OSR Health, Inc. 10-Q

ITEM 1A. RISK FACTORS In addition to the risk factors set forth below and the other information set forth in this report, you should carefully consider the factors discussed under Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 filed with the SEC on April 17, 2024 (or “2023 Annual Report”), in our prospectus dated February 9, 2023 (“IPO Prospectus”), and in the other reports we file with the SEC before making a decision to invest in our securities. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report or we could face liquidation. In that event, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described in our 2023 Annual Report, IPO Prospectus and other reports we filed with the SEC and below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business, financial condition and operating results. Except as disclosed below, there have been no material changes to the risk factors described in Part I, Item 1A, “Risk Factors,” included in our 2023 Annual Report. 32 Table of Contents As a result of the stockholder redemptions in connection with the May Special Meeting, Kuk Hyoun Hwang, through his ownership and control over the Sponsor and affiliated entities, currently possesses beneficial ownership of and controlling voting power with respect to, a majority of our outstanding common stock, which will limit public stockholders’ influence on corporate matters. Additionally, Mr. Hwang has agreed to vote in favor of the initial business combination with OSR Holdings Co., Ltd., regardless of how public stockholders vote. As a result of the stockholder redemptions in connection with the May Special Meeting, Mr. Hwang is entitled to vote an aggregate of approximately 50.4% of our common stock, which represents a majority of outstanding shares of common stock. As such, Mr. Hwang has the ability to control our affairs through the election and removal of the entire Board and all other matters requiring stockholder approval, including a future business combination, merger or consolidation, or a sale of all or substantially all of our assets. This concentrated control limits the influence of our public stockholder on corporate matters and could discourage others from initiating any such potential merger, consolidation or sale or other change-of-control transaction that may otherwise be beneficial to our stockholders. Furthermore, this concentrated control will limit the practical effect of stockholders’ participation in corporate matters, through stockholder votes and otherwise. In addition, Mr. Hwang has agreed to vote his shares in favor of the initial business combination with OSR Holdings Co., Ltd. These shares are sufficient to approve the initial business combination and all other proposals being presented at the relevant meeting. Accordingly, when we present the initial business to our stockholders for a vote, we expect to be able to obtain the necessary stockholder approval for such business combination and other proposals, even if our public stockholders vote against the business combination and such proposals. If we seek stockholder approval of our initial business combination, our Sponsor, officers and directors and Chardan have agreed to vote in favor of such initial business combination, regardless of how our other public stockholders vote. Pursuant to the letter agreement, our sponsor, officers and directors have agreed to vote their founder shares and placement shares, as well as any public shares purchased during or after our IPO (including in open market and privately negotiated transactions), in favor of our initial business combination. In addition, Chardan has agreed to vote all equity participation shares as well as any public shares purchased during or after our IPO (including in open market and privately negotiated transactions) in favor of our initial business combination. Our initial stockholders, officers, directors and Chardan own shares representing approximately 53.3% of our outstanding shares of common stock. As a result, we will not need the affirmative vote of any shares of common stock held by public stockholders in order to approve an initial business combination. We are currently not in compliance with the Nasdaq continued listing requirements. If we are unable to regain compliance with Nasdaq’s listing requirements, our securities could be delisted, which could affect our securities’ market price and liquidity. On February 15, 2024, we received a written notice (the “Notice”) from the Nasdaq Listing Qualifications Department indicating that we were not in compliance with Nasdaq Listing Rule 5550(a)(3), which requires us to have at least 300 public holders for continued listing on the Nasdaq Capital Market (the “Minimum Public Holders Rule”). The Notice is only a notification of deficiency, not of imminent delisting, and has no current effect on the listing or trading of our securities on the Nasdaq Capital Market. We submitted a plan to regain compliance with the Minimum Public Holders Rule to Nasdaq on April 1, 2024. On April 17, 2024, we received written notice that the staff of Nasdaq determined, based on its review of our compliance plan, to grant an extension of time to regain compliance with the Minimum Public Holders Requirement. The terms of the extension are as follows: on or before August 13, 2024, we must file with Nasdaq documentation from its transfer agent, or an independent source, demonstrating that its common stock has a minimum of 300 public holders. In the event we do not satisfy the terms, the Nasdaq staff will provide written notification that our securities will be delisted. At that time, we may appeal the determination to a Listing Qualifications Panel. We are a “controlled company” within the meaning of the Nasdaq rules and, as a result, we qualify for exemptions from certain corporate governance requirements. As a result of the stockholder redemptions in connection with the May Special Meeting, our current Chief Executive Officer and member of our Board of Directors, Mr. Kuk Hyoun Hwang, is entitled to vote an aggregate of approximately 50.4% of our common stock, which represents a majority of our outstanding shares of common stock. As a result, we are considered a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under the Nasdaq corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements that: • we have a board that includes a majority of “independent directors,” as defined under the rules of the Nasdaq; • we have a compensation committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and • we have a nominating and corporate governance committee of our board that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. We do not intend to utilize these exemptions and intend to comply with the corporate governance requirements of the Nasdaq, subject to applicable phase-in rules. However, if we determine in the future to utilize some or all of these exemptions, our stockholders will not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements. 33 Table of Contents ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. MINE SAFETY DISCLOSURES Not applicable.