| DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY AND GOING CONCERN | NOTE
1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS AND LIQUIDITY AND GOING CONCERN SEP
Acquisition Corp. (the “Company”) formerly known as Mercury Ecommerce Acquisition Corp. (name of the Company changed
on December 21, 2022), is a blank check company incorporated in Delaware on March 1, 2021. The Company was formed for the purpose
of entering into a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with
one or more businesses (a “Business Combination”). The Company is not limited to a particular industry or geographic
region for purposes of consummating a Business Combination. The Company is an early stage and emerging growth company and, as
such, the Company is subject to all of the risks associated with early stage and emerging growth companies. As
of December 31, 2023, the Company had not commenced any operations. All activity since inception to date relates to the Company’s
formation and the initial public offering (“Initial Public Offering”), which is described in Note 3, along with costs
associated with the search for a target to enter into the Business Combination with the Company. The Company will not generate
any operating revenues until after the completion of a Business Combination, at the earliest. The Company generates non-operating
income in the form of realized gains from the proceeds derived from the Initial Public Offering and held in the Trust Account. The
registration statement for the Company’s Initial Public Offering was declared effective on July 27, 2021. On July 30, 2021,
the Company consummated the Initial Public Offering of 17,500,000 10.00 175,000,000 Simultaneously
with the closing of the Initial Public Offering, the Company consummated the sale of 7,850,000 1.00 7,850,000 The
Company granted the underwriter in the Initial Public Offering a 45 2,625,000 541,500 5,415,000 108,300 189,525 Simultaneously
with the underwriter partially exercising the over-allotment option, the Sponsor purchased an additional 162,450 1.00 162,450 In
addition, the Sponsor agreed to forfeit up to 656,250 520,875 Transaction
costs amounted to $ 15,401,418 3,608,300 6,314,525 764,193 4,714,400 4,150 Following the closing of the Initial Public
Offering and partial exercise of the underwriter’s over-allotment option, a total of $182,219,150 from the net proceeds of
the sale of the Units in the Initial Public Offering, the sale of the Private Placement Warrants, the sale of the Over-Allotment
Units, and the sale of the Over-Allotment Private Placement Warrants was placed in a Trust Account (the Trust Account) and invested
only in U.S. government treasury obligations with maturities of 185 days or less or in money market funds meeting certain conditions
under Rule 2a-7 under the Investment Company Act which invest only in direct U.S. government treasury obligations, until the earlier
of: (i) the completion of a Business Combination and (ii) the distribution of the funds held in the Trust Account, as described
below. The
Company will provide its stockholders with the opportunity to redeem all or a portion of their Public Shares upon the completion
of a Business Combination either (i) in connection with a stockholder meeting called to approve the Business Combination or (ii)
by means of a tender offer. The decision as to whether the Company will seek stockholder approval of a Business Combination or
conduct a tender offer will be made by the Company. The stockholders will be entitled to redeem their shares for a pro rata portion
of the amount held in the Trust Account (initially $ 10.10 two The
Company will proceed with a Business Combination if the Company has net tangible assets of at least $ 5,000,001 Notwithstanding
the foregoing, if the Company seeks stockholder approval of a Business Combination and it does not conduct redemptions pursuant
to the tender offer rules, the Company’s Amended and Restated Certificate of Incorporation provides 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted
from redeeming its shares with respect to more than an aggregate of 15 The
initial stockholders have agreed to waive (a) their redemption rights with respect to any Founder Shares and any Public Shares
held by them in connection with the completion of an initial Business Combination, (b) their redemption rights with respect to
any Founder Shares and Public Shares held by them in connection with a stockholder vote to approve an amendment to the Amended
and Restated Certificate of Incorporation to modify the substance or timing of the Company’s obligation to provide holders
of Class A common stock the right to have their shares redeemed or to provide for the redemption of Public Shares in connection
with an initial Business Combination or to redeem 100 The
Company initially had 18 24 ten 100,000 On
December 20, 2022, the Company held a special meeting of stockholders where the Company’s stockholders approved the Extension
Amendment, extending the date by which the Company must consummate a business combination from January 30, 2023 (or July 30, 2023,
if the Company had executed a definitive agreement for a business combination by January 30, 2023) to July 30, 2024 (the “Extension
Proposal”). In connection with the Extension Proposal, the Company was required to permit public stockholders to redeem
their shares of the Company’s Class A common stock. Of the 18,041,500 the holders of 16,737,241 shares of the Company’s Class A common stock elected to redeem their shares at a
per share redemption price of approximately $10.22. As a result, the Company transferred cash in the amount of $185,001,686 to
the Trustee, of which $171,094,003 was designated to pay such holders who had elected to redeem their shares in connection with
the Extension Proposal. As of December 31, 2022, $161,957,835 had been paid to the redeeming stockholders and $22,468,765 remained
in restricted cash, $9,136,168 of which was paid subsequent to December 31, 2022 to such holders who elected to redeem their shares.
Following the redemptions, the Company had 1,304,259 shares of the Company’s Class A common stock outstanding and $13,332,597
remained in the Trust Account (i.e. approximately $10.22 per share of the Company’s Class A common stock). In
order to protect the amounts in the Trust Account, the Sponsor has agreed that it will be liable to the Company if and to the
extent any claims by a third party (other than the Company’s independent registered accounting firm) for services rendered
or products sold to the Company, or a prospective target business with which the Company has discussed entering into a transaction
agreement, reduce the amount of funds in the Trust Account to below (i) $ 10.10 10.10 Nasdaq
Notifications On
January 22, 2023, the Company received a written notice from the listing qualifications department staff of The Nasdaq Stock Market
(“Nasdaq”) indicating that the Company was not in compliance with Listing Rule 5550(a)(4), due to the Company’s
failure to meet the minimum 500,000 publicly held shares requirement for continued listing on the Nasdaq Capital Market. On February
9, 2023, the Company submitted to Nasdaq a plan to regain compliance with Listing Rule 5550(a)(4), pursuant to which the Company’s
Chairman, Mr. Blair Garrou, agreed to sell 80,000 of the shares of Class A common stock he is deemed to beneficially own through
Mercury Houston Partners, LLC and Mercury Affiliates XI, LLC by means of private sales to unaffiliated buyers. After the private
sales of 80,000 shares of Class A common stock to unaffiliated buyers, the Company has 509,259 publicly held shares as defined
in Listing Rule 5001(a)(35) of the Nasdaq Rules. On
March 28, 2023, the Company received a written notice from the listing qualifications department staff of Nasdaq notifying the
Company that for the last 30 consecutive business days, the Company’s minimum Market Value of Listed Securities (“MVLS”)
was below the minimum of $35 million required for continued listing on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule
5550(b)(2) (the “Market Value Standard”). In accordance with Nasdaq Listing Rule 5810(c)(3)(C), the Company will have
180 calendar days, or until September 25, 2023, to regain compliance with the Market Value Standard. To regain compliance with
the Market Value Standard, the MVLS for the Company’s common stock must be at least $35 million for a minimum of 10 consecutive
business days at any time during this 180-day period. On September 27, 2023, the Company received
a determination letter (“the Letter”) from the Staff of Nasdaq stating that the Company has not regained compliance
with the MVLS standard, since the Company’s Class A common stock, was below the $35 million minimum MVLS requirement for
continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(b)(2) and had not been at least $35 million for a
minimum of 10 consecutive business days at any time during the 180-day grace period granted to the Company. As previously disclosed,
the Company was initially notified by the Staff on March 28, 2023 that the minimum MVLS for the Company’s Class A common
stock was below the $35 million minimum MVLS requirement for the previous 30 consecutive business days, and in accordance with
the Nasdaq Listing Rules, the Company was provided 180 calendar days, or until September 25, 2023, to regain compliance with the
MVLS Rule. Pursuant to the Letter, unless the Company requested a hearing to appeal this determination by 4:00 p.m. Eastern Time
on October 4, 2023, the Company’s Class A common stock would be delisted from The Nasdaq Capital Market, trading of the Company’s
Class A common stock would be suspended at the opening of business on October 6, 2023, and a Form 25-NSE would be filed with the
SEC, which will remove the Company’s securities from listing and registration on Nasdaq. The Company requested a hearing
before the Nasdaq Hearings Panel (the “Panel”) to appeal the Letter received on September 27, 2023. In order to bring
the Company into compliance with the MVLS standard, Mercury Sponsor Group I LLC (the “Sponsor”) converted (the “Conversion”)
2,415,375 of its shares of Class B common stock, par value $0.0001 per share, of the Company (“Class B common stock”)
into 2,415,375 shares (the “Converted Shares”) of the Class A common stock, par value $0.0001 per share, of the Company
(“Class A common stock”) so that the Company’s MVLS was above the $35 million minimum requirement. Following
the Conversion, the Company has 1,304,259 shares of Class A common stock subject to redemption, 2,415,375 shares of Class A common
stock, and 2,095,000 shares of Class B common stock outstanding as of October 3, 2023. On
October 23, 2023, the Company received a letter from the Staff of Nasdaq notifying the Company that it has regained compliance
with Nasdaq’s $35 million minimum MVLS requirement, and the Company is therefore in compliance with The Nasdaq Capital Market’s
listing requirements. As a result, Nasdaq has cancelled the hearing requested by the Company to appeal the Staff’s prior
delisting determination and has confirmed that the Company’s Class A common stock will continue to be listed and traded
on The Nasdaq Capital Market under the symbol “SEPA.” In order to bring the Company into compliance with the MVLS
standard, the Sponsor converted 2,415,375 of its shares of Class B common stock into 2,415,375 shares of Class A common stock
on October 3, 2023, so that the Company’s MVLS exceeded the $35 million requirement. SANUWAVE
Merger Agreement On
August 23, 2023, the Company, a Delaware corporation (“Acquiror” or “SPAC”), entered into an Agreement
and Plan of Merger (the “Merger Agreement”) by and among the Company, SEP Acquisition Holdings Inc., a Nevada corporation
and a wholly owned subsidiary of the Company (“Merger Sub”), and SANUWAVE Health, Inc., a Nevada corporation (the
“SANUWAVE”). The transactions contemplated by the Merger Agreement are referred to herein as the “Merger”
or the “Merger Agreement” whereby the Merger between the Company and SANUWAVE will be effected at the effective time
(the “Effective Time”). The terms of the Merger Agreement, which contains customary representations and warranties,
covenants, closing conditions and other terms relating to the Merger and the other transactions contemplated hereby, are summarized
below. Pursuant
to the Merger Agreement, at the closing of the Merger, the SANUWAVE Security Holders of (i) SANUWAVE Common Stock, (ii) in-the-money
outstanding options to purchase SANUWAVE Common Stock, immediately prior to the Effective Time, (iii) in-the-money SANUWAVE Warrants
that are outstanding and unexercised and have not been exchanged for shares of SANUWAVE Common Stock immediately prior to the
Effective time, and (iv) the holders of SANUWAVE convertible promissory notes that are outstanding and unexercised and have not
been exchanged for shares of SANUWAVE Common Stock immediately prior to the Effective Time, shall be entitled to receive from
the Company, in aggregate, an amount equal to 7,793,000 shares of Class A common stock (the “Merger Consideration”),
paid or reserved for issuance and payable. Conditions
to Closing The Merger Agreement contains customary
conditions to closing, including the following mutual conditions of the parties, unless waived: (i) approval of the stockholders
of the Company and SANUWAVE, (ii) approvals of any required governmental authorities, (iii) no law or order preventing the Merger,
(iv) the filing of certain Charter Amendments pursuant to the Merger Agreement (the “Charter Amendments”), (v) the
appointment of the Company’s post-closing board of directors, (vi) pursuant to the Merger Agreement, a Registration Statement
having been declared effective by the SEC, (vii) approval of the Class A common stock of the Company for listing on NASDAQ, (vii)
holders of 80% or more of SANUWAVE’s convertible notes with a maturity date occurring after the date of the Closing (the
“Closing Date”), measured by number of shares into which such convertible notes may be converted, agreeing to convert
their convertible notes into shares of SANUWAVE Common Stock immediately prior to the Effective Time, (ix) holders of 80% or more
of SANUWAVE’s warrants that would be outstanding on the Closing Date, measured by number of shares subject to all such warrants
in the aggregate, agreeing to convert their warrants into shares of SANUWAVE Common Stock immediately prior to the Effective Time,
and (x) the Company having, at the Closing, at least $12,000,000 in cash and cash equivalents, including funds remaining in the
Trust Account (after giving effect to the completion and payment of any redemptions) and the proceeds of any Private Investment
in Public Equity (“PIPE Investment”). Refer
to Note 11 of the notes to the financial statements regarding the Company’s amendment to the Merger Agreement in February
2024. Certain
SANUWAVE Related Agreements Voting
Agreements Simultaneously
with the execution and delivery of the Merger Agreement, the Company and SANUWAVE have entered into voting agreements (collectively,
the “Voting Agreements”) with certain stockholders of SANUWAVE required to approve the Transactions. Under the Voting
Agreements, each SANUWAVE stockholder party thereto has agreed to vote all of such stockholder’s shares of SANUWAVE in favor
of the Merger Agreement and the Transactions and to otherwise take (or not take, as applicable) certain other actions in support
of the Merger Agreement and the Transactions and the other matters to be submitted to the SANUWAVE stockholders for approval in
connection with the Transactions, in the manner and subject to the conditions set forth in the Voting Agreements, and provide
a proxy to the Company to vote such SANUWAVE shares accordingly (subject to the condition that the Registration Statement has
been declared effective by the SEC, provided that the covenants not to take certain actions to delay, impair or impede the Transactions
as set forth in the Voting Agreements shall take effect from the date such agreements are executed). The Voting Agreements prevent
transfers of the SANUWAVE shares held by the SANUWAVE stockholders party thereto between the date of the Voting Agreement and
the termination of such Voting Agreement, except for certain permitted transfers where the recipient also agrees to comply with
the Voting Agreement. Sponsor
Voting Agreement Simultaneously
with the execution and delivery of the Merger Agreement, the Company and SANUWAVE have entered into a voting agreement (the “Sponsor
Voting Agreement”) with Mercury Sponsor Group I LLC, a Delaware limited liability company (the “Sponsor”). Under
the Sponsor Voting Agreement, the Sponsor has agreed to vote all of the Sponsor’s shares of the Company in favor of the
Merger Agreement and the Transactions and to otherwise take (or not take, as applicable) certain other actions in support of the
Merger Agreement and the Transactions and the other matters to be submitted to the Company stockholders for approval in connection
with the Transactions, in the manner and subject to the conditions set forth in the Sponsor Voting Agreement, and provide a proxy
to SANUWAVE to vote such Company shares accordingly (subject to the condition that the Registration Statement has been declared
effective by the SEC, provided that the covenants not to take certain actions to delay, impair or impede the Transactions as set
forth in the Sponsor Voting Agreement shall take effect from the date such agreement is executed). The Sponsor Voting Agreement
prevents transfers of the Company shares held by the Sponsor between the date of the Sponsor Voting Agreement and the termination
of such Sponsor Voting Agreement, except for certain permitted transfers where the recipient also agrees to comply with the Sponsor
Voting Agreement. Voting
and Non-Redemption Agreement Simultaneously
with the execution and delivery of the Merger Agreement, the Company has entered into voting and non-redemption agreements
(collectively, the “Voting and Non-Redemption Agreements”) with certain stockholders of the Company required to
approve the Transactions. Under the Voting and Non-Redemption Agreements, each stockholder party thereto has agreed to vote
all of such stockholder’s shares in favor of the Merger Agreement and the Transactions and to otherwise take (or not
take, as applicable) certain other actions in support of the Merger Agreement and the Transactions and the other matters to
be submitted to the Company’s stockholders for approval in connection with the Transactions, in the manner and subject
to the conditions set forth in the Voting and Non-Redemption Agreements, and provide a proxy to the Company to vote such
shares accordingly. Under the Voting and Non-Redemption Agreements, each Company stockholder party thereto agreed to not
redeem certain of such stockholder’s shares pursuant to or in connection with the Merger. In consideration for entering
into and complying with the terms of the Voting and Non-Redemption Agreements, each stockholder will receive shares of Class
A common stock in accordance with the formula set forth in the Voting and Non-Redemption Agreements. The formula, rounded
down to the nearest whole number, is (($10 - PIPE Price) x number of Non-redeemed securities/PIPE Price. The Voting and
Non-Redemption Agreements prevent transfers of the shares held by the stockholders party thereto between the date of the
Voting and Non-Redemption Agreement and the Closing Date or earlier termination of the Merger Agreement or such Voting and
Non-Redemption Agreement, except for certain permitted transfers where the recipient also agrees to comply with the Voting
and Non-Redemption Agreement. Pursuant to the Voting and Non-Redemption Agreements, certain SEPA stockholders agreed to vote
an aggregate of 865,000 681,512 7.1
million Lock-Up
Agreement Simultaneously
with the execution and delivery of the Merger Agreement, certain stockholders of SANUWAVE each entered into a Lock-Up Agreement
with the Company (collectively, the “Lock-Up Agreements”). Pursuant to the Lock-Up Agreements, each SANUWAVE stockholder
party thereto agreed not to, during the period commencing from the Closing and ending 180 days after the Closing (subject to early
release if SANUWAVE consummates a liquidation, merger, share exchange or other similar transaction that results in all of the
Company stockholders having the right to exchange their shares for cash, securities or other property): (i) sell, offer to sell,
contract to sell, hypothecate, pledge, grant an option to purchase or otherwise dispose of, directly or indirectly, or establish
or increase a put equivalent position or liquidation or decrease a call equivalent position, any Company restricted securities,
(ii) enter any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of any security, or (iii) publicly disclose the intention to do any of the foregoing, whether any such transaction described in
clauses (i) or (ii) above is to be settled by delivery of the Company restricted securities, in cash or otherwise (in each case,
subject to certain limited permitted transfers where the recipient takes the shares subject to the restrictions in the Lock-Up
Agreement). Letter
Agreement Amendment Upon
approval of certain of the Company’s stockholders and immediately prior to the Closing, certain insider stockholders of
the Company and other Company stockholders will enter into an amendment to that certain Letter Agreement, dated July 27, 2021
(the “Letter Agreement”), among the Company, the Sponsor, insider stockholders and other Company stockholders (the
“Letter Agreement Amendment”). Pursuant to the Letter Agreement Amendment, each Company stockholder party thereto
will agree not to, until 180 days after the completion of the Company’s initial Business Combination (as defined in the
Letter Agreement) (subject to early release if the Company consummates a liquidation, merger, share exchange or other similar
transaction that results in all of the Company stockholders having the right to exchange their shares for cash, securities or
other property): (i) sell, offer to sell, contract to sell, hypothecate, pledge, grant an option to purchase or otherwise dispose
of, directly or indirectly, or establish or increase a put equivalent position or liquidation or decrease a call equivalent position,
any Company restricted securities, (ii) enter any swap or other arrangement that transfers to another, in whole or in part, any
of the economic consequences of ownership of any security, or (iii) publicly disclose the intention to do any of the foregoing,
whether any such transaction described in clauses (i) or (ii) above is to be settled by delivery of the Company restricted securities,
in cash or otherwise (in each case, subject to certain limited permitted transfers where the recipient takes the shares subject
to the restrictions in the Letter Agreement). Warrant
Agreement Amendment Upon
approval of the Company’s warrant holders and immediately prior to the Closing, the Company and its warrant agent, will
enter into an amendment (the “Warrant Agreement Amendment”) to that certain Warrant Agreement dated as of July 21,
2021 (the “Warrant Agreement”). Pursuant to the Warrant Agreement Amendment, (i) Public Warrants (as defined in the
Warrant Agreement) are not exercisable to purchase shares of Class A common stock, and instead, as of immediately prior to the
Effective Time, will be automatically converted into the right to receive 450,336 shares of Class A common stock of the Company
in accordance with the calculation described in the Warrant Agreement Amendment, (ii) Private Placement Warrants (as defined in
the Warrant Agreement) are not exercisable to purchase shares of Class A common stock and instead, as of immediately prior to
the Effective Time, will be automatically converted into the right to receive 400,000 shares of Class A common stock of the Company
in accordance with the calculation described in the Warrant Agreement Amendment, and (iii) until the Closing or earlier termination
of the Merger Agreement, (A) the terms of Section 3 of the Warrant Agreement regarding any exercise of a warrant or issuance of
Class A common stock in connection therewith will be of no force or effect and (B) the terms of Section 6 of the Warrant Agreement
will be of no force or effect. Forfeiture
and Redemption Agreement In order to conform with the terms and
conditions of the Merger Agreement and to maintain the same economics of the Business Combination for all Class B stockholders,
on October 2, 2023, the Sponsor, the Company and SANUWAVE entered into a Forfeiture and Redemption Agreement (the “Forfeiture
and Redemption Agreement”), pursuant which the Sponsor has agreed to forfeit 1,746,316 of its shares (the “Forfeited
Shares”) of Class A common stock contingent upon and effective immediately prior to the Closing. The Forfeiture and Redemption
Agreement also provides that the Company will subsequently redeem the Forfeited Shares in exchange for no consideration contingent
upon and effective immediately prior to the Closing. The Sponsor’s agreement to forfeit the Forfeited Shares pursuant to
the Forfeiture and Redemption Agreement will result in the Sponsor having the number of shares of Class A common stock at the Closing
that it would have otherwise had if it had converted all of its Founder Shares at the Closing on a 1:0.277 basis pursuant to the
Class B Charter Amendment. On
October 3, 2023, the Sponsor, being the holder of a majority of the Founder Shares, acting by written consent pursuant to Section
228(a) of the General Corporation Law of the State of Delaware and the Company’s bylaws, approved the Class B Charter Amendment.
The Company filed the Class B Charter Amendment with the Secretary of State of the State of Delaware on October 3, 2023. Going
Concern Consideration As of December 31, 2023, the Company had
$ 16,735 2,402,045 As
a result of the above, in connection with the Company’s assessment of going concern, management has determined that the
conditions described above raise substantial doubt about the Company’s ability to continue as a going concern through approximately
one year from the date the consolidated financial statements are issued. The consolidated financial statements do not include
any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary
should the Company be unable to continue as a going concern. Risks
and Uncertainties The credit and financial markets
have experienced extreme volatility and disruptions due to the current conflict between Ukraine and Russia, the war in the Middle
East, and other political tensions. The conflicts are 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, inflation, increases in interest rates and uncertainty about economic and political stability. Any of the foregoing consequences,
including those the Company cannot yet predict, may cause the Company’s business, financial condition, results of operations
and the price of the Company’s common stock to be adversely affected. |
