アメリカ合衆国
証券取引委員会
ワシントン, D.C. 20549
フォーム
(マーク 1)
| 四半期 1934年の証券取引法第13条または15条に基づく報告書 |
四半期の終了日
または
| 移行 1934年証券取引法第13条または第15条に基づく報告書 移行期間： から |
委任
ファイル番号
(定款に記載された登録者の正確な名前)
(州 またはその他の管轄区域の 法人設立または組織) |
(I.R.S. 雇用者 識別 番号.) | |
| (主な経営オフィスの住所) | (郵便番号 ) |
登録者の
電話番号（市外局番を含む）：
証券 法第12(b)条に基づいて登録された:
| 各クラスのタイトル | 取引 シンボル |
登録されている各取引所の名前 | ||
| その 株式市場 LLC | ||||
| その 株式市場 LLC |
チェックマークで示してください、登録者が: (1) 過去12か月間（または登録者が該当する報告書を提出する必要があったより短い期間）に1934年の証券取引法第13条または第15(d)条に基づいて提出する必要があった全ての報告書を提出したか、(2) 過去90日間、その提出要件の対象であったか。 はい ☐
登録者が、過去12ヶ月間（または登録者がそのファイルを提出する必要があった短い期間）に、規則405の規定に基づいて提出する必要があるすべてのインタラクティブデータファイルを電子的に提出したかどうかをチェックマークで示してください。
チェックマークで、登録者が大規模加速開示者、加速開示者、非加速開示者、より小規模な報告会社、または新興成長会社のどれであるかを示してください。「大規模加速開示者」、「加速開示者」、「より小規模な報告会社」、および「新興成長会社」の定義については、取引所法第120億2条をご覧ください。
| 大規模加速企業 | ☐ | 加速企業 | ☐ | |||
| ☒ | 小規模 開示会社 | |||||
| 新興 成長企業 |
もし
新興成長企業であれば、登録者が証券取引法第13条(a)に基づいて新しいまたは改訂された財務会計基準の遵守のための延長移行期間を利用しないことを選択した場合は、チェックマークで示してください。
登録者がシェル企業（取引所法のルール120億2で定義されている）であるかどうかをチェックマークで表示してください。 はい
☐
2024年12月5日現在、 名義額 $ ごとの株式 1シェアあたり、発行済みである。
目次
| ページ | ||
| パート I. | 財務情報 | |
| 項目 1. | 財務諸表 | |
| 2024年3月31日現在の圧縮連結貸借対照表（未監査）および2023年12月31日 | 1 | |
| 2024年および2023年3月31日に終了した3か月間の未監査圧縮連結損益計算書 | 2 | |
| 2024年および2023年3月31日に終了した3か月間の未監査圧縮連結一時的株主持分および株主赤字の変動計算書 | 3 | |
| 2024年および2023年3月31日終了の3ヶ月間の監査されていない簡潔な連結キャッシュフロー計算書 | 4 | |
| 監査されていない要約統合財務諸表に関する注記 | 5 | |
| 項目 2. | 経営者の財務状態及び業績の分析と討論 | 15 |
| 項目 3。 | 市場リスクに関する定量的および定性的開示 | 21 |
| 項目 4. | 管理と手続き | 21 |
| パート II. | その他の情報 | 22 |
| 項目 1. | 法的手続き | 22 |
| 項目 1A. | リスク要因 | 22 |
| 項目 2. | 未登録の株式証券の販売と収益の使用 | 22 |
| 項目 3。 | 上級証券のデフォルト | 22 |
| 項目 4. | 鉱山安全開示 | 22 |
| 項目 5. | その他の情報 | 22 |
| 項目 6. | 付属書類 | 22 |
| 署名 | 23 | |
| i |
PART I—財務情報
項目 1. 凝縮された連結財務諸表
ONEMEDNET CORPORATION
要約された 統合貸借対照表
(千単位で、シェアおよび1株あたりのデータを除く)
(未監査)
3月 31日, 2024 | 2023年12月31日 | |||||||
| 資産 | ||||||||
| 流動資産: | ||||||||
| 現金及び現金同等物 | $ | $ | ||||||
| 売掛金、純額 | ||||||||
| 前払費用及びその他の流動資産 | ||||||||
| 合計流動資産 | ||||||||
| 不動産及び機器、純額 | ||||||||
| 総資産 | $ | $ | ||||||
| 負債と株主の赤字 | ||||||||
| 流動負債: | ||||||||
| 買掛金及び未払費用 | $ | $ | ||||||
| 繰延収益 | ||||||||
| ローンの延長 | ||||||||
| PIPEノート | ||||||||
| 繰延べ引受手数料 | ||||||||
| 信用枠 | ||||||||
| 流動負債合計 | ||||||||
| 貸付金、関連当事者 | ||||||||
| その他の新規買負債 | ||||||||
| 総負債 | ||||||||
| コミットメント及び偶発事象（注12） | ||||||||
| 株主の欠損: | ||||||||
| 優先株、額面$, 2024年3月31日および2023年12月31日時点での発行可能株式数; 2024年3月31日および2023年12月31日に発行済み株式数 | ||||||||
| 普通株式、額面$; 認可されたシェア, 発行済株式数及び 2024年3月31日時点での発行済株式数、及び 2023年12月31日現在の発行済み株式数 | ||||||||
| 追加払込資本 | ||||||||
| 自己株式（原価） および それぞれ2024年3月31日および2023年12月31日の株式 | ( | ) | ||||||
| 累積赤字 | ( | ) | ( | ) | ||||
| 株主の総負債 | ( | ) | ( | ) | ||||
| 総負債及び株主の総負債 | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 1 |
ONEMEDNET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenue | ||||||||
| Subscription revenue | $ | $ | ||||||
| Web imaging revenue | ||||||||
| Total revenue | ||||||||
| Cost of revenue | ||||||||
| Gross margin | ( | ) | ( | ) | ||||
| Operating expenses | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other expense (income), net | ||||||||
| Interest expense | ||||||||
| Change in fair value of warrants | ( | ) | ||||||
| Change in fair value of PIPE Notes | ( | ) | ||||||
| Change in fair value of convertible promissory notes | ||||||||
| Stock warrant expense | ||||||||
| Other (income) expense | ( | ) | ||||||
| Total other expense, net | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Earnings per share: | ||||||||
| Basic and diluted net loss per common share outstanding | $ | ) | $ | ) | ||||
| Basic and diluted weighted average number of common shares outstanding | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
ONEMEDNET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIT
(In thousands, except share data)
(Unaudited)
| 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 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Issuance of OMN warrants in conjunction with convertible promissory notes | - | - | - | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | - | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balances as of March 31, 2023 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Paid-in | Accumulated | Stockholders’ | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
| Balances as of December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issuance of common stock to settle deferred underwriter fee payable | - | |||||||||||||||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||||||||||
| Repurchase of common stock | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances as of March 31, 2024 | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
ONEMEDNET CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Change in fair value of warrant liabilities | ( | ) | ||||||
| Change in fair value of PIPE Notes | ( | ) | ||||||
| Gain on forgiveness of CEBA loan | ( | ) | ||||||
| Non-cash interest | ||||||||
| Change in fair value of convertible promissory notes | ||||||||
| Stock warrant expense | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable & accrued expenses | ||||||||
| Deferred revenues | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of shareholder loans | ||||||||
| Proceeds from line of credit borrowings | ||||||||
| Repayment of CEBA loan | ( | ) | ||||||
| Proceeds from issuance of convertible notes | ||||||||
| Business Combination costs | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosures of non-cash investing and financing activities: | ||||||||
| Issuance of common stock to settle deferred underwriter fee payable | $ | $ | ||||||
| Consideration for repurchase of common stock included in accounts payable and accrued expenses | $ | ( | ) | $ | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
ONEMEDNET CORPORATION
NOTES TO THE UNAUDITED CONDENSED 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, Data Knights Merger Sub, Inc., (“Merger Sub”) a Delaware corporation and a wholly owned subsidiary of Data Knights Acquisition Corp. (“Data Knights”), a Delaware corporation, merged with and into OneMedNet Solutions Corporation (formerly named OneMedNet Corporation) (“Legacy ONMD”), with Legacy ONMD surviving as a wholly owned subsidiary of Data Knights (the “Business Combination”). Following the consummation of the Business Combination, Data Knights was renamed to “OneMedNet Corporation.”
Basis of presentation and consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules and regulations, certain notes or other financial information normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal, recurring adjustments that are necessary to present fairly the Company’s results for the interim periods presented. The results from operations for the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the year ended December 31, 2024, or for any future annual or interim period.
The accompanying interim unaudited condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the related notes for the year ended December 31, 2023 in our Annual Report on Form 10-K, as amended, filed with the SEC on November 5, 2024 (the “Form 10-K/A”).
The interim unaudited condensed consolidated financial statements include the consolidated accounts of the Company’s wholly owned subsidiary, OneMedNet Technologies (Canada) Inc. All significant intercompany transactions have been eliminated in consolidation.
Liquidity and going concern
The
Company has incurred recurring net losses since its inception, including $
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 hopes to attain profitable operations to fulfill its operating and capital requirements for at least 12 months from the date of the issuance of the condensed 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 condensed 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.
| 5 |
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.
Segment information
The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein.
2. Summary of Significant Accounting Policies
Except as described below, the accounting policies of the Company are set forth in Note 2 to the consolidated financial statements contained in the Form 10-K/A, and the accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies therein.
Treasury stock
The Company records the repurchase of its common stock, par value $ per share (“Common Stock”) at cost on the trade date of the transaction. These shares are considered treasury stock, which is a reduction to stockholders’ equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares.
Emerging growth company status
The Company is an “emerging growth company”, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it (1) is no longer an emerging growth company or (2) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act.
Accounting pronouncements not yet adopted
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (Topic 740) (“ASU 2023-09”). ASU 2023-09 requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. ASU 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company is currently evaluating the impact of adopting ASU 2023-09.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which is intended to provide enhancements to segment disclosures, even for entities with only one reportable segment. In particular, the standard will require disclosures of significant segment expenses regularly provided to the chief operating decision maker and included within each reported measure of segment profit and loss. The standard will also require disclosure of all other segment items by reportable segment and a description of its composition. Finally, the standard will require disclosure of the title and position of the chief operating decision maker and an explanation of how the chief operating decision maker uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. The standard is effective for annual periods beginning after December 15, 2023, and interim periods within annual periods beginning after December 15, 2024. Early adoption is permitted. The Company is currently evaluating the impact of the standard on the presentation of its consolidated financial statements and footnotes.
Recently adopted accounting pronouncements
In December 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires fair value measurement of certain crypto assets each reporting period with the changes in fair value reflected in net income. The amendments also require disclosures of the name, fair value, units held, and cost bases for each significant crypto asset held and annual reconciliations of crypto asset holdings. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2024, with early adoption permitted. The Company has opted to adopt this guidance early on January 1, 2024. The Company’s adoption of ASU 2023-08 had no impact on the condensed consolidated financial statements as of and for the three months ended March 31, 2024.
| 6 |
3. Convertible Debt
Convertible Promissory Notes
From
2019 to 2023, the Company issued various convertible promissory notes to related and unrelated party investors, which were
convertible into equity securities of Legacy ONMD upon a next equity financing transaction (the “Convertible Promissory
Notes”). The Convertible Promissory Notes bore interest at a rate of either
The Convertible Promissory Notes were issued for general working capital purposes. The Company elected the fair value option (“FVO”) of accounting under ASC 825, Financial Instruments, for its Convertible Promissory Notes. Under the FVO election, the financial instrument is initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment is presented as a single line item within other (income) expenses, net in the accompanying condensed consolidated statements of operations under the caption change in fair value of convertible debt.
In November 2023, all Convertible Promissory Notes were converted pursuant to their provision in connection with the Business Combination between Data Knights and Legacy ONMD and were no longer outstanding as of December 31, 2023. See the Form 10-K/A for all other details relating to the Convertible Promissory Notes issued prior to December 31, 2023.
PIPE Notes
On
June 28, 2023,
The
Company elected the FVO of accounting for its PIPE Notes. The estimated fair value adjustment is presented as a single line item within
other (income) expenses, net in the accompanying condensed consolidated statements of operations under the caption change in fair value
of PIPE Notes. As of March 31, 2024 and December 31, 2023, the fair value of the PIPE Notes was $
Shareholder Loans
In
January 2024, the Company received gross proceeds of $
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 $
Pursuant
to the Helena Termination Agreement, the Company issued to Helena a warrant to purchase
| 7 |
4. Line of Credit
In
March 2024, the Company obtained a line of credit of $
5. Canadian Emergency Business Loan Act (“CEBA”)
During
December 2020, the Company applied for and received a $
6. Stockholders’ Deficit
Common Stock
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 ($
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 shares of Common Stock in exchange for cash of $
Preferred Stock
As of March 31, 2024, shares of Preferred Stock were issued or outstanding. All shares of Legacy ONMD Series A-2 Preferred Stock and Series A-1 Preferred Stock were converted into Common Stock in connection with the Business Combination. See the Form 10-K/A for all other details relating to the Series A-2 Preferred Stock and Series A-1 Preferred Stock issued prior to December 31, 2023.
| 8 |
For the three months ended March 31, 2024 and 2023, the weighted-average number of shares of Common Stock outstanding used to calculate both basic and diluted net loss per share is the same. In computing diluted net loss per share for the three months ended March 31, 2024 and 2023, the Company excluded the following potentially dilutive securities, as the effect would be anti-dilutive and reduce the net loss per share calculated for each period:
Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Options to purchase Common Stock | ||||||||
| Unvested restricted stock units and awards | ||||||||
| Warrants for Common Stock | ||||||||
| Series A-1 preferred stock | ||||||||
| Series A-2 preferred stock | ||||||||
| Convertible promissory notes | ||||||||
| Total | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cost of revenue | $ | $ | ||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| Total stock-based compensation expense | $ | $ | ||||||
Equity incentive plan – summary
During 2023, the Company adopted the OneMedNet Corporation 2022 Equity Incentive Plan (the “2022 Plan”) and reserved an amount of shares of The 2022 Plan became effective immediately upon the closing of the Business Combination and replaced the Legacy ONMD equity incentive plan.
Equity incentive plan – stock options
For the three months ended March 31, 2024 and 2023, the Company recorded stock-based compensation expense of $ thousand and $ thousand, respectively, on its outstanding stock options.
Equity incentive plan – restricted stock units (“RSU”)
For the three months ended March 31, 2024 and 2023, the Company recorded stock-based compensation expense of $ thousand and $ thousand, respectively, on its outstanding restricted stock units.
9. Stock Warrants
The Company has the following warrants outstanding for the periods presented:
| As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
| Liability Classified Warrants | ||||||||
| Private Placement Warrants | ||||||||
| PIPE Warrants | ||||||||
| Subtotal | ||||||||
| Equity Classified Warrants | ||||||||
| Public Warrants | ||||||||
| Subtotal | ||||||||
| Grand Total | ||||||||
| 9 |
Convertible Promissory Notes Warrants
As
described in Note 3, the Company issued Convertible Promissory Notes Warrants in 2022 and 2023. The Convertible Promissory Notes
Warrants are classified as equity in accordance with ASC subtopic 815-40, Derivatives and Hedging - Contracts in Entity’s
Own Equity (“ASC 815-40”). The Company determined that the fair value of the combined instrument (inclusive of the
Convertible Promissory Notes) significantly exceeds the proceeds received; therefore, the Company concluded that the Convertible Promissory Notes Warrants are
most accurately portrayed as an issuance cost related to the Convertible Promissory Notes. This resulted in an expense of $
In
connection with the closing of the Business Combination on November 7, 2023, all Convertible Promissory Notes Warrants were cashless
exercised into shares of Legacy ONMD common stock and exchanged based on the appropriate conversion ratio for the Common Stock less an
exercise price of $
PIPE Warrants
In
conjunction with the issuance of the PIPE Notes described in Note 3, Data Knights also issued and sold to each of the Purchasers
warrants to purchase Common Stock at an exercise price of $
Private Placement Warrants
In
connection with the closing of the Business Combination on November 7, 2023, the Company assumed
10. 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):
| March 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private Warrants | $ | $ | $ | $ | ||||||||||||
| PIPE Warrants | ||||||||||||||||
| PIPE Notes | ||||||||||||||||
| Total liabilities, at fair value | $ | $ | $ | $ | ||||||||||||
| December 31, 2023 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Liabilities: | ||||||||||||||||
| Private Warrants | $ | $ | $ | $ | ||||||||||||
| PIPE Warrants | ||||||||||||||||
| PIPE Notes | ||||||||||||||||
| Total liabilities, at fair value | $ | $ | $ | $ | ||||||||||||
| 10 |
The following table presents the changes in the Private Warrants, PIPE Notes and PIPE Warrants measured at fair value for the three months ended March 31, 2024 (in thousands):
| Level 3 Rollforward: | Private Warrants | PIPE Notes | PIPE Warrants | |||||||||
| Balance, December 31, 2023 | ||||||||||||
| Changes in fair value | ( | ) | ( | ) | ||||||||
| Balance, March 31, 2024 | $ | $ | $ | |||||||||
Private Placement Warrants and PIPE Warrants
The
aggregate fair value of the Private Placement Warrants and PIPE Warrants was $
| As of March 31, | ||||||||
| 2024 | ||||||||
| PIPE | Private | |||||||
| Warrants | Warrants | |||||||
| Stock price | $ | $ | ||||||
| Exercise price | $ | $ | ||||||
| Expected volatility | % | % | ||||||
| Weighted average risk-free rate | % | % | ||||||
| Expected dividend yield | ||||||||
| Expected term (in years) | ||||||||
PIPE Notes
The estimated fair values of the PIPE Notes 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.
The
fair value of the PIPE Notes was $
11. Related Party Transactions
PIPE Notes and Warrants
Data
Knights issued and sold PIPE Notes in connection with the Business Combination, which are convertible into shares of Common Stock. Total
proceeds raised from the PIPE Notes were $
In
connection with the issuance of the PIPE Notes, the Company also issued a total of
Convertible Promissory Notes and Warrants
As
described in Note 3, the Company issued various Convertible Promissory Notes to related party investors. Total gross proceeds raised
from Convertible Promissory Notes with related parties was $
| 11 |
Shareholder Loans
In
addition to the convertible shareholder loans described in Note 3, the Company also received gross proceeds of $
| As of | ||||||||
March 31, 2024 | December 31, 2023 | |||||||
| Shareholder loans – nonconvertible | $ | $ | ||||||
| Shareholder loans – convertible | ||||||||
| Accrued interest | ||||||||
| Total shareholder loans | $ | $ | ||||||
Loan Extensions
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 $ 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 SEC. As of March 31, 2024,
a registration statement has not yet been declared effective by the SEC, and a balance of $
12. Commitments and Contingencies
Lease Agreement
The
Company has a month-to-month lease for its headquarters space at a cost of $
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 three months ended March 31, 2024 and 2023.
13. Subsequent Events
The Company has evaluated subsequent events occurring through December 5, 2024, the date the condensed consolidated financial statements were issued, for events requiring recording or disclosure in the Company’s condensed consolidated financial statements.
Shareholder Loans
From
April 2024, through the date of this report, the Company received gross proceeds of $
Private Placements
As
described in Note 3, on June 14, 2024, the Company and Helena entered into the Helena Termination Agreement to terminate the Helena SPA
and related documents. Pursuant to the Helena Termination Agreement, the Company issued to Helena a warrant to purchase
| 12 |
On
July 23, 2024 and July 25, 2024, the Company entered into securities purchase agreements (the “Securities Purchase Agreements”)
with certain institutional investors in connection with the private placement of its Common Stock and pre-funded warrants with aggregate
gross proceeds of approximately $
Pursuant
to the Securities Purchase Agreements, the Company agreed to issue and sell to the investors shares of its Common Stock at
a price of $ per share, pre-funded warrants exercisable for
On
September 24, 2024, the Company entered into a securities purchase agreement (the “Follow-on SPA”) with an institutional
accredited investor in connection with the private placement of its Common Stock, warrants and pre-funded warrants with aggregate gross
proceeds of approximately $
Pursuant
to the Follow-on SPA, the Company agreed to issue and sell to the investor shares of its Common Stock at a price of $ per
share, warrants exercisable for shares of its Common Stock at an exercise price of $
Standby Equity Purchase Agreement
On
June 17, 2024, the Company entered into a standby equity purchase agreement (the “SEPA”) with YA II PN, LTD, a Cayman Islands
exempt limited partnership managed by Yorkville Advisors Global, LP (“Yorkville”). Pursuant to the SEPA, subject to certain
conditions, the Company has the option to sell to Yorkville an aggregate amount of up to $
Any
purchase under an advance would be subject to certain limitations, including that Yorkville will not purchase or acquire any shares that
would result in it and its affiliates beneficially owning more than % of the then outstanding voting power or number of shares of
Common Stock or any shares that when aggregated with shares issued under all other earlier advances, would exceed
| 13 |
In
connection with the execution of the SEPA, the Company paid a $
Additionally,
Yorkville agreed to advance to the Company, in exchange for a convertible promissory note (the “Yorkville Promissory Note”),
a principal amount of $
The Yorkville Promissory Note may be accelerated by Yorkville upon specified events of default, and may become amortizable for cash if (i) the daily VWAP is less than the Floor Price for five trading days during a period of seven consecutive trading days, (ii) the Company has issued in excess of 95% of the shares of Common Stock available under the Exchange Cap or (iii) the Company is in material breach of its obligations under a registration rights agreement it entered into with Yorkville in connection with the SEPA or Yorkville becomes limited in its ability to freely resell shares subject to an advance as further described in the Yorkville Promissory Note, subject to de-amortization after certain cures.
Yorkville Letter
On October 8, 2024, Yorkville sent the Company a letter notifying the Company that it had breached a registration rights agreement with Yorkville by failing to file a Registration Statement on Form S-1 on the timeline set forth in the registration rights agreement (the “Yorkville Letter”). The Yorkville Letter asserted that this breach was an event of default and an amortization event under the prepaid advance in connection with the SEPA. The Yorkville Letter also asserted that the Company’s failure to timely file its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2024 was an event of default under the Yorkville Promissory Note. The Company subsequently engaged in discussions with Yorkville regarding the Yorkville Letter, which discussions are ongoing.
Pursuant to the Yorkville Promissory Note, upon the occurrence of an amortization event, the Company is required to pay all principal and accrued interest on the Yorkville Promissory Note, plus a 10% payment premium on the principal amount, in equal installments over 3 calendar months or until the amortization event is cured, whichever is earlier. In addition, upon the occurrence of an event of default, the interest rate on the Yorkville Promissory Note increases to 18% retroactive to the date of the event of default.
Executive Turnover
As previously announced on Form 8-K, on August 26, 2024, Lisa Embree, Chief Financial Officer, Executive Vice President, Treasurer and Secretary, notified the Company of her intention to resign from her position effective August 30, 2024.
Effective
August 30, 2024, the Board of Directors of the Company (the “Board”) appointed Mr. Robert Golden to serve as the Chief Financial
Officer (“CFO”) on an interim basis to fill the vacancy created by the resignation of Lisa Embree. Effective on his appointment
as interim CFO, Mr. Golden stepped down as a member and the chair of the Audit Committee of the Board. In connection with his appointment
as interim CFO, the Company entered into a consulting agreement with Mr. Golden, pursuant to which Mr. Golden will receive a $
As
previously announced on a Current Report on Form 8-K filed with the SEC on October 8, 2024, on October 1, 2024, Paul J. Casey and Erkan
Akyuz resigned from the Board, effective immediately. Also on October 1, 2024, the Board appointed Jair Clarke and Sherry Coonse McCraw
to the Board to fill the vacancies created by Mr. Casey and Mr. Akyuz, respectively. In connection with Ms. Coonse McCraw and Mr. Clarke’s
service on the Board, the Board approved an RSU grant providing for the grant of
| 14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis are intended to help you understand our business, financial condition, results of operations, liquidity, and capital resources. You should read this discussion in conjunction with the Company’s consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this “Report”) and in the Form 10-K/A.
In addition to historical financial analysis, this discussion and analysis contains forward-looking statements based upon current expectations that involve risks, uncertainties, and assumptions, as described under the heading “Cautionary Note Regarding Forward Looking Statements.” Actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of various factors, risks and uncertainties, including those set forth under “Risk Factors” included elsewhere (or incorporated by reference) in this Report and in the Form 10-K/A. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “OneMedNet”, “we”, “us”, “our,” and “the Company” are intended to mean the business and operations of OneMedNet Corporation and its consolidated subsidiary following the Business Combination.
Company Overview
OneMedNet Corporation 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.
Business Combination
On November 7, 2023, we held the closing of the Business Combination whereby Merger Sub merged with and into Legacy ONMD, with Legacy ONMD continuing as the surviving entity, which resulted in all of the issued and outstanding capital stock of Legacy ONMD being exchanged for shares of Common Stock upon the terms set forth in the agreement and plan of merger, dated April 25, 2022 (the “Merger Agreement”), by and among Data Knights, Merger Sub, Legacy ONMD, Data Knights, LLC, a Delaware limited liability company (the “Sponsor”), and Paul Casey, in his capacity as representative of the stockholders of Legacy ONMD. The Business Combination and other transactions that closed on November 7, 2023, pursuant to the Merger Agreement, led to Data Knights changing its name to “OneMedNet Corporation” and the business of the Company became the business of Legacy ONMD.
Pursuant to the terms of the Merger Agreement, the total consideration for the Business Combination and related transactions (the “Merger Consideration”) was approximately $200 million. In connection with the special meeting of stockholders of Data Knights, certain public holders holding 1,600,741 shares of Data Knights common stock exercised their right to redeem such shares for a pro rata portion of the funds held by Continental Stock Transfer & Trust Company, as trustee in the trust account established in connection with Data Knights’ initial public offering. Effective November 7, 2023, Data Knights’ units ceased trading, and effective November 8, 2023, the Common Stock began trading on the Nasdaq Global Market under the symbol “ONMD” and the Public Warrants began trading on the Nasdaq Global Market under the symbol “ONMDW.” The Common Stock and Public Warrants were transferred from The Nasdaq Global Market to The Nasdaq Capital Market at the opening of business on August 19, 2024, and continue to trade under the symbols “ONMD” and “ONMDW,” respectively.
As a result of the Business Combination, holders of Data Knights common stock automatically received Common Stock of OneMedNet, and holders of Data Knights warrants automatically received warrants of OneMedNet with substantively identical terms. At the closing of the Business Combination, all shares of Data Knights owned by the Sponsor (consisting of shares of Data Knights common stock and shares of Data Knights Class B common stock), automatically converted into an equal number of shares of OneMedNet’s Common Stock, and the private placement warrants held by the Sponsor automatically converted into warrants to purchase one share of OneMedNet Common Stock with substantively identical terms.
| 15 |
Key Components of Consolidated Statements of Operations
Revenue
The Company generates revenue from two streams: (1) iRWD, which provides regulatory grade imaging and clinical data in the pharmaceutical, device manufacturing, contract research organizations, and AI markets and (2) BEAM, which is a medical imaging exchange platform between hospital/healthcare systems, imaging centers, physicians and patients. iRWD is sold on a fixed fee basis based on the number of data units and the cost per data unit committed to in the customer contract. Revenue is recognized when the data is delivered to the customer. BEAM revenue is subscription-based revenue that is recognized ratably over the subscription period committed to by the customer. The Company invoices its BEAM customers quarterly or annually in advance with the customer contracts automatically renewing unless the customer issues a cancellation notice.
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. The transaction price for the products is the invoiced amount. Advanced billings from contracts are deferred and recognized as revenue when earned. 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.
Cost of Revenue
Our cost of revenue is composed of our distinct performance obligations of hosting, labor, and data cost.
General and Administrative
General and administrative functions include finance, legal, human resources, operations, 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.
Research and Development
Costs incurred in the research and development of our products are expensed as incurred. Research and development costs include personnel, contracted services, materials, and indirect costs involved in the design and development of new products and services, as well as hosting expense.
Sales and Marketing
Our sales and marketing costs consist of labor and tradeshow costs.
Interest Expense
Interest expense consists of interest incurred on shareholder loans.
Other (Income) Expenses, Net
Other (income) expenses, net, primarily includes the changes in fair value of convertible debt and change in fair value of PIPE Notes for which we have elected the fair value option of accounting. Convertible notes payable, which include convertible promissory notes and PIPE Notes issued to related parties, including accrued interest and contingently issuable warrants, contain embedded derivatives, including settlement of the contingent conversion features, which require bifurcation and separate accounting. Accordingly, we have elected to measure the entire contingently convertible debt instruments, including accrued interest, at fair value. These debt instruments were initially recorded at fair value as liabilities and are subsequently re-measured at fair value on our condensed consolidated balance sheet at the end of each reporting period and at settlement, as applicable. Other income or expenses, net, also includes changes in fair value of loan extensions, deferred underwriting fees and warrants which are treated as liability instruments measured at fair value for accounting purposes, initially recorded at fair value and subsequently re-measured to fair value on our condensed consolidated balance sheets at the end of each reporting period. The changes in the fair value of these debt and liability instruments are recorded in changes in fair value, included as a component of other (income) expenses, net, in the condensed consolidated statements of operations.
At the closing of the Business Combination, convertible promissory notes were converted into Common Stock immediately prior to the Closing and were no longer outstanding as of the closing date.
Other (income) expenses, net, also includes foreign exchange and tax expenses related to the Company’s operations and revenue outside of the United States.
| 16 |
Results of Operations
The following table sets forth our condensed consolidated statements of operations data for the periods presented:
Three Months Ended March 31, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Revenue | ||||||||||||||||
| Subscription revenue | $ | 201 | $ | 167 | $ | 34 | 20 | % | ||||||||
| Web imaging revenue | 47 | 33 | 14 | 42 | % | |||||||||||
| Total revenue | 248 | 200 | 48 | 24 | % | |||||||||||
| Cost of revenue | 317 | 289 | 28 | 10 | % | |||||||||||
| Gross margin | (69 | ) | (89 | ) | 20 | -22 | % | |||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | 1,358 | 539 | 819 | 152 | % | |||||||||||
| Sales and marketing | 229 | 259 | (30 | ) | -12 | % | ||||||||||
| Research and development | 445 | 582 | (137 | ) | -24 | % | ||||||||||
| Total operating expenses | 2,032 | 1,380 | 652 | 47 | % | |||||||||||
| Loss from operations | (2,101 | ) | (1,469 | ) | (632 | ) | 43 | % | ||||||||
| Other (income) expense, net | ||||||||||||||||
| Interest expense | 42 | - | 42 | N/A | ||||||||||||
| Change in fair value of warrants | (7 | ) | - | (7 | ) | N/A | ||||||||||
| Change in fair value of PIPE Notes | (20 | ) | - | (20 | ) | N/A | ||||||||||
| Change in fair value of convertible promissory notes | - | 4,414 | (4,414 | ) | -100 | % | ||||||||||
| Stock warrant expense | - | 1,935 | (1,935 | ) | -100 | % | ||||||||||
| Other (income) expense | (7 | ) | 8 | (15 | ) | -188 | % | |||||||||
| Total other (income) expenses, net | 8 | 6,357 | (6,349 | ) | -100 | % | ||||||||||
| Net loss | $ | (2,109 | ) | $ | (7,826 | ) | $ | 5,717 | -73 | % | ||||||
Revenue
Three Months Ended March 31, | Change | |||||||||||||||
| 2024 | 2023 | $ | % | |||||||||||||
| Subscription revenue (BEAM) | $ | 201 | $ | 167 | $ | 34 | 20 | % | ||||||||
| Web imaging revenue (iRWD) | 47 | 33 | 14 | 42 | % | |||||||||||
| Total | $ | 248 | $ | 200 | $ | 48 | 24 | % | ||||||||
Our revenue is comprised of sales made from our subscription revenue (BEAM) and from our web imaging (iRWD). For the three months ended March 31, 2024, overall revenue increased by 24%. The primary driver for the subscription revenue increase was delivery of revenue to a significant customer. The primary driver for the increase in web imaging revenue was revenue deliveries pushed to the first quarter of 2024.
Cost of Revenue
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Cost of revenue | 317 | 289 | ||||||
| % of revenue | 128 | % | 145 | % | ||||
For the three months ended March 31, 2024, we were able to reduce our cost of revenue as a percentage of revenue by 17%. The decrease is primarily driven by lower iRWD consulting costs during the three months ended March 31, 2024.
| 17 |
General and Administrative
Our general and administrative expense increased $0.8 million, or 152%, to $1.4 million for the three months ended March 31, 2024 from $0.5 million for the three months ended March 31, 2023. The increase is primarily due to an increase in professional fees of $0.6 million from being a public company, employee salaries and benefits of $0.1 million and bad debt expense of $0.1 million.
Sales and Marketing
Our sales & marketing expense decreased $30 thousand, or 12%, to $229 thousand for the three months ended March 31, 2024 from $259 thousand for the three months ended March 31, 2023. The decrease is primarily due to a decrease in salaries and benefits of $84 thousand, which is partially offset by increases in trade shows, dues and subscriptions and consultants, which collectively increased by $54 thousand.
Research and development
Our research and development expense decreased $0.1 million, or 24%, to $0.5 million for the three months ended March 31, 2024 from $0.6 million for the three months ended March 31, 2023. The decrease is primarily due to a decrease in stock compensation expense of $0.2 million, which is partially offset by an increase in salaries and benefits of $0.1 million.
Interest Expense
During the three months ended March 31, 2024, interest expense was primarily comprised of interest expense on loans made from related parties (Management and Directors) and interest expense on $0.5 million of deferred underwriter fees payable in cash. During the three months ended March 31, 2023, we did not incur any interest expense.
Change in Fair Value of Warrants
The change in fair value of Warrants was due to the closing of the Business Combination and the resulting fluctuations in the market price of shares of Common Stock.
Change in Fair Value of PIPE Notes
The change in fair value of PIPE Notes was due to the closing of the Business Combination and the resulting fluctuations in the market price of shares of Common Stock.
Change in Fair Value of Convertible Debt
The change in fair value of convertible debt was due to the closing of the Business Combination and the resulting fluctuations of the market price of shares of Common Stock. The Convertible Promissory Notes were no longer outstanding during the three months ended March 31, 2024.
Non-GAAP Financial Measure
In addition to providing financial measurements based on U.S. GAAP, we provide an additional financial metric that is not prepared in accordance with U.S. GAAP (a “non-GAAP financial measure”). We use this non-GAAP financial measure, in addition to U.S. GAAP financial measures, to understand and compare operating results across accounting periods, for financial and operational decision making, for planning and forecasting purposes, to measure executive compensation, and to evaluate our financial performance. This non-GAAP financial measure is Adjusted EBITDA, as discussed below.
We believe that this non-GAAP financial measure reflects our ongoing business in a manner that allows for meaningful comparisons and analysis of trends in the business, as it facilitates comparing financial results across accounting periods and to those of peer companies. We also believe that this non-GAAP financial measure enables investors to evaluate our operating results and future prospects in the same manner as we do. This non-GAAP financial measure may exclude expenses and gains that may be unusual in nature, infrequent, or not reflective of our ongoing operating results.
This non-GAAP financial measure should not be viewed as a substitute for a U.S. GAAP financial measure and may be different from a similarly titled non-GAAP financial measure used by other companies. Furthermore, there are limitations inherent in the non-GAAP financial measure because it excludes charges and credits that are required to be included in a U.S. GAAP presentation. Accordingly, the non-GAAP financial measure does not replace the presentation of our U.S. GAAP financial measures and should only be used as a supplement to, not as a substitute for, our financial results presented in accordance with U.S. GAAP. U.S. GAAP net loss is the closest comparable U.S. GAAP measure used.
| 18 |
We consider Adjusted EBITDA to be an important indicator of the operational strength and performance of our business and a good measure of our historical operating trends. Adjusted EBITDA eliminates items that we do not consider to be part of our core operations. We define Adjusted EBITDA as U.S. GAAP net loss excluding the following items: interest expense; income tax expense; depreciation and amortization of tangible assets; stock-based compensation; Business Combination transaction expenses; and other non-recurring items that may arise from time to time.
The non-GAAP adjustments, and our basis for excluding them from our non-GAAP financial measure, are outlined below:
| ● | Adjusted EBITDA does not reflect interest expense or the cash requirements necessary to service payments on our shareholder loans, which is not a core form of financing for our business; | |
| ● | Adjusted EBITDA does not reflect income tax expense, which relates to our foreign subsidiary, because we have suffered recurring consolidated operating losses since inception and expect that to continue in the future; | |
| ● | Although depreciation and amortization are non-cash charges, the assets that we currently depreciate and amortize will likely have to be replaced in the future, and Adjusted EBITDA does not reflect the cash required to fund such replacements; | |
| ● | Adjusted EBITDA excludes stock-based compensation expense which has been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business and an important part of our compensation strategy; | |
| ● | Adjusted EBITDA does not reflect the effect of earnings or charges resulting from matters that our management does not consider to be indicative of our ongoing operations. However, some of these charges and gains (such as mark-to-market adjustments, stock warrant expense, etc.) have recurred and may recur; and | |
| ● | Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure. |
The following table reconciles U.S. GAAP net loss to Adjusted EBITDA during the periods presented (in thousands):
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net loss | $ | (2,109 | ) | $ | (7,826 | ) | ||
| Interest expense | 42 | - | ||||||
| Depreciation and amortization | 11 | 6 | ||||||
| Stock-based compensation | 137 | 368 | ||||||
| Change in fair value of warrants | (7 | ) | - | |||||
| Change in fair value of PIPE Notes | (20 | ) | - | |||||
| Change in fair value of convertible promissory notes | - | 4,414 | ||||||
| Stock warrant expense | - | 1,935 | ||||||
| Adjusted EBITDA | (1,946 | ) | (1,103 | ) | ||||
Liquidity and Capital Resources
As of March 31, 2024, our principal sources of liquidity were proceeds from related party investors and our revolving line of credit and cash received from customers.
The following table shows net cash and cash equivalents used in operating activities, net cash and cash equivalents used in investing activities, and net cash and cash equivalents provided by financing activities during the periods presented:
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | $ | (1,547 | ) | $ | (1,002 | ) | ||
| Investing activities | (6 | ) | - | |||||
| Financing activities | 1,680 | 876 | ||||||
| 19 |
Operating Activities
Our net cash and cash equivalents used in operating activities consists of net loss adjusted for certain non-cash items, including depreciation and amortization, stock-based compensation expense, changes in fair value of liability classified financial instruments, and as well as changes in operating assets and liabilities. The primary changes in working capital items, such as the changes in accounts receivable and deferred revenue, result from the difference in timing of payments from our customers related to contract performance obligations. This may result in an operating cash flow source or use for the period, depending on the timing of payments received as compared to the fulfillment of the performance obligation.
Net cash used in operating activities was $1.5 million during the three months ended March 31, 2024. Net cash used in operating activities was due to our net loss of $2.1 million, which is offset by non-cash items of $0.1 million, primarily consisting of stock-based compensation, and cash from operating assets and liabilities of $0.4 million due to the timing of cash payments to vendors and cash receipts from customers.
By comparison, the Company’s net cash used in operating activities was $1.0 million during the three months ended March 31, 2023. Net cash used in operating activities for the three months ended March 31, 2023 was due to our net loss of $7.8 million, which is offset by non-cash items of $6.7 million, primarily consisting of the change in fair value of convertible debt of $4.4 million, stock warrant expense of $1.9 million and stock-based compensation expense of $0.4 million, and cash from operating assets and liabilities of $0.1 million due to the timing of cash payments to vendors and cash receipts from customers.
Investing Activities
Our investing activities have consisted primarily of property and equipment purchases.
Net cash and cash equivalents used in investing activities during the three months ended March 31, 2024 consisted of $6 thousand of purchased property and equipment.
By comparison, no cash and cash equivalents were used or provided by investing activities during the three months ended March 31, 2023.
Financing Activities
Net cash provided by financing activities was $1.7 million for the three months ended March 31, 2024, which primarily consisted of $1.3 million and $0.4 million of proceeds from related party loans and our revolving line of credit, respectively.
By comparison, the Company’s net cash provided by financing activities was $0.9 million for the three months ended March 31, 2023, which primarily consisted of $1.1 million proceeds from the issuance of convertible promissory notes payable offset by $0.2 million of Business Combination costs paid.
Contractual Obligations and Commitments and Going Concern Outlook
Currently, management does not believe that our cash and cash equivalents is sufficient to meet our foreseeable cash needs for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support the expansion of our infrastructure and workforce, interest expense and minimum contractual obligations. Management intends to raise cash for operations through debt and equity offerings. As a result of the Company’s recurring loss from operations and the need for additional financing to fund its operating and capital requirements there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.
Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product and service offerings, and the cost of any future acquisitions of technology or businesses. In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all.
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The following table summarizes our current and long-term material cash requirements as of March 31, 2024:
| Payments due in: | ||||||||||||
| Total | Less than 1 year | 1-3 years | ||||||||||
| Accounts payable & accrued expenses | $ | 5,874 | $ | 5,874 | $ | - | ||||||
| Loan extensions | 2,992 | 2,992 | - | |||||||||
| Deferred underwriter fee payable | 3,307 | 3,307 | - | |||||||||
| Loan, related party | 1,777 | - | 1,777 | |||||||||
| PIPE Notes | 1,617 | 1,617 | - | |||||||||
| Line of credit | 411 | 411 | - | |||||||||
| $ | 15,979 | $ | 14,202 | $ | 1,777 | |||||||
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements which have been prepared in accordance with GAAP. In preparing our financial statements, we make estimates, assumptions, and judgments that can have a significant impact on our reported revenue, results of operations, and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet during and as of the reporting periods. These estimates, assumptions, and judgments are necessary because future events and their effects on our results of operations and the value of our assets cannot be determined with certainty and are made based on our historical experience and on other assumptions that we believe to be reasonable under the circumstances. These estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a prolonged period of time. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates.
For a discussion of our critical accounting estimates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Form 10-K/A, the notes to our audited financial statements appearing in the Form 10-K/A, and the notes to the financial statements appearing elsewhere in this Report. There have been no material changes to these critical accounting policies and estimates through March 31, 2024 from those discussed in the Form 10-K/A.
Recently Issued and Adopted Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our condensed consolidated financial statements included elsewhere in this Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act), as of March 31, 2024. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2024, our disclosure controls and procedures were not effective because of material weaknesses in our internal controls over financial reporting which were not designed properly to ensure proper identification of non-routine transactions and ensure appropriate segregation of duties.
Material Weakness
As disclosed elsewhere in this Report, we completed the Business Combination on November 7, 2023. Prior to the Business Combination, Data Knights, our predecessor, was a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, recapitalization or similar business combination with one or more businesses. As a result, previously existing internal controls are no longer applicable or comprehensive enough as of the assessment date, because Data Knights’ operations prior to the Business Combination were insignificant compared to those of the consolidated entity post-Business Combination. As a result, management is aware of material weaknesses in the Company’s internal control related to user access/segregation of duties, lack of a formalized control environment and oversight of controls over financial reporting, errors in accounting for non-routine transactions, and lack of record keeping. Due to the limited transactional volume currently experienced combined with our financial limitations, we do not currently have an expanded accounting department that would allow us to better segregate duties. Over time, as we continue to grow and add accounting staff, we expect to continue to enhance our internal control structure, including appropriate segregation of duties. During September 2024, changes were made to accounting personnel to enhance our financial reporting structure, which we expect to alleviate reporting pressures, including reporting of non-routine transactions. In addition, the new personnel has focused on creating central filing repositories to manage accounting records and other company documents.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We may be subject from time to time to various claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Some of these claims, lawsuits and other proceedings may involve highly complex issues that are subject to substantial uncertainties, and could result in damages, fines, penalties, non-monetary sanctions or relief. We are not presently party to any legal proceedings that, in the opinion of management, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition, or cash flows.
Item 1A. Risk Factors.
In addition to the other information set forth in this Report, you should carefully consider the factors discussed in the “Risk Factors” in the Form 10-K/A and our other public filings, which could materially affect our business, financial condition or future results. There have been no material changes from risk factors previously disclosed in “Risk Factors” in the Form 10-K/A and our other public filings.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended March 31, 2024, we did not have sales of unregistered securities not previously included in a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During
the three months ended March 31, 2024, no director or officer of the Company
Item 6. Exhibits.
The following documents are included as exhibits to this Quarterly Report on Form 10-Q:
* Filed herewith.
# The certifications furnished in Exhibit 32.1 and Exhibit 32.2 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 5, 2024.
| OneMedNet Corporation | ||
| By: | /s/ Robert Golden | |
| Robert Golden | ||
| Interim
Chief Financial Officer (Duly Authorized Officer and Principal Financial and Accounting Officer) | ||
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