# EDGAR Filing Document

**Accession Number:** 0001805056
**File Stem:** 0001805056-23-000001
**Filing Date:** 2023-3
**Character Count:** 121096
**Document Hash:** da697262a08c9ae0392e88496e8e605d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001805056-23-000001.hdr.sgml**: 20230315

**ACCESSION NUMBER**: 0001805056-23-000001

**CONFORMED SUBMISSION TYPE**: C-AR

**CONFIRMING COPY**: 

**PUBLIC DOCUMENT COUNT**: 2

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230315

**DATE AS OF CHANGE**: 20230315

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** NanoVMs, Inc.
- **CENTRAL INDEX KEY:** 0001805056
- **IRS NUMBER:** 474764095
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** C-AR
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 020-26338

**BUSINESS ADDRESS:**
- **STREET 1:** 148 TOWNSEND STREET
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94107
- **BUSINESS PHONE:** 5732190658

**MAIL ADDRESS:**
- **STREET 1:** 148 TOWNSEND STREET
- **CITY:** SAN FRANCISCO
- **STATE:** CA
- **ZIP:** 94107

### Attached PDF Documents

**Attachment 1:** `formc-ar.pdf`

# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

# FORM C-AR

# UNDER THE SECURITIES ACT OF 1933

(Mark one.)

☐ Form C: Offering Statement
☐ Form C-U: Progress Update
☐ Form C/A: Amendment to Offering Statement

☐ Check box if Amendment is material and investors must reconfirm within five business days.

☑ Form C-AR: Annual Report
☐ Form C-AR/A: Amendment to Annual Report
☐ Form C-TR: Termination of Reporting

Name of issuer

NanoVMs, Inc.

Legal status of issuer

Form

Corporation

Jurisdiction of Incorporation/Organization

Delaware

Date of organization

August 5, 2015

Physical address of issuer

148 Townsend Street, San Francisco, CA 94107

Website of issuer

https://nanovms.com

Current number of employees

3

1

|  | Most recent fiscal year-end (2022) | Prior fiscal year-end (2021) |
| --- | --- | --- |
| Total Assets | $8,719.00 | $261,184.00 |
| Cash & Cash Equivalents | $744.00 | $208,031.00 |
| Accounts Receivable | $0.00 | $0.00 |
| Short-term Debt | $0.00 | $0.00 |
| Long-term Debt | $959,582.00 | $442,897.00 |
| Revenues/Sales | $196,435.00 | $14,554.00 |
| Cost of Goods Sold | $0.00 | $0.00 |
| Taxes Paid | $1,400.00 | $0.00 |
| Net Income | -$806,699.00 | -$772,733.00 |

2

March 13, 2023

# **FORM C-AR**

NanoVMs, Inc.

![img-0.jpeg](img-0.jpeg)

This Form C-AR (including the cover page and all exhibits attached hereto, the 'Form C-AR') is being furnished by NanoVMs, Inc., a Delaware Corporation (the 'Company,' as well as references to 'we,' 'us,' or 'our') for the sole purpose of providing certain information about the Company as required by the Securities and Exchange Commission ('SEC').

No federal or state securities commission or regulatory authority has passed upon the accuracy or adequacy of this document. The U.S. Securities and Exchange Commission does not pass upon the accuracy or completeness of any disclosure document or literature. The Company is filing this Form C-AR pursuant to Regulation CF (§ 227.100 et seq.) which requires that it must file a report with the Commission annually and post the report on its website at https://nanovms.com no later than 120 days after the end of each fiscal year covered by the report. The Company may terminate its reporting obligations in the future in accordance with Rule 202(b) of Regulation CF (§ 227.202(b)) by 1) being required to file reports under Section 13(a) or Section 15(d) of the Exchange Act of 1934, as amended, 2) filing at least one annual report pursuant to Regulation CF and having fewer than 300 holders of record, 3) filing annual reports for three years pursuant to Regulation CF and having assets equal to or less than $10,000,000, 4) the repurchase of all the Securities sold

3

pursuant to Regulation CF by the Company or another party, or 5) the liquidation or dissolution of the Company.

The date of this Form C-AR is March 13, 2023.

THIS FORM C-AR DOES NOT CONSTITUTE AN OFFER TO PURCHASE OR SELL SECURITIES.

### *Forward Looking Statement Disclosure*

*This Form C-AR and any documents incorporated by reference herein or therein contain forward-looking statements and are subject to risks and uncertainties. All statements other than statements of historical fact or relating to present facts or current conditions included in this Form C-AR are forward-looking statements. Forward-looking statements give the Company's current reasonable expectations and projections relating to its financial condition, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as 'anticipate,' 'estimate,' 'expect,' 'project,' 'plan,' 'intend,' 'believe,' 'may,' 'should,' 'can have,' 'likely' and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events.*

*The forward-looking statements contained in this Form C-AR and any documents incorporated by reference herein or therein are based on reasonable assumptions the Company has made in light of its industry experience, perceptions of historical trends, current conditions, expected future developments and other factors it believes are appropriate under the circumstances. As you read and consider this Form C-AR, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties (many of which are beyond the Company's control) and assumptions. Although the Company believes that these forward-looking statements are based on reasonable assumptions, you should be aware that many factors could affect its actual operating and financial performance and cause its performance to differ materially from the performance anticipated in the forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of these assumptions prove incorrect or change, the Company's actual operating and financial performance may vary in material respects from the performance projected in these forward-looking statements.*

*Any forward-looking statement made by the Company in this Form C-AR or any documents incorporated by reference herein or therein speaks only as of the date of this Form C-AR. Factors or events that could cause our actual operating and financial performance to differ may emerge from time to time, and it is not possible for the Company to predict all of them. The Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law.*

## **Table of Contents**

SUMMARY...6

4

SUMMARY...6
The Business...6
    The Business...6
    RISK FACTORS...7
RISK FACTORS...7
Risks Related to the Company's Business and Industry...7
    Risks Related to the Company's Business and Industry...7
    BUSINESS...22
BUSINESS...22
Description of the Business...22
    Description of the Business...22
Business Plan...22
    Business Plan...22
History of the Business...22
    History of the Business...22
The Company's Products and/or Services...22
    The Company's Products and/or Services...22
Competition...23
    Competition...23
Supply Chain and Customer Base...23
    Supply Chain and Customer Base...23
Intellectual Property...24
    Intellectual Property...24
Governmental/Regulatory Approval and Compliance...29
    Governmental/Regulatory Approval and Compliance...29
Litigation...29
Other...29
    Other...29
    DIRECTORS, OFFICERS AND EMPLOYEES...29
DIRECTORS, OFFICERS AND EMPLOYEES...29
Directors...29
    Directors...29
Officers of the Company...30
    Officers of the Company...30
Employees...31
    Employees...31
    CAPITALIZATION AND OWNERSHIP...31
CAPITALIZATION AND OWNERSHIP...31
Capitalization...31
    Capitalization...31
Ownership...35
    Ownership...35
    FINANCIAL INFORMATION...36
FINANCIAL INFORMATION...36
Operations...36
    Operations...36
Liquidity and Capital Resources...36
    Liquidity and Capital Resources...36
Capital Expenditures and Other Obligations...37
    Capital Expenditures and Other Obligations...37

5

Material Changes and Other Information...37
Material Changes and Other Information...37
Trends and Uncertainties...37
Trends and Uncertainties...37
Restrictions on Transfer...37
Restrictions on Transfer...37
TRANSACTIONS WITH RELATED PERSONS AND CONFLICTS OF INTEREST...37
TRANSACTIONS WITH RELATED PERSONS AND CONFLICTS OF INTEREST...37
Related Person Transactions...37
Related Person Transactions...37
Conflicts of Interest...38
Conflicts of Interest...38
OTHER INFORMATION...38
OTHER INFORMATION...38
Bad Actor Disclosure...38
Bad Actor Disclosure...38
EXHIBITS...40
EXHIBITS...40
EXHIBIT A...41
EXHIBIT A...41

### About this Form C-AR

You should rely only on the information contained in this Form C-AR. We have not authorized anyone to provide you with information different from that contained in this Form C-AR. You should assume that the information contained in this Form C-AR is accurate only as of the date of this Form C-AR, regardless of the time of delivery of this Form C-AR. Our business, financial condition, results of operations, and prospects may have changed since that date.

Statements contained herein as to the content of any agreements or other document are summaries and, therefore, are necessarily selective and incomplete and are qualified in their entirety by the actual agreements or other documents.

# SUMMARY

The following summary is qualified in its entirety by more detailed information that may appear elsewhere in this Form C-AR and the Exhibits hereto.

NanoVMs, Inc. (the "Company") is a Delaware Corporation, formed on August 5, 2015. The Company was formerly known as DeferPanic, Inc. The Company is currently also conducting business under the name of NanoVms.

The Company is located at 148 Townsend Street, San Francisco, CA 94107.

The Company's website is https://nanovms.com.

The information available on or through our website is not a part of this Form C-AR.

The Business

6

NanoVMs runs Linux software faster and safer than Linux through unikernels. NanoVMs sells support licenses for working with its open source software and also sells licenses for various micro-products related to unikernal infrastructure.

## RISK FACTORS

### Risks Related to the Company's Business and Industry

#### ***The Company's success depends on the experience and skill of the board of directors, its executive officers and key employees.***

In particular, the Company is dependent on Ian Eyberg who is CEO of the Company. The Company has employment agreements with Ian Eyberg although there can be no assurance that it will do so or that they will continue to be employed by the Company for a particular period of time. The loss of Ian Eyberg or any member of the board of directors or executive officer could harm the Company's business, financial condition, cash flow and results of operations.

#### ***We are subject to income taxes as well as non-income based taxes, such as payroll, sales, use, value-added, net worth, property and goods and services taxes, in the U.S.***

Significant judgment is required in determining our provision for income taxes and other tax liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe that our tax estimates are reasonable: (i) there is no assurance that the final determination of tax audits or tax disputes will not be different from what is reflected in our income tax provisions, expense amounts for non-income based taxes and accruals and (ii) any material differences could have an adverse effect on our financial position and results of operations in the period or periods for which determination is made.

#### ***We are not subject to Sarbanes-Oxley regulations and lack the financial controls and safeguards required of public companies.***

We do not have the internal infrastructure necessary, and are not required, to complete an attestation about our financial controls that would be required under Section 404 of the Sarbanes-Oxley Act of 2002. There can be no assurance that there are no significant deficiencies or material weaknesses in the quality of our financial controls. We expect to incur additional expenses and diversion of management's time if and when it becomes necessary to perform the system and process evaluation, testing and remediation required in order to comply with the management certification and auditor attestation requirements.

#### ***Changes in employment laws or regulation could harm our performance.***

Various federal and state labor laws govern our relationship with our employees and affect operating costs. These laws include minimum wage requirements, overtime pay, healthcare reform and the implementation of the Patient Protection and Affordable Care Act, unemployment tax rates, workers' compensation rates, citizenship requirements, union membership and sales taxes. A number of factors could adversely affect our operating results, including additional government-imposed increases in minimum wages, overtime pay, paid leaves of absence and mandated health benefits, mandated training for employees, increased tax reporting and tax payment requirements for employees who receive tips, a reduction in the number of states that allow tips to be credited toward minimum wage requirements, changing regulations from the

7

National Labor Relations Board and increased employee litigation including claims relating to the Fair Labor Standards Act.

# ***The Company's business operations may be materially adversely affected by a pandemic such as the Coronavirus (COVID-19) outbreak.***

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which spread throughout other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic.” COVID-19 resulted in a widespread health crisis that adversely affected the economies and financial markets worldwide. The Company’s business could be materially and adversely affected. The extent to which COVID-19 impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others. If the disruptions posed by COVID-19 or other matters of global concern continue for an extended period of time, the Company’s operations may be materially adversely affected.

# ***We face risks related to health epidemics and other outbreaks, which could significantly disrupt the Company's operations and could have a material adverse impact on us.***

The outbreak of pandemics and epidemics could materially and adversely affect the Company’s business, financial condition, and results of operations. If a pandemic occurs in areas in which we have material operations or sales, the Company’s business activities originating from affected areas, including sales, materials, and supply chain related activities, could be adversely affected. Disruptive activities could include the temporary closure of facilities used in the Company’s supply chain processes, restrictions on the export or shipment of products necessary to run the Company’s business, business closures in impacted areas, and restrictions on the Company’s employees’ or consultants’ ability to travel and to meet with customers, vendors or other business relationships. The extent to which a pandemic or other health outbreak impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of a virus and the actions to contain it or treat its impact, among others. Pandemics can also result in social, economic, and labor instability which may adversely impact the Company’s business.

If the Company’s employees or employees of any of the Company’s vendors, suppliers or customers become ill or are quarantined and in either or both events are therefore unable to work, the Company’s operations could be subject to disruption. The extent to which a pandemic affects the Company’s results will depend on future developments that are highly uncertain and cannot be predicted.

# ***We face risks relating to public health conditions such as the COVID-19 pandemic, which could adversely affect the Company's customers, business, and results of operations.***

Our business and prospects could be materially adversely affected by the COVID-19 pandemic or recurrences of that or any other such disease in the future. Material adverse effects from COVID-19 and similar occurrences could result in numerous known and currently unknown

8

ways including from quarantines and lockdowns which impair the Company's business including: marketing and sales efforts, supply chain, etc. If the Company purchases materials from suppliers in affected areas, the Company may not be able to procure such products in a timely manner. The effects of a pandemic can place travel restrictions on key personnel which could have a material impact on the business. In addition, a significant outbreak of contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could reduce the demand for the Company's products and impair the Company's business prospects including as a result of being unable to raise additional capital on acceptable terms to us, if at all.

# ***In order for the Company to compete and grow, it must attract, recruit, retain and develop the necessary personnel who have the needed experience.***

Recruiting and retaining highly qualified personnel is critical to our success. These demands may require us to hire additional personnel and will require our existing management personnel to develop additional expertise. We face intense competition for personnel. The failure to attract and retain personnel or to develop such expertise could delay or halt the development and commercialization of our product candidates. If we experience difficulties in hiring and retaining personnel in key positions, we could suffer from delays in product development, loss of customers and sales, and diversion of management resources, which could adversely affect operating results. Our consultants and advisors may be employed by third parties and may have commitments under consulting or advisory contracts with third parties that may limit their availability to us.

# ***The development and commercialization of our products is highly competitive.***

We face competition with respect to any products that we may seek to develop or commercialize in the future. Our competitors include major companies worldwide. Many of our competitors have significantly greater financial, technical, and human resources than we have and superior expertise in research and development and marketing approved products and thus may be better equipped than us to develop and commercialize products. These competitors also compete with us in recruiting and retaining qualified personnel and acquiring technologies. Smaller or early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Accordingly, our competitors may commercialize products more rapidly or effectively than we are able to, which would adversely affect our competitive position, the likelihood that our products will achieve initial market acceptance and our ability to generate meaningful additional revenues from our products.

# ***We depend on third-party service providers and outsource providers for a variety of services and we outsource a number of our non-core functions and operations.***

In certain instances, we rely on single or limited service providers and outsourcing vendors around the world because the relationship is advantageous due to quality, price, or lack of alternative sources. If production or service was interrupted and we were not able to find alternate third-party providers, we could experience disruptions in manufacturing and operations including product shortages, higher freight costs and re-engineering costs. If outsourcing services are interrupted or not performed or the performance is poor, this could impact our ability to process, record and report transactions with our customers and other constituents. Such interruptions in the provision of supplies and/or services could result in our inability to meet

9

customer demand, damage our reputation and customer relationships, and adversely affect our business.

# ***We depend on third party providers, suppliers and licensors to supply some of the hardware, software and operational support necessary to provide some of our services.***

We obtain these materials from a limited number of vendors, some of which do not have a long operating history, or which may not be able to continue to supply the equipment and services we desire. Some of our hardware, software and operational support vendors represent our sole source of supply or have, either through contract or as a result of intellectual property rights, a position of some exclusivity. If demand exceeds these vendors' capacity or if these vendors experience operating or financial difficulties or are otherwise unable to provide the equipment or services we need in a timely manner, at our specifications and at reasonable prices, our ability to provide some services might be materially adversely affected, or the need to procure or develop alternative sources of the affected materials or services might delay our ability to serve our customers. These events could materially and adversely affect our ability to retain and attract customers, and have a material negative impact on our operations, business, financial results and financial condition.

# ***Quality management plays an essential role in determining and meeting customer requirements, preventing defects, improving the Company's products and services and maintaining the integrity of the data that supports the safety and efficacy of our products.***

Our future success depends on our ability to maintain and continuously improve our quality management program. An inability to address a quality or safety issue in an effective and timely manner may also cause negative publicity, a loss of customer confidence in us or our current or future products, which may result in the loss of sales and difficulty in successfully launching new products. In addition, a successful claim brought against us in excess of available insurance or not covered by indemnification agreements, or any claim that results in significant adverse publicity against us, could have an adverse effect on our business and our reputation.

# ***We plan to implement new lines of business or offer new products and services within existing lines of business.***

There are substantial risks and uncertainties associated with these efforts, particularly in instances where markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients, or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.

# ***Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.***

We collect and store sensitive data, including intellectual property, our proprietary business information and that of our customers, and personally identifiable information of our employees,

10

in our data centers and on our networks. The secure processing, maintenance and transmission of this information is critical to our operations and business strategy. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost, or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, and regulatory penalties, disrupt our operations and the services we provide to customers, and damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business/operating margins, revenues and competitive position.

The secure processing, maintenance, and transmission of this information is critical to our operations and business strategy, and we devote significant resources to protecting our information by running our own software as unikernels. The expenses associated with protecting our information/ these steps could reduce our operating margins.

# ***An intentional or unintentional disruption, failure, misappropriation or corruption of our network and information systems could severely affect our business.***

Such an event might be caused by computer hacking, computer viruses, worms and other destructive or disruptive software, 'cyber attacks' and other malicious activity, as well as natural disasters, power outages, terrorist attacks and similar events. Such events could have an adverse impact on us and our customers, including degradation of service, service disruption, excessive call volume to call centers and damage to our plant, equipment and data. In addition, our future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of confidential customer data or intellectual property. Operational or business delays may result from the disruption of network or information systems and the subsequent remediation activities. Moreover, these events may create negative publicity resulting in reputation or brand damage with customers.

# ***We rely on various intellectual property rights, including patents and trademarks in order to operate our business.***

Such intellectual property rights, however, may not be sufficiently broad or otherwise may not provide us a significant competitive advantage. In addition, the steps that we have taken to maintain and protect our intellectual property may not prevent it from being challenged, invalidated, circumvented, or designed-around, particularly in countries where intellectual property rights are not highly developed or protected. In some circumstances, enforcement may not be available to us because an infringer has a dominant intellectual property position or for other business reasons, or countries may require compulsory licensing of our intellectual property. Our failure to obtain or maintain intellectual property rights that convey competitive advantage, adequately protect our intellectual property, or detect or prevent circumvention or unauthorized use of such property, could adversely impact our competitive position and results of operations. We also rely on nondisclosure and noncompetition agreements with employees, consultants, and other parties to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will adequately protect our trade secrets and other proprietary rights and will not be breached, that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information or that third parties will not otherwise gain access to our trade secrets or other proprietary rights.

11

As we expand our business, protecting our intellectual property will become increasingly important. The protective steps we have taken may be inadequate to deter our competitors from using our proprietary information. In order to protect or enforce our patent rights, we may be required to initiate litigation against third parties, such as infringement lawsuits. Also, these third parties may assert claims against us with or without provocation. These lawsuits could be expensive, take significant time and could divert management's attention from other business concerns. The law relating to the scope and validity of claims in the technology field in which we operate is still evolving and, consequently, intellectual property positions in our industry are generally uncertain. We cannot assure you that we will prevail in any of these potential suits or that the damages or other remedies awarded, if any, would be commercially valuable.

# ***From time to time, third parties may claim that one or more of our products or services infringe their intellectual property rights.***

Any dispute or litigation regarding patents or other intellectual property could be costly and time-consuming due to the complexity of our technology and the uncertainty of intellectual property litigation and could divert our management and key personnel from our business operations. A claim of intellectual property infringement could force us to enter into a costly or restrictive license agreement, which might not be available under acceptable terms or at all, could require us to redesign our products, which would be costly and time-consuming, and/or could subject us to an injunction against development and sale of certain of our products or services. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our products infringe on a third party's proprietary rights. Even if these claims are without merit, defending a lawsuit takes significant time, may be expensive, and may divert management's attention from other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our business to be harmed. Our intellectual property portfolio may not be useful in asserting a counterclaim, or negotiating a license, in response to a claim of intellectual property infringement. In certain of our businesses we rely on third party intellectual property licenses and we cannot ensure that these licenses will be available to us in the future on favorable terms or at all.

# ***The amount of capital the Company is attempting to raise in this Offering is not enough to sustain the Company's current business plan.***

In order to achieve the Company's near and long-term goals, the Company will need to procure funds in addition to the amount raised in the Offering. There is no guarantee the Company will be able to raise such funds on acceptable terms or at all. If we are not able to raise sufficient capital in the future, we will not be able to execute our business plan, our continued operations will be in jeopardy and we may be forced to cease operations and sell or otherwise transfer all or substantially all of our remaining assets, which could cause an Investor to lose all or a portion of his or her investment.

# ***Although dependent on certain key personnel, the Company does not have any key man life insurance policies on any such people.***

The Company is dependent on Ian Eyberg in order to conduct its operations and execute its business plan, however, the Company has not purchased any insurance policies with respect to those individuals in the event of their death or disability. Therefore, if Ian Eyberg dies or

12

becomes disabled, the Company will not receive any compensation to assist with such person's absence. The loss of such person could negatively affect the Company and its operations.

***Fluctuations in the mix of customer demand for our various types of solution offerings could impact our financial performance and ability to forecast performance.***

Due to fluctuations in customer needs, changes in customer industries, and general economic conditions, customer demand for the range of our offerings varies from time to time and is not predictable. In addition, our gross margins vary by customer and by segment, and the mix of services provided to our customers could impact our results of operations as certain of our customers and segments have different gross margin profiles. Generally, the profitability of an account increases over time. As a result, the mix of solutions we provide to our customers varies at any given time, both within a quarter and from quarter-to-quarter. These variations in service mix impact gross margins and the predictability of gross margins for any period. You should not rely on the results of any one quarter as an indication of our future performance.

***Our operating results may fluctuate due to factors that are difficult to forecast and not within our control.***

Our past operating results may not be accurate indicators of future performance, and you should not rely on such results to predict our future performance. Our operating results have fluctuated significantly in the past, and could fluctuate in the future. Factors that may contribute to fluctuations include:

* changes in aggregate capital spending, cyclicality and other economic conditions, or domestic and international demand in the industries we serve;
* our ability to effectively manage our working capital;
* our ability to satisfy consumer demands in a timely and cost-effective manner;
* pricing and availability of labor and materials;
* our inability to adjust certain fixed costs and expenses for changes in demand;
* shifts in geographic concentration of customers, supplies and labor pools; and
* seasonal fluctuations in demand and our revenue.

***If we fail to attract and retain enough sufficiently trained customer service associates and other personnel to support our operations, our business and results of operations will be seriously harmed.***

We rely on customer service associates, and our success depends to a significant extent on our ability to attract, hire, train and retain qualified customer service associates. Companies in our industry, including us, experience high employee attrition. Our attrition rate for our customer service associates who remained with us following a 90-day training and orientation period was on average approximately 5% per month. A significant increase in the attrition rate among our customer service associates could decrease our operating efficiency and productivity. Our failure to attract, train and retain customer service associates with the qualifications necessary to fulfill

13

the needs of our existing and future clients would seriously harm our business and results of operations.

*Our ability to sell our products and services is dependent on the quality of our technical support services, and our failure to offer high quality technical support services would have a material adverse effect on our sales and results of operations.*

Once our products are deployed within our end-customers' operations, end-customers depend on our technical support services to resolve any issues relating to these products. If we do not effectively assist our customers in deploying these products, succeed in helping our customers quickly resolve post-deployment issues, and provide effective ongoing support, our ability to sell additional products and services to existing customers would be adversely affected and our reputation with potential customers could be damaged. As a result, our failure to maintain high quality support services would have an adverse effect on our business and results of operations.

*We may be adversely affected by cyclicality, volatility or an extended downturn in the United States or worldwide economy, or in or related to the industries we serve.*

Our revenues are generated primarily from servicing customers seeking to hire qualified professionals in the technology industry. Demand for these professionals tends to be tied to economic and business cycles. Increases in the unemployment rate, specifically in the technology and other vertical industries we serve, cyclicality or an extended downturn in the economy could cause our revenues to decline. Therefore, our operating results, business and financial condition could be significantly harmed by an extended economic downturn or future downturns, especially in regions or industries where our operations are heavily concentrated. Further, we may face increased pricing pressures during such periods as customers seek to use lower cost or fee services, which may adversely affect our financial condition and results of operations.

*We are subject to rapid technological change and dependence on new product development.*

Our industry is characterized by rapid and significant technological developments, frequent new product introductions and enhancements, continually evolving business expectations and swift changes. To compete effectively in such markets, we must continually improve and enhance our products and services and develop new technologies and services that incorporate technological advances, satisfy increasing customer expectations and compete effectively on the basis of performance and price. Our success will also depend substantially upon our ability to anticipate and to adapt our products and services to our collaborative partner's preferences. There can be no assurance that technological developments will not render some of our products and services obsolete, or that we will be able to respond with improved or new products, services, and technology that satisfy evolving customers' expectations. Failure to acquire, develop or

introduce new products, services, and enhancements in a timely manner could have an adverse effect on our business and results of operations. Also, to the extent one or more of our competitors introduces products and services that better address a customer's needs, our business would be adversely affected.

*Failure to obtain new clients or renew client contracts on favorable terms could adversely affect results of operations.*

14

We may face pricing pressure in obtaining and retaining our clients. Our clients may be able to seek price reductions from us when they renew a contract, when a contract is extended, or when the client's business has significant volume changes. They may also reduce services if they decide to move services in-house. On some occasions, this pricing pressure results in lower revenue from a client than we had anticipated based on our previous agreement with that client. This reduction in revenue could result in an adverse effect on our business and results of operations.

Further, failure to renew client contracts on favorable terms could have an adverse effect on our business. Our contracts with clients generally run for several years and include liquidated damage provisions that provide for early termination fees. Terms are generally renegotiated prior to the end of a contract's term. If we are not successful in achieving a high rate of contract renewals on favorable terms, our business and results of operations could be adversely affected.

*We derive significant revenue and profit from commercial and federal government contracts awarded through competitive bidding processes, including renewals, which can impose substantial costs on us.*

Many of these contracts are extremely complex and require the investment of significant resources in order to prepare accurate bids and proposals. Competitive bidding imposes substantial costs and presents a number of risks, including: (i) the substantial cost and managerial time and effort that we spend to prepare bids and proposals for contracts that may or may not be awarded to us; (ii) the need to estimate accurately the resources and costs that will be required to implement and service any contracts we are awarded, sometimes in advance of the final determination of their full scope and design; (iii) the expense and delay that may arise if our competitors protest or challenge awards made to us pursuant to competitive bidding, and the risk that such protests or challenges could result in the requirement to resubmit bids, and in the termination, reduction, or modification of the awarded contracts; and (iv) the opportunity cost of not bidding on and winning other contracts we might otherwise pursue. Adverse events or developments in any of these bidding risks and uncertainties could materially and negatively impact our business and results of operations.

*We may rely on subcontractors and partners to provide customers with a single-source solution or we may serve as a subcontractor to a third party prime contractor.*

From time to time, we may engage subcontractors, teaming partners or other third parties to provide our customers with a single-source solution for a broader range of service needs. Similarly, we are and may in the future be engaged as a subcontractor to a third party prime contractor. Subcontracting arrangements pose unique risks to us because we do not have control over the customer relationship, and our ability to generate revenue under the subcontract is dependent on the prime contractor, its performance and relationship with the customer and its relationship with us. While we believe that we perform appropriate due diligence on our prime contractors, subcontractors and teaming partners and that we take adequate measures to ensure that they comply with the appropriate laws and regulations, we cannot guarantee that those parties will comply with the terms set forth in their agreements with us (or in the case of a prime contractor, their agreement with the customer), or that they will be reasonable in construing their contractual rights and obligations, always act appropriately in dealing with us or customers, provide adequate service, or remain in compliance with the relevant laws, rules or regulations.

15

We may have disputes with our prime contractors, subcontractors, teaming partners or other third parties arising from the quality and timeliness of work being performed, customer concerns, contractual interpretations or other matters. We may be exposed to liability if we lose or terminate a subcontractor or teaming partner due to a dispute, and subsequently have difficulty engaging an appropriate replacement or otherwise performing their functions in-house, such that we fail to fulfill our contractual obligations to our customer. In the event a prime contract, under which we serve as a subcontractor, is terminated, whether for non-performance by the prime contractor or otherwise, then our subcontract will similarly terminate and we could face contractual liability and the resulting contract loss could adversely affect our business and results of operations.

# ***Our business and financial condition may be impacted by military actions, global terrorism, natural disasters and political unrest***

Military actions in Iraq, Afghanistan and elsewhere, global terrorism, natural disasters, and political unrest in the Middle East and other countries are among the factors that may adversely impact regional and global economic conditions and our clients' ability, capacity, and need to invest in our services. Additionally, hurricanes or other unanticipated catastrophes, both in the U.S. and globally, could disrupt our operations and negatively impact our business as well as disrupt our clients' businesses, which may result in a further adverse impact on our business. As a result, significant disruptions caused by such events could materially and adversely affect our business and financial condition.

# ***The Company could be negatively impacted if found to have infringed on intellectual property rights.***

Technology companies, including many of the Company's competitors, frequently enter into litigation based on allegations of patent infringement or other violations of intellectual property rights. In addition, patent holding companies seek to monetize patents they have purchased or otherwise obtained. As the Company grows, the intellectual property rights claims against it will likely increase. The Company intends to vigorously defend infringement actions in court and before the U.S. International Trade Commission. The plaintiffs in these actions frequently seek injunctions and substantial damages. Regardless of the scope or validity of such patents or other intellectual property rights, or the merits of any claims by potential or actual litigants., the Company may have to engage in protracted litigation. If the Company is found to infringe one or more patents or other intellectual property rights, regardless of whether it can develop non infringing technology, it may be required to pay substantial damages or royalties to a third-party, or it may be subject to a temporary or permanent injunction prohibiting the Company from marketing or selling certain products. In certain cases, the Company may consider the desirability of entering into licensing agreements, although no assurance can be given that such licenses can be obtained on acceptable terms or that litigation will not occur.. These licenses may also significantly increase the Company's operating expenses.

Regardless of the merit of particular claims, litigation may be expensive, time-consuming, disruptive to the Company's operations and distracting to management. In recognition of these considerations, the Company may enter into arrangements to settle litigation. If one or more legal matters were resolved against the Company's consolidated financial statements for that reporting period could be materially adversely affected. Further, such an outcome could result in significant compensatory, punitive or trebled monetary damages, disgorgement of revenue or

16

profits, remedial corporate measures or injunctive relief against the Company that could adversely affect its financial condition and results of operations.

# ***Indemnity provisions in various agreements potentially expose us to substantial liability/or intellectual property infringement and other losses.***

Our agreements with advertisers, advertising agencies, customers and other third parties may include indemnification provisions under which we agree to indemnify them for losses suffered or incurred as a result of claims of intellectual property infringement, damages caused by us to property or persons, or other liabilities relating to or arising from our products, services, or other contractual obligations. The term of these indemnity provisions generally survives termination or expiration of the applicable agreement. Large indemnity payments would harm our business, financial condition, and results of operations. In addition, any type of intellectual property lawsuit, whether initiated by us or a third party, would likely be time consuming and expensive to resolve and would divert management's time and attention.

# ***We rely heavily on our technology and intellectual property, but we may be unable to adequately or cost-effectively protect or enforce our intellectual property rights, thereby weakening our competitive position and increasing operating costs.***

To protect our rights in our services and technology, we rely on a combination of copyright and trademark laws, patents, trade secrets, confidentiality agreements with employees and third parties, and protective contractual provisions. We also rely on laws pertaining to trademarks and domain names to protect the value of our corporate brands and reputation. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our services or technology, obtain and use information, marks, or technology that we regard as proprietary, or otherwise violate or infringe our intellectual property rights. In addition, it is possible that others could independently develop substantially equivalent intellectual property. If we do not effectively protect our intellectual property, or if others independently develop substantially equivalent intellectual property, our competitive position could be weakened.

Effectively policing the unauthorized use of our services and technology is time-consuming and costly, and the steps taken by us may not prevent misappropriation of our technology or other proprietary assets. The efforts we have taken to protect our proprietary rights may not be sufficient or effective, and unauthorized parties may copy aspects of our services, use similar marks or domain names, or obtain and use information, marks, or technology that we regard as proprietary. We may have to litigate to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of others' proprietary rights, which are sometimes not clear or may change. Litigation can be time consuming and expensive, and the outcome can be difficult to predict.

# ***We rely on agreements with third parties to provide certain services, goods, technology, and intellectual property rights necessary to enable us to implement some of our applications.***

Our ability to implement and provide our applications and services to our clients depends, in part, on services, goods, technology, and intellectual property rights owned or controlled by third parties. These third parties may become unable to or refuse to continue to provide these services, goods, technology, or intellectual property rights on commercially reasonable terms consistent with our business practices, or otherwise discontinue a service important for us to continue to operate our applications. If we fail to replace these services, goods, technologies, or intellectual

17

property rights in a timely manner or on commercially reasonable terms, our operating results and financial condition could be harmed. In addition, we exercise limited control over our third party vendors, which increases our vulnerability to problems with technology and services those vendors provide. If the services, technology, or intellectual property of third parties were to fail to perform as expected, it could subject us to potential liability, adversely affect our renewal rates, and have an adverse effect on our financial condition and results of operations.

*We depend on profitable royalty-bearing licenses of our technology, and if we are unable to maintain and generate such license agreements, then we may not be able to sustain existing levels of revenue or increase revenue.*

We depend upon the identification, investment in and license of new patents for our revenues. If we are unable to maintain such license agreements and to continue to develop new license arrangements, then we may not have the resources to identify new technology-based opportunities for future patents and inventions in order to maintain sustainable revenue and growth.

Our current or future license agreements may not provide the volume or quality of royalty revenue to sustain our business. In some cases, other technology sources may compete against us as they seek to license and commercialize technologies. These and other strategies may reduce the number of technology sources and potential clients to whom we can market our services. Our inability to maintain current relationships and sources of technology or to secure new licensees may have a material adverse effect on our business and results of operations.

*If we fail to maintain or expand our relationships with our suppliers, in some cases single source suppliers, we may not have adequate access to new or key technology necessary for our products, which may impair our ability to deliver leading-edge products.*

In addition to the technologies we develop, our suppliers develop product innovations at our direction that are requested by our customers. Further, we rely heavily on our component suppliers, such as Google, and Amazon, to provide us with leading-edge components that conform to required specifications or contractual arrangements on time and in accordance with a product roadmap. If we are not able to maintain or expand our relationships with our suppliers or continue to leverage their research and development capabilities to develop new technologies desired by our customers, our ability to deliver leading-edge products in a timely manner may be impaired and we could be required to incur additional research and development expenses. Also, disruption in our supply chain or the need to find alternative suppliers could impact the costs and/or tinting associated with procuring necessary products, components and services. Similarly, suppliers have operating risks that could impact our business. These risks could create product time delays, inventory and invoicing problems, staging delays, and other operational difficulties.

*We must acquire or develop new products, evolve existing ones, address any defects or errors, and adapt to technology change.*

Technical developments, client requirements, programming languages, and industry standards change frequently in our markets. As a result, success in current markets and new markets will depend upon our ability to enhance current products, address any product defects or errors, acquire or develop and introduce new products that meet client needs, keep pace with technology changes, respond to competitive products, and achieve market acceptance. Product development requires substantial investments for research, refinement, and testing. We may not have sufficient

18

resources to make necessary product development investments. We may experience technical or other difficulties that will delay or prevent the successful development, introduction, or implementation of new or enhanced products. We may also experience technical or other difficulties in the integration of acquired technologies into our existing platform and applications. Inability to introduce or implement new or enhanced products in a timely manner could result in loss of market share if competitors are able to provide solutions to meet customer needs before we do, give rise to unanticipated expenses related to further development or modification of acquired technologies as a result of integration issues, and adversely affect future performance.

# ***Our failure to deliver high quality server solutions could damage our reputation and diminish demand for our products, and subject us to liability.***

Our customers require our products to perform at a high level, contain valuable features and be extremely reliable. The design of our server solutions is sophisticated and complex, and the process for manufacturing, assembling and testing our server solutions is challenging.

Occasionally, our design or manufacturing processes may fail to deliver products of the quality that our customers require. For example, a vendor may provide us with a defective component that failed under certain heavy use applications. As a result, our product would need to be repaired. The vendor may agree to pay for the costs of the repairs, but: we may incur costs in connection with the recall and diverted resources from other projects. New flaws or limitations in our products may be detected in the future. Part of our strategy is to bring new products to market quickly, and first-generation products may have a higher likelihood of containing undetected flaws. If our customers discover defects or other performance problems with our products, our customers' businesses, and our reputation, may be damaged. Customers may elect to delay or withhold payment for defective or underperforming products, request remedial action, terminate contracts for untimely delivery, or elect not to order additional products. If we do not properly address customer concerns about our products, our reputation and relationships with our customers may be harmed. In addition, we may be subject to product liability claims for a defective product. Any of the foregoing could have an adverse effect on our business and results of operations.

# ***Cyclical and seasonal fluctuations in the economy, in internet usage and in traditional retail shopping may have an effect on our business.***

Both cyclical and seasonal fluctuations in internet usage and traditional retail seasonality may affect our business. Internet usage generally slows during the summer months, and queries typically increase significantly in the fourth quarter of each year. These seasonal trends may cause fluctuations in our quarterly results, including fluctuations in revenues.

# ***The products we sell are advanced, and we need to rapidly and successfully develop and introduce new products in a competitive, demanding and rapidly changing environment.***

To succeed in our intensely competitive industry, we must continually improve, refresh and expand our product and service offerings to include newer features, functionality or solutions, and keep pace with price-to-performance gains in the industry. Shortened product life cycles due to customer demands and competitive pressures impact the pace at which we must introduce and implement new technology. This requires a high level of innovation by both our software developers and the suppliers. of the third-party software components included in our systems. In addition, bringing new solutions to the market entails a costly and lengthy process, and requires

19

us to accurately anticipate customer needs and technology trends. We must continue to respond to market demands, develop leading technologies, and maintain leadership in analytic data solutions performance and scalability, or our business operations may be adversely affected.

We must also anticipate and respond to customer demands regarding the compatibility of our current and prior offerings. These demands could hinder the pace of introducing and implementing new technology. Our future results may be affected if our products cannot effectively interface and perform well with software products of other companies and with our customers' existing IT infrastructures, or if we are unsuccessful in our efforts to enter into agreements allowing integration of third-party technology with our database and software platforms. Our efforts to develop the interoperability of our products may require significant investments of capital and employee resources. In addition, many of our principal products are used with products offered by third parties and, in the future, some vendors of non-Company products may become less willing to provide us with access to their products, technical information and marketing and sales support. As a result of these and other factors, our ability to introduce new or improved solutions could be adversely impacted and our business would be negatively affected.

# ***Industry consolidation may result in increased competition, which could result in a loss of customers or a reduction in revenue.***

Some of our competitors have made or may make acquisitions or may enter into partnerships or other strategic relationships to offer more comprehensive services than they individually had offered or achieve greater economies of scale. In addition, new entrants not currently considered to be competitors may enter our market through acquisitions, partnerships or strategic relationships. We expect these trends to continue as companies attempt to strengthen or maintain their market positions. The potential entrants may have competitive advantages over us, such as greater name recognition, longer operating histories, more varied services and larger marketing budgets, as well as greater financial, technical and other resources. The companies resulting from combinations or that expand or vertically integrate their business to include the market that we address may create more compelling service offerings and may offer greater pricing flexibility than we can or may engage in business practices that make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology or service functionality. These pressures could result in a substantial loss of our customers or a reduction in our revenue.

# ***Our business could be negatively impacted by cyber security threats, attacks and other disruptions.***

Like others in our industry, we continue to face advanced and persistent attacks on our information infrastructure where we manage and store various proprietary information and sensitive/confidential data relating to our operations. These attacks may include sophisticated malware (viruses, worms, and other malicious software programs) and phishing emails that attack our products or otherwise exploit any security vulnerabilities. These intrusions sometimes may be zero-day malware that are difficult to identify because they are not included in the signature set of commercially available antivirus scanning programs. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of our customers or other third-parties, create system disruptions, or cause shutdowns.. Additionally, sophisticated software and applications that we produce or procure from third-parties may contain defects in design or manufacture,

20

including 'bugs' and other problems that could unexpectedly interfere with the operation of the information infrastructure. A disruption, infiltration or failure of our information infrastructure systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security, loss of critical data and performance delays, which in turn could adversely affect our business.

# ***If we do not respond to technological changes or upgrade our websites and technology systems, our growth prospects and results of operations could be adversely affected.***

To remain competitive, we must continue to enhance and improve the functionality and features of our websites and technology infrastructure. As a result, we will need to continue to improve and expand our hosting and network infrastructure and related software capabilities. These improvements may require greater levels of spending than we have experienced in the past. Without such improvements, our operations might suffer from unanticipated system disruptions, slow application performance or unreliable service levels, any of which could negatively affect our reputation and ability to attract and retain customers and contributors. Furthermore, in order to continue to attract and retain new customers, we are likely to incur expenses in connection with continuously updating and improving our user interface and experience. We may face significant delays in introducing new services, products and enhancements. If competitors introduce new products and services using new technologies or if new industry standards and practices emerge, our existing websites and our proprietary technology and systems may become obsolete or less competitive, and our business may be harmed. In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that our business will improve.

# ***We currently obtain components from single or limited sources, and are subject to significant supply and pricing risks.***

Many components, including those that are available from multiple sources, are at times subject to industry-wide shortages and significant commodity pricing fluctuations. While the Company has entered into agreements for the supply of many components, there can be no assurance that we will be able to extend or renew these agreements on similar terms, or at all. A number of suppliers of components may suffer from poor financial conditions, which can lead to business failure for the supplier or consolidation within a particular industry, further limiting our ability to obtain sufficient quantities of components. The follow-on effects from global economic conditions on our suppliers, also could affect our ability to obtain components. Therefore, we remain subject to significant risks of supply shortages and price increases.

Our products often utilize custom components available from only one source. Continued availability of these components at acceptable prices, or at all, may be affected for any number of reasons, including if those suppliers decide to concentrate on the production of common components instead of components customized to meet our requirements. The supply of components for a new or existing product could be delayed or constrained, or a key manufacturing vendor could delay shipments of completed products to us adversely affecting our business and results of operations.

# ***The Company depends on the performance of distributors, carriers and other resellers.***

21

The Company distributes its products through cellular network carriers, wholesalers, national and regional retailers, and value-added resellers, many of whom distribute products from competing manufacturers. The Company also sells its products and third-party products in most of its major markets directly to education, enterprise and government customers, and consumers and small and mid-sized businesses through its online and retail stores.

Many resellers have narrow operating margins and have been adversely affected in the past by weak economic conditions. Some resellers have perceived the expansion of the Company's direct sales as conflicting with their business interests as distributors and resellers of the Company's products. Such a perception could discourage resellers from investing resources in the distribution and sale of the Company's products or lead them to limit or cease distribution of those products. The Company has invested and will continue to invest in programs to enhance reseller sales, including staffing selected resellers' stores with Company employees and contractors, and improving product placement displays. These programs could require a substantial investment while providing no assurance of return or incremental revenue. The financial condition of these resellers could weaken, these resellers could stop distributing the Company's products, or uncertainty regarding demand for the Company's products could cause resellers to reduce their ordering and marketing of the Company's products.

In addition to the risks listed above, businesses are often subject to risks not foreseen or fully appreciated by the management. It is not possible to foresee all risks that may affect us. Moreover, the Company cannot predict whether the Company will successfully effectuate the Company's current business plan. Each prospective Purchaser is encouraged to carefully analyze the risks and merits of an investment in the Securities and should take into consideration when making such analysis, among other, the Risk Factors discussed above.

## BUSINESS

### Description of the Business

NanoVMs runs Linux software faster and safer than Linux through unikernels. NanoVMs sells support licenses for working with its open source software and also sells licenses for various micro-products related to unikernal infrastructure.

### Business Plan

NanoVMs offers subscription services for various service level agreements of support in utilizing the open source Nanos kernel. NanoVMs also sells monthly licenses for Nanos C2 and NanoVMs Radar. NanoVMs currently addresses public/private cloud software infrastructure needs but needs to continue to invest in research and development related efforts so that it can address other markets with solutions designed specifically for NFV, Edge, and SG technologies. NanoVMs plans to aggressively grow its user-base through developer based bottoms up adoption and so tracks various metrics such as unique downloads per day, and live instances per day. Addressing market awareness is a core activity that the company plans to aggressively address.

### History of the Business

#### The Company's Products and/or Services

22

| Product / Service | Description | Current Market |
| --- | --- | --- |
| NanoVMs Support Subscription | NanoVMs offers technical support subscriptions for its open source software that provides feature development, priority bug fixing, patches and other additions for its customers. | The end users of this subscription are mainly software developers and devops/SRE professionals. |
| NanoVMs C2 | NanoVMs C2 offers a SAAS-downloadable graphical administration tool for engineers working with unikernels. | The end users of this subscription are mainly software developers and devops/SRE professionals. |
| NanoVMs Radar | NanoVMs Radar is an APM solution for software engineers utilizing the NanoVMs open source. | The end users of this subscription are mainly software developers and devops/SRE professionals. |

The company has not publicly announced any new products at this time.

Our core software is distributed as free/open source. This distribution mechanism acts as a proxy for marketing towards our end user-base which is comprised of software engineers and devops professionals. The software that is sold, typically on a monthly recurring basis is available for download or as a hosted SAAS offering after subscription.

## Competition

The Company's primary competitors are VMWare, Redhat, and Docker.

While the company has a few direct unikernel competitors the company considers them irrelevant. The entire cloud native ecosystem which is made up of hundreds of companies in the container/kubernetes space we position against. While the technologies are fairly different and there are different use-cases the cloud native ecosystem could be completely eradicated if our go to market efforts are even remotely successful. NanoVMs unikernels aren't just faster and safer than containers - they are faster and safer than Linux itself. Most virtualized server workloads that are deployed to the public cloud could be ran using NanoVMs software vs the guest Linux vms they are today.

## Supply Chain and Customer Base

The company makes use of quite a lot of software both hosted and downloadable. All the public clouds such as AWS, Microsoft Azure, and AWS all heavily utilized to ensure compatibility. Software licenses for various hypervisors such as VMWare vSphere and Fusion are used as well as common office software such as Microsoft Office. In addition, the company relies on other SAAS vendors such as Sendgrid and even datacenters such as Hurricane Electric.

23

The company's primary customer base in terms of cardinality is composed of individual software developers today, however, we also have small businesses, mid-market, and enterprise customers.

Intellectual Property

*Patents*

24

| Application or Registration # | Title | Description | File Date | Grant Date | Country |
| --- | --- | --- | --- | --- | --- |
| 10628177 | UNIKERNEL PROVISIONING | Unikernel provisioning is disclosed. A binary is received. The received binary is converted into a unikernel that is deployable on a virtual machine at least in part by generating a disk image comprising the received binary, a loader for loading the received binary, and portions of an operating system required to execute the received binary. | April 11, 2018 | April 21, 2020 | USA |

25

| 10592215 | Unikernel cross-compilation | Building a unikernel is disclosed. Code is retrieved from a code repository. One or more unikernel build configuration options are identified. The code is analyzed to determine portions of an operating system required to execute the code. The code is compiled with the determined portions of the operating system into a unikernel that is deployable on a virtual machine to execute the code. | August 17, 2017 | March 17, 2020 | USA |
| --- | --- | --- | --- | --- | --- |
| 11061695 | Unikernel provisioning | Unikernel provisioning is disclosed. A binary is received. The received binary is converted into a unikernel that is deployable on a virtual machine at | February 27, 2020 | July 13, 2021 | United States |

26

|  |  | least in part by generating a disk image comprising the received binary, a loader for loading the received binary, and portions of an operating system required to execute the received binary. |  |  |  |
| --- | --- | --- | --- | --- | --- |

# ***Trademarks***

27

| Application or Registration # | Goods / Services | Mark | File Date | Registration Date | Country |
| --- | --- | --- | --- | --- | --- |
| 6114322 | IC 042: Providing temporary use of non-downloadable cloud-based software for managing network infrastructure, operations, and security; Providing temporary use of non-downloadable cloud-based software for managing virtual machines | Nanos | December 4, 2018 | July 28, 2020 | USA |
| 5655145 | IC 009: Downloadable computer software for managing network infrastructure, operations, and security; Downloadable computer software for managing virtual machines. | NanoVMs | June 3, 2018 | January 15, 2019 | USA |
| 5655146 | IC 042: Providing temporary use of non-downloadable cloud-based software for | NanoVMs | June 3, 2018 | January 15, 2019 | USA |

28

|  | managing network infrastructure, operations, and security; Providing temporary use of non-downloadable cloud-based software for managing virtual machines |  |  |  |  |
| --- | --- | --- | --- | --- | --- |

#### Governmental/Regulatory Approval and Compliance

The Company is not subject to any extraordinary governmental regulations on this business.

#### **Litigation**

There are no existing legal suits pending, or to the Company’s knowledge, threatened, against the Company.

#### **Other**

The Company’s principal address is 148 Townsend Street, San Francisco, CA 94107

The Company conducts business in Georgia, New York, California.

#### **DIRECTORS, OFFICERS AND EMPLOYEES**

##### **Directors**

The directors or managers of the Company are listed below along with all positions and offices held at the Company and their principal occupation and employment responsibilities for the past three (3) years and their educational background and qualifications.

##### ***Name***

Ian Eyberg

***All positions and offices held with the Company and date such position(s) was held with start and ending dates***

CEO and Director, 08/05/15 to present

29

# ***Principal occupation and employment responsibilities during at least the last three (3) years with start and ending dates***

CEO and Director, NanoVMs, Inc., 08/05/15 to present

# ***Education***

University of Missouri-Rolla (Missouri University of Science and Technology). Attended 2000-2003, completed coursework in computer science.

# **Officers of the Company**

The officers of the Company are listed below along with all positions and offices held at the Company and their principal occupation and employment responsibilities for the past three (3) years and their educational background and qualifications.

# ***Name***

Ian Eyberg

# ***All positions and offices held with the Company and date such position(s) was held with start and ending dates***

CEO and Director, 08/05/15 to present

# ***Principal occupation and employment responsibilities during at least the last three (3) years with start and ending dates***

CEO and Director, NanoVMs, Inc., 08/05/15 to present

# ***Education***

University of Missouri-Rolla (Missouri University of Science and Technology). Attended 2000-2003, completed coursework in computer science.

# ***Indemnification***

Indemnification is authorized by the Company to directors, officers or controlling persons acting in their professional capacity pursuant to Delaware law. Indemnification includes expenses such as attorney's fees and, in certain circumstances, judgments, fines and settlement amounts actually paid or incurred in connection with actual or threatened actions, suits or proceedings involving such person, except in certain circumstances where a person is adjudged to be guilty of gross negligence or willful misconduct, unless a court of competent jurisdiction determines that such indemnification is fair and reasonable under the circumstances.

30

## Employees

The Company currently has 3 employees in Georgia, New York, California.

## CAPITALIZATION AND OWNERSHIP

### Capitalization

The Company has issued the following outstanding securities:

| Type of security | Common Stock |
| --- | --- |
| Amount outstanding | 10,464,979 |
| Voting Rights | Each holder of record of Common Stock is entitled to one vote for each share of such stock. |
| Anti-Dilution Rights | None. |
| How this Security may limit, dilute or qualify the Notes/SAFEs issued pursuant to Regulation CF | The Company's board of directors and stockholders may authorize and issue additional shares of Common Stock at a later date which will dilute the securities into which the Notes/SAFEs convert. |
| Difference between these securities and the Notes/SAFEs issued pursuant to Regulation CF | Common Stock are equity securities of the Company, while the Notes/SAFEs convert into equity securities upon the occurrence of certain events. |

| Type of security | Series Seed Preferred Stock |
| --- | --- |
| Amount outstanding | 4,159,706 |
| Voting Rights | Each holder of record of Preferred Stock is entitled to one vote for each share of such stock convertible into Common Stock. |
| Anti-Dilution Rights | The conversion rate of the Preferred Stock will be subject to proportional adjustments for stock splits, stock dividends, recapitalizations, etc. |
| How this security may limit, dilute or qualify the Notes/SAFEs issued pursuant to Regulation CF | The Company's board of directors and stockholders may authorize and issue additional shares of Preferred Stock at a later date which will dilute the securities into |

31

|  | which the Notes/SAFEs convert. |
| --- | --- |
| Difference between these securities and the Notes/SAFEs issued pursuant to Regulation CF | Preferred Stock are equity securities of the Company, while Notes/SAFEs convert into equity securities upon the occurrence of certain events. |

| Type of security | Stock Options |
| --- | --- |
| Amount outstanding | 507,038 |
| Voting Rights | Each option is convertible into shares of Common Stock. Upon conversion of their options, the holders shall have one vote for each share of stock held by such stockholders. |
| Anti-Dilution Rights | None. |
| How this security may limit, dilute or qualify the Notes/SAFEs issued pursuant to Regulation CF | The Company's board of directors and stockholders may authorize and issue additional options to purchase Common Stock at a later date. The availability of any Stock issued pursuant to the exercise of such options, may be dilutive and could adversely affect the value of the Notes/SAFEs issued pursuant to Regulation CF. |
| Difference between these securities and the Notes/SAFEs issued pursuant to Regulation CF | Options are exercisable at the option of the holder, while the Notes/SAFEs only convert upon the occurrence of certain events. |

| Type of security | Series 2020 Crowd SAFE (Simple Agreement for Future Equity) |
| --- | --- |
| Amount outstanding | 968,399 |
| Voting Rights | None |
| Anti-Dilution Rights | None |
| How this security may limit, dilute or qualify the Notes/SAFEs issued pursuant to Regulation CF | When the Series 2020 Crowd SAFEs convert into equity securities, they will dilute the securities into which the Notes/SAFEs convert. |
| Difference between these securities and the Notes/SAFEs issued pursuant to Regulation CF | These are securities issued pursuant to Regulation CF. |

32

| Type of security | December 2021 Convertible Notes |
| --- | --- |
| Amount outstanding | 300,000 |
| Voting Rights | Proxy vote upon conversion |
| Anti-Dilution Rights | None |
| How this security may limit, dilute or qualify the Notes/SAFEs issued pursuant to Regulation CF | When the Convertible Notes convert into equity securities, they will dilute the securities into which the Notes/SAFE issued pursuant to Regulation CF convert. |
| Difference between these securities and the Notes/SAFEs issued pursuant to Regulation CF | These Convertible Notes convert into equity securities upon the occurrence of certain trigger events that are different than the trigger events that convert the Notes/SAFEs issued pursuant to Regulation CF. |

| Type of security | CF Convertible Notes |
| --- | --- |
| Amount outstanding | $320,603 |
| Voting Rights | Proxy vote upon conversion |
| Anti-Dilution Rights | None |
| How this security may limit, dilute or qualify the Notes/SAFEs issued pursuant to Regulation CF | When the CF Convertible Notes convert into equity securities, they will dilute the securities into which the Crowd SAFEs convert. |
| Difference between these securities and the Notes/SAFEs issued pursuant to Regulation CF | These are securities issued pursuant to Regulation CF. |

As of the end of 2022, the Company has the following debt outstanding:

33

| Type of debt | Convertible Notes |
| --- | --- |
| Name of creditor | Various |
| Amount outstanding | $618,704.00 |
| Interest rate and payment schedule | 2% |
| Amortization schedule | N/A |
| Describe any collateral or security | N/A |
| Maturity date | April 1, 2023 |
| Other material terms | Valuation cap $20M Discount Rate 1.0% to 2.0% Notes convert to Preferred Stock when the Company raises $10M in a qualified equity financing. |

| Type of debt | Promissory Note |
| --- | --- |
| Name of creditor | Ian Eyberg |
| Amount outstanding | $323,500.00 |
| Interest rate and payment schedule | 0%, N/A |
| Amortization schedule | N/A |
| Describe any collateral or security | N/A |
| Maturity date | N/A |
| Other material terms | N/A |

The total amount of outstanding debt of the company is $959,582.00.

The Company has conducted the following prior Securities offerings in the past three years:

34

| Security Type | Number Sold | Money Raised | Use of Proceeds | Offering Date | Exemption from Registration Used or Public Offering |
| --- | --- | --- | --- | --- | --- |
| Crowd SAFE (Simple Agreement for Future Equity) | 1 | $968,399.04 | R & D, general working capital | August 17, 2020 | Regulation CF |
| Convertible Notes | N/A | $320,602.73 | R & D, marketing, general working capital | March 24, 2021 | Regulation CF |
| Convertible Notes | 2 | $300,000.00 | R & D, general working capital | December 8, 2021 and February 15, 2022 | Section 4(a) (2) |
| Crowd SAFEs (Simple Agreement for Future Equity) | N/A | Pending | Intermediary fees, campaign marketing expenses, attorney fees, accounting, general marketing, R& D, Equipment purchases, future wages, and general working capital. | May 16, 2022 (this offering is currently live) | Regulation CF |

# Ownership

A majority of the Company is owned by a few people and entities. Those people and organizations are: Ian Eyberg, Hack. VC, Bloomberg Beta, Initialized Capital, Henrik Rosendahl, Alchemist Accelerator, and Liquid2 Ventures.

Below the beneficial owners of 20% percent or more of the Company's outstanding voting equity securities, calculated on the basis of voting power, are listed along with the amount they own.

35

Make sure the following table is up to date with the latest beneficial owners.

| Name | Percentage Owned |
| --- | --- |
| Ian Eyberg | 63.8% |

## FINANCIAL INFORMATION

Please see the financial information listed on the cover page of this Form C-AR and attached hereto in addition to the following information. Financial statements are attached hereto as Exhibit A.

### Recent Tax Return Information (for year ending 12/31/2021)

| Total Income | Taxable Income | Total Tax |
| --- | --- | --- |
| $261,118.00 | -$604,886.00 | $0.00 |

### Operations

The company recently completed a regulation CF raise. Significant challenges remain in delivering on market awareness of the technology. The company intends to raise more capital to keep research and development moving along in addition to expanding on marketing resources.

The company doesn't expect to achieve profitability in the next 12 months but does expect to generate more revenue. The company expects through its top of funnel marketing campaigns to generate more customers and revenue attached.

### Liquidity and Capital Resources

On May 16, 2022 the Company conducted an offering pursuant to Regulation CF. This offering is currently live and the amount raised is pending.

The Company has the following sources of capital in addition to the proceeds from the Regulation CF Offering:

On August 17, 2020 the Company conducted an offering pursuant to Regulation CF and raised $968,399.04.

On March 24, 2021, the Company conducted an additional offering pursuant to Regulation Cf and raised $320,602.73.

On December 8, 2021, and February 15, 2022, the Company conducted an offering pursuant to Regulation D and raised $300,000.00.

36

The Offering proceeds are essential to our operations. We plan to use the proceeds as set forth above under 'use of proceeds', which is an indispensable element of our business strategy. The Offering proceeds will have a beneficial effect on our liquidity, which will be augmented by the Offering proceeds and used to execute our business strategy. The Company does not have any additional sources of capital other than the proceeds from the Offering.

#### Capital Expenditures and Other Obligations

The Company does not intend to make any material capital expenditures in the future.

#### Material Changes and Other Information

##### Trends and Uncertainties

The financial statements are an important part of this Form C-AR and should be reviewed in their entirety. The financial statements of the Company are attached hereto as Exhibit A.

##### Restrictions on Transfer

Any Securities sold pursuant to Regulation CF being offered may not be transferred by any Investor of such Securities during the one-year holding period beginning when the Securities were issued, unless such Securities were transferred: 1) to the Company, 2) to an accredited investor, as defined by Rule 501(d) of Regulation D of the Securities Act of 1933, as amended, 3) as part of an Offering registered with the SEC or 4) to a member of the family of the Investor or the equivalent, to a trust controlled by the Investor, to a trust created for the benefit of a family member of the Investor or the equivalent, or in connection with the death or divorce of the Investor or other similar circumstances. 'Member of the family' as used herein means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse or spousal equivalent, sibling, mother/father/daughter/son/sister/brother-in-law, and includes adoptive relationships. Remember that although you may legally be able to transfer the Securities, you may not be able to find another party willing to purchase them.

#### TRANSACTIONS WITH RELATED PERSONS AND CONFLICTS OF INTEREST

##### Related Person Transactions

From time to time the Company may engage in transactions with related persons. Related persons are defined as any director or officer of the Company; any person who is the beneficial owner of 10 percent or more of the Company's outstanding voting equity securities, calculated on the basis of voting power; any promoter of the Company; any immediate family member of any of the foregoing persons or an entity controlled by any such person or persons.

The Company has the following transactions with related persons:

##### *Loans*

37

| Type of Transaction | Promissory Note |
| --- | --- |
| Related Person/Entity | Ian Eyberg |
| Relationship to the Company | Director & CEO |
| Total amount of money involved | $323,500.00 |
| Benefits or compensation received by related person | N/A |
| Benefits or compensation received by Company | Working capital |
| Description of the transaction | The Company will repay this amount when it has the financial means to do so. |

#### Conflicts of Interest

To the best of our knowledge the Company has not engaged in any transactions or relationships, which may give rise to a conflict of interest with the Company, its operations or its security holders.

#### OTHER INFORMATION

**The Company has not failed to comply with the ongoing reporting requirements of Regulation CF § 227.202 in the past.**

#### Bad Actor Disclosure

The Company is not subject to any Bad Actor Disqualifications under any relevant U.S. securities laws.

38

# SIGNATURE

Pursuant to the requirements of Sections 4(a)(6) and 4A of the Securities Act of 1933 and Regulation Crowdfunding (§ 227.100 et seq.), the issuer certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form C-AR and has duly caused this Form to be signed on its behalf by the duly authorized undersigned.

The issuer also certifies that the attached financial statements are true and complete in all material respects.

/s/Ian Eyberg
(Signature)

Ian Eyberg
(Name)

CEO & Director
(Title)

Pursuant to the requirements of Sections 4(a)(6) and 4A of the Securities Act of 1933 and Regulation Crowdfunding (§ 227.100 et seq.), this Form C-AR has been signed by the following persons in the capacities and on the dates indicated.

/s/Ian Eyberg
(Signature)

Ian Eyberg
(Name)

CEO & Director
(Title)

3/13/23
(Date)

# *Instructions.*

1. The form shall be signed by the issuer, its principal executive officer or officers, its principal financial officer, its controller or principal accounting officer and at least a majority of the board of directors or persons performing similar functions.
2. The name of each person signing the form shall be typed or printed beneath the signature.

Intentional misstatements or omissions of facts constitute federal criminal violations. See 18 U.S.C. 1001.

39

## EXHIBITS

### Exhibit A Financial Statements

40

# EXHIBIT A

# *Financial Statements*

41

# EXHIBIT A

### *Financial Statements*

# NanoVMs Inc.

(a Delaware Corporation)

# GAAP Financial Statement Compilation

Period of January 1, 2022
through December 31, 2022

Compiled by:

![img-0.jpeg](img-0.jpeg)

TaxDrop LLC
A New Jersey CPA Company

FS-2

# Financial Statements

## NanoVMs Inc.

### Table of Contents

| Accountant's Compilation Report | FS-3 |
| --- | --- |
| Financial Statements and Supplementary Notes |  |
| Balance Sheet as of December 31, 2022 | FS-5 |
| Income Statement for the period of January 1, 2022 through December 31, 2022 | FS-6 |
| Statement of Changes in Stockholders' Equity for the period of January 1, 2022 through December 31, 2022 | FS-7 |
| Statement of Cash Flows for the period of January 1, 2022 through December 31, 2022 | FS-8 |
| Notes and Additional Disclosures to the Financial Statements as of December 31, 2022 | FS-9 |

FS - 3

![img-1.jpeg](img-1.jpeg)

# **Independent Accountant's Compilation Report**

February 14, 2023

**To:** Management of NanoVMs Inc.

**Attn:** Ian Eyberg, CEO

**Re:** 2022 Financial Statement GAAP Compilation - NanoVMs Inc.

# **Financial Compilation of the Financial Statements**

Management is responsible for the accompanying financial statements of NanoVMs Inc., which comprise the balance sheet as of December 31, 2022 and the related statements of income, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the financial statements in accordance with accounting principles generally accepted in the United States of America.

We have performed compilation engagements in accordance with the Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. We do not express an opinion, a conclusion, nor provide any assurance on these financial statements.

Sincerely,

*TaxDrop LLC*

TaxDrop LLC

Robbinsville, New Jersey

February 14, 2023

FS - 4

# **NANOVMS, INC.**
**BALANCE SHEET**
**As of December 31, 2022**
**(Unaudited)**

| ASSETS | 2022 |
| --- | --- |
| Current Assets |  |
| Cash and cash equivalents | $744 |
| Deposits | 3,500 |
| Prepaids | 4,475 |
| Total Current Assets | 8,719 |
| Total Assets | $8,719 |
| LIABILITIES AND STOCKHOLDERS' EQUITY |  |
| Current Liabilities |  |
| Accounts payable | $16,094 |
| Payroll liabilities | 1,283 |
| Note Payable - Ian | 323,500 |
| Convertible notes | 618,704 |
| Total Current Liabilities | 959,582 |
| Total Liabilities | 959,582 |
| Stockholders' Equity |  |
| Common Stock, $0.0001 par value; 16,000,000 authorized; 10,464,979 issued and outstanding as of December 31, 2022 | 1,046 |
| Preferred Stock, $0.0001 par value; 4,159,707 authorized; 4,159,707 issued and outstanding as of December 31, 2022 | 416 |
| Additional Paid in Capital | 1,691,146 |
| Additional Paid in Capital SAFE Notes | 1,174,106 |
| Additional Paid in Capital - Stock Options | 21,674 |
| Retained Earnings | (3,839,250) |
| Total Stockholders' Equity | (950,863) |
| Total Liabilities and Stockholders' Equity | $8,719 |

**No Assurance Provided - Compilation Engagement Only**

**The accompanying footnotes are an integral part of these financial statements.**

FS - 5

# **NANOVMS, INC.**  
 **INCOME STATEMENTS**  
 **For the Years Ended December 31, 2022**  
 **(Unaudited)**

|  | 2022 |
| --- | --- |
| Revenues | $196,435 |
| Operating Expenses |  |
| Advertising and marketing | 235,927 |
| General and administrative | 9,830 |
| Salaries and wages | 600,596 |
| Rent | 4,388 |
| Professional services | 107,589 |
| Equipment & Software | 23,105 |
| Total Operating Expenses | 981,437 |
| Other Income |  |
| Return of unused grant funds | (20,298) |
| Income tax | (1,400) |
| Total Other income (expense) | (21,698) |
| Net Income (Loss) | $(806,699) |

**No Assurance Provided - Compilation Engagement Only**

The accompanying footnotes are an integral part of these financial statements.

FS - 6

# NANOVMS, INC.

# STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

For the Year Ended December 31, 2022

(Unaudited)

|  | Common Stock |  | Preferred Stock |  | Additional Paid in Capital | Additional paid in capital SAFE | Additional paid in capital-stock options | Retained Earnings/ (Accumulated Deficit) | Total Stockholders' Equity |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  | Shares | Value ($0.0001 par) | Shares | Value ($0.0001 par) |  |  |  |  |  |
| Balance as of December 31, 2021 | 10,464,979 | $1,046 | 4,159,706 | $416 | $1,691,146 | $968,399 | $21,674 | $(3,032,551) | $(349,870) |
| Issuance of SAFE Notes |  |  |  |  |  | $205,707 |  |  | $205,707 |
| Net loss |  |  |  |  |  |  |  | $(806,699) | $(806,699) |
| Balance as of December 31, 2022 | 10,464,979 | $1,046 | 4,159,706 | $416 | $1,691,146 | $1,174,106 | $21,674 | $(3,839,250) | $(950,863) |

No Assurance Provided - Compilation Engagement Only

The accompanying footnotes are an integral part of these financial statements.

FS - 7

# **NANOVMS, INC.**  
 **STATEMENTS OF CASH FLOWS**  
 **For the Years Ended December 31, 2022**  
 **(Unaudited)**

|  | 2022 |
| --- | --- |
| Cash Flows from Operating Activities |  |
| Net Income (Loss) | $(806,699) |
| Changes in operating assets and liabilities: |  |
| Prepaids | 12,461 |
| R&D tax credit | 32,716 |
| Accounts payable | 9,607 |
| Payroll liabilities | (148) |
| Deferred revenue | (160,238) |
| Net cash provided by (used in) operating activities | (912,301) |
| Cash Flows from Investing Activities |  |
| Net cash used in investing activities | - |
| Cash Flows from Financing Activities |  |
| Advances from Related Party | 323,500 |
| Issuance of Convertible Notes | 175,807 |
| Issuance of SAFE Notes | 205,707 |
| Net cash used in financing activities | 705,014 |
| Net change in cash and cash equivalents | (207,287) |
| Cash and cash equivalents at beginning of period | 208,031 |
| Cash and cash equivalents at end of period | $744 |
| Supplemental information |  |
| Income taxes paid | $1,400 |

**No Assurance Provided - Compilation Engagement Only**

**The accompanying footnotes are an integral part of these financial statements.**

FS - 8

# **NANOVMS, INC.**  
**NOTES TO FINANCIAL STATEMENTS**  
**AS OF DECEMBER 31, 2022**  
**(Unaudited)**

# **NOTE 1 - NATURE OF OPERATIONS**

NanoVMs, Inc. (which may be referred to as the “Company”, “we,” “us,” or “our”) was registered in Delaware on August 5, 2015, originally under the name of DEFERPANIC, INC. The Company is creating an operating system designed for today’s generation of cloud infrastructure. The Company’s headquarters are in San Francisco, California. The company began operations in 2015.

Since Inception, the Company has relied on advances from owners and related parties, the issuance of common, preferred stock and convertible notes, and issuance of Simple Agreements for Future Equity (“SAFEs”) to fund its operations. As of December 31, 2022, the Company had negative working capital and will likely incur additional losses prior to generating positive working capital. These matters raise substantial concern about the Company’s ability to continue as a going concern (see Note 9). During the next twelve months, the Company intends to fund its operations with funding from a crowdfunding campaign (see Note 10), and funds from revenue producing activities, if and when such can be realized. If the Company cannot secure additional short-term capital, it may cease operations. These financial statements and related notes thereto do not include any adjustments that might result from these uncertainties.

# **NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

# **Basis of Presentation**

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America (“US GAAP”). Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

# **Use of Estimates**

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make certain estimates and assumptions that affect the amounts reported in the financial statements and footnotes thereto. Actual results could materially differ from these estimates. It is reasonably possible that changes in estimates will occur in the near term.

Significant estimates inherent in the preparation of the accompanying financial statements include valuation of provision for refunds and chargebacks, equity transactions and contingencies.

# **Risks and Uncertainties**

The Company has a limited operating history. The Company’s business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn or otherwise, local competition or changes in consumer taste. These adverse conditions could affect the Company’s financial condition and the results of its operations.

# **Concentration of Credit Risk**

The Company maintains its cash with a major financial institution located in the United States of America, which it believes to be credit-worthy. The Federal Deposit Insurance Corporation insures balances up to $250,000. At times, the Company may maintain balances in excess of the federally insured limits.

FS - 9

## Cash and Cash Equivalents

The Company considers short-term, highly liquid investment with original maturities of three months or less at the time of purchase to be cash equivalents. Cash consists of funds held in the Company's checking account.

## Fixed Assets

Property and equipment will be recorded at cost. Expenditures for renewals and improvements that significantly add to the productive capacity or extend the useful life of an asset are capitalized. Expenditures for maintenance and repairs are charged to expense. When equipment is retired or sold, the cost and related accumulated depreciation are eliminated from the accounts and the resultant gain or loss is reflected in income. In accordance with FASB ASC 350-40, *Accounting for Costs of Computer Software Developed or Obtained for Internal Use*, the Company has capitalized external direct costs of material and services developed or obtained for software development projects. Amortization for each software project begins when the computer software is ready for its intended use.

Depreciation is provided using the straight-line method, based on useful lives of the assets based on the asset type.

The Company reviews the carrying value of property and equipment for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. In cases where undiscounted expected future cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, the manner in which the property is used, and the effects of obsolescence, demand, competition, and other economic factors. Based on this assessment there was no impairment for December 31, 2022 as the Company had no fixed assets.

## Fair Value Measurements

Generally accepted accounting principles define fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and such principles also establish a fair value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):

- Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
- Level 2 - Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.
- Level 3 - Prices or valuation techniques requiring inputs that are both significant to the fair value measurement and unobservable.

## Income Taxes

Income taxes are provided for the tax effects of transactions reporting in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of receivables, property and equipment, intangible assets, and accrued expenses for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

The Company is taxed as a "C" Corporation. There is a 100 percent valuation allowance against the net operating losses generated by the Company at December 31, 2022.

FS - 10

The Company evaluates its tax positions that have been taken or are expected to be taken on income tax returns to determine if an accrual is necessary for uncertain tax positions. The Company will recognize future accrued interest and penalties related to unrecognized tax benefits in income tax expense if incurred.

## Revenue Recognition

In accordance with ASC 606 the Company recognizes revenue from contracts with customers using the five-step model as follows:

1. Identify the contract with the customer
2. Identify the performance obligations within the contract
3. Determine the transaction price
4. Allocate the transaction price 10 the performance obligations
5. Recognize revenue when (or as) the performance obligations are satisfied

The Company recognizes revenue when has occurred or services have been rendered, the fee for the arrangement is fixed or determinable and collectability is reasonably assured. For year ending December 31, 2022 the Company recognized $196,435 in revenue.

## Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with ASC 718, Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees and directors, including grants of restricted stock units and stock option awards, to be recognized as expense in the statements of operations based on their grant date fair values. Grants of restricted stock units and stock option awards to other service providers, referred to as non-employees, are measured based on the grant-date fair value of the award and expensed in the Company's statement of operations over the vesting period.

## Accounts Receivable

Trade receivables due from customers are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Trade receivables are stated at the amount billed to the customer. Payments of trade receivables are allocated to the specific invoices identified on the customer's remittance advice or, if unspecified, are applied to the earliest unpaid invoices. As of December 31, 2022 the company had no accounts receivable.

The Company estimates an allowance for doubtful accounts based upon an evaluation of the current status of receivables, historical experience, and other factors as necessary. It is reasonably possible that the Company's estimate of the allowance for doubtful accounts will change.

## Organizational Costs

In accordance with FASB ASC 720, organizational costs, including accounting fees, legal fee, and costs of incorporation, are expensed as incurred.

## Advertising

The Company expenses advertising costs as they are incurred.

## Leases

The Company determines if a contract is classified a lease at the contract's inception. Lease agreements are evaluated to determine whether the lease is a finance or operating lease. Right-of-use (ROU) assets and lease liabilities are recognized at the commencement date based on the net present value of lease payments over the lease term. The Company's leases do not provide an implicit rate; therefore, the Company uses its incremental borrowing rate, based on the information available at the commencement date to determine the present value of the lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the accompanying balance sheet and

FS - 11

are recognized as lease expense on a straight-line basis over the lease term. Leases primarily consist of facilities and office space.

# Recent Accounting Pronouncements

The FASB issues ASUs to amend the authoritative literature in ASC. Management believes that those issued to date either (i) provide supplemental guidance, (ii) are technical corrections, (iii) are not applicable to us or (iv) are not expected to have a significant impact our financial statements.

# NOTE 3 - CONVERTIBLE NOTES

In 2021, the Company issued $618,704 of unsecured convertible notes with maturity dates of twelve month, with notes accruing at 2% interest per annum. The outstanding principal and unpaid accrued interest of each Note (the “Conversion Amount”) shall automatically convert into Conversion Shares upon the closing of the Next Equity Financing. The total number of Conversion Shares to be issued upon such conversion shall be equal to the quotient obtained by dividing the Conversion Amount by the Conversion Price (the “Total Number of Shares”). The Total Number of Shares shall consist of Next Preferred Stock and Common Stock as follows: (i) that number of shares of Next Preferred Stock obtained by dividing (x) the Conversion Amount by (y) the price per share paid with cash by purchasers of Next Preferred Stock in the Next Equity Financing (such number of shares, the “Number of Preferred Stock”) and (ii) that number of shares of Common Stock equal to the Total Number of Shares minus the Number of Preferred Stock. The issuance of the Conversion Shares that are Equity Securities sold in the Next Equity Financing pursuant to the conversion of each Note shall be upon and subject to the same terms and conditions applicable to the Equity Securities sold in the Next Equity Financing. The Next Equity Financing shall mean the next sale (or series of related sales) by the Company of its Equity Securities following the date of this Agreement from which the Company receives gross proceeds of not less than $1,000,000.

The Conversion Price shall mean the lesser of (i) 99% of the price paid per share for Equity Securities by the investors paying with cash in the Next Equity Financing or (ii) $20,000,000, divided by the total number of Company Stock outstanding immediately prior to the closing of the Next Equity Financing. The balance of these notes as of December 31, 2022 is $618,704.

# NOTE 4 - RELATED PARTY

From time to time the Company takes advances from members. As of December 31, 2022, the balance of the advances from related parties was $325,000. These advances have no interest rate or specified maturity date.

# NOTE 5 - INCOME TAXES

The Company intends to file its income tax return for the period ended December 31, 2022 by the due date set by the Internal Revenue Service. The return will remain subject to examination by the Internal Revenue Service under the statute of limitations for a period of three years from the date it is filed.

Since the passage of the Tax Cuts and Jobs Act of 2017 (“TJCA”), net operating losses can be carried forward indefinitely. The Federal net operating loss carry forward as of December 31, 2022 was approximately $3,697,000. Net operating loss carryforwards for state income tax purposes approximate those available for Federal income tax purposes.

# NOTE 6 - STOCKHOLDERS’ EQUITY

Common Stock

FS - 12

The Company authorized 16,000,000 shares of common stock at $0.0001 par value, and had issued and outstanding 10,464,979 shares as of December 31, 2022. The fair value of the stock as of the date of issuance was determined based on the present value of anticipated cash flows, the issuance of convertible debt, the lack of current marketability, the uncertainty of potential business prospects, and the current operating losses and the market value of equity interest in similar companies engaged in similar business to the Company.

## Preferred Stock

The Company authorized 4,159,707 shares of preferred stock at $0.0001 par value, with 4,159,706 issued and outstanding as of December 31, 2022. The fair value of the stock as of the date of issuance was determined based on the present value of anticipated cash flows, the issuance of convertible debt, the lack of current marketability, the uncertainty of potential business prospects, and the current operating losses and the market value of equity interest in similar companies engaged in similar business to the Company.

## Additional Paid-In Capital - SAFEs

In 2020, the Company issued Simple Agreements for Future Equity (“SAFEs”) totaling $968,399. The SAFEs were automatically convertible into shadow series of the equity that the Company issues in a sale of equity in which the Company received not less than $3,000,000 (“Qualified Financing”). The conversion price is the lesser of 90% of the price per share of stock received by the Company in a Qualified Financing or the price per share equal to the quotient of $12,000,000 divided by the aggregate number of issued and outstanding shares of capital stock, assuming full conversion or exercise of all convertible and exercisable securities then outstanding, including shares of convertible preferred stock and all outstanding vested and unvested options, but excluding reserved and available shares under an equity incentive plan, convertible promissory notes, and SAFEs.

In 2022 the Company issued additional SAFES totaling $205,707. The SAFEs were automatically convertible into shadow series of the equity that the Company issues in a sale of equity in which the Company received not less than $3,000,000 (“Qualified Financing”). The conversion price is the lesser of 90% of the price per share of stock received by the Company in a Qualified Financing or the price per share equal to the quotient of $25,000,000 divided by the aggregate number of issued and outstanding shares of capital stock, assuming full conversion or exercise of all convertible and exercisable securities then outstanding, including shares of convertible preferred stock and all outstanding vested and unvested options, but excluding reserved and available shares under an equity incentive plan, convertible promissory notes, and SAFEs.

As of December 31, 2022, all $1,174,106 of SAFEs are still outstanding.

## NOTE 7 - STOCK-BASED COMPENSATION

The Company has a 2015 stock compensation plan which permits the grant or option of shares to its employees for up to 1,039,625 shares of common stock. The Company believes that such awards will help the Company attract, retain and motivate its management and other persons, including officers, directors, key employees and certain consultants, will encourage and reward such persons’ contributions to the performance of the Company and will align their interests with the interests of the Company’s stockholders. Stock awards are generally granted or optioned at a price not less than the market price of the Company’s stock as of the date of grant. Stock awards vest between two to four years.

As of December 31, 2022, the Company has issued 507,038 stock options for common stock with exercise prices between $0.09 and $0.12 per share. The options vest over two years and expire in ten years. As of December 31, 2022, 446,664 stock options had vested. There was nominal fair value associated with the issuance of these options. The fair value of each option award is estimated on the date of grant using a Black Scholes option-pricing model. The company uses the average volatility of peer companies to estimate expected volatility. The Company uses the average of the vesting and term of the option to estimate the expected term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Forfeitures are accounted for as they occur. The expected dividend yield is zero based on the Company not anticipating paying dividends in the foreseeable future.

## NOTE 8 - COMMITMENTS AND CONTINGENCIES

FS - 13

# Lease

The Company extended its lease of office space under a noncancelable operating lease. The current amendment requires monthly rental payments of $1,000 and expires March 30, 2023. The Company expects to let the current lease expire at the end of the term. Future rental commitments are as follows for the years ending December 31,

2023

$

3,000

2024 and thereafter

-0-

# Litigation

The Company is not currently involved with and does not know of any pending or threatening litigation against the Company.

# COVID 19

In January 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a "Public Health Emergency of International Concern," which continues to spread throughout the world and has adversely impacted global commercial activity and contributed to significant declines and volatility in financial markets. The coronavirus outbreak and government responses are creating disruption in global supply chains and adversely impacting many industries. The outbreak could have a continued material adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate material adverse impact of the coronavirus outbreak. Nevertheless, the outbreak presents uncertainty and risk with respect to the Company, its performance, and its financial results.

# NOTE 9 - GOING CONCERN

These financial statements are prepared on a going concern basis. The Company has incurred a loss since inception. The Company's ability to continue is dependent upon management's plan to raise additional funds and achieve profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is not able to continue as a going concern.

# NOTE 10 - SUBSEQUENT EVENTS

# Anticipated Crowdfunded Offering

The Company is offering (the "Crowdfunded Offering") up to $4,031,600 in convertible notes. The Company is attempting to raise a minimum amount of $10,000 in this offering and up to $4,031,600 maximum. The Company must receive commitments from investors totaling the minimum amount by the offering deadline listed in the Form C, as amended in order to receive any funds. The Crowdfunded Offering is being made through StartEngine. The Intermediary will be entitled to receive a 3.5% commission of total proceeds issued in this offering.

# Management's Evaluation

Management has evaluated subsequent events through February 14, 2023, the date the financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in the financial statements.

### UNITED STATES SECURITIES AND EXCHANGE COMMISSION
**Washington, D.C. 20549**

## FORM C

### UNDER THE SECURITIES ACT OF 1933

### Issuer Information

**Name of Issuer:** NanoVMs, Inc.

**Legal Status:** Corporation

**Jurisdiction of Incorporation/Organization:** DE

**Date of Organization:** 08-05-2015

**Physical Address:** 148 Townsend Street, San Francisco, CA, 94107

**Issuer Website:** https://nanovms.com

**Is there a Co-Issuer?:** No

### Offering Information

**Oversubscription Accepted:** No

### Annual Report Disclosure Requirements

**Current Number of Employees:** 3

**Total Assets (Most Recent Fiscal Year):** $8,719.00

**Total Assets (Prior Fiscal Year):** $261,184.00

**Cash & Cash Equivalents (Most Recent Fiscal Year):** $744.00

**Cash & Cash Equivalents (Prior Fiscal Year):** $208,031.00

**Accounts Receivable (Most Recent Fiscal Year):** $0.00

**Accounts Receivable (Prior Fiscal Year):** $0.00

**Short-Term Debt (Most Recent Fiscal Year):** $0.00

**Short-Term Debt (Prior Fiscal Year):** $0.00

**Long-Term Debt (Most Recent Fiscal Year):** $959,582.00

**Long-Term Debt (Prior Fiscal Year):** $442,897.00

**Revenues/Sales (Most Recent Fiscal Year):** $196,435.00

**Revenues/Sales (Prior Fiscal Year):** $14,554.00

**Cost of Goods Sold (Most Recent Fiscal Year):** $0.00

**Cost of Goods Sold (Prior Fiscal Year):** $0.00

**Taxes Paid (Most Recent Fiscal Year):** $1,400.00

**Taxes Paid (Prior Fiscal Year):** $0.00

**Net Income (Most Recent Fiscal Year):** $-806,699.00

**Net Income (Prior Fiscal Year):** $-772,733.00

### Signatures

**Issuer:** NanoVMs, Inc.

**Signature:** Ian Eyberg

**Title:** CEO & Director

---

**Signature:** Ian Eyberg

**Title:** CEO & Director

**Date:** 03-15-2023