Per Share Cash Projections
The Per Share Cash Projections were based on an assumed Closing Date of March 31, 2025 and 2,127,020 shares outstanding as of that date. Cash assets include assumed value of marketable securities, cash accounts, and accounts receivable as of that date and rely on assumptions regarding proceeds from dispositions related to the DPNCheck product line. Cash assets include DPNCheck proceeds of approximately $626,000 that were projected to be received on the assumed Closing Date of March 31, 2025. This amount differs from the $400,000 that was ultimately set forth in the Fukuda Asset Purchase Agreement and which are expected to be received as of the Closing pursuant to the Fukuda Asset Purchase Agreement. For more information, please see “- DPNCheck Sale to Fukuda” above. The liabilities include estimated accounts payable and accrued liabilities, including professional fees. Change of control payments account for deduction of the MRIP Closing Consideration payable to the applicable MRIP participants, whereas under the Merger Agreement, “Net Cash,” as defined, does not provide for a deduction of such MRIP Closing Consideration. Instead, for purposes of the Merger Agreement, the MRIP Closing Consideration would be deducted after determination of Net Cash, but prior to the determination of the Per Share Cash Consideration. Due to this difference in methodology, and other assumptions made, in determining the balance of net cash reflected in the Per Share Cash Projections as referred to herein, we refer to the figure calculated below as “Modified Net Cash.”
Based on the assumptions above, management projected, at Closing, Modified Net Cash of approximately $9.2 million, resulting in projected Per Share Cash Consideration of $4.32.
| Cash Assets | | $ | 12,893,279 | | | Less Merger-Related Expenses and Transaction Fees | | $ | (250,000 | ) | | Less Current Liabilities | | $ | (721,439 | ) | | Less Change of Control Payments | | $ | (716,450 | ) | | Less Other Liabilities | | $ | (250,000 | ) | | Less Employee Severance Costs | | $ | (1,464,023 | ) | | Less D&O Insurance | | $ | (305,333 | ) | | Modified Net Cash at Closing | | $ | 9,186,034 | (1) |
| (1) | The difference between this figure and the estimated $9.06 million of Modified Net Cash as noted in GA’s analysis above is due to minor adjustments for estimated expenses, including in connection with GA’s opinion, which subsequently resulted in a slight difference in the calculation of the MRIP Closing Consideration reflected above under “Change of Control Payments.” |
CVR Projections
The CVR Projections prepared by management were also based on an assumed 2,127,020 shares outstanding as of the assumed Closing Date of March 31, 2025. Management’s CVR Projections estimated distributions to holders of Common Stock of approximately $905,000 as of August 1, 2025, $43,000 as of February 28, 2027, and $31,000 as of February 28, 2028. These projections were based on assumptions regarding anticipated milestone payments of approximately $1,000,000 in connection with the Company’s sale of its DPNCheck product line in Japan then anticipated to be received in connection with the Fukuda Transaction and $131,000 with respect to net sales of the Company’s Quell products, reduced by estimated incentive costs and transaction expenses. These CVR Projections were subsequently discounted to their present value by GA in connection with its analysis, as discussed under the heading “Opinion of Great American Group Intellectual Property Advisors, LLC – Material Financial Analyses.”
On January 16, 2025, the Company entered into the Fukuda Asset Purchase Agreement, pursuant to which the Company sold its rights, title and interest in the assets related to its DPNCheck product line for use in the Japanese market, including relevant intellectual property rights, for an initial payment of $400,000 in cash at the closing and up to $1.5 million, payable upon the achievement of certain milestones. For additional information, see “- DPNCheck Sale to Fukuda” above. |
