OneMedNet Corp 10-K/A

Item 8. Financial Statements and Supplementary Data ONEMEDNET CORPORATION INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS Page Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations F-3 Consolidated Statements of Changes in Temporary Equity and Stockholders’ Deficit F-4 Consolidated Statements of Cash Flows F-5 Notes to the Consolidated Financial Statements F-6 46 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of OneMedNet Corporation Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of OneMedNet Corporation (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of operations, changes in temporary equity and stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Restatement to Correct Previously Issued Consolidated Financial Statements As discussed in Note 2 to the consolidated financial statements, the 2023 and 2022 consolidated financial statements have been restated to correct misstatements. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring operating losses and negative cash flows from operating activities since inception and expects to continue incurring operating losses and negative cash flows in the future. These matters raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated 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 audit to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ WithumSmith+Brown, PC We have served as the Company’s auditor since 2024. East Brunswick, New Jersey November 4, 2024 PCAOB ID Number 100 F- 1 ONEMEDNET CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) 2023 2022 As of December 31, 2023 2022 (As Restated) (As Restated) Assets Current assets: Cash and cash equivalents $ 47 $ 271 Accounts receivable, net of allowance for credit losses of $ 0 and $ 125,233 at December 31, 2023 and December 31, 2022, respectively 152 19 Prepaid expenses and other current assets 166 101 Total current assets 365 391 Deferred transaction costs - 815 Property and equipment, net 99 83 Total assets $ 464 $ 1,289 Liabilities, temporary equity and stockholders’ deficit Current liabilities: Accounts payable & accrued expenses $ 4,682 $ 1,177 Deferred revenues 254 184 Loan extensions 2,992 - Convertible promissory notes - 24,743 PIPE Notes 1,637 - Deferred underwriter fee payable 3,525 - Other current liabilities 283 - Total current liabilities 13,373 26,104 Convertible promissory notes - 1,500 Loan, related party 465 - Other long-term liabilities 68 44 Total liabilities 13,906 27,648 Commitments and contingencies (Note 13) - - Temporary equity: Preferred Series A-2, par value $ 0.0001 , 4,200,000 shares authorized, and 0 and 3,415,923 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively - 9,634 Preferred Shares A-1, par value $ 0.0001 , 4,400,000 shares authorized, and 0 and 2,839,957 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively - 8,010 Total temporary equity - 17,644 Stockholders’ (deficit) equity: Preferred Stock, par value $ 0.0001 , 1,000,000 and 0 shares authorized at December 31, 2023 and 2022, respectively; no shares issued and outstanding at December 31, 2023 and 2022 - - Common Stock, par value $ 0.0001 , 100,000,000 shares authorized and 23,572,232 and 4,033,170 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 2 - Additional paid-in-capital 77,996 13,657 Accumulated deficit ( 91,440 ) ( 57,660 ) Total stockholders’ deficit ( 13,442 ) ( 26,359 ) Total liabilities, temporary equity, and stockholders’ deficit $ 464 $ 1,289 The accompanying notes are an integral part of these consolidated financial statements. F- 2 ONEMEDNET CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) 2023 2022 For the year ended December 31, 2023 2022 (As Restated) (As Restated) Revenue Subscription revenue $ 878 $ 678 Web imaging revenue 143 475 Total revenue 1,021 1,153 Cost of revenue 1,150 1,513 Gross margin ( 129 ) ( 360 ) Operating expenses General and administrative 3,544 4,806 Sales and marketing 1,115 958 Research and development 2,065 1,591 Total operating expenses 6,724 7,355 Loss from operations ( 6,853 ) ( 7,715 ) Other expense (income), net Interest expense 11 - Stock warrant expense 9,207 8,073 Change in fair value of warrants ( 129 ) - Change in fair value of PIPE Notes 269 - Change in fair value of convertible promissory notes 17,517 14,616 Other expense 34 30 Total other expense, net 26,909 22,719 Loss before income taxes $ ( 33,762 ) $ ( 30,434 ) Income tax expense 18 17 Net loss $ ( 33,780 ) $ ( 30,451 ) Earnings per share: Basic and diluted net loss per common share outstanding $ ( 4.77 ) $ ( 7.66 ) Basic and diluted weighted average number of common shares outstanding 7,084,068 3,973,897 The accompanying notes are an integral part of these consolidated financial statements. F- 3 ONEMEDNET CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT (In thousands, except share data) Shares Amount Shares Amount Amount Shares Amount Capital Deficit Deficit Total Series A-2 Series A-1 Temporary Additional Total Preferred Stock Preferred Stock Equity Common Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Amount Shares Amount Capital Deficit Deficit Balances as of December 31, 2021 3,853,797 $ 9,634 3,204,000 $ 8,010 $ 17,644 4,342,666 $ - $ 2,513 $ ( 27,209 ) $ ( 7,052 ) Retroactive application of recapitalization due to the Business Combination ( 437,874 ) - ( 364,043 ) - - ( 493,420 ) - - - - Issuance of common shares in exchange for services - - - - - 177,276 - - - - Exercise of stock options - - - - - 6,648 - 8 - 8 Issuance of OMN warrants in conjunction with convertible promissory notes - - - - - - - 8,073 - 8,073 Issuance of OMN warrants to board of directors - - - - - - 1,198 - 1,198 Stock-based compensation expense - - - - - - - 1,865 - 1,865 Net loss - - - - - - - - ( 30,451 ) ( 30,451 ) Balances as of December 31, 2022 (Restated) 3,415,923 $ 9,634 2,839,957 $ 8,010 $ 17,644 4,033,170 $ - $ 13,657 $ ( 57,660 ) $ ( 26,359 ) Beginning balance 3,415,923 $ 9,634 2,839,957 $ 8,010 $ 17,644 4,033,170 $ - $ 13,657 $ ( 57,660 ) $ ( 26,359 ) Issuance of common shares in exchange for services - - - - - 265,914 - - - - Issuance of Series A-2 Preferred Stock 5,673 16 - - 16 - - - - 16 Issuance of OMN warrants in conjunction with convertible promissory notes - - - - - - - 9,207 - 9,207 Exercise of OMN stock options upon Business Combination - - - - - 543,056 - - - - Exercise of OMN warrants upon Business Combination - - - - - 3,420,945 - - - - Conversion of OMN convertible promissory notes upon Business Combination - - - - - 5,475,362 1 47,935 - 47,936 Conversion of preferred stock to common stock upon Business Combination ( 3,421,596 ) ( 9,650 ) ( 2,839,957 ) ( 8,010 ) ( 17,660 ) 6,261,553 1 17,659 - - Issuance of common stock upon Business Combination with Data Knights, net of liabilities assumed and transaction costs - - - - - 3,572,232 - ( 11,937 ) - ( 11,937 ) Stock-based compensation expense - - - - - - - 1,475 - 1,475 Net loss - - - - - - - - ( 33,780 ) ( 33,780 ) Balances as of December 31, 2023 (Restated) - $ - - $ - $ - 23,572,232 $ 2 $ 77,996 $ ( 91,440 ) $ ( 13,442 ) Ending balance - $ - - $ - $ - 23,572,232 $ 2 $ 77,996 $ ( 91,440 ) $ ( 13,442 ) The accompanying notes are an integral part of these consolidated financial statements. F- 4 ONEMEDNET CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 2023 2022 For the year ended December 31, 2023 2022 (As Restated) (As Restated) Cash flows from operating activities: Net loss $ ( 33,780 ) $ ( 30,451 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 28 25 Stock-based compensation expense 1,475 1,865 Stock warrant expense 9,207 8,073 Change in fair value of warrant liabilities ( 129 ) - Board of director warrant expense - 1,198 Change in fair value of PIPE Notes 269 - Change in fair value of convertible promissory notes 17,517 14,616 Non-cash interest 11 - Change in operating assets and liabilities: Accounts receivable ( 133 ) 73 Prepaid expenses and other current assets ( 43 ) ( 59 ) Accounts payable & accrued expenses 717 415 Deferred revenues 70 ( 458 ) Net cash used in operating activities ( 4,791 ) ( 4,703 ) Cash flows from investing activities: Purchases of property and equipment ( 44 ) ( 58 ) Net cash used in investing activities ( 44 ) ( 58 ) Cash flows from financing activities: Proceeds from issuance of shareholder loans 454 - Proceeds from issuance of pipe notes 1,500 - Proceeds from issuance of convertible notes 4,175 5,140 Proceeds from issuance of Series A-2 preferred stock 16 - Proceeds from exercise of stock options - 8 Business Combination costs ( 1,534 ) ( 815 ) Net cash provided by financing activities 4,611 4,333 Net decrease in cash and cash equivalents ( 224 ) ( 428 ) Cash and cash equivalents at beginning year 271 699 Cash and cash equivalents at end of year $ 47 $ 271 Supplemental disclosures of non-cash investing and financing activities: Common shares issued to preferred shareholders $ 17,659 $ - Common shares related to convertible promissory notes $ 47,935 $ - Common shares issued to Data Knights shareholders $ ( 11,937 ) $ - The accompanying notes are an integral part of these consolidated financial statements. F- 5 ONEMEDNET CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Operations OneMedNet Corporation (the “Company”) is a healthcare software company with solutions focused on digital medical image management, exchange, and sharing. The Company was founded in Delaware on November 20, 2015. The Company has been solely focused on creating solutions that simplify digital medical image management, exchange, and sharing. The Company has one wholly-owned subsidiary, OneMedNet Technologies (Canada) Inc., incorporated on October 16, 2015 under the provisions of the Business Corporations Act of British Columbia whose functional currency is the Canadian dollar. The Company’s headquarters location is Eden Prairie, Minnesota. On November 7, 2023, we consummated a merger (the “Merger”) following the approval at the special meeting of the shareholders of Data Knights Acquisition Corp. (“Data Knights”), a Delaware corporation, held on October 17, 2023 (the “Special Meeting”), of the agreement and plan of merger, dated as of April 25, 2022 (the “Merger Agreement”), by and among Data Knights, Data Knights Merger Sub, Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of Data Knights, OneMedNet Solutions Corporation (formerly named OneMedNet Corporation) (“Legacy ONMD”), Data Knights, LLC, a Delaware limited liability company (“Sponsor”), and Paul Casey, in his capacity as representative of the stockholders of Legacy ONMD. Pursuant to the Merger Agreement, Merger Sub merged with and into Legacy ONMD, with Legacy ONMD surviving the Merger as a wholly-owned subsidiary of Data Knights (such transactions contemplated by the Merger Agreement, the “Business Combination”). Risks and Uncertainties The Company is subject to risks common to companies in the markets it serves, including, but not limited to, global economic and financial market conditions, fluctuations in customer demand, acceptance of new products, development by its competitors of new technological innovations, dependence on key personnel, and protection of proprietary technology. Going Concern and Management’s Plan The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or amounts and classification of liabilities that may result from the outcome of this uncertainty. The Company has incurred recurring net losses since its inception, including $ 33.8 million and $ 30.5 million for the years ended December 31, 2023 and 2022, respectively. In addition, the Company had an accumulated deficit of $ 91.4 million as of December 31, 2023. The Company’s cash balance of $ 47 thousand is not adequate to fund its operations through at least twelve months from the date these consolidated financial statements were available for issuance. Therefore, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. To continue in existence and expand its operations, the Company will be required to, and management plans to, raise additional working capital through an equity or debt offering and ultimately attain profitable operations to fulfill its operating and capital requirements for at least 12 months from the date of the issuance of the consolidated financial statements. However, the Company may not be able to secure such financing in a timely manner or on favorable terms, if at all. Furthermore, if the Company issues equity securities to raise additional funds, its existing stockholders may experience dilution, and the new equity securities may have rights, preferences and privileges senior to those of the Company’s existing stockholders. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent upon its ability to continue receiving working capital cash payments and generating cash flow from operations. F- 6 Nasdaq Notices On February 7, 2024, the Company received written notice (the “MVLS Nasdaq Notice”) from the Nasdaq Stock Market (“Nasdaq”) indicating that for the preceding 30 consecutive business days, the market value of the Company’s listed securities (“MVLS”) did not maintain a minimum market value of $50,000,000 (the “Minimum MVLS Requirement”) as required by Nasdaq Listing Rule 5450(b)(2)(A). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company had a compliance period of 180 calendar days, or until August 5, 2024, to regain compliance with the Minimum MVLS Requirement. Compliance could have been achieved if the Company’s MVLS closed at $50,000,000 or more for a minimum of ten consecutive business days at any time during the 180-day compliance period, in which case Nasdaq would notify the Company of its compliance, and the matter would be closed. If the Company did not regain compliance with the Minimum MVLS Requirement by August 5, 2024, Nasdaq would have provided written notification to the Company that its Common Stock was subject to delisting. At that time, the Company could have appealed the relevant delisting determination to a hearings panel pursuant to the procedures set forth in the applicable Nasdaq Listing Rules. The Company sought to apply for a transfer to The Nasdaq Capital Market, and on August 15, 2024, the Company received approval from Nasdaq to list the Common Stock and Public Warrants on The Nasdaq Capital Market. The Common Stock and Public Warrants were transferred from The Nasdaq Global Market to The Nasdaq Capital Market at the opening of business on August 19, 2024, and continue to trade under the symbols “ONMD” and “ONMDW,” respectively. On March 26, 2024, the Company received written notice (the “Bid Price Nasdaq Notice”) from Nasdaq notifying the Company that, for the 30 consecutive business days prior to the date of the Bid Price Nasdaq Notice, the Common Stock did not meet the minimum bid price of $1.00 per share requirement (the “Minimum Bid Price Requirement”) as required by Nasdaq Listing Rule 5450(a)(1). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company had a compliance period of 180 calendar days, or until September 23, 2024, to regain compliance with the Minimum Bid Price Requirement. Compliance could have been achieved if the closing bid price of the Company’s Common Stock was at least $1 for a minimum of ten consecutive business days. On June 10, 2024, the Nasdaq staff determined that for the prior 11 consecutive business days, from May 23, 2024, to June 7, 2024, the closing bid price of the Company’s Common Stock had been at $1.00 per share or greater. Accordingly, the Company regained compliance with Listing Rule 5450(a)(1), and this matter was closed. On June 20, 2024, the Company received a delinquency notification letter from Nasdaq (the “Q1 2024 Form 10-Q Nasdaq Notice”), which indicated that, as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2024 (the “Q1 2024 Form 10-Q”) by the applicable due date, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1) (the “Periodic Report Rule”), which requires Nasdaq-listed companies to timely file all required periodic financial reports with the U.S. Securities and Exchange Commission (“SEC”). The Q1 2024 Form 10-Q Nasdaq Notice stated that the Company had 60 calendar days to submit to Nasdaq a plan to regain compliance with the Periodic Report Rule. If Nasdaq accepted the Company’s plan to regain compliance, then Nasdaq could have granted the Company up to 180 calendar days from the prescribed due date of the Form 10-Q to regain compliance. On September 9, 2024, the Company received a delinquency notification letter from Nasdaq (the “Q2 2024 Form 10-Q Nasdaq Notice”), which indicated that, as a result of the Company’s delay in filing its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 (together with the Q1 2024 Form 10-Q, the “Delinquent Filings”) by the applicable due date, the Company was not in compliance with the Periodic Report Rule, which requires Nasdaq-listed companies to timely file all required periodic financial reports with the SEC. On September 10, 2024, the Company received a notification letter from Nasdaq the “Nasdaq Compliance Plan Notice”), which responded to the Company’s plan to regain compliance regarding its delinquent Q1 2024 Form 10-Q, granting the Company an exception until October 31, 2024 to file the Delinquent Filings with the SEC and regain compliance with the Periodic Report Rule. In the event the Company does not regain compliance with the Periodic Report Rule by October 31, 2024, Nasdaq will provide written notification that the Company’s securities will be delisted. At that time, the Company may appeal Nasdaq’s determination to a hearings panel. F- 7 On October 8, 2024, the Company received a delinquency notification letter from Nasdaq (the “Second MVLS Nasdaq Notice”) indicating that for the preceding 30 consecutive business days, the Company’s MVLS was below the minimum of $35 million required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(b)(2). The staff at Nasdaq also noted in the Second MVLS Nasdaq Notice that the Company is not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires listed companies to maintain a minimum stockholders’ equity of $2.5 million, and Nasdaq Listing Rule 5550(b)(3), which requires listed companies to maintain a minimum of $500,000 of net income from continuing operations. In accordance with Nasdaq listing rule 5810(c)(3)(C), the Company has 180 calendar days, or until April 7, 2025, to regain compliance with the Minimum MVLS Requirement. Compliance may be achieved if the Company’s MVLS closes at $35 million or more for a minimum of ten consecutive business days at any time during the 180-day compliance period, in which case Nasdaq will notify the Company of its compliance and the matter will be closed, If the Company does not regain compliance by the end of the 180-day compliance period, Nasdaq staff will provide written notice to the Company that its securities are subject to delisting. At that time, the Company may appeal any such delisting determination to a hearings panel. On October 16, 2024, the Company received a delinquency notification letter from Nasdaq (the “Second Bid Price Nasdaq Notice,” and together with the MVLS Nasdaq Notice, the Bid Price Nasdaq Notice, the Q1 2024 Form 10-Q Nasdaq Notice, the Q2 2024 Form 10 Q Nasdaq Notice, the Nasdaq Compliance Plan Notice, and the Second MVLS Nasdaq Notice, the “Nasdaq Notices”) notifying the Company that, for the 30 consecutive business days prior to the date of the Second Bid Price Nasdaq Notice, the Common Stock did not meet the Minimum Bid Price Requirement as required by Nasdaq Listing Rule 5550(a)(2). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has 180 calendar days, or until April 14, 2025, to regain compliance. The Second Bid Price Nasdaq Notice notes that to regain compliance, the Common Stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days at any time during the 180-day compliance period. In the event the Company does not regain compliance by the end of the 180-day compliance period, the Company may be eligible for additional time to regain compliance. To qualify for additional time, the Company must (i) meet the continued listing requirement for the market value of its publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement and (ii) provide written notice of its intention to cure the deficiency during the second compliance period by effecting a reverse stock split, if necessary. If the Company meets these requirements, the Company may be granted an additional 180 calendar days to regain compliance. However, if it appears to Nasdaq that the Company will be unable to cure the deficiency, or if the Company is not otherwise eligible for the additional cure period, Nasdaq will provide written notice to the Company that its securities are subject to delisting. At that time, the Company may appeal any such delisting determination to a hearings panel. The Nasdaq Notices received have no immediate effect on the Company’s continued listing on the Nasdaq Capital Market or the trading of the Company’s Common Stock, subject to the Company’s compliance with the other continued listing requirements. The Company is presently evaluating potential actions to regain compliance with all applicable requirements for continued listing on the Nasdaq Capital Market. There can be no assurance that the Company will be successful in maintaining the listing of its Common Stock on the Nasdaq Capital Market. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business. The accompanying consolidated financial statements include the accounts of OneMedNet Corporation, formerly Data Knights, and its wholly-owned subsidiary, OneMedNet Technologies Canada Ltd. All intercompany transactions and balances have been eliminated in consolidation. Restatement to Previously Issued Consolidated Financial Statements The Company’s consolidated financial statements for the years ended December 31, 2023 and 2022, as previously filed with the SEC on April 9, 2024, have been restated. The previously filed consolidated financial statements did not reflect the proper accounting for the business combination transaction, convertible notes, warrants, preferred stock, stock-based compensation expense, and accounts payable and accrued expenses. The Company has also restated related amounts within the accompanying footnotes to the consolidated financial statements to conform to the restated amounts in the consolidated financial statements. The following consolidated financial statements provide a reconciliation from the originally “as reported” financial information to the now “as restated” consolidated financial information as of and for the years ended December 31, 2023 and 2022 (in thousands, except share and per share data). F- 8 Reconciliation of the Original and Restated Balance Sheet as of December 31, 2023 Schedule of Restatement of Financial Statements As of December 31, 2023 As Previously Reported Restatement Adjustments Reclassification Adjustments ( 1 ) As Restated Ref. Assets Current assets: Cash and cash equivalents $ 47 $ - $ - $ 47 Investments held in trust - - - - Accounts receivable, net of allowance for credit losses of $ 0 and $ 125,233 at December 31, 2023 and December 31, 2022, respectively 152 - - 152 Prepaid expenses and other current assets 166 - - 166 Total current assets 365 - - 365 Deferred transaction costs - - - - Property and equipment, net 99 - - 99 Total assets $ 464 $ - $ - $ 464 Liabilities, temporary equity and stockholders’ deficit Current liabilities: Accounts payable & accrued expenses $ 4,184 $ 498 $ - $ 4,682 2 Loan amount due to related parties 11 - ( 11 ) - Excise tax 113 - ( 113 ) - Deferred revenues 254 - - 254 Convertible promissory notes - - - - Loan extensions 2,992 - - 2,992 Loan payable 39 - ( 39 ) - Canada Emergency Business Loan Act 45 - ( 45 ) - Income tax payable 120 - ( 120 ) - Deferred underwriter fee payable 3,525 - - 3,525 PIPE notes 1,550 87 - 1,637 3 Other current liabilities - - 283 283 Franchise tax payable - - - - Total current liabilities 12,833 585 ( 45 ) 13,373 Convertible promissory notes - - - Canada Emergency Business Loan Act - - - - Accrued interest Loan, related party 465 - - 465 Deferred underwriter fee payable - - - - Working capital loan - - - - Warrant liabilities 25 - ( 25 ) - Other long-term liabilities - ( 2 ) 70 68 4 Total liabilities 13,323 583 - 13,906 Commitments and contingencies (Note 13) - - - - Temporary equity: Preferred Series A-2, par value $ 0.0001 , 4,200,000 shares authorized, and 0 and 3,415,923 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively - - - - Preferred Shares A-1, par value $ 0.0001 , 4,400,000 shares authorized, and 0 and 2,839,957 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively - - - - Total temporary equity - - - - Stockholders’ (deficit) equity: Preferred Stock, par value $ 0.0001 , 1,000,000 and 0 shares authorized at December 31, 2023 and 2022, respectively; no shares issued and outstanding at December 31, 2023 and 2022, respectively - - - - Common Stock, par value $ 0.0001 , 100,000,000 shares authorized and 23,572,232 and 4,033,170 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 3 ( 1 ) - 2 Additional paid-in-capital 42,221 35,775 - 77,996 5 Accumulated deficit ( 55,083 ) ( 36,357 ) - ( 91,440 ) 6 Total stockholders’ deficit ( 12,859 ) ( 583 ) - ( 13,442 ) Total liabilities, temporary equity, and stockholders’ deficit $ 464 $ - $ - $ 464 1 Represents certain reclassification adjustments made to the consolidated balance sheet that are separate from the restatement but were included herein for completeness purposes. 2 Impact of errors related to: (i) improper cutoff of miscellaneous vendor payables; and (ii) under-accruals related to the year-end bonus and taxes. 3 Impact of errors related to the valuation of the PIPE notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO. 4 Impact of errors related to the valuation of liability-classified warrants. 5 Impact of errors related to the accounting for the Business Combination. Management did not properly assess the Business Combination and associated recapitalization of the shares. Additionally, an impairment charge was erroneously included in the initial filed financial statements. 6 Cumulative and current year impacts of corrections of errors to the consolidated statements of operations, primarily related to historical adjustments within fair value of convertible debt, warrants and stock-based compensation expense. F- 9 Reconciliation of the Original and Restated Balance Sheet as of December 31, 2022 As Previously Reported Restatement Adjustments Reclassification Adjustments 1 As Restated Ref. As of December 31, 2022 As Previously Reported Restatement Adjustments Reclassification Adjustments (1) As Restated Ref. Assets Current assets: Cash and cash equivalents $ 302 $ ( 31 ) $ - $ 271 2 Investments held in trust 29,029 ( 29,029 ) - - 2 Accounts receivable, net of allowance of $ 0 and $ 125,233 at December 31, 2023 and December 31, 2022, respectively 19 - - 19 Prepaid expenses and other current assets 101 - - 101 Total current assets 29,451 ( 29,060 ) - 391 Deferred transaction costs 900 ( 85 ) - 815 3 Property and equipment, net 83 - - 83 Total assets $ 30,434 $ ( 29,145 ) $ - $ 1,289 Liabilities, temporary equity and stockholders’ deficit Current liabilities: Accounts payable & accrued expenses $ 2,814 ( 1,637 ) $ - $ 1,177 4 Loan amount due to related parties 12 ( 12 ) - - 2 Deferred revenues 184 - - 184 Convertible promissory notes 8,490 16,253 - 24,743 5 Income tax payable 215 ( 215 ) - - 2 Franchise tax payable 70 ( 70 ) - - 2 Total current liabilities 11,785 14,319 - 26,104 Convertible promissory notes 1,500 - 1,500 Canada Emergency Business Loan Act 44 - ( 44 ) - Accrued interest 691 ( 691 ) - - 5 Warrant liabilities 363 ( 363 ) - - 2 Deferred underwriter fee payable 4,025 ( 4,025 ) - - 2 Working capital loan 207 ( 207 ) - - 2 Extension loans 2,546 ( 2,546 ) - - 2 Other long-term liabilities - - 44 44 Total liabilities 21,161 6,488 - 27,648 Commitments and contingencies (Note 13) 28,750 ( 28,750 ) - - Temporary equity: Preferred Series A-2, par value $ 0.0001 , 4,200,000 shares authorized, and 0 and 3,415,923 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively - 9,634 - 9,634 6 Preferred Shares A-1, par value $ 0.0001 , 4,400,000 shares authorized, and 0 and 2,839,957 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively - 8,010 - 8,010 6 Total temporary equity - 17,644 - 17,644 Stockholders’ (deficit) equity: Common Stock, par value $ 0.0001 , 100,000,000 shares authorized and 23,572,232 and 4,033,170 shares issued and outstanding as of December 31, 2023 and December 31, 2022, respectively 1 ( 1 ) - - Additional paid-in-capital 24,032 ( 10,375 ) - 13,657 7 Accumulated deficit ( 43,510 ) ( 14,150 ) - ( 57,660 ) Total stockholders’ deficit 9,273 ( 35,632 ) - ( 26,359 ) Total liabilities, temporary equity, and stockholders’ deficit $ 30,434 $ ( 29,145 ) $ - $ 1,289 1 Represents reclassification adjustment made to the consolidated balance sheet that are separate from the restatement but were included herein for completeness purposes. 2 Impact of improper inclusion of Data Knights financial information prior to the closing of the Business Combination. 3 Impact of: (i) improper capitalization of interim review expenses; and (ii) exclusion of certain transaction-related costs for the Business Combination. 4 Impact of (i) under-accruals related to the year-end bonus and taxes; and (ii) improper inclusion of Data Knights accounts payable and accrued expenses. 5 Impact of errors related to the valuation of the convertible promissory notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO (including accrued interest). 6 Impact of errors related to the accounting for historical preferred stock as temporary equity. 7 Impact of errors related to: (i) valuation of stock compensation expense; (2) identification, classification and valuation of equity-classified warrants; and (3) improper inclusion of Data Knights APIC balances. 8 Cumulative and current year impacts of corrections of errors to the consolidated statements of operations. F- 10 Reconciliation of the Original and Restated Statement of Operations for the Year Ended December 31, 2023 As Previously Reported Restatement Adjustments Reclassification Adjustments 1 As Restated Ref. For the year ended December 31, 2023 As Previously Reported Restatement Adjustments Reclassification Adjustments (1) As Restated Ref. Revenue Subscription revenue $ 878 $ - $ - $ 878 Web imaging revenue 143 - - 143 Total revenue 1,021 - - 1,021 Cost of revenue 1,150 - - 1,150 Gross margin ( 129 ) - - ( 129 ) Operating expenses - General and administrative 5,274 ( 1,730 ) - 3,544 2 Operations 226 - ( 226 ) - Sales and marketing 1,115 - - 1,115 Research and development 1,632 433 - 2,065 2 Total operating expenses 8,247 ( 1,297 ) ( 226 ) 6,724 Loss from operations ( 8,376 ) 1,523 ( 6,853 ) Other expense (income), net Income tax provision - - - - Impairment 10,504 ( 10,504 ) - - 3 Interest expense 749 ( 738 ) - 11 4 Stock warrant expense 3,572 5,635 - 9,207 5 Change in fair value of warrants ( 47 ) ( 82 ) - ( 129 ) 6 Change in fair value of PIPE Notes - 269 - 269 7 Change in fair value of convertible promissory notes 17,517 - 17,517 4 Other expense 52 - ( 18 ) 34 Unrealized gain or loss - - - - Total other expense, net 14,830 12,097 ( 18 ) 26,909 Loss before income taxes $ ( 23,206 ) $ ( 10,574 ) $ 18 $ ( 33,762 ) Income tax expense - - 18 18 Net loss $ ( 23,206 ) $ ( 10,574 ) $ - $ ( 33,780 ) Earnings per share: Basic and diluted net loss per common share outstanding $ ( 0.98 ) $ ( 3.78 ) $ - $ ( 4.77 ) 8 Basic and diluted weighted average number of common shares outstanding 23,572,232 ( 16,488,164 ) - 7,084,068 8 1 Represents certain reclassification adjustments made to the consolidated income statement that are separate from the restatement but were included herein for completeness purposes. 2 Impact of errors related to (i) improper valuation of stock compensation expense; (ii) improper capitalization of deferred transaction costs; and (iii) under-accrued bonus and taxes. 3 Impact of improper recognition of impairment expense upon the closing of the Business Combination with Data Knights. 4 Impact of errors related to the valuation of the convertible promissory notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO with changes in fair value reflected in the consolidated statements of operations (including interest expense). 5 Impact of errors related to the identification, classification and valuation of equity-classified warrants. 6 Impact of errors related to valuation of liability classified warrant values and the corresponding changes in fair value reflected in the consolidated statements of operations. 7 Impact of errors related to the valuation of the PIPE notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO with changes in fair value reflected in the consolidated statements of operations (including interest expense). 8 EPS impact of corrections of errors to the consolidated statements of operations. F- 11 Reconciliation of the Original and Restated Statement of Operations for the Year Ended December 31, 2022 As Previously Reported Restatement Adjustments Reclassification Adjustments 1 As Restated Ref. For the year ended December 31, 2022 As Previously Reported Restatement Adjustments Reclassification Adjustments (1) As Restated Ref. Revenue Subscription revenue $ 678 $ - $ - $ 678 Web imaging revenue 475 - - 475 Total revenue 1,153 1,153 - 1,153 Cost of revenue 1,513 - - 1,513 Gross margin ( 360 ) 1,153 - ( 360 ) Operating expenses General and administrative 8,756 ( 3,950 ) - 4,806 2 Operations 399 - ( 399 ) - Sales and marketing 958 - - 958 Research and development 953 638 - 1,591 2 Total operating expenses 11,066 ( 3,312 ) ( 399 ) 7,355 Loss from operations ( 11,426 ) 3,711 399 ( 7,715 ) Other expense (income), net Income tax provision 215 ( 215 ) - - 3 Interest expense 403 ( 403 ) - - 4 Stock warrant expense - 8,073 - 8,073 5 Change in fair value of warrants ( 4,489 ) 4,489 - - 3 Change in fair value of convertible promissory notes - 14,616 - 14,616 4 Other expense 47 - ( 17 ) 30 Unrealized gain or loss ( 1,372 ) 1,372 - - 3 Total other expense, net ( 5,196 ) 27,932 ( 17 ) 22,719 Loss before income taxes $ ( 6,230 ) $ ( 24,221 ) $ 416 $ ( 30,434 ) Income tax expense - - 17 17 Net loss $ ( 6,230 ) $ ( 24,221 ) $ 399 $ ( 30,451 ) Earnings per share: Basic and diluted net loss per common share outstanding N/M $ ( 7.66 ) $ - $ ( 7.66 ) 6 Basic and diluted weighted average number of common shares outstanding N/M 3,973,897 - 3,973,897 6 1 Represents certain reclassification adjustments made to the consolidated income statement that are separate from the restatement but were included herein for completeness purposes. 2 Impact of errors related to (i) improper valuation of stock compensation expense; (ii) improper capitalization of deferred transaction costs; and (iii) under-accrued bonus and taxes. 3 Impact of improper recognition of Data Knights income tax provision, liability classified warrants and unrealized gain/loss prior to the closing of the Business Combination. 4 Impact of errors related to the valuation of the convertible promissory notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO with changes in fair value reflected in the consolidated statements of operations (including interest expense). 5 Impact of errors related to the identification, classification and valuation of equity-classified warrants. 6 EPS impact of corrections of errors to the consolidated statements of operations. F- 12 Reconciliation of the Original and Restated Statement of Cash Flows for the Year Ended December 31, 2023 As Previously Reported Restatement Adjustments As Restated Ref. For the year ended December 31, 2023 As Previously Reported Restatement Adjustments As Restated Ref. Cash flows from operating activities: Net loss $ ( 23,206 ) $ ( 10,574 ) $ ( 33,780 ) 1 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 28 - 28 Business combination cost 900 ( 900 ) - 2 Cash held in trust account 29,029 ( 29,029 ) - 3 Stock-based compensation expense - 1,475 1,475 4 Stock warrant expense - 9,207 9,207 5 Board of director warrant expense - - - Change in fair value of warrant liabilities - ( 129 ) ( 129 ) 6 Change in fair value of PIPE Notes - 269 269 7 Change in fair value of convertible promissory notes - 17,517 17,517 8 Non-cash interest - 11 11 10 Change in operating assets and liabilities: Accounts receivable ( 133 ) - ( 133 ) Prepaid expenses and other current assets ( 65 ) 22 ( 43 ) 2, 3 Accounts payable & accrued expenses 1,372 ( 655 ) 717 2, 3, 9 Deferred revenues 70 - 70 Amount due to related party - - - Excise tax liability 113 ( 113 ) - 2, 3 Extension loan 446 ( 446 ) - 2, 3 Franchise tax payable ( 70 ) 70 - 2, 3 Income tax payable ( 95 ) 95 - 2, 3 Working capital loan ( 168 ) 168 - 2, 3 Net cash used in operating activities 8,221 ( 13,012 ) ( 4,791 ) Cash flows from investing activities: Purchases of property and equipment ( 44 ) - ( 44 ) Net cash used in investing activities ( 44 ) - ( 44 ) Cash flows from financing activities: Payments of Canada Emergency Business Loan Act - - - Proceeds from issuance of shareholder loans 465 ( 11 ) 454 10 Proceeds from issuance of PIPE notes 1,550 ( 50 ) 1,500 7 Common stock subject to redemption ( 28,750 ) 28,750 - 2 Deferred underwriting fee ( 500 ) 500 - 2 Warrant liability ( 338 ) 338 - 2 Additional paid-in capital 18,189 ( 18,189 ) - 2 Retained earnings adjustment 11,633 ( 11,633 ) - 2 Proceeds (repayment) from issuance of convertible notes ( 10,681 ) 14,856 4,175 8 Proceeds from exercise of stock options - - - Proceeds from issuance of Series A-2 preferred stock - 16 16 2 Business Combination costs - ( 1,534 ) ( 1,534 ) 2 Net cash provided by financing activities ( 8,432 ) 13,043 4,611 Net decrease in cash and cash equivalents ( 255 ) 31 ( 224 ) Cash and cash equivalents at beginning of year 302 ( 31 ) 271 Cash and cash equivalents at end of year $ 47 $ - $ 47 Supplemental disclosures of non-cash investing and financing activities: Common shares issued to preferred shareholders $ - $ 17,659 $ 17,659 2 Common shares related to convertible promissory notes $ - $ 47,935 $ 47,935 2 Common shares issued to Data Knights shareholders $ - $ ( 11,937 ) $ ( 11,937 ) 2 1 Accumulated effects of adjustments due to the restatement of the consolidated statement of operations for the year ended December 31, 2023. 2 Includes impact of errors related to the accounting for the Business Combination. Management did not properly assess the Business Combination and associated recapitalization of the shares. Additionally, an impairment charge was erroneously included in the initial filed financial statements. 3 Includes impact of improper inclusion of Data Knights financial information as of December 31, 2022 prior to the closing of the Business Combination. 4 Impact of errors related to improper valuation of stock compensation expense. 5 Impact of errors related to the identification, classification and valuation of equity-classified warrants. 6 Impact of errors related to valuation of liability classified warrant values and the corresponding changes in fair value reflected in the consolidated statements of operations. 7 Impact of errors related to the valuation of the PIPE notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO. 8 Impact of errors related to the valuation of the convertible promissory notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO (including accrued interest). 9 Includes current year and prior year impact of errors related to improper cutoff of accounts payable and accrued expenses. Refer to balance sheet restatement reconciliation for more information. 10 Impact of improper presentation of non-cash interest expense in financing activities. F- 13 Reconciliation of the Original and Restated Statement of Cash Flows for the Year Ended December 31, 2022 As Previously Reported Restatement Adjustments As Restated Ref. For the year ended December 31, 2022 As Previously Reported Restatement Adjustments As Restated Ref. Cash flows from operating activities: Net loss $ ( 6,230 ) $ ( 24,221 ) $ ( 30,451 ) 1 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 25 - 25 Stock-based compensation expense 1,600 265 1,865 3 Cash held in trust account 88,292 ( 88,292 ) - 2 Stock warrant expense - 8,073 8,073 4 Board of director warrant expense - 1,198 1,198 4 Change in fair value of convertible promissory notes - 14,616 14,616 6 Change in operating assets and liabilities: Accounts receivable 73 - 73 Prepaid expenses and other current assets ( 876 ) 817 ( 59 ) 2 Accounts payable & accrued expenses 1,929 ( 1,514 ) 415 2, 7 Deferred revenues ( 458 ) - ( 458 ) Amount due to related party 12 ( 12 ) - 2 Extension loan 2,546 ( 2,546 ) - 2 Franchise tax payable ( 94 ) 94 - 2 Income tax payable 215 ( 215 ) - 2 Working capital loan 207 ( 207 ) - 2 Net cash used in operating activities 87,241 ( 91,944 ) ( 4,703 ) Cash flows from investing activities: - Purchases of property and equipment ( 58 ) - ( 58 ) Net cash used in investing activities ( 58 ) - ( 58 ) Cash flows from financing activities: Payments of Canada Emergency Business Loan Act ( 3 ) 3 - N/M Common stock subject to redemption ( 88,550 ) 88,550 - 2 Warrant liability ( 4,489 ) 4,489 - 2 Additional paid-in capital 2,826 ( 2,826 ) - 2 Retained earnings adjustment ( 3,360 ) 3,360 - 2 Proceeds from issuance of convertible notes 5,543 ( 403 ) 5,140 6 Proceeds from exercise of stock options - 8 8 N/M Business Combination Costs - ( 815 ) ( 815 ) 2 Net cash provided by financing activities ( 88,033 ) 92,366 4,333 Net decrease in cash and cash equivalents ( 850 ) 422 ( 428 ) Cash and cash equivalents at beginning of year 1,152 ( 453 ) 699 Cash and cash equivalents at end of year $ 302 ( 31 ) $ 271 1 Accumulated effects of adjustments due to the restatement of the consolidated statement of operations for the year ended December 31, 2022. 2 Impact of improper inclusion of Data Knights financial information as of December 31, 2022 prior to the closing of the Business Combination. 3 Impact of errors related to improper valuation of stock compensation expense. 4 Impact of errors related to the identification, classification and valuation of equity-classified warrants. 5 Impact of errors related to valuation of liability classified warrant values and the corresponding changes in fair value reflected in the consolidated statements of operations. 6 Impact of errors related to the valuation of the convertible promissory notes containing certain embedded features that were not previously considered, which are now accounted for under the FVO (including accrued interest). 7 Current year and prior year impact of errors related to improper cutoff of accounts payable and accrued expenses. Refer to balance sheet restatement reconciliation for more information. 8 Improper presentation of Business Combination costs as well as errors identified related to capitalization of such costs. Refer to balance sheet restatement reconciliation for more information. F- 14 Reconciliation of the Original and Restated Statement of Changes in Temporary Equity and Stockholders’ Deficit as of December 31, 2023 Ref. Shares Amount Shares Amount Amount Shares Amount Commitments Capital Deficit Deficit Total Series A-2 Series A-1 Temporary Additional Total Preferred Stock Preferred Stock Equity Common Stock Paid-in Accumulated Stockholders’ Ref. Shares Amount Shares Amount Amount Shares Amount Commitments Capital Deficit Deficit As Previously Reported Balances as of December 31, 2022 3,853,797 $ - 3,204,000 $ - $ - 9,388,958 $ 1 $ 28,750 $ 24,032 $ ( 43,510 ) $ 9,273 Retroactive application of recapitalization due to Business Combination Retroactive application of recapitalization due to Business Combination, shares Issuance of common shares in exchange for services - - - - - - - - - - Exercise of stock options Exercise of stock options, shares Issuance of Series A-2 Preferred Stock - - - - - - - - - - Issuance of OMN warrants in conjunction with convertible promissory notes - - - - - - - - - - Exercise of OMN stock options upon Business Combination - - - - - 612,670 - - 613 - 613 Exercise of OMN warrants upon Business Combination - - - - - 3,859,464 - - 3,859 - 3,859 Conversion of OMN convertible loans upon Business Combination - - - - - 6,177,229 1 - 6,177 - 6,178 Conversion of preferred stock to common stock upon Business Combination Conversion of preferred stock to common stock upon Business Combination, shares Conversion of OMN convertible promissory notes upon Business Combination ( 3,853,797 ) - ( 3,204,000 ) - - 7,057,797 1 - 7,057 - 7,058 Private OneMedNet to ONMD Public Shares - - - - - ( 2,257,326 ) - - ( 2,257 ) - ( 2,257 ) Issuance of PIPE warrants - - - - - - - - 101 - 101 Issuance of common stock upon Business Combination with Data Knights, net of liabilities assumed and transaction costs - - - - - ( 1,266,560 ) - - 746 - 746 Common stock redemption - - - - - - - ( 28,750 ) - ( 28,750 ) Stock-based compensation expense - - - - - - - - 1,893 - 1,893 Retained earnings adjustment - - - - - - - - 11,633 11,633 Issuance of OMN warrants to board of directors Net loss - - - - - - - - ( 23,206 ) ( 23,206 ) Balances as of December 31, 2023 (as previously reported) - $ - - $ - $ - 23,572,232 $ 3 $ - $ 42,221 $ ( 55,083 ) $ ( 12,859 ) Restatement Adjustments Balances as of December 31, 2022 1 ( 437,874 ) $ 9,634 ( 364,043 ) $ 8,010 $ 17,644 ( 5,355,788 ) $ ( 1 ) $ ( 28,750 ) $ ( 10,375 ) $ ( 14,150 ) $ ( 35,632 ) Issuance of common shares in exchange for services 2 - - - - - 265,914 - - - - - Issuance of Series A-2 Preferred Stock 2 5,673 16 - - 16 - - - - - 16 Issuance of OMN warrants in conjunction with convertible promissory notes 3 - - - - - - - - 9,207 - 9,207 Exercise of OMN stock options upon Business Combination 4 - - - - - ( 69,614 ) - - ( 613 ) - ( 613 ) Exercise of OMN warrants upon Business Combination 4 - - - - - ( 438,519 ) - - ( 3,859 ) - ( 3,859 ) Conversion of OMN convertible promissory notes upon Business Combination 4 - - - - - ( 701,867 ) - - 41,758 - 41,758 Conversion of preferred stock to common stock upon Business Combination 4 432,201 ( 9,650 ) 364,043 ( 8,010 ) ( 17,660 ) ( 796,244 ) - - 10,602 - ( 7,058 ) Private OneMedNet to ONMD Public Shares 4 - - - - - 2,257,326 - - 2,257 - 2,257 Issuance of PIPE warrants 3 - - - - - - - - ( 101 ) - ( 101 ) Issuance of common stock upon Business Combination with Data Knights, net of liabilities assumed and transaction costs 1 - - - - - 4,838,792 - - ( 12,683 ) - ( 12,683 ) Common stock redemption 1 - - - - - - - 28,750 - - 28,750 Stock-based compensation expense 5 - - - - - - - - ( 418 ) - ( 418 ) Retained earnings adjustment 1 - - - - - - - - - ( 11,633 ) ( 11,633 ) Net loss 6 - - - - - - - - - ( 10,574 ) ( 10,574 ) Balances as of December 31, 2023 (restatement adjustments) - $ - - $ - $ - - $ ( 1 ) $ - $ 35,775 $ ( 36,357 ) $ ( 583 ) As Restated Balances as of December 31, 2022 3,415,923 $ 9,634 2,839,957 $ 8,010 $ 17,644 4,033,170 $ - $ - $ 13,657 $ ( 57,660 ) $ ( 26,359 ) Issuance of common shares in exchange for services - - - - - 265,914 - - - - - Issuance of Series A-2 Preferred Stock 5,673 16 16 16 Issuance of OMN warrants in conjunction with convertible promissory notes - - - - - - - - 9,207 - 9,207 Exercise of OMN stock options upon Business Combination - - - - - 543,056 - - - - - Exercise of OMN warrants upon Business Combination - - - - - 3,420,945 - - - - - Conversion of OMN convertible promissory notes upon Business Combination 5,475,362 1 47,935 47,936 Conversion of preferred stock to common stock upon Business Combination ( 3,421,596 ) ( 9,650 ) ( 2,839,957 ) ( 8,010 ) ( 17,660 ) 6,261,553 1 17,659 - Private OneMedNet to ONMD Public Shares - - - - - - - - - - - Issuance of PIPE warrants - - - - - - - - - - - Issuance of common stock upon Business Combination with Data Knights, net of liabilities assumed and transaction costs - - - - - 3,572,232 - - ( 11,937 ) - ( 11,937 ) Common stock redemption - - - - - - - - - - - Stock-based compensation expense - - - - - - - - 1,475 - 1,475 Retained earnings adjustment - - - - - - - - - - - Net loss - - - - - - - - - ( 33,780 ) ( 33,780 ) Balances as of December 31, 2023 (as restated) - $ - - $ - $ - 23,572,232 $ 2 $ - $ 77,996 $ ( 91,440 ) $ ( 13,442 ) 1 Cumulative impact of corrections of errors to the prior year. 2 Impact of errors related to the accounting and presentation of the recapitalization. 3 Impact of errors related to identification, classification and valuation of equity-classified warrants. 4 Includes impact of errors related to the accounting for the Business Combination. Management did not properly assess the Business Combination and associated recapitalization of the shares. Additionally, an impairment charge was erroneously included in the initial filed financial statements. 5 Impact of errors related to improper valuation of stock compensation expense. 6 Current year impact of corrections of errors to the consolidated statements of operations. F- 15 Reconciliation of the Original and Restated Statement of Changes in Temporary Equity and Stockholders’ Deficit as of December 31, 2022 Ref. Shares Amount Shares Amount Amount Shares Amount Commitments Capital Deficit Deficit Total Series A-2 Series A-1 Temporary Additional Total Preferred Stock Preferred Stock Equity Common Stock Paid-in Accumulated Stockholders’ Ref. Shares Amount Shares Amount Amount Shares Amount Commitments Capital Deficit Deficit As Previously Reported Balances as of December 31, 2021 3,853,797 $ - 3,204,000 $ - $ - 7,802,941 $ 1 $ 28,750 $ 19,607 $ ( 33,920 ) $ 14,438 Retroactive application of recapitalization due to Business Combination - - - - - 1,378,517 - - 2,826 ( 3,360 ) ( 534 ) Issuance of common shares in exchange for services - - - - - 200,000 - - 200 - 200 Exercise of stock options - - - - - 7,500 - - 7 - 7 Issuance of OMN warrants in conjunction with convertible promissory notes - - - - - - - - - - - Issuance of OMN warrants to board of directors - - - - - - - - - - - Stock-based compensation expense - - - - - - - - 1,392 - 1,392 Net loss - - - - - - - - - ( 6,230 ) ( 6,230 ) Balances as of December 31, 2022 (as previously reported) 3,853,797 $ - 3,204,000 $ - $ - 9,388,958 $ 1 $ 28,750 $ 24,032 $ ( 43,510 ) $ 9,273 Restatement Adjustments Balances as of December 31, 2021 1 - $ 9,634 - $ 8,010 $ 17,644 ( 3,460,275 ) $ ( 1 ) $ ( 28,750 ) $ ( 17,094 ) $ 6,711 $ ( 21,490 ) Retroactive application of recapitalization due to Business Combination 2 ( 437,874 ) - ( 364,043 ) - - ( 1,871,937 ) - - ( 2,826 ) 3,360 534 Issuance of common shares in exchange for services 2 - - - - - ( 22,724 ) - - ( 200 ) - ( 200 ) Exercise of stock options 2 - - - - - ( 852 ) - - 1 - 1 Issuance of OMN warrants in conjunction with convertible promissory notes 3 - - - - - - - - 8,073 - 8,073 Issuance of OMN warrants to board of directors 4 - - - - - - - - 1,198 - 1,198 Stock-based compensation expense 5 - - - - - - - - 473 - 473 Net loss 6 - - - - - - - - - ( 24,221 ) ( 24,221 ) Balances as of December 31, 2022 (restatement adjustments) ( 437,874 ) $ 9,634 ( 364,043 ) $ 8,010 $ 17,644 ( 5,355,788 ) $ ( 1 ) $ ( 28,750 ) $ ( 10,375 ) $ ( 14,150 ) $ ( 35,632 ) As Restated Balances as of December 31, 2021 3,853,797 $ 9,634 3,204,000 $ 8,010 $ 17,644 4,342,666 $ - $ - $ 2,513 $ ( 27,209 ) $ ( 7,052 ) Retroactive application of recapitalization due to Business Combination ( 437,874 ) - ( 364,043 ) - - ( 493,420 ) - - - - - Issuance of common shares in exchange for services - - - - - 177,276 - - - - - Exercise of stock options - - - - - 6,648 - - 8 - 8 Issuance of OMN warrants in conjunction with convertible promissory notes - - - - - - - - 8,073 - 8,073 Issuance of OMN warrants to board of directors 1,198 - 1,198 Stock-based compensation expense - - - - - - - - 1,865 - 1,865 Net loss - - - - - - - - - ( 30,451 ) ( 30,451 ) Balances as of December 31, 2022 (as restated) 3,415,923 $ 9,634 2,839,957 $ 8,010 $ 17,644 4,033,170 $ - $ - $ 13,657 $ ( 57,660 ) $ ( 26,359 ) 1 Cumulative impact of corrections of errors to the prior year. 2 Impact of errors related to the accounting and presentation of the recapitalization. 3 Impact of errors related to identification, classification and valuation of equity-classified warrants. 4 Impact of error related to identificatoin and recognition of board of director warrante expense. 5 Impact of errors related to improper valuation of stock compensation expense. 6 Current year impact of corrections of errors to the consolidated statements of operations. F- 16 Principles of Consolidation The consolidated financial statements include the accounts of the Company, including its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments, and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the amounts disclosed in these notes to the consolidated financial statements. Actual results and outcomes may differ materially from management’s estimates, judgments, and assumptions. Significant estimates, judgments, and assumptions used in these financial statements include, but are not limited to, those related to revenue such as determining the nature and timing of the satisfaction of performance obligations, allowances for accounts receivable, useful lives and realizability of long-lived assets, accounting for income taxes and related valuation allowances, and stock-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. Operating Segments The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the chief operating decision maker (“CODM”), which is the Company’s Chief Executive Officer, in deciding how to allocate resources and assess performance. The Company’s CODM evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. The Company is not organized by market and is managed and operated as one business. A single management team that reports to the chief executive officer comprehensively manages the entire business. Accordingly, the Company does not accumulate discrete financial information with respect to separate divisions and does not have separate operating or reportable segments. Since the Company operates in one operating segment, all required financial segment information can be found in the consolidated financial statements. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid, short-term investments with a maturity of three months or less when purchased. Cash equivalents consist of money market funds and are carried at cost, which approximates fair value. The balances, at times, may exceed FDIC insured limits. The Company believes that, as of December 31, 2023 and 2022, its risk relating to deposits exceeding federally insured limits was not significant. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows. Accounts Receivable and Allowance for Credit Losses Accounts receivable is unsecured, recorded at net realizable value, and do not bear interest. Accounts receivable is considered past due if not paid within the terms established between the Company and the customer. Amounts are only written off after all attempts at collections have been exhausted. The Company determines the need for an allowance for credit losses based upon factors surrounding the credit risk of specific customers, historical trends and other information. As of December 31, 2023 and 2022, the Company established allowances for credit losses of $ 0 and $ 0.1 million, respectively. F- 17 The Company believes its credit policies are prudent and reflect normal industry terms and business risk. The Company generally does not require collateral from its customers and generally requires payment from 0 to 90 days from the invoice date. For the year ended December 31, 2023, there was 1 customer that accounted for 10 % or more of total revenue, and there were 2 customers that accounted for 10 % or more of total revenue for the year ended December 31, 2022. The following table represents these customers’ aggregate percent of total revenue: Schedule of Aggregate Percentage Revenue and Accounts Receivable 2023 2022 For the year ended December 31, 2023 2022 Customer 1 51 % 29 % Customer 2 0 % 22 % Aggregate percent of revenue 51 % 51 % As of December 31, 2023, three customers accounted for more than 10 % of the Company’s accounts receivable balance, and four customers accounted for over 10 % of the Company’s accounts receivable balance at December 31, 2022. The following table represents these customers’ aggregate percent of total accounts receivable: 2023 2022 As of December 31, 2023 2022 Customer 1 36 % 0 % Customer 2 33 % 0 % Customer 3 27 % 0 % Customer 4 0 % 39 % Customer 5 0 % 32 % Customer 6 0 % 16 % Customer 7 0 % 13 % Aggregate percent of total accounts receivable 96 % 100 % Aggregate Percent of Revenue and Accounts Receivable 96 % 100 % Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation and amortization. The straight-line method is used for computing depreciation and amortization. Assets are depreciated and amortized over their estimated useful lives ranging from three to five years. Cost of maintenance and repairs are charged to expense when incurred. Impairment of Long-Lived Assets The Company reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized when the estimated future undiscounted net cash flows from the use of the asset are less than the carrying amount of that asset. There were no such losses during the years ended December 31, 2023 or December 31, 2022. Fair value option of accounting When financial instruments contain various embedded derivatives which may require bifurcation and separate accounting of those derivatives apart from the entire host instrument, if eligible, ASC 825, Financial Instruments , allows issuers to elect the fair value option (“FVO”) of accounting for those instruments. The FVO may be elected on an instrument-by-instrument basis and is irrevocable unless a new election date occurs. The FVO allows the issuer to account for the entire financial instrument at fair value with subsequent remeasurements of that fair value recorded through the statements of operations at each reporting date. A financial instrument is generally eligible for the FVO if, amongst other factors, no part of the convertible, or contingently convertible, instrument is classified in stockholders’ equity and the instrument does not contain a beneficial conversion feature at issuance. In addition, because a contingent beneficial conversion feature, if any, is not separately recognized within stockholders’ equity at the issuance date, a convertible debt instrument with a contingent beneficial conversion feature is therefore eligible for the FVO if all other criteria are met. Based on the eligibility assessment discussed above, the Company concluded that its convertible notes payable is eligible for the FVO and accordingly elected the FVO for those debt instruments. This election was made because of operational efficiencies in valuing and reporting for these debt instruments in their entirety at each reporting date. F- 18 Convertible promissory notes and the PIPE Notes contain embedded derivatives, which require bifurcation and separate accounting under GAAP, for which the Company elected the FVO. In addition, certain term PIPE Notes were issued with separately exercisable and freestanding warrants to purchase common stock, were issued with substantial discounts at issuance and contained certain embedded derivatives to be bifurcated and accounted for separately for those term notes, unless the FVO is eligible and elected. Accordingly, the Company qualified for and elected the FVO for the entire PIPE Notes instruments. The convertible debt and accrued interest at their stated interest rates were initially recorded at fair value as liabilities on the consolidated balance sheets and were subsequently re-measured at fair value at the end of each reporting period presented within the consolidated financial statements. The changes in the fair value of the convertible promissory notes and PIPE Notes are recorded in changes in fair value of convertible debt and change in fair value of PIPE Notes, included as a component of other (income) expenses, net, in the consolidated statements of operations. The change in fair value related to the accrued interest components is also included within the respective single line of change in fair value of convertible debt and change in fair value of PIPE Notes on the consolidated statements of operations. See additional information on valuation methodologies and significant assumptions used in Note 6 and Note 10. 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, Distinguishing Liabilities from Equity , and ASC 815, Derivatives and Hedging . Warrants that meet the definition of a derivative financial instrument and the equity scope exception in ASC 815-10-15-74(a) are classified as equity and are not subject to remeasurement provided that the Company continues to meet the criteria for equity classification. Warrants that are classified as liabilities are accounted for at fair value and remeasured at each reporting date until exercise, expiration, or modification that results in equity classification. Any change in the fair value of the warrants is recognized as change in fair value of warrant liabilities included as a component of other (income) expenses, net in the consolidated statements of operations. The classification of warrants, including whether warrants should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The fair value of liability-classified warrants is determined using the Black-Scholes options pricing model (“Black-Scholes model”) which includes Level 3 inputs, as shown in Note 11 to the consolidated financial statements. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value: Level 1 - Valuations based on quoted prices for identical assets and liabilities in active markets. Level 2 - Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data. Level 3 - Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment. When quoted market prices are available in active markets, the fair value of assets and liabilities is estimated within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using pricing models, quoted prices of assets and liabilities with similar characteristics, or discounted cash flows, within Level 2 of the valuation hierarchy. In cases where Level 1 or Level 2 inputs are not available, the fair values are estimated by using inputs within Level 3 of the hierarchy. The Company has determined the estimated fair value of its financial instruments based on appropriate valuation methodologies; however, considerable judgment is required to develop these estimates. Accordingly, these estimated fair values are not necessarily indicative of the amounts the Company could realize in a current market exchange. The estimated fair values can be materially affected by using different assumptions or methodologies. The methods and assumptions used in estimating the fair values of financial instruments are based on carrying values and future cash flows. F- 19 The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, convertible notes payable, liability classified financial instruments and certain privately issued warrants. The carrying amounts of cash and cash equivalents and accounts payable financial instruments approximate their fair value due to their short-term nature. The carrying amount of accounts receivable is net of an allowance that reflects management’s best estimate of expected credit losses. See Note 11 for fair value measurements. Classification of Series A-1, and Series A-2 preferred stock The Company originally classified its Series A-1 and Series A-2 preferred stock (collectively “Preferred Stock”) outside of permanent equity because the Preferred Stock contained certain redemption features that result in those shares being redeemable upon the occurrence of certain events that are not solely within the Company’s control, including liquidation, sale or transfer of control. Accordingly, the Preferred Stock was recorded outside of permanent equity and was subject to the classification guidance provided under ASC 480-10-S99. Because dividends were not contractually required to be accrued on the Preferred Stock as there was no stated or required dividend rate per annum, the Company was not required to accrete dividends into the carrying amount of the Preferred Stock in anticipation of a future contingent event or redemption value. Accordingly, the Company did not adjust the carrying values of the Preferred Stock to the respective liquidation preferences of such shares because of the uncertainty of whether or when such events would occur. As of December 31, 2023, all shares of Preferred Stock were converted into Common Stock pursuant to their provisions in connection with the Business Combination, which closed on November 7, 2023 (see Note 3). Revenue Recognition The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers , which aligns revenue recognition with the transference of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. This core principle is achieved to the application of a five-step model: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue as performance obligations are satisfied. Payment terms between customers related to product and services sales vary by the type of customer, country of sale, and the products or services offered and could result in an unbilled receivable or deferred revenue balance depending on whether the performance obligation has been satisfied (or partially satisfied). Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation in proportion to the standalone selling price for each and recognized as revenue when, or as, the performance obligation is satisfied. Individual promised goods and services in a contract are considered a performance obligation and accounted for separately if the good or service is distinct. A good or service is considered distinct if the customer can benefit from the good or service on its own or with other resources that are readily available to the customer and the good or service is separately identifiable from other promises in the arrangement. The transaction price for the products is the invoiced amount. Advanced billings from contracts are deferred and recognized as revenue when earned. Revenue is recognized only to the extent that it is probable that a significant reversal of revenue will not occur and when collection is considered probable. The Company excludes from revenue taxes collected from a customer that are assessed by a governmental authority and imposed on and concurrent with a specific revenue-producing transaction. Deferred revenue consists of payments received in advance of performance under the contract. Such amounts are generally recognized as revenue over the contractual period. The Company receives payments from customers based upon contractual billing schedules. Accounts receivable is recorded when the right to consideration becomes unconditional. Payment terms on invoiced amounts typically range from zero to 90 days, with typical terms of 30 days. F- 20 Subscription Revenue Subscription revenues are generated from the Company’s data exchange (BEAM) product, which is a medical imaging exchange platform between hospital/healthcare systems, imaging centers, physicians and patients. Subscriptions to the BEAM platform offering are recognized over time as the customer consumes the benefits of the services as the Company stands ready to provide access to the programs throughout the subscription period. Subscription customers are invoiced either quarterly or annually in advance with the customer contracts automatically renewing unless the customer issues a cancellation notice. The timing of revenue recognition is based on a time-based measure of progress as the Company provides access to the programs evenly over the course of the subscription period. Web Imaging Revenue Web imaging revenues are generated from the Company’s data broker (iRWD) product, which provides regulatory grade imaging and clinical data in the pharmaceutical, device manufacturing, clinical research organizations, and artificial intelligence markets. Web imaging customers are invoiced in installments as the related data is delivered. Revenue from the sale of web imaging products is recognized over time using an output measure of progress, which is based on the number of data units delivered relative to the total data units committed by the customer. Income Taxes The Company recognizes income taxes under the asset and liability method. Deferred income taxes are recognized for differences between the financial reporting and tax bases of assets and liabilities, at enacted statutory tax rates in effect for the years in which the differences are expected to reverse. The Company establishes a valuation allowance if it believes it is more likely than not that the deferred tax assets will not be recovered based on an evaluation of all available evidence. The Company determines whether it is more likely than not that a tax position will be sustained upon examination. If it is not more likely than not that a position will be sustained, none of the benefit attributable to the position is recognized. The tax benefit to be recognized for any tax position that meets the more-likely-than-not recognition threshold is calculated as the largest amount that is more than 50% likely to be realized upon resolution of the contingency. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. Patents and Trademarks Costs associated with the submission of a patent application are expensed as incurred given the uncertainty of the patents resulting in probable future economic benefits to the Company and are included in research and development expenses on the consolidated statements of operations. Research and Development The Company accounts for its research and development (“R&D”) costs in accordance with ASC 730, Research and Development (“ASC 730”). ASC 730 requires that R&D costs are generally recognized as an expense as incurred. However, some costs associated with R&D activities that have an alternative future use (e.g., materials, equipment, facilities) may be capitalizable. For the years ended December 31, 2023 and December 31, 2022 research and development expenditures were charged to operating expense as incurred. F- 21 Stock-based Compensation The Company recognizes compensation expense related to employee option grants and restricted stock grants, if any, in accordance with ASC 718, Compensation - Stock Compensation (“ASC 718”). The Company measures all stock options and other stock-based awards granted based on the fair value of the award on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. The Company has elected to recognize forfeitures as they occur. The reversal of compensation cost previously recognized for an award that is forfeited because of a failure to satisfy a service condition is recognized in the period of the forfeiture. Generally, and unless otherwise specified, the Company grants stock options with service-based only vesting conditions and records the expense for these awards using the straight-line method over the requisite service period. The Company classifies stock-based compensation expense in its consolidated statements of operations in the same manner in which the award recipient’s payroll costs are classified or in which the award recipients’ service payments are classified. Prior to the Business Combination, the Company was required to periodically estimate the fair value of its Common Stock with the assistance of an independent third-party valuation firm when issuing stock options and computing estimated stock-based compensation expense. The assumptions underlying these valuations represented the Company’s best estimates, which involved inherent uncertainties and the application of significant levels of judgment. In order to determine the fair value of its Common Stock, the Company considered, among other items, previous transactions involving the sale of Company securities, the business, financial condition and results of operations, economic and industry trends, the market performance of comparable publicly traded companies, and the lack of marketability of the Company’s Common Stock. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold convertible preferred stock and common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in materially different fair values of stock options at each valuation date, as applicable. Following the Business Combination (see Note 3), the Company used the public price of its Common Stock. The fair value of each stock option grant is estimated using the Black-Scholes option-pricing model. The Company estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the biotechnology industry with characteristics similar to the Company. The expected term of the Company’s stock options has been determined utilizing the “simplified” method, which reflects the weighted-average of time-to-vesting. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Net loss per common share Earnings per share attributable to common stockholders is calculated using the two-class method, which is an earnings allocation formula that determines earnings per share for the holders of the Company’s Common Stock and participating securities. Although the Company’s historical Preferred Stock contained participating rights in any dividend declared and paid by the Company and were therefore participating securities, the Preferred Stock had no stated dividends and OneMedNet has never paid any cash dividends and does not plan to pay any dividends in the foreseeable future. Net loss attributable to common stockholders and participating securities is allocated to each share on an if-converted basis as if all of the earnings for the period had been distributed. However, the participating securities do not include a contractual obligation to share in the losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss. In addition, common stock equivalent shares (whether or not participating) are excluded from the computation of diluted earnings per share in periods in which they have an anti-dilutive effect on net loss per common share. F- 22 Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method and treasury stock method, as applicable. Contingently convertible notes payable and PIPE Notes were not included for purposes of calculating the number of diluted shares outstanding as the number of dilutive shares is based on a conversion contingency associated with the completion of a future financing event that had not occurred, and the contingency was not resolved, in the reporting periods presented herein. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share is equivalent to basic net loss per share for the periods presented herein because common stock equivalent shares from the Preferred Stock, convertible notes, stock option awards and outstanding warrants to purchase common stock were antidilutive. As a result of the Company reporting net loss attributable to common stockholders for all periods presented herein, the following common stock equivalents were excluded from the computation of diluted net loss per common share for the years ended December 31, 2023 and 2022 because including them would have been antidilutive (in thousands): Schedule of Antidilutive Securities Excluded from Computation of Diluted Net Loss 2023 2022 (1) For the year ended December 31, 2023 2022 (1) Employee stock options - 913,856 Restricted stock awards - 177,276 Warrants for common stock 12,181,019 2,367,607 Series A-1 preferred stock - 2,839,957 Series A-2 preferred stock - 3,415,923 Convertible promissory notes - 3,786,610 Total common stock equivalents 12,181,019 13,501,229 (1) Retroactively restated for the reverse recapitalization in Note 3. General and Administrative General and administrative expenses include all costs that are not directly related to satisfaction of customer contracts. General and administrative expenses include items for the Company’s selling and administrative functions, such as sales, finance, legal, human resources, and information technology support. These functions include costs for items such as salaries and benefits and other personnel-related costs, maintenance and supplies, professional fees for external legal, accounting, and other consulting services, and depreciation expense. Emerging Growth Company The Company is an emerging growth company, as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has not elected to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Accounting Pronouncements Not Yet Adopted In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740) (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. ASU 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of adopting ASU 2023-09. F- 23 In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which is intended to provide enhancements to segment disclosures, even for entities with only one reportable segment. In particular, the standard will require disclosures of significant segment expenses regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. The standard will also require disclosure of all other segment items by reportable segment and a description of its composition. Finally, the standard will require disclosure of the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and footnotes. Recently adopted accounting pronouncements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses , “Topic 326”, an amendment on measurement of credit losses on financial assets held by at each reporting date. The guidance requires the use of a new current expected credit loss (“CECL”) model in estimating allowances for doubtful accounts with respect to accounts receivable. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances that, when deducted from the balance of the receivables, represent the estimated net amounts expected to be collected. Effective January 1, 2023, the Company adopted ASU No. 2016-13 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements. In June 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”), which clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. ASU 2022-03 is effective for public business entities for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023. The Company adopted ASU No. 2022-03 and the adoption of this standard did not have a material impact on the Company’s consolidated financial statements. 3. Business Combination On November 7, 2023, the Company closed the previously announced Business Combination pursuant to the Merger Agreement, dated April 25, 2022, by and among Data Knights, Merger Sub, and Legacy ONMD, as described in Note 1. Pursuant to the Merger Agreement: (i) Merger Sub merged with and into Legacy ONMD, with Legacy ONMD surviving the Merger, as a wholly-owned subsidiary of Data Knights, and (ii) Data Knights, which had been formed as a Delaware corporation solely for the purpose of facilitating the Business Combination, changed its name to OneMedNet Corporation. The Business Combination was accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Data Knights was treated as the acquired company for financial reporting purposes. This determination is primarily based on the fact that subsequent to the Business Combination, Legacy ONMD’s stockholders have the majority of the voting power of the combined entity, Legacy ONMD comprised all of the ongoing operations of the combined entity, Legacy ONMD comprised a majority of the governing body of the combined entity, and Legacy ONMD’s senior management comprised all of the senior management of the combined entity. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Legacy ONMD issuing shares for the net assets of Data Knights, accompanied by a recapitalization. F- 24 Since this is considered a recapitalization for accounting purposes, the net assets of Data Knights were not remeasured at fair value but were stated at historical cost and there was no goodwill or intangibles recognized. Operations prior to the Business Combination are those of Legacy ONMD. The aggregate consideration to the stockholders of Legacy ONMD at the closing of the Business Combination was approximately $ 20.0 million, which consisted of the Company’s shares of common stock, par value $ 0.0001 per share (“Common Stock”), valued at $ 10.00 per share, resulting in the issuance of 20,000,000 shares of Common Stock. Upon the closing, each of Legacy ONMD’s outstanding convertible notes, with a fair value of $ 47.9 million, converted into 5,475,362 shares of the Company’s Common Stock. Also, upon the closing, 3,853,797 shares of Series A-2 Preferred Stock and 3,204,000 shares of Series A-1 Preferred Stock converted into 6,261,553 shares of Common Stock. Legacy ONMD’s 612,670 outstanding stock options and 3,859,464 outstanding warrants converted into 543,057 and 3,420,945 shares, respectively, of Common Stock. As a result of the above, the share figures in the consolidated statement of temporary equity and stockholders’ deficit for the year ended December 31, 2022 have been adjusted for the application of the recapitalization ratio of 0.88637847 per share. The Company received net cash consideration of approximately $ 0.1 million and net liabilities of Data Knights of approximately $ 11.0 million. The net liabilities of Data Knights were as follows (in thousands): Schedule of Business Combination Liabilities Prepaid expenses and other current assets $ 22 Accounts payable & accrued expenses ( 4,501 ) Loan extensions ( 2,992 ) Deferred underwriter fee payable ( 3,525 ) Warrant liability ( 20 ) Net Liabilities $ ( 11,016 ) The Company incurred transaction costs of $ 0.9 million in connection with the Business Combination. Following consummation of the Business Combination, the Company owned all of the issued and outstanding equity interests in Legacy ONMD and its subsidiary, and the Legacy ONMD securityholders held approximately 78.2 % of the Company. Following consummation of the Business Combination, the Company’s Common Stock and the Company’s Public Warrants began trading on the Nasdaq Global Market under the symbols “ONMD” and “ONMDW”, respectively. Private Investment in Public Equity (“PIPE”) Financing On June 28, 2023, the Company and Data Knights entered into a Securities Purchase Agreement (the “SPA”) with certain investors (collectively referred to as the “Purchasers”) for PIPE financing in the aggregate original principal amount of $ 1.5 million. Pursuant to the Securities Purchase Agreement, Data Knights issued and sold to each of the Purchasers, a new series of senior secured convertible notes (the “PIPE Notes”), which are convertible into shares of Common Stock at the Purchasers election at a conversion price equal to the lower of (i) $10.00 per share, pr (ii) 92.5% of the lowest volume weighted average trading price for the ten (10) Trading Days immediately preceding the Conversion Date . The Purchasers’ $ 1.5 million investment in the PIPE Notes closed and funded contemporaneous to the Closing of the Business Combination. Effective immediately prior to the Closing, Data Knights issued the PIPE Notes to the Purchasers under the private offering exemptions under Securities Act of 1933, as amended (the “Securities Act”). F- 25 Deferred Underwriter Fees In connection with the Business Combination, Data Knights entered into an agreement with their underwriters (“EF Hutton”) whereby EF Hutton agreed to waive the related merger underwriting fees that were payable at closing ($ 4.0 million) in exchange for allocated payments as follows: (i) $ 0.5 million in cash at closing; (ii) a $ 0.5 million promissory note that matures on March 1, 2024 ; and (iii) a transfer of 277,778 shares of Common Stock. The Company paid the $ 0.5 million of cash due at closing and the remaining $ 3.5 million is recorded as deferred underwriter fee payable on its consolidated balance sheet as of December 31, 2023. Loan Extensions In connection with the Business Combination, the Company assumed Data Knights’ liabilities, which included existing loan extensions to related parties. The loan extensions were to be exchanged for a fixed amount of Common Stock upon the closing of a business combination or a similar event. As of December 31, 2023, a balance of $ 3.0 million remained outstanding and is recorded as loan extensions on the Company’s consolidated balance sheet. 4. Property and Equipment Property and equipment are summarized as of December 31 (in thousands): Schedule of Property and Equipment 2023 2022 As of December 31, 2023 2022 Computers $ 303 $ 259 Furniture and equipment 4 4 Total property and equipment 307 263 Less: accumulated depreciation and amortization ( 208 ) ( 180 ) Property and equipment, net $ 99 $ 83 Depreciation and amortization expense was $ 0.03 million and $ 0.02 million for the years ended December 31, 2023 and 2022, respectively, which is recorded within general and administrative expenses in the consolidated statements of operations. 5. Income Taxes The Company has operations in the United States and Canada. The components of income (loss) before the provision for income taxes are as follows (in thousands): Schedule of Components of Income (Loss) Before Provision for Income Tax 2023 2022 For the year ended December 31, 2023 2022 United States $ ( 33,827 ) $ ( 30,456 ) Foreign 65 22 Total loss before income taxes $ ( 33,762 ) $ ( 30,434 ) F- 26 The components of the income tax provision for the years ended December 31, 2023 and 2022 were as follows (in thousands): Schedule of Income Tax Provision 2023 2022 As of December 31, 2023 2022 Current federal $ - $ - Current state - - Current foreign 18 17 Total current tax provision (benefit) $ 18 $ 17 Deferred federal - - Deferred state - - Deferred foreign - - Total deferred tax provision (benefit) $ - $ - Total income tax provision (benefit) $ 18 $ 17 A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows: Schedule of Reconciliation of Income Tax Benefit 2023 2022 As of December 31, 2023 2022 Tax provision at statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 0.2 % ( 1.2 )% Stock-based compensation expense ( 0.9 )% ( 1.4 )% Permanent differences - other ( 0.2 )% 0.0 % Change in fair value of convertible notes ( 11.0 )% ( 10.5 )% Change in fair value of warrants ( 5.7 )% ( 5.8 )% Change in valuation allowance ( 3.4 )% ( 1.0 )% Other, net ( 0.1 )% ( 1.2 )% Effective income tax rate - 0.1 % - 0.1 % The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities are as follows (in thousands): Schedule of Components of Deferred Tax Assets and Liabilities 2023 2022 As of December 31, 2023 2022 Deferred tax assets Net operating loss carryforwards $ 7,393 $ 6,551 Capitalized research costs 337 - Fixed assets 25 34 Other 4 16 Total gross deferred tax assets 7,759 6,601 Less: valuation allowance ( 7,753 ) ( 6,597 ) Net deferred tax assets $ 6 $ 4 Deferred tax liabilities Other $ ( 6 ) $ ( 4 ) Total deferred tax liabilities $ ( 6 ) $ ( 4 ) Net deferred taxes $ - $ - The Company has generated both federal and state net operating losses (NOL) of approximately $ 31.3 million and $ 15.9 million, respectively. The federal NOLs include $ 12.2 million which expire at various dates beginning in 2030 and $ 19.1 million which carry forward indefinitely. The state NOLs expire at various dates beginning in 2030. Ownership changes, as defined in the Internal Revenue Code Section 382, could limit the amount of NOLs that can be utilized annually to offset future taxable income. Generally, an ownership change occurs when the ownership percentage of 5% or greater stockholders increases by more than 50 % over a three-year period. The Company’s ability to utilize its federal and state tax attributes may be limited by ownership changes that have occurred in the past or may occur in the future. The Company has not yet conducted a formal study of whether, or to what extent, past changes in control of the Company impacts its ability to utilize NOL carryforwards because such NOL carryforwards cannot be utilized until the Company achieves profitability. F- 27 Management has evaluated the positive and negative evidence bearing upon the realizability of the Company’s net deferred tax assets, which are comprised primarily of net operating loss carryforwards and research costs capitalized for tax purposes. Management has considered the Company’s history of cumulative operating losses and estimated future tax losses and has determined that it is more likely than not that the Company will not recognize the benefits of the net deferred tax assets. As a result, the Company has recorded a full valuation allowance at December 31, 2023 and 2022. The valuation allowance increased by $ 1.2 million in 2023 due to the increase in deferred tax assets, primarily due to net operating loss carryforwards and capitalized research costs. As of December 31, 2023 and 2022, the Company had no uncertain tax positions. The Company recognizes both interest and penalties associated with unrecognized tax benefits as a component of income tax expense. The Company has not recorded any interest or penalties for unrecognized tax benefits since its inception. The Company files federal, various state, and Canada tax returns. In the U.S., all tax years since inception remain open to examination by major tax jurisdictions to which the Company is subject, as carryforward attributes generated in years past may still be adjusted upon examination by the respective tax authorities if they have or will be used in a future period. In Canada, the Company is generally no longer subject to income tax examinations for the years before 2020. The Company is currently not under examination by any tax authority. 6. Convertible Debt Convertible Promissory Notes 2019 Notes During November 2019, the Company entered into a convertible promissory note (the “2019 Note”) agreement with a related party investor. The total amount of the 2019 Note is $ 1.5 million. The 2019 Note is unsecured and bears interest at a rate of four percent annually from the date of issuance until the outstanding principal is paid or converted. The 2019 Note matures on January 1, 2025. The 2019 Note shall automatically convert into the next offering of preferred stock upon closing of such next equity financing. The number of shares of preferred stock to be issued upon conversion shall be equal to the number obtained by dividing the outstanding principal and unpaid accrued interest owed on the date of conversion, by the conversion price. The conversion price is 100 percent of the lowest price per share paid for the next equity preferred stock by other investors in the next equity financing. In the event that prior to the conversion or repayment of amounts owed, the Company completes a financing transaction in which the Company sells equity securities but such transaction does not qualify as next equity financing (i.e., an “alternative financing”), then the principal and unpaid accrued interest may (upon written election of the purchaser holding the 2019 Note) convert into the securities issued by the Company in the alternative financing. The number of alternative financing equity securities to be issued upon such conversion shall be equal to the number obtained by dividing the outstanding principal and unpaid accrued interest owed by an amount equal to 100 percent multiplied by the lowest price per share at which the alternative financing equity securities are sold and issued for cash in the alternative financing. 2022 Notes and 2023 Notes During 2022, the Company entered into convertible promissory notes with related party investors totaling $ 4.7 million and unrelated party investors totaling $ 0.4 million (each investor, a “Purchaser”) (the “2022 Notes”). During 2023, the Company entered into various convertible promissory notes with related party investors totaling $ 2.3 million and unrelated party investors totaling $ 1.9 million (the “2023 Notes”, and together with the 2019 Notes and 2022 Notes, the “Convertible Promissory Notes”). The 2022 Notes and 2023 Notes issued are unsecured and bear an interest rate of six percent annually from the date of issuance until the outstanding principal is paid or converted. On November 11, 2022, the 2022 Notes were amended and restated in order to (i) provide for the sale and issuance to Purchasers of additional convertible promissory notes and warrants to purchase shares of the Company’s capital stock, (ii) provide for the sale and issuance of warrants to purchase shares of the Company’s common stock at an exercise price of $ 1.00 per share to Purchasers who purchased 2022 Notes between January 1, 2022 and November 11, 2022; and (iii) extend the maturity date of all outstanding 2022 Notes from December 31, 2022 to March 31, 2023. F- 28 The principal and unpaid accrued interest on each of the 2022 Notes and 2023 Notes will convert: (i) automatically, upon the Company’s issuance of equity securities (the “Next Equity Financing”) in a single transaction, or series of related transactions, with aggregate gross proceeds to the Company of at least $ 5,000,000 , into shares of the Company’s capital stock issued to investors in the Next Equity Financing, at a conversion price equal to the lesser of (A) a 20% discount to the lowest price per share of shares sold in the Next Equity Financing, or (B) $2.50 per share; (ii) at the noteholder’s option, in the event of a defined Corporate Transaction (as defined in the next paragraph) while the 2022 Notes and 2023 Notes remain outstanding, into shares of the Company’s Series A-2 Preferred Stock at a conversion price equal to $2.50 per share; and (iii) at the noteholder’s option, on or after the maturity date while the 2022 Notes and 2023 Notes remains outstanding, into shares of the Company’s Series A-2 Preferred Stock at a conversion price equal to $2.50 per share . If a Corporate Transaction occurs before the repayment or conversion of the 2022 Notes and 2023 Notes, the Company will pay at the closing of the Corporate Transaction to each noteholder that elects not to convert its 2022 Notes and 2023 Notes in connection with such Corporate Transaction an amount equal to the outstanding principal amount of such noteholder’s Note plus a 20% premium. “Corporate Transaction” means (a) a sale by the Company of all or substantially all of its assets, (b) a merger of the Company with or into another entity (if after such merger the holders of a majority of the Company’s voting securities immediately prior to the transaction do not hold a majority of the voting securities of the successor entity) or (c) the transfer of more than 50% of the Company’s voting securities to a person or group. In connection with the issuance of the 2022 Notes and 2023 Notes, the Company also issued 2,056,000 and 1,670,000 warrants (the “Convertible Notes Warrants”) in 2022 and 2023, respectively, with an exercise price of $ 1.00 per share. The expiration date of the Convertible Notes Warrant is the earliest to occur the expiration of the five-year period following the date of issuance, the closing of a firm commitment underwritten public offering of the Company’s Common Stock; or the closing of an Corporation Transaction. The Convertible Notes Warrants when exercised entitles the holder to one share of the Company’s Common Stock. The Convertible Notes Warrants include anti-dilutive measure to address stock dividends, stock splits, and additional shares of Common Stock due to reorganization of the Company. In the case of reclassification or reorganization, each holder shall be entitled to receive, in lieu of stock or other securities and property receivable, the stock or other securities or property to which such holder would have been entitled if the holder had exercised the Convertible Notes Warrants immediately prior. The Convertible Notes Warrants will terminate at the earliest of (1) the expiration of five-year period following the date of issuance, (2) the closing of a firm commitment underwritten public offering of the Company’s Common Stock; (3) the closing of a sale of the Company. The holders of the Convertible Notes Warrants are not permitted to sell, pledge, distribute, offer for sale, transfer, or otherwise dispose of the Convertible Notes Warrants in the absence of (i) an effective registration statement under the Securities Act, or (ii) an opinion of counsel, satisfactory to the Company and to be provided at the sole cost of the holder, that such registration and qualification are not required. Furthermore, neither the Convertible Notes Warrants nor any rights may be assigned, conveyed, or transferred, in whole or in part, without the Company’s prior written consent. See additional information on the accounting for the warrants in Note 10. The Convertible Promissory Notes were issued for general working capital purposes. The Company elected the FVO of accounting for its Convertible Promissory Notes. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is presented as a single line item within other (income) expenses, net in the accompanying consolidated statements of operations under the caption change in fair value of convertible debt. As of December 31, 2022 the fair value of the 2019 Notes and 2022 Notes was $ 26.2 million which was included in both short-term and long-term liabilities on the consolidated balance sheets. In November 2023, the Convertible Promissory Notes were converted pursuant to their provision in connection with the Business Combination between Data Knights and the Company and were no longer outstanding as of December 31, 2023. F- 29 PIPE Notes In June 2023, the Company entered into the PIPE SPA in which the Company was required to sell senior secured convertible notes and warrants to directors of the Company. The PIPE SPA stipulates a collateral security agreement between the Company and the directors for punctual payment and performance by the Company on its obligations to the Directors. The intellectual property of the Company serves as the collateral for the PIPE Notes. The PIPE Notes and related warrants were issued through a PIPE financing transaction, which is a form of debt and equity offering under an exemption in the securities laws for qualifying private placements by issuers of publicly traded securities. On November 7, 2023, the Company received a total of $ 1.5 million from the directors in exchange for PIPE Notes in the aggregate principal amount of $ 1.6 million (plus accrued interest of $ 0.1 million) and 95,745 warrants to acquire Common Stock. The PIPE Notes are convertible into shares of Common Stock at the PIPE Investor’s election at a conversion price equal to the lower of (i) $10.00 per share, and (ii) 92.5% of the lowest VWAP for the ten (10) trading days immediately preceding the conversion date, subject to the floor price of $1.14 (representing 20% of the closing price of the Common Stock on the last trading day before the closing of the Business Combination), or the alternative conversion ratio of the greater of the floor price and the lesser of 80% of the VWAP of the common stock as of the trading day and 80% of the price computed as the quotient of the sum of the VWAP of the Common Stock for each of the three trading days with the lowest VWAP of the Common Stock during the fifteen consecutive trading day period ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, divided by three . All such determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction that proportionately decreases or increases the Common Stock. The PIPE Notes mature on the first anniversary of the issuance date, or November 7, 2024. The Company elected the FVO of accounting for its PIPE Notes. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is presented as a single line item within other (income) expenses, net in the accompanying consolidated statements of operations under the caption change in fair value of pipe notes. As of December 31, 2023 the fair value of the PIPE Notes was $ 1.6 million which was included in current liabilities on the consolidated balance sheets. 7. Canadian Emergency Business Loan Act (“CEBA”) During December 2020, the Company applied for and received a $ 0.06 CAD ($ 0.04 USD) equivalent CEBA loan. The loan was provided by the Government of Canada to provide capital to organizations to see them through the challenges related to the COVID-19 pandemic and better position them to return to providing services and creating employment. The loan is unsecured. The loan was interest free through December 31, 2023. If the loan was paid back by January 18, 2024, $ 0.01 million of the loan would have been forgiven. If the loan was not paid back by January 18, 2024, the full $ 0.04 million loan would have been converted to loan repayable over three years with a 5 % interest rate. The loan was paid back prior to January 18, 2024. At December 31, 2023 the loan was classified as Canada Emergency Business Loan Act under other long-term liabilities on the consolidated balance sheets. The Company accounted for the loan as debt in accordance with FASB ASC 470, Debt , and accrued interest in accordance with the interest method under FASB ASC 835-30. 8. Stockholders’ Deficit As of December 31, 2022, 4,033,170 and 6,255,880 shares of Common Stock and Preferred Stock were issued and outstanding, respectively (after giving effect to the exchange ratio in Note 3). Subsequent to the Business Combination, the Company was authorized to issue up to 101,000,000 shares of capital stock, par value $ 0.0001 per share, consisting of (a) 100,000,000 shares of Common Stock and (b) 1,000,000 shares of preferred stock (the “Preferred Stock”). As of December 31, 2023, 23,572,232 shares of Common Stock were issued and outstanding. The Company had no Preferred Stock outstanding at December 31, 2023. F- 30 Series A-2 Preferred Stock The Company’s previously issued and outstanding Series A-2 preferred stock included a $ 0.15 per share annual noncumulative dividend when and if declared by the Board of Directors. No dividends were declared in the years ended December 31, 2023 or December 31, 2022. The Series A-2 preferred stock also included a liquidation preference of 1.25 times the original issue price plus any declared but unpaid dividends upon the liquidation, dissolution, merger or sale of substantially all the assets of the Company and had a preference upon liquidation over Series A-1 preferred stock and Common Stock. Each share of Series A-2 preferred stock could have been converted into equal shares of Common Stock at the option of the holder at any time. In addition, the Series A-2 preferred stock shares were automatically convertible into common shares upon the sale of shares of common stock to the public at the then applicable conversion price in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in at least $ 20 million in proceeds, net of underwriting discounts and commissions. Each share of Series A-2 preferred stock had voting rights equal to the number of shares of Common Stock then issuable upon conversion of such share of Series A-2 preferred stock. The Company was obligated to redeem shares of Series A-2 Preferred Stock upon liquidation, dissolution, or winding-up of the Company, or a merger, consolidation, lease or transfer of the Company (a “Deemed Liquidation Event”), unless a majority of the holders of Series A-2 Preferred Stock and a majority of the holders of Series A-1 Preferred Stock consent otherwise. As of December 31, 2022, the liquidation preference of the Series A-2 Preferred Stock was $ 10.7 million (after giving effect to the Business Combination exchange ratio described Note 3). In connection with the Business Combination, the shares of Series A-2 preferred stock were converted into Common Stock using an exchange ratio of 1:1. Series A-1 Preferred Stock The Company’s previously issued and outstanding Series A-1 preferred stock included a $ 0.15 per share annual noncumulative dividend when and if declared by the Board of Directors. No dividends were declared in the years ended December 31, 2023 or December 31 2022. The Series A-1 preferred stock also included a liquidation preference of 1.25 times the original issue price plus any declared but unpaid dividends upon the liquidation, dissolution, merger or sale of substantially all the assets of the Company and had a preference upon liquidation over Common Stock. Each share of Series A-1 preferred stock could have been converted into equal shares of Common Stock at the option of the holder at any time. In addition, the Series A-1 preferred stock shares were automatically convertible into common shares upon the sale of shares of common stock to the public at the then applicable conversion price in a firm commitment underwritten public offering pursuant to an effective registration statement under the Securities Act, resulting in at least $ 20 million in proceeds, net of underwriting discounts and commissions. Each share of Series A-1 preferred stock had voting rights equal to the number of shares of Common Stock then issuable upon conversion of such share of Series A-1 preferred stock. The Company was obligated to redeem shares of Series A-1 Preferred Stock upon a Deemed Liquidation Event, unless a majority of the holders of Series A-1 Preferred Stock consent otherwise. As of December 31, 2022, the Series A-1 preferred stock has a liquidation preference of $ 8.9 million (after giving effect to the Business Combination exchange ratio described in Note 3). In connection with the Business Combination, the shares of Series A-1 preferred stock were converted into Common Stock using an exchange ratio of 1:1. 9. Stock Based Compensation Stock Options During 2020, the Company adopted an equity incentive plan (the “2020 Plan”), which provided for the granting of incentive and nonqualified stock options to employees, directors, and consultants of Legacy ONMD. As of December 31, 2020, the Company had reserved 3,000,000 shares of common stock under the 2020 Plan. Under the 2020 Plan, option awards were generally granted with an exercise price equal to the fair market value of the Company’s stock at the date of grant; those option awards generally vested with a range of one to four years of continuous service and had ten-year contractual terms. Certain option awards provided for accelerated vesting if there was a change in control, as defined in the 2020 Plan. The 2020 Plan also permitted the granting of restricted stock and other stock-based awards. Unexercised options were cancelled upon termination of employment and became available for reissuance under the 2020 Plan. F- 31 At the Special Meeting held on October 17, 2023 , Data Knights shareholders considered and approved the OneMedNet Corporation 2022 Equity Incentive Plan (the “2022 Plan”) and reserved an amount of shares of Common Stock equal to 10% of the number of shares of Common Stock of OneMedNet following the Business Combination for issuance thereunder. The 2022 Plan was approved by the Legacy ONMD Board of Directors on October 17, 2023. The 2022 Plan became effective immediately upon the Closing of the Business Combination and replaced the 2020 Plan. Information with respect to options outstanding is summarized as follows: Schedule of Options Outstanding Weighted Aggregate Number of Average Intrinsic Options Exercise Price Value Outstanding as of December 31, 2021 728,603 $ 1.00 $ - Granted 511,440 1.00 Exercised ( 6,648 ) 1.00 Cancelled ( 319,539 ) 1.00 Outstanding as of December 31, 2022 913,856 $ 1.00 $ 3,199 Exercised ( 613,510 ) 1.00 Cancelled ( 300,346 ) 1.00 Outstanding as of December 31, 2023 - $ - $ - Vested and exercisable as of December 31, 2023 - - $ - For the years ended December 31, 2023 and 2022, the Company recorded stock-based compensation expense of $ 0.4 million and $ 0.3 million, respectively, on its outstanding stock options. The Company has determined its share-based payments to be a Level 3 fair value measurement. For the year ended December 31, 2023 and 2022, the Company has used the Black-Scholes option pricing model and estimated no expected dividends and the following weighted average assumptions: Schedule of Fair Value of Stock Options For the year ended December 31, 2023 2022 Risk-free interest rate - 0.73 % - 2.96 % Expected dividend yield - - Expected term in years - 1.36 - 1.85 Expected volatility - 50.0 % - 86.3 % On November 7, 2023, as part of the Business Combination, the 2020 Plan was cancelled and all vested shares were exercised and converted at the appropriate conversion ratio to Common Stock of the Company. The Company issued shares of Common Stock of 543,057 which represents 613,510 vested options less an exercise price of $ 1.00 . F- 32 Restricted Stock Awards Certain employees, directors and consultants have been awarded restricted stock. The restricted stock vesting consists of milestone and time-based vesting as well as compensation for services performed by the Board of Directors. The following table summarizes restricted stock award activity for the years ended December 31, 2023 and 2022: Schedule of Restricted Stock Award Activity Weighted Number of Average Grant Awards Date Fair Value Nonvested as of December 31, 2021 - $ - Granted 354,551 4.80 Vested ( 177,276 ) 4.80 Nonvested as of December 31, 2022 177,275 $ 1.48 Granted 88,639 7.21 Vested ( 265,914 ) 5.60 Nonvested as of December 31, 2023 - $ - The total fair value of the Company’s previous stock awards vested during the years ended December 31, 2023 and 2022 was $ 1.1 million and $ 1.5 million, respectively. On November 7, 2023, as part of the Business Combination, all vested shares were exercised and converted at the appropriate conversion ratio to Common Stock of the Company. The Company recorded stock-based compensation expense in the following categories on the accompanying consolidated statements of operations for the periods presented (in thousands): Schedule of Stock-based Compensation Expense 2023 2022 For the year ended December 31, 2023 2022 Research and development $ 434 $ 638 General and administrative 1,041 1,227 Total stock-based compensation expense $ 1,475 $ 1,865 10. Stock Warrants The Company has the following warrants outstanding for the periods presented: Schedule of Warrants Outstanding 2023 2022 As of December 31, 2023 2022 Liability Classified Warrants Private Placement Warrants 585,275 - PIPE Warrants 95,744 - Subtotal 681,019 - Equity Classified Warrants Legacy ONMD Warrants - 545,213 Convertible Promissory Note Warrants - 1,822,394 Public Warrants 11,500,000 - Subtotal 11,500,000 2,367,607 Grant Total 12,181,019 2,367,607 F- 33 Legacy ONMD Warrants In 2021, there were 174,102 Legacy ONMD outstanding common stock warrants (“Legacy ONMD Warrants”) issued to directors for service at a weighted average exercise price of $ 0.10 . In 2022 for the exercise price of $ 1.00 , Legacy ONMD issued 145,746 warrants to directors for 2021 service and 294,000 warrants for 2022 service. The Legacy ONMD Warrants are equity-classified and accounted for in accordance with ASC 718. ASC 718 requires the use of the “fair-value-based method” for measuring the value of stock-based compensation. In applying “fair-value-based method” (absent identical or similar instruments) companies are required to use an option-pricing model, adjusted to accommodate the unique characteristics of the employee stock options. ASC 718’s measurement objective is to determine the fair value of stock-based compensation at the grant date assuming that employees/directors fulfill the award’s vesting conditions (if applicable) and will retain the award. The fair value of an award is the cost to the Company for granting the award and should reflect the estimated value of the instruments that the company would be obligated to provide to an employee/director when the employee has satisfied the service conditions. This resulted in an expense of $ 0 and $ 1.2 million for the years ended December 31, 2023 and 2022, respectively. In connection with the closing of the Business Combination on November 7, 2023, all Legacy ONMD Warrants issued for services were cashless exercised into shares of Legacy ONMD common stock and exchanged for Common Stock based on the appropriate conversion ratio less the applicable exercise price per Legacy ONMD Warrant. Convertible Promissory Notes Warrants As described in Note 6, the Company issued Convertible Promissory Notes Warrants in 2022 and 2023. The Convertible Promissory Note Warrants are classified as equity in accordance with ASC 815. The Company has elected to measure the Notes using the fair value option under ASC 825 discussed in Note 6. The Company determined that the fair value of the combined instrument significantly exceeds the proceeds received, therefore, the Company concluded that the warrants are most accurately portrayed as an issuance cost related to the convertible promissory notes. This resulted in an expense of $ 9.2 million and $ 8.0 million being allocated to the Convertible Promissory Notes Warrants during the year ended December 31, 2023 and 2022, respectively, which is classified as stock warrant expense in the consolidated statements of operations. In connection with the closing of the Business Combination on November 7, 2023, all Convertible Promissory Notes Warrants were cashless exercised into shares of Legacy ONMD common stock and exchanged based on the appropriate conversion ratio for the Common Stock less an exercise price of $ 1.00 . PIPE Warrants In connection with the PIPE Notes described in Note 6, the Company also issued 95,745 warrants to purchase Common Stock (“PIPE Warrants”). The Company accounts for the PIPE Warrants 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. The accounting treatment of derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, requires that the Company record a derivative liability upon issuance of the warrants. Accordingly, the Company classifies each warrant as a liability at its fair value and the warrants were allocated a portion of the proceeds from the issuance of the Units equal to its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement, the warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the warrants will be reclassified as of the date of the event that causes the reclassification. As of December 31, 2023, all 95,745 PIPE Warrants remain outstanding. Public Warrants In connection with the closing of the Business Combination on November 7, 2023, the Company assumed 11,500,000 public warrants (the “Public Warrants”) to purchase Common Stock with an exercise price of $ 11.50 per share. The Public Warrants became exercisable 30 days after the Closing of the Business Combination. Each Public Warrant is exercisable for one share of Common Stock F- 34 The Company may redeem the outstanding Public Warrants for $ 0.01 per Public Warrant upon at least 30 days’ prior written notice of redemption given after the Public Warrants become exercisable, if the reported last sale price of the Common Stock equals or exceeds $ 18.00 per share (as adjusted for stock dividends, sub-divisions, reorganizations, recapitalizations and the like) for any 20 trading days within a 30-trading day period commencing after the Public Warrants become exercisable and ending on the third trading day before the Company sends the notice of redemption to the holders of the Public Warrants. Upon issuance of a redemption notice by the Company, the holders of the Public Warrants may, at any time after the redemption notice, exercise the Public Warrants on a cashless basis. The Public Warrants are classified as equity, with the fair value of the Public Warrants as of the date of the Business Combination closed to additional paid-in capital. As of December 31, 2023, all 11,500,000 Public Warrants remain outstanding. Private Placement Warrants In connection with the closing of the Business Combination on November 7, 2023, the Company assumed 585,275 private warrants to purchase Common Stock with an exercise price of $ 11.50 per share (the “Private Placement Warrants”). The Private Placement Warrants (and shares of Common Stock issued or issuable upon exercise of the Private Placement Warrants) in general were not transferable, assignable or salable until 30 days after the Closing (excluding permitted transferees) and they will not be redeemable under certain redemption scenarios by the Company so long as they are held by the Sponsor or their respective permitted transferees. Otherwise, the Private Placement Warrants have terms and provisions that are identical to those of the Public Warrants, including as to exercise price, exercisability and exercise period. If the Private Placement Warrants are held by holders other than the Sponsor, Metric or their respective permitted transferees, the Private Placement Warrants will be redeemable by the Company under all redemption scenarios and exercisable by the holders on the same basis as the Public Warrants. The Company accounts for the Private Placement Warrants in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the Private Placement Warrants do not meet the criteria for equity treatment thereunder, each Private Placement Warrant must be recorded as a liability. The accounting treatment of derivative financial instruments in accordance with ASC 815, Derivatives and Hedging, required that the Company record a derivative liability upon the closing of the Business Combination. Accordingly, the Company classifies each Private Placement 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 Private Placement Warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statement of operations. The Company will reassess the classification at each balance sheet date. If the classification changes as a result of events during the period, the Private Placement Warrants will be reclassified as of the date of the event that causes the reclassification. As of December 31, 2023, all 585,275 Private Placement Warrants remained outstanding. F- 35 11. Fair Value Measurements The following table presents the Company’s assets and liabilities that are measured at fair value on a recurring basis, inclusive of related party (in thousands): Schedule of Assets and Liabilities Measured at Fair Value Level 1 Level 2 Level 3 Total December 31, 2023 Level 1 Level 2 Level 3 Total Liabilities: Private warrants $ - $ - $ 9 $ 9 PIPE warrants - - 14 14 PIPE notes - - 1,637 1,637 Total liabilities, at fair value $ - $ - $ 1,660 $ 1,660 Level 1 Level 2 Level 3 Total December 31, 2022 Level 1 Level 2 Level 3 Total Liabilities: Convertible promissory notes $ - $ - $ 26,243 $ 26,243 Total liabilities, at fair value $ - $ - $ 26,243 $ 26,243 The following table presents the changes in the Private Warrants, PIPE Notes and PIPE Warrants, and the convertible promissory notes measured at fair value for the years ended December 31, 2023 and 2022 (in thousands): Schedule of Warrants and Promissory Notes Measured at Fair Value Level 3 Rollforward: Private Warrants PIPE Notes & Warrants Convertible Promissory Notes Balance, December 31, 2021 $ - $ - $ 6,487 Additions - - 5,140 Changes in fair value - - 14,616 Balance, December 31, 2022 - - 26,243 Beginning balance - - 26,243 Additions 21 1,500 4,175 Changes in fair value ( 12 ) 151 17,517 Reclassified to additional paid-in-capital - - ( 47,935 ) Balance, December 31, 2023 $ 9 $ 1,651 $ - Ending balance $ 9 $ 1,651 $ - Private Placement Warrants and PIPE Warrants The aggregate fair value of the Private Placement Warrants and PIPE Warrants was $ 152,602 and $ 23,393 as of November 7, 2023 and December 31, 2023, respectively. The Company remeasured the fair value of the Private Placement Warrants and PIPE Warrants at November 7, 2023 and December 31, 2023 using the Black-Scholes option-pricing model with the following assumptions: Schedule of Fair Value Assumptions and Valuation Warrants Warrants Warrants Warrants As of December 31, As of November 7, 2023 2023 PIPE Private PIPE Private Warrants Warrants Warrants Warrants Stock price $ 0.81 $ 0.81 $ 5.25 $ 7.76 Exercise price $ 10.00 $ 11.50 $ 10.00 $ 11.50 Expected volatility 80.0 % 51.5 % 45.0 % 5.2 % Weighted average risk-free rate 3.8 % 3.9 % 4.5 % 4.6 % Expected dividend yield - - - - Expected term (in years) 4.9 4.8 5.0 5.0 Warrants measurement input 4.9 4.8 5.0 5.0 Convertible Promissory Notes and PIPE Notes The estimated fair values of the convertible promissory notes and PIPE Notes are each determined based on the aggregated, probability-weighted average of the outcomes of certain possible scenarios. The combined value of the probability-weighted average of those outcomes is then discounted back to each reporting period in which the convertible notes are outstanding, in each case, based on a risk-adjusted discount rate estimated based on the implied discount rate. The discount rate was held constant over the valuation periods given the fact pattern associated with the company and the stage of development. As of December 31, 2023, in connection with the Closing of the Business Combination described in Note 3, all convertible promissory notes were converted to Common Stock in accordance with the conversion provisions in the original agreements. The fair value of the PIPE Notes was $ 1.8 million and $ 1.6 million as of November 7, 2023 and December 31, 2023, respectively. F- 36 12. Related Party Transactions PIPE Notes and Warrants As disclosed in Note 3 and Note 6, Data Knights issued and sold PIPE Notes in connection with the Business Combination, which are convertible into shares of the Company’s Common Stock. Total proceeds raised from the PIPE Notes were $ 1.5 million, of which $ 1.0 million were with related party investors. Refer to Note 3 and Note 6 for additional details on the terms of the PIPE Notes. In connection with the issuance of the PIPE Notes, the Company also issued a total of 95,744 shares of PIPE Warrants, of which 63,829 shares were issued to the same related party investors. Refer to Note 10 for additional details on the terms of the PIPE Warrants. Convertible Promissory Notes and Warrants From 2019 to 2023, the Company issued various Convertible Promissory Notes to related party investors. Total gross proceeds raised from Convertible Promissory Notes with related parties was $ 12.3 million (out of $ 14.2 million total). In connection with the issuance of the Convertible Promissory Notes, the Company also issued 2,976,000 shares of Convertible Promissory Note Warrants to the same related parties (out of 3,726,000 total). Refer to Note 6 and Note 10 for additional details on the terms of the Convertible Promissory Notes and Convertible Promissory Note Warrants, respectively. The Closing of the Business Combination triggered the conversion of all Convertible Promissory Notes into shares of Common Stock of the Company, as disclosed in Note 3. Shareholder Loans From April 2023 to December 2023, the Company entered into shareholder loans with two related party investors (the “Shareholder Loans”) for aggregate gross proceeds of $ 954 thousand. The Shareholder Loans bear an interest rate of 8.0 % and mature one year after the commencement date of each agreement. There are no financial or non-financial covenants associated with the Shareholder Loans. The Shareholder Loans are not convertible into equity. On November 7, 2023, in connection with the Business Combination, one of the Shareholder Loans for $ 0.5 million was converted into a PIPE Note equal to the amount of principal and interest outstanding at the time of Closing. The Company accounted for the exchange as an extinguishment whereby the Shareholder Loan was written off and a separate PIPE Note was recorded at fair value, as disclosed in Note 6. The extinguishment had no impact on the Company’s consolidated statement of operations for the year ended December 31, 2023. As of December 31, 2023, a total of $ 454 thousand of Shareholder Loans remains outstanding which is classified as loan – related party on the consolidated balance sheet. Loan Extensions As disclosed in Note 3, in connection with the Business Combination, the Company assumed Data Knights’ liabilities, which included existing loan extensions to related parties. The loan extensions were to be exchanged for a fixed amount of the Company’s Common Stock upon the closing of a business combination or a similar event. As of December 31, 2023, a balance of $ 3.0 million remains outstanding and is recorded as loan extensions on the Company’s consolidated balance sheet. 13. Commitments and Contingencies Lease Agreement The Company has a month-to-month lease for a suite at a cost of $ 530 per month. The Company incurred $ 7,695 and $ 7,694 of rent expense, including common tenant costs and cancellation costs, during the years ended December 31, 2023 and 2022, respectively. F- 37 Litigation From time to time, the Company may become involved in legal proceedings arising in the ordinary course of business. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recognized, if and when it is probable that a liability has been incurred and the amount can be reasonably estimated. The Company was not subject to any material legal proceedings during the years ended December 31, 2023 and 2022. 14. Subsequent Events The Company has evaluated subsequent events occurring through November 4, 2024, the date the consolidated financial statements were issued, for events requiring recording or disclosure in the Company’s consolidated financial statements. Settlement of Deferred Underwriting Fees During 2024, through the date of this report, the Company issued 256,944 and 20,834 shares of Common Stock to EF Hutton LLC and Kingwood Capital Partners, LLC, respectively, as consideration for $ 3.0 million owed by the Company for underwriting commission due at the Closing of the Business Combination. Share Repurchase During 2024, through the date of this report, the Company bought back 187,745 shares of Common Stock from a convertible note holder. Shareholder Loans During 2024, through the date of this report, the Company received gross proceeds of $ 2.0 million in connection with shareholder loans with related party investors. Of the $ 2.0 million, $ 1.6 million is convertible into shares of Common Stock at a conversion price of $ 0.7535 per share. The remaining $ 0.4 million is not convertible into equity and bears an interest rate of 8.0 % with a maturity date one year from issuance. The Company subsequently repaid $ 0.2 million of the non-convertible shareholder loans through the date of this report. Private Placements As previously announced on a Current Report on Form 8-K filed with the SEC on April 2, 2024, on March 28, 2024, the Company entered into a definitive securities purchase agreement (the “Helena SPA”) with Helena Global Investment Opportunities 1 Ltd. (“Helena”), an affiliate of Helena Partners Inc., a Cayman-Islands based advisor and investor providing for up to $ 4.5 million in funding through a private placement for the issuance of senior secured convertible notes (the “Helena Notes”). On June 14, 2024, the Company and Helena entered into a termination agreement (the “Helena Termination Agreement”) to terminate the Helena SPA and related documents. Pursuant to the Helena Termination Agreement, the Company issued to Helena a warrant to purchase 50,000 shares of Common Stock at an exercise price of $ 1.20 per share and agreed to reimburse Helena for certain reasonable and documented out-of-pocket legal fees and expenses incurred in connection with entry into the Helena SPA and Helena Termination Agreement and related documents. On July 23, 2024 and July 25, 2024, the Company entered into securities purchase agreements (the “Securities Purchase Agreements”) with certain institutional investors in connection with the private placement of its Common Stock and pre-funded warrants with aggregate gross proceeds of approximately $ 4.6 million, before deducting fees and expenses payable by the Company. The Company intends to use the net proceeds for working capital and general corporate purposes. Pending use of the funds, the Company used a portion of the net proceeds to purchase Bitcoin ($BTC). There is no guarantee on the holding period for the purchased Bitcoin. Pursuant to the Securities Purchase Agreements, the Company agreed to issue and sell to the investors 1,297,059 shares of its Common Stock at a price of $ 1.0278 per share, pre-funded warrants exercisable for 1,323,530 shares of its Common Stock at an exercise price of $ 1.0278 per share, and 2,301,791 shares of its Common Stock at a price of $ 0.85 per share. The investors were required to prepay the exercise price for the pre-funded warrants, other than $ 0.0001 per share. The pre-funded warrants will be exercisable at any time after the date of issuance and will not expire. The price per share of all Common Stock and pre-funded warrants sold in the private placement meets the minimum price requirement under Nasdaq Listing Rule 5635(d). The securities were issued to institutional accredited investors in a private placement pursuant to Section 4(a)(2) and Regulation D promulgated under the Securities Act. F- 38 On September 24, 2024, the Company entered into securities purchase agreements (the “Follow-on SPA”) with an institutional investor in connection with the private placement of its Common Stock, warrants and pre-funded warrants with aggregate gross proceeds of approximately $ 1.7 million, before deducting fees and expenses payable by the Company. The Company intends to use the net proceeds from the Private Placement for working capital and general corporate purposes. Pending use of the funds, the Company plans to use a portion of the net proceeds to purchase Bitcoin ($BTC). Pursuant to the Follow-on SPA, the Company agreed to issue and sell to the investor 1,918,591 shares of its Common Stock at a price of $ 0.65 per share, warrants exercisable for 133,095 shares of its Common Stock at an exercise price of $ 0.325 per share and pre-funded warrants exercisable for 743,314 shares of its Common Stock at an exercise price of $ 0.65 per share. The investor was required to prepay the exercise price for the pre-funded warrants, other than $ 0.0001 per share. The warrants and pre-funded warrants will be exercisable at any time after the date of issuance and will not expire. The price per share of all Common Stock and pre-funded warrants sold in the private placement meets the minimum price requirement under Nasdaq Listing Rule 5635(d). The securities were issued to institutional accredited investors in a private placement pursuant to Section 4(a)(2) and Regulation D promulgated under the Securities Act. Standby Equity Purchase Agreement On June 17, 2024, the Company entered into a standby equity purchase agreement (the “SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”). Pursuant to the SEPA, subject to certain conditions, the Company has the option to sell to Yorkville an aggregate amount of up to up to $ 25.0 million of the Company’s shares of Common Stock at the Company’s request from time to time following both the repayment of the Promissory Note described below and the effectiveness of a resale registration statement covering the shares of Common Stock issued under the SEPA. The SEPA terminates on its 24-month anniversary. Each advance may not exceed the greater of 500,000 shares and 100% of the average daily volume traded of the Common Stock during the five trading days immediately prior to requested advance. The shares would be purchased at a price equal to 97% of the Market Price as defined in the SEPA. The Company may establish a minimum acceptable price in each advance below which the Company will not be obligated to make any sales to Yorkville . Any purchase under an advance would be subject to certain limitations, including that Yorkville will not purchase or acquire any shares that would result in it and its affiliates beneficially owning more than 4.99 % of the then outstanding voting power or number of shares of Common Stock or any shares that when aggregated with shares issued under all other earlier advances, would exceed 4,767,616 shares of Common Stock (representing 19.99 % of the aggregate number of then outstanding shares of Common Stock) (the “Exchange Cap”) unless shareholders approved issuances in excess of the Exchange Cap. In connection with the execution of the SEPA, the Company paid a $ 25,000 structuring fee to Yorkville. The Company agreed to pay a commitment fee of $ 0.5 million to Yorkville, which will be paid in shares in two tranches. Additionally, Yorkville agreed to advance to the Company, in exchange for a convertible promissory note (the “Yorkville Promissory Note”), a principal amount of $ 1.5 million, which was funded on June 18, 2024. The Yorkville Promissory Note is due on June 18, 2025, and interest shall accrue at an annual rate equal to 0%, subject to an increase to 18% upon an event of default as described in the Yorkville Promissory Note. The Yorkville Promissory Note will be convertible by Yorkville into shares of Common Stock at an aggregate purchase price based on a price per share equal to the lower of (a) $1.3408 per share (subject to downward reset upon the filing of the resale registration statement described below) or (b) 90% of the lowest daily VWAP of the Common Stock on Nasdaq during the seven trading days immediately prior to each conversion (the “Variable Price”), but which Variable Price may not be lower than the Floor Price then in effect . The “Floor Price” is $ 0.28 per share, subject to the Company’s option to reduce the Floor Price to any amounts set forth in a written notice to Yorkville. While the Promissory Note is outstanding, Yorkville may initiate an investor advance under the SEPA at the Promissory Note conversion price, the proceeds of which would be used to repay the Yorkville Promissory Note. The Yorkville Promissory Note may be accelerated by Yorkville upon specified events of default, and may become amortizable for cash if (i) the daily VWAP is less than the Floor Price for five trading days during a period of seven consecutive trading days, (ii) the Company has issued in excess of 95% of the shares of Common Stock available under the Exchange Cap or (iii) the Company is in material breach of its obligations under a Registration Rights Agreement it entered into with Yorkville in connection with the SEPA or Yorkville becomes limited in its ability to freely resell shares subject to an advance as further described in the Yorkville Promissory Note, subject to de-amortization after certain cures. F- 39 Yorkville Letter On October 8, 2024, Yorkville sent the Company a letter notifying the Company that it had breached a registration rights agreement with Yorkville by failing to file a Registration Statement on Form S-1 on the timeline set forth in the registration rights agreement (the “Yorkville Letter”). The Yorkville Letter asserted that this breach was an event of default and an amortization event under the prepaid advance in connection with SEPA. The Yorkville Letter also asserted that the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 was an event of default under the Yorkville Promissory Note. The Company subsequently engaged in discussions with Yorkville regarding the Yorkville Letter, which discussions are ongoing. Pursuant to the Yorkville Promissory Note, upon the occurrence of an amortization event, the Company is required to pay all principal and accrued interest on the Yorkville Promissory Note, plus a 10% payment premium on the principal amount, in equal installments over 3 calendar months or until the amortization event is cured, whichever is earlier. In addition, upon the occurrence of an event of default, the interest rate on the Yorkville Promissory Note increases to 18% retroactive to the date of the event of default. Executive Turnover As previously announced on a Current Report on Form 8-K filed with the SEC on April 2, 2024, on March 22, 2024, Paul J. Casey notified the Company of his intention to retire as Chief Executive Officer of the Company effective March 29, 2024. Mr. Casey continued to serve as a member of the Board of Directors until October 1, 2024. In connection with Mr. Casey’s retirement from the Company, Mr. Casey and the Company entered into a Resignation Agreement and Release, dated March 22, 2024, pursuant to which Mr. Casey was paid $ 12,000 as a severance payment, and the Board of Directors approved a stock option grant providing for the grant of 147,000 five-year options exercisable at $ 1.00 per share to Mr. Casey. On March 27, 2024, Scott Holbrook, a member of the Board of Directors and a member of the Company’s Audit Committee, notified the Company of his intention to retire from the Company’s Board of Directors effective March 29, 2024. Effective March 29, 2024, the Board of Directors (i) appointed Aaron Green to serve as Chief Executive Officer of the Company to fill the vacancy created by the retirement of Paul Casey; (ii) appointed Mr. Green, to serve as a member of the Board of Directors to fill the vacancy created by the retirement of Scott Holbrook; and (iii) appointed Dr. Thomas Kosasa, a member of the Board of Directors, to serve on the Company’s Audit Committee, also to fill the vacancy created by the retirement of Scott Holbrook. As previously announced on Form 8-K, on August 26, 2024, Lisa Embree, Chief Financial Officer (“CFO”), Executive Vice President, Treasurer and Secretary, notified the Company of her intention to resign from her position effective August 30, 2024. Effective August 30, 2024, the Board appointed Mr. Robert Golden to serve as the Chief Financial Officer on an interim basis to fill the vacancy created by the resignation of Lisa Embree. Effective on his appointment as interim CFO, Mr. Golden stepped down as a member and the chair of the Audit Committee of the Board. In connection with his appointment as interim CFO, the Company entered into a consulting agreement with Mr. Golden, pursuant to which Mr. Golden will receive a $ 12,000 monthly salary and a grant of 100,000 restricted stock units, which will vest on the first anniversary of the consulting agreement, subject to the terms and conditions set forth in the consulting agreement. As previously announced on a Current Report on Form 8-K filed with the SEC on October 8, 2024, on October 1, 2024, Paul J. Casey and Erkan Akyuz resigned from the Board, effective immediately. Also on October 1, 2024, the Board of Directors appointed Jair Clarke and Sherry Coonse McCraw to the Board to fill the vacancies created by Mr. Casey and Mr. Akyuz, respectively. In connection with Ms. Coonse McCraw and Mr. Clarke’s service on the Advisory Board of the Company, the Board of Directors approved a restricted stock unit (“RSU”) grant providing for the grant of 45,000 RSUs to each director for one full year of service (pro-rated for 2024). The RSUs will vest at the end of December 2024. F- 40 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure On May 3, 2024, the US Securities and Exchange Commission (“Commission”) entered an Order denying BF Borgers CPA PC (“Borgers”) the privilege of appearing or practicing before the Commission as an accountant. As a result, Borgers may not participate in or perform the audit or review of financial information included in Commission filings, issue audit reports included in Commission filings, provide consents with respect to audit reports, or otherwise appear or practice before the Commission. As a result of the foregoing, on May 6, 2024, the Board of Directors terminated Borgers as the Company’s independent registered public accounting firm. Borgers had audited the Company’s financial statements since 2022. Borger’s report on the Company’s financial statements for the fiscal years ended December 31, 2023 and 2022 did not contain an adverse opinion or disclaimer of opinion, nor was such report qualified or modified as to uncertainty, audit scope or accounting principle, except for an explanatory paragraph relating to a substantial doubt regarding the Company’s ability to continue as a going concern. During the fiscal years ended December 31, 2023, and 2022 and through May 6, 2024, there were no disagreements with BF Borgers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Borgers’s satisfaction, would have caused Borgers to make reference to the subject matter of the disagreement in connection with its report. During the fiscal years ended December 31, 2023, and 2022 and through May 6, 2024, there were no “reportable events” as defined under Item 304(a)(1)(v) of Regulation S-K, except for the identified material weaknesses in the Company’s internal control over financial reporting as disclosed in this Amended Form 10-K. On June 3, 2024, the Company appointed WithumSmith+Brown, PC (“Withum”) as its new independent registered public accounting firm, effective immediately, for the fiscal years ended December 31, 2023, and 2022. This appointment was authorized and approved by the Audit Committee of the Company’s Board of Directors.