ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The
following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction
with our audited consolidated financial statements and the notes related thereto which are included in “Item 8. Consolidated Financial
Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis
set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including those set forth under “Cautionary Note Regarding Forward-Looking Statements,”
“Item 1A. Risk Factors” and elsewhere in this Annual Report on Form 10-K.
Overview
We
are a blank check company incorporated on April 19, 2021 as a Delaware corporation and formed for the purpose of effecting a merger,
capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses
(a “Business Combination”). We consummated our initial public offering on December 22, 2021 and have identified a target
company for our business combination. We intend to use the cash proceeds from our Public Offering and the Private Placement described
below as well as additional issuances, if any, of our capital stock, debt or a combination of cash, stock and debt to complete the Business
Combination.
We
expect to incur significant costs in the pursuit of our initial Business Combination. We cannot assure you that our plans to raise capital
or to complete our initial Business Combination will be successful.
Recent
Developments
Proposed
Business Combination
On
November 7, 2022, NorthView entered into a Merger Agreement and Plan of Reorganization (the “Merger Agreement”), by and among
NorthView, NV Profusa Merger Sub Inc., a Delaware corporation and a direct, wholly-owned subsidiary of NorthView (“Merger Sub”),
and Profusa, Inc., a California corporation (“Profusa”).
The
Merger Agreement provides that, among other things, at the closing (the “Closing”) of the transactions contemplated by the
Merger Agreement, Merger Sub will merge with and into Profusa (the “Merger”), with Profusa surviving as a wholly-owned subsidiary
of NorthView. In connection with the Merger, NorthView will change its name to “Profusa, Inc.” The Merger and the other transactions
contemplated by the Merger Agreement are hereinafter referred to as the “Business Combination.”
The
Business Combination is subject to customary closing conditions, including the satisfaction of the minimum available cash condition of
$15,000,000, the receipt of certain governmental approvals and the required approval by the stockholders of NorthView and Profusa. There
is no assurance that the Business Combination will be completed.
The
aggregate consideration to be received by the Profusa stockholders is based on a pre-transaction equity value of $155,000,000. The exchange
ratio will be equal to (a) $155,000,000, divided by an assumed value of NorthView Common Stock of $10.00 per share.
42
Pursuant
to the Merger Agreement, subject to certain future revenue and stock-price based milestones, Profusa stockholders will have the right
to receive an aggregate of up to an additional 3,875,000 shares of NorthView Common Stock (the “Earnout Shares”). One-quarter
of the Earnout Shares will be issued if, between the 18-month anniversary and the two year anniversary of the Closing, the combined company’s
common stock achieves a daily volume weighted average market price of at least $12.50 per share for any 20 trading days within a 30 consecutive
trading day period (“Milestone Event I”). One-quarter of the Earnout Shares will be issued if, between the first and second
anniversary of the Closing, the combined company’s common stock achieves a daily volume weighted average market price of at least
$14.50 per share for a similar number of days (“Milestone Event II”). Pursuant to the Merger Agreement, the remaining one-quarter
of the Earnout Shares were to be issued if the combined company achieves at least $5,100,000 in revenue in fiscal year 2023, and one-quarter
of the Earnout Shares will be issued if the combined company achieves at least $73,100,000 in revenue in fiscal year 2024, (or up to
one-half of the Earnout Shares if both milestones are achieved).
On
September 12, 2023, the parties to the Merger Agreement entered into Amendment No. 1 to the Merger Agreement ( “Amendment No. 1”)
pursuant to which the parties agreed to revise the revenue earnout milestones to reflect updated projections provided by Profusa. Specifically,
Amendment No. 1 revised the definition of “Milestone Event III” and “Milestone Event IV” such that one-quarter
of the Earnout Shares would be issued to Profusa stockholders if the combined company achieves Earnout Revenue of $11,864,000 for the
fiscal year ended December 31, 2024, and one-quarter of the Earnout Shares would be issued to Profusa stockholders if the combined company
achieves Earnout Revenue of $99,702,000 for the fiscal year ended December 31, 2025. Amendment No. 1 also clarified the exercise price
of certain the Company Warrants.
On January 12, 2024, the parties to the Merger Agreement entered
into an Amendment No. 2 to the Merger Agreement (“Amendment No. 2”) pursuant to which the parties agreed to revise the definition
of “Milestone Event III” and such that the Earnout Revenue milestone of $11,864,000 for the fiscal year ended December 31,
2024, was replaced with a milestone of consummating the APAC Joint Venture and receipt of the related funding (as described elsewhere
in this proxy statement/prospectus) during the fiscal year ended December 31, 2024.
On March 4, 2024, the parties to the Merger Agreement entered
into an Amendment No. 3 to the Merger Agreement (“Amendment No. 3”) pursuant to which the parties agreed to revise
the Company Reference Value to adjust for financing proceeds and debt conversions that could be received by Profusa prior to the Business
Combination
On February 11, 2025, the parties to the Merger
Agreement entered into an Amendment No. 4 to the Merger Agreement (“Amendment No. 4”) pursuant to which the parties agreed
to revise the Company Reference Value to adjust for financing proceeds received by Profusa prior to the Business Combination, along with
debt conversions and incentive shares being issued. Additionally, Amendment No. 4 to the Merger Agreement revised the definition of “Milestone
Event III” and “Milestone Event IV” such that the parties extended the period for Profusa to consummate the APAC Joint
Venture and receive the related funding until December 31, 2025, and extended the period for Profusa to achieve Earnout Revenue of $11,864,000
for the fiscal year ended December 31, 2026.
Additionally,
if Milestone Event I or Milestone Event II are achieved by the second anniversary of the Closing, NorthView’s sponsor, NorthView
Sponsor I, LLC and Profusa stockholders, will be issued additional shares up to the amount of any shares forgone as an inducement to
obtaining Additional Financings (as defined in the Merger Agreement).
43
Merger Agreement Amendment and Termination
of Financing
On
January 12, 2024, the parties to the Merger Agreement entered into an Amendment No. 2 to the Merger Agreement pursuant to which the parties
agreed to revise the definition of “Milestone Event III” and such that the Earnout Revenue milestone of $11,864,000 for the
fiscal year ended December 31, 2024, was replaced with a milestone of consummating the Tasly JV (as defined in the amended Merger Agreement)
and receipt of the related funding during the fiscal year ended December 31, 2024. All other aspects of the Merger Agreement were unmodified.
On
February 16, 2024, the Company’s Board of Directors approved and authorized the Company to execute a binding term sheet (“Original
term sheet”) between the Company and Profusa, Inc. (the “Target”) for PIPE funding with Vellar Opportunities Fund Master,
Ltd. (“Vellar”). Vellar agreed to subscribe for 2,500,000 shares of common and/or preferred stock of the Target upon the
closing of the Business Combination at a price of $2.00 per share, for a total amount of $5,000,000 to be funded by Vellar immediately
prior to the Business Combination. On May 9, 2024, the original term sheet between the Company and Profusa was amended and restated to
clarify certain provisions of the Original term sheet.
On
March 4, 2024, the parties to the Merger Agreement entered into Amendment No. 3 to the Merger Agreement pursuant to which the parties
agreed to revise the definition of Company Reference Value (as defined in the Merger Agreement) to adjust for financing proceeds and
debt conversions that could be received by Profusa prior to the Business Combination. All other aspects of the Merger Agreement were
unmodified.
On
September 25, 2024, Vellar terminated the Amended and Restated Binding Principal Terms and Conditions with the Company and Profusa,
dated May 9, 2024.
On February 11, 2025, the parties entered into
Amendment No. 4 to the Merger Agreement pursuant to which the parties agreed to revise the Company Reference Value (as defined in the
Merger Agreement) to adjust for financing proceeds received by Profusa prior to the Business Combination, along with debt conversions
and incentive shares to be issued. Additionally, the Amendment (i) revised the definition of “Milestone Event III” such that
the parties extended the period for Profusa to consummate the APAC Joint Venture (as defined in the Merger Agreement) and receive the
related funding from December 31, 2024 until December 31, 2025, and (ii) revised the definition of “Milestone Event IV” to
change the earnout revenue target from $99,702,000 for the fiscal year ended December 31, 2025 to an earnout revenue target of $11,864,000
for the fiscal year ended December 31, 2026.
Extension
of Our Combination Period
On March 10, 2023, the Company held a vote to
amend its amended and restated certificate of incorporation to extend the date by which the Company must consummate a Business Combination
from March 22, 2023 to December 22, 2023 (the “First Extension Meeting”).
On
December 21, 2023, the Company held a special meeting of stockholders to vote on extending the Combination Period. As a result, the Company
has extended the Combination Period from December 22, 2023 to March 22, 2024. In connection with the extension, 140,663 shares of the
Company’s common stock were redeemed, with 6,027,219 shares of Common Stock remaining outstanding after the Redemption; 833,469
shares of Common Stock remaining outstanding after the Redemption are shares issued in connection with our initial public offering. In
January 2024, $1,565,078 was paid from the trust account to redeeming stockholders in connection with the extension.
On
January 2, 2024, the Company and Continental Stock Transfer & Trust Company (“CST”) entered into Amendment No. 1 to Investment
Management Trust Agreement, dated December 20, 2021, by and between the Company and CST, to allow CST, upon written instruction of the
Company, to (i) hold the funds in the Company’s trust account uninvested or (ii) hold the funds in an interest-bearing bank demand
deposit account.
On
March 21, 2024, the Company held its 2024 Annual Meeting of Stockholders (the “Meeting”). At the meeting, the Company’s
stockholders approved the amendment of the Company’s amended and restated certificate of incorporation to extend the date by which
the Company must consummate a business combination or, if it fails to do so, cease its operations and redeem or repurchase 100% of the
shares of the Company’s common stock issued in the Company’s initial public offering, from March 22, 2024, monthly for up
to six additional months at the election of the Company and only upon contribution of $0.05 per month per outstanding public share, ultimately
until September 22, 2024.
44
In
connection with the meeting, the holders of 95,394 Public Shares properly exercised their right to redeem, with 5,931,825 shares
of Common Stock remaining outstanding after the Redemption; 738,075 shares of Common Stock remaining outstanding after the Redemption
are shares issued in connection with the initial public offering. Consequently, the contribution is $36,904 per month needed for
the Company to continue to extend the Combination Period monthly. On May 8, 2024 and May 31, 2024, the Company made two deposits of $36,904
each for April and May extension contributions. On September 10, 2024, the Company made a deposit of $112,114, of which $110,174 was
for June, July and August extension contributions and $1,400 for lost interest due to late trust payments.
On
September 19, 2024, the Company held a special meeting of stockholders. At the meeting, the Company’s stockholders approved an
amendment to the Company’s amended and restated certificate of incorporation to extend the date by which the Company must consummate
its initial Business Combination to March 22, 2025. In connection with the approval of the extension amendment, holders of 50,556 shares
of the Company’s common stock exercised their right to redeem, with 5,881,269 shares of common stock remaining outstanding after
the redemption; 687,519 shares of common stock remaining outstanding after the redemption are shares issued in connection with our initial
public offering. Consequently, the contribution is $34,376 per month needed for the Company to continue to extend the Combination
Period monthly. On October 4, 2024, the Company made a deposit of $34,376 for the September extension contribution. In October 2024,
$595,439 was paid from the trust account to redeeming stockholders in connection with the extension that took place at the September
19, 2024 stockholders meeting. On December 13, 2024, the Company made a deposit of $68,752 for the October and November extension contributions.
On December 23, 2024, the Company made a deposit of $34,376 for the December extension contribution. On February 27, 2025, the Company
made a deposit of $49,376 for the January extension contribution and a portion ($15,000) of the February extension contribution. On March
7, 2025, the Company deposited the remainder of the February extension contribution of $19,376, plus interest.
On March 18, 2025, the company commenced a special
meeting of stockholders, which was adjourned until March 21, 2025 without conducting any business. On March 21, 2025, the Company reconvened
the special meeting to approve an extension of time for the Company to consummate an initial business combination from March 22, 2025
to June 22, 2025. The meeting was adjourned until March 21, 2025, at which the stockholders approve the extension of the business combination
period until June 22, 2025. As a condition of the extension, the Company contributed $30,000 to the Trust Account, for the entire extension
period, on March 21, 2025.
Promissory
Note
On
January 10, 2024, the Company’s Board of Directors approved, and the Company amended, its Convertible Working Capital Promissory
Note (the “Note”) with the sponsor to increase the principal amount of the Note that could be drawn on to $1.5 million.
The amended and restated Note also allows for the conversion of the outstanding principal balance of the Note to be repaid in shares
of Company common stock at a price of $2.22 per share at the election of the sponsor.
On
May 31, 2024, the Company’s Board of Directors approved, and the Company second amended its Convertible Working Capital Promissory
Note with the sponsor to increase the principal amount of the Note that could be drawn on to $2.5 million. The second amended and
restated Note also allows for the conversion of the outstanding principal balance of the Note to be repaid in shares of Company common
stock at a price of $2.22 per share at the election of the sponsor.
Nasdaq
Delisting
On December 20, 2024, the Company received a written
notice from the Nasdaq Listing Qualifications Department of The Nasdaq Stock Market that the Company’s securities would be delisted
from The Nasdaq Stock Market by reason of the failure of the Company to complete its initial business combination by December 20, 2024
(36 months from the effectiveness of its IPO registration statement) as required by Listing Rule IM-5101-2. Accordingly, trading in the
Company’s Common Stock, Rights and Warrants was suspended at the opening of business on December 27, 2024 and a Form 25-NSE was
filed by Nasdaq with the Securities and Exchange Commission, which removed the Company’s securities from on the Nasdaq Stock Market.
The Company’s Common Stock, Rights and Warrants began to be quoted its on the Pink Markets operated on The OTC Market systems (“OTC
Market”) under the symbols “NVAC,” “NVACR” and “NVACW.”
45
Results
of Operations
As
of December 31, 2024, we had not commenced any operations. All activity for the period from April 19, 2021 (inception) through December
31, 2024 relates to our formation and the Initial Public Offering, and, subsequent to the IPO, identifying a target company for a Business
Combination. We have neither engaged in any operations nor generated any operating revenues to date. We will not generate any operating
revenues until after the completion of our initial Business Combination, at the earliest. We will generate non-operating income in the
form of interest income and unrealized gains from the cash and marketable securities held in the Trust Account. We expect to 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, 2024, we had
net loss of $8,711,619 which consisted of operating costs of $1,351,038, income tax provision of $80,513, change in fair value of our
warrant liabilities of $539,531 and change in fair value of convertible note of $7,165,953, offset by interest income on securities held
in the Trust Account of $425,416.
For the year ended December 31, 2023, we had
net income of $1,161,910, which consisted of interest income on securities held in the Trust Account of $2,248,538 and a gain of $701,148
for the change in fair value of our warrant liabilities and change in fair value of convertible note of $177,697, offset by operating
costs of $1,508,683, and income tax provision of $456,790.
Liquidity
and Going Concern
As of December 31, 2024, we had $16,204 in cash and a working capital
deficit of $12,254,024.
For the year ended December 31, 2024, cash used
in operating activities was $1,296,812. Net loss of $8,711,619 was impacted primarily by trust interest income of $425,416, change in
fair value of convertible note of $7,165,953 and change in fair value of our warrant liabilities of $539,531. Changes in operating assets
and liabilities reflected cash provided by operating activities of $134,739 during such period.
For
the year ended December 31, 2024, cash provided by investing activities included $485,350 of extension payments made to the trust, $204,459
of reimbursement from the trust of franchise and income tax payments and cash withdrawn from the trust of $3,248,878 in relation to stock
redemptions.
For the year ended December 31, 2024, cash used in financing activities
included $797,981 of proceeds from a convertible promissory note, $791,407 of an advance from Profusa and $3,248,878 paid out in relation
to stock redemptions.
For
the year ended December 31, 2023, cash used in operating activities was $2,064,860. Net income of $1,161,910 was impacted primarily by
trust interest income of $2,248,538, change in fair value of convertible note of $177,697, change in fair value of our warrant liabilities
of $701,148. Changes in operating assets and liabilities reflected a use of cash of $99,387 from operating activities during such period.
46
For
the year ended December 31, 2023, cash provided by investing activities included $438,360 of extension payments made to the trust, $1,192,438
of reimbursement from the trust of franchise and income tax payments and cash withdrawn from the trust of $184,845,836 in relation to
a partial stock redemption.
For
the year ended December 31, 2023, cash used in financing activities included $1,121,815 of proceeds from a convertible promissory note
and $184,845,836 of a partial stock redemption.
Prior
to the completion of the initial public offering, our liquidity needs had been satisfied through a capital contribution from the sponsor
of $25,000 for the founder shares to cover certain of the offering costs and the loan under an unsecured promissory note from the sponsor
of $204,841, which was fully paid upon the initial public offering. Subsequent to the consummation of the initial public offering and
private placement, our liquidity needs have been satisfied through the proceeds from the consummation of the private placement not held
in the trust account, and the drawdowns on the convertible promissory note.
In
order to finance transaction costs in connection with an intended Business Combination, the initial stockholders or an affiliate of the
initial stockholders or certain of the Company’s officers and directors may, but are not obligated to, provide the Company Working
Capital Loans (see Note 5).
On April 27, 2023, the Company signed a Convertible Working Capital
Promissory Note (“the Note”) with the Sponsor for $1,200,000. The Note is non-interest bearing and is due the earlier of the
consummation of a business combination or the date of liquidation. The Sponsor may elect to convert all or any portion of the unpaid principal
balance of this Note into warrants, at a price of $1.00 per warrant. On January 10, 2024, the Company’s Board of Directors approved,
and the Company amended the Note to increase the principal amount of the Note that could be drawn on to $1.5 million. The amended
and restated Note also allows for the conversion of the outstanding principal balance of the Note to be repaid in shares of Company common
stock at a price of $2.22 per share at the election of the sponsor. On May 31, 2024, the Company’s Board of Directors approved and
the Company entered into a second amendment of its Convertible Working Capital Promissory Note with the sponsor to increase the principal
amount of the Note that could be drawn on to $2.5 million. The second amended and restated Note also allows for the conversion of
the outstanding principal balance of the Note to be repaid in shares of Company common stock at a price of $2.22 per share at the
election of the sponsor. The Company had principal outstanding of $1,919,796 and is presenting the Note at fair value on its balance sheet
at December 31, 2024 in the amount of $8,908,052.
The Company has until June 22, 2025 to consummate
a Business Combination. It is uncertain that the Company will be able to consummate a Business Combination by June 22, 2025. If a Business
Combination is not consummated by the required date, there will be an option to either extend the time available for us to consummate
our initial business combination or execute a mandatory liquidation and subsequent dissolution. In connection with the Company’s
assessment of going concern considerations in accordance with the authoritative guidance in Financial Accounting Standards Board (“FASB”)
Accounting Standards Update (“ASU”) 2014-15, “Disclosure of Uncertainties About an Entity’s Ability to Continue
as a Going Concern,” management has determined that mandatory liquidation, and subsequent dissolution, should the Company be unable
to complete a business combination, raises substantial doubt about the Company’s ability to continue as a going concern for the
next twelve months from the issuance of these consolidated financial statements. No adjustments have been made to the carrying amounts
of assets and liabilities should the Company be required to liquidate after June 22, 2025.
Off-Balance
Sheet Financing Arrangements
We
did not have any off-balance sheet arrangements as of December 31, 2024 and 2023.
Contractual
Obligations
As
of December 31, 2024 and 2023, we did not have any long-term debt or capital or operating lease obligations.
We
entered into an administrative services agreement with our sponsor pursuant to which we pay for office space and secretarial and administrative
services provided to members of our management team, in an amount of $5,000 per month. As of June 30, 2023, the Company and the sponsor
terminated this agreement. For the year ended December 31, 2024, $0 had been incurred and billed relating to the administrative service
fee. For the year ended December 31, 2023, $30,000 had been incurred and billed relating to the administrative service fee. As of December
31, 2024 and 2023, $50,000 relating to the administrative service fee was not paid and recorded as due to related party.
47
NorthView previously engaged I-Bankers as an advisor
to assist in holding meetings to discuss the potential business combination and the target business’ attributes, introduce NorthView
to potential investors that are interested providing funding in connection with a Business Combination, assist NorthView in obtaining
stockholder approval for such business combination and assist NorthView with its press releases and public filings in connection with
such business combination (the “Business Combination Marketing Agreement”). In connection with such engagement, NorthView
agreed to pay I-Bankers and Dawson James a cash fee (the “Business Combination Fee”) for such services upon the consummation
of a business combination in an amount equal to 3.68% of the gross proceeds of its initial public offering (exclusive of any applicable
finders’ fees which might become payable). In connection with the Business Combination, NorthView, I-Bankers and Dawson James amended
the Business Combination Marketing Agreement to revise a portion of the Business Combination Fee to be partially payable in NorthView
securities and partially payable in cash upon the closing of the Merger with Profusa, with such securities to be subject to lock-up provisions.
Subsequently, on January 19, 2025, the agreement was modified by the parties such that the Company will be required to pay $2,000,000,
payable in cash, if a business combination is consummated.
Critical Accounting Estimates
Certain of our accounting policies require that
management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management
reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented
fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and
information available from outside sources, as appropriate. Some of the more significant estimates are in connection with determining
the fair value of the warrant liabilities and convertible promissory note. However, by their nature, judgments are subject to an inherent
degree of uncertainty, and, therefore, actual results could differ from our estimates.
Convertible
Promissory Note
The
fair value of the Company’s convertible promissory note is valued using a compound option formula on the convertible feature and
a present value of the host contract. The valuation technique requires inputs that are both unobservable and significant to the overall
fair value measurement. These inputs reflect management’s own assumption about the assumptions a market participant would use in
pricing the working capital loan.
Warrant
Liabilities
We
account for the warrants issued in connection with the IPO in accordance with the guidance contained in ASC 815-40. Such guidance provides
that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as a liability. Accordingly,
we classified each warrant as a liability at its fair value. This liability is subject to re-measurement at each balance sheet date.
With each such re-measurement, the warrant liabilities will be adjusted to fair value, with the change in fair value recognized in our
consolidated statements of operations.
In
determining the fair value of the Private Placement Warrants and the Representative’s Warrants assumptions related to expected
share-price volatility, expected life and risk-free interest rate are utilized. The Company estimates the volatility of its common stock
based on historical volatility that matches the expected remaining life of the warrants.
48
Recent
Accounting Standards
Standards Adopted
In November 2023, the FASB
issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The
amendments in this ASU require disclosures, on an annual and interim basis, of significant segment expenses that are
regularly provided to the chief operating officer decision maker (“CODM”), as well as the aggregate amount of other
segment items included in the reported measure of segment profit or loss. The ASU requires that a public entity disclose
the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in
assessing segment performance and deciding how to allocate resources. Public entities will be required to provide all annual
disclosures currently required by Topic 280 in interim periods, and entities with a single reportable segment are required
to provide all the disclosures required by the amendments in this ASU and existing segment disclosures in Topic 280.
This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-07, which was applied retrospectively
to all prior periods presented. See Note 10 for further details regarding this adoption.
Standards not yet Adopted
In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”),
which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional
information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income
taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions.
ASU 2023-09 will become effective for annual periods beginning after December 15, 2024. The Company is still reviewing the impact of
ASU 2023-09.
Our
management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have
a material effect on the accompanying consolidated financial statements.
JOBS
Act
The JOBS
Act contains provisions that, among other things, relax certain reporting requirements for qualifying public companies. We qualify
as an “emerging growth company” under the JOBS Act and are allowed to comply with new or revised accounting pronouncements
based on the effective date for private (not publicly traded) companies. We are electing to delay the adoption of new or revised accounting
standards, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our consolidated financial statements may not be comparable
to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Additionally,
we are in the process of evaluating the benefits of relying on the other reduced reporting requirements provided by the JOBS Act.
Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such
exemptions we may not be required to, among other things, (i) provide an independent registered public accounting firm’s attestation
report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure
that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection
Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the
independent registered public accounting firm’s report providing additional information about the audit and the consolidated financial
statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation
between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These
exemptions will apply for a period of five years following the completion of our initial public offering or until we are no longer an
“emerging growth company,” whichever is earlier.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk
We
are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise
required under this item.
Item 8.
Consolidated Financial Statements and Supplementary Data
This
information appears following Item 15 of this Report and is included herein by reference.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
49
ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation
of Disclosure Controls and Procedures
Disclosure
controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed
under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the
SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated
and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely
decisions regarding required disclosure. Our management evaluated, with the participation of our principal executive officer and principal
financial and accounting officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures
as of December 31, 2024, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers
concluded that, as of December 31, 2024, our disclosure controls and procedures were not effective.
We
do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and
procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there
are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure
controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all
our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions.
Management’s
Report on Internal Controls Over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f)
under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with
accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. 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 because the degree of compliance with policies or procedures
may deteriorate.
Under the supervision and with the participation
of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation
of the effectiveness of our internal control over financial reporting as of December 31, 2024, as such term is defined in Rules 13a-15(f)
and 15d-15(f) under the Exchange Act. Based upon their evaluation, our principal executive officer and principal financial and accounting
officer, concluded that our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act) were not effective as of December 31, 2024 due to the existence of material weaknesses. Our internal controls did not detect an error
in (i) the review of the convertible promissory notes valuation and warrant valuation (ii) proper recording of accounts payable and accrued
expenses, expensing or prepaid expenses and the calculation of our income tax provision.
We
do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and
procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the
disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there
are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure
controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all
our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain
assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions
This
Annual Report on Form 10-K does not include an attestation report of our registered public accounting firm due to a transition period
established by rules of the SEC for 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.
Changes
in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting
(as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting, other than as described above.
ITEM 9B. OTHER INFORMATION.
During the period covered
by this Annual Report, none of the Company’s directors or executive officers has adopted or terminated a Rule 10b5-1 trading arrangement
or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as
amended).
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
Directors and Executive Officers
Our directors and officers are as follows:
Name Age Title
Jack Stover 69 Co-Founder, Director, Chief Executive Officer
Fred Knechtel 63 Co-Founder, Director, Chief Financial Officer
Peter O’Rourke 50 Chairman of the Board, Independent Director
Ed Johnson 62 Independent Director
Lauren Chung 49 Independent Director
Jack Stover - Co-Founder, Director and Chief
Executive Officer
Jack Stover has served as
our Chief Executive Officer and director since inception. From June 2016 to November 2020, Mr. Stover served as president and chief executive
officer of Interpace Biosciences, Inc., a publicly-traded small cap life sciences company providing complex molecular analysis for the
early diagnosis and treatment of cancer and supporting the development of targeted therapeutics. From December 2015 until June 2016, Mr.
Stover served as interim president and chief executive officer of Interpace Biosciences, Inc. Mr. Stover on the board of directors of
Interpace Biosciences, Inc. from August 2005 until November 2020, and was chairman of the audit committee from August 2005 until December
2015. From June 2016 to December 2016, Mr. Stover was chairman of the audit committee and a member of the board of directors of Viatar
CTC Solutions, Inc. From 2004 to 2008, he served as chief executive officer, president and director of Antares Pharma, Inc., a publicly
held specialty pharmaceutical company (current market cap of ~$700M) then listed on the American Stock Exchange. In addition to other
relevant experience, Mr. Stover was also formerly a partner with PricewaterhouseCoopers (then Coopers and Lybrand), working in the bioscience
industry division in New Jersey. Mr. Stover received his B.A. in Accounting from Lehigh University and is a Certified Public Accountant.
We believe that Mr. Stover is well-qualified to serve as a director of our company based on Mr. Stover’s experience holding senior
leadership positions in the life sciences industry, and his specific experience and skills in the areas of general operations, financial
operations and administration.
Fred Knechtel - Co-Founder, Director and Chief
Financial Officer
Fred Knechtel has served as
our Chief Financial Officer and director since inception. From August 2022 to August 2023, Mr. Knechtel served as chief financial officer
of DiamiR Biosciences. From January 2020 to January 2021, Mr. Knechtel served as chief financial officer of Interpace Biosciences, Inc.
From June 2018 to December 2018, Mr. Knechtel served as chief financial officer of GENEWIZ, Inc. From November 2014 to November 2017,
Mr. Knechtel served as group chief financial officer of Sims Metal Management. From November 2009 to October 2014, Mr. Knechtel served
as chief financial officer of Remy International, Inc. Mr. Knechtel received a Bachelor of Engineering from Stony Brook University and
a M.B.A in Finance from Hofstra University. We believe that Mr. Knechtel is well-qualified to serve as a director of our company based
on Mr. Knechtel’s experience holding high level executive positions in the life sciences industry, and his financial and accounting
experience.
Peter O’Rourke - Chairman of the Board
Peter O’Rourke has served
as our chairman of the board since the effective date of our initial public offering. Since December 2018, Mr. O’Rourke has served
as Managing Partner at TCI Partners, a consulting firm focused on healthcare, aerospace and the public sector. From November 2020-August
2022, Mr. O’Rourke was President and Director for Western Magnesium, where he created the U.S. operations strategy and team during
the successful technology pilot phase of the company, and led enterprise and defense business development, government affairs, and communications.
From January 2017 to December 2018, Mr. O’Rourke served as the Acting Secretary and Chief of Staff of the Department of Veteran
Affairs. From May 2015 to July 2016, Mr. O’Rourke served as a principal of Calibre Systems, Inc., a consulting firm. Mr. O’Rourke
also served in both the U.S. Navy and Air Force. Mr. O’Rourke served as Director for AXIM Biotechnologies from July 2020 to present.
AXIM is a vertically integrated research and development company focused on improving the landscape for the diagnosis of ophthalmological
conditions such as Dry Eye Disease (DED) through rapid diagnostic tests. Mr. O’Rourke received a Bachelor of Arts in Political Science
from the University of Tennessee in Knoxville as well as a Master of Science in Logistics and Supply Chain Management from the United
States Air Force’s Institute of Technology. We believe that Mr. O’Rourke is well-qualified to serve as a director of our company
based on Mr. O’Rourke’s leadership and consulting experience in the healthcare industry.
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Ed Johnson - Director
Ed Johnson has served as a
director since the effective date of our initial public offering. Since March 2020, Mr. Johnson has served as the chief executive officer
of iONEBIOUSA Molecular COVID-19 Technologies, which he founded. Since March 2018, Mr. Johnson has served as chief executive officer of
Johnson Global Ventures, LLC. Since March 2018, Mr. Johnson has served on the Advisory Board to Advantage Capital Partners. Mr. Johnson
received a Bachelor of Science in Marketing from Florida State University and a M.B.A. from Nova Southeastern University. We believe that
Mr. Johnson is well-qualified to serve as a director of our company based on Mr. Johnson’s healthcare focused experience.
Lauren Chung - Director
Lauren Chung has served as
a director since the effective date of our initial public offering. Since November 2019, Dr. Chung has served as chief executive officer
of MINLEIGH LLC, identifying, evaluating and partnering with companies for investments and strategic, operational, and commercial opportunities,
and venture partner at Yozma Group. From May 2017 to November 2019, Dr. Chung was an Equity Research Managing Director at WestPark Capital.
From August 2016 to April 2017, Dr. Chung as in equity research at Maxim Group. Previously, Dr. Chung founded and served as chief operating
officer and chief compliance officer of Tokum Capital Management, a global healthcare investment fund. Prior to that, she managed healthcare
investment portfolios at institutional investment firms. Dr. Chung serves as director of Todos Medical Ltd. Dr. Chung previously served
as director of Cure Pharmaceutical Holding Corp from August 2019 until November 2021, UltraSight, Inc from December 2020 to December 2021,
and AdiTxt, Inc. from June 2021 until December 2021. Dr. Chung holds a Ph.D. in Neuropathology from Columbia University-College of Physicians
& Surgeons, an M.B.A from Columbia Business School, and a BA with honors in Biochemistry and Economics from Wellesley College. We
believe that Dr. Chung is well-qualified to serve as a director of our company based on Dr. Chung’s extensive corporate board and
investment analysis experience.
Number of Officers and Directors
Our board of directors consists
of five directors. We may not hold an annual meeting of stockholders until after we consummate our initial business combination. Our officers
are elected by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office.
Our board of directors is authorized to appoint persons to the offices set forth in our bylaws as it deems appropriate.
Director Independence
The Nasdaq listing standards
require that a majority of our board of directors be independent. An “independent director” is defined generally as a person
other than an officer or employee of the company or its subsidiaries or any other individual having a relationship which in the opinion
of the company’s board of directors, would interfere with the director’s exercise of independent judgment in carrying out
the responsibilities of a director. Our board of directors have determined that Dr. Chung, Mr. Johnson and Mr. O’Rourke are “independent
directors” as defined in the Nasdaq listing standards and applicable SEC rules. Our independent directors have regularly scheduled
meetings at which only independent directors are present.
Committees of the Board of Directors
Our board of directors has
three standing committees: an audit committee, a compensation committee and a nominating and corporate governance committee. Each committee
operates under a charter that has been approved by our board and has the composition and responsibilities described below. Our audit committee,
compensation committee and nominating and corporate governance committee is composed solely of independent directors.
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Audit Committee
The members of our audit committee
are Dr. Chung, Mr. Johnson and Mr. O’Rourke. Dr. Chung serves as chair of the audit committee. Under the Nasdaq listing standards
and applicable SEC rules, we are required to have at least three members on the audit committee. The rules of Nasdaq and Rule 10A-3 of
the Exchange Act require that the audit committee of a listed company be comprised solely of independent directors. Dr. Chung, Mr. Johnson
and Mr. O’Rourke qualify as independent directors under applicable rules. Each member of the audit committee is financially literate
and our board of directors has determined that Dr. Chung qualifies as an “audit committee financial expert” as defined in
applicable SEC rules.
We have adopted an audit committee
charter, which details the principal functions of the audit committee, including:
Compensation Committee
The members of our Compensation
Committee are Mr. Johnson, Dr. Chung, and Mr. O’Rourke. Mr. Johnson serves as chair of the compensation committee. Under the Nasdaq
listing standards and applicable SEC rules, we are required to have at least two members on the compensation committee, all of whom must
be independent.
We have adopted a compensation
committee charter, which details the principal functions of the compensation committee, including:
● reviewing our executive compensation policies and plans;
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The charter also provides
that the compensation committee may, in its sole discretion, retain or obtain the advice of a compensation consultant, legal counsel or
other adviser and will be directly responsible for the appointment, compensation and oversight of the work of any such adviser. However,
before engaging or receiving advice from a compensation consultant, external legal counsel or any other adviser, the compensation committee
will consider the independence of each such adviser, including the factors required by Nasdaq and the SEC.
Nominating and Corporate Governance Committee
The members of our nominating
and corporate governance are Dr. Chung, Mr. O’Rourke and Mr. Johnson. Dr. Chung serves as chair of the nominating and corporate
governance committee.
The primary purposes of our
nominating and corporate governance committee will be to assist the board in:
The nominating and corporate
governance committee is governed by a charter that complies with the rules of Nasdaq.
Director Nominations
Our nominating and corporate
governance committee will recommend to the board of directors candidates for nomination for election at the annual meeting of the stockholders.
The board of directors will also consider director candidates recommended for nomination by our stockholders during such times as they
are seeking proposed nominees to stand for election at the next annual meeting of stockholders (or, if applicable, a special meeting of
stockholders).
We have not formally established
any specific, minimum qualifications that must be met or skills that are necessary for directors to possess. In general, in identifying
and evaluating nominees for director, the board of directors considers educational background, diversity of professional experience, knowledge
of our business, integrity, professional reputation, independence, wisdom, and the ability to represent the best interests of our stockholders.
Prior to our initial business combination, holders of our public shares will not have the right to recommend director candidates for nomination
to our board of directors.
Code of Ethics
We have adopted a Code of
Ethics applicable to our directors, officers and employees. We have filed a copy of our form of Code of Ethics and our audit committee
charter as exhibits to the registration statement we filed in connection with our initial public offering. You are able to review these
documents by accessing our public filings at the SEC’s website at www.sec.gov. In addition, a copy of the Code of Ethics
will be provided without charge upon request from us. We intend to disclose any amendments to or waivers of certain provisions of our
Code of Ethics in a Current Report on Form 8-K.
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Conflicts of Interest
Each of our officers and directors
presently has, and any of them in the future may have additional, fiduciary or contractual obligations to another entity pursuant to which
such officer or director is or will be required to present a business combination opportunity to such entity. Accordingly, if any of our
officers or directors becomes aware of a business combination opportunity which is suitable for an entity to which he or she has then-current
fiduciary or contractual obligations, he or she will honor these fiduciary obligations under applicable law. We do not believe, however,
that the fiduciary duties or contractual obligations of our officers or directors will materially affect our ability to complete our business
combination. Our amended and restated certificate of incorporation provides that we renounce our interest in any corporate opportunity
offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director
or officer of our company and such opportunity is one we are legally and contractually permitted to undertake and would otherwise be reasonable
for us to pursue.
Potential investors should
also be aware of the following other potential conflicts of interest:
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