OneMedNet Corp 10-K

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 40 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, 2024 and 2023, 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, 2024, 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, 2024 and 2023, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. 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. Emphasis of Matter – Crypto Assets Risks Associated with Crypto Assets and Risks of Ownership As of the date of these consolidated financial statements, digital assets are loosely regulated and there is no central marketplace or currency exchange. Supply is not determined by a central bank, and prices have been extremely volatile during the periods presented in the financial statements. Transferability and ownership of digital assets is verified by a thirty-two-character cryptographic key. Digital asset exchanges in the marketplace have been closed due to fraud, failure or security breaches. Any of the Company’s digital assets that reside on an exchange that shuts down may be lost. Several factors may affect the price of digital assets, including, but not limited to, supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of digital assets or the use of digital assets as a form of payment. There is no assurance that digital assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of digital asset payments by mainstream retail merchants and commercial businesses will continue to grow. Risks Associated With Crypto Asset Regulation As digital assets have grown in popularity and market size, various countries and jurisdictions have begun to develop regulations governing the digital assets industry. To the extent that future regulatory actions or policies limit the ability to exchange digital assets or utilize them for payments, the demand for digital assets will be reduced. Furthermore, regulatory actions may limit the ability of end-users to convert digital assets into fiat currency (e.g., U.S. dollars) or use digital assets to pay for goods and services. Such regulatory actions or policies would result in a reduction of demand, and in turn, a decline in the underlying digital asset unit prices. The effect of any future regulatory change on the Company or digital assets in general is impossible to predict, but such change could be substantial and adverse to the Company and the value of the Company’s investments in digital assets. Risks Associated With No FDIC or SIPC Protection The Company’s crypto assets are held by a custodian that is not a banking institution or otherwise a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”). Accordingly, deposits or assets held by the custodian are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. /s/ WithumSmith+Brown, PC We have served as the Company’s auditor since 2024. East Brunswick, New Jersey April 15, 2025 PCAOB ID Number 100 F- 1 ONEMEDNET CORPORATION CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share data) 2024 2023 As of December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 172 $ 47 Investment in crypto assets – Bitcoin 2,849 - Accounts receivable, net 213 152 Prepaid expenses and other current assets 385 166 Total current assets 3,619 365 Property and equipment, net 108 99 Total assets $ 3,727 $ 464 Liabilities and stockholders’ deficit Current liabilities: Accounts payable & accrued expenses $ 6,371 $ 4,682 Deferred revenues 561 254 Loan extensions 2,992 2,992 PIPE Notes 1,734 1,637 Yorkville Note 1,718 - Deferred underwriter fee payable 3,250 3,525 Loan – related party 2,319 465 Other current liabilities 283 283 Total current liabilities 19,228 13,838 Other long-term liabilities 449 68 Total liabilities 19,677 13,906 Commitments and contingencies (Note 15) - - Stockholders’ (deficit) equity: Preferred Stock, par value $ 0.0001 , 1,000,000 authorized at December 31, 2024 and 2023; no shares issued and outstanding at December 31, 2024 and 2023 - - Common Stock, par value $ 0.0001 , 100,000,000 shares authorized, 28,175,172 shares issued and 27,987,427 shares outstanding at December 31, 2024, and 23,572,232 shares issued and outstanding at December 31, 2023 2 2 Additional paid-in-capital 86,146 77,996 Treasury stock, at cost, 187,745 and 0 shares at December 31, 2024 and 2023, respectively ( 529 ) - Accumulated deficit ( 101,569 ) ( 91,440 ) Total stockholders’ deficit ( 15,950 ) ( 13,442 ) Total liabilities and stockholders’ deficit $ 3,727 $ 464 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) 2024 2023 For the year ended December 31, 2024 2023 Revenue Subscription revenue $ 351 $ 878 Web imaging revenue 292 143 Total revenue 643 1,021 Cost of revenue 924 1,150 Gross margin ( 281 ) ( 129 ) Operating expenses General and administrative 7,027 3,544 Sales and marketing 830 1,115 Research and development 1,467 2,065 Total operating expenses 9,324 6,724 Loss from operations ( 9,605 ) ( 6,853 ) Other expense (income), net Interest expense 147 11 Stock warrant expense 35 9,207 Change in fair value of warrants ( 9 ) ( 129 ) Change in fair value of PIPE Notes 97 269 Change in fair value of Yorkville Note 711 - Change in fair value of crypto assets – Bitcoin ( 798 ) - Realized gain on sale of crypto assets – Bitcoin ( 120 ) - Change in fair value of derivative liability 434 - Change in fair value of convertible promissory notes - 17,517 Other expense 25 34 Total other expense, net 522 26,909 Loss before income taxes $ ( 10,127 ) $ ( 33,762 ) Income tax expense 2 18 Net loss $ ( 10,129 ) $ ( 33,780 ) Earnings per share: Basic and diluted net loss per common share outstanding $ ( 0.36 ) $ ( 4.65 ) Basic and diluted weighted average number of common shares outstanding 28,076,512 7,271,014 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, 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 - - 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 - $ - - $ - $ - 23,572,232 $ 2 - $ 77,996 $ ( 91,440 ) $ ( 13,442 ) Shares Amount Shares Amount Capital Deficit Deficit Additional Total Common Stock Treasury Stock Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Deficit Balances as of December 31, 2023 23,572,232 $ 2 - $ - $ 77,996 $ ( 91,440 ) $ ( 13,442 ) Issuance of common stock to settle deferred underwriter fee payable 277,778 - - - 242 - 242 Repurchase of common stock - - ( 187,745 ) ( 529 ) - - ( 529 ) Vesting of restricted stock units 200,000 - - - - - - Issuance of common stock and pre-funded warrants in connection with private placements, net of issuance costs 3,598,850 - - - 6,270 - 6,270 Issuance of common stock to settle Yorkville commitment fee 526,312 - - - 500 - 500 Issuance of warrants to terminate Helena SPA - - - - 35 - 35 Extinguishment of officer accrued salaries - - - - 132 - 132 Partial conversion of Yorkville Note - - - - 343 - 343 Stock-based compensation expense - - - - 628 - 628 Net loss - - - - - ( 10,129 ) ( 10,129 ) Balances as of December 31, 2024 28,175,172 $ 2 ( 187,745 ) $ ( 529 ) $ 86,146 $ ( 101,569 ) $ ( 15,950 ) The accompanying notes are an integral part of these consolidated financial statements. F- 4 ONEMEDNET CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) 2024 2023 For the year ended December 31, 2024 2023 Cash flows from operating activities: Net loss $ ( 10,129 ) $ ( 33,780 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 57 28 Stock-based compensation expense 628 1,475 Stock warrant expense 35 9,207 Change in fair value of warrant liabilities ( 9 ) ( 129 ) Change in fair value of PIPE Notes 97 269 Change in fair value of Yorkville Note 711 - Change in fair value of convertible promissory notes - 17,517 Change in fair value of crypto assets – Bitcoin ( 798 ) - Change in fair value of derivative liability 434 - Realized gain on sale of crypto assets – Bitcoin ( 120 ) - Non-cash SEPA commitment fee 500 - Gain on forgiveness of CEBA loan ( 15 ) - Non-cash interest 121 11 Change in operating assets and liabilities: Accounts receivable ( 61 ) ( 133 ) Prepaid expenses and other current assets ( 234 ) ( 43 ) Accounts payable & accrued expenses 1,493 717 Deferred revenues 307 70 Net cash used in operating activities ( 6,983 ) ( 4,791 ) Cash flows from investing activities: Purchases of property and equipment ( 51 ) ( 44 ) Purchases of crypto assets – Bitcoin ( 2,900 ) - Proceeds from sales of crypto assets – Bitcoin 969 - Net cash used in investing activities ( 1,982 ) ( 44 ) Cash flows from financing activities: Proceeds from private placements, net of issuance costs 6,270 - Proceeds from issuance of shareholder loans 2,000 454 Proceeds from issuance of Yorkville Note, net of issuance costs 1,350 - Proceeds from line of credit borrowings 500 - Repayment of CEBA loan ( 30 ) - Repayment of deferred underwriter fees ( 100 ) - Repayment for common stock repurchase ( 200 ) - Repayment of shareholder loan ( 200 ) - Repayment of line of credit borrowings ( 500 ) - Proceeds from issuance of PIPE Notes - 1,500 Proceeds from issuance of convertible notes - 4,175 Proceeds from issuance of Series A-2 preferred stock - 16 Business Combination costs - ( 1,534 ) Net cash provided by financing activities 9,090 4,611 Net increase (decrease) in cash and cash equivalents 125 ( 224 ) Cash and cash equivalents at beginning year 47 271 Cash and cash equivalents at end of year $ 172 $ 47 Supplemental disclosure of cash flow information: Cash paid for interest $ 26 $ - Cash paid for taxes $ 18 $ - Supplemental disclosures of non-cash investing and financing activities: Common shares issued to settle deferred underwriter fees $ 242 $ - Recognition of prepaid forward contract in exchange for partial conversion of Yorkville Note $ 343 $ - Common stock repurchase consideration in accounts payable and accrued expenses $ 329 $ - Extinguishment of officer accrued salaries reclassified to additional paid-in capital $ 132 $ - Insurance premium settled by issuance of note payable $ 318 $ - 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. Description of Business Organization and Description of Business 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, the Company 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. Liquidity and Going Concern 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 $ 10.1 million and $ 33.8 million for the years ended December 31, 2024 and 2023, respectively. In addition, the Company had an accumulated deficit of $ 101.6 million as of December 31, 2024. The Company’s cash balance of $ 0.2 million 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. Investment in Crypto Assets – Bitcoin The Company has also invested in Bitcoin, which is a crypto asset. Crypto assets are loosely regulated and there is no central marketplace for currency exchange. Supply is determined by a computer code, not by a central bank, and prices have been extremely volatile. Certain crypto asset exchanges have been closed due to fraud, failure or security breaches. Any of the Company’s crypto assets that reside on an exchange that shuts down may be lost. Several factors may affect the price of crypto assets, including, but not limited to: supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of crypto assets, and the use of crypto assets as a form of payment. There is no assurance that crypto assets will maintain their long-term value in terms of purchasing power in the future, or that acceptance of crypto asset payments by mainstream retail merchants and commercial businesses will continue to grow. As crypto assets have grown in popularity and market size, various countries and jurisdictions have begun to develop regulations governing the crypto asset industry. To the extent future regulatory actions or policies limit the ability to exchange crypto assets or utilize them for payments, the demand for crypto assets could be reduced. Furthermore, regulatory actions may limit the ability of end-users to convert crypto assets into fiat currency (e.g., U.S. dollars) or use crypto assets to pay for goods and services. Such regulatory actions or policies could result in a reduction of demand, and in turn, a decline in the underlying crypto asset unit prices. The effect of any future regulatory change on crypto assets in general is impossible to predict, but such change could be substantial and adverse to the Company and the value of the Company’s investments in crypto assets. Crypto assets are not insured or protected under the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Company (“SIPC”). Accordingly, with respect to its Bitcoin investment, the Company does not enjoy the protections of other assets covered by the FDIC or SIPC. Nasdaq Notices On March 12, 2025, the Company received written notice (the “MVLS Nasdaq Notice”) from Nasdaq indicating that for the preceding 31 consecutive business days, the market value of the Company’s listed securities (“MVLS”) did not maintain a minimum market value of $ 35,000,000 (the “Minimum MVLS Requirement”) as required by Nasdaq Listing Rule 5550(b)(2). Nasdaq also noted 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 a compliance period of 180 calendar days, or until September 8, 2025, to regain compliance with the Minimum MVLS Requirement. Compliance could have been achieved if the Company’s MVLS closed at $ 35,000,000 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 does not regain compliance with the Minimum MVLS Requirement by September 8, 2025, 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. In addition, on April 10, 2025, the Company received a separate notice (the “Bid Price Notice”) from Nasdaq indicating that the Company, based on the closing bid price of the Company’s common stock for the last 30 consecutive business days, is not in compliance with the $ 1.00 minimum bid price requirement for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has a period of 180 calendar days, or until October 7, 2025, to regain compliance with the Bid Price Rule. To regain compliance, the minimum bid price of the Company’s common stock must meet or exceed $ 1.00 per share for a minimum of ten consecutive business days during this 180-calendar day grace period. In the event the Company does not regain compliance with the Bid Price Rule by October 7, 2025, the Company may be eligible for an additional 180-calendar day compliance period. To qualify, the Company will be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and will need to 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, Nasdaq will inform the Company that it has been granted an additional 180 calendar days. However, if it appears to Nasdaq that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, the Staff will provide notice that its securities will be subject to delisting. The notices from Nasdaq described above 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. F- 6 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”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding annual financial reporting. 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. Immaterial Revision to Previously Issued Financial Statements Subsequent to the issuance of the consolidated financial statements as of and for the year ended December 31, 2023, the Company determined that it had inadvertently excluded 1,240,644 shares from its calculation of basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. These shares represent a forward contract on the Company’s common shares for no consideration and should be considered outstanding shares for purposes of calculating net loss per share. As a result, the Company has revised its calculation of basic and diluted net loss per common share outstanding for the year ended December 31, 2023. Basic and diluted net loss per share attributable to common stockholders for the year ended December 31, 2023 as previously presented was $ ( 4.77 ) and as revised is $ ( 4.65 ) . The Company assessed the materiality of the change in the calculation of net loss per share resulting from its inadvertent exclusion of these shares, considering both quantitative and qualitative factors, and concluded that the effects of the change to the calculation and presentation of net loss per share was not material, individually or in the aggregate, to any previously reported quarterly or annual period. However, the Company has revised its previously issued consolidated financial statements to reflect the change in presentation of net loss per share inclusive of these shares. All related amounts have been updated to reflect the effects of the revision through the financial statements and related footnotes, as applicable. Net loss per share for the interim periods within the annual periods ended December 31, 2024 and 2023, as revised in accordance with the changes disclosed above, is presented below. The Company will revise the presentation of net loss per share in the subsequent quarterly filings on Form 10-Q in 2025. Schedule of Revised Net Loss Per Share Three Months Ended March 31, 2024 As Reported As Revised Numerator: Net loss $ ( 2,109 ) $ ( 2,109 ) Denominator: Weighted average shares outstanding, basic and diluted 23,681,846 24,922,490 Net loss per share, basic and diluted $ ( 0.09 ) $ ( 0.08 ) Six Months Ended June 30, 2024 As Reported As Revised Numerator: Net loss $ ( 5,698 ) $ ( 5,698 ) Denominator: Weighted average shares outstanding, basic and diluted 23,717,110 24,957,754 Net loss per share, basic and diluted $ ( 0.24 ) $ ( 0.23 ) Three Months Ended June 30, 2024 As Reported As Revised Numerator: Net loss $ ( 3,589 ) $ ( 3,589 ) Denominator: Weighted average shares outstanding, basic and diluted 23,940,120 25,180,764 Net loss per share, basic and diluted $ ( 0.15 ) $ ( 0.14 ) F- 7 Nine Months Ended September 30, 2024 As Reported As Revised Numerator: Net loss $ ( 7,755 ) $ ( 7,755 ) Denominator: Weighted average shares outstanding, basic and diluted 25,051,293 26,340,952 Net loss per share, basic and diluted $ ( 0.31 ) $ ( 0.29 ) Three Months Ended September 30, 2024 As Reported As Revised Numerator: Net loss $ ( 2,058 ) $ ( 2,058 ) Denominator: Weighted average shares outstanding, basic and diluted 27,878,399 29,265,023 Net loss per share, basic and diluted $ ( 0.07 ) $ ( 0.07 ) 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, the valuation of the liability classified warrants, SEPA derivative liability, convertible debt measured at fair value, revenue recognition, provision for income taxes, and stock-based compensation. Estimates are periodically reviewed in light of changes in circumstances, facts, and experience. Operating Segments The Company adopted Accounting Standard Update (“ASU”) 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures , as of January 1, 2024. See the recently adopted accounting pronouncements section below for more information. Operating segments are defined as components of an entity for which separate discrete financial information is made available and that is regularly evaluated by the chief operating decision maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company is a healthcare software company with solutions focused on digital medical image management, exchange, and sharing. The Company’s operations are organized and reported as a single reportable segment, which includes all activities related to digital medical image management, exchange, and sharing. The Company’s CODM, its chief executive officer, reviews operating results on an aggregate basis and manages the operations as a single operating segment. The CODM evaluates performance and allocates resources based on operating loss that also is reported on the statements of operations as operating loss, and cash used in operations. Significant expenses reviewed by the CODM include those that are presented in the consolidated statements of operations. The measure of segment assets is reported on the balance sheets as total assets. Substantially all long-lived assets are located in the United States. The table below provides the Company’s total revenue by geographic region based on the location of the customer (in thousands): Schedule of Revenue by Geographic Region 2024 2023 For the year ended December 31, 2024 2023 Americas $ 401 $ 822 Europe and Middle East 242 199 Total $ 643 $ 1,021 F- 8 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, 2024 and 2023, 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. Investment in Crypto Assets The Company adopted ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), as of January 1, 2024. ASU 2023-08 provides an update to existing crypto asset guidance and requires an entity to measure certain crypto assets at fair value. In addition, this guidance requires disclosures related to crypto assets once it is adopted. See the recently adopted accounting pronouncements section below for more information. The Company reflects crypto assets held at fair value on the consolidated balance sheets and consolidated statements of cash flows, the activity from remeasurement of crypto assets at fair value on the consolidated statements of operations, and the required expanded disclosures in Note 4, Investment in Crypto Assets – Bitcoin . Crypto assets are generally valued using prices as reported on reputable and liquid exchanges based on the quoted end-of-day price provided by such exchanges as of the date and time of determination. The time used is 23:59 UTC. Accounts Receivable and Allowance for Credit Losses Accounts receivable is unsecured, recorded at net realizable value, and do not bear interest. Unbilled receivables arise from services rendered but not yet billed. As of December 31, 2024 and 2023, unbilled receivables totaled $ 0.2 million and $ 0 , respectively. Accounts receivable are 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. Accounts receivable, net includes $ 0.2 million and $ 0 as of December 31, 2024 and 2023, respectively, representing accounts not billed to customers. As of December 31, 2024 and 2023, the Company established allowances for credit losses of $ 0 . F- 9 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, 2024, there were 2 customers that accounted for 10 % or more of total revenue, and there was 1 customer that accounted for 10 % or more of total revenue for the year ended December 31, 2023. The following table represents these customers’ aggregate percent of total revenue: Schedule Of Aggregate Percentage Revenue and Accounts Receivable 2024 2023 For the year ended December 31, 2024 2023 Customer 1 35 % 51 % Customer 2 17 % 0 % Aggregate percent of revenue 52 % 51 % As of December 31, 2024, two customers accounted for more than 10 % of the Company’s accounts receivable balance, and three customers accounted for over 10 % of the Company’s accounts receivable balance as of December 31, 2023. The following table represents these customers’ aggregate percent of total accounts receivable: 2024 2023 As of December 31, 2024 2023 Customer 1 37 % 0 % Customer 2 17 % 33 % Customer 3 7 % 36 % Customer 4 6 % 27 % Aggregate percent of accounts receivable 67 % 96 % 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, 2024 or December 31, 2023. 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, Accounting Standards Codification (“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- 10 Convertible promissory notes, PIPE Notes and the Yorkville Note all 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, PIPE Notes and Yorkville Note are recorded in changes in fair value of convertible debt, change in fair value of PIPE Notes and change in fair value of Yorkville Note, respectively, 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, change in fair value of PIPE Notes and change in fair value of Yorkville Note on the consolidated statements of operations. See additional information on valuation methodologies and significant assumptions used in Note 7 and Note 13. Derivative Financial Instruments The Company evaluates its convertible debt, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 480, Distinguishing Liabilities from Equity and ASC 815, Derivatives and Hedging . Instruments 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. Instruments 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 13 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- 11 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 13 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. 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). As such, there were no shares of Series A-1 or Series A-2 preferred stock issued or outstanding as of December 31, 2024 and 2023. Treasury Stock The Company records the repurchase of its common stock, par value $ 0.0001 per share at cost on the trade date of the transaction. These shares are considered treasury stock, which is a reduction to stockholders’ equity (deficit). Treasury stock is included in authorized and issued shares but excluded from outstanding shares. 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- 12 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. Subscription revenue is 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. 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 at a point in 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, 2024 and December 31, 2023, research and development expenditures were charged to operating expense as incurred. F- 13 Stock-based Compensation The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). The Company has issued stock options and restricted stock units (“RSUs”). In accordance with ASC 718, the Company recognizes compensation expense for all stock-based awards based on the estimated grant-date fair value. The Company uses the Black-Scholes option-pricing model to determine the fair value of stock options granted. The determination of fair value for stock options on the date of grant using an option-pricing model requires management to make certain assumptions including expected volatility, expected term, risk-free interest rate and expected dividends in addition to the Company’s common stock valuation. For RSUs, the fair value of an RSU is equal to the market price of the Company’s common stock (“Common Stock”) on the grant date. The Company recognizes forfeitures as they occur. Stock-based compensation expense for stock-based awards is recognized on a straight-line basis based on the grant date fair value over the associated service period of the award, which is generally the vesting period. Stock-based awards generally vest over three-year service periods and stock options expire after ten years. The Company records stock-based compensation expense to cost of revenue, general and administrative expense, sales and marketing expense or research and development expense based on the underlying function of the individual that was granted the stock-based compensation award. Shares issued upon stock option exercise and RSU vesting are newly issued shares. Prior to the Business Combination, due to the absence of an active market for the Company’s common stock, the Company utilized methodologies, approaches, and assumptions consistent with the American Institute of Certified Public Accountants Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation to estimate the fair value of its common stock. In determining the exercise prices for options granted, the Company considered the fair value of the Company as of the grant date. The fair value of the Company was determined based upon a variety of factors, including the Company’s financial position, historical performance and operating results, the Company’s stage of development, the progress of the Company’s research and development programs, the prices at which the Company sold its convertible preferred stock, the superior rights, preferences and privileges of the Company’s convertible preferred stock relative to its common stock, external market conditions affecting the biotechnology industry, the lack of marketability of the Company’s common stock and the prospects of a liquidity event and the analysis of initial public offering and market performance of similar companies as well as recently completed mergers and acquisition of peer companies. Significant changes to the key assumptions underlying the factors used could result in different fair values of the Company at each valuation date. Net Loss per Share The Company calculates basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for participating securities. Certain warrants participate in distributions of the Company. The pre-funded warrants associated with the July and September 2024 private placements (see Note 10) are considered outstanding shares in the basic earnings per share calculation given their nominal exercise price. In addition, the shares issuable pursuant to the forward contracts are considered outstanding shares in the basic earnings per share calculation because there is no consideration (see Note 7 and Note 10). The net loss attributable to common stockholders is not allocated to the warrant holders as the warrant holders do not have a contractual obligation to share in losses. Basic net loss per share is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of shares of Common Stock and common stock equivalents outstanding for the period. Common stock equivalents are only included when their effect is dilutive. The Company’s potentially dilutive securities, including outstanding stock options and RSUs under the Company’s equity incentive plan, warrants to purchase Common Stock, convertible debt, deferred underwriter fees and loan extensions have been excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding to the Company’s net loss position. F- 14 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, 2024 and 2023 because including them would have been antidilutive (in thousands): Schedule of Antidilutive Earnings Per Share 2024 2023 For the year ended December 31, 2024 2023 Employee stock options 147,000 - Restricted stock units 1,625,404 - Warrants for common stock 12,364,114 12,181,019 Convertible debt 8,549,417 1,450,547 Deferred underwriter fees 3,174,999 3,174,999 Loan extensions 3,274,182 3,274,182 Total common stock equivalents 29,135,116 20,080,747 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. F- 15 Recently Adopted Accounting Pronouncements Effective January 1, 2024, the Company retrospectively adopted Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”) on an annual basis, which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items. ASU 2023-07 also requires public entities with a single reportable segment to apply the disclosure requirements in ASU 2023-07, as well as all existing segment disclosures and reconciliation requirements in FASB ASC Topic 280, Segment Reporting . The standard is effective for annual periods beginning after December 15, 2023 and interim periods within annual periods beginning after December 15, 2024. The Company adopted this as of December 31, 2024 and the adoption had no material impact on the Company’s consolidated financial statements or footnotes. Effective January 1, 2024, the Company adopted ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), which provides an update to existing crypto asset guidance and requires an entity to measure certain crypto assets at fair value. In addition, this guidance requires disclosures related to crypto assets once it is adopted. The adoption of ASU 2023-08 resulted in no cumulative-effect adjustment to the opening balance of retained earnings as of January 1, 2024. Recently Issued Accounting Pronouncements 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. 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- 16 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 statements 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 Acquisition 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 ) Total $ ( 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, or (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 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- 17 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 matured on March 1, 2024 ; and (iii) a transfer of 277,778 shares of Common Stock, which were valued at the closing stock price of $ 10.89 per share on June 28, 2023. If, five trading days prior to the six-month anniversary, the aggregate VWAP value of the 277,778 shares of Common Stock was lower than the original share value of $ 3.0 million, the Company was obligated to compensate EF Hutton at a new share price equal to the difference in amount on such date. Due to the decrease in share value on the six-month anniversary, the Company was required to either pay to EF Hutton an additional $ 2.8 million or issue to EF Hutton an additional 3,175,000 shares of Common Stock. In January 2024, the Company issued the original 277,778 shares of Common Stock as consideration for $ 0.2 million owed by the Company. In August 2024, the Company made a promissory note payment of $ 0.1 million. As of December 31, 2024, the Company was obligated to pay EF Hutton the true-up of either $ 2.8 million or 3,175,000 shares of Common Stock valued at $ 0.88 per share, plus the remaining $0.4 million promissory note. Upon the occurrence of an event of default, the promissory note bears interest at a rate of 12.5 % until such event of default is cured. The promissory note remained unpaid upon maturity on March 1, 2024, and the Company recorded interest expense of $ 0.1 million during the year ended December 31, 2024, because of the event of default. As of December 31, 2024 and 2023, deferred underwriter fees payable totaled $ 3.3 million and $ 3.5 , respectively. 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 either repaid in cash or, at the option of the lender, exchanged for a fixed amount of Common Stock at a price of $ 10.00 per share upon the closing of a business combination or a similar event. At the closing of the Business Combination, all lenders provided notice to have their loans converted into shares upon the filing of a registration statement on Form S-1 with the SE C. As of December 31, 2024 and December 31, 2023, a registration statement has not yet been declared effective by the SEC, and a balance of $3.0 million remains outstanding on the Company’s consolidated balance sheets. 4. Investment in Crypto Assets – Bitcoin The Company’s crypto assets are comprised solely of Bitcoin. In accordance with ASC Topic 820, Fair Value Measurement , the Company measures the fair value of its Bitcoin based on the quoted end-of-day price on the measurement date for a single Bitcoin on an active trading platform, River.com. Management has determined that River.com, an active exchange market, represents a principal market for Bitcoin and the end-of-day quoted price is both readily available and representative of fair value (Level 1 inputs). The following table sets forth the units held, cost basis, and fair value of its investments in crypto assets, as shown on the consolidated balance sheets as of December 31, 2024 (in thousands): Schedule of Crypto Assets Held Units Cost Basis Fair Value Investments in crypto assets: Bitcoin 31 $ 2,051 $ 2,849 Total 31 $ 2,051 $ 2,849 The following table presents a reconciliation of the fair values of the Company’s investments in crypto assets for the year ended December 31, 2024 (in thousands): Schedule of Crypto Assets Reconciliation of Fair Values Bitcoin Balance, December 31, 2023 $ - Additions 2,900 Dispositions ( 849 ) Unrealized gain, net 798 Balance, December 31, 2024 $ 2,849 Additions are the result of the Company acquiring Bitcoin with liquid assets from private placements, while dispositions are the result of sales of Bitcoin. During the year ended December 31, 2024, the Company had Bitcoin dispositions of $ 0.8 million, inclusive of realized gains of $ 0.1 million. The Company uses a first-in, first-out methodology to assign costs to Bitcoin for purposes of the Bitcoin held and realized gains and losses disclosure above. Bitcoin is included in current assets in the consolidated balance sheets due to the Company’s ability to sell them in a highly liquid marketplace and its intent to liquidate its Bitcoin to support operations when needed. 5. Property and Equipment Property and equipment are summarized as of December 31 (in thousands): Schedule of Property and Equipment 2024 2023 As of December 31, 2024 2023 Computers $ 297 $ 303 Furniture and equipment 27 4 Total property and equipment 324 307 Less: accumulated depreciation ( 216 ) ( 208 ) Property and equipment, net $ 108 $ 99 Depreciation expense was $ 0.04 million and $ 0.03 million for the years ended December 31, 2024 and 2023, respectively, which is recorded within general and administrative expenses in the consolidated statements of operations. 6. 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 Income by Geographical Location 2024 2023 For the year ended December 31, 2024 2023 United States $ ( 10,046 ) $ ( 33,827 ) Foreign ( 81 ) 65 Total loss before income taxes $ ( 10,127 ) $ ( 33,762 ) F- 18 The components of the income tax provision for the years ended December 31, 2024 and 2023 were as follows (in thousands): Schedule of Components of Income Tax 2024 2023 As of December 31, 2024 2023 Current federal $ - $ - Current state 2 - Current foreign - 18 Total current tax provision (benefit) $ 2 $ 18 Deferred federal - - Deferred state - - Deferred foreign - - Total deferred tax provision (benefit) $ - $ - Total income tax provision $ 2 $ 18 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 Income Tax Expense 2024 2023 As of December 31, 2024 2023 Tax provision at statutory rate 21.0 % 21.0 % State taxes, net of federal benefit 1.2 % 0.2 % Stock-based compensation expense ( 1.0 )% ( 0.9 )% Permanent differences - other ( 1.2 )% ( 0.2 )% Change in fair value of convertible notes 0.0 % ( 11.0 )% Change in fair value of warrants 0.0 % ( 5.7 )% Change in fair value of Yorkville Note ( 1.5 )% 0.0 % SEPA commitment fee ( 1.0 )% 0.0 % Change in valuation allowance ( 17.9 )% ( 3.4 )% Other, net 0.4 % ( 0.1 )% Effective income tax rate 0.0 % - 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 Deferred Income Taxes 2024 2023 As of December 31, 2024 2023 Deferred tax assets Net operating loss carryforwards $ 9,092 $ 7,393 Capitalized research costs 584 337 Fixed assets 21 25 Other 37 4 Total gross deferred tax assets 9,734 7,759 Less: valuation allowance ( 9,551 ) ( 7,753 ) Net deferred tax assets $ 183 $ 6 Deferred tax liabilities Other $ ( 183 ) $ ( 6 ) Total deferred tax liabilities $ ( 183 ) $ ( 6 ) Net deferred taxes $ - $ - The Company has generated both federal and state net operating losses (NOL) of approximately $ 38.8 million and $ 18.1 million, respectively. The federal NOLs include $ 12.2 million which expire at various dates beginning in 2030 and $ 26.6 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- 19 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, 2024 and 2023. The valuation allowance increased by $ 1.8 million in 2024 due to the increase in deferred tax assets, primarily due to net operating loss carryforwards and capitalized research costs. As of December 31, 2024 and 2023, 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 2021. The Company is currently not under examination by any tax authority. 7. Convertible Debt 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. As of December 31, 2024, the PIPE Notes have not been repaid or converted and remain outstanding. 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, 2024 and 2023 the fair value of the PIPE Notes was $ 1.7 million and $ 1.6 million, respectively, which were included in current liabilities on the consolidated balance sheets. Shareholder Loans For the year ended December 31, 2024, the Company received gross proceeds of $ 1.6 million in connection with shareholder loans with a related party investor which are convertible into 2,123,312 shares of Common Stock at a conversion price of $ 0.7535 per share. These loans do not bear interest and mature one year from issuance. The balance of $ 1.6 million is included in loan – related party on the consolidated balance sheets as of December 31, 2024. Helena Notes 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 and warrants across multiple tranches. The Helena SPA was subsequently terminated in June 2024 prior to the closing of any tranches (the “Helena Termination Agreement”). As such, except as described below, the Helena SPA had no impact on the Company’s consolidated financial statements as of and for the year ended December 31, 2024. Pursuant to the Helena Termination Agreement, the Company agreed to issue to Helena a warrant to purchase 50,000 shares of Common Stock at an exercise price of $ 1.20 per share (the “Helena Termination Warrants”) 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. The Helena Termination Warrants were issued in December 2024 and the Company recorded stock warrant expense of $ 0.04 million in its consolidated statements of operations. See additional information on the accounting for the warrants in Note 12. The Company also incurred legal fees and expenses of $ 0.04 million in connection with the Helena Termination Agreement. Yorkville Note On June 17, 2024, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with YA II PN, LTD, a Cayman Islands exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”) (see Note 7). Upon entry into the SEPA, the Company issued Yorkville a $ 1.5 million convertible promissory note for $ 1.35 million in cash (after a 10 % original issue discount) (the “Yorkville Note”). The Yorkville Note does not bear interest and matures on June 17, 2025 . The Yorkville Note is 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 volume-weighted average price (“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. Upon the occurrence and during the continuation of an event of default (as defined in the Yorkville Note), the Yorkville Note will become immediately due and payable. The issuance of the Common Stock upon conversion of the note and otherwise under the SEPA is capped at 19.9 % of the outstanding Common Stock as of June 18, 2024. Further, the note and SEPA include a beneficial ownership blocker for Yorkville such that Yorkville may not be deemed the beneficial owner of more than 4.99 % of the Company’s Common Stock. The Company’s failure to file its Form 10-Q for the fiscal quarter ended June 30, 2024 by August 14, 2024 was an event of default under the Yorkville Note. A further event of default occurred as a result of the Company’s failure to file a registration statement with the SEC for the resale by Yorkville of the shares of Common Stock issuable under the SEPA by August 30, 2024 (see Note 10). Upon any event of default, the interest rate increases to 18 % and the full unpaid principal amount may become immediately due and payable at Yorkville’s election. As of December 31, 2024, the Company has not accrued any payments related to these events of default. The Company elected the FVO of accounting for the Yorkville Note. The estimated fair value adjustment is presented as a single line item within other expense (income), net in the accompanying consolidated statements of operations under the caption change in fair value of Yorkville Note. On December 20, 2024, Yorkville provided the Company with a form of conversion notice specifying their request to convert $ 0.2 million of outstanding principal into 245,007 shares of the Company’s Common Stock, which was based on the Variable Price of $ 0.8163 . As of December 31, 2024, the Company had not yet issued the 245,007 shares of Common Stock. The fair value of $ 0.3 million was recorded as an equity forward sale contract and was included in additional paid-in-capital in stockholders’ deficit in the consolidated balance sheets as it met the criteria for equity accounting under ASC 815. The shares were issued to Yorkville on January 22, 2025. As of December 31, 2024, the fair value of the Yorkville Note was $ 1.7 million, which is included in current liabilities on the consolidated balance sheets. Convertible Promissory Notes The following provides disclosure on certain convertible promissory notes that existed prior to the Business Combination (the “Convertible Promissory Notes”). As a result of the Business Combination, all outstanding principal and accrued interest was converted into shares of the Company’s Common Stock, and no obligation related to the Convertible Promissory Notes remained immediately after the Business Combination. Accordingly, there were no Convertible Promissory Notes outstanding as of December 31, 2024 and 2023. Prior to the Business Combination, the Convertible Promissory Notes bore interest at a rate of either 4 % or 6 % annually from the date of issuance until the outstanding principal was paid or converted. In connection with the issuance of Convertible Promissory Notes in 2022 and 2023, the Company also issued warrants at an exercise price of $ 1.00 per share (the “Convertible Note Warrants”). See additional information on the accounting for the warrants in Note 12. 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. For the year ended December 31, 2023, 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. There was no change in fair value of convertible debt during the year ended December 31, 2024, as the Convertible Promissory Notes no longer existed after the Business Combination. F- 20 8. Line of Credit In March 2024, the Company obtained a line of credit of $ 1.0 million with BOC Bank to support short-term working capital needs. The line of credit bore an interest rate of 5.0 % and was to mature in 120 days. In July 2024, the maturity date was extended an additional 120 days to November 2, 2024. The line of credit was terminated at maturity in November 2024 and there was no balance outstanding as of December 31, 2024. The Company incurred $ 0.02 million in loan fees, which were amortized over the access period and included in general and administrative expenses in the consolidated statements of operations. 9. 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, and the Company recognized a gain on extinguishment of $ 15 thousand, which is presented in other expense (income), net in the consolidated statements of operations for the year ended December 31, 2024. As of December 31, 2023, the loan was classified under other long-term liabilities on the consolidated balance sheets given the three-year maturity term if not repaid by January 18, 2024. 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. 10. Stockholders’ Deficit Common Stock During the year ended December 31, 2023, all shares of Series A-2 preferred stock and Series A-1 preferred stock were converted into Common Stock using an exchange ratio of 1:1. Subsequent to the Business Combination, the Company is authorized to issue 100,000,000 shares of Common Stock. Each share of Common Stock entitles the stockholder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are entitled to receive dividends, as may be declared by the Company’s board of directors. As of December 31, 2024, no dividends had been declared. In February 2024, the Company entered into a stock repurchase agreement with a former holder of Convertible Promissory Notes pursuant to which the Company repurchased 187,745 shares of Common Stock in exchange for cash of $ 0.5 million that is payable in installments. The Company made payments of $ 0.1 million in July and October 2024 and the remaining $ 0.3 million is expected to be repaid in early 2025. The $ 0.5 million represents the principal and accrued interest outstanding on the holder’s Convertible Promissory Note immediately prior to the Business Combination. The $ 0.3 million outstanding at December 31, 2024 is classified in accounts payable and accrued expenses on the consolidated balance sheets. The 187,745 repurchased shares were reclassified to treasury stock as of December 31, 2024. As of December 31, 2024, the Company had an outstanding forward contract to issue 1,240,644 shares of its Common Stock to ARC Group Limited for success fees earned from Data Knights in connection with the Business Combination. The forward contract was included in additional paid-in-capital in stockholders’ deficit in the consolidated balance sheets as it met the criteria for equity accounting under ASC 815. Standby Equity Purchase Agreement On June 17, 2024, the Company and Yorkville entered into the SEPA. Under the SEPA, the Company has the right to sell to Yorkville up to $ 25.0 million of its Common Stock, subject to certain limitations and conditions set forth in the SEPA, from time to time, over a 24-month period. Sales of the Common Stock to Yorkville under the SEPA, and the timing of any such sales, are at the Company’s option, and the Company is under no obligation to sell any shares of Common Stock to Yorkville under the SEPA except in connection with notices that may be submitted by Yorkville, in certain circumstances as described below. Upon the satisfaction of the conditions precedent in the SEPA, which include having a resale shelf for shares of Common Stock issued to Yorkville declared effective, the Company has the right to direct Yorkville to purchase a specified number of shares of Common Stock by delivering written notice (each an “Advance”). An Advance may not exceed the greater of (i) 100% of the average of the daily trading volume of the Common Stock on Nasdaq, during the five consecutive trading days immediately preceding the date of the Advance, and (ii) five hundred thousand (500,000) shares of Common Stock. Yorkville will generally purchase shares pursuant to an Advance at a price per share equal to 97% of the VWAP, on Nasdaq during the three consecutive trading days commencing on the date of the delivery of the Advance (unless the Company specifies a minimum acceptable price or there is no VWAP on the subject trading day). The SEPA will automatically terminate on the earliest to occur of (i) the first day of the month next following the 24-month anniversary of the date of the SEPA or (ii) the date on which Yorkville shall have made payment for shares of Common Stock equal to $ 25.0 million. The Company has the right to terminate the SEPA at no cost or penalty upon five trading days’ prior written notice to Yorkville, provided that there are no outstanding advances for which shares of Common Stock need to be issued and the Yorkville Note has been paid in full. The Company and Yorkville may also agree to terminate the SEPA by mutual written consent. As consideration for Yorkville’s commitment to purchase the shares of Common Stock pursuant to the SEPA, the Company paid Yorkville a $ 25 thousand cash structuring fee. In addition, the Company must pay a commitment fee in shares equal to $ 0.5 million. In September 2024, the Company paid an equivalent of the commitment fee by issuing 526,312 shares of Common Stock to Yorkville. In connection with the entry into the SEPA, on June 17, 2024, the Company entered into a registration rights agreement with Yorkville, pursuant to which the Company agreed to file with the SEC no later than August 30, 2024, a registration statement for the resale by Yorkville of the shares of Common Stock issued under the SEPA (including the commitment fee shares). The Company agreed to use commercially reasonable efforts to have such registration statement declared effective within 30 days of such filing and to maintain the effectiveness of such registration statement during the 24-month commitment period. The Company will not have the ability to request any Advances under the SEPA (nor may Yorkville convert the Yorkville Note into Common Stock) until such resale registration statement is declared effective by the SEC. The Company has not yet filed a registration statement with the SEC for the resale by Yorkville of the shares of Common Stock issued under the SEPA, which is deemed an event of default under the SEPA. As a result, the full unpaid principal and accrued interest amount of the Yorkville Note, plus a payment premium of 10%, may become immediately due and payable at Yorkville’s election. As of December 31, 2024, the Company has not accrued any payments related to these events of default. The SEPA was accounted for as a liability under ASC 815 as it includes an embedded put option and an embedded forward option. The put option is recognized at inception and the forward option is recognized upon issuance of notice for the sale of the Company’s Common Stock. The fair value of the derivative liability related to the embedded put option was estimated at $ 0.2 million at the inception of the agreement and $ 0.4 million as of December 31, 2024. The $ 0.4 million outstanding at December 31, 2024 is classified in other long-term liabilities on the consolidated balance sheets. The estimated issuance date fair value and remeasurement adjustment is presented as a single line item within other expense (income), net in the accompanying consolidated statements of operations under the caption change in fair value of derivative liability. The embedded forward option was deemed to have no value as there were no notices for the sale of the Company’s Common Stock as of December 31, 2024. Private Placements July 2024 Financings On July 23, 2024, the Company entered into a securities purchase agreement with a certain institutional investor, pursuant to which the Company agreed to issue and sell 1,297,059 shares of its Common Stock at a price of $ 1.0278 per share and pre-funded warrants exercisable for 1,323,530 shares of its Common Stock at an exercise price of $ 1.0278 per share (the “July 2024 Pre-Funded Warrants”). 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. Holders of pre-funded warrants are entitled to receive dividends, if declared, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the Common Stock. On July 25, 2024, the Company entered into a securities purchase agreement with a certain institutional investor, pursuant to which the Company agreed to issue and sell 2,301,791 shares of its Common Stock at a price of $ 0.85 per share. The Company received net proceeds of approximately $ 4.5 million from the July 2024 private placements, after deducting offering expenses of $ 0.1 million. September 2024 Financing On September 24, 2024, the Company entered into a securities purchase agreement with a certain institutional investor, pursuant to which 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 (the “September 2024 Warrants”) and pre-funded warrants exercisable for 743,314 shares of its Common Stock at an exercise price of $ 0.65 per share (the “September 2024 Pre-Funded Warrants”). 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. Holders of pre-funded warrants are entitled to receive dividends, if declared, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the Common Stock. The Company received net proceeds of approximately $ 1.7 million, after deducting an immaterial amount of offering expenses. As of December 31, 2024, the Company had not yet issued the 1,918,591 shares of Common Stock in order to keep the investor’s ownership percentage below a defined threshold. The net proceeds of $ 1.7 million was recorded akin to an equity forward sale contract and was included in additional paid-in-capital in stockholders’ deficit in the consolidated balance sheets as it met the criteria for equity accounting under ASC 815. Preferred Stock Subsequent to the Business Combination, the Company is authorized to issue 1,000,000 shares of preferred stock (“the Preferred Stock”). As of December 31, 2024 and 2023, no shares of Preferred Stock were issued or outstanding. F- 21 11. Stock Based Compensation Equity Incentive Plan – Summary 2020 Equity Incentive Plan In 2020, the Company adopted the 2020 Equity Incentive Plan (the “2020 Plan”) to provide long-term incentive for its employees and non-employee service providers. 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. 2022 Equity Incentive Plan In 2023, the Company’s Board of Directors adopted the 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 immediately following the Business Combination. 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. As of December 31, 2024, the Company had 384,819 shares available for issuance under the 2022 Plan. F- 22 Equity Incentive Plan – Stock Options The Company has historically granted stock options to employees, directors, and consultants with vesting conditions based on continued service over time. Accordingly, stock compensation expense for such awards is recognized using a straight-line attribution model over the vesting term of each option. The following table summarizes activity for time-based stock options under the 2022 Equity Incentive Plan and 2020 Equity Incentive Plan for the years ended December 31, 2024 and 2023: Schedule of Stock Options Weighted Aggregate Number of Average Intrinsic Options Exercise Price Value Outstanding as of December 31, 2022 913,856 $ - $ 3,199 Exercised ( 613,510 ) 1.00 Cancelled ( 300,346 ) 1.00 Outstanding as of December 31, 2023 - $ 1.00 $ - Granted 147,000 1.00 Outstanding as of December 31, 2024 147,000 $ 1.00 $ - Vested and exercisable as of December 31, 2024 147,000 $ 1.00 $ - For the years ended December 31, 2024 and 2023, the Company recorded stock-based compensation expense of $ 0.03 million and $ 0.4 million, respectively, on its outstanding stock options. The fair value of each stock option granted is estimated using the Black-Scholes option pricing model, pursuant to which the weighted-average grant date fair value was $ 0.23 during the year ended December 31, 2024. There were no stock options granted during the year ended December 31, 2023. The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised for the years ended December 31, 2024 and 2023 was $ 0 and $ 4.1 million, respectively. The following table summarizes the assumptions used in calculating the fair value of the stock options granted: Schedule of Stock Options Granted For the year ended December 31, 2024 2023 Risk-free interest rate 4.47 % - Expected dividend yield - - Expected term in years 2.50 - Expected volatility 64.5 % - On November 7, 2023, as part of the Business Combination, all vested shares under the 2020 Plan were exercised and converted at the appropriate conversion ratio to Common Stock of the Company. The Company issued 543,057 shares of Common Stock which represents 613,510 vested options less an exercise price of $ 1.00 . The expected term is applied to the time-based stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among the Company’s employees, directors, and consultants. The risk-free interest rate is based on a U.S. treasury instrument, whose term is consistent with the expected term of the stock options. The Company’s stock price volatility assumption is based on historical volatility of a group of peer companies with similar characteristics to the Company and who have similar risk profiles and positions within the industry. The Company accounts for forfeitures as they occur. As of December 31, 2024, there was no unrecognized stock compensation related to unvested stock options. F- 23 Equity Incentive Plan – Restricted Stock Awards (“RSAs”) Prior to the Business Combination, the Company granted RSAs to employees, directors and service providers under the 2020 Equity Incentive Plan. The majority of RSAs granted to date have vesting conditions based on continuous service over time. Accordingly, stock compensation expense for the majority of such awards is recognized using a straight-line attribution model over the vesting term of each RSA. The fair value of each RSA is based on the estimated fair value of Legacy ONMD’s common stock on the date of the grant. The following table summarizes activity for RSAs under the 2020 Equity Incentive Plan for the year ended December 31, 2023: Schedule of Restricted Stock Awards Weighted Number of Average Grant Awards Date Fair Value 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 RSAs vested during the year ended December 31, 2023 was $ 1.1 million. 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. Equity Incentive Plan – Restricted Stock Units (“RSUs”) Starting in 2024, the Company began granting RSUs to employees and directors under the 2022 Equity Incentive Plan. Each of the RSUs represents the right to receive one share of the Company’s Common Stock upon vesting. The majority of RSUs granted to date have vesting conditions based on continuous service over time. Accordingly, stock compensation expense for the majority of such awards is recognized using a straight-line attribution model over the vesting term of each RSU. The fair value of each RSU is based on the closing price of the Company’s Common Stock on the date of grant. The following table summarizes activity for RSUs under the 2022 Equity Incentive Plan for the year ended December 31, 2024: Schedule of Restricted Stock Units Weighted Number of Average Grant Awards Date Fair Value Unvested at December 31, 2023 - $ - Granted 2,143,737 0.48 Vested – issued ( 200,000 ) 0.43 Vested – unissued ( 558,279 ) 0.46 Cancelled ( 318,333 ) 0.43 Unvested at December 31, 2024 1,067,125 $ 0.43 For the year ended December 31, 2024, the Company recorded stock-based compensation expense of $ 0.6 million on its outstanding RSUs. The fair value of RSUs that vested during the year ended December 31, 2024 was $ 0.3 million. As of December 31, 2024, the total unrecognized compensation related to unvested RSUs granted was $ 0.4 million, which the Company expects to recognize over a weighted-average period of approximately 1.24 years. 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 For the year ended December 31, 2024 2023 Cost of revenue $ 17 $ - General and administrative 585 1,041 Sales and marketing 6 - Research and development 20 434 Total stock-based compensation expense $ 628 $ 1,475 12. Stock Warrants The Company has the following warrants outstanding for the periods presented: Schedule of Warrants Outstanding As of December 31, 2024 2023 Liability Classified Warrants Business Combination Warrants 585,275 585,275 PIPE Warrants 95,744 95,744 Subtotal 681,019 681,019 Equity Classified Warrants Public Warrants 11,500,000 11,500,000 Private Placement Warrants 2,199,939 - Helena Termination Warrants 50,000 - Subtotal 13,749,939 11,500,000 Grand Total 14,430,958 12,181,019 Warrants outstanding 14,430,958 12,181,019 F- 24 Business Combination 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 “Business Combination Warrants”). The Business Combination Warrants (and shares of Common Stock issued or issuable upon exercise of the Business Combination 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 Business Combination 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 Business Combination Warrants are held by holders other than the Sponsor, Metric or their respective permitted transferees, the Business Combination 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 Business Combination Warrants in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the Business Combination Warrants do not meet the criteria for equity treatment thereunder, each Business Combination 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 Business Combination 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 Business Combination Warrant liability will be adjusted to fair value, with the change in fair value recognized in the Company’s statements 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 Business Combination Warrants will be reclassified as of the date of the event that causes the reclassification. As of December 31, 2024, all 585,275 Private Placement Warrants remained outstanding. PIPE Warrants In connection with the PIPE Notes described in Note 7, 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 statements 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, 2024, 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. 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, 2024, all 11,500,000 Public Warrants remain outstanding. Private Placement Warrants As described in Note 10, the Company issued the July 2024 Pre-Funded Warrants, the September 2024 Pre-Funded Warrants and the September 2024 Warrants in connection with the July and September 2024 private placements (together, the “Private Placement Warrants”). The Private Placement Warrants are classified as equity in accordance with ASC Subtopic 815-40, Derivatives and Hedging - Contracts in Entity’s Own Equity (“ASC 815-40”). As of December 31, 2024, all 2,199,939 Private Placement Warrants remain outstanding. Helena Termination Warrants In connection with the Helena Termination Agreement described in Note 7, the Company issued 50,000 warrants purchase Common Stock at an exercise price of $ 1.20 per share. The Helena Termination Warrants became immediately upon issuance on December 4, 2024. Each Helena Termination Warrant is exercisable for one share of Common Stock. The Helena Termination Warrants are classified as equity in accordance with ASC 815-40, with the fair value on the date of issuance recorded to stock warrant expense as a cost to terminate the Helena SPA. As of December 31, 2024, all 50,000 Helena Termination Warrants remain outstanding. Convertible Note Warrants As described in Note 7, the Company issued Convertible Note Warrants in 2022 and 2023. The Convertible Note Warrants are classified as equity in accordance with ASC 815. The Company has elected to measure the Convertible Promissory Notes using the fair value option under ASC 825 discussed in Note 7. 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 being allocated to the Convertible Promissory Notes Warrants during the year ended December 31, 2023, 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 Note 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 . F- 25 13. 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 December 31, 2024 Level 1 Level 2 Level 3 Total Assets: Bitcoin $ 2,849 $ - $ - $ 2,849 Total assets, at fair value $ 2,849 $ - $ - $ 2,849 Liabilities: Business Combination Warrants $ - $ - $ 12 $ 12 PIPE Warrants - - 3 3 PIPE Notes - - 1,734 1,734 Yorkville Note - - 1,718 1,718 SEPA derivative liability - - 434 434 Total liabilities, at fair value $ - $ - $ 3,901 $ 3,901 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 Business Combination Warrants and PIPE Warrants The following table presents the changes in the Business Combination Warrants and PIPE Warrants measured at fair value during the year ended December 31, 2024 (in thousands): Schedule of Warrants and Notes Measured at Fair Value Business Combination Warrants PIPE Warrants Balance, December 31, 2023 $ 9 $ 14 Additions - - Conversion to Common Stock Changes in fair value 3 ( 11 ) Balance, December 31, 2024 $ 12 $ 3 The Company remeasured the fair value of the Business Combination Warrants and PIPE Warrants at December 31, 2024 using the Black-Scholes option-pricing model with the following assumptions: Schedule of Fair Value Assumptions and Valuation As of December 31, 2024 PIPE Business Combination Warrants Warrants Stock price $ 1.36 $ 1.36 Exercise price $ 10.00 $ 11.50 Expected volatility 48.3 % 48.3 % Weighted average risk-free rate 4.3 % 4.3 % Expected dividend yield - - Warrants measurement input - - Expected term (in years) 3.9 3.9 PIPE Notes, Yorkville Note and Convertible Promissory Notes 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 following table presents the changes in the PIPE Notes and Yorkville Note measured at fair value during the year ended December 31, 2024 (in thousands): PIPE Notes Yorkville Note Balance, December 31, 2023 $ 1,637 $ - Additions - 1,350 Conversion to Common Stock - ( 343 ) Changes in fair value 97 711 Balance, December 31, 2024 $ 1,734 $ 1,718 The estimated fair values of the PIPE Notes and Yorkville Note are 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. SEPA Derivative Liability The following table presents the changes in the SEPA derivative liability measured at fair value during the year ended December 31, 2024 (in thousands): Yorkville SEPA Balance, December 31, 2023 $ - Additions 160 Changes in fair value 274 Balance, December 31, 2024 $ 434 The estimated fair value of the SEPA derivative liability was determined using a Monte Carlo simulation model in order to project the future path of the Company’s stock price over the commitment period with the following assumptions: As of December 31, June 17, 2024 2024 Expected draws (in thousands) $ 5,000 $ 5,850 Starting stock price $ 1.36 $ 1.23 Expected volatility 132.5 % 111.9 % Risk-free rate 4.2 % 4.7 % Derivative liability 4.2 % 4.7 % F- 26 14. Related Party Transactions PIPE Notes and Warrants As disclosed in Note 3 and Note 7, 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 7 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 12 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 Note Warrants to the same related parties (out of 3,726,000 total). Refer to Note 7 and Note 12 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 In addition to the convertible shareholder loans described in Note 7, the Company also entered into non-convertible shareholder loans with two related party investors for aggregate gross proceeds of $ 0.4 million and $ 1.0 million during the years ended December 31, 2024 and 2023, respectively. These non-convertible shareholder loans bear interest at a 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. 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 7. The extinguishment had no impact on the Company’s consolidated statements of operations for the year ended December 31, 2023. In June and July 2024, the Company made payments of $ 0.1 million to partially repay the outstanding non-convertible shareholder loan balance. The following table summarizes shareholder loans outstanding for the periods presented (in thousands): Schedule of Shareholder Loans Outstanding As of December 31, 2024 December 31, 2023 Shareholder loans – nonconvertible $ 654 $ 454 Shareholder loans – convertible 1,600 - Accrued interest 65 11 Total loan – related party $ 2,319 $ 465 Loan Extensions As disclosed in Note 3, the Company assumed Data Knights’ liabilities, which included existing loan extensions to related parties. Refer to Note 3 for details on the loan extensions recorded on the Company’s consolidated balance sheets as of December 31, 2024 and 2023. 15. 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 $ 7,830 and $ 7,695 of rent expense, including common tenant costs and cancellation costs, during the years ended December 31, 2024 and 2023, respectively. F- 27 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, 2024 and 2023. 16. Subsequent Events The Company has evaluated subsequent events occurring through April 15, 2025, the date the consolidated financial statements were available to be issued, for events requiring recording or disclosure in the Company’s consolidated financial statements. During January 2025, pursuant to the terms of the Yorkville Note, an aggregate of $ 0.8 million of outstanding principal was converted into 866,701 shares of the Company’s Common Stock. The Company also issued 245,007 shares of Common Stock to Yorkville to settle the conversion notice from December 2024, as described in Note 7. As previously announced on Form 8-K, on January 31, 2025, the Board appointed Mr. Robert Golden as Chief Financial Officer (“CFO”) of the Company on a permanent basis. In connection with this appointment as CFO, Mr. Golden will receive a cash bonus of $ 25,000 and a grant of restricted stock units equal to $ 25,000 , which will be fully vested on the grant date. Mr. Golden had previously been serving as the interim CFO of the Company since August 30, 2024. F- 28 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.