Sales of Unregistered Securities
None.
Use of Proceeds
On December 28, 2020, we consummated our IPO of 17,500,000 Units, each Unit consisting of one share of Common Stock of the Company, and one redeemable Warrant, entitling the holder thereof to purchase one-half of a share of Common Stock at a price of $11.50 per whole share, and one right to receive one-twentieth (1/20) of a share of Common Stock. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to the Company of $175,000,000. On December 28, 2020, the underwriters exercised the over-allotment option in full, and the closing occurred on December 30, 2020 when we sold 2,625,000 Over-Allotment Option Units at a price of $10.00 per unit, generating additional gross proceeds of $26,250,000.
On December 28, 2020, simultaneously with the consummation of the IPO, we sold to our Sponsor 18,000,000 Private Warrants at a price of $0.50 per Private Warrant, generating total proceeds of $9,000,000. The Private Warrants are identical to the Warrants (as defined below) sold in the IPO except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor, or its permitted transferees. Additionally, our Sponsor agreed not to transfer, assign, or sell any of the Private Warrants or underlying securities (except in limited circumstances, as described in the Private Placement Warrants Subscription Statement) until the date we complete our initial business combination.
A total of $203,262,500 of the net proceeds from the sale of Units in the IPO and the private placement were placed in a trust account established for the benefit of our public stockholders at J.P. Morgan Chase Bank, N.A. maintained by Continental Stock Transfer & Trust Company, acting as trustee (the “Trust Account”). At the time of the IPO, our initial amended and restated certificate of incorporation provided that, none of the funds held in trust will be released from the Trust Account, other than interest income to pay any tax obligations until the earlier of (i) the consummation of our initial business combination, (ii) our failure to consummate a business combination by 15 months after the IPO, and (iii) the redemption of any public shares properly submitted in connection with a stockholder vote to amend our amended and restated certificate of incorporation (a) to modify the substance or timing of the ability of holders of our public shares to seek redemption in connection with our initial business combination or our obligation to redeem 100% of our public shares if we do not complete our initial business combination by 15 months after the IPO, or (b) with respect to any other provision relating to stockholders’ rights or pre-business combination activity.
As previously disclosed under the section titled “Extensions of Business Combination Period and Amendments to Our Certificate of Incorporation” to this Annual Report, our stockholders voted to amend our amended and restated certificate on three occasions resulting in 18,507,585 shares being redeemed since the IPO and $188,955,280 paid from the Trust Account to the redeeming stockholders.
As of the date of this filing, the Company has 1,617,415 shares of public common stock outstanding, and approximately $17,777,323 remains in the Trust Account.
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Annual Report includes “forward-looking statements” 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 Annual Report 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 “Cautionary Note Regarding Forward-Looking Statements and Risk Factor Summary,” “Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K. 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.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations has been amended and restated to give effect to the restatement of our financial statements as of and for the year ended December 31, 2022. We are restating our historical financial results for such period to correct accrued costs and expenses as of December 31, 2022 and professional fees for the year ended December 31, 2022. The impact of the restatement is reflected in the Management’s Discussion and Analysis of Financial Condition and Results of Operations below. Other than as disclosed in the Explanatory Note and with respect to the impact of the restatement, no other information in this Item 7 has been amended and this Item 7 does not reflect any events occurring after the Original Filing. The impact of the restatement is more fully described in Note 2 to our financial statements included in Item 15 of Part IV of this Amendment and Item 9A: Controls and Procedures, both contained herein.
Overview
We are a blank check company formed under the laws of the State of Delaware on August 7, 2020 for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more target businesses. Although we are not limited to a particular industry or geographic region for purposes of consummating an initial business combination, we intend to focus on businesses that have their primary operations located in North America in the healthcare industry. We intend to utilize cash derived from the proceeds of our initial public offering in effecting our initial business combination.
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The issuance of additional shares in connection with an initial business combination:
| ● | may significantly dilute the equity interest of our investors in this offering who would not have pre-emption rights in respect of any such issuance; | |
| ● | may subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded to our shares of common stock; | |
| ● | will likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things, our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our present officers and directors; and | |
| ● | may adversely affect prevailing market prices for our securities. | |
| ● | Similarly, if we issue debt securities, it could result in: | |
| ● | default and foreclosure on our assets if our operating revenues after our Initial Business Combination are insufficient to pay our debt obligations; | |
| ● | acceleration of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation of that covenant; | |
| ● | our immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand | |
| ● | our inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional financing while such security is outstanding; and | |
| ● | limitations on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of our strategy and other purposes and other disadvantages compared to our competitors who have less debt. |
We expect to continue to incur significant costs in the pursuit of our acquisition plans. We cannot assure you that our plans to complete our initial business combination will be successful.
On January 12, 2022, we entered into a merger agreement (the “Old Merger Agreement”) with VHAC Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Old Merger Sub”), and Suneva Medical, Inc., a Delaware corporation (“Suneva”). Pursuant to the terms of the Old Merger Agreement, a business combination between the Company and Suneva will be consummated through the merger of Old Merger Sub with and into Suneva, with Suneva surviving the merger as a wholly owned subsidiary of the Company (the “Old Merger”). On February 2, 2023, legal counsel for Viveon sent a letter informing Suneva’s legal counsel that Viveon decided, effective immediately, to unilaterally terminate the Old Merger Agreement pursuant to Sections 10.2(a) and 10.3 thereof, based upon material breaches of the Old Merger Agreement by Suneva. The termination letter was sent without prejudice and reserved all of Viveon, Old Merger Sub and Viveon Health, LLC (Viveon’s sponsor) rights, claims and remedies, specifically including those within the Old Merger Agreement, against Suneva and others associated with Suneva who participated in the merger discussions and arrangements, and waived none.
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On March 18, 2022, we held our 2022 Annual Meeting of Stockholders for the purpose of approving: (i) a proposal to approve an amendment to our amended and restated certificate of incorporation to (i) extend the date by which the Company has to consummate a business combination for three months, from March 28, 2022 (the “Original Termination Date”) to June 28, 2022, and (ii) allow us, without another stockholder vote, to elect to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time after the Extended Date, upon five days’ advance notice prior to the applicable deadline, for a total of up to nine months after the Original Termination Date, unless the closing of the proposed business combination with Suneva or any potential alternative initial business combination shall have occurred (the “Extension Proposal”); (ii) a proposal to re-elect five current directors to our Board of Directors (the “Director Election Proposal”); and (iii) a proposal to ratify the appointment of Marcum LLP as our independent registered certified public accountants for fiscal year 2020 (the “Auditor Ratification Proposal”). Stockholders voted to approve the Extension Proposal, Director Election Proposal and Auditor Ratification Proposal.
On March 18, 2022, stockholders elected to redeem 15,092,126 shares of our common stock, resulting in redemption payments out of the trust account totaling approximately $152,451,819. Subsequent to the redemptions, 5,032,874 shares of common stock remained in the trust account.
On March 21, 2022, an initial amount of $2,700,000 was drawn down from the Notes. $720,000 of the loan proceeds was deposited into our trust account in connection with extending the business combination completion window from the Original Termination Date until June 28, 2022. After June 28, 2022, we elected to continue to extend such date until December 28, 2022 (the “December Extension Date”), by making a monthly deposit of $240,000 into the trust account each month for each monthly period, until the December Extension Date. We deposited $240,000 into the trust account on each of June 23, 2022, July 26, 2022, August 30, 2022, September 28, 2022, October 28, 2022, and November 25, 2022 to extend the business combination completion window to July 28, 2022, August 28, 2022, September 28, 2022, October 28, 2022, November 28, 2022, and December 28, 2022, respectively.
On December 23, 2022, the Company held its 2022 Annual Meeting of the Stockholders in which they voted to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time for a total of up to six months from December 28, 2022 until June 30, 2023 (the “Second Extended Date”), upon three calendar days’ advance notice prior to the applicable monthly deadline, unless the closing of any potential initial business combination shall have occurred prior to the Second Extended Date.
On each of December 27, 2022, January 26, 2023, February 27, 2023, March 27, 2023 and April 28, 2023, the Company deposited $100,000 into the Trust Account to extend the date to consummate a Business Combination through January 31, 2023, February 28, 2023, March 31, 2023, April 30, 2023 and May 31, 2023 (the “Extended Date”), respectively. Viveon made a final deposit of $100,000 on May 24, 2023 for a one month extension until June 30, 2023.
On December 23, 2022, stockholders elected to redeem 3,188,100 Public Shares, resulting in a redemption payable as of December 31, 2022 of $34,004,514 included in common stock tendered for redemption on the consolidated balance sheet. On January 25, 2023, redemption payments out of the trust account totaled $34,004,514. Subsequent to the redemptions, 1,844,774 shares of common stock remained in the trust account.
On June 22, 2023, the Company held a stockholder meeting to amend the Company’s Amended and Restated Certificate of Incorporation, to allow the Company, without another stockholder vote, to elect to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month until December 31, 2023, by depositing $85,000 into the trust account and (ii) further extend the date by which the Company must consummate an initial business combination (without seeking additional approval from the stockholders) for up to an additional three months, from January 1, 2024 to March 31, 2024, with no additional deposits to be made into the Trust Account during such period, each such extension for an additional one month period, (the “Third Extended Date”). The Company has deposited the initial payment of $85,000 into the Trust Account to extend the date by which the Company can complete an initial business combination by one month to July 31, 2023.
On June 22, 2023, stockholders elected to redeem 227,359 Public Shares, resulting in a redemption of $2,498,947 from the Trust Account. Subsequent to the redemptions, 1,617,415 Public Shares remained.
The entry into the Subscription Agreement and the terms of the Notes and Subscription Warrants was approved by the Audit Committee of the Board of Directors of the Company at a meeting held on March 21, 2022.
On March 23, 2022, we filed an amendment to our amended and restated certificate of incorporation with the Delaware Secretary of State (the “Amendment”) The Amendment (i) extends the date by which we have to consummate a business combination for three months, from the Original Termination Date to the Extended Date and (ii) allows us, without another stockholder vote, to elect to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time after the Extended Date, upon five days’ advance notice and the deposit of $240,000 prior to the applicable deadline, for a total of up to nine months after the Original Termination Date, unless the closing of the proposed business combination with Suneva Medical, Inc. or any potential alternative initial business combination shall have occurred. As disclosed in the Current Report on Form 8-K filed on March 18, 2022, the Amendment was approved by our stockholders at our Annual Meeting of Stockholders held on March 18, 2022.
On December 28, 2022, we filed an amendment to our amended and restated certificate of incorporation with the Delaware Secretary of State (the “Second Amendment”) The Second Amendment extends the date by which we have to consummate a business combination on a monthly basis for a total of up to six months from December 28, 2022 until June 30, 2023 unless the closing of the proposed Business Combination with Suneva, or any potential alternative initial business combination shall have occurred prior to June 30, 2023. Thereafter, we deposited $100,000 for each such monthly period. As disclosed in the Current Report on Form 8-K filed on December 28, 2022, the Amendment was approved by our stockholders at our Annual Meeting of Stockholders held on December 28, 2022.
On June 27, 2023, we filed a third amendment to our amended and restated certificate of incorporation with the Delaware Secretary of State (the “Third Amendment”). The Third Amendment allows us, to (i) initially extend the date by which the Company must consummate an initial business combination up to six times, each such extension for an additional one month period, until December 31, 2023, by depositing into the trust account established in connection with the Company’s initial public offering (the “Trust Account”) the amount of $85,000 for each one-month extension until December 31, 2023, and (ii) further extend the date by which the Company must consummate an initial business combination (without seeking additional approval from the stockholders) for up to an additional three months, from January 1, 2024 to March 31, 2024, with no additional deposits to be made into the Trust Account during such period, each such extension for an additional one month period, (the “Third Extended Date”), upon one calendar day advance notice to Continental Stock Transfer & Trust Company (the “Trustee”), prior to the applicable monthly deadline, unless the closing of the proposed initial business combination with Clearday, Inc., or any potential alternative initial business combination shall have occurred prior to the Third Extended Date.
On March 21, 2022, March 23, 2022, April 4, 2022, April 27, 2022, May 9, 2022, October 27, 2022, and November 25, 2022, we entered into subscription agreements with several lenders for a loan of up to $4,000,000, in the aggregate (the “Subscription Agreements”).
Pursuant to the Subscription Agreements, we issued a series of unsecured senior promissory notes in the aggregate principal amount of up to $4,000,000 (the “Notes”) to the subscribers. Of the $4,000,000 in Notes, $1,955,000 was subscribed for by several related parties affiliated with our sponsor, Viveon Health LLC, and the balance in the amount of $2,045,000 was subscribed for by parties that are not related to our sponsor.
Pursuant to the terms of the Subscription Agreements, the subscribers also received warrants to purchase one share of our common stock for every $2.00 of the funded principal amount of the Notes up to 2,000,000 shares of our common stock, in the aggregate, at an exercise price of $11.50 per share, subject to adjustment (the “Subscription Warrants”). The Subscription Warrant term commences on the Exercise Date (as hereinafter defined) for a period of 49 months. The Subscription Warrants are exercisable commencing on the date of the initial business combination (the “Exercise Date”) and have a cashless exercise feature that is available at any time on or after the Exercise Date. Commencing on the date 13 months following the Exercise Date, the subscribers have the right, but not the obligation, to put the Subscription Warrants to us at a purchase price of $5.00 per share. We have agreed to file, within thirty (30) calendar days after the consummation of an initial business combination, a registration statement with the Securities and Exchange Commission to register for resale the shares of common stock underlying the Subscription Warrants.
The Notes do not bear interest and mature upon the earlier of (i) the closing of our initial business combination, and (ii) December 31, 2022 (the “Maturity Date”). The Notes provide for a credit line up to the maximum amount of $4,000,000. We will not have the right to re-borrow any portion of any loans made under the Notes once repaid . As of December 31, 2022, a commitment fee in the amount of $400,000, equal to 10% of the maximum principal amount of the Note, had been paid to the subscribers, on a pro rata basis. In the event that we do not consummate a business combination by the Maturity Date, the Notes will be repaid only from amounts remaining outside of our Trust Account, if any. Subsequent to December 31, 2022, in connection with the Merger Agreement (as defined below) a majority of the holders of the Notes and Subscription Warrants have agreed to exchange such Notes and Subscription Warrants pursuant to the terms of an exchange agreement with Viveon dated as of May 1, 2023 (the Exchange Agreement”) for a separate series of Clearday senior convertible promissory notes (the “Clearday Senior Convertible Notes”). The Clearday Senior Convertible Notes bear 8% interest per annum and mature upon the earlier of (i) June 30, 2024, or (ii) the date of any Change in Control. Upon the consummation of the business combination and the exchange of the Subscription Agreements for the Clearday Senior Convertible Notes, the lenders will forfeit their Subscription Warrants as part of the exchange. One lender has chosen not to convert to Clearday Senior Convertible Notes. The balance owed to this lender under the Notes is considered due upon demand by the lender. As of the date of this filing of this Annual Report the lender has not requested payment of the Note. Pursuant to a warrant cancellation and forfeiture agreement dated as of August 16, 2023, one of the Company’s directors agreed to forfeit for cancellation 89,029 of the warrant shares underlying the warrant issued to an affiliate that he controls in connection with the Notes described above.
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In accordance with ASC 470-20-25-2, Debt with Conversion and Other Options - Debt Instruments with Detachable Warrants, the proceeds from the issuance of the Notes were allocated to the Notes and Subscription Warrants using the with-and-without method. Under this method, the Company first allocated the proceeds from the issuance of the Notes to the Subscription Warrants based on their initial fair value measurement. The measurement of the Subscription Warrants fair value was determined utilizing a Monte Carlo simulation model considering all relevant assumptions current at the dates of issuance. See Note 10 to the consolidated financial statements for more details on the assumptions used. The initial fair value of certain Subscription Warrants exceeded the proceeds received from the issuance of the Notes. In these instances, the proceeds allocated to the Notes were nil, and the Company recognized a loss on the issuance of those Subscription Warrants. In other instances, the fair value of Subscription Warrants did not exceed the proceeds received from the issuance of the Notes. As such a portion of the proceeds equal to the fair value of the Subscription Warrants on the date of issuance was allocated to the Subscription Warrants. The remaining proceeds were allocated to the Notes issued.
Discounts to the principal amounts are included in the carrying value of the Notes and amortized to “Interest expense” over the remaining term of the underlying debt to the Original Maturity Date. During the years ended December 31, 2022 and 2021, we recorded a $3,645,777 and $0 debt discount upon issuance of the Notes. The discount is amortized to interest expense over the term of the debt to the Original Maturity Date. For the years ended December 31, 2022 and 2021, the amortization of the discount resulted in interest expense of $3,645,777 and $0, respectively.
Our Sponsor agreed to loan the Company an aggregate of up to $500,000 to cover expenses related to the Initial Public Offering pursuant to a promissory note (the “IPO Note”). This loan was non-interest bearing and payable on the earlier of March 31, 2021 or the completion of the Initial Public Offering. On January 13, 2021, we paid the $228,758 balance on the note from the proceeds of the Initial Public Offering. We no longer have the ability to borrow under the IPO Note.
Our Chief Financial Officer loaned the Company $75,000 to cover expenses related to ongoing operations, which was funded on December 27, 2022. This loan is non-interest bearing and payable upon consummation of the Company’s initial Business Combination. The loan agreement was entered into on December 27, 2022.
As of December 31, 2022, and December 31, 2021, the outstanding balance of the loan was $75,000 and $0, respectively. Subsequent to December 31, 2022, our Chief Financial Officer loaned the Company an additional $555,000 through the date of this filing. These loans will be exchanged for Clearday Senior Convertible Notes upon consummation of the Company’s initial Business Combination
Our Chief Executive Officer of the Company loaned the Company $100,000 to cover expenses related to ongoing operations, which was funded on April 2, 2023. This loan is non-interest bearing and payable upon consummation of the Company’s initial Business Combination. The loan agreement was entered into on April 2, 2023. As of December 31, 2022, and December 31, 2021, the outstanding balance of the loan was $0, respectively.
Subsequent to December 31, 2022, three investors in our Sponsor, loaned the Company $100,000 in the aggregate, to cover expenses related to ongoing operations, funded on April 5, 2023, and April 7, 2023 . These loans are non-interest bearing and payable upon consummation of the Company’s initial Business Combination. The loan agreements were entered into on April 5, 2023, and April 7, 2023. As of December 31, 2022, and December 31, 2021, the outstanding balance of the loans was $0, respectively.
On May 12, 2023, we entered into an unsecured promissory note with Clearday (the “Clearday Note”). The Clearday Note is non-interest bearing mature upon the earlier of (i) the first anniversary of the issuance date and (ii) December 31, 2022. Proceeds provided to us under the Clearday Note through the filing date were approximately $881,710 during fiscal year 2023. Funds in the Trust Account may not be used to repay the obligations under the Clearday Note. We used such funds for general working capital purposes. A copy of the Clearday Note is incorporated as Exhibit 10.22 of this Annual Report, and all references herein to the Clearday Note are qualified in their entirety by reference to the full text of such agreement.
Recent Developments
Merger Agreement with Clearday
On April 5, 2023, the Company entered into a Merger Agreement (the “Merger Agreement”), by and among Viveon, Clearday, Inc., a Delaware corporation (the “Clearday”), VHAC2 Merger Sub, Inc., a Delaware corporation (“New Merger Sub”), Viveon Health LLC, a Delaware limited liability Company, in the capacity as the representative from and after the effective time for the stockholders of the Company (other than the Company Stockholders (as defined in the Merger Agreement)) as of immediately prior to the effective time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement, and Clearday SR LLC, a Delaware limited liability company, in the capacity as the representative from and after the effective time for the holders of Company preferred stock as of immediately prior to the effective time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement. Pursuant to the terms of the Merger Agreement, a business combination between the Company and Clearday will be consummated through the merger of New Merger Sub with and into Clearday, with Clearday surviving the merger as a wholly owned subsidiary of the Company and the Company will change its name to “Clearday Holdings, Inc.” (the “Merger”). The board of directors of the Company has (i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement, the Merger and related transactions by the stockholders of Company. Capitalized terms used herein but not defined shall have the meanings ascribed thereto in the Merger Agreement.
Consideration
Merger Consideration
The total consideration to be paid at closing (the “Merger Consideration”) by the Company to Clearday security holders (and holders who have the right to acquire Clearday capital stock) will be an amount equal to $250 Million (plus the aggregate exercise price for all Clearday options and warrants). The Merger Consideration will be payable in shares of the Company’s common stock, par value $0.0001 per share, valued at $10 per share.
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Earnout Payments
In addition, the holders of Clearday preferred stock will have the contingent right to earn up to 5,000,000 shares of the Company’s common stock, in the aggregate (the “Earnout Shares”), if at any time during the period beginning on the date of the Closing (the “Closing Date”) and ending on the fifth anniversary of the Closing Date (the “Earnout Eligibility Period”), the Adjusted Net Income for any Earnout Period is a positive number for the first time during the Earnout Eligibility Period (the “Earnout Milestone”).
If, following the Closing Date and prior to end of the Earnout Eligibility Period, there is a change of control, then, immediately prior to such change of control, all the Earnout Shares not yet earned shall be earned by the Clearday earnout holders and shall be released from escrow and delivered to the Clearday earnout holders, and the Clearday earnout holders shall be eligible to participate in such change of control transaction with respect to such Earnout Shares.
The Earnout Shares will be placed in escrow and will not be released from escrow until they are earned as a result of the occurrence of the Earnout Milestone or a change of control, if applicable. The Earnout Shares that are not earned on or before the expiration of the Earnout Eligibility Period shall be automatically forfeited and cancelled.
Treatment of Clearday Securities
Cancellation of Securities.
Each share of Clearday capital stock, if any, that is owned by the Company, New Merger Sub, Clearday, or any of their subsidiaries (as treasury stock or otherwise) immediately prior to the effective time of the Merger (the “Effective Time”), will automatically be cancelled and retired without any conversion or consideration.
Preferred Stock.
At the Effective Time, each issued and outstanding share of Clearday’s Series F Cumulative Convertible Preferred Stock, par value $0.001 per share (“Clearday Series F Preferred Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares), will be converted into the right to receive: (A) one (1) share of Parent New Series F Preferred Stock plus (B) a number of Earnout Shares in accordance with, and subject to the contingencies, set forth in the Merger Agreement.
Each issued and outstanding share of Clearday’s Series A Convertible Preferred Stock, par value $0.001 per share (“Clearday Series A Preferred Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares), will be converted into the right to receive: (A) one (1) share of Parent New Series A Preferred Stock plus (B) a number of Earnout Shares in accordance with, and subject to the contingencies, set forth in the Merger Agreement.
Common Stock.
At the Effective Time, each issued and outstanding share of Clearday’s common stock, par value $0.001 per share (“Clearday Common Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares) will be converted into the right to receive a number of shares of the Company’s common stock equal to the conversion ratio. The “Conversion Ratio” as defined in the Merger Agreement means an amount equal to (a)(i) the sum of $250 Million, plus the aggregate exercise or conversion price of outstanding Clearday’s stock options and warrants (excluding unvested options and options or warrants with an exercise or conversion price of $5.00 or more), divided by (ii) the number of fully diluted Clearday capital stock (including Clearday preferred stock, warrants, stock options, convertible notes, and any other convertible securities) (excluding unvested options and options or warrants with an exercise or conversion price of $5.00 or more and assuming a conversion price of Clearday subsidiary securities as provided in the Merger Agreement); divided by (b) $10.00.
Merger Sub Securities.
Each share of common stock, par value $0.0001 per share, of New Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into and become one newly issued share of common stock of the surviving corporation.
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Stock Options.
At the Effective Time, each outstanding option to purchase shares of Clearday Common Stock will be converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under such options prior to the Effective Time, shares of the Company’s common stock equal to the number of shares subject to such option prior to the effective time multiplied by the Conversion Ratio, at an exercise price per share of the Company’s common stock equal to the exercise price per share of Clearday Common Stock subject to such option divided by the Conversion Ratio.
Warrants.
Contingent on and effective as of immediately prior to the effective time, each outstanding warrant to purchase shares of Clearday Preferred Stock or Clearday Common Stock will be treated in accordance with the terms thereof.
Convertible Notes.
Contingent on and effective as of immediately prior to the Effective Time, Clearday’s convertible notes outstanding as of immediately prior to the effective time, will be treated in accordance with the terms of the relevant agreements governing such convertible notes.
Subsidiary Capital Stock.
At and as of the effective time, the subsidiary capital stock will remain in full force and effect with the right to acquire the Clearday Common Stock with such adjustments noted in the terms of such subsidiary capital stock.
Representations and Warranties
The Merger Agreement contains customary representations and warranties of the parties thereto with respect to, among other things, (a) corporate existence and power, (b) authorization to enter into the Merger Agreement and related transactions; subsidiaries, (c) governmental authorization, (d) non-contravention, (e) capitalization, (f) corporate records, (g) consents, (h) financial statements, (i) internal accounting controls, (j) absence of certain changes, (k) properties; title to assets, (l) litigation, (m) material contracts, (n) licenses and permits, (o) compliance with laws, (p) intellectual property, (q) privacy and data security, (r) employee matters and benefits, (s) tax matters, (t) real property, (u) environmental laws, (v) finders’ fees, (w) directors and officers, (x) anti-money laundering laws, (y) insurance, (z) related party transactions, and (aa) certain representations related to securities law and activity. The Company has additional representations and warranties, including (a) issuance of shares, (b) trust fund, (c) listing, (d) board approval, (e) SEC documents and financial statements, (f) certain business practices, (g) expenses, indebtedness and other liabilities and (h) brokers and other advisors.
Covenants
The Merger Agreement includes customary covenants of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, access to information, cooperation in the preparation of the registration statement and proxy statement (as each such terms are defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals of each party’s respective stockholders. The Company and Clearday have each also agreed to include in the proxy statement the recommendation of its respective board that its stockholders approve all of the proposals to be presented at its respective special meeting. In addition, each of the Company and Clearday have agreed to use commercially reasonable efforts to solicit and finalize definitive documentation for a committed equity in an aggregate amount that, together with the funds in the Trust Account after giving effect to potential redemptions from the Company’s public stockholders, together with financing programs available to Clearday after the Closing, will provide to Clearday working capital to meet its short-term commercial development goals.
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The Company has also agreed to prepare a proxy statement to seek the approval of its stockholders (the “Extension Proposal”) to amend its organizational documents to extend the period of time the Company is afforded under its organizational documents and IPO prospectus to consummate an initial business combination for an additional three months, from June 30,2023 to September 30, 2023 (or such earlier date as the Company and Clearday may agree in writing).
Each party’s representations, warranties and pre-Closing covenants will not survive Closing and no party has any post-Closing indemnification obligations.
Viveon Equity Incentive Plan
The Company has agreed to approve and adopt an equity incentive plan (the “Incentive Plan”) to be effective as of the Closing and in a form mutually acceptable to the Company and Clearday, subject to approval of the Incentive Plan by the Company’s stockholders. The Incentive Plan will provide for an initial aggregate share reserve equal to 8% of the number of shares of the Company’s common stock issued and outstanding at the Closing and an “evergreen” provision that is mutually agreeable to the Company and Clearday will provide for an automatic increase on the first day of each fiscal year in the number of shares available for issuance under the Incentive Plan as mutually determined by the Company and Clearday.
Non-Solicitation Restrictions
Each of the Company and Clearday has agreed that from the date of the Merger Agreement to the effective time or, if earlier, the valid termination of the Merger Agreement in accordance with its terms, it will not initiate any negotiations with any party relating to an alternative transaction (as such term is defined in the Merger Agreement) or enter into any agreement relating to such a proposal, other than as expressly excluded from the definition of an alternative transaction. Each of the Company and Clearday has also agreed to be responsible for any acts or omissions of any of its respective representatives that, if they were the acts or omissions of the Company and Clearday, as applicable, would be deemed a breach of the party’s obligations with respect to these non-solicitation restrictions.
Conditions to Closing
The consummation of the Merger is conditioned upon, among other things, (i) the absence of any applicable law or order restraining, prohibiting or imposing any condition on the consummation of the Merger and related transactions, (ii) the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) receipt of any consent, approval or authorization required by any Authority (as defined in the Merger Agreement), (iv) the Company having net tangible assets of at least $5,000,001 (as determined in accordance with Rule 3a51-1(g)(1) of the Exchange Act), unless the Company’s amended and restated certificate of incorporation shall have been amended to remove such requirement prior to or concurrently with the Closing, (v) approval by Clearday’s stockholders of the Merger and related transactions, (vi) approval by the Company’s stockholders of the Merger and related transactions, (vii) the conditional approval for listing by NYSE American (or an alternate exchange) of the shares of the Company’s common stock to be issued in connection with the transactions contemplated by the Merger Agreement and satisfaction of initial and continued listing requirements, and (viii) the registration statement becoming effective in accordance with the provisions of the Securities Act of 1933, as amended (“Securities Act”).
Solely with respect to the Company and New Merger Sub, the consummation of the Merger is conditioned upon, among other things, (i) Clearday having duly performed or complied with all of its obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of Clearday, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure would not have or reasonably be expected to have a material adverse effect (as defined in the Merger Agreement) on Clearday or any of its subsidiaries, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a material adverse effect on Clearday or any of its subsidiaries, (v) Clearday and its securityholders having executed and delivered to the Company each additional agreement (as defined in the Merger Agreement) to which they each are a party and (vi) Clearday delivering certain certificates to the Company.
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Solely with respect to Clearday, the consummation of the Merger is conditioned upon, among other things, (i) Viveon and New Merger Sub having duly performed or complied with all of their respective obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of the Company and Merger Sub, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure to be true and correct would not have or reasonably be expected to have a material adverse effect on the Company or New Merger Sub and their ability to consummate the Merger and related transactions, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a Material Adverse Effect on the Company or New Merger Sub, (v) the amended parent charter (as defined in the Merger Agreement) being filed with, and declared effective by, the Delaware Secretary of State, (vi) the Company delivering certain certificates to Clearday, (vii) the size and composition of the post-Closing board of directors of the Company having been appointed as set forth in the Merger Agreement and (viii) the Company, Viveon Health LLC and other stockholders, as applicable, having executed and delivered to Clearday each additional agreement to which they each are a party.
Termination
The Merger Agreement may be terminated at any time prior to the effective time as follows:
(i) by either the Company or Clearday, if (A) the Merger and related transactions are not consummated on or before the latest of (i) June 30, 2023, (ii) if the Extension Proposal is approved, September 30, 2023 and (iii) if one or more extensions to a date following September 30, 2023 are obtained at the election of the Company, with the Company’s stockholder vote, in accordance with the Company’s amended and restated certificate of incorporation, the last date for the Company to consummate a business combination pursuant to such extensions; and (B) the material breach or violation of any representation, warranty, covenant or obligation under the Merger Agreement by the party seeking to terminate the Merger Agreement was not the cause of, or resulted in, the failure of the closing to occur on or before the outside Closing Date, without liability to the other party;
(ii) by either the Company or Clearday, if any authority has issued any final decree, order, judgment, award, injunction, rule or consent or enacted any law, having the effect of permanently enjoining or prohibiting the consummation of the Merger, provided that, the party seeking to terminate cannot have breached its obligations under the Merger Agreement and such breach was a substantial cause of, or substantially resulted in, such action by the authority; and
(iii) by mutual written consent of the Company and Clearday duly authorized by each of their respective boards of directors.
The Merger Agreement and other agreements described below have been included to provide investors with information regarding their respective terms. They are not intended to provide any other factual information about the Company, Clearday or the other parties thereto. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, are modified or qualified by information in one or more disclosure letters prepared in connection with the execution and delivery of the Merger Agreement, may be subject to a contractual standard of materiality different from what might be viewed as material to investors, or may have been used for the purpose of allocating risk between the parties. Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts about the Company, Clearday or the other parties thereto at the time they were made or otherwise and should only be read in conjunction with the other information that the Company or Clearday makes publicly available in reports, statements and other documents filed with the SEC. The Company and Clearday investors and securityholders are not third-party beneficiaries under the Merger Agreement.
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Certain Related Agreements
Parent Support Agreements.
Concurrently with the execution of the Merger Agreement, the Company, Clearday and the Sponsor and the officers and directors of the Company entered into a support agreement (the “Parent Support Agreement”) pursuant to which the Sponsor and the officers and directors of the Company have agreed to vote all shares of the Company’s common stock beneficially owned by them, including any additional shares of the Company they acquire ownership of or the power to vote: (i) in favor of the Merger and related transactions, (ii) against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions, and (iii) in favor of an extension of the period of time the Company is afforded to consummate an initial business combination.
Company Support Agreements.
Concurrently with the execution of the Merger Agreement, the Company, Clearday and certain stockholders of Clearday entered into a support agreement (the “Company Support Agreement”), pursuant to which such Clearday stockholders have agreed to vote all common and preferred stock of Clearday beneficially owned by them, including any additional shares of Clearday they acquire ownership of or the power to vote, in favor of the Merger and related transactions and against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions.
Lock-Up Agreements.
In connection with the closing, certain Clearday stockholders will each agree, subject to certain customary exceptions, not to (i) offer, sell contract to sell, pledge or otherwise dispose of, directly or indirectly, any lockup shares, (ii) enter into a transaction that would have the same effect, (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the lock-up shares or otherwise, (iv) engage in any short sales or other arrangement with respect to the lock-up shares or (v) publicly announce any intention to effect any transaction specified in clause (i), (ii) or (iii) until the date that is six months after the Closing Date (the “Lock-Up Period”). The term “Lockup Shares” mean the Merger Consideration Shares and the Earnout Shares, if any, whether or not earned prior to the end of the Lock-up Period, together with any other shares of the Company’s common stock, and including any securities convertible into, or exchangeable for, or representing the rights to receive the Company’s common stock, if any, acquired during the Lock-up Period. If the closing price of the Company’s common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period following the Closing Date, 50% of the Lock-up Shares will be released from the lock-up. The existing escrow provisions of the Company’s common stock held by certain stockholders will remain in effect.
Amended and Restated Registration Rights Agreement.
At the Closing, the Company will enter into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with certain existing stockholders of the Company and Clearday with respect to their shares of the Company’s common stock acquired before or pursuant to the Merger, and including the shares issuable on conversion of the warrants issued to the Sponsor in connection with the Company’s initial public offering and any shares issuable on conversion of loans or other convertible securities. The agreement amends and restates the registration rights agreement the Company entered into on December 22, 2020 in connection with its initial public offering. Subject to the Lock-Up Agreements described above, the holders of a majority of the shares held by the Company’s existing stockholders, and the holders of a majority of the shares held by the Clearday stockholders will each be entitled to make one demand that Clearday register such securities for resale under the Securities Act, or two demands each if the Company is eligible to use Form S-3 or a similar short-form registration statement. In addition, the holders will have certain “piggy-back” registration rights that require the Company to include such securities in registration statements that the Company otherwise files. 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.
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Results of Operations
We have neither engaged in any operations nor generated any revenues to date. Our only activities for the years ended December 31, 2022 and 2021 were organizational activities, identifying target companies for a business combination, conducting due diligence on such target companies and negotiating the Business Combination Agreement with Suneva, which was terminated on February 2, 2023. We do not expect to generate any operating revenues until after the completion of our business combination. We generate non-operating income in the form of interest income on marketable securities held after our initial public offering. 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.
For the year ended December 31, 2022, we had a net loss of $605,294, which consisted of loss on issuance of subscription warrants of $3,209,183 amortization of the debt discount of $3,645,777, professional fees of $1,487,205, operating costs of $756,386, expensed issuance costs of $392,642, franchise tax expense of $246,216 and income tax expense of $61,310, partially offset by a gain on the change in fair value of warrant liability of $8,468,308 interest and dividend income on investments held in Trust Account of $724,225, and interest income on the operating bank account of $892.
For the year ended December 31, 2021, we had net income of $2,489,829, which consisted of a change in fair value of warrant liability of $6,575,140, interest income on investments held in Trust Account of $20,329 and interest income on the operating bank account of $147, partially offset by formation and operating costs of $1,050,016, professional fees of $2,701,431, franchise tax expense of $197,200, and stock compensation expense of $157,140. The gains on the change in fair value of warrant liabilities was due in large part to the decrease in the public traded price of the public warrants.
Liquidity, Capital Resources, and Going Concern
For the year ended December 31, 2022, net cash used in operating activities was $1,753,388, which was primarily due to operational costs and franchise taxes paid during the period.
For the year ended December 31, 2021, net cash used in operating activities was $2,082,334, which was due to the change in fair value of warrant liability of $6,575,140 and interest earned on investments held in Trust Account of $20,329, offset in part by net income of $2,489,829, changes in working capital of $1,866,166, and stock compensation expense of $157,140.
For the year ended December 31, 2022, net cash provided by investing activities was $150,191,819 which resulted from cash withdrawn from Trust Account to pay redeeming stockholders of $152,451,819, offset in part by cash deposited for the extension contribution of $2,260,000.
There were no cash flows from investing activities for the year ended December 31, 2021.
For the year ended December 31, 2022, net cash used in financing activities was $148,813,819, which was due to the redemption of common stock of $152,451,819 and the payment of issuance costs of $437,000, offset in part by proceeds from note agreements payable of $2,045,000, proceeds from note agreements payable - related party of $1,955,000 and proceeds from promissory note - related party of $75,000.
For the year ended December 31, 2021, net cash used in financing activities was $619,387, which was due to payment of other payable – related party of $364,880, payment of the promissory note – related party of $228,758 and offering costs paid of $25,749.
As of December 31, 2022, we had cash and marketable securities in the trust account of $53,815,395. 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 taxes payable and deferred underwriting commissions) to complete our initial business combination. We may withdraw interest to pay taxes. During the year ended December 31, 2022, we did not withdraw any of the interest income from the Trust Account to pay for franchise and income taxes. In June 2023, we withdrew approximately $429,305 to make payments for delinquent franchise taxes. To the extent that our capital stock or debt is used, in whole or in part, as consideration to complete our Initial 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.
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As of December 31, 2022, we had cash and cash equivalents of $19,847 outside of the Trust Account and a working capital deficit of $40,959,763.
In connection with our assessment of going concern considerations in accordance with FASB’s ASC Subtopic 205-40, Presentation of Financial Statements - Going Concern, management has determined that if we are unable to raise additional funds to alleviate liquidity needs, or complete a business combination by March 31, 2024, then we will cease all operations except for the purpose of liquidating, unless we seek stockholder approval to amend our current charter to extend the date by which we complete a business combination. The liquidity condition and date for mandatory liquidation and subsequent dissolution raise substantial doubt about our ability to continue as a going concern one year from the date that these consolidated financial statements are issued. No adjustments have been made to the carrying amounts of assets or liabilities should we be unable to continue as a going concern. We intend to complete a business combination before the mandatory liquidation date or obtain approval from our stockholders to amend our current charter for an extension.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2022 and December 31, 2021.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease obligations or long-term liabilities other than an agreement to pay an affiliate of our sponsor a monthly fee of $20,000 for office space, utilities and secretarial and administrative support and the series of unsecured senior promissory note agreements we entered into with several lenders affiliated with our Sponsor. We began incurring these fees on December 22, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
Chardan is entitled to a deferred fee of $0.35 per Unit, or $7,043,750. The deferred fee will become payable Chardan from the amounts held in the Trust Account solely in the event that we complete a Business Combination, subject to the terms of the Underwriting Agreement, dated as of December 22, 2020, between the Company and Chardan (the “Underwriting Agreement”). A copy of the Underwriting Agreement is incorporated by reference in Exhibit 1.1 of this Annual Report, and all references herein to the Underwriting Agreement are qualified in their entirety by reference to the full text of such agreement.
In addition, pursuant to the Underwriting Agreement, we granted Chardan for a period of 12 months after the date of the consummation of a Business Combination, a right of first refusal to act as book-running managing underwriter or placement agent, with at least 30% of the economics, for any and all future public and private equity, convertible and debt offerings (the “ROFR”). On April 20, 2021, pursuant to the terms of an Addendum to the Underwriting Agreement, Chardan waived and released the ROFR. Subsequently, on July 12, 2021, we entered into a Letter Agreement with Chardan (the “Letter Agreement”) that reinstates the ROFR in the event Chardan introduces us to a target that results in a Business Combination and entitles Chardan to a fee equal to 0.5% of the aggregate value of the target measured prior to the Business Combination, paid in cash or shares at the close of the Business Combination. A copy of the Letter Agreement is filed as Exhibit 10.23 of this Annual Report, and all references herein to the Letter Agreement are qualified in their entirety by reference to the full text of such agreement.
On May 18, 2021, the Company entered into an agreement with a transactional and strategic advisory firm (the “Strategic Advisor”) for advisory services as needed by the Company in connection with a Business Combination. Pursuant to this agreement, the Company incurred approximately $875,000 in fees. As of December 31, 2022 and December 31, 2021, $500,000 of such fees remain unpaid and are included in accrued costs and expenses on the consolidated balance sheets. On November 1, 2021, the Company and the Strategic Advisor entered into an amendment to the agreement. Pursuant to this amendment, the Company will pay the Strategic Advisor a fee of $2,625,000, inclusive of the $500,000 accrued as of December 31, 2022 and December 31, 2021. The remaining $2,125,000 is contingent upon the consummation of the Business Combination.
On October, 8, 2021, the Company entered into an agreement with a financial advisor (the “Exclusive Financial Advisor”) for financial advisory services such as financial and transaction feasibility analysis, assistance in negotiations, assistance in capital planning, and other customary services in connection with a Business Combination, pursuant to which the Company will pay the Exclusive Financial Advisor a fee of $1,500,000 contingent upon the consummation of the Business Combination. This agreement was terminated on January 31, 2023 as a result of the termination of the merger agreement between the Company and Suneva.
In addition to the above overstatement of legal fees, management determined that there was an understatement of accrued fees relating to the agreement with a consultant (“the Consultant”) that is the subject of the below-mentioned dispute. On October 25, 2021, the Company entered into an agreement with the Consultant for investor relations and public relations services in connection with a Business Combination with Suneva. The Consulting Agreement specifically identified Suneva as the target of the Business Combination. Pursuant to the agreement, the Consultant would be paid a fee of $15,000 per month from the date of the agreement until the Business Combination with Suneva, with an additional $15,000 accruing each month until the Business Combination date. Additionally, pursuant to the agreement the Consultant would be paid a success fee of $300,000 contingent upon the consummation of the Business Combination with Suneva, a performance based fee of up to $200,000 upon the consummation of the Business Combination with Suneva if the Consultant achieved certain objectives, a retainer of $34,000 due upon the consummation of the Business Combination with Suneva which would be held to the term of the agreement, a fee of $17,000 per month for investor relations services for the combined entity commencing upon the consummation of the Business Combination with Suneva with the first payment due within 5 days of the Business Combination with Suneva and subsequent monthly payments due upon the first of the corresponding month of services, and a fee of $17,000 per month for public relations services for the combined entity commencing upon the consummation of the Business Combination with Suneva with the first payment due within 5 days of the Business Combination with Suneva and subsequent monthly payments due upon the first of the corresponding month of services. The Consultant stopped providing services in February 2023.
On November 1, 2021, the Company entered into an agreement with a financial advisor (the “Second Financial Advisor”) for financial advisory services such as guidance on valuation and transaction structure and terms, assistance in negotiations, coordination of due diligence, documentation, and transaction closing, and introduction of the Company to institutional investors in connection with a Business Combination, pursuant to which the Company will pay the Second Financial Advisor a fee of $400,000 contingent upon the consummation of the Business Combination. As a result of the termination of the merger agreement between the Company and Suneva, this agreement was terminated on January 31, 2023, and there are no related contingent fees for the agreement.
On November 2, 2021, the Company entered into an agreement with a financial advisor (the “Third Financial Advisor”) for financial advisory services such as market related advice and assistance in connection with a Business Combination, pursuant to which the Company will pay the Third Financial Advisor a fee of $500,000 contingent upon the consummation of the Business Combination. As a result of the termination of the merger agreement between the Company and Suneva, this agreement was terminated on June 9, 2023, and there are no related contingent fees for the agreement.
On November 5, 2021, the Company entered into an agreement with an advisor (the “Advisor”) for services such as assistance in refining strategic objectives, preparation or refinement of solicitation materials, identification, contact, and solicitation of or potential investors and other sources of capital, and assistance in review, selection, negotiation, and closing of a transaction in connection with a Business Combination, pursuant to which the Company will pay the Advisor a fee of $200,000 contingent upon the consummation of the Business Combination. As a result of the termination of the merger agreement between the Company and Suneva, this agreement was terminated on June 19, 2023, and there are no related contingent fees for the agreement.
On November 15, 2021, the Company entered into an agreement with two placement agents (the “Placement Agents”) for services such as analysis of potential contributions and assets of a target to the Company’s future prospects, assistance in negotiations, and assistance in preparation of presentations to investors, lenders, and/or other financial sources in connection with a Business Combination, pursuant to which the Company will pay the Placement Agents a fee equal to the difference between 5% of the total aggregate sales price of the securities sold as part of the Business Combination and 5% of any securities sold as part of the Business Combination to investors identified by the Advisor, contingent upon the consummation of the Business Combination. This agreement was terminated on February 15, 2022, as a result of an automatic termination provision upon the earlier to occur of three months or the final closing of Business Combination and there are no related contingent fees for the agreement.
On February 17, 2022, the Company entered into an agreement with a broker-dealer (the “Broker-Dealer”) for services such as providing the Company with capital markets advisory services with regard to a forward purchase agreement, convertible private investment in public equity (“PIPE”), secured credit facility, and any other capital structure topics in connection with a Business Combination, pursuant to which the Company will pay the Broker-Dealer a fee of $250,000. This agreement was terminated on June 9, 2023, as a result of the termination of the merger agreement between the Company and Suneva. Pursuant to the terms of the agreement the Broker-Dealer will remain entitled to the fee of $250,000 if a Business Combination is consummated within 24 months after the termination date. The Company is pursuing a waiver from the Broker-Dealer to waive the $250,000 fee upon a Business Combination. As such, the fee remains contingent upon the consummation of the Business Combination.
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On May 9, 2023, the Company entered into an agreement with a placement agent (the “Placement Agent”) for services such as advising and assisting the Company in identifying one or more investors that are “accredited” or “qualified institutional buyers. Pursuant to which the Company will pay the Placement Agents a cash fee upon closing equal to eight percent (8.0%) of the gross proceeds received by the Company, contingent upon the consummation of the Business Combination.
Contingencies
On October 5, 2023, a legal complaint was filed in Connecticut Superior Court against the Company and Suneva by the Consultant. The Complaint alleges that the Company and Suneva owe the Consultant unpaid fees under an October 25, 2021 consulting agreement and asserts claims for breach of contract, breach of implied contract, unjust enrichment, and quantum meruit. As of the date of this filing, this action is not pending and has not been officially docketed with the Connecticut Superior Court. The Company is continuing to assess the merits of the complaint but believes that the claims by the Consultant against the Company are without merit and the Company intends to defend the action if it is properly initiated.
Critical Accounting Policies
The preparation of consolidated 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 consolidated financial statements, and income and expenses during the periods reported. Actual results could materially differ from those estimates. We have identified the following critical accounting policies:
Common Stock Subject to Possible Redemption
All of the 1,844,774 public shares sold as part of the units in our initial public offering and subsequent full exercise of the underwriters’ over-allotment option that have not been redeemed by stockholders, contain a redemption feature which allows for the redemption of such redeemable common stock in connection with our liquidation, if there is a stockholder vote or tender offer in connection with our initial business combination and in connection with certain amendments to our amended and restated certificate of incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all redeemable common stock have been classified outside of permanent equity.
We recognize 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.
Net (Loss) Income per Common Share - As Restated Amendment No. 1
Net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding for the period. The calculation of diluted (loss) income per common share does not consider the effect of the warrants and rights issued in connection with the (i) initial public offering, (ii) exercise of over-allotment, (iii) Private Placement, and (iv) extension financing since the exercise of the warrants and rights are contingent upon the occurrence of future events and the inclusion of such warrants and rights would be anti-dilutive. The warrants and rights are exercisable to purchase 22,068,750 shares of common stock in the aggregate.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, Derivatives and Hedging. The Company’s derivative instruments are recorded at fair value and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. Derivative assets and liabilities are classified on the consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument’ could be required within 12 months of the balance sheet date. The Company has determined that the public warrants qualify for equity treatment and are not derivative instruments. The public warrants were measured at fair value and recorded as a component of additional paid-in capital at the time of issuance. The Company has determined that the private warrants and subscription warrants are derivative instruments. As the private warrants and subscription warrants meet the definition of a derivative the private warrants and subscription warrants are measured at fair value at issuance and at each reporting date in accordance with ASC 820, Fair Value Measurement, with changes in fair value recognized in the statement of operations in the period of change. In accordance with ASC Topic 825, Financial Instruments, the Company has concluded that a portion of the transaction costs which directly related to the initial public offering and the private placement, should be allocated to the private warrants based on their relative fair value against total proceeds, and recognized as transaction costs in the statement of operations.
Debt with Conversion and Other Options
The Company accounts for a series of unsecured senior promissory note agreements under ASC Topic ASC 470-20-25-2, Debt with Conversion and Other Options - Debt Instruments with Detachable Warrants (“ASC 470-20-25-2”). In accordance with ASC 470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants (detachable call options) are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance.
Recent Accounting Standards
Management does not believe that any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company we are not required to make disclosures under this Item.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Our financial statements and the notes thereto begin on page F-1 of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES (RESTATED)
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Evaluation of Disclosure Controls and Procedures
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. During the fiscal year ended December 31, 2021, the Company restated its audited financial statements as of December 31, 2020 to provide for the reclassification of the private warrants as a liability for the affected period and restated its audited financial statements as of December 31, 2020 and condensed financial statements as of and for the periods ended March 31, 2021 and June 30, 2021 to reclassify the Company’s redeemable common stock. In connection with the restatements, the Company identified a material weakness in its internal controls related to accounting for complex financial instruments. Subsequent to the aforementioned restatements, the Company determined that it had inappropriately accounted for the allocation of proceeds received in its initial public offering and did not appropriately recognize stock-based compensation related to the transfer of shares of common stock to members of the Company’s board of directors. This resulted in the restatement of the Company’s audited financial statement as of December 31, 2020 and condensed financial statements as of and for the periods ended June 30, 2021 and September 30, 2021. Subsequent to the aforementioned restatements, the Company determined it had inappropriately accounted for the remeasurement of common stock subject to possible redemption in connection with the Company’s deposit into the Trust Account on March 23, 2022 for the extension of the Company’s business combination period. This resulted in the restatement of the Company’s condensed consolidated financial statements as of and for the three months ended March 31, 2022. The control deficiencies related to the allocation of proceeds, stock-based compensation, and remeasurement of common stock subject to possible redemption represent a continuation of the previously identified material weakness related to accounting for complex financial instruments.
In addition, management identified deficiencies in internal control over financial reporting relating to the process of recording accounts payable, accrued expenses, tax liabilities and concluded that the failure to properly account for such accrued expenses constituted a material weakness as defined in the SEC regulations. The deficiencies related to accounts payable and accrued expenses resulted in the restatement of the Company’s condensed financial statements as of and for the periods ended March 31, 2021, June 30, 2021, September 30, 2021. The deficiencies related to accounts payable and accrued expenses resulted in the restatement of the Company’s condensed consolidated financial statements as of and for the periods ended March 31, 2022, June 30, 2022 and September 30, 2022. The deficiencies related to accounts payable and accrued expenses resulted in the restatement of the Company’s consolidated financial statements as of and for the year ended December 31, 2022. Management additionally determined that a new material weakness existed as of March 31, 2022, June 30, 2022, September 30, 2022, and December 31, 2022 related to properly evaluating and disclosing contractual arrangements and differentiating them as contractual liabilities or accounting contingencies. As such, our Chief Executive Officer and Chief Financial Officer determined that the Company’s disclosure controls and procedures (as defined in Rules 13a-15 (e) and 15d-15 (e) under the Exchange Act) were not effective as of December 31, 2022.
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A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
Management’s Annual Report on Internal Controls Over Financial Reporting
As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, (as defined in Rules 13a-15(e) and 15- d-15(e) under the Exchange Act) our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2022. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that our internal control over financial reporting was not effective, due to the material weaknesses described elsewhere in this Report.
Notwithstanding these material weaknesses, management has concluded that our audited consolidated financial statements included in this Report are fairly stated in all material respects in accordance with GAAP for each of the periods presented therein.
This Report does not include an attestation report of internal controls from our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.
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Changes in Internal Control Over Financial Reporting
During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. In light of the restatement of our financial statements as described above, we plan to enhance our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding complex accounting applications. In addition, we plan to enhance our processes to identify and record potential accruals and identify any necessary disclosures of agreements with service providers. Our plans at this time include increased communication with third-party service providers and additional procedures to identify and review subsequent invoices, disbursements, and agreements. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following table sets forth information about our directors and executive officers as of the date of this Annual Report.
| Name | Age | Position | ||
| Jagi Gill | 57 | Chief Executive Officer, President and Director | ||
| Rom Papadopoulos | 64 | Chief Financial Officer, Treasurer, Secretary and Director | ||
| Demetrios (Jim) G. Logothetis | 66 | Director | ||
| Brian Cole | 60 | Director | ||
| Doug Craft | 61 | Director |
Below is a summary of the business experience of each our executive officers and directors:
Jagi Gill, PhD is our Chief Executive Officer. Dr. Gill has more than 20 years of healthcare investment and general management experience. From 2017 to 2020, he served as the Vice-President of Business Development and General Manager of AcuVentures, a business unit within Acumed LLC, a Berkshire Hathaway Company. Acumed LLC is a market leader in the orthopedic sector with particular strength in the upper extremity fracture repair and trauma market segments. As the General Manager, Dr. Gill led two business units, Rib Fixation and the Soft Tissue Repair, with responsibilities for product development, sales, marketing and profitability. Under his leadership, the business units grew 2-3x faster than their market segment. In addition to general management responsibilities, Dr. Gill was involved in sourcing, closing and integrating four acquisitions within the orthopedic sector for Acumed. These transactions ranged from technology acquisitions serving as tuck-in product integrations to stand alone companies with global revenue. From 2009 to 2017, he was the Founder, Chief Executive Officer and Board Member of Tenex Health a privately held orthopedic sports medicine company. In this capacity he patented, designed and developed the initial platform technology intended to treat chronic tendon pain. Under his leadership, Tenex Health launched commercially, generated positive operating income, secured FDA regulatory approval, developed a manufacturing and operations infrastructure, and established sales channels serving the outpatient Ambulatory Surgery Centers. Before founding Tenex Health, Dr. Gill was the Founder and Chief Executive Officer of OrthoCor, a company providing non-invasive pain management technology, from 2007 to 2009, while also serving on an advisory and consulting capacity to a number of medical technology companies. OrthoCor developed and commercialized orthopedic knee braces integrating pulsed electromagnetic technology to address chronic pain associated with trauma or osteoarthritis. Prior to this, he served in executive business development roles for Boston Scientific Corporation from 2001 to 2007 where he was involved in sourcing and supporting the acquisition of private companies which collectively accounted for more than $750 million in enterprise value. While at Boston Scientific, he was involved in the investments in, and acquisition of, the following private companies: Advanced Bionics (implantable neurostimulation), Cameron Health (implantable cardiac rhythm management), Innercool (systemic hypothermia for recovery from cardiac arrest), Orqis Medical (heart failure treatment) and Kerberos (endovascular thrombectomy). Dr. Gill completed his BSc and MSc in Anatomy from McGill University and PhD in Neuroscience from Mayo Clinic College of Medicine. We believe we will be able to capitalize on Dr. Gill’s experience and accomplishments in the orthopedic and spine markets, along with his relationships among executives in the target companies, their supply chains, and their customer networks, to successfully close a business combination.
Rom Papadopoulos, M.D. is our Chief Financial Officer. Dr. Papadopoulos has more than 25 years of healthcare investment and operational experience. From 2006 to June 2020, Dr. Papadopoulos was the Founder and Sole Proprietor of Intuitus Capital, a private equity firm actively investing in the healthcare sector. At Intuitus, he led investments in more than 30 companies with a total of more than $700 million in enterprise value. Prior to founding Intuitus Capital, Dr. Papadopoulos was Chief Financial Officer, Chief Operations Officer, Corporate Executive Vice President and Corporate Secretary of Global Energy Holdings (NYSE Amex: GNH). While at GNH, he created and executed the company’s repositioning from traditional markets to renewable energy. He was responsible for coordinating all aspects of the financial management of the company including cash management and treasury, risk management, audit functions, SEC reporting and compliance as well as HR functions and employee policies. Dr. Papadopoulos was an early investor in Tenex Health Inc., a medical device company engaged in the manufacturing and sale of minimally invasive high frequency technology used to perform percutaneous tenotomy and fasciotomy. He eventually became the interim CFO for the company until September 2013. In this capacity, he was an integral part of the team seeking and completing acquisitions for the company. From 2002 to 2006, Dr. Papadopoulos was the Managing Director and head of healthcare investment banking for Caymus Partners, a middle market investment banking firm. Dr. Papadopoulos received his medical degree (M.D.) from the Aristotelian University of Thessaloniki, Greece, Medical School in 1985 and conducted his post-graduate training in Pediatrics at Emory University in 1986. We believe that Dr. Papadopoulos is qualified to sit on our board due to his years of experience in the healthcare industry, as a clinician as well as an investor who possesses unique insight into medical technology assets, in addition to his strong financial credentials.
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Demetrios (Jim) G. Logothetis, is one of our directors and served as Senior Advisor in the Department of Housing and Urban Development (HUD) Office of the Assistant Secretary and Chief Financial Officer where he led the Audit Coordination Committee for Ginnie Mae, a government corporation within HUD from May 2020 to November 2020. Mr. Logothetis retired from Ernst & Young (EY) effective in June 2019 extending three years beyond normal retirement at the request of the EY Executive Board. Throughout his forty-year career with EY, from January 1979 to June 2019, Mr. Logothetis served some of EY’s largest global clients as lead audit partner, and fulfilled senior leadership roles within the firm, from offices in Chicago, Frankfurt Germany, New York, London England, and Atlanta. Mr. Logothetis has served over the years on the boards of several non-profit organizations, including The National Board of the Boys & Girls Clubs of Americas where he served on the audit committee; The Archbishop Lakovos Leadership 100 Endowment Fund where he serves as Vice Chair, The American College of Greece where he serves as Chairman of the Board of Trustees; The Board of National Hellenic Museum; Founder and Chairman of the Board of Trustees of the Hellenic American Academy, one of the largest Greek American schools in the United States; and founding Chairman of the Foundation for Hellenic Education and Culture. Mr. Logothetis holds an M.B.A. degree in Accounting, Finance and International Business from The University of Chicago Booth Graduate School of Business and a B.S.C degree in Accountancy from DePaul University. Mr. Logothetis is also a Certified Public Accountant and a Certified Management Accountant. Mr. Logothetis has taught many EY training programs as well as graduate accounting classes at DePaul University. Mr. Logothetis served for several years on the DePaul University, Richard H. Driehaus College of Business advisory council, and since 2017 on the board of Trustees of the University as vice-chair, and then chair of the audit committee and member of the finance committee. Mr. Logothetis has also served as a member of the Trusteeship and Finance Committees for DePaul University.
Brian Cole MD, MBA is one of our directors, and the Managing Partner of Midwest Orthopedics at Rush in Chicago, the lead executive for this large specialty practice which is consistently ranked as one of the top orthopedic groups by US News & World Report. Dr. Cole is a Professor in the Department of Orthopedics with a conjoint appointment in the Department of Anatomy and Cell Biology at Rush University Medical Center. In 2015, he was appointed as an Associate-Chairman of the Department of Orthopedics at Rush. In 2011, he was appointed as Chairman of Surgery at Rush Oak Park Hospital. He is the Section Head of the Cartilage Research and Restoration Center at Rush specializing in the treatment of arthritis in young active patients with a focus on regenerative medicine and biologic alternatives to surgery. He also serves as the head of the Orthopedic Master’s Training Program and trains residents and fellows in sports medicine and research. He lectures nationally and internationally and holds several leadership positions in prominent sports medicine societies. Through his basic science and clinical research, he has developed several innovative techniques with several patents for the treatment of shoulder, elbow and knee conditions. He has published more than 1,000 articles and 10 widely read textbooks in orthopedics and regenerative medicine. In addition to his academic accomplishments, Dr. Cole currently serves in many senior leadership roles in organizations such as President of the Arthroscopy Association of North America, President of the Ortho-regeneration Network Foundation, and Secretary General (Presidential-line) International Cartilage Repair Society. Dr. Cole is frequently chosen as one of the “Best Doctors in America” since 2004 and as a “Top Doctor” in the Chicago metro area since 2003. In 2006, he was featured on the cover of Chicago Magazine as “Chicago’s Top Doctor” and was selected as NBA Team Physician of the Year in 2009. Orthopedics This Week has named Dr. Cole as one of the top 20 sports medicine, knee and shoulder specialists repeatedly over the last 5 years as selected by his peers. He is the head team physician for the Chicago Bulls NBA team, co-team physician for the Chicago White Sox MLB team and DePaul University in Chicago. Dr. Cole was awarded his medical degree from the University of Chicago Pritzker School of Medicine and his MBA from the University of Chicago Booth School of Business. He completed his residency in Orthopedic Surgery at the Hospital for Special Surgery — Cornell Medical Center in New York and his fellowship in Sports Medicine at the University of Pittsburgh.
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Doug Craft is one of our directors, and the Chief Executive Officer of Atlanta-based Medicraft, Inc., which is one of the largest independent agents for Medtronic, the world leader in medical technology and pioneering therapies. He has devoted his entire career to the medical industry, initially concentrating in the sale of spinal implants, which he continues today. Mr. Craft has extensive relationships with health care systems, surgeons and other senior health care professionals across the nation. Over the past three decades his commercial interests have expanded to include evaluating, consulting and developing businesses in the medical field generally, including but not limited to neuro-intraoperative monitoring, biologic agents, orthopedic reconstruction implants, surgical navigation systems, regenerative kidney technology, trans-catheter cardiac valves and spinal implant device design. He has funded and started over 12 businesses in the Orthopedic, Spine and Neurological segments such as Biocraft Inc, Orthocraft Inc, Neurocraft Inc, Pharmacraft, Premier Medical Systems, and Diamond Orthopedics. Early in his career, he was one of the first agents for Danek a publicly traded spinal implant company which merged with Sofamor to become Sofamor-Danek and relisting on the NYSE. Sofamor-Danek was acquired by Medtronic in 1999 for $3.7 billion. Mr. Craft is a highly experienced entrepreneur who is continually exploring opportunities to multiply investments in medical businesses and technologies. Mr. Craft earned a B.S. degree in biomedical engineering from Mississippi State University, and is a Distinguished Fellow of the College of Engineering at Mississippi State University.
Our directors and officers have played a key role in identifying, evaluating, and selecting target businesses, and structuring, negotiating and consummating our initial Business Consummation. Except as described below and under “Conflicts of Interest,” none of these individuals is currently a principal of or affiliated with a public company or blank check company that executed a business plan similar to our business plan. We believe that the skills and experience of these individuals, their collective access to acquisition opportunities and ideas, their contacts, and their transaction expertise should enable them to identify successfully and effect an acquisition transaction, although we cannot assure you that they will, in fact, be able to do so.
Family Relationships
There are no family relationships among the officers and directors, nor are there any arrangements or understanding between any of the Directors or Officers of our Company or any other person pursuant to which any Officer or Director was or is to be selected as an officer or director.
Involvement in Certain Legal Proceedings
During the last ten years, none of our officers, directors, promoters or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.
Board Meetings; Committee Meetings; and Annual Meeting Attendance
In 2022, the Board of Directors held board meetings on two occasions: November 7, 2022 and November 16, 2022.
Officer and Director Qualifications
Our officers and board of directors are composed of a diverse group of leaders with a wide array of professional roles. In these roles, they have gained experience in core management skills, such as strategic and financial planning, financial reporting, compliance, risk management, and leadership development. Many of our officers and directors also have experience serving on boards of directors and board committees of other companies, and have an understanding of corporate governance practices and trends, which provides an understanding of different business processes, challenges, and strategies. Further, our officers and directors also have other experience that makes them valuable, managing and investing assets or facilitating the consummation of business combinations.
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We, along with our officers and directors, believe that the above-mentioned attributes, along with the leadership skills and other experiences of our officers and board members described below, provide us with a diverse range of perspectives and judgment necessary to facilitate our goals of consummating an acquisition transaction.
Board Committees
The Board has a standing audit, nominating and compensation committee. The independent directors oversee director nominations. Each audit committee, nominating committee and compensation committee has a charter, which were filed with the SEC as exhibits to the Registration Statement on Form S-1 in connection with our IPO on December 21, 2020.
Audit Committee
The Audit Committee, which is established in accordance with Section 3(a)(58)(A) of the Exchange Act, engages Company’s independent accountants, reviewing their independence and performance; reviews the Company’s accounting and financial reporting processes and the integrity of its financial statements; the audits of the Company’s financial statements and the appointment, compensation, qualifications, independence and performance of the Company’s independent auditors; the Company’s compliance with legal and regulatory requirements; and the performance of the Company’s internal audit function and internal control over financial reporting. During 2022, the Audit Committee held six meetings on March 15, 2022, March 21, 2022, March 25, 2022, June 10, 2022, August 19, 2022 and November 18, 2022.
The Audit Committee consists of Demetrios (Jim) G. Logothetis and Doug Craft, each of whom is an independent director under NYSE American’s listing standards. Mr. Logothetis serves as the Chairperson of the Audit Committee and at the time of his appointment as an independent director, the Board has determined that Mr. Logothetis qualifies as an “audit committee financial expert,” as defined under the rules and regulations of the SEC.
Mr. Brian Cole previously served as a member of the Audit Committee, however due to his receipt of warrants in connection with the Subscription Agreement, he no longer meets the qualification to serve as an Audit Committee Member under Rule 10A-3 of the Securities Exchange Act of 1934, as amended.
Nominating Committee
The Nominating Committee is responsible for overseeing the selection of persons to be nominated to serve on our Board. Specifically, the Nominating Committee makes recommendations to the Board regarding the size and composition of the Board, establishes procedures for the director nomination process and screens and recommends candidates for election to the Board. On an annual basis, the Nominating Committee recommends for approval by the Board certain desired qualifications and characteristics for board membership. Additionally, the Nominating Committee establishes and administers a periodic assessment procedure relating to the performance of the Board as a whole and its individual members. The Nominating Committee will consider a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the Board. The Nominating Committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The Nominating Committee does not distinguish among nominees recommended by stockholders and other persons. During 2022, the Nominating Committee acted by unanimous written consent on one occasion.
The Nominating Committee consists of Demetrios (Jim) G. Logothetis, Brian Cole and Doug Craft, each of whom is an independent director under NYSE American’s listing standards. Dr. Cole is the Chairperson of the Nominating Committee.
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Compensation Committee
The Compensation Committee reviews annually the Company’s corporate goals and objectives relevant to the officers’ compensation, evaluates the officers’ performance in light of such goals and objectives, determines and approves the officers’ compensation level based on this evaluation; makes recommendations to the Board regarding approval, disapproval, modification, or termination of existing or proposed employee benefit plans, makes recommendations to the Board with respect to non-CEO and non-CFO compensation and administers the Company’s incentive-compensation plans and equity-based plans. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as it may deem appropriate in its sole discretion. The chief executive officer of the Company may not be present during voting or deliberations of the Compensation Committee with respect to his compensation. The Company’s executive officers do not play a role in suggesting their own salaries. Neither the Company nor the Compensation Committee has engaged any compensation consultant who has a role in determining or recommending the amount or form of executive or director compensation. During 2022, the Compensation Committee did not hold any meetings.
Notwithstanding the foregoing, as indicated above, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our executive officers existing stockholders, our directors, or any of their respective affiliates, prior to, or for any services they render in order to effectuate, the consummation of a business combination. Accordingly, it is likely that prior to the consummation of an initial business combination, the compensation committee will only be responsible for the review and recommendation of any compensation arrangements to be entered into in connection with such initial business combination.
The Compensation Committee consists of Demetrios (Jim) G. Logothetis, Brian Cole and Doug Craft, each of whom is an independent director under NYSE American’s listing standards. Mr. Craft is the Chairperson of the Compensation Committee.
Conflicts of Interest
Investors should be aware of the following potential conflicts of interest:
| ● | None of our officers and directors is required to commit their full time to our affairs and, accordingly, they may have conflicts of interest in allocating their time among various business activities. | |
| ● | In the course of their other business activities, our officers and directors may become aware of investment and business opportunities which may be appropriate for presentation to our company as well as the other entities with which they are affiliated. Our management has pre-existing fiduciary duties and contractual obligations and may have conflicts of interest in determining to which entity a particular business opportunity should be presented. | |
| ● | Our officers and directors may in the future become affiliated with entities, including other blank check companies, engaged in business activities similar to those intended to be conducted by our company. | |
| ● | The insider shares owned by our officers and directors will be released from escrow only if a business combination is successfully completed and subject to certain other limitations. Additionally, our officers and directors will not receive distributions from the Trust Account with respect to any of their insider shares if we do not complete a business combination. In addition, our officers and directors may loan funds to us after the IPO and may be owed reimbursement for expenses incurred in connection with certain activities on our behalf which would only be repaid if we complete an initial business combination. For the foregoing reasons, the personal and financial interests of our directors and executive officers may influence their motivation in identifying and selecting a target business, completing a business combination in a timely manner and securing the release of their shares. |
In general, officers and directors of a corporation incorporated under the laws of the State of Delaware are required to present business opportunities to a corporation if:
| ● | the corporation could financially undertake the opportunity; | |
| ● | the opportunity is within the corporation’s line of business; and | |
| ● | it would not be fair to the corporation and its stockholders for the opportunity not to be brought to the attention of the corporation. |
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In addition, when exercising powers or performing duties as a director, the director is required to exercise the care, diligence and skill that a reasonable director would exercise in the same circumstances taking into account, without limitation the nature of the company, the nature of the decision and the position of the director and the nature of the responsibilities undertaken by him. A director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
As set out above, directors have a duty not to engage in self-dealing, or to otherwise benefit as a result of their position. A director shall, forthwith after becoming aware of the fact that he is interested in a transaction entered into or to be entered into by the company, disclose the interest to the board of the company. However, in some instances what would otherwise be a breach of this duty can be forgiven and/or authorized in advance by the stockholders provided that there is full disclosure by the directors. This can be done by way of stockholder approval at a meeting of stockholders.
Accordingly, as a result of multiple business affiliations, our officers and directors may have similar legal obligations relating to presenting business opportunities meeting the above-listed criteria to multiple entities. In addition, conflicts of interest may arise when our board evaluates a particular business opportunity with respect to the above-listed criteria. We cannot assure you that any of the above mentioned conflicts will be resolved in our favor. Furthermore, most of our officers and directors have pre-existing fiduciary obligations to other businesses of which they are officers or directors. To the extent they identify business opportunities which may be suitable for the entities to which they owe pre-existing fiduciary obligations, our officers and directors will honor those fiduciary obligations. Accordingly, it is possible they may not present opportunities to us that otherwise may be attractive to us unless the entities to which they owe pre-existing fiduciary obligations and any successors to such entities have declined to accept such opportunities.
In order to minimize potential conflicts of interest which may arise from multiple corporate affiliations, each of our officers and directors has contractually agreed, pursuant to a written agreement with us, until the earliest of a business combination, our liquidation or such time as he ceases to be an officer or director, to present to our company for our consideration, prior to presentation to any other entity, any suitable business opportunity which may reasonably be required to be presented to us, subject to any pre-existing fiduciary or contractual obligations he might have.
The following table summarizes the current pre-existing fiduciary or contractual obligations of our officers and directors.
| Individual | Entity | Entity’s Business | Affiliation | |||
| Doug Craft | Medicraft, Inc. | medical technology company | Chairman and CEO | |||
| Brian Cole | Midwest Orthopedics at Rush | specialty medical practice | Managing Partner |
In connection with the vote required for any business combination, all of our existing stockholders, including all of our officers and directors, have agreed to vote their respective insider shares in favor of any proposed business combination. In addition, they have agreed to waive their respective rights to participate in any liquidation distribution with respect to the insider shares acquired by them prior to the IPO. If they purchased shares of Common Stock in the IPO or in the open market, however, they would be entitled to participate in any liquidation distribution in respect of such shares but have agreed not to redeem such shares (or sell their shares in any tender offer) in connection with the consummation of our initial business combination or an amendment to our amended and restated certificate of incorporation relating to pre-business combination activity.
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Any such related party transactions, as defined under the rules and regulations of the Exchange Act, will require prior approval by our audit committee and a majority of our uninterested “independent” directors, or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
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With respect to possible initial business combinations that may be entered into between us and an entity that is affiliated with any of our officers, directors or initial stockholders, to further minimize conflicts of interest, we have agreed not to consummate such an affiliated initial business combination unless we have obtained (i) an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire that such an initial business combination is fair to our unaffiliated stockholders from a financial point of view and (ii) the approval of a majority of our disinterested and of our independent directors. Furthermore, in no event will any of our initial stockholders, officers, directors, special advisors or their respective affiliates be paid any finder’s fee, consulting fee or other similar compensation prior to, or for any services they render in order to effectuate, the consummation of our initial business combination.
Code of Ethics
We adopted a code of conduct and ethics applicable to our directors, officers and employees in accordance with applicable federal securities laws. The code of ethics codifies the business and ethical principles that govern all aspects of our business.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, officers and stockholders who beneficially own more than 10% of any class of equity securities of the Company registered pursuant to Section 12 of the Exchange Act, collectively referred to herein as the “Reporting Persons,” to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership of securities with respect to the Company’s equity securities with the SEC. All Reporting Persons are required by SEC regulation to furnish us with copies of all reports that such Reporting Persons file with the SEC pursuant to Section 16(a). Based solely on our review of the copies of such reports and upon written representations of the Reporting Persons received by us, we believe that all filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were filed in a timely manner.
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ITEM 11. EXECUTIVE COMPENSATION
Employment Agreements
We have not entered into any employment agreements with our executive officers and have not made any agreements to provide benefits upon termination of employment.
Executive Officers and Director Compensation
No executive officer has received any cash compensation for services rendered to us. Except as set forth below, no compensation of any kind, including finders, consulting or other similar fees, will be paid to any of our existing stockholders, including our directors, or any of their respective affiliates, prior to, or for any services they render in order to effectuate, the consummation of a business combination. However, such individuals will be reimbursed for any out-of-pocket expenses incurred in connection with activities on our behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. There is no limit on the amount of these out-of-pocket expenses and there will be no review of the reasonableness of the expenses by anyone other than our board of directors and audit committee, which includes persons who may seek reimbursement, or a court of competent jurisdiction if such reimbursement is challenged.
Pursuant to the Subscription Agreements, the Company’s Chief Financial Officer, Rom Papadopoulos, as Sole Proprietor of Intuitus has funded $580,000 of the principal amount of the Notes. In connection with such loan, Intuitus has received Subscription Warrants exercisable for up to 290,000 shares. The warrants were not issued for services rendered. Pursuant to the Subscription Agreements, one of our directors, Brian Cole as an affiliate and control person of EAC Enterprises, L.P. Series D, has funded $250,000 of the principal amount of the Notes. In connection with such loan, EAC Enterprises, L.P. Series D has received Subscription Warrants exercisable for up to $125,000 shares. The warrants were not issued for services rendered. See section entitled “Item 13. Certain Relationships and Related Transactions, and Director Independence” of this Annual Report for further detail.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth as of the date of this Annual Report, the number of shares of Common Stock beneficially owned by (i) each person who is known by us to be the beneficial owner of more than five percent of our issued and outstanding shares of Common Stock, (ii) each of our officers and directors; and (iii) all of our officers and directors as a group. As of the date of this Annual Report, as a result of the redemptions by public stockholders in connection with the Amendment, we have 6,648,665 shares of Common Stock issued and outstanding.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of Common Stock beneficially owned by them. The following table does not reflect record of beneficial ownership of any shares of Common Stock issuable upon exercise of the warrants, as the warrants are not exercisable within 60 days of the date of this Annual Report.
| Name and Address of Beneficial Owner(1) | Number of Shares Beneficially Owned | Approximate Percentage of Common Stock | ||||||
| Jagi Gill(2) | 4,923,250 | 74.04 | % | |||||
| Rom Papadopoulos(2) (3) | 4,923,250 | 74.04 | % | |||||
| Brian Cole | 27,000 | * | ||||||
| Doug Craft | 27,000 | * | ||||||
| Demetrios G. Logothetis | 27,000 | * | ||||||
| All current directors and executive officers as a group (five individuals) | 5,004,250 | 75.27 | % | |||||
| Holders of 5% or more of our Common Stock | ||||||||
| Viveon Health, LLC(2) (3) | 4,923,250 | 74.04 | % | |||||
| Meteora Capital, LLC(4) | 892,807 | 13.43 | ||||||
| Karpus Investment Management(5) | 2,027,285 | 30.49 | % | |||||
| Mizuho Financial Group, Inc.(6) | 543,000 | 8.17 | % | |||||
| Polar Asset Management Partners, Inc. (7) | 650,000 | 9.78 | % | |||||
| Fir Tree Capital Management LP (8) | 518,742 | 7.80 | % | |||||
| * | Less than 1% |
| (1) | Unless otherwise indicated, the business address of each of the individuals is c/o Viveon Health Acquisition Corp., 3480 Peachtree Road NE 2nd Floor - Suite #112 Atlanta, Georgia 30326. |
| (2) | Consists of shares of Common Stock owned by Viveon Health, LLC, for which Jagi Gill is a member and Rom Papadopoulos is the managing member. Mr. Papadopoulos has sole voting and dispositive control over those shares. |
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| (3) | Rom Papadopoulos is the managing member of Viveon Health, LLC. |
| (4) | Based on a Schedule 13G filed by the reporting persons on February 10, 2023, the address for the reporting person is 840 Park Drive East, Boca Raton, Florida 33444.The number of shares of Common Stock owned is as of February 10, 2022, the date of filing of the Schedule 13G. The Schedule 13G was filed by the following reporting persons: (i) Meteora Capital, LLC, a Delaware limited liability company (“Meteora Capital”) with respect to the common stock held by certain funds and managed accounts to which Meteora Capital serves as investment manager (collectively, the “Meteora Funds”); and (ii) Vik Mittal, who serves as the Managing Member of Meteora Capital, with respect to the common stock held by the Meteora Funds. The filing of the Schedule 13G by the reporting persons should not be construed as an admission that any of the reporting persons is, for the purposes of Section 13 of the Act, the beneficial owner of the common stock reported herein. |
| (5) | Based on a Schedule 13G filed by the reporting person on February 14, 2022, the address for the reporting person is 183 Sully’s Trail, Pittsford, New York 14534.The number of shares of Common Stock owned is as of February 14, 2022, the date of filing of the Schedule 13G. The reporting person has not amended such schedule to report changes in ownership due to any redemption of its shares of Common Stock in connection with the Amendment. As a result, the number of shares and percentage ownership may not be accurate as of the date of the filing of this Annual Report. |
| (6) | Based on a Schedule 13G filed by the reporting person on February 14, 2023, the address for the reporting person is 1-5-5. Otemachi, Chiyoda-ku, Tokyo 100-8176, Japan. Mizuho Financial Group, Inc., Mizuho Bank, Ltd. and Mizuho Americas LLC may be deemed to be indirect beneficial owners of said equity securities directly held by Mizuho Securities USA LLC which is their wholly-owned subsidiary. |
| (7) | Based on a Schedule 13G/A filed by the reporting person on February 10, 2023, the address for the reporting person is 16 York Street, Suite 2900, Toronto, ON, Canada M5J 0E6. The Schedule 13G was filed by Polar Asset Management Partners Inc., which serves as the investment advisor to Polar Multi-Strategy Master Fund (“PMSMF”) with respect to the shares of common stock directly held by PMSMF. |
| (8) | Based on a Schedule 13G filed by the reporting person on February 14, 2023, the address for the reporting person is 500 5th Avenue, 9th Floor, New York, New York 10110. |
All of the insider shares issued and outstanding prior to the IPO were placed in escrow with Continental Stock Transfer & Trust Company, as escrow agent, until (1) with respect to 50% of the insider shares, the earlier of six months after the date of the consummation of our initial business combination and the date on which the closing price of our shares of Common Stock equals or exceeds $12.50 per share (as adjusted for share splits, share capitalizations, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing after our initial business combination and (2) with respect to the remaining 50% of the insider shares, six months after the date of the consummation of our initial business combination, or earlier, in either case, if, subsequent to our initial business combination, we consummate a liquidation, merger, share exchange or other similar transaction which results in all of our stockholders having the right to exchange their shares for cash, securities or other property.
During the escrow period, the holders of these shares will not be able to sell or transfer their securities except (1) to any persons (including their affiliates and stockholders) participating in the private placement of the private warrants, officers, directors, stockholders, employees and members of the Company’s sponsor and its affiliates, (2) amongst initial stockholders or their respective affiliates, or to the Company’s officers, directors, advisors and employees, (3) if a holder is an entity, as a distribution to its, partners, stockholders or members upon its liquidation, (4) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes, (5) by virtue of the laws of descent and distribution upon death, (6) pursuant to a qualified domestic relations order, (7) by certain pledges to secure obligations incurred in connection with purchases of the Company’s securities, or (8) by private sales at prices no greater than the price at which the shares were originally purchased, in each case where the transferee agrees to the terms of the escrow agreement and the insider letter.
Our initial stockholders, officers and directors or their affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be repaid upon consummation of our initial business combination, without interest.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
2020 Transactions
In August 2020, our sponsor purchased 3,593,750 shares for an aggregate purchase price of $25,000, or approximately $0.007 per share. We subsequently declared a share dividend of 0.36 for each outstanding share, resulting in 4,887,500 shares outstanding, and on December 22, 2020 declared another share dividend of 0.03 for each outstanding share, resulting in 5,031,250 shares outstanding, which shares are referred to herein as “founder shares” or “insider shares.” Prior to the initial investment in the company of $25,000 by our sponsor, we had no assets, tangible or intangible.
On December 23, 2020, our Sponsor transferred 81,000 of its founder shares to three board members 27,000 Founder Shares to each board member, for a nominal fee. On April 30, 2021, our Sponsor subsequently transferred 27,000 of its founder shares to a new board member.
On December 28, 2020, simultaneously with the consummation of the IPO, we sold to our Sponsor 18,000,000 Private Warrants at a price of $0.50 per Private Warrant, generating total proceeds of $9,000,000. The Private Warrants are identical to the Warrants sold in the IPO except that the Private Warrants are non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the Sponsor, or its permitted transferees. Additionally, our Sponsor agreed not to transfer, assign, or sell any of the Private Warrants or underlying securities (except in limited circumstances, as described in the Private Placement Warrants Subscription Statement) until the date we complete our initial business combination. The Sponsor was granted certain demand and piggyback registration rights in connection with the purchase of the Private Warrants.
The holders of our insider shares issued and outstanding on the date of this Annual Report, as well as the holders of the Private Warrants (and all underlying securities) are entitled to registration rights pursuant to the registration rights agreement, dated December 22, 2020. The holders of a majority of these securities are entitled to make up to two demands that we register such securities. The holders of the majority of the insider shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of Common Stock are to be released from escrow. The holders of a majority of the private warrants can elect to exercise these registration rights at any time after we consummate a business combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to our consummation of a business combination. We will bear the expenses incurred in connection with the filing of any such registration statements.
In order to meet our working capital needs following the consummation of our IPO, our initial stockholders, officers and directors and their respective affiliates may, but are not obligated to, loan us funds, from time to time or at any time, in whatever amount they deem reasonable in their sole discretion. Each loan would be evidenced by a promissory note. The notes would be repaid upon consummation of our initial business combination, without interest.
2022 Transactions
On March 21, 2022, March 23, 2022, April 4, 2022, April 27, 2022, May 9, 2022, October 27, 2022, and November 25, 2022, we entered into subscription agreements with several lenders for a loan of up to $4,000,000, in the aggregate (the “Subscription Agreements”).
Pursuant to the Subscription Agreements, we issued a series of unsecured senior promissory notes in the aggregate principal amount of up to $4,000,000 (the “Notes”) to the subscribers. Of the $4,000,000 in Notes, $1,955,000 was subscribed for by several related parties affiliated with our sponsor, Viveon Health LLC, and the balance in the amount of $2,045,000 was subscribed for by parties that are not related to our sponsor.
Pursuant to the terms of the Subscription Agreements, the subscribers also received warrants to purchase one share of our common stock for every $2.00 of the funded principal amount of the Notes up to 2,000,000 shares of our common stock, in the aggregate, at an exercise price of $11.50 per share, subject to adjustment (the “Subscription Warrants”). The Subscription Warrant term commences on the Exercise Date (as hereinafter defined) for a period of 49 months. The Subscription Warrants are exercisable commencing on the date of the initial business combination (the “Exercise Date”) and have a cashless exercise feature that is available at any time on or after the Exercise Date. Commencing on the date 13 months following the Exercise Date, the subscribers have the right, but not the obligation, to put the Subscription Warrants to us at a purchase price of $5.00 per share. We have agreed to file, within thirty (30) calendar days after the consummation of an initial business combination, a registration statement with the Securities and Exchange Commission to register for resale the shares of common stock underlying the Subscription Warrants.
The Notes do not bear interest and mature upon the earlier of (i) the closing of our initial business combination, and (ii) December 31, 2022 (the “Maturity Date”). The Notes provide for a credit line up to the maximum amount of $4,000,000. We will not have the right to re-borrow any portion of any loans made under the Notes once repaid . As of December 31, 2022, a commitment fee in the amount of $400,000, equal to 10% of the maximum principal amount of the Note, had been paid to the subscribers, on a pro rata basis. In the event that we do not consummate a business combination by the Maturity Date, the Notes will be repaid only from amounts remaining outside of our Trust Account, if any. Subsequent to December 31, 2022, in connection with the Merger Agreement (as defined below) a majority of the holders of the Notes and Subscription Warrants have agreed to exchange such Notes and Subscription Warrants pursuant to the terms of an exchange agreement with Viveon dated as of May 1, 2023 (the Exchange Agreement”) for a separate series of Clearday senior convertible promissory notes (the “Clearday Senior Convertible Notes”). The Clearday Senior Convertible Notes bear 8% interest per annum and mature upon the earlier of (i) June 30, 2024, or (ii) the date of any Change in Control. . Upon the consummation of the business combination and the exchange of the Subscription Agreements for the Clearday Senior Convertible Notes, the lenders will forfeit their Subscription Warrants as part of the exchange. One lender has chosen not to convert to Clearday Senior Convertible Notes. The balance owed to this lender under the Notes is considered due upon demand by the lender. As of the date of this filing of this Annual Report the lender has not requested payment of the Note.
Of the $4,000,000 in notes, $1,955,000 was subscribed for by several related parties affiliated with our sponsor, Viveon Health LLC. $250,000 of the principal amount of the Notes was funded by Brian Cole, one of our directors pursuant to a Subscription Agreement dated as of April 4, 2022, between the Company and EAC Enterprises, L.P. Series D(the “Cole Warrant Holder”), an entity that is an affiliate of, and controlled by Brian Cole (the “Cole Subscription Agreement”), and the balance of the Notes was subscribed for by parties that are not related to our sponsor. The entry into the subscription agreements and the terms of the notes and warrants was approved by the Audit Committee at a meeting held on March 21, 2022. Pursuant to the Cole Subscription Agreement, the Company also issued the Cole Warrant Holder, a warrant to purchase 125,000 shares of common stock, at an exercise price of $11.50 per share.
On May 10, 2022, Suneva entered into a subordinated convertible promissory note (the “Subordinated Convertible Promissory Note”) with Intuitus Suneva Debt LLC (“Intuitus”), pursuant to which Suneva borrowed an aggregate of $1,500,000 to be used to fund working capital. The Subordinated Convertible Promissory Note bears interest at a rate of 10.0% per annum and is payable upon the earlier of: (i) December 31, 2022 or (ii) the voluntary or involuntary liquidation, dissolution or winding up of Suneva. In addition, Intuitus may elect by written notice to Suneva to convert all (but not less than all) of the then-outstanding principal and interest on the Note into shares of Suneva Series AA Stock as is determined by dividing the total principal and accrued but unpaid interest balance on the Note by the $0.80. The Company’s Chief Financial Officer, Rom Papadopoulos, as Sole Proprietor of Intuitus, has contributed $200,000 of the $1,500,000 available under the Subordinated Convertible Promissory Note.
Commencing on the date of the Company’s final prospectus, the Company has agreed to pay an affiliate of the Sponsor a total of $20,000 per month for office space, utilities and secretarial support. Upon completion of the initial Business Combination or the Company’s liquidation, the Company will cease paying these monthly fees. The Company incurred $240,000 and $240,000 of administrative service fees for the year ended December 31, 2022 and 2021, respectively. The accrued amounts are included in Due to related party on the balance consolidated balance sheets. For the year ended December 31, 2022 and 2021, $50,000 and $10,000 of such expenses were recorded in Due to related party, respectively.
2023 Transactions
We have an agreement to pay an affiliate of our sponsor a monthly fee of $20,000 for office space, utilities and secretarial and administrative support and the series of unsecured senior promissory note agreements we entered into with several lenders affiliated with our Sponsor. We began incurring these fees on December 22, 2020 and will continue to incur these fees monthly until the earlier of the completion of the Business Combination and our liquidation.
On February 2, 2023, the Merger Agreement between Viveon and Suneva was terminated. From the point of termination, the Subordinated Convertible Promissory Note is no longer considered a related party transaction to Viveon as the Company will no longer be entering into a Business Combination with Suneva.
Pursuant to a Warrant Cancellation and Forfeiture Agreement dated as of August 16, 2023, the Cole Warrant Holder agreed to forfeit for cancellation 89,029 of the warrant shares underlying the warrant issued pursuant to the Cole Subscription Agreement described above. At initial issuance the value of the warrants exceeded $120,000. As a result, Mr. Cole agreed to forfeit certain of the warrants so that the value would be reduced to $120,000 and would not impact the determination that he is an independent director.
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We reimburse our officers and directors for any reasonable out-of-pocket business expenses incurred by them in connection with certain activities on our behalf such as identifying and investigating possible target businesses and business combinations. There is no limit on the amount of out-of-pocket expenses reimbursable by us; provided, however, that to the extent such expenses exceed the available proceeds not deposited in the Trust Account and the interest income earned on the amounts held in the Trust Account, such expenses would not be reimbursed by us unless we consummate an initial business combination. Our audit committee reviews and approves all reimbursements and payments made to any initial stockholder or member of our management team, or our or their respective affiliates, and any reimbursements and payments made to members of our audit committee are reviewed and approved by our Board of Directors, with any interested director abstaining from such review and approval.
No compensation or fees of any kind, including finder’s fees, consulting fees or other similar compensation, will be paid to any of our initial stockholders, officers or directors who owned our shares of Common Stock, or to any of their respective affiliates, prior to or with respect to the business combination (regardless of the type of transaction that it is).
All ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions, including the payment of any compensation, will require prior approval by a majority of our uninterested “independent” directors (to the extent we have any) or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested “independent” directors (or, if there are no “independent” directors, our disinterested directors) determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties.
Related Party Policy
Our code of ethics requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests, except under guidelines approved by the board of directors (or the audit committee). Related-party transactions are defined as transactions in which (1) the aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries is a participant, and (3) any (a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our Common Stock, or (c) immediate family member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives improper personal benefits as a result of his or her position.
Our audit committee, pursuant to its written charter, is responsible for reviewing and approving related-party transactions to the extent we enter into such transactions. All ongoing and future transactions between us and any of our officers and directors or their respective affiliates will be on terms believed by us to be no less favorable to us than are available from unaffiliated third parties. Such transactions require prior approval by our audit committee and a majority of our uninterested “independent” directors, or the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our audit committee and a majority of our disinterested “independent” directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties. Additionally, we require each of our directors and executive officers to complete a directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict of interest on the part of a director, employee or officer.
In furtherance of our policies with respect to related party transactions, with respect to any initial business combination that we consider with an entity that is affiliated with any of our initial stockholders, directors or officers, to further minimize potential conflicts of interest, we have agreed not to consummate a business combination with an entity affiliated with such parties unless (i) an opinion from an independent investment banking firm or another independent entity that commonly renders valuation opinions on the type of target business we seek to acquire that such an initial business combination is fair to our unaffiliated stockholders from a financial point of view and (ii) the approval of a majority of our disinterested and of our independent directors. Furthermore, in no event will any of our existing officers, directors or initial stockholders, or any entity with which they are affiliated, be paid any finder’s fee, consulting fee or other compensation prior to, or for any services they render in order to effectuate, the consummation of a business combination.
Director Independence
NYSE American’s listing standards require that a majority of our board of directors be independent. For a description of the director independence, see above Part III, Item 10 - Directors, Executive Officers and Corporate Governance.
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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Public Accounting Fees
During the year ended December 31, 2022, Marcum LLP, has acted as our principal independent registered public accounting firm. The following is a summary of fees paid or to be paid to Marcum LLP for services rendered.
Audit Fees. Audit fees consist of fees billed for professional services rendered for the audit of our year-end financial statements and services that are normally provided by Marcum LLP in connection with regulatory filings, such as registration statements filed with the SEC. The aggregate fees billed by Marcum LLP for professional services rendered for the audit of our annual financial statements, review of the financial information included in our Forms 10-Q for the respective periods, registration statements filed in connection with the pursuit of a business combination, and other required filings with the SEC for the year ended December 31 2022 totaled approximately $473,903. Audit fees for the year ended December 31, 2021 totaled $149,000. The above amount includes interim procedures and audit fees, as well as attendance at audit committee meetings.
Audit-Related Fees. We did not pay Marcum LLP for consultations concerning financial accounting and reporting standards for the years ended December 31, 2021 or 2022.
Tax Fees. We did not pay Marcum LLP for tax planning and tax advice for the years ended December 31, 2021 or 2022.
All Other Fees. We did not pay Marcum LLP for other services for the years ended December 31, 2021 or 2022.
Pre-Approval of Services
All services for the year ended December 31, 2022 have been approved by the audit committee.
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PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (RESTATED)
| (a) | The following are filed with this report: |
| (1) | The financial statements listed on the Financial Statements Table of Contents |
| (2) | Not applicable |
| (b) | Exhibits |
The following exhibits are filed with this report. Exhibits which are incorporated herein by reference can be obtained from the SEC’s website at sec.gov.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VIVEON HEALTH ACQUISITION CORP. | ||
| Dated: February 21, 2024 | By: | /s/ Jagi Gill |
| Name: | Jagi Gill | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Signature | Title | Date | ||
| /s/ Jagi Gill | Chief Executive Officer, President and Director | February 21, 2024 | ||
| Jagi Gill | (Principal Executive Officer) | |||
| /s/ Rom Papadopoulos | Chief Financial Officer, Treasurer, Secretary and Director | February 21, 2024 | ||
| Rom Papadopoulos | (Principal Accounting and Financial Officer) | |||
| /s/ Demetrios (Jim) G. Logothetis | Director | February 21, 2024 | ||
| Demetrios (Jim) G. Logothetis | ||||
| /s/ Brian Cole | Director | February 21, 2024 | ||
| Brian Cole | ||||
| /s/ Doug Craft | Director | February 21, 2024 | ||
| Doug Craft |
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INDEX TO FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Viveon Health Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Viveon Health Acquisition Corp. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America
Restatement of the 2022 Financial Statements
As discussed in Note 2 to the financial statements, the accompanying financial statements as of December 31, 2022 and for the year ended December 31, 2022 have been restated to correct a misstatement.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1 to the financial statements, the Company’s business plan is dependent on the completion of a business combination and the Company’s cash and working capital as of December 31, 2022 are not sufficient to complete its planned activities for a reasonable period of time, which is considered to be one year from the issuance date of the financial statements. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Marcum llp
We have served as the Company’s auditor since 2020
August 23, 2023, except for the effects of the of the restatement discussed in Notes 2, 3, 8 and 12, as to which the date is February 21, 2024
| F-2 |
PART 1 – FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
VIVEON HEALTH ACQUISITION CORP.
CONSOLIDATED BALANCE SHEETS
| December
31, 2022
(As Restated)(1) | December 31, 2021 | |||||||
| Assets: | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Due from related party | ||||||||
| Total current assets | ||||||||
| Investment held in Trust Account | ||||||||
| Deferred tax asset | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit: | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued costs and expenses | ||||||||
| Franchise tax payable | ||||||||
| Note Agreements payable | ||||||||
| Note Agreements payable – related party | ||||||||
| Due to related party | ||||||||
| Promissory note – related party | ||||||||
| Common stock tendered for redemption | ||||||||
| Total current liabilities | ||||||||
| Deferred underwriting fee | ||||||||
| Warrant liabilities | ||||||||
| Uncertain tax position | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (see Note 8) | ||||||||
| Common Stock subject to possible redemption, and shares at redemption value as of December 31, 2022 and 2021, respectively | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, $ par value; shares authorized; issued and outstanding | ||||||||
| Common stock not subject to possible redemption, $ par value; shares authorized; issued and outstanding (excluding and shares subject to redemption as of December 31, 2022 and 2021, respectively) | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
VIVEON HEALTH ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
| For the years ended December 31, | ||||||||
| 2022 (As Restated)(1) | 2021 | |||||||
| Operating costs | $ | $ | ||||||
| Professional fees | ||||||||
| Franchise tax | ||||||||
| Stock compensation expense | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Expensed issuance costs on issuance of subscription warrants | ( | ) | ||||||
| Interest and dividends earned on investments held in Trust Account | ||||||||
| Interest earned on money market account | ||||||||
| Interest expense - amortization of debt discount | ( | ) | ||||||
| Gain on change in fair value of warrant liabilities | ||||||||
| Loss on issuance of subscription warrants | ( | ) | ||||||
| Total other income | ||||||||
| (Loss) income before income taxes | ( | ) | ||||||
| Income tax expense | ( | ) | ||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Weighted average shares outstanding, basic and diluted | ||||||||
| Basic and diluted net (loss) income per common share | $ | ) | $ | |||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
VIVEON HEALTH ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
| For the Year ended December 31, 2022 | ||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| Remeasurement of common stock subject to possible redemption, to redemption amount | — | ( | ) | ( | ) | ( | ) | |||||||||||||
| Net loss, as restated | — | ( | ) | ( | ) | |||||||||||||||
| Balance as of December 31, 2022 (As Restated)(1) | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||
| For the Year ended December 31, 2021 | ||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Total Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | ( | ) | $ | ( | ) | |||||||||||||
| Additional offering costs related to the Initial Public Offering | — | ( | ) | ( | ) | |||||||||||||||
| Stock compensation expense | — | |||||||||||||||||||
| Net income | — | |||||||||||||||||||
| Balance as of December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
VIVEON HEALTH ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the years ended December 31, | ||||||||
| 2022 (As Restated)(1) | 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net (loss) income | $ | ( | ) | $ | ||||
| Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||
| Expensed issuance costs on issuance of subscription warrants | ||||||||
| Interest and dividends earned on investments held in Trust Account | ( | ) | ( | ) | ||||
| Interest expense - amortization of debt discount | ||||||||
| Gain on change in fair value of warrant liabilities | ( | ) | ( | ) | ||||
| Loss on issuance of subscription warrants | ||||||||
| Stock compensation expense | ||||||||
| Deferred tax expense | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Due from related party | ( | ) | ||||||
| Accounts payable | ||||||||
| Accrued costs and expenses | ||||||||
| Franchise tax payable | ||||||||
| Due to related party | ||||||||
| Uncertain tax position | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Cash withdrawn from Trust Account for payment to redeeming stockholders | ||||||||
| Cash deposited to Trust Account for extension contribution | ( | ) | ||||||
| Net cash provided by investing activities | ||||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from Note Agreements payable | ||||||||
| Proceeds from Note Agreements payable – related party | ||||||||
| Proceeds from promissory note- related party | ||||||||
| Payment to redeeming stockholders | ( | ) | ||||||
| Payment of issuance costs | ( | ) | ||||||
| Payment of promissory note - related party | ( | ) | ||||||
| Payment of other payable - related party | ( | ) | ||||||
| Offering costs paid | ( | ) | ||||||
| Net cash used in financing activities | ( | ) | ( | ) | ||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash - beginning of period | ||||||||
| Cash - end of period | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Common stock tendered for redemption | $ | |||||||
| Remeasurement of common stock subject to possible redemption, to redemption amount | $ | $ | ||||||
| (1) |
The accompanying notes are an integral part of these consolidated financial statements.
| F-6 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Viveon Health Acquisition Corp. (the “Company” or “Viveon”) is a newly organized blank check company incorporated as a Delaware company on August 7, 2020. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities (“Business Combination”).
The Company has neither engaged in any operations nor generated any revenues to date. The Company’s only activities for the years ended December 31, 2022 and 2021 were organizational activities, those necessary to prepare for the Company’s initial public offering (the “Initial Public Offering”), described below, and, after the Initial Public Offering, identifying a target company for a Business Combination. The Company does not expect to generate any operating revenues until after the completion of our Business Combination. The Company generates non-operating income in the form of interest income on marketable securities held after the Initial Public Offering. The Company incurs expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses. The Company’s sponsor is Viveon Health, LLC, a Delaware limited liability company (the “Sponsor”).
The
registration statement for the Initial Public Offering was declared effective by the U.S. Securities and Exchange Commission (the “SEC”)
on December 22, 2020. On December 28, 2020, the Company consummated the Initial Public Offering of units (the “Units”
and, with respect to the common stock included in the Units being offered, the “Public Shares”), at $ per Unit, generating
gross proceeds of $
On
December 30, 2020, the underwriters fully exercised the over-allotment option by purchasing Units (the “Over-Allotment
Units”), generating aggregate of gross proceeds of $
Upon
closing of the Initial Public Offering and the sale of the Over-Allotment Units, $
While
the Company’s management has broad discretion with respect to the specific application of the cash held outside of the Trust Account,
substantially all of the net proceeds from the Initial Public Offering and the sale of the Private Warrants, which are placed in the
Trust Account, are intended to be applied generally toward completing a Business Combination. There is no assurance that the Company
will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having
an aggregate fair market value of at least
| F-7 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with any proposed initial Business Combination, the Company will either (1) seek stockholder approval of such initial Business Combination at a meeting called for such purpose at which public stockholders may seek to convert their Public Shares, regardless of whether they vote for or against the proposed Business Combination, into their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable) or (2) provide its public stockholders with the opportunity to sell their Public Shares to the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share of the aggregate amount then on deposit in the Trust Account (net of taxes payable), in each case subject to the limitations described herein. The Public Shares subject to redemption were recorded at redemption value and classified as temporary equity upon the completion of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”).
If
the Company determines to engage in a tender offer, such tender offer will be structured so that each public stockholder may tender any
or all of his, her or its Public Shares rather than some pro rata portion of his, her or its shares. If enough stockholders tender their
shares so that the Company is unable to satisfy any applicable closing condition set forth in the definitive agreement related to its
initial Business Combination, or the Company is unable to maintain net tangible assets of at least $
If the Company provides stockholders with the opportunity to sell their shares to it by means of a tender offer, it will file tender offer documents with the SEC which will contain substantially the same financial and other information about the initial Business Combination as is required under the SEC’s proxy rules. If the Company seeks stockholder approval of its initial Business Combination, the Company will consummate the Business Combination only if a majority of the outstanding shares of common stock present in person or by proxy at a meeting of the Company are voted in favor of the Business Combination.
Notwithstanding
the foregoing redemption rights, if the Company seeks stockholder approval of its initial Business Combination and the Company does not
conduct redemptions in connection with its initial Business Combination pursuant to the tender offer rules,(the Amended and Restated
Certificate of Incorporation will provide 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 Exchange Act), will be
restricted from redeeming its Public Shares with respect to more than an aggregate of
| F-8 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
March 18, 2022, the Company held a stockholder meeting to seek approval to extend the date by which the Company has to consummate a
business combination from March 28, 2022 (the “Original Termination Date”) to June 28, 2022. In connection with the
extension, the Company made a deposit into the Trust Account of $
On December 23, 2022, the Company held its 2022 Annual Meeting of Stockholders, to among other things, seek approval
to amend the Company’s Amended and Restated Certificate of Incorporation,
to allow the Company to extend the date to consummate a Business Combination on a monthly basis for up to six times by an additional
one month each time for a total of up to six months from December 28, 2022 until June 30, 2023 (the “Second Extended Date”),
upon three calendar days’ advance notice prior to the applicable monthly deadline unless the closing of any potential initial business
combination shall have occurred prior to the Second Extended Date. On each of December 27, 2022, January 26, 2023, February 27, 2023,
March 27, 2023, and April 28, 2023, the Company deposited $
On June 22, 2023, the Company held a
stockholder meeting to amend the Company’s Amended and Restated Certificate of Incorporation, to allow the Company, without
another stockholder vote, to elect to extend the date to consummate a business combination on a monthly basis for up to six times by
an additional one month until December 31, 2023, by depositing $
On June 22, 2023, the Company held a stockholder meeting (the “June 2023 Stockholders Meeting”) in which
stockholders voted to (A) amend the Company’s Amended and Restated Certificate of Incorporation, to allow the Company to (i)
initially extend the date by which the Company must consummate an initial business combination up to six times, each such extension for
an additional one month period, until December 31, 2023, by depositing into the Trust Account, the amount of $
If the Company is unable to complete its initial Business Combination by the Third Extended Date (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 five business days thereafter, redeem % of the outstanding Public Shares (including any Units or Public Shares that its initial stockholders or their affiliates purchased in the Initial Public Offering or later acquired in the open market or in private transactions), which will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably practicable following such redemption, subject to the approval of the Company’s remaining holders of common stock and its board of directors, proceed to commence a voluntary liquidation and thereby a formal dissolution of the Company, subject (in the case of (ii) and (iii) above) to its obligations to provide for claims of creditors and the requirements of applicable law.
The Company’s initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares (as defined in Note 6) held by them if the Company fails to complete its initial Business Combination within the Combination Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete its initial Business Combination within the Combination Period.
Merger Agreement
On January 12, 2022, the Company entered into a Merger Agreement (the “Old Merger Agreement”) by and among the Company, VHAC Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Old Merger Sub”), and Suneva Medical, Inc., a Delaware corporation (“Suneva”). Pursuant to the terms of the Merger Agreement, a Business Combination between the Company and Suneva will be effected through the merger of Old Merger Sub with and into Suneva, with Suneva surviving the merger as a wholly owned subsidiary of the Company (the “Old Merger”). The board of directors of the Company has (i) approved and declared advisable the Old Merger Agreement, the Old Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Old Merger Agreement and related transactions by the stockholders of the Company.
| F-9 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
July 13, 2022, the Company, Old Merger Sub, and Suneva entered into the Second Amendment to Old Merger Agreement (the “Second
Amendment”) that amended and modified the Old Merger Agreement to extend the outside closing date to December 31, 2022 and to
reduce the amount of parent closing cash required as a closing condition from $
On
November 10, 2022, the Company, Old Merger Sub, and Suneva entered into the Third Amendment to Old Merger Agreement (the
“Third Amendment”) that amended and modified the Old Merger Agreement to (i) fix the aggregate exercise price for all of
the in-the-money Suneva options and warrants at $
On February 2, 2023, legal counsel for Viveon sent a letter informing Suneva’s legal counsel that Viveon decided, effective immediately, to unilaterally terminate the Old Merger Agreement pursuant to Sections 10.2(a) and 10.3 thereof, based upon material breaches of the Old Merger Agreement by Suneva. The termination letter was sent without prejudice and reserved all of Viveon, Old Merger Sub and Viveon Health, LLC (Viveon’s sponsor) rights, claims and remedies, specifically including those within the Merger Agreement, against Suneva and others associated with Suneva who participated in the merger discussions and arrangements, and waived none.
Merger Agreement with Clearday
On April 5, 2023, the Company entered into a Merger Agreement (the “Merger Agreement”), by and among Viveon, Clearday, Inc., a Delaware corporation (“Clearday”), VHAC2 Merger Sub, Inc., a Delaware corporation (“New Merger Sub”), Viveon Health LLC, a Delaware limited liability Company, in the capacity as the representative from and after the effective time for the stockholders of the Company (other than the Company Stockholders (as defined in the Merger Agreement)) as of immediately prior to the effective time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement, and Clearday SR LLC, a Delaware limited liability company, in the capacity as the representative from and after the effective time for the holders of Company preferred stock as of immediately prior to the effective time (and their successors and assigns) in accordance with the terms and conditions of the Merger Agreement. Pursuant to the terms of the Merger Agreement, a business combination between the Company and Clearday will be effected through the merger of New Merger Sub with and into Clearday, with Clearday surviving the merger as a wholly owned subsidiary of the Company and the Company will change its name to “Clearday Holdings, Inc.” (the “Merger”). The board of directors of the Company has (i) approved and declared advisable the Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement, the Merger and related transactions by the stockholders of Company. Capitalized terms used herein but not defined shall have the meanings ascribed thereto in the Merger Agreement.
| F-10 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Consideration
Merger Consideration
The
total consideration to be paid at closing (the “Merger Consideration”) by the Company to Clearday security holders
(and holders who have the right to acquire Clearday capital stock) will be an amount equal to $
Earnout Payments
In addition, the holders of Clearday preferred stock will have the contingent right to earn up to shares of the Company’s common stock, in the aggregate (the “Earnout Shares”), if at any time during the period beginning on the date of the Closing (the “Closing Date”) and ending on the fifth anniversary of the Closing Date (the “Earnout Eligibility Period”), the Adjusted Net Income (as defined below) for any Earnout Period is a positive number for the first time during the Earnout Eligibility Period (the “Earnout Milestone”). Under the Merger Agreement, Adjusted Net Income means for any Earnout Period, the consolidated net income or loss for such period calculated in accordance with U.S. GAAP applied on a basis consistent with past practice, of (a) for periods prior to the Closing, the Company and its subsidiaries (the “Company Group”), and (b) for periods from and after the Closing, of us and our subsidiaries (including the Company Group), in each case before adjusting for the following to the extent deducted/added in calculating consolidated net income or loss: (1) interest expense/income; (2) income tax expense/tax credits; (3) depreciation and amortization; (4) transaction expenses; (5) extraordinary items; (6) any income or loss attributable to us that accrues in accordance with U.S. GAAP on or prior to the Closing Date; and (7) all gains or losses in connection with sales or dispositions of assets and investments not in the ordinary course of business.
If, following the Closing Date and prior to end of the Earnout Eligibility Period, there is a change of control, then, immediately prior to such change of control, all the Earnout Shares not yet earned shall be earned by the Clearday earnout holders and shall be released from escrow and delivered to the Clearday earnout holders, and the Clearday earnout holders shall be eligible to participate in such change of control transaction with respect to such Earnout Shares.
The Earnout Shares will be placed in escrow and will not be released from escrow until they are earned as a result of the occurrence of the Earnout Milestone or a change of control, if applicable. The Earnout Shares that are not earned on or before the expiration of the Earnout Eligibility Period shall be automatically forfeited and cancelled.
Treatment of Clearday Securities
Cancellation of Securities.
Each share of Clearday capital stock, if any, that is owned by the Company, New Merger Sub, Clearday, or any of their subsidiaries (as treasury stock or otherwise) immediately prior to the effective time of the Merger (the “Effective Time”), will automatically be cancelled and retired without any conversion or consideration.
Preferred Stock.
At
the Effective Time, each issued and outstanding share of Clearday’s Series F Cumulative Convertible Preferred Stock, par value
$per share (“Clearday Series F Preferred
Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares), will
be converted into the right to receive:
Each
issued and outstanding share of Clearday’s Series A Convertible Preferred Stock, par value $per share (“Clearday Series A Preferred
Stock”) (other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares), will
be converted into the right to receive:
| F-11 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Common Stock.
At
the Effective Time, each issued and outstanding share of Clearday’s common stock, par value $per share (“Clearday Common Stock”)
(other than any such shares of Clearday capital stock cancelled as described above and any dissenting shares) will be converted into
the right to receive a number of shares of the Company’s common stock equal to the conversion ratio. The “Conversion Ratio”
as defined in the Merger Agreement means an amount equal to (a)(i)
Merger Sub Securities.
Each share of common stock, par value $ per share, of New Merger Sub issued and outstanding immediately prior to the Effective Time will be converted into and become one newly issued share of common stock of the surviving corporation.
Stock Options.
At the Effective Time, each outstanding option to purchase shares of Clearday Common Stock will be converted into an option to purchase, subject to substantially the same terms and conditions as were applicable under such options prior to the Effective Time, shares of the Company’s common stock equal to the number of shares subject to such option prior to the effective time multiplied by the Conversion Ratio, at an exercise price per share of the Company’s common stock equal to the exercise price per share of Clearday Common Stock subject to such option divided by the Conversion Ratio.
Warrants.
Contingent on and effective as of immediately prior to the effective time, each outstanding warrant to purchase shares of Clearday Preferred Stock or Clearday Common Stock will be treated in accordance with the terms thereof.
Convertible Notes.
Contingent on and effective as of immediately prior to the Effective Time, Clearday’s convertible notes outstanding as of immediately prior to the effective time, will be treated in accordance with the terms of the relevant agreements governing such convertible notes.
Subsidiary Capital Stock.
At and as of the effective time, the subsidiary capital stock will remain in full force and effect with the right to acquire the Clearday Common Stock with such adjustments noted in the terms of such subsidiary capital stock.
| F-12 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Representations and Warranties
The Merger Agreement contains customary representations and warranties of the parties thereto with respect to, among other things, (a) corporate existence and power, (b) authorization to enter into the Merger Agreement and related transactions; subsidiaries, (c) governmental authorization, (d) non-contravention, (e) capitalization, (f) corporate records, (g) consents, (h) financial statements, (i) internal accounting controls, (j) absence of certain changes, (k) properties; title to assets, (l) litigation, (m) material contracts, (n) licenses and permits, (o) compliance with laws, (p) intellectual property, (q) privacy and data security, (r) employee matters and benefits, (s) tax matters, (t) real property, (u) environmental laws, (v) finders’ fees, (w) directors and officers, (x) anti-money laundering laws, (y) insurance, (z) related party transactions, and (aa) certain representations related to securities law and activity. The Company has additional representations and warranties, including (a) issuance of shares, (b) trust fund, (c) listing, (d) board approval, (e) SEC documents and financial statements, (f) certain business practices, (g) expenses, indebtedness and other liabilities and (h) brokers and other advisors.
Covenants
The Merger Agreement includes customary covenants of the parties with respect to operation of their respective businesses prior to consummation of the Merger and efforts to satisfy conditions to consummation of the Merger. The Merger Agreement also contains additional covenants of the parties, including, among others, access to information, cooperation in the preparation of the registration statement and proxy statement (as each such terms are defined in the Merger Agreement) required to be filed in connection with the Merger and to obtain all requisite approvals of each party’s respective stockholders. The Company and Clearday have each also agreed to include in the proxy statement the recommendation of its respective board that its stockholders approve all of the proposals to be presented at its respective special meeting. In addition, each of the Company and Clearday have agreed to use commercially reasonable efforts to solicit and finalize definitive documentation for a committed equity in an aggregate amount that, together with the funds in the Trust Account after giving effect to potential redemptions from the Company’s public stockholders, together with financing programs available to Clearday after the Closing, will provide to Clearday working capital to meet its short term commercial development goals.
The Company has also agreed to prepare a proxy statement to seek the approval of its stockholders (the “Extension Proposal”) to amend its organizational documents to extend the period of time the Company is afforded under its organizational documents and IPO prospectus to consummate an initial business combination for an additional three months, from June 30,2023 to September 30, 2023 (or such earlier date as the Company and Clearday may agree in writing).
Each party’s representations, warranties and pre-Closing covenants will not survive Closing and no party has any post-Closing indemnification obligations.
Viveon Equity Incentive Plan
The
Company has agreed to approve and adopt an equity incentive plan (the “Incentive Plan”) to be effective as of the
Closing and in a form mutually acceptable to the Company and Clearday, subject to approval of the Incentive Plan by the Company’s
stockholders. The Incentive Plan will provide for an initial aggregate share reserve equal to
Non-Solicitation Restrictions
Each of the Company and Clearday has agreed that from the date of the Merger Agreement to the effective time or, if earlier, the valid termination of the Merger Agreement in accordance with its terms, it will not initiate any negotiations with any party relating to an alternative transaction (as such term is defined in the Merger Agreement) or enter into any agreement relating to such a proposal, other than as expressly excluded from the definition of an alternative transaction. Each of the Company and Clearday has also agreed to be responsible for any acts or omissions of any of its respective representatives that, if they were the acts or omissions of the Company and Clearday, as applicable, would be deemed a breach of the party’s obligations with respect to these non-solicitation restrictions.
| F-13 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Conditions to Closing
The
consummation of the Merger is conditioned upon, among other things, (i) the absence of any applicable law or order restraining, prohibiting
or imposing any condition on the consummation of the Merger and related transactions, (ii) the expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iii) receipt of any consent, approval or authorization
required by any Authority (as defined in the Merger Agreement), (iv) the Company having net tangible assets of at least $
Solely with respect to the Company and New Merger Sub, the consummation of the Merger is conditioned upon, among other things, (i) Clearday having duly performed or complied with all of its obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of Clearday, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure would not have or reasonably be expected to have a material adverse effect (as defined in the Merger Agreement) on Clearday or any of its subsidiaries, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a material adverse effect on Clearday or any of its subsidiaries, (v) Clearday and its securityholders having executed and delivered to the Company each additional agreement (as defined in the Merger Agreement) to which they each are a party and (vi) Clearday delivering certain certificates to the Company.
Solely with respect to Clearday, the consummation of the Merger is conditioned upon, among other things, (i) Viveon and New Merger Sub having duly performed or complied with all of their respective obligations under the Merger Agreement in all material respects, (ii) the representations and warranties of the Company and Merger Sub, other than certain fundamental representations as defined in the Merger Agreement, being true and correct in all respects unless failure to be true and correct would not have or reasonably be expected to have a material adverse effect on the Company or New Merger Sub and their ability to consummate the Merger and related transactions, (iii) certain fundamental representations, as defined in the Merger Agreement, being true and correct in all respects, other than de minimis inaccuracies, (iv) no event having occurred that would result in a Material Adverse Effect on the Company or New Merger Sub, (v) the amended parent charter (as defined in the Merger Agreement) being filed with, and declared effective by, the Delaware Secretary of State, (vi) the Company delivering certain certificates to Clearday, (vii) the size and composition of the post-Closing board of directors of the Company having been appointed as set forth in the Merger Agreement and (viii) the Company, Viveon Health LLC and other stockholders, as applicable, having executed and delivered to Clearday each additional agreement to which they each are a party.
Termination
The Merger Agreement may be terminated at any time prior to the effective time as follows:
(i) by either the Company or Clearday, if (A) the Merger and related transactions are not consummated on or before the latest of (i) June 30, 2023, (ii) if the Extension Proposal is approved, September 30, 2023 and (iii) if one or more extensions to a date following September 30, 2023 are obtained at the election of the Company, with the Company’s stockholder vote, in accordance with the Company’s amended and restated certificate of incorporation, the last date for the Company to consummate a business combination pursuant to such extensions; and (B) the material breach or violation of any representation, warranty, covenant or obligation under the Merger Agreement by the party seeking to terminate the Merger Agreement was not the cause of, or resulted in, the failure of the closing to occur on or before the outside Closing Date, without liability to the other party;
| F-14 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(ii) by either the Company or Clearday, if any authority has issued any final decree, order, judgment, award, injunction, rule or consent or enacted any law, having the effect of permanently enjoining or prohibiting the consummation of the Merger, provided that, the party seeking to terminate cannot have breached its obligations under the Merger Agreement and such breach was a substantial cause of, or substantially resulted in, such action by the authority; and
(iii) by mutual written consent of the Company and Clearday duly authorized by each of their respective boards of directors.
The Merger Agreement and other agreements described below have been included to provide investors with information regarding their respective terms. They are not intended to provide any other factual information about the Company, Clearday or the other parties thereto. In particular, the assertions embodied in the representations and warranties in the Merger Agreement were made as of a specified date, are modified or qualified by information in one or more disclosure letters prepared in connection with the execution and delivery of the Merger Agreement, may be subject to a contractual standard of materiality different from what might be viewed as material to investors, or may have been used for the purpose of allocating risk between the parties. Accordingly, the representations and warranties in the Merger Agreement are not necessarily characterizations of the actual state of facts about the Company, Clearday or the other parties thereto at the time they were made or otherwise and should only be read in conjunction with the other information that the Company or Clearday makes publicly available in reports, statements and other documents filed with the SEC. The Company and Clearday investors and securityholders are not third-party beneficiaries under the Merger Agreement.
Certain Related Agreements
Parent Support Agreements.
Concurrently with the execution of the Merger Agreement, the Company, Clearday and the Sponsor and the officers and directors of the Company entered into a support agreement (the “Parent Support Agreement”) pursuant to which the Sponsor and the officers and directors of the Company have agreed to vote all shares of the Company’s common stock beneficially owned by them, including any additional shares of the Company they acquire ownership of or the power to vote: (i) in favor of the Merger and related transactions, (ii) against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions, and (iii) in favor of an extension of the period of time the Company is afforded to consummate an initial business combination.
Company Support Agreements.
Concurrently with the execution of the Merger Agreement, the Company, Clearday and certain stockholders of Clearday entered into a support agreement (the “Company Support Agreement”), pursuant to which such Clearday stockholders have agreed to vote all common and preferred stock of Clearday beneficially owned by them, including any additional shares of Clearday they acquire ownership of or the power to vote, in favor of the Merger and related transactions and against any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions.
Lock-Up Agreements.
In connection with the closing, certain Clearday stockholders will each agree, subject to certain customary exceptions, not to (i) offer, sell contract to sell, pledge or otherwise dispose of, directly or indirectly, any lockup shares, (ii) enter into a transaction that would have the same effect, (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of the lock-up shares or otherwise, (iv) engage in any short sales or other arrangement with respect to the lock-up shares or (v) publicly announce any intention to effect any transaction specified in clause (i), (ii) or (iii) until the date that is six months after the Closing Date (the “Lock-Up Period”). The term “Lockup Shares” mean the Merger Consideration Shares and the Earnout Shares, if any, whether or not earned prior to the end of the Lock-up Period, together with any other shares of the Company’s common stock, and including any securities convertible into, or exchangeable for, or representing the rights to receive the Company’s common stock, if any, acquired during the Lock-up Period. If the closing price of the Company’s common stock equals or exceeds $per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period following the Closing Date, % of the Lock-up Shares will be released from the lock-up. The existing escrow provisions of the Company’s common stock held by certain stockholders will remain in effect.
| F-15 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Amended and Restated Registration Rights Agreement.
At the Closing, the Company will enter into an amended and restated registration rights agreement (the “Amended and Restated Registration Rights Agreement”) with certain existing stockholders of the Company and Clearday with respect to their shares of the Company’s common stock acquired before or pursuant to the Merger, and including the shares issuable on conversion of the warrants issued to the Sponsor in connection with the Company’s initial public offering and any shares issuable on conversion of loans or other convertible securities. The agreement amends and restates the registration rights agreement the Company entered into on December 22, 2020 in connection with its initial public offering. Subject to the Lock-Up Agreements described above, the holders of a majority of the shares held by the Company’s existing stockholders, and the holders of a majority of the shares held by the Clearday stockholders will each be entitled to make one demand that Clearday register such securities for resale under the Securities Act, or two demands each if the Company is eligible to use Form S-3 or a similar short-form registration statement. In addition, the holders will have certain “piggy-back” registration rights that require the Company to include such securities in registration statements that the Company otherwise files. 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.
Going Concern
As
of December 31, 2022, the Company had $
Risks & Uncertainties
Management continues to evaluate the impact of the COVID-19 pandemic on the industry 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 prospective partner company, the specific impact is not readily determinable as of the date of these consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia. The conflict is expected to have further global economic consequences, including but not limited to the possibility of severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and uncertainty about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and businesses. Any of the foregoing consequences, including those we cannot yet predict, may cause our business, financial condition, results of operations and the price of our common stock to be adversely affected.
| F-16 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Inflation Reduction Act of 2022 and Excise Tax
On
August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022, which, among other things, imposes a
NOTE 2. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS
In
connection with the preparation of the March 10-Q, management identified that the total legal fees owed to the Company’s
primary law firm were incorrect as of and for the year ended December 31, 2022. This inaccurate information resulted in an
overstatement of $
In addition to the
above overstatement of legal fees, management determined that there was an understatement of accrued fees relating to the agreement
with the Consultant that is the subject of a dispute (see Note 8). On October 25, 2021, the Company entered into an agreement with
the Consultant for investor relations and public relations services in connection with a Business Combination with Suneva. The
Consulting Agreement specifically identified Suneva as the target of the Business Combination. Pursuant to the agreement, the
Consultant would be paid a fee of $
The following tables summarize the effect of the restatement on each financial statement line item as of the date, and for the periods indicated.
| March 31, 2022 | ||||||||||||
| Previously Reported | Adjustments | As Restated | ||||||||||
| Condensed Consolidated Balance Sheet as of March 31, 2022 | ||||||||||||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| Total current liabilities | $ | $ | $ | |||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Operations for the Three Months Ended March 31, 2022 | ||||||||||||
| Professional fees | $ | $ | $ | |||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at March 31, 2022 - Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at March 31, 2022 - Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Cash Flows for the Three Months Ended March 31, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| F-17 |
| June 30, 2022 | ||||||||||||
| Previously Reported | Adjustments | As Restated | ||||||||||
| Condensed Consolidated Balance Sheet as of June 30, 2022 | ||||||||||||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| Total current liabilities | $ | $ | $ | |||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 2022 | ||||||||||||
| Professional fees | $ | $ | $ | |||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net income (loss) | $ | $ | ( | ) | $ | |||||||
| Basic and diluted net income per common share | $ | $ | ) | $ | ||||||||
| Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 2022 | ||||||||||||
| Professional fees | $ | $ | $ | |||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | ||||||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at March 31, 2022 - Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at March 31, 2022 - Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended June 30, 2022 | ||||||||||||
| Net income | $ | $ | ( | ) | $ | |||||||
| Balance at June 30, 2022 - Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at June 30, 2022 - Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| September 30, 2022 | ||||||||||||
| Previously Reported | Adjustments | As Restated | ||||||||||
| Condensed Consolidated Balance Sheet as of September 30, 2022 | ||||||||||||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| Total current liabilities | $ | $ | $ | |||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Operations for the Three Months Ended September 30, 2022 | ||||||||||||
| Professional fees | $ | $ | $ | |||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | ||||||
| Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2022 | ||||||||||||
| Professional fees | $ | $ | $ | |||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | ||||||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended March 31, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at March 31, 2022 – Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at March 31, 2022 – Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended June 30, 2022 | ||||||||||||
| Net income | $ | $ | ( | ) | $ | |||||||
| Balance at June 30, 2022 - Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at June 30, 2022 - Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Three Months Ended September 30, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at September 30, 2022 – Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at September 30, 2022 – Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Cash Flows for the Nine Months Ended September 30, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| F-18 |
| December 31, 2022 | ||||||||||||
| Previously Reported | Adjustments | As Restated | ||||||||||
| Condensed Consolidated Balance Sheet as of December 31, 2022 | ||||||||||||
| Accrued costs and expenses | $ | $ | $ | |||||||||
| Total current liabilities | $ | $ | $ | |||||||||
| Total liabilities | $ | $ | $ | |||||||||
| Accumulated deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Total stockholders’ deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Operations for the Year Ended December 31, 2022 | ||||||||||||
| Professional fees | $ | $ | $ | |||||||||
| Loss from operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Loss before income taxes | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Basic and diluted net loss per common share | $ | ) | $ | ) | $ | ) | ||||||
| Condensed Consolidated Statement of Changes in Shareholders’ Deficit for the Year Ended December 31, 2022 | ||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at December 31, 2022 – Accumulated Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Balance at December 31, 2022 – Total Stockholders’ Deficit | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Condensed Consolidated Statement of Cash Flows for the Year Ended December 31, 2022 | ||||||||||||
| Net (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Accrued costs and expenses | $ | $ | $ | |||||||||
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of the Company are presented in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”).
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its majority-owned and controlled operating subsidiary, Old Merger Sub after elimination of all intercompany transactions and balances as of December 31, 2022 and 2021.
Emerging Growth Company
The Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart 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 auditor 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 non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. The Company has elected to implement the aforementioned exemptions.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
| F-19 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. 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 consolidated financial statements and the reported amounts of expenses during the reporting period.
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 consolidated 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 from those estimates. The initial valuation of the Public Warrants (as defined in Note 4), Rights (as defined in Note 4) common stock subject to redemption and the periodic valuation of the Private Warrants and Subscription Warrants (as defined in Note 5) required management to exercise significant judgement in its 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 cash equivalents in the amount of $
Investments Held in Trust Account
As
of December 31, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in a money
market account and mutual funds which invested in U.S. Treasury securities, respectively. The assets were transferred from mutual
funds to a money market account on December 21, 2022. The assets in the amount of $
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 Topic 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 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.
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 recorded as a warrant liability. In accordance with guidance contained in ASC 815, the Public Warrants (as defined in Note 4) qualify for equity treatment. The Private Warrants and Subscription Warrants (as defined in Note 7) do not qualify as equity and are recorded as liabilities at fair value. Changes in the estimated fair value of the Private Warrants and Subscription Warrants are recognized as non-cash gains or losses on the consolidated statements of operations.
Debt with Conversion and Other Options
The Company accounts for a series of unsecured senior promissory note agreements under ASC Topic ASC 470-20-25-2, Debt with Conversion and Other Options - Debt Instruments with Detachable Warrants (“ASC 470-20-25-2”). In accordance with ASC 470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants (detachable call options) are allocated to the two elements based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance.
| F-20 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
All of the Public Shares sold as part of the Units in the Initial Public Offering and subsequent full exercise of the underwriters’ over-allotment option that have not been redeemed by stockholders, contain a redemption feature which allows for the redemption of such redeemable common stock in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection with the Business Combination and in connection with certain amendments to the Amended and Restated Certificate of Incorporation. In accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent equity. Therefore, all Public Shares been classified outside of permanent equity.
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. There was no change in redemption
value for the year ended December 31, 2021. In connection with extending the Company’s Original Termination Date to the
Extended Date, the Company deposited $
In connection to the Company’s Third Extended Date, On June 27, 2023, the
Company deposited the payment of $
As of December 31, 2022 and December 31, 2021, the redeemable common stock reflected in the consolidated balance sheets are reconciled in the following table:
| Gross proceeds | $ | |||
| Less: | ||||
| Fair value of Public Warrants at issuance | ( | ) | ||
| Fair value of Rights at issuance | ( | ) | ||
| Issuance costs allocated to common stock subject to possible redemption | ( | ) | ||
| Plus: | ||||
| Remeasurement of carrying value to redemption value | ||||
| Common stock subject to possible redemption as of December 31, 2021 | ||||
| Redemption of common stock by stockholders | ( | ) | ||
| Common stock tendered for redemption | ( | ) | ||
| Remeasurement of carrying value to redemption value | ||||
| Common stock subject to possible redemption as of December 31, 2022 | $ |
Offering Costs associated with the Initial Public Offering
The
Company complies with the requirements of ASC Topic 340, Other Assets and Deferred Costs (“ASC 340”) and SEC Staff
Accounting Bulletin Topic 5A - Expenses of Offering. Offering costs consist principally of professional and registration fees
incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to the
issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts
that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $
| F-21 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company accounts for stock awards in accordance with ASC Topic 718, Compensation - Stock Compensation (“ASC 718”), which requires that all equity awards be accounted for at their fair value. Fair value is measured on the grant date and is equal to the underlying value of the stock.
Costs equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to vest, or in the period of grant for awards that vest immediately and have no future service condition. For awards that vest over time, cumulative adjustments in later periods are recorded to the extent actual forfeitures differ from the Company’s initial estimates; previously recognized compensation cost is reversed if the service or performance conditions are not satisfied and the award is forfeited.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, Income Taxes (“ASC 740”). Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the consolidated financial statements carrying amounts 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 of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
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. There were unrecognized tax benefits as of December 31, 2022 and 2021 of
$
See Note 12 for additional information on income taxes for the periods presented.
Net
(loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding
for the period. The calculation of diluted (loss) income per common share does not consider the effect of the Public Warrants (as defined
in Note 4), Private Warrants, Subscription Warrants (as defined in Note 7), and Rights (as defined in Note 4) since the exercise of the
warrants and Rights are contingent upon the occurrence of future events and the inclusion of such warrants and Rights would be anti-dilutive.
The warrants and Rights are exercisable to purchase
| F-22 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Year ended December 31, 2022 | For the Year ended December 31, 2021 | |||||||||||||||
| Redeemable Common Stock | Non-redeemable Common Stock | Redeemable Common Stock | Non-redeemable Common Stock | |||||||||||||
| Basic and diluted net (loss) income per share: | ||||||||||||||||
| Numerator: | ||||||||||||||||
| Net (loss) income | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||
| Denominator: | ||||||||||||||||
| Weighted Average Common Stock | ||||||||||||||||
| Basic and diluted net (loss) income per common share | $ | ) | $ | ) | $ | $ | ||||||||||
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 of $
Fair Value of Financial Instruments
The Company applies ASC Topic 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 carrying amounts reflected in the consolidated balance sheets for current assets and current liabilities approximate fair value due to their short-term nature.
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.
See Note 11 for additional information on assets and liabilities measured at fair value.
| F-23 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC 815. The Company’s derivative instruments are recorded at fair value and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. Derivative assets and liabilities are classified on the consolidated balance sheets as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the Private Warrants and Subscription Warrants (as defined in Note 7) are derivative instruments. As the Private Warrants and Subscription Warrants meet the definition of a derivative the warrants are measured at fair value at issuance and at each reporting date in accordance with ASC 820 with changes in fair value recognized in the consolidated statements of operations in the period of change. In accordance with ASC Topic 825, Financial Instruments, the Company has concluded that a portion of the transaction costs which directly related to the Initial Public Offering and the Private Placement, should be allocated to the Private Warrants based on their relative fair value against total proceeds, and recognized as transaction costs in the consolidated statements of operations.
Recent Accounting Standards
The Company’s 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 consolidated financial statements.
NOTE 4. INITIAL PUBLIC OFFERING
On
December 28, 2020, the Company sold Units, at a purchase price of $ per Unit. Each Unit consists of one share of common
stock, par value $ per share, one redeemable warrant (the “Public Warrants”) and one right (the “Rights”).
Each Public Warrant entitles the holder thereof to purchase one-half (1/2) of a share of common stock at a price of $
On
December 30, 2020, the Company sold Over-Allotment Units pursuant to the underwriters’ full exercise of the over-allotment
option (see Note 8), generating aggregate of gross proceeds of $
NOTE 5. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of
NOTE 6. RELATED PARTY TRANSACTIONS
Founder Shares
In August 2020, the Sponsor paid $, or approximately $ per share, to cover certain offering costs in consideration for shares of common stock, par value $ (the “Founder Shares”). On December 3, 2020, the Company declared a share dividend of for each outstanding share, resulting in shares outstanding, and on December 22, 2020 the Company declared a share dividend of resulting in shares which includes an aggregate of up to shares that are subject to forfeiture to the extent that the underwriters’ over-allotment option is not exercised in full or in part, and up to an aggregate of shares of common stock (or shares of common stock to the extent that the underwriters’ over-allotment is not exercised, pro rata) that are subject to forfeiture to the extent that Rights are exercised upon consummation of an initial Business Combination. In connection with the underwriters’ fully exercise of their over-allotment option on December 30, 2020 (see Note 8), the shares were no longer subject to forfeiture.
| F-24 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Founder Shares were placed into an escrow account maintained by Continental Stock Transfer & Trust Company acting as escrow agent.
During the escrow period, the holders of these shares will not be able to sell or transfer their securities except (1) to any persons (including their affiliates and stockholders) participating in the Private Placement of the Private Warrants, officers, directors, stockholders, employees and members of the Company’s Sponsor and its affiliates, (2) amongst initial stockholders or their respective affiliates, or to the Company’s officers, directors, advisors and employees, (3) if a holder is an entity, as a distribution to its, partners, stockholders or members upon its liquidation, (4) by bona fide gift to a member of the holder’s immediate family or to a trust, the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes, (5) by virtue of the laws of descent and distribution upon death, (6) pursuant to a qualified domestic relations order, (7) by certain pledges to secure obligations incurred in connection with purchases of the Company’s securities, (8) by private sales at prices no greater than the price at which the shares were originally purchased or (9) for the cancellation of up to shares of common stock subject to forfeiture to the extent that the underwriters’ over-allotment is not exercised in full or in part or in connection with the consummation of the Company’s initial Business Combination.
On December 23, 2020, the Sponsor transferred of its Founder Shares of the Company to three board members (the “Transferees”) ( Founder Shares to each Transferee) for a nominal fee. On April 30, 2021, the Sponsor subsequently transferred of its Founder Shares of the Company to a new board member (the “Additional Transferee”, and, together with the Transferees, the “Directors”). These awards are subject to ASC 718.
Under
ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founder
Shares vested immediately, and, as such, in accordance with ASC 718, the Company recognized compensation expense on the transfer date
in an amount equal to the number of Founders Shares sold times the grant date fair value per share less the amount initially received
for the purchase of the Founders Shares. The fair value of the Founder Shares transferred to the Additional Transferee was determined
to be $
| F-25 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note Agreements Payable - Related Party
We entered into a series of Note Agreements with several lenders affiliated with our Sponsor, Viveon Health LLC and
Intuitus Group LLC, for which the Chief Financial Officer of the Company is the Sole Proprietor for up to an aggregate amount totaling
$
Promissory Notes - Related Party
The
Sponsor agreed to loan the Company an aggregate of up to $
The Chief Financial Officer of the Company loaned the Company $
As
of December 31, 2022, and December 31, 2021, the outstanding balance of the loan was $
The Chief Executive Officer of the Company loaned the Company $
Subsequent
to December 31, 2022, three investors in the Sponsor, loaned the Company $
On May 12, 2023, the Company entered into an unsecured promissory note with Clearday (the “Clearday Note”). The Clearday Note is non-interest bearing mature upon the earlier of (i) the first anniversary of the issuance date and (ii) December 31, 2022. Proceeds provided to us under the Clearday Note through the filing date were approximately $881,710 during fiscal year 2023.Funds in the Trust Account may not be used to repay the obligations under the Clearday Note. We used such funds for general working capital purposes.
Working Capital Loans
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, loan the Company funds as may be required (“Working Capital Loans”). Each loan would be evidenced by a promissory note. The notes would be repaid upon consummation of the Company’s initial Business Combination, without interest. As of December 31, 2022 and December 31, 2021, the Company had no borrowings under Working Capital Loans.
Administrative Service Fee
Commencing
on the date of the Company’s final prospectus, the Company has agreed to pay an affiliate of the Sponsor a total of $
Due to Related Party
The
Company’s directors and officers are reimbursed for any reasonable out-of-pocket expenses incurred by them in connection with
certain activities on behalf of the Company, such as identifying and investigating possible target businesses and Business
Combinations. For the years ended December 31, 2022 and 2021, $
Due from Related Party
As of December 31, 2021, the Company had a receivable of
$
| F-26 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. NOTE AGREEMENTS PAYABLE
Pursuant
to the terms of the Note Agreements, the subscribers shall receive warrants to purchase one share of Company common stock for every $of the funded principal amount of the Notes up
to
In
accordance with ASC 470-20-25-2, Debt with Conversion and Other Options - Debt Instruments with Detachable Warrants, the proceeds
from the issuance of the Notes were allocated to the Notes and Subscription Warrants using the with-and-without method. Under this method,
the Company first allocated the proceeds from the issuance of the Notes to the Subscription Warrants based on their initial fair value
measurement of $
The
Company complies with ASC Topic 835, Interest (“ASC 835”). In accordance with ASC 835-30, discounts to the principal
amounts are included in the carrying value of the Notes and amortized to “Interest expense” over the remaining term of the
underlying debt to the Original Maturity Date. During the year ended December 31, 2022, the Company recorded a $
| F-27 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the Notes as of December 31, 2022:
| Note | $ | |||
| Debt discount | $ | |||
| Carrying value of notes | $ |
NOTE 8. COMMITMENTS AND CONTINGENCIES (AS RESTATED)
Underwriting Agreement
The Company granted the underwriter a 45-day option to purchase up to additional shares of common stock to cover over-allotments at the Initial Public Offering price, less the underwriting discounts and commissions. The underwriters exercised the over-allotment option in full on December 28, 2020.
The
underwriter was paid a cash underwriting fee of $ per share, or $
In addition, subject to certain conditions, the Company granted the underwriters of the Initial Public Offering, for a period of 12 months after the date of the consummation of a Business Combination, a right of first refusal to act as book-running managing underwriter or placement agent, with at least 30% of the economics, for any and all future public and private equity, convertible and debt offerings. In accordance with FINRA Rule 5110(f)(2)(E)(i), such right of first refusal shall not have a duration of more than three years from the effective date of the registration statement related to our initial public offering. Subsequently this agreement was voided.
Registration Rights
The holders of the Company’s Founder Shares issued and outstanding on the date of this prospectus, as well as the holders of the Private Warrants (and underlying securities) will be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of this offering. The holders of a majority of these securities are entitled to make up to two demands that the Company registers such securities. The holders of the majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities) can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
Vendor Agreements
On
May 18, 2021, the Company entered into an agreement with a transactional and strategic advisory firm (the “Strategic Advisor”)
for advisory services as needed by the Company in connection with a Business Combination. Pursuant to this agreement, the Company incurred
approximately $
On
October, 8, 2021, the Company entered into an agreement with a financial advisor (the “Exclusive Financial Advisor”) for
financial advisory services such as financial and transaction feasibility analysis, assistance in negotiations, assistance in capital
planning, and other customary services in connection with a Business Combination, pursuant to which the Company will pay the Exclusive
Financial Advisor a fee of $
In addition to the above overstatement of legal fees,
management determined that there was an understatement of accrued fees relating to the agreement with the Consultant that is the subject
of the below-mentioned dispute. On October 25, 2021, the Company entered into an agreement with the Consultant for investor relations
and public relations services in connection with a Business Combination with Suneva. The Consulting Agreement specifically identified
Suneva as the target of the Business Combination. Pursuant to the agreement, the Consultant would be paid a fee of $
On October 5, 2023, a legal complaint was filed in Connecticut Superior Court against the Company and Suneva by the Consultant. The Complaint alleges that the Company and Suneva owe the Consultant unpaid fees under an October 25, 2021 consulting agreement and asserts claims for breach of contract, breach of implied contract, unjust enrichment, and quantum meruit. As of the date of this filing, this action is not pending and has not been officially docketed with the Connecticut Superior Court. The Company is continuing to assess the merits of the complaint but believes that the claims by the Consultant against the Company are without merit and the Company intends to defend the action if it is properly initiated.
| F-28 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
November 1, 2021, the Company entered into an agreement with a financial advisor (the “Second Financial Advisor”) for financial
advisory services such as guidance on valuation and transaction structure and terms, assistance in negotiations, coordination of due
diligence, documentation, and transaction closing, and introduction of the Company to institutional investors in connection with a Business
Combination, pursuant to which the Company will pay the Second Financial Advisor a fee of $
On
November 2, 2021, the Company entered into an agreement with a financial advisor (the “Third Financial Advisor”) for
financial advisory services such as market related advice and assistance in connection with a Business Combination, pursuant to
which the Company will pay the Third Financial Advisor a fee of $
On
November 5, 2021, the Company entered into an agreement with an advisor (the “Advisor”) for services such as assistance in
refining strategic objectives, preparation or refinement of solicitation materials, identification, contact, and solicitation of or potential
investors and other sources of capital, and assistance in review, selection, negotiation, and closing of a transaction in connection
with a Business Combination, pursuant to which the Company will pay the Advisor a fee of $
On
February 17, 2022, the Company entered into an agreement with a broker-dealer (the “Broker-Dealer”) for services such as
providing the Company with capital markets advisory services with regard to a forward purchase agreement, convertible private
investment in public equity (“PIPE”), secured credit facility, and any other capital structure topics in connection with
a Business Combination, pursuant to which the Company will pay the Broker-Dealer a fee of $
Extension
On March 18, 2022, the Company held its 2022 Annual Meeting of Stockholders for the purpose of approving: (i) a proposal to approve an amendment to the Company’s Amended and Restated Certificate of Incorporation to (i) extend the date by which the Company has to consummate a Business Combination for three months, from March 28, 2022 (the “Original Termination Date”) to June 28, 2022 (the “Extended Date”), and (ii) allow the Company, without another stockholder vote, to elect to extend the date to consummate a Business Combination on a monthly basis for up to six times by an additional one month each time after the Extended Date, upon five days’ advance notice prior to the applicable deadline, for a total of up to nine months after the Original Termination Date, unless the closing of the proposed Business Combination with Suneva Medical, Inc. or any potential alternative initial Business Combination shall have occurred (the “Extension Proposal”); (ii) a proposal to re-elect five current directors to the Company’s Board of Directors (the “Director Election Proposal”); and (iii) a proposal to ratify the appointment of Marcum LLP as the Company’s independent registered certified public accountants for fiscal year 2020 (the “Auditor Ratification Proposal”). Stockholders voted to approve the Extension Proposal, Director Election Proposal and Auditor Ratification Proposal.
| F-29 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On
March 18, 2022, stockholders elected to redeem shares of the Company’s common stock, resulting in redemption payments
out of the Trust Account totaling approximately $
On March 21, 2022, March 23, 2022, April 4, 2022, April 27, 2022, May 9, 2022, October 27, 2022, and November 25, 2022, the Company entered into the Note Agreements (see Note 7). The Note Agreements included Subscription Warrants (see Note 10). The entry into the Note Agreements and the terms of the Notes and Subscription Warrants was approved by the Audit Committee of the Board of Directors of the Company at a meeting held on March 21, 2022.
On
March 23, 2022, the Company filed an amendment to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of
State (the “Amendment”) The Amendment (i) extends the date by which the Company has to consummate a Business Combination
for three months, from the Original Termination Date to the Extended Date and (ii) allows the Company, without another stockholder vote,
to elect to extend the date to consummate a Business Combination on a monthly basis for up to six times by an additional one month each
time after the Extended Date, upon five days’ advance notice and the deposit of $
On
December 23, 2022, the Company held its 2022 Annual Meeting of the Stockholders in which they voted to extend the date to consummate
a business combination on a monthly basis for up to six times by an additional one month each time for a total of up to six months from
December 28, 2022 until June 30, 2023, upon three calendar days’ advance notice and the deposit of $
On
December 23, 2022, stockholders elected to redeem
Public Shares, resulting in a redemption payable as of December 31, 2022 of $
On June 22, 2023, the Company held a stockholder meeting (the “June 2023 Stockholders Meeting”) in which
stockholders voted to (A) amend the Company’s Amended and Restated Certificate of Incorporation, to allow the Company to (i)
initially extend the date by which the Company must consummate an initial business combination up to six times, each such extension for
an additional one month period, until December 31, 2023, by depositing into the Trust Account, the amount of $
NOTE 9. STOCKHOLDERS’ DEFICIT
Preferred stock — The Company is authorized to issue shares of preferred stock with a par value of $ and with such designations, voting and other rights and preferences as may be determined from time to time by the Company’s board of directors. As of December 31, 2022 and December 31, 2021, there was preferred stock issued or outstanding.
Common
stock — The Company is authorized to issue shares of common stock with a par value of $ per share.
Rights — Except in cases where the Company is not the surviving company in a Business Combination, each holder of a Right will automatically receive one-twentieth (1/20) of a share of common stock upon consummation of the initial Business Combination. In the event the Company will not be the surviving company upon completion of the initial Business Combination, each holder of a Right will be required to affirmatively convert his, her or its rights in order to receive the one-twentieth (1/20) of a share underlying each right upon consummation of the Business Combination. The Company will not issue fractional shares in connection with an exchange of Rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law. As a result, holders must hold Rights in multiples of 20 in order to receive shares for all Rights upon closing of a Business Combination. If the Company is unable to complete an initial Business Combination within the required time period and the Company redeems the Public Shares for the funds held in the Trust Account, holders of Rights will not receive any of such funds for their Rights and the Rights will expire worthless.
| F-30 |
NOTE 10. WARRANTS
Each
Public Warrant entitles the holder thereof to purchase one-half (1/2) of a share of common stock at a price of $
The Company may call the Public Warrants for redemption (except the Private Warrants):
| ● | in whole and not in part; | |
| ● | at a price of $ | |
| ● | upon not less than 30 days’ prior written notice of redemption (the “30-day redemption period”) to each warrant holder; and | |
| ● | if and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
If the Company calls the Public Warrants for redemption as described above, its management will have the option to require all holders that wish to exercise Public Warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of the Company’s common stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants. Whether the Company will exercise its option to require all holders to exercise their Public Warrants on a “cashless basis” will depend on a variety of factors including the price of our common shares at the time the Public Warrants are called for redemption, its cash needs at such time and concerns regarding dilutive share issuances.
| F-31 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Private Warrants
The Private Warrants are identical to the Public Warrants except that the Private Warrants will be non-redeemable and may be exercised on a cashless basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees.
Subscription Warrants
The Subscription Warrant term commences on the Exercise Date (as hereinafter defined) for a period of 49 months. The Subscription Warrants are exercisable commencing on the date of the initial Business Combination (the “Exercise Date”) and have a cashless exercise feature that is available at any time on or after the Exercise Date. Commencing on the date 13 months following the Exercise Date, the subscribers have the right, but not the obligation, to put the Subscription Warrants to the Company at a purchase price of $ per share. The Company has agreed to file, within thirty (30) calendar days after the consummation of an initial Business Combination, a registration statement with the Securities and Exchange Commission to register for resale the shares of common stock underlying the Subscription Warrants.
As
of December 31, 2022 and December 31, 2021, there were
NOTE 11. FAIR VALUE MEASUREMENTS
The following tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2022 and December 31, 2021, and indicate the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
| Description | Amount at Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| December 31, 2022 | ||||||||||||||||
| Assets | ||||||||||||||||
| Money Market Account | $ | $ | $ | $ | ||||||||||||
| Money Market Funds held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Private Warrant Liability | $ | $ | $ | $ | ||||||||||||
| Subscription Warrant Liability | $ | $ | $ | $ | ||||||||||||
| December 31, 2021 | ||||||||||||||||
| Assets | ||||||||||||||||
| Money Market Account | $ | $ | $ | $ | ||||||||||||
| Mutual Funds held in Trust Account | $ | $ | $ | $ | ||||||||||||
| Liabilities | ||||||||||||||||
| Private Warrant Liability | $ | $ | $ | $ | ||||||||||||
The Private Warrants and Subscription Warrants are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the consolidated balance sheets. The warrant liabilities were 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 consolidated statements of operations.
The Company established the initial fair value of the Private Warrants on December 28, 2020, the date of the Company’s Initial Public Offering, and revalued on December 31, 2022 and on December 31, 2021, using a Monte Carlo simulation model. The Warrants were classified as Level 3 at the initial measurement date, on December 31, 2022 and on December 31, 2021 due to the use of unobservable inputs.
The key inputs into the Monte Carlo simulation for the Private Warrants as of December 31, 2022 and December 31, 2021 were as follows:
| Inputs | As of December 31, 2022 | As of December 31, 2021 | ||||||
| Risk-free interest rate | % | % | ||||||
| Expected term remaining (years)1 | ||||||||
| Expected volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
The Company established the initial fair value of the Subscription Warrants on March 21, 2022, March 23, 2022, April 4, 2022, April 27, 2022, May 9,2022, October 27,2022, and November 25,2022 the dates of issuance, and revalued on December 31, 2022, using a Monte Carlo simulation model. The Warrants were classified as Level 3 at the initial measurement dates, and on December 31, 2022 due to the use of unobservable inputs.
1 The
contractual term of the Private Warrants is from the closing of a Business Combination. As of December 31, 2022 the expected
term remaining of the Private Warrants was calculated based on assumptions for both a successful and unsuccessful Business
Combination resulting in a weighted expected term remaining of . This was calculated using an expected term remaining with an
unsuccessful Business Combination of year (weighted at
| F-32 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The key inputs into the Monte Carlo simulation for the Subscription Warrants as of December 31, 2022 and the issuance dates were as follows:
| Inputs | As of December 31, 2022 | As of November 25, 2022 (Initial Measurement) | As of October 27, 2022 (Initial Measurement) | As of May 9, 2022 (Initial Measurement) | As of April 27, 2022 (Initial Measurement) | As of April 4, 2022 (Initial Measurement) | As of March 23, 2022 (Initial Measurement) | As of March 21, 2022 (Initial Measurement) | ||||||||||||||||||||||||
| Risk-free interest rate | | % | | % | | % | | % | | % | | % | | % | | % | ||||||||||||||||
| Market debt rate1 | % | % | % | % | % | % | N/A | N/A | ||||||||||||||||||||||||
| Expected term remaining (years) | ||||||||||||||||||||||||||||||||
| Expected volatility | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||
| Probability of completing a Business Combination | % | % | % | % | % | % | % | % | ||||||||||||||||||||||||
| Stock price | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| 1 |
The following tables presents the changes in the fair value of the Company’s Level 3 financial instruments that are measured at fair value:
| Fair value as of December 31, 2020 | $ | |||
| Change in fair value | ( | ) | ||
| Fair value as of December 31, 2021 | $ |
| Fair value as of December 31, 2021 | $ | |||
| Fair value of Subscription Warrants at issuance on March 21, 2022 | ||||
| Fair value of Subscription Warrants at issuance on March 23, 2022 | ||||
| Fair value of Subscription Warrants at issuance on April 4, 2022 | ||||
| Fair value of Subscription Warrants at issuance on April 27, 2022 | ||||
| Fair value of Subscription Warrants at issuance on May 9, 2022 | ||||
| Fair value of Subscription Warrants at issuance on October 27, 2022 | ||||
| Fair value of Subscription Warrants at issuance on November 25, 2022 | ||||
| Change in fair value | ( | ) | ||
| Fair value as of December 31, 2022 | $ |
| F-33 |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The
Company recognized a loss in connection with changes in the fair value of the Private and Subscription Warrants of $
NOTE 12. INCOME TAXES (Restated)
The Company’s net deferred tax assets (liabilities) as of December 31, 2022 and December 31, 2021 are as follows:
| December 31, 2022 | December 31, 2021 | |||||||
| Deferred tax assets: | ||||||||
| Start-up costs | $ | $ | ||||||
| Accrued interest | ||||||||
| Transaction costs | ||||||||
| Net operating loss carryforwards | ||||||||
| Total deferred tax assets | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| Deferred tax assets, net of allowance | $ | $ | ||||||
The income tax provision for the year ended December 31, 2022 and December 31, 2021 consist of the following:
| December 31, 2022 | December 31, 2021 | |||||||
| Federal | ||||||||
| Current | $ | $ | ||||||
| Deferred | ( | ) | ( | ) | ||||
| State | ||||||||
| Current | $ | $ | ||||||
| Deferred | ||||||||
| Change in valuation allowance | ||||||||
| Income tax provision | $ | $ | ||||||
As
of December 31, 2022 and 2021, the Company has available U.S. federal operating loss carry forwards of approximately $
In assessing the realization of deferred tax
assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After
consideration of all the information available, management believes that significant uncertainty exists with respect to future
realization of the deferred tax assets and has therefore established a partial valuation allowance. For the year ended December 31,
2022 and December 31, 2021, the valuation allowance was $
A reconciliation of the federal income tax rate to the Company’s effective tax rate as of December 31, 2022 and December 31, 2021 are as follows:
December 31, 2022 (As Restated) | December 31, 2021 | |||||||
| Statutory federal income tax rate | % | % | ||||||
| State taxes, net of federal tax benefit | % | % | ||||||
| Change in fair value of derivative warrant liabilities | % | ( | )% | |||||
| Non-deductible transaction costs | ( | )% | % | |||||
| Stock compensation expense | % | % | ||||||
| Other permanent items, net | ( | )% | % | |||||
| Warrant issuance costs | ( | )% | % | |||||
| Change in valuation allowance | ( | )% | % | |||||
| Income tax provision | ( | )% | % | |||||
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. There were unrecognized tax benefits as of December 31, 2022 and December 31, 2021
of $
Below is a tabular reconciliation of the total amount of unrecognized tax benefits as of the years:
| Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Uncertain tax benefits - January 1 | $ | $ | ||||||
| Gross increases - Tax positions in prior period | ||||||||
| Uncertain tax benefits - December 31 | $ | $ | ||||||
The Company files income tax returns in the U.S. federal jurisdiction and Georgia. Tax returns since inception remain open and subject to examination.
NOTE 13. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions that occurred after the consolidated balance sheet date up to the date that the consolidated financial statements were issued. Based upon this review, other than as described in Note 1, Note 3, Note 6, Note 8, the Company did not identify any subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
| F-34 |
Exhibit 4.7
DESCRIPTION OF SECURITIES OF VIVEON
The following description of capital stock of Viveon Health Acquisition Corp. (“Viveon”, or the “Company”) and provisions of Viveon’s current amended and restated certificate of incorporation, as amended (the “Existing Charter”), bylaws and the Delaware General Corporation Law (“DGCL”) are summaries and are qualified in their entirety by reference to Viveon’s Existing Charter and bylaws and the text of the DGCL. Copies of these documents have been filed with the U.S. Securities and Exchange Commission (“SEC”) as exhibits to the Annual Report on Form 10-K to which this description has been filed as an exhibit.
General
Viveon’s authorized capital stock consists of 60,000,000 shares of common stock, par value $0.0001 per share (the “Common Stock”) and 1,000,000 shares of preferred stock, par value $0.0001 per share. The authorized and unissued shares of Common Stock are available for issuance without further action by Viveon’s stockholders unless such action is required by applicable law or the rules of any stock exchange on which Viveon’s securities may be listed. Unless approval of stockholders is so required, the board of directors of Viveon (the “Board”) will not seek stockholder approval for the issuance and sale of Common Stock.
On December 28, 2020, Viveon consummated an initial public offering (“IPO”) of 17,500,000 units (the “Units” and, with respect to the Common Stock included in the Units being offered, the “public share”, the warrants included in the Units, the “Public Warrants” and the rights included in the Units, the “Rights”), at $10.00 per Unit, generating gross proceeds of $175,000,000.
Units
Each Unit consists of one share of Common Stock, one Public Warrant and one Right. Each Public Warrant entitles the holder thereof to purchase one-half (½) of a share of Common Stock at a price of $11.50 per whole share, subject to adjustment. Each Public Warrant will become exercisable on the later of one year after the closing of the IPO or the consummation of an initial business combination, and will expire five years after the completion of an initial business combination, or earlier upon redemption. Pursuant to the warrant agreement, a warrant holder may exercise its Public Warrants only for a whole number of shares. This means that only an even number of Public Warrants may be exercised at any given time by a warrant holder. For example, if a warrant holder holds one Public Warrant to purchase one-half (½) of one share, such Public Warrant shall not be exercisable. If a warrant holder holds two Public Warrants, such Public Warrants will be exercisable for one share. Each right entitles the holder thereof to receive one-twentieth (1/20) of a share of Common Stock upon consummation of our initial business combination.
Common Stock
Holders of record of Viveon’s Common Stock are entitled to one vote for each share held on all matters to be voted on by stockholders. In connection with any vote held to approve Viveon’s initial business combination, Viveon’s insiders, officers and directors, have agreed to vote their respective shares of Common Stock owned by them, and any shares acquired in the open market, in favor of the proposed business combination.
Viveon will consummate the business combination only if public stockholders do not exercise conversion rights in an amount that would cause its net tangible assets to be less than $5,000,001.
Pursuant to the Charter, Viveon has until June 30, 2023 to complete a business combination. In the event that Viveon does not consummate its initial business combination by June 30, 2023, we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business days thereafter, redeem 100% of the outstanding public shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. Our Initial Stockholders have agreed to waive their rights to share in any distribution with respect to their Founders Shares.
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Viveon’s stockholders have no conversion, preemptive or other subscription rights and there are no sinking fund or redemption provisions applicable to the shares of Common Stock, except that public stockholders have the right to sell their shares to Viveon in any tender offer or have their shares of Common Stock converted to cash equal to their pro rata share of the Trust Account if they vote on the proposed business combination and the business combination is completed.
If Viveon holds a stockholder vote to amend any provisions of the Existing Charter relating to stockholder’s rights or pre-business combination activity (including the substance or timing within which Viveon has to complete a business combination), Viveon will provide its public stockholders with the opportunity to redeem their shares of Common Stock upon approval of any such amendment 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 Viveon to pay its franchise and income taxes, divided by the number of then outstanding Public Shares, in connection with any such vote. In either of such events, converting stockholders would be paid their pro rata portion of the Trust Account promptly following consummation of the business combination or the approval of the amendment to the Existing Charter. If the business combination is not consummated or the amendment is not approved, stockholders will not be paid such amounts.
Preferred Stock
There are 1,000,000 shares of preferred stock authorized. Our Board is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights of the holders of Common Stock. However, the underwriting agreement prohibits us, prior to a business combination, from issuing preferred stock which participates in any manner in the proceeds of the Trust Account, or which votes as a class with the Common Stock on our initial business combination. We may issue some or all of the preferred stock to consummate our initial business combination. In addition, the preferred stock could be utilized as a method of discouraging, delaying or preventing a change in control of us. Although we do not currently intend to issue any shares of preferred stock, we reserve the right to do so in the future.
Public Warrants
20,125,000 Public Warrants are currently outstanding. Each Public Warrant entitles the registered holder to purchase one-half (1/2) of a share of Common Stock at a price of $11.50 per whole share, subject to adjustment as discussed below, at any time commencing on the later of one year after the closing of Viveon’s initial public offering (“IPO”) or the consummation of an initial business combination. Pursuant to the warrant agreement, a warrant holder may exercise its warrants only for a whole number of shares. This means that only an even number of Public Warrants may be exercised at any given time by a warrant holder. However, no Public Warrants will be exercisable for cash unless we have an effective and current registration statement covering the shares of Common Stock issuable upon exercise of the warrants and a current prospectus relating to such shares of Common Stock. Notwithstanding the foregoing, if a registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrant is not effective within 120 days from the closing of our initial business combination, warrant holders may, until such time as there is an effective registration statement and during any period when we shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to an available exemption from registration under the Securities Act. The warrants will expire five years from the closing of our initial business combination at 5:00 p.m., New York City time.
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18,000,000 Private Warrants are current outstanding. The Private Warrants are identical to the Public Warrants underlying the Units except that such Private Warrants will not be redeemable and may be exercisable for cash (even if a registration statement covering the shares of Common Stock issuable upon exercise of such warrants is not effective) or on a cashless basis, at the holder’s option, and will not be redeemable by us, in each case so long as they are still held by the initial purchasers or their affiliates.
We may call the outstanding Public Warrants for redemption, in whole and not in part, at a price of $0.01 per warrant:
| ● | at any time while the warrants are exercisable, |
| ● | upon not less than 30 days’ prior written notice of redemption to each warrant holder, |
| ● | if, and only if, the reported last sale price of the shares of Common Stock equals or exceeds $16.50 per share, for any 20 trading days within a 30-day trading period ending on the third business day prior to the notice of redemption to warrant holders, and |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of Common Stock underlying such warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
The right to exercise will be forfeited unless the Public Warrants are exercised prior to the date specified in the notice of redemption. On and after the redemption date, a record holder of a Public Warrant will have no further rights except to receive the redemption price for such holder’s Public Warrant upon surrender of such Public Warrant.
The redemption criteria for our Public Warrants have been established at a price which is intended to provide warrant holders a reasonable premium to the initial exercise price and provide a sufficient differential between the then-prevailing share price and the warrant exercise price so that if the share price declines as a result of our redemption call, the redemption will not cause the share price to drop below the exercise price of the Public Warrants.
If we call the Public Warrants for redemption as described above, our management will have the option to require all holders that wish to exercise warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the Public Warrants for that number of shares of Common Stock equal to the quotient obtained by dividing (x) the product of the number of shares of Common Stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the average reported last sale price of our Common Stock for the 10 trading days ending on the third trading day prior to the date on which the notice of redemption is sent to the holders of Public Warrants. Whether we will exercise our option to require all holders to exercise their Public Warrants on a “cashless basis” will depend on a variety of factors including the price of our Common Stock at the time the Public Warrants are called for redemption, our cash needs at such time and concerns regarding dilutive share issuances.
The Public Warrants will be issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and us. The warrant agreement provides that the terms of the Public Warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval, by written consent or vote, of the holders of a majority of the then outstanding Public Warrants in order to make any change that adversely affects the interests of the registered holders.
The exercise price and number of shares of Common Stock issuable on exercise of the Public Warrants may be adjusted in certain circumstances including in the event of a share dividend, extraordinary dividend or our recapitalization, reorganization, merger or consolidation. However, except as described below, the Public Warrants will not be adjusted for issuances of shares of Common Stock at a price below their respective exercise prices.
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If (x) we issue additional shares of Common Stock or equity-linked securities for capital raising purposes in connection with the closing of our initial business combination at an issue price or effective issue price of less than $9.50 per share of Common Stock (with such issue price or effective issue price to be determined in good faith by the Board, and in the case of any such issuance to our sponsor, initial stockholders or their affiliates, without taking into account any founders’ shares held by them prior to such issuance), (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 our initial business combination on the date of the consummation of our initial business combination (net of redemptions), and (z) the Market Value is below $9.50 per share, the exercise price of the Public Warrants will be adjusted (to the nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which we issue the additional shares of Common Stock or equity-linked securities and the $16.50 per share redemption trigger price described above will be adjusted (to the nearest cent) to be equal to 165% of the Market Value. The Public Warrants may be exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to us, for the number of Public Warrants being exercised. The warrant holders do not have the rights or privileges of holders of shares of Common Stock and any voting rights until they exercise their Public Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Public Warrants, each holder will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Except as described above, no Public Warrants will be exercisable for cash and we will not be obligated to issue shares of Common Stock unless at the time a holder seeks to exercise such Public Warrant, a prospectus relating to the shares of Common Stock issuable upon exercise of the Public Warrants is current and the shares of Common Stock have been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the holder of the warrants. Under the terms of the warrant agreement, we have agreed to use our best efforts to meet these conditions and to maintain a current prospectus relating to the shares of Common Stock issuable upon exercise of the Public Warrants until the expiration of the Public Warrants. However, there is no assurance that we will be able to do so and, if we do not maintain a current prospectus relating to the shares of Common Stock issuable upon exercise of the Public Warrants, holders will be unable to exercise their Public Warrants and we will not be required to settle any such Public Warrants exercise. If the prospectus relating to the shares of Common Stock issuable upon the exercise of the Public Warrants is not current or if the Common Stock is not qualified or exempt from qualification in the jurisdictions in which the holders of the Public Warrants reside, we will not be required to net cash settle or cash settle the Public Warrants exercise, the Public Warrants may have no value, the market for the Public Warrants may be limited and the Public Warrants may expire worthless.
Warrant holders may elect to be subject to a restriction on the exercise of their Public Warrants such that an electing warrant holder would not be able to exercise their warrants to the extent that, after giving effect to such exercise, such holder would beneficially own in excess of 9.9% of the shares of Common Stock outstanding.
No fractional shares will be issued upon exercise of the Public Warrants. If, upon exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round down to the nearest whole number of shares of Common Stock to be issued to the warrant holder.
On March 21, 2022, March 23, 2022, April 4, 2022, April 27, 2022, May 9, 2022, October 27, 2022, and November 25, 2022, we entered into subscription agreements with several lenders for a loan of up to $4,000,000, in the aggregate (the “Subscription Agreements”). Pursuant to the Subscription Agreement, we issued a series of unsecured senior promissory notes in the aggregate principal amount of up to $4,000,000 (the “Notes”) to the subscribers. Pursuant to the terms of the Subscription Agreements, the subscribers shall receive warrants to purchase one share of Company common stock for every $2.00 of the funded principal amount of the Notes up to 2,000,000 shares of the Company common stock, in the aggregate, at an exercise price of $11.50 per share, subject to adjustment (the “March 2022 Warrants”). The March 2022 Warrant term commences on the Exercise Date (as hereinafter defined) for a period of 49 months. The March 2022 Warrants are exercisable commencing on the date of the initial business combination (the “Exercise Date”) and have a cashless exercise feature that is available at any time on or after the Exercise Date. Commencing on the date 13 months following the Exercise Date, the subscribers have the right, but not the obligation, to put the March 2022 Warrants to the Company at a purchase price of $5.00 per share. The Company has agreed to file, within thirty (30) calendar days after the consummation of an initial business combination, a registration statement with the Securities and Exchange Commission to register for resale the shares of common stock underlying the March 2022 Warrants.
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Contractual Arrangements with respect to the Certain Warrants
We have agreed that so long as the Private Warrants are still held by the initial purchasers or their affiliates, we will not redeem such warrants and we will allow the holders to exercise such warrants on a cashless basis (even if a registration statement covering the shares of Common Stock issuable upon exercise of such warrants is not effective). However, once any of the Private Warrants are transferred from the initial purchasers or their affiliates, these arrangements will no longer apply. The Private Warrants were issued in a private transaction. Accordingly, the holders and their transferees will be allowed to exercise the Private the Private Warrants is not effective and receive unregistered shares of Common Stock.
Rights included as part of Units
Each holder of a Right will automatically receive one twentieth (1/20) of a share of Common Stock upon consummation of the business combination, even if the holder of a Right converted all shares of Common Stock held by him, her or it in connection with the business combination or an amendment to the Existing Charter with respect to Viveon’s pre-business combination activities. No additional consideration will be required to be paid by a holder of Rights in order to receive his, her or its additional shares of Common Stock upon consummation of the business combination. The shares issuable upon exchange of the Rights will be freely tradable (except to the extent held by affiliates of Viveon).
Viveon will not issue fractional shares in connection with an exchange of Rights. Fractional shares will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware General Corporation Law. As a result, holders must hold rights in multiples of 20 in order to receive shares for all of the holders’ Rights upon closing of the business combination. If Viveon is unable to complete an initial business combination within the required time period and it liquidates the funds held in the Trust Account, holders of Rights will not receive any of such funds with respect to their Rights, nor will they receive any distribution from Viveon’s assets held outside of the Trust Account with respect to such Rights, and the Rights will expire worthless. Further, there are no contractual penalties for failure to deliver securities to the holders of the Rights upon consummation of the business combination. Additionally, in no event will Viveon be required to net cash settle the Rights. Accordingly, the Rights may expire worthless.
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Exhibit 10.19
AMENDMENT TO THE
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Amendment No. 2 (this “Amendment”), dated as of January 20, 2023, to the Investment Management Trust Agreement (as defined below) is made by and between Viveon Health Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust Company, as trustee (“Trustee”). All terms used but not defined herein shall have the meanings assigned to them in the Trust Agreement.
WHEREAS, the Company and the Trustee entered into an Investment Management Trust Agreement dated as of December 22, 2020, as amended by Amendment No. 1 on March 23, 2022 (the “Trust Agreement”);
WHEREAS, Section 1(i) of the Trust Agreement sets forth the terms that govern the liquidation of the Trust Account under the circumstances described therein;
WHEREAS, at an annual meeting of shareholders of the Company held on December 23, 2022, the Company stockholders approved a proposal to amend (the “Second Extension Amendment”) the Company’s amended and restated certificate of incorporation, (the “Amended Charter”) to allow the Company to extend the date to consummate a business combination on a monthly basis for up to six times by an additional one month each time for a total of up to six months from December 28, 2022 (the “December Termination Date”) until June 30, 2023 (the “Second Extended Date”), upon three calendar days’ advance notice prior to the applicable monthly deadline, unless the closing of the proposed Business Combination with Suneva Medical Inc. (“Suneva”), or any potential alternative initial business combination shall have occurred prior to the Second Extended Date; and
WHEREAS, prior to the date hereof, the Company has deposited an additional $100,000 into the trust account and filed the Second Extension Amendment with the Secretary of State of the State of Delaware.
NOW THEREFORE, IT IS AGREED:
| 1. | Section 1(i) of the Trust Agreement is hereby amended and restated to read in full as follows: |
“(i) Commence liquidation of the Trust Account only after and promptly after receipt of, and only in accordance with, the terms of a letter (“Termination Letter”), in a form substantially similar to that attached hereto as either Exhibit A or Exhibit B, signed on behalf of the Company by its President, Chief Executive Officer or Chairman of the Board and Secretary or Assistant Secretary and, in the case of a Termination Letter in a form substantially similar to that attached hereto as Exhibit A, acknowledged and agreed to by Chardan, and complete the liquidation of the Trust Account and distribute the Property in the Trust Account only as directed in the Termination Letter and the other documents referred to therein; provided, however, that in the event (i) that a Termination Letter has not been received by the Trustee by June 30, 2023, or, (ii) prior to June 30, 2023, the Company fails to timely make the required additional monthly deposit into the trust account to extend the date to consummate an initial Business Combination on a monthly basis, upon three days’ advance notice prior to the applicable monthly deadline, commencing with the first additional monthly deposit to be made by December 28, 2022, and subsequent additional monthly deposits by January 31, 2023, February 28, 2023, March 31, 2023, April 30, 2023 and May 31, 2023, the Trust Account shall be liquidated in accordance with the procedures set forth in the Termination Letter attached as Exhibit B hereto and distributed to the Public Shareholders.”
| 4. | All other provisions of the Trust Agreement shall remain unaffected by the terms hereof. |
| 5. | This Amendment may be signed in any number of counterparts, each of which shall be an original and all of which shall be deemed to be one and the same instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument. A facsimile signature shall be deemed to be an original signature for purposes of this Amendment. |
| 6. | This Amendment is intended to be in full compliance with the requirements for an Amendment to the Trust Agreement as required by Section 7(c) of the Trust Agreement, and every defect in fulfilling such requirements for an effective amendment to the Trust Agreement is hereby ratified, intentionally waived and relinquished by all parties hereto. |
| 7. | This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. |
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have duly executed this Amendment to the Investment Management Trust Agreement as of the date first written above.
| CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE | ||
| By: | /s/ Francis Wolf | |
| Name: | Francis Wolf | |
| Title: | Vice President | |
| VIVEON HEALTH ACQUISITION CORP. | ||
| By: | /s/ Jagi Gill | |
| Name: | Jagi Gill | |
| Title: | Chief Executive Officer | |
| Acknowledged and Agreed: | ||
| Chardan Capital Markets, LLC | ||
| By: | /s/ George Kaufman | |
| Name: | George Kaufman | |
| Title: | Managing Director | |
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Exhibit 10.20
AMENDMENT TO THE
INVESTMENT MANAGEMENT TRUST AGREEMENT
This Amendment No. 3 (this “Amendment”), dated as of June 27, 2023, to the Investment Management Trust Agreement (as defined below) is made by and between Viveon Health Acquisition Corp. (the “Company”) and Continental Stock Transfer & Trust Company, as trustee (“Trustee”). All terms used but not defined herein shall have the meanings assigned to them in the Trust Agreement.
WHEREAS, the Company and the Trustee entered into an Investment Management Trust Agreement dated as of December 22, 2020, as amended by Amendment No. 1 on March 23, 2022, and Amendment No. 2 on January 20, 2023 (the “Trust Agreement”);
WHEREAS, Section 1(i) of the Trust Agreement sets forth the terms that govern the liquidation of the Trust Account under the circumstances described therein;
WHEREAS, at a special meeting of stockholders of the Company held on June 22, 2023, the Company stockholders approved a proposal to amend (the “Third Extension Amendment”) the Company’s amended and restated certificate of incorporation, (the “Amended Charter”) to allow the Company to (i) initially extend the date by which the Company must consummate an initial business combination up to six times, each such extension for an additional one month period, until December 31, 2023, by depositing into the trust account established in connection with the Company’s initial public offering (the “Trust Account”) the amount of $85,000 for each one-month extension, until December 31, 2023, and (ii) further extend the date by which the Company must consummate an initial business combination (without seeking additional approval from the stockholders) for up to an additional three months, from January 1, 2024 to March 31, 2024, with no additional deposits to be made into the Trust Account during such period, each such extension for an additional one month period, (the “Third Extended Date”), upon one calendar day advance notice to the Trustee, prior to the applicable monthly deadline, unless the closing of the proposed initial business combination with Clearday, Inc., or any potential alternative initial business combination shall have occurred prior to the Third Extended Date; and
WHEREAS, prior to the date hereof, the Company has deposited an additional $85,000 into the trust account and filed the Third Extension Amendment with the Secretary of State of the State of Delaware.
NOW THEREFORE, IT IS AGREED:
| 1. | Section 1(i) of the Trust Agreement is hereby amended and restated to read in full as follows: |
“(i) Commence liquidation of the Trust Account only after and promptly after receipt of, and only in accordance with, the terms of a letter (“Termination Letter”), in a form substantially similar to that attached hereto as either Exhibit A or Exhibit B, signed on behalf of the Company by its President, Chief Executive Officer or Chairman of the Board and Secretary or Assistant Secretary and, in the case of a Termination Letter in a form substantially similar to that attached hereto as Exhibit A, acknowledged and agreed to by Chardan, and complete the liquidation of the Trust Account and distribute the Property in the Trust Account only as directed in the Termination Letter and the other documents referred to therein; provided, however, that in the event (i) that a Termination Letter has not been received by the Trustee by March 31, 2024, or, (ii) prior to December 31, 2023 the Company fails to timely make the required additional monthly deposit into the Trust Account to extend the date to consummate an initial Business Combination on a monthly basis, upon one day advance notice prior to the applicable monthly deadline, commencing with the first additional monthly deposit to be made by June 30, 2023, and subsequent additional monthly deposits by July 31, 2023, August 31, 2023, September 30, 2023, October 31, 2023, November 30, 2023 and December 31, 2023 (no additional deposits need to be made into the Trust Account during the period from January 1, 2024 through March 31, 2024), the Trust Account shall be liquidated in accordance with the procedures set forth in the Termination Letter attached as Exhibit B hereto and distributed to the Public Shareholders.”
| 2. | All other provisions of the Trust Agreement shall remain unaffected by the terms hereof. |
| 3. | This Amendment may be signed in any number of counterparts, each of which shall be an original and all of which shall be deemed to be one and the same instrument, with the same effect as if the signatures thereto and hereto were upon the same instrument. A facsimile signature shall be deemed to be an original signature for purposes of this Amendment. |
| 4. | This Amendment is intended to be in full compliance with the requirements for an Amendment to the Trust Agreement as required by Section 7(c) of the Trust Agreement, and every defect in fulfilling such requirements for an effective amendment to the Trust Agreement is hereby ratified, intentionally waived and relinquished by all parties hereto. |
| 5. | This Amendment shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. |
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have duly executed this Amendment to the Investment Management Trust Agreement as of the date first written above.
CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS TRUSTEE
| By: | /s/ Francis Wolf | |
| Name: | Francis Wolf | |
| Title: | Vice President |
VIVEON HEALTH ACQUISITION CORP.
| By: | /s/ Jagi Gill | |
| Name: | Jagi Gill | |
| Title: | Chief Executive Officer |
Acknowledged and Agreed:
Chardan Capital Markets, LLC
| By: | /s/ George Kaufman | |
| Name: | George Kaufman | |
| Title: | Managing Director |
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Exhibit 10.21
Viveon Health Acquisition Corp.
As of May 1, 2023
Reference is made to the following documents:
| i. | The Subscription Agreement (the “Subscription Agreement”) between you and Viveon Health Acquisition Corp., a Delaware corporation (“Viveon”), relating to the Extension Note (as hereinafter defined) and the Extension Warrant (as hereinafter defined); | |
| ii. | Senior Note due 2022 (as heretofore amended and supplemented, the “Extension Note”) of Viveon in favor of you, issued pursuant to the Subscription Agreement; | |
| iii. | Warrant, registered in your name (the “Extension Warrant”), issued pursuant to the Subscription Agreement; | |
| iv. | Termsheet (the “Termsheet”) relating to the offering of 8% Senior Convertible Notes of Clearday, Inc., a Delaware corporation (“Clearday”); and | |
| v. | Form of Senior Convertible Notes of Clearday (“Clearday Notes”). |
As you know, on April 5, 2023, Viveon has entered into a Business Combination Agreement to acquire Clearday. In connection with the merger contemplated by such agreement (the “Merger”) and as set forth in the Termsheet, Clearday is conducting an offering (the “Clearday Bridge”) of securities in advance of the Merger of up to $16 million of Clearday Notes, including $4 million of Clearday Notes issuable to holders of Extension Notes and Extension Warrants in exchange for such securities. The purpose of the Clearday Bridge is to, among other things, permit Clearday and Viveon to pay expenses relating to, and in advance of, the Merger.
Viveon respectfully requests your consent to exchange your Extension Notes and Extension Warrants for a principal amount of Clearday Notes equal to the principal amount of your Extension Notes effective immediately prior to the consummation of the Merger.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
Please indicate your consent where indicated below to exchange your Extension Notes and Extension Warrants for Clearday Notes as described herein effective immediately prior to the consummation of the Merger. By executing this consent, you confirm that your representations and warranties set forth in the Subscription agreement are true and correct as of the date hereof and as of the date of the consummation of the Merger with respect to the Clearday Notes.
| VIVEON HEALTH ACQUISITION CORP. | ||
| By: | ||
| Rom Papadopoulos | ||
| Chief Financial Officer | ||
| CONSENTED TO AND AGREED AS OF | |
| THE DATE FIRST ABOVE WRITTEN: | |
| INVESTOR NAME: | |
| Name: | |
| Title: |
Exhibit 10.22
THIS PROMISSORY NOTE (THE “NOTE”) HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAWS, AND HAS BEEN ISSUED AND SOLD IN RELIANCE UPON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SUCH LAWS, INCLUDING, WITHOUT LIMITATION, THE EXEMPTION CONTAINED IN SECTION 4(a)(2) OF THE SECURITIES ACT. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT HAS BECOME AND IS THEN EFFECTIVE WITH RESPECT TO SUCH SECURITIES, (2) THIS NOTE IS TRANSFERRED PURSUANT TO RULE 144 PROMULGATED UNDER THE SECURITIES ACT (OR ANY SUCCESSOR RULE) OR (3) THE COMPANY (AS HEREINAFTER DEFINED) HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT, TO THE EFFECT THAT THE PROPOSED SALE OR TRANSFER OF SUCH SECURITIES IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT AND ALL OTHER APPLICABLE FEDERAL OR STATE SECURITIES LAWS.
Promissory Note
of
Viveon Health Acquisition Corp.
| May 12, 2023 | Atlanta, Georgia |
Viveon Health Acquisition Corp., a Delaware corporation (the “Company”), for value received, hereby promises unconditionally to pay to the order of Clearday, Inc., a Delaware corporation, or such person’s assigns (collectively, the “Holder”), at the address set forth in Section 12 hereof, in lawful money of the United States of America (“Dollars” or “$”) and in immediately available funds, the aggregate principal amount of each loan (each, a “Loan”) that is from time to time recorded on the schedule attached to this Note as Annex A and initialed by an authorized signatory of the Company (the “Principal”), in full, on the Maturity Date (as defined below). Each Loan shall be binding on the Company and may be established by such other reasonable evidence such as a payment by the Holder or any of its subsidiaries or Affiliates or their respective related persons to the Company in addition to being evidenced by the notation of the Loan on Annex A.
The following is a statement of the rights of the Holder and the conditions to which this Note is subject, and to which the Holder hereof, by the acceptance of this Note, agrees:
1. Definitions. For the purposes of this Note:
“Affiliate(s)” means, with respect to any given Person other than a partnership or limited liability company, any other Person directly or indirectly controlling, controlled by or under common control with such Person and with respect to a partnership, the partners of such partnership and with respect to a limited liability company, the members of such limited liability company.
“Business Combination” means the business combination contemplated by Merger Agreement.
“Business Day” means any day that is not a Saturday, Sunday or a legal holiday in the State of New York.
“Event of Default” shall have the meaning assigned to such term in Section 5.
“Governmental Authority” means any Federal, state, local, foreign or other court, governmental department, commission, board, bureau, agency or instrumentality.
“Interest” shall have the meaning assigned to such term in Section 2(b).
“Issue Date” means May 12, 2023.
“Lien” means any mortgage, pledge, lien, security interest or other charge or encumbrance of any kind.
“Maturity Date” means the earlier of (i) first anniversary of the Issue Date and (ii) the date of the closing the Business Combination.
“Merger Agreement” means the Merger Agreement, dated as of April 5, 2023 (as amended or supplemented), by and among Company, Clearday SR LLC, in the capacity as the Company Representative, Viveon Health Acquisition Corp., VHAC2 Merger Sub, Inc. and Viveon Health LLC, in the capacity as the SPAC Representative.
“Person” means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint stock company, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.
2. Principal; Interest; Prepayment; Maturity Date Extension.
(a) Principal; Principal Increase. The entire unpaid Principal shall be paid in Dollars on the Maturity Date. Promptly following the payment in full of this Note, including all accrued and unpaid Interest and any other amounts owing hereunder, the Holder shall surrender this Note to the Company for cancellation.
(b) Interest. Subject to Section 2(c) hereof, Interest on the Note (“Interest”), during the period from the Issue Date (or with respect to any increase in the Principal during the term of this Note, from the date set forth opposite such increase in Principal in Annex A) through the Maturity Date, shall accrue on the Principal of the Note set forth in Annex A hereto at a rate 0.0% per annum and shall be payable on the Maturity Date. Interest shall be computed on the basis of a 360-day year applied to actual days elapsed. Interest shall accrue on each Loan (as set forth in Annex A hereto) commencing on the date thereof set forth in Annex A hereto and terminating on the Maturity Date and shall be paid in arrears on the Maturity Date. The rate of interest payable under the Note from time to time shall in no event exceed the maximum rate, if any, permissible under applicable law. If the rate of interest payable under the Note is ever reduced as a result of the preceding sentence and at any time thereafter the maximum rate permitted by applicable law shall exceed the rate of interest provided hereunder, then the rate provided for hereunder shall be increased to the maximum rate permitted by applicable law for such period as required so that the total amount of interest received by the Holder is that which would have been received by the Holder but for the operation of the preceding sentence.
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(c) Prepayment. This Note may be prepaid, in whole or in part, at any time and from time to time, without penalty or premium.
(d) Maturity Extension. Upon no less than thirty (30) days written notice prior to the Maturity Date, the Holder may extend this Note for on a month-by-month basis, in which event that Maturity Date shall be deemed to be the last day of the last monthly extension thereof.
3. Covenants of the Company.
(a) The Company covenants and agrees with the Holder that the Company will comply with all applicable laws, rules, regulations and orders, such compliance to include, without limitation, paying before they become delinquent all taxes, assessments and governmental charges imposed on it or upon its property, except to the extent contested in good faith.
(b) The Company covenants and agrees with the Holder that the Company will use the proceeds of each Loan only in accordance with payments that are described and listed (and only in such amounts) as in the budget that has been approved by Holder or any amendment or supplement thereto that has been approved by Holder, in each case, in writing.
(c) The Company covenants and agrees with the Holder that the Company hereby waives any or all defaults or breaches by the Company that may have occurred under the terms of the Merger Agreement and accepts as a supplement to the Disclosure Schedules to the Merger Agreement by all of the disclosures made by Holder in its draft Form 10K that has been provided by Holder to the Company.
(d) The Company covenants and agrees with the Holder that each notation on Annex A is or will have been made by an executive of the Company that, prior to the date and time of such notation and in effect on the date and time of such notation, is an executive of the Company, duly authorized to execute Annex A by the Board of Directors of the Company and that the signature of such individual is the true and genuine signature of such individual.
4. Events of Default. If one or more of the following events (“Events of Default”) shall have occurred and be continuing:
(a) the Company shall fail to pay any Principal of, or Interest on, this Note, or any fees or any other amount payable hereunder within ten (10) days of the due date of such payment;
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(b) the Company shall fail to observe or perform any covenant or agreement in this Note;
(c) any representation, warranty, certification or statement made by the Company in this Note, or in any document delivered pursuant to this Note shall prove to have been incorrect in any material respect when made (or deemed made);
(d) a judgment or order for the payment of money shall be rendered against the Company and such judgment or order shall continue unsatisfied and unstayed for a period of ten (10) days;
(e) the Company shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;
(f) an involuntary case or other proceeding shall be commenced against the Company seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed for a period of 60 days; or an order for relief shall be entered against the Company under the federal bankruptcy laws as now or hereafter in effect;
then, and in every such event, the Holder may, by written notice to the Company, declare the Principal (together with accrued Interest thereon and all other amounts owing hereunder) to be, and the Principal (together with accrued Interest thereon and all other amounts owing hereunder) shall thereupon become, immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company; provided, that in the case of any of the Events of Default specified in clause (e) or (f) above, without any notice to the Company or any other act by the Holder, the Principal (together with accrued Interest thereon and all other amounts owing hereunder) shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Company.
5. Payments; Extension of Maturity. All payments of Principal and Interest (and all other amounts owing hereunder) to be made by the Company in respect of this Note shall be made in Dollars by wire transfer to an account designated by the Holder by written notice to the Company. All amounts payable under this Note shall be paid free and clear of, and without reduction by reason of, any deduction, setoff, or counterclaim. If the Principal and accrued and unpaid Interest become due and payable on any day other than a Business Day, the Maturity Date shall be extended to the next succeeding Business Day, and to such payable amounts shall be added the Interest which shall have accrued during such extension period at the rate per annum herein specified.
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6. Replacement of Note. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Note, and (in case of loss, theft or destruction) of indemnity reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental thereto, and (if mutilated) upon surrender and cancellation of this Note, the Company shall make and deliver to the Holder a new note of like tenor in lieu of this Note. Any replacement note made and delivered in accordance with this Section 6 shall be dated as of the date hereof.
7. Remedies.
(a) Upon the occurrence of an Event of Default, Principal then outstanding of, and the accrued and unpaid Interest on, this Note shall automatically become immediately due and payable without presentment, demand, protest, or other formalities of any kind, all of which are hereby expressly waived by the Company.
(b) The Holder may institute such actions or proceedings in law or equity as it shall deem expedient for the protection of its rights and may prosecute and enforce its claims against all assets of the Company, and in connection with any such action or proceeding shall be entitled to receive from the Company payment of the principal amount of this Note plus accrued interest to the date of payment plus reasonable expenses of collection, including, without limitation, attorneys’ fees and expenses.
8. Costs and Expenses. The Company shall be responsible for all expenses incurred by any Holder in connection with the conversion of the Principal and accrued and unpaid Interest under this Note.
9. No Waivers by Delay or Partial Exercise. No delay by the Holder in exercising any powers or rights hereunder shall operate as a waiver of such power or right, nor shall any single or partial exercise of any power or right preclude other or further exercise thereof, or the exercise of any other power or right hereunder or otherwise.
10. Further Assurances. Each party agrees to execute such other documents, instruments, agreements and consents, and take such other actions as may be reasonably requested by the other parties hereto to effectuate the purposes of this Note.
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11. Notices. All notices required or permitted hereunder shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not, then on the next Business Day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. All communications shall be sent as follows:
| If to the Company: | Viveon Health Acquisition Corp. | |
| 3480 Peachtree Road NE | ||
| 2nd Floor, Suite #112 | ||
| Atlanta, Georgia 30326 | ||
| Attention: Chief Executive Officer | ||
| Telecopy: |
| If to the Holder: | Clearday, Inc. | |
| 8800 Village Drive, Suite 106 | ||
| San Antonio, TX 78217 | ||
| Attention: James Walesa, Chief Executive Officer | ||
| Telecopy: |
or to such other address or telecopy number as the party to whom notice is to be given may have furnished to the other party in writing in accordance herewith.
12. Amendments and Waivers. No modification, amendment or waiver of any provision of, or consent required by, this Note, nor any consent to any departure herefrom, shall be effective unless it is in writing and signed by each of the Company and the Holder. Such modification, amendment, waiver or consent shall be effective only in the specific instance and for the purpose for which given.
13. Exclusivity and Waiver of Rights. No failure to exercise and no delay in exercising on the part of any party, any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other right, power or privilege. The rights and remedies herein provided are cumulative and are not exclusive of any other rights or remedies provided by law.
14. Invalidity. Any term or provision of this Note shall be ineffective to the extent it is declared invalid or unenforceable, without rendering invalid or enforceable the remaining terms and provisions of this Note.
15. Headings. Headings used in this Note are inserted for convenience only and shall not affect the meaning of any term or provision of this Note.
16. Assignment. This Note and the rights and obligations hereunder shall not be assignable or transferable by the Company without the prior written consent of the Holder. The Holder may assign this Note and the rights and obligations hereunder without the prior written consent of the Company. Any instrument purporting to make an assignment in violation of this Section 16 shall be void.
17. Survival. Unless otherwise expressly provided herein, all representations warranties, agreements and covenants contained in this Note shall survive the execution hereof and shall remain in full force and effect until the payment in full of all Principal and accrued and unpaid Interest and all other amounts owing under this Note.
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18. Miscellaneous. This Note shall inure to the benefit of the Company and the Holder, and all their respective successors and permitted assigns. Nothing in this Note is intended or shall be construed to give to any other person, firm or corporation any legal or equitable right, remedy or claim under or in respect of this Note or any provision herein contained.
19. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS (WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISIONS).
20. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF TEXAS AND OF THE FEDERAL COURTS SITTING IN THE STATE OF TEXAS. THE COMPANY AGREES THAT ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS NOTE OR THE TRANSACTIONS CONTEMPLATED HEREBY MUST BE LITIGATED EXCLUSIVELY IN ANY SUCH STATE OR FEDERAL COURT THAT SITS IN THE CITY OF SAN ANTONIO, TEXAS, AND ACCORDINGLY, THE COMPANY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH LITIGATION IN ANY SUCH COURT.
21. WAIVER OF JURY TRIAL. THE COMPANY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE. THE COMPANY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE HOLDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE HOLDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE HOLDER HAS BEEN INDUCED TO ENTER INTO THIS NOTE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 21.
22. Attorneys’ Fees. In the event that any suit or action is instituted to enforce any provision in this Note, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Note, including without limitation, such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals.
23. Conversion. Principal of, and accrued and unpaid Interest on, this Note shall be convertible, at the option of the holder, into the securities heretofore offered in connection with the financing relating to the extension of the term of the Company or any other securities issued by the Company following the date hereof.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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In Witness Whereof, the undersigned has executed this Note as of the date first above written.
| VIVEON HEALTH ACQUISITION CORP. | ||
| By: | /s/ Jagi Gill | |
| Name: | Jagi Gill | |
| Title: | Chief Executive Officer | |
ANNEX A
Advance # | Date | Amount Funded | Aggregate Principal Amount | Initials of Authorized Company Signatory | ||||||||||||
| 1 | May 16, 2023 | $ | 167,616 | $ | 167,616 | |||||||||||
| 2 | May 22, 2023 | $ | 58,200 | $ | 225,816 | |||||||||||
| 3 | June 5, 2023 | $ | 46,560 | $ | 272,376 | |||||||||||
| 4 | June 19, 2023 | $ | 46,560 | $ | 318,936 | |||||||||||
| 5 | June 30, 2023 | $ | 34,920 | $ | 353,856 | |||||||||||
| 6 | July 14, 2023 | $ | 34,704 | $ | 388,560 | |||||||||||
| 7 | August 2, 2023 | $ | 256,080 | $ | 644,640 | |||||||||||
| 8 | August 7, 2023 | $ | 174,600 | $ | 819,240 | |||||||||||
| 9 | August 11, 2023 | $ | 58,416 | $ | 877,656 | |||||||||||
| 10 | ||||||||||||||||
| 11 | ||||||||||||||||
| 12 | ||||||||||||||||
| 13 | ||||||||||||||||
| 14 | ||||||||||||||||
| 15 | ||||||||||||||||
| 16 | ||||||||||||||||
Exhibit 10.23
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jagi Gill, certify that:
1. I have reviewed this Annual Report on Form 10-K/A of Viveon Health Acquisition Corp. for the annual period ended December 31, 2022;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 21, 2024 | ||
| By: | /s/ Jagi Gill | |
| Jagi Gill | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Rom Papadopoulos, certify that:
1. I have reviewed this Annual Report on Form 10-K/A of Viveon Health Acquisition Corp. for the annual period ended December 31, 2022;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: February 21, 2024 | ||
| By: | /s/ Rom Papadopoulos | |
| Rom Papadopoulos | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Viveon Health Acquisition Corp. (the “Company”) on Form 10-K/A for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| Date: February 21, 2024 | ||
| By: | /s/ Jagi Gill | |
| Jagi Gill | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Viveon Health Acquisition Corp. (the “Company”) on Form 10-K/A for the year ended December 31, 2022 as filed with the Securities and Exchange Commission (the “Report”), the undersigned, in the capacities and on the dates indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| Date: February 21, 2024 | ||
| By: | /s/ Rom Papadopoulos | |
| Rom Papadopoulos | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |