NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
1. DESCRIPTION OF ORGANIZATION, BUSINESS OPERATIONS AND GOING CONCERN
Viveon
Health Acquisition Corp. (the “Company”) is a newly organized blank check company incorporated as a Delaware company on August
7, 2020. The Company was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization,
reorganization or other similar business combination with one or more businesses or entities (“Business Combination”).
The
Company has neither engaged in any operations nor generated any revenues to date. The Company’s only activities for the three months
ended March 31, 2022 and for the three months ended March 31, 2021 were organizational activities, those necessary to prepare for the
Company’s initial public offering (the “Initial Public Offering”), described below, and, after the Initial Public Offering,
identifying a target company for a Business Combination. The Company does not expect to generate any operating revenues until after the
completion of our Business Combination. The Company generates non-operating income in the form of interest income on marketable securities
held after the Initial Public Offering. The Company incurs expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses. The Company’s sponsor is Viveon Health, LLC, a Delaware
limited liability company (the “Sponsor”).
The
registration statement for the Initial Public Offering was declared effective by the U.S. Securities and Exchange Commission (the “SEC”)
on December 22, 2020. On December 28, 2020, the Company consummated the Initial Public Offering of 17,500,000 units (the “Units”
and, with respect to the common stock included in the Units being offered, the “Public Shares”), at $10.00 per Unit, generating
gross proceeds of $175,000,000, which is discussed in Note 3. Simultaneously with the closing of the Initial Public Offering, the Company
consummated the sale of 18,000,000 warrants (the “Private Warrants”), at a price of $0.50 per Private Warrant, which is discussed
in Note 4.
On
December 30, 2020, the underwriters fully exercised the over-allotment option by purchasing 2,625,000 Units (the “Over-Allotment
Units”), generating aggregate of gross proceeds of $26,250,000.
Upon
closing of the Initial Public Offering and the sale of the Over-Allotment Units, $203,262,500 (approximately $10.10 per Unit) from net
offering proceeds of the sale of the Units in the Initial Public Offering and the sale of the Private Warrants was placed in a trust
account (the “Trust Account”) and invested in U.S. government securities, with a maturity of 180 days or less or in money
market funds meeting certain conditions under Rule 2a-7 under the Investment Company Act 1940, as amended (the “Investment Company
Act”), which invest only in direct U.S. government treasury obligations. Except with respect to interest earned on the funds held
in the Trust Account that may be released to the Company to pay its tax obligations, the proceeds from the Initial Public Offering will
not be released from the Trust Account until the earliest to occur of (1) the completion of the initial Business Combination within 15
months, unless extended to a total of 24 months, pursuant to the terms of an amendment to the Company’s amended and restated certificate
of incorporation (the “Amended and Restated Certificate of Incorporation”),
and (2) the Company’s redemption of 100% of the outstanding Public Shares if the Company has not completed a Business Combination
in the required time period.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
While
the Company’s management has broad discretion with respect to the specific application of the cash held outside of the Trust Account,
substantially all of the net proceeds from the Initial Public Offering and the sale of the Private Warrants, which are placed in the
Trust Account, are intended to be applied generally toward completing a Business Combination. There is no assurance that the Company
will be able to complete a Business Combination successfully. The Company must complete one or more initial Business Combinations having
an aggregate fair market value of at least 80% of the assets held in the Trust Account (as defined below) (net of amounts disbursed to
management for working capital purposes, if permitted, and excluding the amount of any deferred underwriting commissions) at the time
of the agreement to enter into the initial Business Combination. However, the Company will only complete a Business Combination if the
post-transaction company owns or acquires 50% or more of the outstanding voting securities of the target or otherwise acquires an interest
in the target sufficient for it not to be required to register as an investment company under the Investment Company Act.
In
connection with any proposed initial Business Combination, the Company will either (1) seek stockholder approval of such initial Business
Combination at a meeting called for such purpose at which public stockholders may seek to convert their Public Shares, regardless of
whether they vote for or against the proposed Business Combination, into their pro rata share of the aggregate amount then on deposit
in the Trust Account (net of taxes payable) or (2) provide its public stockholders with the opportunity to sell their Public Shares to
the Company by means of a tender offer (and thereby avoid the need for a stockholder vote) for an amount equal to their pro rata share
of the aggregate amount then on deposit in the Trust Account (net of taxes payable), in each case subject to the limitations described
herein. The Public Shares subject to redemption were recorded at redemption value and classified as temporary equity upon the completion
of the Initial Public Offering in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards
Codification (“ASC”) Topic 480, Distinguishing Liabilities from Equity (“ASC 480”).
If
the Company determines to engage in a tender offer, such tender offer will be structured so that each public stockholder may tender any
or all of his, her or its Public Shares rather than some pro rata portion of his, her or its shares. If enough stockholders tender their
shares so that the Company is unable to satisfy any applicable closing condition set forth in the definitive agreement related to its
initial Business Combination, or the Company is unable to maintain net tangible assets of at least $5,000,001, the Company will not consummate
such initial Business Combination. The decision as to whether it will seek stockholder approval of a proposed Business Combination or
will allow stockholders to sell their shares to the Company in a tender offer will be made by the Company based on a variety of factors
such as the timing of the transaction or whether the terms of the transaction would otherwise require us to seek stockholder approval.
If
the Company provides stockholders with the opportunity to sell their shares to it by means of a tender offer, it will file tender offer
documents with the SEC which will contain substantially the same financial and other information about the initial Business Combination
as is required under the SEC’s proxy rules. If the Company seeks stockholder approval of its initial Business Combination, the
Company will consummate the Business Combination only if a majority of the outstanding shares of common stock present in person or by
proxy at a meeting of the Company are voted in favor of the Business Combination.
Notwithstanding
the foregoing redemption rights, if the Company seeks stockholder approval of its initial Business Combination and the Company does not
conduct redemptions in connection with its initial Business Combination pursuant to the tender offer rules,(the Amended and Restated
Certificate of Incorporation will provide that a public stockholder, together with any affiliate of such stockholder or any other person
with whom such stockholder is acting in concert or as a “group” (as defined under Section 13 of the Exchange Act), will be
restricted from redeeming its Public Shares with respect to more than an aggregate of 20% of the shares sold in the Initial Public Offering,
without the Company’s prior consent. The Company’s Sponsor, officers and directors (the “initial stockholders”)
have agreed not to propose any amendment to the Amended and Restated Certificate of Incorporation (a) that would modify the substance
or timing of the Company’s obligation to provide for the redemption of its Public Shares in connection with an initial Business
Combination or to redeem 100% of its Public Shares if the Company does not complete its initial Business Combination within 15 months
from the closing of the Initial Public Offering or (b) with respect to any other material provisions relating to stockholders’
rights or pre-initial Business Combination activity, unless the Company provide its public stockholders with the opportunity to redeem
their Public Shares in conjunction with any such amendment.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
March 18, 2022, the Company held a stockholder meeting to extend the date by which the Company has to consummate a business combination
from March 28, 2022 (the “Original Termination Date”) to June 28, 2022 (the “Extended Date”). As part of the meeting,
stockholders redeemed 15,092,126 resulting in redemption payments out of the Trust Account totaling approximately $152,451,819. In addition,
stockholders approved a proposal to allow the Company, without another stockholder vote, to elect to extend the date to consummate a
Business Combination on a monthly basis for up to six times by an additional one month each time after the Extended Date, upon five days’
advance notice prior to the applicable deadline, for a total of up to nine months after the Original Termination Date, unless the closing
of the proposed Business Combination with Suneva Medical, Inc. (as described below”) or any potential alternative initial Business
Combination shall have occurred.
If
the Company is unable to complete its initial Business Combination by the Extended Date (or up to six months from the Extended Date should
the Company elect to extend the period of time to consummate a Business Combination) (the “Combination Period”), the Company
will: (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than five business
days thereafter, redeem 100% of the outstanding Public Shares (including any Units or Public Shares that its initial stockholders or
their affiliates purchased in the Initial Public Offering or later acquired in the open market or in private transactions), which will
completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidation distributions,
if any), subject to applicable law, and (iii) as promptly as reasonably practicable following such redemption, subject to the approval
of the Company’s remaining holders of common stock and its board of directors, proceed to commence a voluntary liquidation and
thereby a formal dissolution of the Company, subject (in the case of (ii) and (iii) above) to its obligations to provide for claims of
creditors and the requirements of applicable law.
The
Company’s initial stockholders agreed to waive their rights to liquidating distributions from the Trust Account with respect to
any Founder Shares (as defined in Note 5) held by them if the Company fails to complete its initial Business Combination within the Combination
Period. However, if the initial stockholders acquire Public Shares in or after the Initial Public Offering, they will be entitled to
liquidating distributions from the Trust Account with respect to such Public Shares if the Company fails to complete its initial Business
Combination within the Combination Period.
Merger
Agreement
On
January 12, 2022, the Company entered into a Merger Agreement (the “Merger Agreement”) by and among the Company, VHAC Merger
Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), and Suneva Medical, Inc.,
a Delaware corporation (“Suneva”). Pursuant to the terms of the Merger Agreement, a Business Combination between the Company
and Suneva will be effected through the merger of Merger Sub with and into Suneva, with Suneva surviving the merger as a wholly owned
subsidiary of the Company (the “Merger”). The board of directors of the Company has (i) approved and declared advisable the
Merger Agreement, the Merger and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Merger Agreement
and related transactions by the stockholders of the Company.
Merger
Consideration
Initial
Consideration
The
total consideration to be paid at Closing (the “Initial Consideration”) by the Company to Suneva security holders will be
an amount equal to $250 Million (plus the aggregate exercise price for all Suneva options and warrants). The Initial Consideration will
be payable in shares of common stock, par value $0.0001 per share, of the Company (“Viveon Common Stock”) valued at $10 per
share.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Earnout
Payments
In
addition to the Initial Consideration, the Suneva security holders will also have the contingent right to earn up to 12,000,000 shares
of Viveon Common Stock in the aggregate (“Earnout Consideration”) as follows:
| ● | The
Suneva security holders will earn 4,000,000 shares of the Earnout Consideration, in the aggregate, if at any time during the period beginning
on the date of the Closing (the “Closing Date”) and ending on the second anniversary of the Closing Date (the “First
Earnout Period”), the VWAP (as defined in the Merger Agreement) of Viveon Common Stock over any twenty (20) Trading Days (as defined
in the Merger Agreement) within any thirty (30) Trading Day period is greater than or equal to $12.50 per share of Viveon Common Stock
(the “First Milestone”). |
| ● | The
Suneva security holders will earn an additional 4,000,000 shares of the Earnout Consideration, in the aggregate, if at any time during
the period beginning on the Closing Date and ending on the third anniversary of the Closing Date (the “Second Earnout Period”),
the VWAP of Viveon Common Stock over any twenty (20) Trading Days within any thirty (30) Trading Day period is greater than or equal
to $15.00 per share of Viveon Common Stock (the “Second Milestone”). |
| ● | The
Suneva security holders will earn an additional 4,000,000 shares of the Earnout Consideration, in the aggregate, if at any time during
the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date (the “Third Earnout Period”
and together with the First Earnout Period and the Second Earnout Period, each, an “Earnout Period” and collectively, the
“Earnout Periods”), the VWAP of the Viveon Common Stock over any twenty (20) Trading Days within any thirty (30) consecutive
Trading Day period is greater than or equal to $17.50 per share of Viveon Common Stock (the “Third Milestone” and together
with the First Milestone and the Second Milestone, the “Earnout Milestones”). |
| ● | Upon
the first Change in Control to occur during the applicable Earnout Period, if the corresponding price per share of Viveon Common Stock
in connection with such Change in Control is equal to or greater than the Earnout Milestone or Milestones in respect of such Earnout
Period, the Suneva security holders will earn the shares of the Earnout Consideration issuable in respect to such Earnout Milestone or
Milestones as described above as of immediately prior to the Change of Control. |
The
aggregate shares of the Earnout Consideration (1) will be issued to the Suneva security holders at Closing in accordance with their respective
pro rata shares of the Earnout Consideration (determined based on the fully diluted Suneva capital stock, including stock options, warrants
and convertible notes), except that shares of the Earnout Consideration issued in respect of Suneva stock options will be retained by
the Company and not issued to the holders of Suneva stock options, and (2) will be placed in escrow at Closing.
In
the case of the Suneva security holders (other than holders of Suneva stock options), the shares of the Earnout Consideration will not
be released from escrow until they are earned as a result of the occurrence of the applicable Earnout Milestone. Shares of the Earnout
Consideration not earned on or before the expiration of the applicable Earnout Period will be automatically forfeited and cancelled.
In
the case of the holders of Suneva stock options, the shares of the Earnout Consideration will not be released from escrow until the later
of the occurrence of the applicable Earnout Milestone within the applicable Earnout Period and the date on which the assumed stock options
of such holder vest, but only if such holder continues to provide services to the Company or one of its subsidiaries at such time. Shares
of the Earnout Consideration that are not earned by a holder of Suneva Stock options on or before the fifth anniversary of the Closing
Date will be forfeited without any consideration. Shares forfeited by a holder of Suneva stock options will be reallocated to the other
Suneva security holders who remain entitled to receive shares of Earnout Consideration in accordance with their respective pro rata shares.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Certain
Related Agreements
The
Merger Agreement contemplates the execution of various additional agreements and instruments, on or before the Closing, including, among
others, the following:
Parent
Stockholder Support Agreements
In
connection with the execution of the Merger Agreement, the Company, Suneva and the Sponsor and the officers and directors of the Company
entered into support agreements (the “Parent Stockholder Support Agreements”) pursuant to which the Sponsor and the officers
and directors of the Company have agreed to vote all shares of the Company’s common stock beneficially owned by them, including any additional
shares of the Company they acquire ownership of or the power to vote: (i) in favor of the Merger and related transactions, (ii) against
any action reasonably be expected to impede, delay, or materially and adversely affect the Merger and related transactions, and (iii)
in favor of an extension of the period of time the Company is afforded to consummate an initial Business Combination.
Company
Stockholder Support Agreements
In
connection with the execution of the Merger Agreement, the Company, Suneva and certain stockholders of Suneva entered into support agreements
(the “Company Stockholder Support Agreements”), pursuant to which such Suneva stockholders have agreed to vote all common
and preferred stock of Suneva beneficially owned by them, including any additional shares of Suneva they acquire ownership of or the
power to vote, in favor of the Merger and related transactions and against any action reasonably be expected to impede, delay, or materially
and adversely affect the Merger and related transactions.
Lock-Up
Agreements
In
connection with the Closing, certain key Suneva stockholders will each agree, subject to certain customary exceptions, not to (i) offer,
sell contract to sell, pledge or otherwise dispose of, directly or indirectly, any Lockup Shares (as defined below), (ii) enter into
a transaction that would have the same effect, (iii) enter into any swap, hedge or other arrangement that transfers, in whole or in part,
any of the economic consequences of ownership of the Lock-Up Shares or otherwise or engage in any short sales or other arrangement with
respect to the Lock-Up Shares or (iv) publicly announce any intention to effect any transaction specified in clause (i) or (ii) until
the date that is six months after the Closing Date. The term “Lockup Shares” mean the Merger Consideration Shares and the
Earnout Shares, if any, whether or not earned prior to the end of the Lock-up Period, and including any securities convertible into,
or exchangeable for, or representing the rights to receive Common Stock, and the term “Lock-Up Period” means the period from
the Closing Date until six (6) months after the Closing Date, but ending early as to 50% of the Lock-up Shares if the closing price of
the Common Stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period following the Closing Date.
Amended
and Restated Registration Rights Agreement
At
the closing, the Company will enter into an amended and restated registration rights agreement (the “Amended and Restated Registration
Rights Agreement”) with certain existing stockholders of the Company and Suneva with respect to their shares of the Company acquired
before or pursuant to the Merger, and including the shares issuable on conversion of the warrants issued to the Sponsor in connection
with the Company’s Initial Public Offering and any shares issuable on conversion of preferred stock or loans. The agreement amends
and restates the Registration Rights Agreement the Company entered into on December 22, 2020 in connection with its Initial Public Offering.
Subject to the Lock-Up Agreements described above, the holders of a majority of the shares held by the Company’s existing stockholders,
and the holders of a majority of the shares held by the Suneva stockholders will each be entitled to make one demand that the Company
register such securities for resale under the Securities Act (as defined below), or two demands each if the Company is eligible to use
Form S-3 or a similar short-form registration statement. In addition, the holders will have certain “piggy-back” registration
rights that require the Company to include such securities in registration statements that the Company otherwise files. The Registration
Rights Agreement does not contain liquidating damages or other cash settlement provisions resulting from delays in registering the Company’s
securities. The Company will bear the expenses incurred in connection with the filing of any such registration statements.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Going
Concern
As
of March 31, 2022, the Company had $2,079,611 of cash and cash equivalents held outside the Trust Account available for working
capital needs. All remaining cash held in the Trust Account is generally unavailable for the Company’s use, prior to an initial
Business Combination, and is restricted for use either in a Business Combination or to redeem common stock. As of March 31, 2022
and December 31, 2021, none of the amount in the Trust Account was available to be withdrawn as described above.
The
Company has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. These conditions raise substantial
doubt about the Company’s ability to continue as a going concern for a period of time within one year after the date that the condensed
consolidated financial statements are issued. Management plans to address this uncertainty through the Merger as discussed above. There
is no assurance that the Company’s plans to consummate the Merger will be successful or successful within the Combination Period.
The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Risks
& Uncertainties
Management
continues to evaluate the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that
the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a prospective
partner company, the specific impact is not readily determinable as of the date of these condensed consolidated financial statements.
The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
The
credit and financial markets have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia.
The conflict is expected to have further global economic consequences, including but not limited to the possibility of severely diminished
liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in inflation rates and uncertainty
about economic and political stability. In addition, the United States and other countries have imposed sanctions on Russia which increases
the risk that Russia, as a retaliatory action, may launch cyberattacks against the United States, its government, infrastructure and
businesses. Any of the foregoing consequences, including those we cannot yet predict, may cause our business, financial condition, results
of operations and the price of our ordinary shares to be adversely affected.
Emerging
Growth Company
The
Company is an “emerging growth company”, as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities
Act”), as modified by the Jumpstart Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies”
including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley
Act of 2002, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions
from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute
payments not previously approved.
In
addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended
transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other
words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise
apply to private companies. The Company intends to take advantage of the benefits of this extended transition period.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying condensed consolidated financial statements of the Company are presented in conformity with accounting principles generally
accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the SEC. Certain
information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or
omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information
and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. In the opinion
of management, the accompanying condensed consolidated financial statements include all adjustments, consisting of a normal recurring
nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying condensed consolidated financial statements should be read in conjunction with the Company’s Form 10-K as filed
with the SEC on March 31, 2022. The interim results for the three months ended March 31, 2022 are
not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future periods.
Principles
of Consolidation
The
condensed consolidated financial statements include the accounts of the Company and its majority-owned and controlled operating subsidiary,
Merger Sub, after elimination of all intercompany transactions and balances as of March 31, 2022 and December 31, 2021.
Use
of Estimates
The
preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company’s management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting period.
Making
estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of
a condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management
considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual
results could differ from those estimates. The initial valuation of the Public Warrants (as defined in Note 3), Rights (as defined in
Note 3) common stock subject to redemption and the periodic valuation of the Private Warrants and Subscription Warrants (as defined in
Note 6) required management to exercise significant judgement in its estimates.
Cash
and Cash Equivalents
The
Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents.
The cash equivalents in the amount of $2,000,466 and $350,455, were held in money market funds as of March 31, 2022 and December
31, 2021, respectively.
Investments
Held in Trust Account
As
of March 31, 2022 and December 31, 2021, substantially all of the assets held in the Trust Account were held in mutual funds which
invest in U.S. Treasury securities. The mutual fund assets in the amount of $51,564,084 and $203,282,989 were held in the Trust Account
as of March 31, 2022 and December 31, 2021, respectively.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Warrants
The
Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s
specific terms and applicable authoritative guidance in ASC 480 and ASC Topic 815, Derivatives and Hedging (“ASC 815”).
The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability
pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether
the warrants are indexed to the Company’s own common shares and whether the warrant holders could potentially require “net
cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This
assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly
period end date while the warrants are outstanding.
For
issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component
of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification,
the warrants are required to be recorded at their initial fair value on the date of issuance and recorded as a warrant liability. In
accordance with guidance contained in ASC 815, the Public Warrants (as defined in Note 3) qualify for equity treatment. The Private Warrants
and Subscription Warrants do not qualify as equity and are recorded as liabilities at fair value. Changes in the estimated fair value
of the Private Warrants and Subscription Warrants are recognized as non-cash gains or losses on the condensed consolidated statements
of operations.
Common
Stock Subject to Possible Redemption
All
of the 5,032,874 Public Shares sold as part of the Units in the Initial Public Offering and subsequent full exercise of the underwriters’
over-allotment option that have not been redeemed by stockholders, contain a redemption feature which allows for the redemption of such
redeemable common stock in connection with the Company’s liquidation, if there is a stockholder vote or tender offer in connection
with the Business Combination and in connection with certain amendments to the Amended and Restated Certificate of Incorporation. In
accordance with SEC and its staff’s guidance on redeemable equity instruments, which has been codified in ASC 480-10-S99, redemption
provisions not solely within the control of the Company require common stock subject to redemption to be classified outside of permanent
equity. Therefore, all Public Shares been classified outside of permanent equity.
The
Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to
equal the redemption value at the end of each reporting period. There was no change in redemption value for the year ended December 31,
2021. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital
and accumulated deficit.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As
of March 31, 2022 and December 31, 2021, the redeemable common stock reflected in the condensed consolidated balance sheets are
reconciled in the following table:
Gross proceeds | |
$ | 201,250,000 | |
Less: | |
| | |
Fair value of Public Warrants at issuance | |
| (10,384,500 | ) |
Fair value of Rights at issuance | |
| (9,136,750 | ) |
Issuance costs allocated to common stock subject to possible redemption | |
| (10,660,961 | ) |
Plus: | |
| | |
Accretion of carrying value to redemption value | |
| 32,194,711 | |
Common stock subject to possible redemption as of December 31, 2021 | |
| 203,262,500 | |
Redemption of common stock by stockholders | |
| (152,451,819 | ) |
Remeasurement of carrying value to redemption value | |
| 21,347 | |
Common stock subject to possible redemption as of March 31, 2022 | |
$ | 50,832,028 | |
Offering
Costs associated with the Initial Public Offering
The
Company complies with the requirements of ASC Topic 340, Other Assets and Deferred Costs (“ASC 340”) and SEC Staff
Accounting Bulletin Topic 5A - Expenses of Offering. Offering costs consist principally of professional and registration fees
incurred through the balance sheet date that are related to the Initial Public Offering. Offering costs directly attributable to the
issuance of an equity contract to be classified in equity are recorded as a reduction in equity. Offering costs for equity contracts
that are classified as assets and liabilities are expensed immediately. The Company incurred offering costs amounting to $11,830,356
as a result of the Initial Public Offering (consisting of a $4,025,000 underwriting fee, $7,043,750 of deferred underwriting fees, and
$761,606 of other offering costs). The Company recorded $10,660,961 of offering costs as a reduction of temporary equity in connection
with the redeemable common stock included in the Units. The Company recorded $1,144,422 of offering costs as a reduction of permanent
equity in connection with the Public Warrants and Rights classified as equity instruments. The Company immediately expensed $24,973 of
offering costs in connection with the Private Warrants that were classified as liabilities.
Share-Based
Payment Arrangements
The
Company accounts for stock awards in accordance with ASC Topic 718, Compensation - Stock Compensation (“ASC 718”),
which requires that all equity awards be accounted for at their fair value. Fair value is measured on the grant date and is equal to
the underlying value of the stock.
Costs
equal to these fair values are recognized ratably over the requisite service period based on the number of awards that are expected to
vest, or in the period of grant for awards that vest immediately and have no future service condition. For awards that vest over time,
cumulative adjustments in later periods are recorded to the extent actual forfeitures differ from the Company’s initial estimates;
previously recognized compensation cost is reversed if the service or performance conditions are not satisfied and the award is forfeited.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under ASC Topic 740, Income Taxes (“ASC 740”).
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the
condensed consolidated financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred
tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
ASC
740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions
taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be
sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of March 31, 2022 and December 31,
2021. The Company’s management determined that the United States is the Company’s only major tax jurisdiction. The Company
recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No amounts were accrued for the
payment of interest and penalties for the three months ended March 31, 2022 and for the three months ended March 31, 2021. The Company
is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its
position. The Company is subject to income tax examinations by major taxing authorities since inception.
Net
(Loss) Income Per Common Share
Net
(loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding
for the period. The calculation of diluted (loss) income per common share does not consider the effect of the Public Warrants, Private
Warrants, and Subscription Warrants since the exercise of the warrants are contingent upon the occurrence of future events and the inclusion
of such warrants would be anti-dilutive. The warrants are exercisable to purchase 20,497,500 shares of common stock in the aggregate.
The
following table reflects the calculation of basic and diluted net (loss) income per common share (in dollars, except per share amounts):
| |
For the Three Months Ended March 31, 2022 | | |
For the Three Months Ended
March 31, 2021 | |
| |
Redeemable Common Stock | | |
Nonredeemable Common
Stock | | |
Redeemable Common Stock | | |
Nonredeemable Common
Stock | |
Basic and diluted net (loss) income per share: | |
| | |
| | |
| | |
| |
Numerator: | |
| | |
| | |
| | |
| |
Net (loss) income | |
$ | (1,244,751 | ) | |
$ | (279,193 | ) | |
$ | 2,972,871 | | |
$ | 594,574 | |
Denominator: | |
| | | |
| | | |
| | | |
| | |
Weighted Average Common Stock | |
| 17,945,027 | | |
| 4,025,000 | | |
| 20,125,000 | | |
| 4,025,000 | |
Basic and diluted net (loss) income per common share | |
$ | (0.07 | ) | |
$ | (0.07 | ) | |
$ | 0.15 | | |
$ | 0.15 | |
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution,
which, at times, may exceed the Federal Depository Insurance Coverage of $250,000. The Company has not experienced losses on these accounts
and management believes the Company is not exposed to significant risks on such accounts.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Fair
Value of Financial Instruments
The
Company applies ASC Topic 820, Fair Value Measurement (“ASC 820”), which establishes a framework for measuring fair
value and clarifies the definition of fair value within that framework. ASC 820 defines fair value as an exit price, which is the price
that would be received for an asset or paid to transfer a liability in the Company’s principal or most advantageous market in an
orderly transaction between market participants on the measurement date. The fair value hierarchy established in ASC 820 generally requires
an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable
inputs reflect the assumptions that market participants would use in pricing the asset or liability and are developed based on market
data obtained from sources independent of the reporting entity. Unobservable inputs reflect the entity’s own assumptions based
on market data and the entity’s judgments about the assumptions that market participants would use in pricing the asset or liability
and are to be developed based on the best information available in the circumstances.
The
carrying amounts reflected in the condensed consolidated balance sheets for current assets and current liabilities approximate fair value
due to their short-term nature.
Level
1 — Assets and liabilities with unadjusted, quoted prices listed on active market exchanges. Inputs to the fair value measurement
are observable inputs, such as quoted prices in active markets for identical assets or liabilities.
Level
2 — Inputs to the fair value measurement are determined using prices for recently traded assets and liabilities with similar underlying
terms, as well as direct or indirect observable inputs, such as interest rates and yield curves that are observable at commonly quoted
intervals.
Level
3 — Inputs to the fair value measurement are unobservable inputs, such as estimates, assumptions, and valuation techniques when
little or no market data exists for the assets or liabilities.
See
Note 10 for additional information on assets and liabilities measured at fair value.
Derivative
Financial Instruments
The
Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded
derivatives in accordance with ASC 815. The Company’s derivative instruments are recorded at fair value and re-valued at each reporting
date, with changes in the fair value reported in the condensed consolidated statements of operations. Derivative assets and liabilities
are classified on the condensed consolidated balance sheets as current or non-current based on whether or not net-cash settlement or
conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the Private Warrants
and Subscription Warrants (as defined in Note 6) are derivative instruments. As the Private Warrants and Subscription Warrants meet the
definition of a derivative the warrants are measured at fair value at issuance and at each reporting date in accordance with ASC 820
with changes in fair value recognized in the condensed consolidated statements of operations in the period of change. In accordance with
ASC Topic 825, Financial Instruments, the Company has concluded that a portion of the transaction costs which directly related
to the Initial Public Offering and the Private Placement, should be allocated to the Private Warrants based on their relative fair value
against total proceeds, and recognized as transaction costs in the condensed consolidated statements of operations.
Recent
Accounting Standards
The
Company’s management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted,
would have a material effect on the accompanying condensed consolidated financial statements.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE
3. INITIAL PUBLIC OFFERING
On
December 28, 2020, the Company sold 17,500,000 Units, at a purchase price of $10.00 per Unit. Each Unit consists of one share of common
stock, par value $0.0001 per share, one redeemable warrant (the “Public Warrants”) and one right (the “Rights”).
Each Public Warrant entitles the holder thereof to purchase one-half (1/2) of a share of common stock at a price of $11.50 per whole
share. Each Right entitles the holder thereof to receive one-twentieth (1/20) of a share of common stock upon consummation of an initial
Business Combination.
On
December 30, 2020, the Company sold 2,625,000 Over-Allotment Units pursuant to the underwriters’ full exercise of the over-allotment
option (see Note 7), generating aggregate of gross proceeds of $26,250,000.
NOTE
4. PRIVATE PLACEMENT
Simultaneously
with the closing of the Initial Public Offering, the Sponsor purchased an aggregate of 18,000,000 Private warrants at a price of $0.50
per warrant ($9,000,000 in the aggregate), each exercisable to purchase one-half of a share common stock at a price of $11.50 per whole
share, in a Private Placement that closed simultaneously with the closing of this offering. A portion of the purchase price of the Private
Warrants was added to the proceeds from the Initial Public Offering held in the Trust Account
NOTE
5. RELATED PARTY TRANSACTIONS
Founder
Shares
In
August 2020, the Sponsor paid $25,000, or approximately $0.007 per share, to cover certain offering costs in consideration for 3,593,750
shares of common stock, par value $0.0001 (the “Founder Shares”). On December 3, 2020, the Company declared a share dividend
of 0.36 for each outstanding share, resulting in 4,887,500 shares outstanding, and on December 22, 2020 the Company declared a share
dividend of 0.03 resulting in 5,031,250 shares which includes an aggregate of up to 656,250 shares that are subject to forfeiture to
the extent that the underwriters’ over-allotment option is not exercised in full or in part, and up to an aggregate of 1,006,250
shares of common stock (or 875,000 shares of common stock to the extent that the underwriters’ over-allotment is not exercised,
pro rata) that are subject to forfeiture to the extent that Rights are exercised upon consummation of an initial Business Combination.
In connection with the underwriters’ fully exercise of their over-allotment option on December 30, 2020 (see Note 3), the 656,250
shares were no longer subject to forfeiture.
The
Founder Shares were placed into an escrow account maintained by Continental Stock Transfer & Trust Company acting as escrow agent.
50% of these shares will not be transferred, assigned, sold or released from escrow until the earlier of (i) 6 months after the date
of the consummation of the initial Business Combination or (ii) the date on which the closing price of the Company’s shares of
common stock equals or exceeds $12.50 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations)
for any 20 trading days within any 30-trading day period commencing after the initial Business Combination and the remaining 50% of the
Founder Shares will not be transferred, assigned, sold or released from escrow until 6 months after the date of the consummation of the
initial Business Combination, or earlier, in either case, if, subsequent to its initial Business Combination, the Company consummates
a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of its stockholders having the right
to exchange their shares of common stock for cash, securities or other property.
During
the escrow period, the holders of these shares will not be able to sell or transfer their securities except (1) to any persons (including
their affiliates and stockholders) participating in the Private Placement of the Private Warrants, officers, directors, stockholders,
employees and members of the Company’s Sponsor and its affiliates, (2) amongst initial stockholders or their respective affiliates,
or to the Company’s officers, directors, advisors and employees, (3) if a holder is an entity, as a distribution to its, partners,
stockholders or members upon its liquidation, (4) by bona fide gift to a member of the holder’s immediate family or to a trust,
the beneficiary of which is a holder or a member of a holder’s immediate family, for estate planning purposes, (5) by virtue of
the laws of descent and distribution upon death, (6) pursuant to a qualified domestic relations order, (7) by certain pledges to secure
obligations incurred in connection with purchases of the Company’s securities, (8) by private sales at prices no greater than the
price at which the shares were originally purchased or (9) for the cancellation of up to 656,250 shares of common stock subject to forfeiture
to the extent that the underwriters’ over-allotment is not exercised in full or in part or in connection with the consummation
of the Company’s initial Business Combination.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On
December 23, 2020, the Sponsor transferred 81,000 of its Founder Shares of the Company to three board members (the “Transferees”)
(27,000 Founder Shares to each Transferee) for a nominal fee. On April 30, 2021, the Sponsor subsequently transferred 27,000 of its Founder
Shares of the Company to a new board member (the “Additional Transferee”, and, together with the Transferees, the “Directors”).
These awards are subject to ASC Topic 718, Compensation – Stock Compensation (“ASC 718”).
Under
ASC 718, stock-based compensation associated with equity-classified awards is measured at fair value upon the grant date. The Founder
Shares vested immediately, and, as such, in accordance with ASC 718, the Company recognized compensation expense on the transfer date
in an amount equal to the number of Founders Shares sold times the grant date fair value per share less the amount initially received
for the purchase of the Founders Shares. The fair value of the Founder Shares transferred to the Transferees was determined to be $424,440
($5.24 per share) as of December 23, 2020. As such, the Company recognized compensation expense of $424,440 within stock compensation
expense in the Company’s statement of operations for the period from August 7, 2020 (inception) through December 31, 2020. The
fair value of the Founder Shares transferred to the Additional Transferee was determined to be $157,140 ($5.82 per share) as of April
30, 2021. As such, the Company recognized compensation expense of $157,140 within stock compensation expense in the Company’s statement
of operations for the fiscal year ended December 31, 2021.
Promissory
Note - Related Party
The
Sponsor agreed to loan the Company an aggregate of up to $500,000 to cover expenses related to the Initial Public Offering pursuant to
a promissory note (the “Note”). This loan is non-interest bearing and payable on the earlier of March 31, 2021 or the completion
of the Initial Public Offering. On January 13, 2021, the Company paid the $228,758 balance on the note from the proceeds of the Initial
Public Offering. As of March 31, 2022 and December 31, 2021, there was no balance outstanding under the Note.
Working
Capital Loans
In
addition, in order to finance transaction costs in connection with a Business Combination, the Sponsor or an affiliate of the Sponsor,
or certain of the Company’s officers and directors may, but are not obligated to, loan the Company funds as may be required (“Working
Capital Loans”). Each loan would be evidenced by a promissory note. The notes would be repaid upon consummation of the Company’s
initial Business Combination, without interest. As of March 31,
2022 and December 31, 2021, the Company had no borrowings under the Working Capital Loans.
Administrative
Service Fee
Commencing
on the date of the Company’s final prospectus, the Company has agreed to pay an affiliate of the Sponsor a total of $20,000
per month for office space, utilities and secretarial support. Upon completion of the initial Business Combination or the
Company’s liquidation, the Company will cease paying these monthly fees. The Company incurred $60,000 of administrative
service fees for each the three months ended March
31, 2022 and for the three months ended March 31, 2021.
The Company accrued $10,000 and $10,000 of administrative service fees as of March 31, 2022 and December 31, 2021, respectively. The
unpaid amounts are accrued in Due to related party.
Due to
Related Party
The Company’s
directors and officers are reimbursed for any reasonable out-of-pocket expenses incurred by them in connection with certain activities
on behalf of the Company, such as identifying and investigating possible target businesses and Business Combinations. For the three months
ended March 31, 2022, $2,905 of such expenses were incurred, and $1,131 was recorded in Due to related party as of March 31, 2022. For
the three months ended March 31, 2021, $1,914 of such expenses were incurred. As of December 31,
2021, $44 of such expenses were recorded in Due to related party.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 6. DEBT
On March 21, 2022 and March 23, 2022, in connection
with the extension of the date by which the Company has to consummate a Business Combination (see Note 7), the Company entered into a
series of unsecured senior promissory note agreements (“Note Agreements”) with several lenders affiliated with the Company’s
Sponsor, Viveon Health LLC and Rom Papadopoulos, the Chief Financial Officer of the Company, for up to an aggregate amount totaling $4.0
million (the “Notes”). The Notes do not bear interest and mature upon the earlier of (i) the closing of the Company’s
initial business combination, and (ii) December 31, 2022 (the “Maturity Date”). A commitment fee in the amount equal to 10%
of all amounts funded under Notes (up to a maximum of $400,000), is due to the subscribers, on a pro rata basis, by the Company promptly
following the initial funding. As of March 31, 2022, the Company has received $2.9 million of funding for the Notes. A commitment fee
of $287,000 is due to the subscribers as of March 31, 2022.
Pursuant to the terms of the Note Agreements,
the subscribers shall receive warrants to purchase one share of Company common stock for every $2.00 of the funded principal amount of
the Notes up to 2,000,000 shares of the Company common stock, in the aggregate, at an exercise price of $11.50 per share, subject to adjustment
(the “Subscription Warrants”). See Note 9 for additional terms of the Subscription Warrants.
In accordance with ASC 470-20-25-2, the proceeds
from the issuance of the Notes were allocated to the Notes and Subscription Warrants using the with-and-without method. Under this method,
the Company first allocated the proceeds from the issuance of the Notes to the Subscription Warrants based on their initial fair value
measurement of $5,370,185 for the Subscription Warrants issued on March 21, 2022, and $337,991 for the Subscription Warrants issued on
March 23, 2022. The measurement of the Subscription Warrants fair value was determined utilizing a Monte Carlo simulation model considering
all relevant assumptions current at the dates of issuance (i.e., share price of $10.08, exercise price of $11.50, term of 4.44 years,
volatility of 2.4%, risk-free rate of 2.33%, and expected dividend rate of 0% as of March 21, 2022, and share price of $10.08, exercise
price of $11.50, term of 4.44 years, volatility of 2.5%, risk-free rate of 2.33%, and expected dividend rate of 0% as of March 23, 2022).
The initial fair value of the Subscription Warrants exceeded the proceeds received from the issuance of the Notes. As such, the proceeds
allocated to the Notes were nil. The Company recognized a loss on issuance of the Subscription Warrants of $2,838,176.
The Company complies with ASC Topic 835, Interest.
In accordance with ASC 835-30, discounts to the principal amounts are included in the carrying value of the Notes and amortized to “Interest
expense” over the remaining term of the underlying debt. During the three months ended March 31, 2022, the Company recorded
a $2,770,457 debt discount upon issuance of the Notes. The discount is amortized to interest expense over the term of the debt. For the
three months ended March 31, 2022, the amortization of the discount resulted in interest expense of $99,543.
The following table presents the Notes as of March
31, 2022:
Note | |
$ | 2,870,000 | |
Debt discount | |
| (2,770,457 | ) |
Carrying value of notes | |
$ | 99,543 | |
NOTE 7. COMMITMENTS
Underwriting Agreement
The Company granted the underwriter a 45-day option
to purchase up to 2,625,000 additional shares of Class A common stock to cover over-allotments at the Initial Public Offering price, less
the underwriting discounts and commissions. The underwriters exercised the over-allotment option in full on December 28, 2020.
The underwriter was paid a cash underwriting fee
of $0.20 per share, or $4,025,000 in the aggregate, upon the closing of the Initial Public Offering. In addition, $0.35 per share, or
$7,043,750 in the aggregate was payable to the underwriter for deferred underwriting commissions. The deferred fee will become payable
to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a Business Combination, subject
to the terms of the underwriting agreement.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Registration Rights
The holders of the Company’s Founder Shares
issued and outstanding on the date of this prospectus, as well as the holders of the Private Warrants (and underlying securities) will
be entitled to registration rights pursuant to an agreement to be signed prior to or on the effective date of this offering. The holders
of a majority of these securities are entitled to make up to two demands that the Company registers such securities. The holders of the
majority of the Founder Shares can elect to exercise these registration rights at any time commencing three months prior to the date on
which these shares of common stock are to be released from escrow. The holders of a majority of the Private Warrants (and underlying securities)
can elect to exercise these registration rights at any time after the Company consummates a Business Combination. In addition, the holders
have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the Company’s
consummation of a Business Combination. The Company will bear the expenses incurred in connection with the filing of any such registration
statements.
Vendor Agreements
On May 18, 2021, the Company entered into an agreement
with a transactional and strategic advisory firm (the “Strategic Advisor”) for advisory services as needed by the Company
in connection with a Business Combination. Pursuant to this agreement, the Company incurred approximately $875,000 in fees. As of March 31,
2022 and December 31, 2021, $500,000 of such fees remain unpaid and are included in accrued costs and expenses on the condensed consolidated
balance sheets. On November 1, 2021, the Company and the Strategic Advisor entered into an amendment to the agreement. Pursuant to this
amendment, the Company will pay the Strategic Advisor a fee of $2,625,000, inclusive of the $500,000 accrued as of March 31, 2022
and December 31, 2021. The remaining $2,125,000 is contingent upon the consummation of the Business Combination.
On October, 8, 2021, the Company entered into
an agreement with a financial advisor (the “Exclusive Financial Advisor”) for financial advisory services such as financial
and transaction feasibility analysis, assistance in negotiations, assistance in capital planning, and other customary services in connection
with a Business Combination, pursuant to which the Company will pay the Exclusive Financial Advisor a fee of $1,500,000 contingent upon
the consummation of the Business Combination.
On November 1, 2021, the Company entered into
an agreement with a financial advisor (the “Second Financial Advisor”) for financial advisory services such as guidance on
valuation and transaction structure and terms, assistance in negotiations, coordination of due diligence, documentation, and transaction
closing, and introduction of the Company to institutional investors in connection with a Business Combination, pursuant to which the Company
will pay the Second Financial Advisor a fee of $400,000 contingent upon the consummation of the Business Combination.
On November 2, 2021, the Company entered into
an agreement with a financial advisor (the “Third Financial Advisor”) for financial advisory services such as market related
advice and assistance in connection with a Business Combination, pursuant to which the Company will pay the Third Financial Advisor a
fee of $500,000 contingent upon the consummation of the Business Combination.
On November 5, 2021, the Company entered into
an agreement with an advisor (the “Advisor”) for services such as assistance in refining strategic objectives, preparation
or refinement of solicitation materials, identification, contact, and solicitation of or potential investors and other sources of capital,
and assistance in review, selection, negotiation, and closing of a transaction in connection with a Business Combination, pursuant to
which the Company will pay the Advisor a fee of $200,000 contingent upon the consummation of the Business Combination.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On November 15, 2021, the Company entered into
an agreement with two placement agents (the “Placement Agents”) for services such as analysis of potential contributions and
assets of a target to the Company’s future prospects, assistance in negotiations, and assistance in preparation of presentations
to investors, lenders, and/or other financial sources in connection with a Business Combination, pursuant to which the Company will pay
the Placement Agents a fee equal to the difference between 5% of the total aggregate sales price of the securities sold as part of the
Business Combination and 5% of any securities sold as part of the Business Combination to investors identified by the Advisor, contingent
upon the consummation of the Business Combination.
On February 17, 2022, the Company entered into
an agreement with a broker-dealer (the “Broker-Dealer”) for services such as providing the Company with capital markets advisory
services with regard to a forward purchase agreement, convertible private investment in public equity (“PIPE”), secured credit
facility, and any other capital structure topics in connection with a Business Combination, pursuant to which the Company will pay the
Broker-Dealer a fee of $250,000 contingent upon the consummation of the Business Combination.
Extension
On March 18, 2022, the Company held its 2022 Annual
Meeting of Stockholders for the purpose of approving: (i) a proposal to approve an amendment to the Company’s Amended and Restated
Certificate of Incorporation to (i) extend the date by which the Company has to consummate a Business Combination for three months, from
March 28, 2022 (the “Original Termination Date”) to June 28, 2022 (the “Extended Date”), and (ii) allow the Company,
without another stockholder vote, to elect to extend the date to consummate a Business Combination on a monthly basis for up to six times
by an additional one month each time after the Extended Date, upon five days’ advance notice prior to the applicable deadline, for
a total of up to nine months after the Original Termination Date, unless the closing of the proposed Business Combination with Suneva
Medical, Inc. or any potential alternative initial Business Combination shall have occurred (the “Extension Proposal”); (ii)
a proposal to re-elect five current directors to the Company’s Board of Directors (the “Director Election Proposal”);
and (iii) a proposal to ratify the appointment of Marcum LLP as the Company’s independent registered certified public accountants
for fiscal year 2020 (the “Auditor Ratification Proposal”). Stockholders voted to approve the Extension Proposal, Director
Election Proposal and Auditor Ratification Proposal.
On March 18, 2022, stockholders elected to redeem
15,092,126 shares of the Company’s common stock, resulting in redemption payments out of the Trust Account totaling approximately
$152,451,819. Subsequent to the redemptions, 5,032,874 shares of common stock remained in the Trust Account.
On March 21, 2022, the Company entered into the
Note Agreements (see Note 6). The Note Agreements included Subscription Warrants (see Note 9). The entry into the Note Agreements and
the terms of the Notes and Subscription Warrants was approved by the Audit Committee of the Board of Directors of the Company at a meeting
held on March 21, 2022.
On March 23, 2022, the Company filed an amendment
to its Amended and Restated Certificate of Incorporation with the Delaware Secretary of State (the “Amendment”) The Amendment
(i) extends the date by which the Company has to consummate a Business Combination for three months, from the Original Termination Date
to the Extended Date and (ii) allows the Company, without another stockholder vote, to elect to extend the date to consummate a Business
Combination on a monthly basis for up to six times by an additional one month each time after the Extended Date, upon five days’
advance notice and the deposit of $240,000 prior to the applicable deadline, for a total of up to nine months after the Original Termination
Date, unless the closing of the proposed Business Combination with Suneva Medical, Inc. or any potential alternative initial Business
Combination shall have occurred. As disclosed in the Current Report on Form 8-K filed on March 18, 2022, the Amendment was approved by
the Company’s stockholders at its Annual Meeting of Stockholders held on March 18, 2022.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 8. STOCKHOLDERS’ DEFICIT
Preferred stock — The Company
is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 and with such designations, voting and other rights
and preferences as may be determined from time to time by the Company’s board of directors. As of March 31, 2022 and December
31, 2021, there was no preferred stock issued or outstanding.
Common stock — The Company
is authorized to issue 60,000,000 shares of common stock with a par value of $0.0001 per share. Holders are entitled to one vote for each
share of common stock. As of March 31, 2022 and December 31, 2021, there were 5,031,250 shares of common stock issued and outstanding,
excluding 5,032,874 and 20,125,000 shares of common stock subject to possible redemption, respectively.
Rights
— Except in cases where the Company is not the surviving company in a Business Combination, each holder of a Right will
automatically receive one-twentieth (1/20) of a share of common stock upon consummation of the initial Business Combination. In the event
the Company will not be the surviving company upon completion of the initial Business Combination, each holder of a Right will be required
to affirmatively convert his, her or its rights in order to receive the one-twentieth (1/20) of a share underlying each right upon consummation
of the Business Combination. The Company will not issue fractional shares in connection with an exchange of Rights. Fractional shares
will either be rounded down to the nearest whole share or otherwise addressed in accordance with the applicable provisions of the Delaware
General Corporation Law. As a result, holders must hold Rights in multiples of 20 in order to receive shares for all Rights upon closing
of a Business Combination. If the Company is unable to complete an initial Business Combination within the required time period and the
Company redeems the Public Shares for the funds held in the Trust Account, holders of Rights will not receive any of such funds for their
Rights and the Rights will expire worthless.
NOTE 9. WARRANTS
Each Public
Warrant entitles the holder thereof to purchase one-half (1/2) of a share of common stock at a price of $11.50 per whole share, subject
to adjustment. Pursuant to the warrant agreement, a warrant holder may exercise its s only for a whole number of shares. This means that
only an even number of s may be exercised at any given time by a warrant holder.
The Company
may call the Public Warrants for redemption (except the Private Warrants):
| ● | in whole and not in part; |
| ● | at a price of $0.01 per warrant; |
| ● | upon not less than 30 days’ prior written notice of redemption
(the “30-day redemption period”) to each warrant holder; and |
| ● | if and only if, there is a current registration statement in effect
with respect to the shares of common stock underlying such warrants at the time of redemption and for the entire 30-day trading period
referred to above and continuing each day thereafter until the date of redemption. |
If the Company
calls the Public Warrants for redemption as described above, its management will have the option to require all holders that wish to exercise
Public Warrants to do so on a “cashless basis.” In such event, each holder would pay the exercise price by surrendering the
Public Warrants for that number of shares of common stock equal to the quotient obtained by dividing (x) the product of the number of
shares of common stock underlying the Public Warrants, multiplied by the difference between the exercise price of the Public Warrants
and the “fair market value” (defined below) by (y) the fair market value. The “fair market value” shall mean the
average reported last sale price of the Company’s common stock for the 10 trading days ending on the third trading day prior to
the date on which the notice of redemption is sent to the holders of Public Warrants. Whether the Company will exercise its option to
require all holders to exercise their Public Warrants on a “cashless basis” will depend on a variety of factors including
the price of our common shares at the time the Public Warrants are called for redemption, its cash needs at such time and concerns regarding
dilutive share issuances.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
If (x) the
Company issues additional shares of common stock or equity-linked securities for capital raising purposes in connection with the closing
of its initial Business Combination at an issue price or effective issue price of less than $9.50 per share of common stock (with such
issue price or effective issue price to be determined in good faith by its board of directors, and in the case of any such issuance to
its Sponsor, initial stockholders or their affiliates, without taking into account any founders’ shares held by them prior to such
issuance), (y) the aggregate gross proceeds from such issuances represent more than 60% of the total equity proceeds, and interest thereon,
available for the funding of our initial Business Combination on the date of the consummation of our initial Business Combination (net
of redemptions), and (z) the Market Value is below $9.50 per share, the exercise price of the Public Warrants will be adjusted (to the
nearest cent) to be equal to 115% of the greater of (i) the Market Value or (ii) the price at which the Company issues the additional
shares of common stock or equity-linked securities and the $16.50 per share redemption trigger price described above will be adjusted
(to the nearest cent) to be equal to 165% of the Market Value. The Public Warrants may be exercised upon surrender of the warrant certificate
on or prior to the expiration date at the offices of the warrant agent, with the exercise form on the reverse side of the warrant certificate
completed and executed as indicated, accompanied by full payment of the exercise price, by certified or official bank check payable to
the Company, for the number of warrants being exercised. The warrant holders do not have the rights or privileges of holders of shares
of common stock and any voting rights until they exercise their Public Warrants and receive shares of common stock. After the issuance
of shares of common stock upon exercise of the Public Warrants, each holder will be entitled to one vote for each share held of record
on all matters to be voted on by stockholders.
Private Warrants
The Private
Warrants are identical to the Public Warrants except that the Private Warrants will be non-redeemable and may be exercised on a cashless
basis, in each case so long as they continue to be held by the initial purchasers or their permitted transferees.
Subscription Warrants
The Subscription
Warrant term commences on the Exercise Date (as hereinafter defined) for a period of 49 months. The Subscription Warrants are exercisable
commencing on the date of the initial Business Combination (the “Exercise Date”) and have a cashless exercise feature that
is available at any time on or after the Exercise Date. Commencing on the date 13 months following the Exercise Date, the subscribers
have the right, but not the obligation, to put the Subscription Warrants to the Company at a purchase price of $5.00 per share. The Company
has agreed to file, within thirty (30) calendar days after the consummation of an initial Business Combination, a registration statement
with the Securities and Exchange Commission to register for resale the shares of common stock underlying the Subscription Warrants.
As of March 31, 2022 and December 31, 2021,
there were 20,125,000 Public Warrants and 18,000,000 Private Warrants outstanding. As of March 31,
2022, there were 1,435,000 Subscription Warrants outstanding. The Company accounts for the Public
Warrants, Private Warrants, and Subscription Warrants in accordance with the guidance contained in ASC 815-40. The Public Warrants qualify
for equity treatment under ASC 815-40. Such guidance provides that because the Private Warrants and Subscription Warrants do not meet
the criteria for equity treatment thereunder, the Private Warrants and Subscription Warrants must be recorded as a liability.
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 10. FAIR VALUE MEASUREMENTS
The following
tables present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of
March 31, 2022 and December 31, 2021, and indicate the fair value hierarchy of the valuation
inputs the Company utilized to determine such fair value:
Description | |
Amount at Fair Value | | |
Level 1 | | |
Level 2 | | |
Level 3 | |
March 31, 2022 | |
| | |
| | |
| | |
| |
Assets | |
| | |
| | |
| | |
| |
Money Market Account | |
$ | 2,000,466 | | |
$ | 2,000,466 | | |
$ | — | | |
$ | — | |
Mutual Funds held in Trust Account | |
$ | 51,564,084 | | |
$ | 51,564,084 | | |
$ | — | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Private Warrant Liability | |
$ | 1,415,020 | | |
$ | — | | |
$ | — | | |
$ | 1,415,020 | |
Subscription Warrant Liability | |
$ | 5,687,820 | | |
$ | — | | |
$ | — | | |
$ | 5,687,820 | |
| |
| | | |
| | | |
| | | |
| | |
December 31, 2021 | |
| | | |
| | | |
| | | |
| | |
Assets | |
| | | |
| | | |
| | | |
| | |
Money Market Account | |
$ | 350,455 | | |
$ | 350,455 | | |
$ | — | | |
$ | — | |
Mutual Funds held in Trust Account | |
$ | 203,282,989 | | |
$ | 203,282,989 | | |
$ | — | | |
$ | — | |
Liabilities | |
| | | |
| | | |
| | | |
| | |
Private Warrant Liability | |
$ | 4,188,221 | | |
$ | — | | |
$ | — | | |
$ | 4,188,221 | |
The Private Warrants and Subscription Warrants
are accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the condensed consolidated
balance sheets. The warrant liabilities were measured at fair value at inception and on a recurring basis, with changes in fair value
presented within change in fair value of warrant liabilities in the condensed consolidated statements of operations.
The Company established the initial fair value
of the Private Warrants on December 28, 2020, the date of the Company’s Initial Public Offering, and revalued on March 31,
2022 and on December 31, 2021, using a Monte Carlo simulation model. The Warrants were classified as Level 3 at the initial measurement
date, on March 31, 2022 and on December 31, 2021 due to the use of unobservable inputs.
The key inputs into the Monte Carlo simulation
as of March 31, 2022 and December 31, 2021 were as follows:
Inputs | |
As of
March 31,
2022 | | |
As of
December 31,
2021 | |
Risk-free interest rate | |
| 2.42 | % | |
| 1.30 | % |
Expected term remaining (years) | |
| 5.33 | | |
| 5.50 | |
Expected volatility | |
| 2.0 | % | |
| 7.6 | % |
Stock price | |
$ | 10.100 | | |
$ | 10.020 | |
VIVEON HEALTH ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Company established the initial fair value
of the Subscription Warrants on March 21, 2022 and March 23, 2022, the dates of issuance, and revalued on March 31, 2022, using a
Monte Carlo simulation model. The Warrants were classified as Level 3 at the initial measurement dates, and on March 31, 2022 due
to the use of unobservable inputs.
The key inputs into the Monte Carlo simulation
as of March 31, 2022 and the issuance dates were as follows:
Inputs | |
As of
March 31,
2022 | | |
As of
March 23,
2022
(Initial Measurement) | | |
As of
March 21,
2022
(Initial Measurement) | |
Risk-free interest rate | |
| 2.43 | % | |
| 2.33 | % | |
| 2.33 | % |
Expected term remaining (years) | |
| 4.42 | | |
| 4.44 | | |
| 4.44 | |
Expected volatility | |
| 2.0 | % | |
| 2.5 | % | |
| 2.4 | % |
Stock price | |
$ | 10.100 | | |
$ | 10.080 | | |
$ | 10.080 | |
The following table presents the changes in the
fair value of the Company’s Level 3 financial instruments that are measured at fair value:
Fair value as of August 7, 2020 | |
$ | — | |
Fair value Private Placement Warrants at issuance on December 28, 2020 | |
| 9,631,197 | |
Change in fair value | |
| 1,132,164 | |
Fair Value as of December 31, 2020 | |
| 10,763,361 | |
Change in fair value | |
| (6,575,140 | ) |
Fair value as of December 31, 2021 | |
| 4,188,221 | |
Fair value of Subscription warrants at issuance on March 21, 2022 | |
| 5,370,185 | |
Fair value of Subscription warrants at issuance on March 23, 2022 | |
| 337,991 | |
Change in fair value | |
| (2,793,557 | ) |
Fair value as of March 31, 2022 | |
$ | 7,102,840 | |
The Company recognized gains in connection with
changes in the fair value of the warrants of $2,793,557 and 3,897,673 for the three months ended March 31, 2022 and for the three months
ended March 31, 2021 within change in fair value of warrant liabilities in the condensed consolidated statements of operations, respectively.
NOTE 11. SUBSEQUENT EVENTS
The Company evaluated subsequent events and transactions
that occurred after the condensed consolidated balance sheet date up to the date that the condensed consolidated financial statements
were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have
required adjustment or disclosure in the condensed consolidated financial statements.
On April 4, 2022, April 27, 2022, and May 9, 2022, the Company received additional proceeds of $200,000, $250,000, and $100,000, respectively,
on the Notes.
On May 10, 2022, Suneva entered into a subordinated convertible promissory note (the “Subordinated Convertible Promissory
Note”) with Intuitus Suneva Debt LLC (“Intuitus”), pursuant to which Suneva may borrow up to an aggregate of $1,500,000
to be used to fund working capital. The Subordinated Convertible Promissory Note bears interest at a rate of 10.0% per annum and is payable
upon the earlier of: (i) December 31, 2022 or (ii) the voluntary or involuntary liquidation, dissolution or winding up of Suneva. In addition,
Intuitus may elect by written notice to Suneva to convert all (but not less than all) of the then-outstanding principal and interest on
the Note into shares of Suneva Series AA Stock as is determined by dividing the total principal and accrued but unpaid interest balance
on the Note by the $0.80. The Company’s Chief Financial Officer, Rom Papadopoulos, as managing member of Intuitus, has contributed
$200,000 of the $1,500,000 available under the Subordinated Convertible Promissory Note.