[PART I — FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents VSee Health's unaudited condensed consolidated financial statements, covering balance sheets, income statements, equity, cash flows, and accounting notes [Condensed Consolidated Balance Sheets](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) Total assets decreased to **$18.2 million**, liabilities increased to **$23.9 million**, and stockholders' deficit worsened to **$(5.7) million** by June 30, 2025 Key Balance Sheet Metrics (June 30, 2025 vs. December 31, 2024) | Metric | December 31, 2024 | June 30, 2025 | | :-------------------------- | :------------------ | :------------------ | | Total assets | $19,992,488 | $18,210,041 | | Total liabilities | $20,010,976 | $23,946,345 | | Total stockholders' deficit | $(18,488) | $(5,736,304) | [Condensed Consolidated Statements of Operations](index=7&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Total revenues increased by **101%** to **$6.7 million**, but net loss significantly widened to **$(6.6) million** due to increased operating and other expenses Consolidated Statements of Operations (6 Months Ended June 30) | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 (Restated) | YoY Change (%) | | :--------------------------------- | :----------------------------------- | :----------------------------------- | :------------- | | Total revenues | $6,711,604 | $3,332,561 | 101% | | Cost of revenues | $3,263,141 | $1,320,823 | 147% | | Gross margin | $3,448,463 | $2,011,738 | 71% | | Total operating expenses | $7,534,521 | $2,840,201 | 165% | | Net operating (loss) profit | $(4,086,058) | $(828,463) | (393%) | | Total other (expense), net | $(2,468,676) | $(1,421,277) | (74%) | | Net loss | $(6,572,723) | $(571,352) | (1050%) | | Basic and diluted loss per common share | $(0.40) | $(0.11) | (264%) | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=8&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) Total stockholders' deficit worsened to **$(5.7) million** by June 30, 2025, primarily due to a **$(6.6) million net loss**, partially offset by new paid-in capital Key Stockholders' Equity (Deficit) Metrics | Metric | December 31, 2024 | June 30, 2025 | | :--------------------------------- | :------------------ | :------------------ | | Total Stockholder's Deficit | $(18,488) | $(5,736,303) | | Net loss for the six months ended June 30, 2025 | N/A | $(6,572,723) | | Additional paid-in capital | $67,683,754 | $68,538,649 | | Accumulated deficit | $(67,703,873) | $(74,276,596) | [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=UNAUDITED%20CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash used in operating activities improved to **$(0.77) million**, while financing cash decreased to **$0.75 million**, resulting in a **$(34,520) net cash decrease** for the period Selected Cash Flow Captions (6 Months Ended June 30) | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------------- | :----------------------------------- | | Net cash used in operating activities | $(765,094) | $(2,594,214) | | Net cash used in investing activities | $(15,466) | $(16,390) | | Net cash provided by financing activities | $746,040 | $3,597,841 | | NET CHANGE IN CASH | $(34,520) | $987,237 | | CASH, END OF PERIOD | $291,595 | $1,105,971 | [Notes to Condensed Consolidated Financial Statements](index=12&type=section&id=NOTES%20TO%20THE%20UNAUDITED%20CONDENSED%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering the Company's organization, significant accounting policies, business combination with iDoc, restatement of prior financials, and specific notes on leases, debt, equity, related party transactions, commitments, and fair value measurements [Note 1 Organization and Description of Business](index=12&type=section&id=Note%201%20Organization%20and%20Description%20of%20Business) VSee Health, a telehealth software company, completed a business combination with VSee Lab and iDoc in June 2024, but faces substantial doubt about its ability to continue as a going concern due to losses - VSee Health, Inc. is a Delaware-based telehealth software company providing a scalable, API-driven platform for virtual healthcare delivery, integrating secure video streaming with medical device data, EMRs, and other health information[25](index=25&type=chunk) - On June 24, 2024, the Company completed a business combination with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc., with Digital Health Acquisition Corp. changing its name to VSee Health, Inc. The transaction was accounted for as a reverse recapitalization, with VSee Lab, Inc. identified as the accounting acquirer[26](index=26&type=chunk) - Management has determined that the liquidity condition and historical operating losses raise **substantial doubt about its ability to continue as a going concern** for at least one year after the financial statements' issuance date[29](index=29&type=chunk) - To address going concern issues, the Company is implementing revenue enhancement strategies, including new contracts and market expansion (e.g., acquisition of iDoc), and pursuing additional financing, including an existing equity line of credit (ELOC) for up to **$50 million**[31](index=31&type=chunk) [Note 2 Restatement of Previously Issued Financial Statements](index=13&type=section&id=Note%202%20Restatement%20of%20Previously%20Issued%20Financial%20Statements) The Company restated its June 30, 2024, financial statements due to material misstatements in tax accruals, revenue, and compensation, significantly impacting key financial items - The Company restated its previously issued VSee Lab, Inc. condensed consolidated financial statements for June 30, 2024, due to material misstatements, including errors in sales and use tax accruals, revenue recognition, accrued expenses for DHAC and iDoc, and compensation obligations[32](index=32&type=chunk) Impact of Restatement on Consolidated Balance Sheet (June 30, 2024) | Metric | As Reported | Adjustment | As Restated | | :--------------------------------- | :---------- | :--------- | :---------- | | Accounts receivable | $2,513,855 | $(1,590,596) | $923,259 | | Prepaids and other current assets | $760,789 | $(500,000) | $260,789 | | Total current assets | $5,166,549 | $(2,090,596) | $3,075,953 | | Goodwill | $59,900,694 | $1,691,210 | $61,591,904 | | Total assets | $78,987,750 | $(399,386) | $78,588,364 | | Accounts payable and accrued liabilities | $6,752,985 | $1,291,896 | $8,044,881 | | ELOC Note | $500,000 | $(500,000) | $- | | Common stock issuance obligation | $- | $447,930 | $447,930 | | Total current liabilities | $22,879,867 | $1,239,826 | $24,119,693 | | Deferred tax liability | $- | $67,378 | $67,378 | | Total liabilities | $24,177,194 | $1,307,204 | $25,484,398 | | Additional paid-in-capital | $64,582,130 | $(906,436) | $63,675,694 | | Accumulated deficit | $(9,773,056) | $(800,154) | $(10,573,210) | | Total stockholders' equity (deficit) | $54,810,556 | $(1,706,590) | $53,103,966 | Impact of Restatement on Consolidated Statement of Operations (6 Months Ended June 30, 2024) | Metric | As Reported | Adjustment | As Restated | | :--------------------------------- | :---------- | :--------- | :---------- | | Revenues, technical engineering fees | $352,889 | $125,000 | $477,889 | | Total Revenue | $3,207,561 | $125,000 | $3,332,561 | | Cost of revenues | $872,893 | $447,930 | $1,320,823 | | Gross margin | $2,334,668 | $(322,930) | $2,011,738 | | Compensation and related benefits | $1,811,988 | $(5,668) | $1,806,320 | | General and administrative expenses | $660,398 | $118,838 | $779,236 | | Transaction expenses | $1,007,145 | $(752,500) | $254,645 | | Total operating expenses | $3,479,531 | $(639,330) | $2,840,201 | | Net operating (loss) profit | $(1,144,863) | $316,400 | $(828,463) | | Interest expense | $(359,005) | $7,860 | $(351,145) | | Total other income (expense), net | $(1,429,137) | $7,860 | $(1,421,277) | | (Loss) income before income taxes | $(2,574,000) | $324,260 | $(2,249,740) | | (Provision for) benefit from income tax | $2,241,208 | $(562,820) | $1,678,388 | | Net loss | $(332,792) | $(238,560) | $(571,352) | | Net loss attributable to stockholders | $(332,792) | $(238,560) | $(571,352) | | Basic and diluted net loss per common share | $(0.07) | $(0.04) | $(0.11) | [Note 3 Summary of Significant Accounting Policies](index=17&type=section&id=Note%203%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the Company's significant accounting policies, covering consolidation, segment reporting, revenue recognition, and fair value measurements - The Company's condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include VSee Health, VSee Lab, iDoc, Encompass Healthcare Billing, LLC, and This American Doc, Inc. (TAD)[37](index=37&type=chunk)[38](index=38&type=chunk) - The Company operates in two consolidated operating segments: Healthcare Technology (VSee Lab) and Telehealth Services (iDoc), with management evaluating performance and allocating resources based on these segments[41](index=41&type=chunk)[42](index=42&type=chunk) - Revenue is recognized in accordance with ASC 606, based on a five-step model, for various services including subscription fees, professional services, technical engineering fees, patient fees, telehealth fees, and institutional fees[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) Net Loss Per Common Share (6 Months Ended June 30) | Metric | 2025 | 2024 (Restated) | | :--------------------------------- | :--------- | :-------------- | | Net loss | $(6,572,723) | $(571,352) | | Weighted average shares outstanding – basic and diluted | 16,368,254 | 4,971,066 | | Net loss per share – basic and diluted | $(0.40) | $(0.11) | - The allowance for credit losses increased from **$2,393,033** as of December 31, 2024, to **$2,639,917** as of June 30, 2025, with credit loss expense recognized as **$246,884** for the six months ended June 30, 2025[80](index=80&type=chunk)[81](index=81&type=chunk) - Goodwill impairment assessment is performed annually and when triggering events occur. A non-cash goodwill impairment charge of **$56,675,210** was recorded for the year ended December 31, 2024, related to the Telehealth Services reporting unit. No impairment indicators were identified for the three and six months ended June 30, 2025[95](index=95&type=chunk) Intangible Assets, Net (June 30, 2025 vs. December 31, 2024) | Asset Type | June 30, 2025 | December 31, 2024 | | :------------------- | :-------------- | :---------------- | | Customer relationships | $2,115,000 | $2,100,000 | | Developed technology | $10,000,000 | $10,000,000 | | Less: Accumulated amortization | $(2,224,998) | $(1,105,000) | | Intangible assets, net | $9,890,002 | $10,995,000 | [Note 4 Business Combination](index=29&type=section&id=Note%204%20Business%20Combination) VSee Health completed a business combination with VSee Lab and iDoc on June 24, 2024, acquiring iDoc for **$68.9 million**, resulting in **$61.6 million** goodwill, later impaired by **$56.7 million** - On June 24, 2024, VSee Health, Inc. completed a Business Combination with VSee Lab and iDoc, a provider of tele-intensive acute and neurocritical care services. The transaction was accounted for as a reverse recapitalization with VSee Lab as the accounting acquirer[107](index=107&type=chunk) - The acquisition of iDoc enhanced the Company's platform by integrating iDoc's clinical capabilities in managing critically ill patients and supported the Company's strategy to expand its telehealth offerings[108](index=108&type=chunk) - At closing, the Company issued **5,542,500 shares of common stock** and **300 shares of Series A preferred stock** (convertible into 150,000 common shares), totaling **5,692,500 common shares** on an as-converted basis, with an aggregate consideration of **$68.9 million**[109](index=109&type=chunk) - The purchase price allocation included **$10 million** for developed technology and **$2.1 million** for customer relationships, resulting in approximately **$61.6 million in goodwill**. A goodwill impairment charge of **$56.7 million** was recorded in December 2024[110](index=110&type=chunk) [Note 5 Leases](index=29&type=section&id=Note%205%20Leases) Operating lease assets decreased to **$337,770** and liabilities to **$307,850**, while finance lease liabilities, now fully current, decreased to **$234,673** by June 30, 2025 Operating Lease Right-of-Use Assets, Net | Metric | June 30, 2025 | December 31, 2024 (Restated) | | :-------------------------- | :-------------- | :--------------------------- | | Office lease | $433,173 | $433,173 | | Less: Accumulated amortization | $(95,403) | $(53,588) | | Right-of-use assets, net | $337,770 | $379,585 | Operating Lease Liabilities | Metric | June 30, 2025 | December 31, 2024 (Restated) | | :-------------------------- | :-------------- | :--------------------------- | | Office lease | $307,850 | $342,174 | | Less: current portion | $(81,132) | $(72,836) | | Long term portion | $226,718 | $269,338 | Finance Lease Liabilities | Metric | June 30, 2025 | December 31, 2024 (Restated) | | :-------------------------- | :-------------- | :--------------------------- | | Equipment lease | $234,673 | $328,833 | | Less: Current portion | $(234,673) | $(328,833) | | Long term portion | $— | $— | - The entirety of the finance lease liability has been reclassified to current liabilities as of June 30, 2025, and December 31, 2024, due to a revised forbearance agreement with a repayment expected by November 2025[118](index=118&type=chunk)[123](index=123&type=chunk) [Note 6 Accounts Payable and Accrued Liabilities](index=32&type=section&id=Note%206%20Accounts%20Payable%20and%20Accrued%20Liabilities) Total accounts payable and accrued liabilities increased to **$9.6 million** by June 30, 2025, driven by higher sales and use tax and financing lease liabilities, partially offset by lower compensation accruals Components of Accounts Payable and Accrued Liabilities | Component | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Accounts payable | $4,402,224 | $4,283,397 | | Accrued compensation and benefits | $2,090,240 | $2,176,070 | | Accrued interest | $536,796 | $558,358 | | Accrued sales and use tax | $1,157,346 | $999,547 | | Accrued financing lease | $543,770 | $446,890 | | Other accrued liabilities | $890,513 | $879,397 | | **Total** | **$9,620,889** | **$9,343,659** | [Note 7 Factoring Payable](index=32&type=section&id=Note%207%20Factoring%20Payable) The Company assumed **$143,220** in unsecured, non-interest-bearing factoring payables from iDoc as part of the June 2024 business combination, subject to weekly adjustments - The Company assumed factoring payable liabilities from iDoc as a result of the June 24, 2024, Business Combination. These agreements are generally unsecured, non-interest-bearing, and subject to weekly adjustments based on future receipts[125](index=125&type=chunk) Factoring Payable Balances | Agreement Date | June 30, 2025 | December 31, 2024 | | :------------------- | :-------------- | :---------------- | | June 21, 2023 | $51,300 | $59,527 | | June 28, 2023 | $17,320 | $34,315 | | October 13, 2023 | $74,600 | $85,166 | | **Total Factoring Payable** | **$143,220** | **$179,007** | [Note 8 Line of Credit and Notes Payable](index=34&type=section&id=Note%208%20Line%20of%20Credit%20and%20Notes%20Payable) This note details various notes payable and lines of credit, including defaulted notes, new convertible notes, and an ELOC, with many financial instruments measured at fair value due to embedded features Summary of Notes Payable (June 30, 2025 vs. December 31, 2024) | Note Payable | June 30, 2025 | December 31, 2024 (Restated) | | :--------------------------------- | :-------------- | :--------------------------- | | Note payable issued Nov 29, 2021 | $336,983 | $336,983 | | Note payable issued Dec 1, 2021 | $1,500,600 | $1,500,600 | | Note payable issued Aug 18, 2023 | $64,000 | $64,000 | | Note payable issued Nov 29, 2023 | $33,000 | $33,000 | | **Total notes payable and line of credit** | **$1,934,583** | **$1,934,583** | | Less: Current portion | $(433,983) | $(433,983) | | Less: Fair value adjustment for debt | $(906,659) | $(906,659) | | **Total notes payable, net of current portion** | **$593,941** | **$593,941** | - Several assumed notes payable (November 29, 2021; December 1, 2021; August 3, 2023; August 18, 2023) are currently in default, leading to increased interest rates (e.g., **26% per annum** for some defaulted notes) and full classification as current liabilities[130](index=130&type=chunk) - The March 2025 Convertible Note (**$108,696 principal**) and May 2025 Convertible Note (**$216,871 principal**) were issued in 2025, both accounted for at fair value due to embedded features, with significant losses recognized on initial recognition or extinguishment of prior notes[132](index=132&type=chunk)[137](index=137&type=chunk)[149](index=149&type=chunk) - The Exchange Note, Quantum Convertible Note, and September 2024 Convertible Note are share-settled debt instruments accounted for as liabilities under ASC 480 and re-measured at fair value each reporting period, with significant changes in fair value recognized in earnings[166](index=166&type=chunk)[182](index=182&type=chunk)[204](index=204&type=chunk) - The Equity Line of Credit (ELOC) Agreement allows the Company to sell up to **$50,000,000** of common stock over 36 months. It is classified as a liability under ASC 815 and re-measured at fair value, with a floor price of **$1.25 per share** as of March 20, 2025[185](index=185&type=chunk)[187](index=187&type=chunk)[191](index=191&type=chunk) [Note 9 Related Party](index=47&type=section&id=Note%209%20Related%20Party) This note details various related party transactions, including loans from VSee Lab's CEO, a note receivable from iDoc's CEO, and advances from DHAC's Sponsor, many converted to equity - VSee Lab incurred several promissory notes from its then CEO, Milton Chen, totaling **$323,000** in principal, with default interest rates of **26% per annum**. Accrued interest balances as of June 30, 2025, were **$64,991**, **$72,459**, and **$27,253** respectively[210](index=210&type=chunk) - iDoc had a related party balance due from its then CEO, Imoigele Aisiku, of **$241,122** as of June 30, 2025, which is unsecured and non-interest-bearing. A **$336,000** note receivable from Mr. Aisiku was written off in 2024, resulting in a **$245,500 loss**[209](index=209&type=chunk)[211](index=211&type=chunk) - DHAC had various loans and advances from its Sponsor and affiliates, totaling **$1,268,000**, which were converted into Series A Preferred Stock at the closing of the Business Combination. Additionally, **$405,000** in working capital advances from SCS (a Sponsor affiliate) were converted into **202,500 shares of Common Stock**, treated as a troubled debt restructuring[212](index=212&type=chunk)[213](index=213&type=chunk)[219](index=219&type=chunk) - SCS Capital Partners LLC, a Sponsor affiliate, owns approximately **40.74%** of the Quantum Investor, which subscribed for the **$3,000,000 Quantum Convertible Note**[213](index=213&type=chunk) [Note 10 Commitments, Contingencies, and Concentration Risk](index=51&type=section&id=Note%2010%20Commitments,%20Contingencies,%20and%20Concentration%20Risk) The Company faces legal proceedings, commitments for robots and reseller agreements, and credit risk concentrations with key customers, alongside a significant sales tax liability - The Company is involved in a pending lawsuit for alleged breach of contract and unjust enrichment, with settlement discussions actively ongoing. The Company believes the resolution will not have a material adverse effect on its business[215](index=215&type=chunk)[216](index=216&type=chunk)[217](index=217&type=chunk) - Commitments include an unpaid **$179,900** for telepresence robots, a **$200,000** promissory note with a related party where payments are based on **80% of monthly revenue** from deployed robots, and a **$413,731** commitment on a reseller agreement for international market expansion[223](index=223&type=chunk) - The Company faces concentrations of credit risk in cash and trade accounts receivables. As of June 30, 2025, **two customers represented 35% of total accounts receivable**, and **one customer accounted for approximately 29% of total revenue** for the three months ended June 30, 2025[224](index=224&type=chunk)[225](index=225&type=chunk)[226](index=226&type=chunk) - A sales tax liability of **$1,157,346** was recorded as of June 30, 2025, with **$89,885** in sales tax expense recognized for the three months ended June 30, 2025[228](index=228&type=chunk) [Note 11 Income Taxes](index=54&type=section&id=Note%2011%20Income%20Taxes) For the six months ended June 30, 2025, the Company reported a **$(6.5 million) loss before taxes** and an income tax expense of **$17,989**, resulting in a **(0.27%) effective tax rate** Loss Before Income Taxes (6 Months Ended June 30) | Geographic Area | 2025 | 2024 | | :-------------- | :----------- | :----------- | | United States | $(6,544,734) | $(2,249,740) | | Total | $(6,544,734) | $(2,249,740) | Income Tax Expense and Effective Tax Rate (6 Months Ended June 30) | Metric | 2025 | 2024 | | :-------------------- | :--------- | :----------- | | Income tax expense (benefit) | $17,989 | $(1,678,388) | | Effective tax rate | (0.27%) | 74.6% | | Statutory federal income tax rate | 21.0% | 21.0% | - The effective tax rate varied from the statutory federal income tax rate primarily due to state income taxes, adjustments for meals, entertainment and penalties, changes in fair value of financial instruments, stock compensation expenses, and changes to valuation allowance[229](index=229&type=chunk)[230](index=230&type=chunk) [Note 12 Equity](index=56&type=section&id=Note%2012%20Equity) The Company has authorized preferred and common stock, with **6,158 Series A Preferred** and **16.4 million common shares** outstanding, alongside stock options and a common stock issuance obligation - The Company has **10,000,000 authorized preferred shares** (**$0.0001 par value**), with **6,158 Series A Preferred Stock shares** issued and outstanding as of June 30, 2025. These shares have voting rights, cumulative participating dividends, and are convertible into common stock at the holder's option[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - The Company is authorized to issue **100,000,000 shares of common stock** (**$0.0001 par value**), with **16,422,690 shares outstanding** as of June 30, 2025, an increase from **16,297,190 shares** at December 31, 2024[239](index=239&type=chunk) - The 2024 Equity Incentive Plan reserves **2,544,021 shares of common stock**, with **803,646 stock options** granted at the closing of the Business Combination on June 24, 2024, at an exercise price of **$12.11**[240](index=240&type=chunk) - A common stock issuance obligation of **$59,383** as of June 30, 2025 (down from **$69,621** at December 31, 2024) for iDoc employees is classified as a liability and re-measured at fair value each reporting date[243](index=243&type=chunk) [Note 13 Warrants](index=58&type=section&id=NOTE%2013%20Warrants) The Company has **12.99 million** equity-classified warrants outstanding, including Public, Private, Bridge, Extension, and September 2024 Warrants, with a weighted average exercise price of **$9.65** - The Company's Public, Private, Bridge, Extension, and September 2024 Warrants are classified as equity instruments under ASC 480 and ASC 815, as they meet the requirements for equity classification[245](index=245&type=chunk) Summary of Warrants Outstanding (June 30, 2025) | Warrant Type | Outstanding (Shares) | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | | :------------------- | :------------------- | :------------------------------ | :-------------------------------------- | | Public Warrants | 11,500,000 | $11.50 | 3.98 | | Private Warrants | 557,000 | $11.50 | 3.98 | | Bridge Warrants | 173,913 | $11.50 | 2.26 | | Extension Warrants | 26,086 | $11.50 | 2.85 | | September 2024 Warrants | 740,741 | $2.25 | 4.25 | | **Total** | **12,997,740** | **$9.65** | **3.46** | - Public and Private Warrants have an exercise price of **$11.50** and expire on the fifth anniversary of the business combination. They are redeemable by the Company at **$0.01 per warrant** if the common stock price equals or exceeds **$18.00** for 20 trading days within a 30-day period[246](index=246&type=chunk)[247](index=247&type=chunk) - September 2024 Warrants, issued to an institutional investor, are exercisable at **$2.25 per share** for five years and are subject to standard and down-round antidilution adjustments[253](index=253&type=chunk) [Note 14 Reportable segments](index=59&type=section&id=NOTE%2014%20Reportable%20segments) The Company operates in Healthcare Technology and Telehealth Services segments; for H1 2025, Technology generated **$4.46 million** revenue with a **$(83,969) loss**, while Telehealth generated **$2.25 million** revenue with a **$(1.3 million) loss** - The Company has two reportable segments: Healthcare Technology (VSee Lab) and Telehealth Services (iDoc), which align with how the Co-CEOs review results and allocate resources[254](index=254&type=chunk)[257](index=257&type=chunk)[258](index=258&type=chunk) Segment Revenues and Operating Income (Loss) (6 Months Ended June 30, 2025) | Metric | Technology | Telehealth | Total | | :--------------------------------- | :----------- | :----------- | :----------- | | Total revenues | $4,458,800 | $2,252,805 | $6,711,604 | | Cost of revenues | $2,435,618 | $827,523 | $3,263,141 | | Segment gross margin | $2,023,181 | $1,425,282 | $3,448,463 | | Segment operating income (loss) | $(83,969) | $(1,300,001) | $(1,383,970) | Segment Total Assets (June 30, 2025 vs. December 31, 2024) | Segment | June 30, 2025 | December 31, 2024 | | :-------------------- | :-------------- | :---------------- | | Technology | $1,016,971 | $1,503,995 | | Telehealth | $17,138,696 | $18,271,724 | | Non-operating corporate | $54,374 | $216,769 | | **Total** | **$18,210,041** | **$19,992,488** | Segment Depreciation and Amortization (6 Months Ended June 30) | Segment | 2025 | 2024 | | :---------- | :------- | :------- | | Technology | $4,888 | $1,716 | | Telehealth | $1,289,749 | $375 | | **Total** | **$1,294,636** | **$2,091** | Segment Interest Expense (6 Months Ended June 30) | Segment | 2025 | 2024 | | :-------------------- | :--------- | :--------- | | Technology | $21,155 | $47,205 | | Telehealth | $112,170 | $3,941 | | Non-Operating corporate | $837,919 | $299,999 | | **Total** | **$971,244** | **$351,145** | [Note 15 Fair Value Measurements](index=64&type=section&id=NOTE%2015%20Fair%20Value%20Measurements) This note details fair value measurements for financial liabilities, primarily Level 3 instruments like convertible notes, valued using Monte Carlo models, while common stock issuance obligation is Level 1 Fair Value of Financial Liabilities (June 30, 2025) | Liabilities | Fair Value | Level 1 | Level 2 | Level 3 | | :--------------------------------- | :--------- | :------ | :------ | :--------- | | Exchange Note | $2,485,636 | $— | $— | $2,485,636 | | Equity line of credit | $59,843 | $— | $— | $59,843 | | Quantum Convertible Note, related party | $3,580,612 | $— | $— | $3,580,612 | | September 2024 Convertible Note | $2,918,875 | $— | $— | $2,918,875 | | Common stock issuance obligation | $59,383 | $59,383 | $— | $— | | March 2025 Convertible Note | $194,791 | $— | $— | $194,791 | | May 2025 Convertible Note | $342,996 | $— | $— | $342,996 | - The Quantum Convertible Note, Exchange Note, ELOC Agreement, September 2024 Convertible Note, March 2025 Convertible Note, and May 2025 Convertible Note are classified within **Level 3** of the fair value hierarchy due to the use of unobservable inputs in their valuation models (e.g., Monte Carlo model)[269](index=269&type=chunk)[271](index=271&type=chunk)[273](index=273&type=chunk) - The common stock issuance obligation is classified within **Level 1** of the fair value hierarchy as its fair value is estimated based on the observable closing price of the Company's common stock[278](index=278&type=chunk) Level 3 Changes in Fair Value of Derivatives (December 31, 2024 to June 30, 2025) | Metric | Quantum Convertible Note | Exchange Note | ELOC | September Convertible Note | Common Stock Issuance Obligation | March 2025 Convertible Note | May 2025 Convertible Note | Total | | :--------------------------------- | :----------------------- | :------------ | :----- | :------------------------- | :------------------------------- | :-------------------------- | :------------------------ | :---------- | | Fair value as of December 31, 2024 | $3,248,000 | $1,499,000 | $80,000 | $2,094,000 | $69,621 | $— | $— | $6,990,621 | | Initial fair value at issuance | $— | $— | $— | $— | $— | $238,020 | $342,996 | $581,016 | | (Gain) Loss on change in fair value | $332,612 | $986,636 | $(20,157) | $824,875 | $(10,238) | $(43,229) | $— | $2,070,499 | | Fair value as of June 30, 2025 | $3,580,612 | $2,485,636 | $59,843 | $2,918,875 | $59,383 | $194,791 | $342,996 | $9,642,136 | [Note 16 Subsequent Events](index=68&type=section&id=Note%2016%20Subsequent%20Events) Subsequent events include the issuance of the ELOC Commitment Fee Note, Quantum Note maturity extension, conversions of bridge and exchange notes, and new loan agreements with Change Capital and an October 2025 Note - On July 2, 2025, the Company issued the ELOC Commitment Fee Note (**$500,000 principal**) payable in common stock. On July 3, 2025, the Quantum Note's maturity date was extended to June 30, 2026, with **18 months of guaranteed interest**[284](index=284&type=chunk)[285](index=285&type=chunk) - In August 2025, Additional Bridge Notes (**$32,408 principal**) and the Exchange Note (**$500,000 principal**) were converted into **14,199** and **213,759 shares of common stock**, respectively[286](index=286&type=chunk)[287](index=287&type=chunk) - On September 5, 2025, the Company entered a Master Business Loan Agreement (MBLA) with Change Capital Holdings I, LLC for up to **$2,500,001** in advances. An initial advance of **$525,000** was secured by a junior lien on all Company assets and personal guarantees from Co-CEOs and CFO[288](index=288&type=chunk) - On October 9, 2025, the Company issued a secured, non-convertible promissory note (October 2025 Note) for **$133,333** (purchase price **$120,000**), bearing **5% annual interest** and secured by all Company assets, subordinated to existing debt[289](index=289&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=70&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses VSee Health's financial condition and operations, focusing on the impact of the June 2024 business combination, revenue growth, increased expenses, net loss, and liquidity [Overview](index=70&type=section&id=Overview) VSee Health, formed by the June 2024 business combination of VSee Lab and iDoc, provides a scalable telehealth software platform and high-acuity patient care solutions - VSee Health, Inc. completed a business combination with VSee Lab and iDoc on June 24, 2024, transforming from a blank check company into a telehealth software and services provider[291](index=291&type=chunk) - VSee Lab's core platform is a highly scalable, API-driven technology for virtual healthcare delivery, offering customizable and white-labeled solutions with deep integration across the healthcare ecosystem, enabling clinicians to configure workflows with low-code/no-code tools[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - iDoc, a wholly-owned subsidiary, provides high-acuity patient care solutions, including elite physician services in intensive care units, specializing in neuro-critical care, general tele-critical care, and specialty e-consults to various hospital systems and facilities[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) [Implications of Being an Emerging Growth Company](index=72&type=section&id=Implications%20of%20Being%20an%20Emerging%20Growth%20Company) As an emerging growth and smaller reporting company, VSee Health benefits from reduced reporting requirements and an extended transition period for new accounting standards - VSee Health is an 'emerging growth company' and 'smaller reporting company,' allowing it to take advantage of exemptions from certain reporting requirements, such as auditor attestation for Section 404 of Sarbanes-Oxley and reduced executive compensation disclosures[298](index=298&type=chunk)[300](index=300&type=chunk) - The Company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, meaning it will adopt new standards at the same time as private companies, which may impact comparability with other public companies[299](index=299&type=chunk) [Performance Factors](index=72&type=section&id=Performance%20Factors) VSee Health's future performance depends on capitalizing on the telehealth market, expanding customer base through industry relationships, and continuous innovation to address existing solution limitations - Future performance depends on capitalizing on the rapid transformation of the telehealth market, which is characterized by strong future growth and an attractive value proposition from the Company's current offerings[301](index=301&type=chunk) - The Company aims to expand within the market and attract new customers by leveraging industry relationships with government, hospital systems, and insurance providers, as telehealth is still in its infancy stages[302](index=302&type=chunk) - Innovation and new product offerings are critical for long-term success, as existing telehealth solutions often lack healthcare-specific design, device integration, optimized backend coordination, and robust functionality, which the Company's technology aims to address[304](index=304&type=chunk)[305](index=305&type=chunk) [Critical Accounting Estimates](index=74&type=section&id=Critical%20Accounting%20Estimates) This section outlines critical accounting estimates requiring significant management judgment, including revenue recognition, fair value measurements, goodwill impairment, and income taxes, which can materially affect financial statements - Critical accounting estimates involve significant management judgment and affect reported amounts, including revenue recognition (ASC 606), fair value of financial instruments (ASC 820), goodwill impairment (ASC 350), impairment of long-lived and intangible assets (ASC 360-10), and income taxes (ASC 740-10)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Revenue recognition follows a five-step model under ASC 606, involving identifying contracts, performance obligations, transaction price, allocation, and timing of recognition for various service types (subscription, professional, patient, telehealth, institutional fees)[310](index=310&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk) - Goodwill is evaluated for impairment at the reporting unit level, with a non-cash goodwill impairment charge of **$56,675,210** recorded in 2024 for the Telehealth Services unit. No impairment indicators were identified for the three and six months ended June 30, 2025[340](index=340&type=chunk)[341](index=341&type=chunk) [Financial Statement Components (Results of Operations)](index=80&type=section&id=Financial%20Statement%20Components) For H1 2025, total revenue increased by **101%** to **$6.7 million**, but net loss widened by **1050%** to **$(6.6) million** due to surging cost of revenues and operating expenses Results of Operations (6 Months Ended June 30) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :--------------------------------- | :----------- | :----------- | :----------- | :----------- | | Revenue | $6,711,604 | $3,332,561 | $3,379,043 | 101% | | Cost of revenues | $3,263,141 | $1,320,823 | $1,942,318 | 147% | | Gross margin | $3,448,463 | $2,011,738 | $1,436,725 | 71% | | Operating expenses | $7,534,521 | $2,840,201 | $4,694,320 | 165% | | Other income (expense) | $(2,468,676) | $(1,421,277) | $(1,047,399) | 74% | | Net loss before taxes | $(6,554,734) | $(2,249,740) | $4,304,994 | 191% | | Income tax benefit | $(17,989) | $1,678,388 | $(1,696,377) | 101% | | Net loss | $(6,572,723) | $(571,352) | $(6,001,371) | 1050% | - Total revenue increased by **101%** for the six months ended June 30, 2025, driven by a **3,501% increase in iDoc revenue** (primarily patient and telehealth fees) from its acquisition, and higher professional services and technical engineering fees related to the HHS contract. This was partially offset by an **18% decline in subscription revenue**[351](index=351&type=chunk) - Cost of goods sold increased by **147%** for the six months ended June 30, 2025, mainly due to **146% higher compensation expenses** (from HHS contract support and iDoc acquisition) and **623% higher procurement of medical devices** for the HHS project[354](index=354&type=chunk) - Operating expenses rose by **165%** for the six months ended June 30, 2025, primarily due to a **440% increase in general and administrative expenses** (from iDoc acquisition, amortization, bad debt, insurance, and DHAC recapitalization professional fees) and **84% higher compensation-related expenses**[357](index=357&type=chunk) - Other expense increased by **74%** for the six months ended June 30, 2025, driven by a **$1,964,396 loss on change in fair value of debt and derivative financial instruments** and a **$620,099 increase in interest expense**, partially offset by the absence of a prior period initial fair value loss on the Quantum Note and **$183,007 in other income (ERC)**[359](index=359&type=chunk) [Cash Flows](index=84&type=section&id=Cash%20Flows) Net cash used in operating activities improved to **$(0.77) million**, while financing cash decreased to **$0.75 million**, resulting in a **$(34,520) net cash decrease** for H1 2025 Selected Cash Flow Captions (6 Months Ended June 30) | Cash Flow Activity | 2025 | 2024 | | :--------------------------------- | :----------- | :----------- | | Net cash used in operating activities | $(765,094) | $(2,594,214) | | Net cash used in investing activities | $(15,466) | $(16,390) | | Net cash provided by financing activities | $746,040 | $3,597,841 | | Change in cash | $(34,520) | $987,237 | - Cash used in operating activities improved to **$(765,094)** for the six months ended June 30, 2025, from a net loss of **$(6,572,723)**, adjusted by **$4,027,812** in non-cash items and a **$1,779,817 increase in net changes in operating assets and liabilities** (primarily accounts payable and deferred revenue)[364](index=364&type=chunk) - Cash provided by financing activities for the six months ended June 30, 2025, was **$746,040**, mainly from **$816,871 in proceeds from new notes** (M2B, Ascent, FWE Capital) offset by payments to shareholders, factoring payables, and finance lease liabilities[367](index=367&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=85&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, VSee Health, Inc. is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, VSee Health, Inc. is exempt from providing quantitative and qualitative disclosures about market risk[369](index=369&type=chunk) [Item 4. Controls and Procedures](index=85&type=section&id=Item%204.%20Controls%20and%20Procedures) As of June 30, 2025, VSee Health's disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting. These weaknesses include insufficient accounting personnel for segregation of duties, ineffective IT General Controls (access controls), lack of formalized control environment, and inadequate accounting for significant or non-recurring transactions. Management believes these issues will persist without additional funding for the accounting department, though they assert the financial statements fairly represent the Company's condition - As of June 30, 2025, the Company's disclosure controls and procedures were not effective due to **material weaknesses in internal control over financial reporting**[370](index=370&type=chunk) - Material weaknesses include insufficient accounting personnel for segregation of duties, ineffective IT General Controls (access controls), lack of formalized control environment and oversight, and inadequate accounting for significant or non-recurring transactions[371](index=371&type=chunk) - Management anticipates these material weaknesses will not be remediated without additional funding for the accounting department, but believes the consolidated financial statements fairly represent the Company's financial condition[372](index=372&type=chunk)[373](index=373&type=chunk) - Subsequent to quarter-end, the Company has enhanced processes to identify and apply accounting requirements, including improved access to accounting literature and increased communication, though remediation will take time[376](index=376&type=chunk) [PART II — OTHER INFORMATION](index=86&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=86&type=section&id=Item%201.%20Legal%20Proceedings) The Company is subject to claims, lawsuits, and other legal and administrative proceedings in the ordinary course of business. While defending such proceedings is costly and burdensome, management does not believe that any currently pending litigation, if determined adversely, would individually or in aggregate have a material adverse effect on the Company's business, operating results, cash flows, or financial condition - The Company is subject to claims, lawsuits, and legal proceedings in the ordinary course of business, which can be costly and burdensome[378](index=378&type=chunk) - Management believes that no currently pending litigation would individually or in aggregate have a material adverse effect on the Company's business, operating results, cash flows, or financial condition[378](index=378&type=chunk) [Item 1A. Risk Factors](index=86&type=section&id=Item%201A.%20Risk%20Factors) The Company refers readers to the risk factors discussed in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and does not believe there have been any material changes to these risks. Additional unknown or currently immaterial risks may also adversely affect the business - Readers should consider the risk factors discussed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024[379](index=379&type=chunk) - The Company does not believe there have been any material changes to the previously disclosed risk factors, but acknowledges that additional unknown or immaterial risks could adversely affect the business[379](index=379&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=86&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) For the fiscal quarter ended June 30, 2025, there were no unregistered securities to report that had not been previously disclosed in prior SEC filings - No unregistered sales of equity securities or use of proceeds were reported for the fiscal quarter ended June 30, 2025, that had not been previously disclosed[380](index=380&type=chunk) [Item 3. Defaults Upon Senior Securities](index=86&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - This item is not applicable[381](index=381&type=chunk) [Item 4. Mine Safety Disclosures](index=86&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - This item is not applicable[382](index=382&type=chunk) [Item 5. Other Information](index=86&type=section&id=Item%205.%20Other%20Information) During the six months ended June 30, 2025, no directors or officers informed the Company of the adoption or termination of any Rule 10b5-1 trading arrangements or non-Rule 10b5-1 trading arrangements - No directors or officers reported the adoption or termination of Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the six months ended June 30, 2025[383](index=383&type=chunk) [Item 6. Exhibits](index=87&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q, including organizational documents, certifications, and XBRL taxonomy documents - The exhibits filed include the Second Amended and Restated Certificate of Incorporation, Certificate of Designation of Series A Convertible Preferred Stock, Amended and Restated Bylaws, CEO and CFO certifications, and XBRL taxonomy documents[386](index=386&type=chunk) [Signatures](index=88&type=section&id=Signatures) The report is signed by Imoigele Aisiku, Co-Chief Executive Officer and Chairman of the Board, and Jerry Leonard, Chief Financial Officer and Secretary, on October 15, 2025, certifying its submission in accordance with the Exchange Act - The report is signed by Imoigele Aisiku, Co-Chief Executive Officer and Chairman of the Board, and Jerry Leonard, Chief Financial Officer and Secretary, on October 15, 2025[390](index=390&type=chunk)

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 or For the transition period from to Commission File Number: 001-41015 VSee Health, Inc. (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-41015 VSee Health, Inc. (Exact name of registrant as specified in its charter) Delaware 86-2970927 (State or other ...

Game-Changing AI-Powered Telehealth Redefining the $787 Billion Digital Healthcare MarketVSee Health, Inc. (Nasdaq: VSEE): Major Clients Include NASA, U.S. Department of Health and Human Services, McKesson, DaVita and the Entire Nation of QatarHARRISON TOWNSHIP, N.J., April 2, 2025 /PRNewswire/ -- The healthcare industry is undergoing a significant transformation, and VSee Health, Inc. (Nasdaq: VSEE) is at the forefront, pioneering AI-driven telehealth solutions that are revolutionizing patient care. As a l ...

[Company Overview and Highlights](index=1&type=section&id=Company%20Overview%20and%20Highlights) VSee Health reported significant revenue growth for Q3 and the nine months ended September 30, 2024, driven by strategic acquisitions and expanded service offerings, alongside key business developments [Financial & Business Highlights](index=1&type=section&id=Financial%20%26%20Business%20Highlights) VSee Health reported significant revenue growth for Q3 and the nine months ended September 30, 2024, driven by strategic acquisitions and expanded service offerings. Key business developments include new partnerships, product launches, and initiatives aimed at addressing healthcare disparities and expanding access Financial & Business Highlights Table | Metric | Q3 2024 (USD) | Q3 2023 (USD) | Change (%) | 9M 2024 (USD) | 9M 2023 (USD) | Change (%) | | :----------------- | :------------ | :------------ | :--------- | :------------ | :------------ | :--------- | | Revenue | $3.4 million | $1.5 million | 131% | $6.6 million | $4.3 million | 51% | - Contracted with Seven Corners Correctional Health to provide specialty care to inmates in **24 federal prisons**[4](index=4&type=chunk) - Expanded telehealth and billing services to major healthcare clients, including nonprofit, hospital, and Fortune 20 corporate clients, through a partnership with SkywardRx[4](index=4&type=chunk) - Launched 'Aimee,' a virtual healthcare, labs, and prescription drug service providing low-cost access to quality healthcare for insured and uninsured patients[4](index=4&type=chunk) - Introduced a GLP-1 telehealth program to address obesity and chronic diseases, integrating prescription medication, personalized care plans, and behavioral interventions[4](index=4&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management highlighted the third quarter as a transformative period, marking the first full quarter post-merger of VSee Lab and iDoc Virtual Telehealth Solutions, emphasizing its strengthened position in delivering scalable, tailored telehealth solutions and commitment to addressing critical healthcare challenges - The third quarter marks a transformative moment, completing the first full quarter post-merger of VSee Lab and iDoc Virtual Telehealth Solutions, solidifying the company's position in **scalable telehealth solutions**[5](index=5&type=chunk) - The combined company is uniquely positioned to address critical challenges in healthcare, including expanding access in underserved communities and optimizing workflows for enterprise-level clients[5](index=5&type=chunk) - Strategic initiatives and partnerships, such as programs addressing obesity, maternal health disparities, and veteran care, exemplify the commitment to delivering scalable solutions that improve lives and create **long-term stakeholder value**[5](index=5&type=chunk) [Unaudited Financial Performance](index=1&type=section&id=Unaudited%20Financial%20Performance) This section details VSee Health's unaudited financial results for Q3 and the nine months ended September 30, 2024, highlighting revenue growth, significant net losses due to goodwill impairment, and cash position [Third Quarter 2024 Financial Results](index=1&type=section&id=Third%20Quarter%202024%20Financial%20Results) VSee Health experienced substantial revenue growth in Q3 2024, primarily due to the iDoc acquisition and increased service fees, but recorded a significant net loss driven by one-time goodwill impairment charges [Revenue Analysis](index=1&type=section&id=Revenue%20Analysis_Q3) Q3 2024 revenue saw a 131% increase, primarily driven by the iDoc acquisition and significant growth in technical and engineering fees Revenue Analysis Table | Metric | Q3 2024 (USD) | Q3 2023 (USD) | Change (%) | | :--------------- | :------------ | :------------ | :--------- | | Total Revenue | $3.4 million | $1.5 million | 131% | | iDoc Acquisition | $1.1 million | N/A | 100% | | Tech & Eng Fees | N/A | N/A | 267% | | Prof & Other Fees| N/A | N/A | 40% | | Subscription Rev | N/A | N/A | 9% | - The increase in technical and engineering fees was due to a higher volume of engineering, customizations, and integration services provided to the U.S. Department of Health and Human Services and existing customers[7](index=7&type=chunk) [Operating Expenses and Net Loss](index=2&type=section&id=Operating%20Expenses%20and%20Net%20Loss_Q3) Q3 2024 operating expenses surged due to a $55.0 million goodwill impairment charge, leading to a substantial net loss partially offset by gains on financial instruments Operating Expenses and Net Loss Table | Metric | Q3 2024 (USD) | Q3 2023 (USD) | Change (USD) | | :----------------- | :------------ | :------------ | :----------- | | Operating Expenses | N/A | N/A | +$58.2 million | | Net Loss | $51.8 million | $0.1 million | +$51.7 million | | Goodwill Impairment| $55.0 million | N/A | N/A | - The increase in operating expenses was primarily driven by one-time goodwill impairment charges of **$55.0 million**, higher general and administrative expenses (including amortization and iDoc acquisition-related expenses), and transaction-related expenses[8](index=8&type=chunk) - The net loss was partially offset by a **$5.7 million gain** on the change in fair value of debt and derivative financial instruments[9](index=9&type=chunk) [Nine Months Ended September 30, 2024 Financial Results](index=2&type=section&id=Nine%20Months%20Ended%20September%2030%2C%202024%20Financial%20Results) For the nine months ended September 30, 2024, VSee Health reported a 51% increase in revenue, largely due to the iDoc acquisition and growth in technical and professional services, but incurred a substantial net loss primarily from goodwill impairment charges and other one-time losses [Revenue Analysis](index=2&type=section&id=Revenue%20Analysis_9M) Total revenue for the nine months ended September 30, 2024, increased by 51%, driven by the iDoc acquisition and growth in technical and professional fees, despite a slight decline in subscription revenue Revenue Analysis Table | Metric | 9M 2024 (USD) | 9M 2023 (USD) | Change (USD) | Change (%) | | :--------------- | :------------ | :------------ | :----------- | :--------- | | Total Revenue | $6.6 million | $4.3 million | +$2.2 million| 51% | | iDoc Acquisition | 100% of revenue | N/A | N/A | N/A | | Tech & Eng Fees | N/A | N/A | N/A | 161% | | Prof & Other Fees| N/A | N/A | N/A | 50% | | Subscription Rev | N/A | N/A | N/A | -2% | - Subscription revenue declined by **2%** due to churned enterprise customers in 2024, as some clients shifted back to face-to-face consultations[10](index=10&type=chunk) [Operating Expenses and Net Loss](index=2&type=section&id=Operating%20Expenses%20and%20Net%20Loss_9M) Operating expenses for the nine months ended September 30, 2024, significantly increased due to a $55.0 million goodwill impairment charge and other transaction-related costs, resulting in a substantial net loss Operating Expenses and Net Loss Table | Metric | 9M 2024 (USD) | 9M 2023 (USD) | Change (USD) | | :----------------- | :------------ | :------------ | :----------- | | Operating Expenses | $63.0 million | N/A | +$58.6 million | | Net Loss | $52.1 million | $1.0 million | +$51.1 million | | Goodwill Impairment| $55.0 million | N/A | N/A | | Quantum Note Loss | $1.6 million | N/A | N/A | | Loss on Extinguishment | $0.7 million | N/A | N/A | - The increase in operating expenses was primarily driven by one-time goodwill impairment charges of **$55.0 million**, higher general and administrative expenses, and transaction expenses from recapitalization and acquisitions[11](index=11&type=chunk) - The net loss was partially offset by a **$6.3 million gain** on the change in fair value of debt and derivative financial instruments[12](index=12&type=chunk) [Cash Position](index=2&type=section&id=Cash%20Position_9M) As of September 30, 2024, VSee Health reported a cash balance of $2.3 million Cash Position Table | Metric | As of Sep 30, 2024 (USD) | | :----- | :----------------------- | | Cash | $2.3 million | [Pro Forma Financial Information](index=2&type=section&id=Pro%20Forma%20Financial%20Information) This section presents pro forma financial results, assuming the iDoc acquisition occurred at the beginning of 2023, to provide a comparable view of the company's performance [Pro Forma Financial Summary](index=2&type=section&id=Pro%20Forma%20Financial%20Summary) Pro forma financial results, assuming the iDoc acquisition occurred at the beginning of 2023, show a slight increase in Q3 2024 revenue and a decrease in net loss for both Q3 and the nine-month period compared to the prior year Pro Forma Financial Summary Table | Metric | Q3 2024 (USD) | Q3 2023 (USD) | 9M 2024 (USD) | 9M 2023 (USD) | | :----------------- | :------------ | :------------ | :------------ | :------------ | | Total Revenues | $3,354,437 | $3,076,235 | $9,191,682 | $9,390,435 | | Net Loss | $(368,063) | $(1,322,199) | $(2,436,877) | $(3,435,940) | | Net Loss Per Share | $(0.02) | $(0.09) | $(0.16) | $(0.24) | - Pro forma total revenues for the nine months ended September 30, 2024, were **$9.2 million**, a slight decrease from **$9.4 million** for the same period in 2023[15](index=15&type=chunk) - The pro forma net loss for Q3 2024 significantly improved to **$0.4 million** (EPS **$(0.02)**) from **$1.3 million** (EPS **$(0.09)**) in Q3 2023[16](index=16&type=chunk) [About the Company](index=3&type=section&id=About%20the%20Company) This section provides an overview of VSee Health's AI telehealth platform, its global reach, client base, and commitment to improving healthcare access, along with a cautionary note on forward-looking statements [VSee Health Profile](index=3&type=section&id=VSee%20Health%20Profile) VSee Health provides an AI telehealth platform designed for rapid enterprise deployment, offering customizable, secure, and scalable solutions, with a global presence serving diverse clients and focusing on improving healthcare access and reducing workforce shortages - VSee Health's AI telehealth platform enables enterprises to quickly go from ideation to market, with customizable building blocks meeting stringent security standards[18](index=18&type=chunk) - The platform is field-hardened on over **1.5 million HIPAA-compliant video encounters monthly** and has deployed services in over **50 countries**[18](index=18&type=chunk) - Clients include NASA Space Station, US Department of Health and Human Services, McKesson, Magellan, DaVita, GE, and the entire country of Qatar[18](index=18&type=chunk) - VSee Health is committed to empowering high-quality healthcare access and reducing physician burnout and workforce shortages through its telehealth technology[19](index=19&type=chunk) [Forward-Looking Statements](index=3&type=section&id=Forward-Looking%20Statements) This section serves as a cautionary note regarding forward-looking statements, indicating that future performance may differ materially from historical results due to various known and unknown risks and uncertainties, and the company disclaims any obligation to update them - Statements in the news release that are not historical facts are considered 'forward-looking statements' under the Private Securities Litigation Reform Act of 1995[20](index=20&type=chunk) - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual performance or achievements to differ materially from those expressed or implied[20](index=20&type=chunk) - VSee Health undertakes no obligation to publicly update or revise any forward-looking statements after their date of issuance[20](index=20&type=chunk) [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents VSee Health's condensed consolidated balance sheets, statements of operations, and cash flows, providing a detailed view of the company's financial position and performance [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2024, reflects a significant increase in total assets and liabilities compared to December 31, 2023, primarily driven by the iDoc acquisition and related financing activities, alongside a substantial increase in cash balances Condensed Consolidated Balance Sheets Table | Metric | Sep 30, 2024 (Unaudited) | Dec 31, 2023 | | :------------------------- | :----------------------- | :----------- | | Cash | $2,327,337 | $118,734 | | Total current assets | $7,107,513 | $827,134 | | Intangible assets, net | $11,547,500 | - | | Goodwill | $4,916,694 | - | | Total assets | $25,029,730 | $830,791 | | Total current liabilities | $19,206,202 | $4,243,438 | | Total liabilities | $20,270,718 | $4,243,438 | | Total stockholders' equity (deficit) | $4,759,012 | $(3,412,647) | - The significant increase in intangible assets and goodwill reflects the impact of the **iDoc acquisition**[22](index=22&type=chunk) - Stockholders' equity shifted from a deficit of **$(3,412,647)** at December 31, 2023, to a positive **$4,759,012** as of September 30, 2024[22](index=22&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statements of operations show a substantial increase in total revenues for both the three and nine months ended September 30, 2024, compared to the prior year, but this was overshadowed by a significant rise in operating expenses, primarily due to goodwill impairment charges, leading to a much larger net loss Condensed Consolidated Statements of Operations Table | Metric | Q3 2024 (USD) | Q3 2023 (USD) | 9M 2024 (USD) | 9M 2023 (USD) | | :------------------------- | :------------ | :------------ | :------------ | :------------ | | Total Revenues | $3,354,437 | $1,451,471 | $6,561,998 | $4,337,962 | | Gross Margin | $2,413,049 | $973,072 | $4,747,717 | $2,809,954 | | Total Operating Expenses | $59,479,147 | $1,247,428 | $62,958,678 | $4,332,582 | | Goodwill Impairment Charges| $54,984,000 | - | $54,984,000 | - | | Net Loss | $(51,751,525) | $(98,581) | $(52,084,317) | $(983,181) | | Basic and Diluted Loss per Common Share | $(3.43) | $(0.01) | $(6.24) | $(0.10) | - The significant increase in total operating expenses for both periods is primarily attributable to the **$54,984,000 goodwill impairment charges**[24](index=24&type=chunk) - Despite revenue growth, the net loss per common share increased substantially due to the impairment charges and other one-time expenses[24](index=24&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended September 30, 2024, VSee Health experienced a net cash outflow from operating activities, largely influenced by the net loss and non-cash adjustments, but significant cash inflows from financing activities led to a positive net change in cash and cash equivalents Condensed Consolidated Statements of Cash Flows Table | Metric | 9M 2024 (USD) | 9M 2023 (USD) | | :--------------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(2,815,248) | $(523,436) | | Net cash used in investing activities | $(21,384) | $(2,690) | | Net cash provided by financing activities| $5,045,235 | $455,000 | | Net change in cash and cash equivalents | $2,208,603 | $(71,126) | | Cash and Cash Equivalents, End of Period | $2,327,337 | $159,538 | - Key non-cash adjustments reconciling net loss to operating cash flow include **$54,984,000 in goodwill impairment charges** and a **$(6,285,706) change in fair value of financial instruments**[25](index=25&type=chunk) - Significant financing activities include proceeds from Quantum Convertible Note (**$2,700,000**), September 2024 Convertible Note (**$2,000,000**), and reverse recapitalization with DHAC (**$1,323,362**)[25](index=25&type=chunk) - Non-cash investing and financing activities include net liabilities acquired in reverse merger (**$18,704,806**) and fair value of shares issued in iDoc acquisition (**$68,907,052**)[25](index=25&type=chunk)[26](index=26&type=chunk)

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2024 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-41015 VSee Health, Inc. (Exact name of registrant as specified in its charter) Delaware 86-2970927 (State ...

Exhibit 99.1 VSee Health Provides a Business Update and Reports Second Quarter 2024 Financial Results BOCA RATON, Fla., September 23, 2024 – VSee Health, Inc. (Nasdaq: VSEE), a provider of comprehensive telehealth services that customize workflow streams and enhance patient care, today provided a business update and reported financial results for the three and six months ended June 30, 2024. Business Highlights · Successfully completed the de-SPAC transaction and now publicly traded as VSee Health, followin ...

```markdown [Cautionary Note on Forward-Looking Statements](index=3&type=section&id=Cautionary%20Note%20on%20Forward-Looking%20Statements) This section outlines the nature of forward-looking statements, emphasizing inherent uncertainties and risks [Forward-Looking Statements Disclosure](index=3&type=section&id=Forward-Looking%20Statements%20Disclosure) This section details forward-looking statements, their inherent uncertainties, and key risks that could cause actual results to differ - Forward-looking statements are identified by words like 'plan,' 'believe,' 'expect,' 'anticipate,' 'intend,' 'outlook,' 'estimate,' 'forecast,' 'project,' 'continue,' 'could,' 'may,' 'might,' 'possible,' 'potential,' 'predict,' 'should,' 'would' and similar expressions[5](index=5&type=chunk) - Key risks include operating in a **competitive industry**, uncertainty in demand for software and solutions, potential for future losses, challenges in evaluating the evolving business, and fluctuations in business results[6](index=6&type=chunk)[7](index=7&type=chunk)[8](index=8&type=chunk) - Other **significant** risks involve the impact of the COVID-19 pandemic, long and unpredictable sales cycles, adverse developments in healthcare spending, medical malpractice risks, economic uncertainties, client retention issues, and the ability to maintain and expand the telemedicine network[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) - The company also highlights risks related to developing new solutions, providing high-quality technical support, attracting and retaining skilled employees, management's strategic decisions, potential acquisitions, managing future **growth**, accuracy of market size estimates, stock price volatility, litigation, medical liability claims, tax assertions, and the need for additional capital[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk)[20](index=20&type=chunk) [PART I — FINANCIAL INFORMATION](index=8&type=section&id=PART%20I%20%E2%80%94FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) This section presents VSee Health's unaudited condensed consolidated financial statements and detailed explanatory notes [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's condensed consolidated balance sheets, detailing key financial metrics Condensed Consolidated Balance Sheets | ASSETS | June 30, 2024 (Unaudited) | December 31, 2023 | | :-------------------------- | :------------------------ | :---------------- | | Cash | $1,105,971 | $118,734 | | Accounts receivable, net | $2,513,855 | $628,480 | | Total current assets | $5,166,549 | $827,134 | | Goodwill | $59,900,694 | — | | Total assets | $78,987,750 | $830,791 | | LIABILITIES AND EQUITY | June 30, 2024 (Unaudited) | December 31, 2023 | | :-------------------------- | :------------------------ | :---------------- | | Accounts payable & accrued | $6,752,985 | $1,824,408 | | Total current liabilities | $22,879,867 | $4,243,438 | | Total liabilities | $24,177,194 | $4,243,438 | | Total stockholders' equity | $54,810,556 | $(3,412,647) | | Total liabilities and equity| $78,987,750 | $830,791 | - **Total assets significantly increased** from **$830,791** at December 31, 2023, to **$78,987,750** at June 30, 2024, **primarily due to** the business combination and acquisition of iDoc, which introduced **substantial** goodwill and other assets[25](index=25&type=chunk) - **Stockholders' equity shifted** from a deficit of **$(3,412,647)** to a **positive $54,810,556**, **reflecting** the impact of the reverse recapitalization and new equity issuances[25](index=25&type=chunk) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section presents the company's condensed consolidated statements of operations, detailing key financial metrics Condensed Consolidated Statements of Operations | Metric (Unaudited) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total Revenue | $1,711,566 | $1,290,223 | $3,207,561 | $2,886,491 | | Gross margin | $1,224,926 | $815,936 | $2,334,668 | $1,836,882 | | Total operating expenses | $2,408,268 | $1,427,063 | $3,479,531 | $3,085,154 | | Net operating loss | $(1,183,342) | $(611,127) | $(1,144,863) | $(1,248,272) | | Loss before income taxes | $(2,603,169) | $(602,976) | $(2,574,000) | $(1,241,838) | | Benefit from income tax | $2,241,208 | $174,395 | $2,241,208 | $357,238 | | Net loss | $(361,961) | $(428,581) | $(332,792) | $(884,600) | | Basic and diluted loss per common share | $(0.06) | $(0.09) | $(0.07) | $(0.19) | - **Total revenue increased** by **33%** for the three months ended June 30, 2024, and **11%** for the six months ended June 30, 2024, compared to the prior year periods, **driven by** higher professional services, technical engineering fees, and the iDoc acquisition[26](index=26&type=chunk) - **Net loss decreased** for both the three-month (**16%**) and six-month (**62%**) periods ended June 30, 2024, **primarily due to** a **significant** income tax benefit related to valuation allowance changes from the business combination[26](index=26&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity (Deficit)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Deficit)) This section presents the company's condensed consolidated statements of shareholders' equity (deficit), detailing key financial metrics Condensed Consolidated Statements of Shareholders' Equity (Deficit) | Metric | December 31, 2023 | June 30, 2024 | | :-------------------------------------- | :---------------- | :------------ | | Total Stockholders' Equity (Deficit) | $(3,412,647) | $54,810,556 | | Common Shares Outstanding | 4,639,643 | 14,806,820 | | Additional Paid-In Capital | $6,027,153 | $64,582,130 | | Accumulated Deficit | $(9,114,985) | $(9,773,056) | - The company's **total stockholders' equity dramatically increased** from a deficit of **$3.41 million** at December 31, 2023, to a **positive $54.81 million** at June 30, 2024, **primarily due to** the reverse recapitalization and issuance of new shares in connection with the Business Combination[28](index=28&type=chunk) - **Common shares outstanding increased** from **4,639,643** to **14,806,820**, and **additional paid-in capital grew** from **$6.03 million** to **$64.58 million**, **reflecting significant** equity transactions during the period[28](index=28&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's condensed consolidated statements of cash flows, detailing key financial metrics Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2024 | 2023 | | :-------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(2,594,214) | $(474,643) | | Net cash used in investing activities | $(16,390) | $(2,690) | | Net cash provided by financing activities | $3,597,841 | $320,000 | | Change in cash | $987,237 | $(157,333) | - **Net cash used in operating activities increased significantly** to **$(2,594,214)** in H1 2024 from **$(474,643)** in H1 2023, **primarily due to** changes in operating assets and liabilities[31](index=31&type=chunk) - **Net cash provided by financing activities surged** to **$3,597,841** in H1 2024 from **$320,000** in H1 2023, **driven by** proceeds from the Quantum Convertible Note and reverse recapitalization with DHAC[31](index=31&type=chunk) - The company experienced a **positive** net change in cash and cash equivalents of **$987,237** in H1 2024, ending the period with **$1,105,971** in cash, a **substantial increase** from **$73,331** in H1 2023[31](index=31&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's notes to condensed consolidated financial statements, detailing key financial information [Note 1 Organization and Description of Business](index=13&type=section&id=Note%201%20Organization%20and%20Description%20of%20Business) VSee Health completed a business combination, integrating VSee Lab's telehealth platform and iDoc's high acuity patient care solutions - VSee Health, Inc. operates a telehealth software platform with proprietary technology for virtual healthcare delivery, integrating video streaming, medical device data, and EMRs[32](index=32&type=chunk) - On June 24, 2024, Digital Health Acquisition Corp. (DHAC) completed a business combination with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc., changing its name to VSee Health, Inc[33](index=33&type=chunk) - The business combination was accounted for as a reverse recapitalization, with VSee Lab as the accounting acquirer and DHAC and iDoc as accounting acquirees[41](index=41&type=chunk) - The transaction involved the issuance of common stock to VSee Lab and iDoc stockholders, conversion of debt into Series A preferred stock and common stock, and the establishment of an Equity Line of Credit (ELOC) for up to **$50,000,000**[34](index=34&type=chunk)[35](index=35&type=chunk)[38](index=38&type=chunk)[40](index=40&type=chunk) [Note 2 Summary of Significant Accounting Policies](index=17&type=section&id=Note%202%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines critical accounting policies and estimates, involving **significant** management judgment and assumptions - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP and include VSee Health, Inc. and its **100%** wholly-owned subsidiaries, VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc[45](index=45&type=chunk)[46](index=46&type=chunk) - The company is an 'emerging **growth** company' and 'smaller reporting company,' allowing it to take advantage of certain exemptions from reporting requirements and delay adoption of new accounting standards[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk) - The company has two consolidated operating segments: Healthcare Technology ('Technology') and Telehealth Services ('Telehealth'), with VSee Lab in Technology and iDoc in Telehealth[52](index=52&type=chunk)[53](index=53&type=chunk) - **Revenue** is recognized following ASC 606, based on a five-step model, with **revenue** derived from subscription fees, professional services, technical engineering fees, patient fees, telehealth fees, and institutional fees[59](index=59&type=chunk)[60](index=60&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk) - The company's ability to continue as a going concern is in **substantial** doubt **due to** historical operating losses and deteriorating liquidity, but management is pursuing **revenue** enhancement strategies and additional financing[118](index=118&type=chunk)[119](index=119&type=chunk)[120](index=120&type=chunk)[121](index=121&type=chunk) [Note 3 Business Combination](index=38&type=section&id=Note%203%20Business%20Combination) This note details the acquisition of iDoc Telehealth Solutions, Inc. and its accounting treatment as a business combination - On June 24, 2024, VSee Health, Inc. completed the Business Combination, acquiring iDoc Telehealth Solutions, Inc. and undergoing a reverse recapitalization with DHAC[126](index=126&type=chunk) - The acquisition of iDoc was treated as a business combination under ASC 805, with VSee Lab as the accounting acquirer, aiming to integrate iDoc's high acuity patient care and critical care expertise[126](index=126&type=chunk) iDoc Purchase Consideration | Consideration Type | Amount | | :-------------------------------------------------------------------------------------------------------------- | :------------- | | 4,950,000 shares of common stock issued to sellers at $12.11 per share | $59,944,500 | | 292,500 shares of common stock issued upon conversion of debt at $12.11 per share | $3,542,175 | | 300,000 shares of common stock issued upon conversion of debt at $12.11 per share | $3,633,000 | | 300 shares of series A preferred stock issued upon conversion of debt (150,000 common shares issuable) at $12.11 per share | $1,816,500 | | **Total purchase consideration** | **$68,936,175**| Preliminary Allocation of iDoc Purchase Consideration | Item | Amount | | :---------------------------------------- | :------------- | | Total purchase price consideration, net of cash acquired | $68,907,052 | | Estimated fair value of assets acquired | $17,161,687 | | Estimated fair value of liabilities assumed | $8,155,329 | | **Goodwill** | **$59,900,694**| Purchased Intangible Assets from iDoc Acquisition | Intangible Asset | Weighted-Average Useful Life (in Years) | Amount | | :----------------- | :-------------------------------------- | :----------- | | Customer relationships | 10 | $2,100,000 | | Developed technology | 5 | $10,000,000 | | **Total** | | **$12,100,000**| [Note 4 Fixed Assets](index=45&type=section&id=Note%204%20Fixed%20Assets) This section presents the company's fixed assets, detailing key financial metrics Fixed Assets, Net | Asset Category | June 30, 2024 | December 31, 2023 | | :----------------------- | :------------ | :---------------- | | Office equipment | $19,264 | $3,335 | | Medical equipment | $122,095 | $1,000 | | Furniture | $5,045 | — | | Leased equipment | $736,624 | — | | Leasehold improvements | $6,604 | — | | Less accumulated depreciation | $(6,309) | $(678) | | **Fixed Assets, net** | **$883,323** | **$3,657** | - **Fixed assets**, net, **increased substantially** from **$3,657** at December 31, 2023, to **$883,323** at June 30, 2024, **largely due to** the acquisition of iDoc, which brought in **significant** leased equipment, medical equipment, and other **fixed assets**[143](index=143&type=chunk)[144](index=144&type=chunk) - Depreciation expense for the six months ended June 30, 2024, was **$2,091**, compared to **$204** in the prior year, **reflecting** the expanded asset base[143](index=143&type=chunk) [Note 5 Leases](index=45&type=section&id=Note%205%20Leases) This note details the company's operating and finance leases, including right-of-use assets and liabilities - The company assumed operating leases for office spaces in Boston, Houston, and a new Houston lease, with varying monthly payments and lease terms up to August 2028, as a result of the iDoc acquisition[145](index=145&type=chunk) Operating Lease Right-of-Use Assets and Liabilities (June 30, 2024) | Item | Amount | | :--------------------------------- | :---------- | | Office Lease Right-of-Use, net | $431,311 | | Office Lease - related party, net | $260,373 | | Operating Lease Liabilities (current portion) | $121,509 | | Operating Lease Liabilities (long term portion) | $307,849 | | Related Party Operating Lease Liabilities (current portion) | $101,401 | | Related Party Operating Lease Liabilities (long term portion) | $163,658 | - **Finance leases** for office equipment were also assumed from iDoc, with maturities in June and August 2026. The weighted average discount rate for **finance leases** was **19.3%** as of June 30, 2024[155](index=155&type=chunk)[162](index=162&type=chunk) Finance Lease Right-of-Use Assets and Liabilities (June 30, 2024) | Item | Amount | | :--------------------------------- | :---------- | | Equipment Lease Right-of-Use, net | $733,084 | | Finance Lease Liabilities (current portion) | $507,538 | | Finance Lease Liabilities (long term portion) | $231,879 | [Note 6 Factoring Payable](index=49&type=section&id=Note%206%20Factoring%20Payable) This note details factoring payable liabilities assumed from iDoc, representing future receipts sale agreements - VSee Health assumed several **factoring payable** liabilities from iDoc upon the business combination, totaling **$348,463** as of June 30, 2024[25](index=25&type=chunk)[163](index=163&type=chunk) - These agreements involve iDoc selling future receipts for a net purchase price, with weekly collection amounts authorized to factoring purchasers[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk)[167](index=167&type=chunk)[170](index=170&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Most factoring agreements are not collateralized by a general security agreement over iDoc's assets, except for one January 11, 2024 agreement which is collateralized by a security interest in all accounts[163](index=163&type=chunk)[166](index=166&type=chunk)[172](index=172&type=chunk) [Note 7 Line of Credit and Notes Payable](index=51&type=section&id=Note%207%20Line%20of%20Credit%20and%20Notes%20Payable) This note outlines the company's line of credit and various notes payable, many assumed from iDoc and DHAC Notes Payable & Line of Credit (June 30, 2024) | Item | Amount | | :-------------------------------------------- | :------------ | | Total notes payable and line of credit | $2,428,880 | | Less: current portion | $(928,280) | | Less fair value adjustment for debt | $(906,659) | | **Total notes payable and line of credit, net of current portion** | **$593,941** | - The company assumed several **notes payable** and a line of credit from iDoc, with many currently in default and bearing **increased** interest rates[175](index=175&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk)[181](index=181&type=chunk)[183](index=183&type=chunk)[185](index=185&type=chunk)[186](index=186&type=chunk) - **Significant** financing activities include the Exchange Note (**$5,666,873** fair value), Additional Bridge Notes (**$397,408** fair value), and the **Quantum Convertible Note** (**$4,697,050** fair value), all classified as liabilities under ASC 480 and re-measured at fair value[199](index=199&type=chunk)[204](index=204&type=chunk)[212](index=212&type=chunk) - The company also has an Equity Line of Credit (ELOC) agreement for up to **$50,000,000**, with an ELOC Note issued as a commitment fee, and the ELOC Purchase Agreement is recorded as a liability under ASC 815 and re-measured at fair value[214](index=214&type=chunk)[215](index=215&type=chunk)[216](index=216&type=chunk) [Note 8 Related Party](index=67&type=section&id=Note%208%20Related%20Party) This note details various related party transactions involving VSee Lab, iDoc, and DHAC, including loans and debt conversions - VSee Lab had **related party transactions** including employee stock subscriptions converted to VSee Health common stock and promissory notes from its former CEO, Milton Chen, totaling **$121,000**, **$132,000**, and **$77,000**, all of which are currently in default[225](index=225&type=chunk)[226](index=226&type=chunk)[227](index=227&type=chunk)[229](index=229&type=chunk)[230](index=230&type=chunk) - iDoc's **related party transactions** include a balance **due to** its former CEO, Imoigele Aisiku (**$785,934**), a note receivable from him (**$245,000**), and a promissory note with a board member (**$141,651**), all unsecured or non-interest-bearing and some in default[232](index=232&type=chunk)[233](index=233&type=chunk)[234](index=234&type=chunk) - DHAC's **related party transactions** involved unsecured promissory notes and outstanding office expenses with its Sponsor and affiliates, which were converted into Series A Preferred Shares at the closing of the Business Combination[238](index=238&type=chunk)[239](index=239&type=chunk)[240](index=240&type=chunk) - As of June 30, 2024, **$456,859** in advances from the Sponsor and certain Sponsor affiliates remained **due to** DHAC[241](index=241&type=chunk) [Note 9 Commitments, Contingencies, and Concentration Risk](index=71&type=section&id=Note%209%20Commitments,%20Contingencies,%20and%20Concentration%20Risk) This note outlines the company's commitments, contingencies, and concentration risks, including potential litigation and customer concentrations - The company has an **unpaid commitment** of **$103,833** on a reseller agreement to generate international market **revenue**, payable upon **revenue** generation[244](index=244&type=chunk) - iDoc has an **unpaid commitment** of **$179,900** for the purchase of twenty Telepresence Robots and related services, **due to** upon invoicing for delivery and installation[246](index=246&type=chunk) - A forbearance agreement related to iDoc's promissory note and line of credit resulted in a court-ordered payment of **$1,499,409** principal plus interest, accrued in the company's liabilities[249](index=249&type=chunk) - The VSee Health, Inc. 2024 Equity Incentive Plan reserved **2,544,021** shares of common stock for issuance[251](index=251&type=chunk) - As of June 30, 2024, the company had no single customer concentration exceeding **10%** of **total receivables**, but one customer accounted for **12%** of **total revenue** for the three months ended June 30, 2024[254](index=254&type=chunk)[255](index=255&type=chunk) [Note 10 Income Taxes](index=75&type=section&id=Note%2010%20Income%20Taxes) This note details the company's income tax accounting, including deferred tax assets, liabilities, and valuation allowances - As of June 30, 2024, the company has a **valuation allowance** of **$2,152,167** against net domestic deferred tax assets, indicating uncertainty about their realization[256](index=256&type=chunk) Income Tax Expense (Six Months Ended June 30) | Item | 2024 | 2023 | | :---------------------------------------- | :------------ | :------------ | | Loss before taxes | $(2,574,000) | $(1,241,838) | | Expected United States income tax benefit | $540,540 | $259,956 | | Expected income tax (expense) benefit at statutory rate | $1,700,668 | $97,282 | | **Total income tax benefit** | **$2,241,208**| **$357,238** | - The company recorded a **substantial** income tax benefit of **$2,241,208** for the six months ended June 30, 2024, compared to **$357,238** in the prior year, **primarily due to** **valuation allowance** changes from the business combination[257](index=257&type=chunk) [Note 11 Equity](index=77&type=section&id=Note%2011%20Equity) This note describes the company's equity structure, including preferred and common stock, and the equity incentive plan - The company has **6,158** shares of **Series A Preferred Stock** outstanding as of June 30, 2024, which have voting rights, cumulative participating dividends, liquidation preferences, and are convertible into common stock[260](index=260&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk) - **Common stock outstanding increased** to **14,806,820** shares as of June 30, 2024, from **4,639,643** shares at December 31, 2023, following the reverse recapitalization[266](index=266&type=chunk) - The VSee Health, Inc. 2024 Equity Incentive Plan reserved **2,544,021** shares, with **803,646** stock options granted at an exercise price of **$12.11** as of June 24, 2024[271](index=271&type=chunk)[273](index=273&type=chunk) - Unrecognized compensation cost related to unvested options was approximately **$1,394,222** as of June 30, 2024, to be recognized over a one-year service period[275](index=275&type=chunk)[276](index=276&type=chunk) [Note 12 Warrants](index=82&type=section&id=Note%2012%20Warrants) This note details various **warrants** assumed from DHAC, including Public, Private, Bridge, and Extension **Warrants**, classified as equity - VSee Health assumed **12,256,999 warrants** from DHAC as of June 24, 2024, including Public, Private, Bridge, and Extension **Warrants**, all classified as equity[277](index=277&type=chunk)[278](index=278&type=chunk) Warrants Outstanding (June 30, 2024) | Warrant Type | Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Life (years) | | :----------- | :---------- | :------------------------------ | :-------------------------------------- | | Public | 11,500,000 | $11.50 | 4.99 | | Private | 557,000 | $11.50 | 4.99 | | Bridge | 173,913 | $11.50 | 3.27 | | Extension | 26,086 | $11.50 | 3.85 | | **Total** | **12,256,999**| **$11.50** | **4.27** | - Public and Private **Warrants** are exercisable at **$11.50** per share, expiring on the fifth anniversary of the business combination, and may be redeemed by the company under certain conditions[279](index=279&type=chunk)[280](index=280&type=chunk)[281](index=281&type=chunk) - Bridge and Extension **Warrants** also have an exercise price of **$11.50** per share and are subject to various anti-dilution adjustments[292](index=292&type=chunk)[293](index=293&type=chunk)[299](index=299&type=chunk)[305](index=305&type=chunk)[312](index=312&type=chunk) [Note 13 Reportable segments](index=92&type=section&id=Note%2013%20Reportable%20segments) This note identifies the company's two reportable operating segments: Technology and Telehealth, providing summary financial information - As of June 2024, following the business combination, the company has two **reportable operating segments**: Technology (VSee Lab, Inc.) and Telehealth (iDoc Virtual Telehealth Solutions, Inc.)[315](index=315&type=chunk) Segment Revenue (Six Months Ended June 30) | Segment | 2024 | 2023 | | :--------- | :------------ | :------------ | | Technology | $3,144,992 | $2,886,491 | | Telehealth | $62,569 | — | | **Total** | **$3,207,561**| **$2,886,491**| Segment Loss from Operations (Six Months Ended June 30) | Segment | 2024 | 2023 | | :---------------------- | :------------ | :------------ | | Technology | $(236,002) | $(1,248,272) | | Telehealth | $(17,902) | — | | Non-operating corporate | $(890,959) | — | | **Total** | **$(1,144,863)**| **$(1,248,272)**| - **Telehealth segment reported $76,843,794** in **total assets** and **$59,900,694** in goodwill as of June 30, 2024, **reflecting** the iDoc acquisition[318](index=318&type=chunk) [Note 14 Fair Value Measurements](index=96&type=section&id=Note%2014%20Fair%20Value%20Measurements) This note provides fair value information for financial liabilities, classified within Level 3 of the fair value hierarchy Fair Value of Financial Liabilities (June 30, 2024) | Liability | Fair Value (Level 3) | | :------------------------- | :------------------- | | Convertible note-Quantum | $4,697,050 | | ELOC | $638,321 | | Additional Bridge Note | $397,408 | | Exchange Note | $5,666,873 | | **Total** | **$11,399,652** | - The **Quantum Convertible Note**, ELOC, Additional Bridge Note, and Exchange Note are all classified within Level 3 of the fair value hierarchy, indicating **significant** unobservable inputs in their valuation[323](index=323&type=chunk)[325](index=325&type=chunk)[327](index=327&type=chunk)[329](index=329&type=chunk)[331](index=331&type=chunk) - Valuation models used include the Monte Carlo model for the **Quantum Convertible Note**, Additional Bridge Note, Exchange Note, and ELOC, and a Discounted Cash Flow model for the Extension Note Bifurcated Derivative[322](index=322&type=chunk)[324](index=324&type=chunk)[326](index=326&type=chunk)[328](index=328&type=chunk)[330](index=330&type=chunk) - The **change** in fair value of Level 3 financial liabilities from June 24, 2024, to June 30, 2024, resulted in a net **decrease** of **$(535,665)**[332](index=332&type=chunk) [Note 15 Subsequent Events](index=101&type=section&id=Note%2015%20Subsequent%20Events) This note discloses **significant** subsequent events, including note amendments and conversions of debt into common stock - On July 3, 2024, the **Quantum Note's** maturity date was extended from June 25, 2025, to June 30, 2026, with **18** months of guaranteed interest[334](index=334&type=chunk) - On July 2, 2024, the company issued an **Equity Purchase Commitment Note** for **$500,000**, payable in common stock, as a commitment fee for the equity purchase agreement[335](index=335&type=chunk) - In August 2024, the **Bridge Investor converted $32,408** principal from the Additional Bridge Note into **14,199** shares of common stock[336](index=336&type=chunk) - On August 8, 2024, the **Bridge Investor converted $500,000** principal from the Exchange Note into **213,759** shares of common stock[337](index=337&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=102&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's discussion and analysis of VSee Health's financial condition and results of operations [Overview](index=102&type=section&id=Overview) VSee Health completed a business combination, integrating VSee Lab's telehealth platform and iDoc's high acuity patient care solutions - VSee Health, Inc. (formerly DHAC) completed a business combination on June 24, 2024, integrating VSee Lab and iDoc Virtual Telehealth Solutions[340](index=340&type=chunk) - VSee Lab provides a proprietary telehealth software platform with end-to-end encrypted video, medical device integration, EMR connectivity, and customizable workflows for virtual healthcare delivery[341](index=341&type=chunk)[342](index=342&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk) - iDoc, a wholly-owned subsidiary, offers high acuity patient care solutions, including neuro-critical and general critical care services, leveraging a custom internal virtual health care technology platform[346](index=346&type=chunk)[347](index=347&type=chunk) [Performance Factors](index=104&type=section&id=Performance%20Factors) Future performance is **driven by** telehealth market **growth**, market share expansion, and continuous innovation in product offerings - Future performance depends on the rapid transformation of the telehealth market, which is characterized by **strong growth potential** and an attractive value proposition for health systems[348](index=348&type=chunk) - The company aims to expand within the market and attract new customers by leveraging industry relationships and the **significant potential** of its software platform and services in the nascent telehealth sector[349](index=349&type=chunk) - Innovation and new product offerings are critical, addressing existing telehealth limitations such as non-healthcare-specific video, poor device integration, and complex backend software[350](index=350&type=chunk)[351](index=351&type=chunk)[352](index=352&type=chunk)[353](index=353&type=chunk) [Critical Accounting Estimates](index=106&type=section&id=Critical%20Accounting%20Estimates) This section outlines critical accounting policies and estimates, involving **significant** management judgment and assumptions - The company's critical accounting policies include **revenue** recognition (ASC 606), income taxes (asset and liability method with **valuation allowances**), accounts receivable and credit losses (CECL model), fair value measurements (Level 3 hierarchy), goodwill impairment, and intangible assets amortization[354](index=354&type=chunk)[359](index=359&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[398](index=398&type=chunk)[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk) - Management has determined two consolidated operating segments: Healthcare Technology ('Technology') and Telehealth Services ('Telehealth')[357](index=357&type=chunk)[358](index=358&type=chunk) - The allowance for credit losses was **$1,741,238** as of June 30, 2024, a **significant increase** from **$32,457** at December 31, 2023[397](index=397&type=chunk) - Goodwill, valued at **$59,900,694** as of June 30, 2024, is evaluated for impairment annually or when circumstances indicate, using income and market-based models[402](index=402&type=chunk) - Intangible assets, including developed technology (**$10,000,000**) and customer list (**$2,100,000**), are amortized over **5** and **15** years, respectively[403](index=403&type=chunk) [Recent Accounting Pronouncements](index=121&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses recently issued accounting standards, including ASU No. 2023-07 and ASU No. 2023-09 - ASU No. 2023-07, effective for annual periods beginning after December 15, 2023, requires additional disclosures for reportable segment expenses and CODM information[409](index=409&type=chunk) - ASU No. 2023-09, effective for annual periods beginning after December 15, 2024, mandates additional income tax rate reconciliation and disaggregation of income taxes paid[410](index=410&type=chunk) - Management is evaluating both ASUs and does not believe they will have a material effect on the company's condensed consolidated financial statements upon adoption[409](index=409&type=chunk)[412](index=412&type=chunk) [Emerging Growth Company Status](index=123&type=section&id=Emerging%20Growth%20Company%20Status) VSee Health qualifies as an 'emerging **growth** company' and 'smaller reporting company' under the JOBS Act - VSee Health qualifies as an 'emerging **growth** company' and 'smaller reporting company' under the JOBS Act[413](index=413&type=chunk)[415](index=415&type=chunk) - This status allows the company to rely on exemptions such as delaying adoption of new accounting standards, reduced executive compensation disclosures, and exemptions from certain advisory votes[413](index=413&type=chunk)[415](index=415&type=chunk)[416](index=416&type=chunk) - The company expects to use the extended transition period for accounting standards, which may make its financial statements not comparable to companies that comply with public company effective dates[416](index=416&type=chunk) [Financial Statement Components](index=124&type=section&id=Financial%20Statement%20Components) This section analyzes the company's financial performance, highlighting changes **driven by** the iDoc acquisition and cost management [Three Months Ended June 30, 2024 and 2023 Results of Operations](index=124&type=section&id=Three%20Months%20Ended%20June%2030,%202024%20and%202023%20Results%20of%20Operations) This section presents the company's three months ended june 30, 2024 and 2023 results of operations, detailing key financial metrics Three Months Ended June 30, 2024 vs. 2023 | Metric | 2024 | 2023 | Change | % Change | | :------------------------- | :------------ | :------------ | :------------ | :-------- | | Revenue | $1,711,566 | $1,290,223 | $421,343 | 33% | | Cost of revenue | $486,640 | $474,287 | $12,353 | 3% | | Gross profit | $1,224,926 | $815,936 | $408,990 | 50% | | Operating expenses | $2,408,268 | $1,427,063 | $981,205 | 69% | | Other (expenses)/income | $(1,419,827) | $8,151 | $(1,427,978) | (17,519)% | | Net income (loss) before taxes | $(2,603,169) | $(602,976) | $(2,000,193) | 332% | | Income tax (expense) benefit | $2,241,208 | $174,395 | $2,066,813 | 1,185% | | Net income (loss) | $(361,961) | $(428,581) | $66,620 | 16% | - **Revenue increased** by **33% due to** higher professional and technical engineering fees, and the iDoc acquisition[421](index=421&type=chunk) - **Net loss decreased** by **16% primarily due to** a **significant** income tax benefit, despite higher operating expenses and other expenses[434](index=434&type=chunk) [Six Months Ended June 30, 2024 and 2023 Results of Operations](index=124&type=section&id=Six%20Months%20Ended%20June%2030,%202024%20and%202023%20Results%20of%20Operations) This section presents the company's six months ended june 30, 2024 and 2023 results of operations, detailing key financial metrics Six Months Ended June 30, 2024 vs. 2023 | Metric | 2024 | 2023 | Change | % Change | | :------------------------- | :------------ | :------------ | :------------ | :-------- | | Revenue | $3,207,561 | $2,886,491 | $321,070 | 11% | | Cost of revenue | $872,893 | $1,049,609 | $(176,716) | (17)% | | Gross profit | $2,334,668 | $1,836,882 | $497,786 | 27% | | Operating expenses | $3,479,531 | $3,085,154 | $394,377 | 13% | | Other (expenses)/income | $(1,429,137) | $6,434 | $(1,435,571) | (22,312)% | | Net income (loss) before taxes | $(2,574,000) | $(1,241,838) | $(1,332,162) | 107% | | Income tax (expense) benefit | $2,241,208 | $357,238 | $1,883,970 | 527% | | Net income (loss) | $(332,792) | $(884,600) | $551,808 | 62% | - **Revenue increased** by **11% driven by** higher professional and technical engineering fees, and the iDoc acquisition, partially offset by a **decline** in subscription **revenue**[424](index=424&type=chunk) - **Net loss decreased** by **62% due to** a **significant** income tax benefit, despite higher operating expenses and other expenses[435](index=435&type=chunk) [Revenue](index=124&type=section&id=Revenue) This section presents the company's **revenue**, highlighting total **revenue** for the three months ended June 30, 2024, **increased** by **$421,343** (**33%**) to **$1,711,566** - **Total revenue** for the three months ended June 30, 2024, **increased** by **$421,343** (**33%**) to **$1,711,566**, **primarily due to** a **93% increase** in professional and other fees and a **290% increase** in technical engineering fees[421](index=421&type=chunk) - For the six months ended June 30, 2024, **total revenue increased** by **$321,070** (**11%**) to **$3,207,561**, **driven by 57% increases** in professional and other fees and technical engineering fees, and **$62,569** from the iDoc acquisition[424](index=424&type=chunk) - Subscription **revenue declined** by **$141,194** (**6%**) for the six-month period **due to** churned enterprise customers and a **shift** back to face-to-face consultations[424](index=424&type=chunk) [Cost of Revenue](index=126&type=section&id=Cost%20of%20Revenue) This section presents the company's cost of **revenue**, highlighting cost of **revenue** for the three months ended June 30, 2024, **increased** by **$12,353** (**3%**) - **Cost of revenue** for the three months ended June 30, 2024, **increased** by **$12,353** (**3%**), **primarily due to** **$25,331** from the iDoc acquisition, partially offset by a **2.7% decrease** from VSee Lab **due to** lower hosting costs and headcount reduction[426](index=426&type=chunk) - For the six months ended June 30, 2024, **cost of revenue decreased** by **$176,716** (**17%**), **driven by** a **30% reduction** in hosting costs and a **26% decrease** in compensation costs from headcount reduction, partially offset by higher hardware costs and iDoc acquisition costs[427](index=427&type=chunk) [Operating Expenses](index=126&type=section&id=Operating%20Expenses) This section presents the company's operating expenses, highlighting operating expenses for the three months ended June 30, 2024, **increased** by **$981,205** (**69%**) - Operating expenses for the three months ended June 30, 2024, **increased** by **$981,205** (**69%**), mainly **due to** a **6,008% increase** in transaction expenses related to the business combination (**$964,748**), and a **56% increase** in general and administrative expenses[429](index=429&type=chunk) - For the six months ended June 30, 2024, operating expenses **increased** by **$394,377** (**13%**), **driven by** a **1,656% increase** in transaction expenses (**$949,800**) and a **9% increase** in general and administrative expenses, partially offset by a **25% decrease** in compensation and **related benefits**[430](index=430&type=chunk)[431](index=431&type=chunk) [Other (Expense) Income](index=128&type=section&id=Other%20(Expense)%20Income) This section presents the company's other (expense) income, highlighting other expense for the three months ended June 30, 2024, **increased** by **$1,427,978** (**17,519%**) - Other expense for the three months ended June 30, 2024, **increased** by **$1,427,978** (**17,519%**), **primarily due to** a **$1,618,234** initial fair value **loss** on the **Quantum Note** and **$269,835** higher interest expense, partially offset by **$480,656** in fair value gains on financial instruments[432](index=432&type=chunk) - For the six months ended June 30, 2024, other expense **increased** by **$1,435,571** (**22,312%**), **driven by** the **Quantum Note** fair value **loss** and higher interest expense, partially offset by a **$434,023 change** in fair value gain from financial instruments[433](index=433&type=chunk) [Net loss](index=128&type=section&id=Net%20loss) This section presents the company's net **loss**, highlighting net **loss** for the three months ended June 30, 2024, **decreased** by **$66,620** (**16%**) - **Net loss** for the three months ended June 30, 2024, **decreased** by **$66,620** (**16%**) to **$(361,961)**, **driven by** a **$2,066,813** tax benefit and higher **revenue**, partially offset by **increased** operating and other expenses[434](index=434&type=chunk) - **Net loss** for the six months ended June 30, 2024, **decreased** by **$551,808** (**62%**) to **$(332,792)**, **primarily due to** a **$1,883,970** income tax benefit and higher **revenue**, partially offset by **increased** operating and other expenses[435](index=435&type=chunk) [Cash Flows](index=128&type=section&id=Cash%20Flows) This section analyzes cash flow activities, highlighting **increased** cash from financing **due to** the **Quantum Note** and recapitalization Cash Flow Summary (Six Months Ended June 30) | Cash Flow Activity | 2024 | 2023 | | :-------------------------------- | :------------ | :------------ | | Net cash used in operating activities | $(2,594,214) | $(474,643) | | Net cash used in investing activities | $(16,390) | $(2,690) | | Net cash provided by financing activities | $3,597,841 | $320,000 | | Change in cash | $987,237 | $(157,333) | - **Net cash used in operating activities increased** to **$(2,594,214)** in H1 2024, **primarily due to** a **decrease** in net changes in operating assets and liabilities[439](index=439&type=chunk) - **Net cash provided by financing activities significantly increased** to **$3,597,841** in H1 2024, **driven by $2,700,000** from the **Quantum Note** and **$1,323,362** from the recapitalization with DHAC[442](index=442&type=chunk) - The company's cash and cash equivalents at the end of June 30, 2024, totaled **$1,105,971**, a **substantial increase** from **$73,331** in the prior year[438](index=438&type=chunk) [Cash Used in Operating Activities](index=130&type=section&id=Cash%20Used%20in%20Operating%20Activities) This section presents the company's cash used in operating activities, highlighting cash used in operating activities was **$(2,594,214)** for the six months ended June 30, 2024 - Cash used in operating activities was **$(2,594,214)** for the six months ended June 30, 2024, **reflecting** a net **loss** of **$332,792**, adjusted for non-cash items of **$895,392**, and a **$1,366,030 decrease** in net changes in operating assets and liabilities[439](index=439&type=chunk) - The **decrease** in net changes in operating assets was **primarily due to** **decreases** in accounts payable and accrued liabilities and amounts **due to related parties**[439](index=439&type=chunk) [Cash Used in Investing Activities](index=130&type=section&id=Cash%20Used%20in%20Investing%20Activities) This section presents the company's cash used in investing activities, highlighting cash used for investing activities for the six months ended June 30, 2024, was **$(16,390)** - Cash used for investing activities for the six months ended June 30, 2024, was **$(16,390)**, **primarily due to $45,513** for **fixed asset** purchases, partially offset by **$29,123** cash acquired from the iDoc acquisition[441](index=441&type=chunk) [Cash Provided by Financing Activities](index=130&type=section&id=Cash%20Provided%20by%20Financing%20Activities) This section presents the company's cash provided by financing activities, highlighting cash provided by financing activities for the six months ended June 30, 2024, was **$3,597,841** - Cash provided by financing activities for the six months ended June 30, 2024, was **$3,597,841**, mainly from **$2,700,000** proceeds from the **Quantum Note** and **$1,323,362** from the recapitalization with DHAC[442](index=442&type=chunk) - This was partially offset by repayments on the Extension Note (**$365,750**), advances from a **related party** (**$47,800**), **factoring payable** (**$10,941**), and acquisition purchase (**$1,030**)[442](index=442&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=130&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section states that quantitative and qualitative disclosures about market risk are not applicable for this report [Item 4. Controls and Procedures](index=130&type=section&id=Item%204.%20Controls%20and%20Procedures) This section addresses the effectiveness of disclosure controls and procedures, noting material weaknesses related to filing delays - As of June 30, 2024, the company's disclosure controls and procedures were deemed not effective **due to** material weaknesses in internal control over financial reporting[445](index=445&type=chunk)[447](index=447&type=chunk) - A material weakness was identified relating to delays in filing, indicating a reasonable possibility of material misstatement not being prevented or detected timely[447](index=447&type=chunk) - The company plans to remediate these weaknesses by enhancing access to accounting literature, research materials, and **increasing** communication among personnel and third-party professionals[450](index=450&type=chunk) [PART II — OTHER INFORMATION](index=132&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=132&type=section&id=Item%201.%20Legal%20Proceedings) The company has no legal proceedings to report - The company has no legal proceedings to report[451](index=451&type=chunk) [Item 1A. Risk Factors](index=132&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, VSee Health is exempt from Item 1A disclosures, with no material changes to risk factors - As a smaller reporting company, VSee Health is exempt from making disclosures under Item 1A[452](index=452&type=chunk) - There have been no material changes to the risk factors previously disclosed in the registration statements on Form S-1 filed on July 17, 2024, and August 7, 2024[452](index=452&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=132&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered sales of equity securities, detailing common stock issuance to satisfy a promissory note - iDoc Virtual Telehealth Solutions, Inc. issued **114,000** shares of the company's common stock to Mr. David L. Wickersham to fully satisfy a secured convertible promissory note of **$224,000**[454](index=454&type=chunk)[456](index=456&type=chunk) [Item 3. Defaults Upon Senior Securities](index=134&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There are no defaults upon senior securities to report - There are no defaults upon senior securities to report[456](index=456&type=chunk) [Item 4. Mine Safety Disclosures](index=134&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) There are no mine safety disclosures to report - There are no mine safety disclosures to report[456](index=456&type=chunk) [Item 5. Other Information](index=134&type=section&id=Item%205.%20Other%20Information) There is no other information to report - There is no other information to report[456](index=456&type=chunk) [Item 6. Exhibits](index=134&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q, including agreements and certifications - The exhibits include the Third Amended and Restated Business Combination Agreement and its amendments, Second Amended and Restated Certificate of Incorporation, Certificate of Designation of **Series A Convertible Preferred Stock**, and Amended and Restated Bylaws[458](index=458&type=chunk) - Key agreements listed are various Securities Purchase Agreements, Additional Bridge Notes, Exchange Agreement, **Quantum Note**, Equity Purchase Agreement, and **related** registration rights and security agreements[458](index=458&type=chunk)[459](index=459&type=chunk) - Certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Rule 13a-14(a) and 18 U.S.C. § 1350) are also included[461](index=461&type=chunk) [SIGNATURES](index=139&type=section&id=SIGNATURES) [Signatures](index=139&type=section&id=Signatures) This section contains the official signatures of the registrant's Co-Chief Executive Officer and Chief Financial Officer - The report was signed on September 23, 2024, by Imoigele Aisiku, Co-Chief Executive Officer and Chairman of the Board, and Jerry Leonard, Chief Financial Officer and Secretary[464](index=464&type=chunk) ```

Financial Performance - The net loss for the three months ended March 31, 2024, was $967,817, compared to a net loss of $1,894,642 for the same period in 2023, representing a 48.9% improvement[13]. - Basic and diluted net loss per share improved from $(0.45) in Q1 2023 to $(0.27) in Q1 2024[13]. - The company reported a loss from operations of $674,262 for the three months ended March 31, 2024, compared to a loss of $707,592 in the same period of 2023, showing a decrease of about 4.7%[13]. - Net cash used in operating activities was $335,318 for the three months ended March 31, 2024, slightly down from $340,667 in the same period of 2023[19]. - The effective tax rate for the Company was 0.0% for both the three months ended March 31, 2024, and 2023, due to a full valuation allowance on deferred tax assets[62]. Assets and Liabilities - Total current assets decreased from $1,863 million as of December 31, 2023, to $724 million as of March 31, 2024[10]. - Total assets increased slightly from $1,370.5 million to $1,387.2 million during the same period[10]. - Current liabilities rose from $7,984.4 million to $8,968.9 million, indicating a significant increase of approximately 12.3%[11]. - Total liabilities increased from $12,354.4 million to $13,338.9 million, reflecting a rise of approximately 7.9%[11]. - As of March 31, 2024, the Company had a cash balance of $724 and a working capital deficit of $8,968,207[49]. Business Combination and Future Plans - The company has extended the deadline to consummate a Business Combination to November 8, 2024, allowing for additional time to identify a target[29]. - The Company is required to complete its initial Business Combination by November 8, 2024, or face mandatory liquidation[49]. - The Company has the ability to extend the Business Combination period up to four times, each by an additional three months, for a total of twelve additional months[30]. - The Business Combination Agreement includes the merger of Merger Sub I with VSee and Merger Sub II with iDoc, with both becoming wholly owned subsidiaries of the Company[39]. - The Company has not commenced any significant operations and will not generate operating revenues until after completing its initial Business Combination[22]. Capital Raising and Financing - The company generated gross proceeds of $115,000,000 from its Initial Public Offering, which included the full exercise of the underwriter's over-allotment option[23]. - The Company intends to raise additional capital through loans or investments from the Sponsor or its stockholders to meet working capital needs[48]. - The Company has entered into a securities purchase agreement for Bridge Financing, issuing senior secured promissory notes totaling $2,222,222[92]. - The Company will issue a senior unsecured convertible note worth $500,000 to the investor at a fixed conversion price of $10.00 per share as a commitment fee[168]. Shareholder and Stock Information - A total of 579,157 shares of common stock were redeemed in connection with the 2023 Annual Meeting, leaving 114,966 shares subject to redemption[31]. - As of March 31, 2024, the common stock subject to possible redemption is valued at $7,395,349 after accounting for redemptions and accretion[60]. - The Company is authorized to issue 50,000,000 common shares, with 3,489,000 shares issued and outstanding as of March 31, 2024[171]. - The Company has received multiple notifications from Nasdaq regarding non-compliance with listing requirements, including a market value of listed securities below $50 million and a market value of publicly held shares below $15 million[40][41]. Debt and Interest Expenses - Interest expense on Bridge/Exchange Note decreased from $133,138 in Q1 2023 to $51,036 in Q1 2024, a reduction of approximately 61.7%[13]. - The Company recognized interest expense of $22,792 for the three months ended March 31, 2024, including $20,296 of default interest[91]. - The Company defaulted on the Bridge Notes, resulting in a total amount due of $2,523,744, including penalties and interest[148]. - The Exchange Agreement recognized $1,579,927 in default interest due to the Bridge Investor[148]. Regulatory and Compliance - The Company is classified as an "emerging growth company" and may take advantage of certain exemptions from reporting requirements[50]. - The Company has determined that its liquidity condition raises substantial doubt about its ability to continue as a going concern[49]. - The Inflation Reduction Act of 2022 imposes a 1% excise tax on stock repurchases, effective January 1, 2023, which may affect the Company's future financial strategies[79]. Warrants and Securities - As of March 31, 2024, there are 12,057,000 warrants issued and outstanding, each entitling the holder to purchase one share of common stock at $11.50[177]. - The warrants may be called for redemption at $0.01 per warrant if the stock price exceeds $18.00 for 20 trading days within a 30-day period[179]. - The Company must reserve sufficient shares for the exercise of the Bridge Warrants and will amend its Certificate of Incorporation as necessary[188]. - The Extension Warrants are exercisable for a period of five years from the date of issuance[200].

PART I This part details DHAC's business as a **blank check company**, its target acquisition strategy, associated risks, corporate structure, and legal status [ITEM 1. BUSINESS](index=4&type=section&id=ITEM%201.%20BUSINESS) Digital Health Acquisition Corp. (DHAC) is a **blank check company** formed to effect a **business combination**, primarily targeting technology and healthcare-focused businesses with an **enterprise value of $175 million to $500 million** - **DHAC** is a **blank check company** (**SPAC**) focused on technology and healthcare businesses for its initial **business combination**[7](index=7&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk) - The target **enterprise value** for a **business combination** is approximately **$175 million to $500 million**[7](index=7&type=chunk)[13](index=13&type=chunk) Key Financial Events & Redemptions | Event | Date | Details | |---|---|---| | **IPO** Consummation | November 8, 2021 | **11,500,000 units** at **$10.00/unit**, generating **$115,000,000 gross proceeds** | | **Private Placement** | Simultaneously with **IPO** | **557,000 units** at **$10.00/unit** to Sponsor, generating **$5,570,000 gross proceeds** | | **Trust Account** Deposit | Post-**IPO** | Approximately **$116,725,000** placed in **trust** | | **Redemption** (Nov 2023) | November 7, 2023 | **579,157 shares redeemed**, withdrawing **$6,796,063** from **Trust Account** | | **Business Combination Deadline Extension** | November 6, 2023 | Stockholders approved extension up to November 8, 2024. Current deadline is May 8, 2024 | - The management team, led by Scott Wolf (**CEO**) and Daniel Sullivan (**CFO**), has extensive experience in healthcare, medical technology, and financial services[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) - The company faces intense competition from other **blank check companies**, private equity groups, and operating businesses for acquisition targets[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk) [ITEM 1A. RISK FACTORS](index=8&type=section&id=ITEM%201A.%20RISK%20FACTORS) As a **smaller reporting company**, **DHAC** is not required to provide specific disclosures under this item - The registrant is a **smaller reporting company** and is not required to make disclosures under this item[24](index=24&type=chunk) [ITEM 1B. UNRESOLVED STAFF COMMENTS](index=8&type=section&id=ITEM%201B.%20UNRESOLVED%20STAFF%20COMMENTS) This item is not applicable to **DHAC** - This item is not applicable[24](index=24&type=chunk) [ITEM 1C. CYBERSECURITY](index=8&type=section&id=ITEM%201C.%20CYBERSECURITY) As a **SPAC** with no business operations, **DHAC** does not consider itself to face significant cybersecurity risk and has not adopted a formal cybersecurity risk management program - **DHAC** is a **SPAC** with no business operations, primarily focused on identifying acquisition candidates[25](index=25&type=chunk) - The company does not consider itself to face significant cybersecurity risk and has not adopted a formal cybersecurity risk management program[25](index=25&type=chunk) - The board of directors is generally responsible for oversight of cybersecurity threats, and no incidents have occurred since the **IPO**[25](index=25&type=chunk) [ITEM 2. PROPERTIES](index=8&type=section&id=ITEM%202.%20PROPERTIES) **DHAC** maintains its executive offices in Boca Raton, FL, provided by an affiliate of its sponsor for a **monthly administrative fee of $10,000** - Executive offices are located at 980 N Federal Hwy 304, Boca Raton, FL 33432[26](index=26&type=chunk) - An affiliate of the sponsor provides the office space for a **monthly administrative fee of $10,000**[26](index=26&type=chunk) [ITEM 3. LEGAL PROCEEDINGS](index=8&type=section&id=ITEM%203.%20LEGAL%20PROCEEDINGS) **DHAC** is not aware of any legal proceedings, investigations, or claims that have a more than remote possibility of materially adversely affecting its business, financial condition, or results of operations - The company is not aware of any material adverse legal proceedings, investigations, or claims[27](index=27&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=8&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This item is not applicable to **DHAC** - This item is not applicable[27](index=27&type=chunk) PART II This part covers **DHAC**'s equity market listing, management's financial analysis, liquidity, **going concern** status, and internal controls [ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES](index=8&type=section&id=ITEM%205.%20MARKET%20FOR%20REGISTRANT%27S%20COMMON%20EQUITY%2C%20RELATED%20STOCKHOLDER%20MATTERS%20AND%20ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) **DHAC**'s units, **common stock**, and **warrants** trade on The **Nasdaq Capital Market**, having transferred from the **Nasdaq Global Market** in October 2023 due to non-compliance with certain listing standards - **DHAC**'s units (**DHACU**), **common stock** (**DHAC**), and **warrants** (**DHACW**) are listed on The **Nasdaq Capital Market**[28](index=28&type=chunk)[43](index=43&type=chunk) - The company transferred its listing from **Nasdaq Global Market** to **Nasdaq Capital Market** on October 30, 2023, following non-compliance with **MVLS**, **MVPHS**, and shareholder count requirements[29](index=29&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) Key Metrics & Stockholder Information | Metric | Value (as of March 5, 2024) | |---|---| | **Common Stock Issued and Outstanding** | **3,603,966 shares** | | Stockholders of Record | Approximately **15** | Key Financial Events & Redemptions | Event | Date | Details | |---|---|---| | **IPO Gross Proceeds** | November 8, 2021 | **$115,000,000** | | **Private Placement Gross Proceeds** | Simultaneously with **IPO** | **$5,570,000** | | **Trust Account** Deposit | Post-**IPO** | Approximately **$116,725,000** | | **Common Stock Redemption** | October 20, 2022 | **10,805,877 shares redeemed**, **$110,472,254** withdrawn from **Trust Account** | | **Common Stock Redemption** | November 6, 2023 | **579,157 shares redeemed** | | Legal Settlement Share Issuance | February 2023 | **20,000 shares of common stock issued** | - **DHAC** has not paid cash dividends and does not intend to prior to completing an initial **business combination**, with future dividend payments at the board's discretion[31](index=31&type=chunk) - The company entered into various **securities purchase agreements** in November 2023, including a **$3,000,000 convertible promissory note** (**Quantum Note**) and agreements to convert certain indebtedness into **Series A Preferred Stock** or **common stock** at the **business combination** closing[36](index=36&type=chunk)[37](index=37&type=chunk) [ITEM 6. [RESERVED]](index=10&type=section&id=ITEM%206.%20%5BRESERVED%5D) This item is reserved and contains no information [ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=10&type=section&id=ITEM%207.%20MANAGEMENT%27S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) **DHAC**, a **blank check company**, has focused solely on organizational activities and identifying a **business combination** target since its **IPO** in November 2021 [Overview](index=10&type=section&id=Overview) **DHAC** is a Delaware-incorporated **blank check company** formed in March 2021, aiming to complete a **business combination** with a technology and healthcare-focused entity - **DHAC** was incorporated on March 30, 2021, as a **blank check company** to pursue a **business combination** in the technology and healthcare sectors[39](index=39&type=chunk) Key Corporate Events | Event | Date | Details | |---|---|---| | **IPO** Consummation | November 8, 2021 | **11,500,000 units** at **$10.00/unit**, generating **$115,000,000 gross proceeds** | | **Private Placement** | Simultaneously with **IPO** | **557,000 units** at **$10.00/unit** to Sponsor, generating **$5,570,000 gross proceeds** | | **Trust Account** Deposit | Post-**IPO** | **$116,725,000** deposited into the **Trust Account** | | **Business Combination Deadline** | Extended to May 8, 2024 | Originally **30 months** from **IPO**, extended via stockholder approvals in Oct 2022 and Nov 2023 | | **Common Stock Redemptions** | Oct 20, 2022 & Nov 6, 2023 | Aggregate of **11,385,034 shares redeemed** in connection with term extensions | - **DHAC**'s Units, **Common Stock**, and **Warrants** are listed on the **Nasdaq Capital Market** under symbols '**DHACU**,' '**DHAC**,' and '**DHACW**,' respectively[43](index=43&type=chunk) [NASDAQ Listing Rules Compliance](index=12&type=section&id=NASDAQ%20Listing%20Rules%20Compliance) **DHAC** faced multiple non-compliance notifications from **Nasdaq Global Market** in 2023 for failing to meet minimum **Market Value of Listed Securities** (**MVLS**), **Market Value of Publicly Held Shares** (**MVPHS**), and total shareholders requirements - **DHAC** received multiple Nasdaq non-compliance letters in 2023 for failing to meet minimum **MVLS** (**$50M**), **MVPHS** (**$15M**), and **400 total shareholders** requirements[44](index=44&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) - **DHAC** successfully applied to transfer its securities listing from **Nasdaq Global Market** to the **Nasdaq Capital Market** (**NasdaqCM**)[46](index=46&type=chunk)[48](index=48&type=chunk) - **DHAC**'s securities began trading on **NasdaqCM** on October 30, 2023, and the delisting hearing was subsequently cancelled[48](index=48&type=chunk)[49](index=49&type=chunk) [The Business Combination Agreement](index=14&type=section&id=The%20Business%20Combination%20Agreement) **DHAC** entered into a **Business Combination Agreement** with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc., which has been amended multiple times, most recently on February 13, 2024 - **DHAC** entered into a **Business Combination Agreement** with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc., amended multiple times, with the latest amendment on February 13, 2024[50](index=50&type=chunk) - Upon closing, VSee and iDoc will merge into **DHAC**'s subsidiaries, and **DHAC** will be renamed VSee Health, Inc[50](index=50&type=chunk) Business Combination Valuation | Metric | Value | |---|---| | **Implied Post-Closing Equity Value** | **$53.9 million** | | **Combined Equity Value of VSee and iDoc** | **$110 million** | | VSee **Merger Consideration** | **$60,500,000** (minus option grants and transaction expenses), paid in Company **Common Stock** | | iDoc **Merger Consideration** | **$49,500,000** (minus transaction expenses), paid in Company **Common Stock** | - Closing conditions include shareholder approvals, Nasdaq listing approval for **DHAC**'s application, and the composition of the **DHAC** board of directors[320](index=320&type=chunk)[321](index=321&type=chunk) [Business Combination Related Financing Transactions](index=16&type=section&id=Business%20Combination%20Related%20Financing%20Transactions) To fund the **business combination**, **DHAC** has secured several financing arrangements Business Combination Related Financing Transactions | Financing Type | Details | |---|---| | **Bridge Financing** | | | Original **Bridge Notes** (Oct 2022) | Aggregate **$2,222,222** (**DHAC**, VSee, iDoc), **10% interest**, convertible, issued with **warrants** and **common stock** | | **Additional Bridge Notes** (Nov 2023) | Aggregate **$166,667** (subscription **$150,000**), **8% interest**, convertible, subject to reset if stock trades below **$10.00** | | **Exchange Note** (Nov 2023) | Aggregate **$2,523,744**, **8% interest**, convertible, subject to reset if stock trades below **$10.00** | | **Quantum Financing** (Nov 2023) | **$3,000,000 convertible promissory note**, **7% OID**, **12% interest**, convertible at **$10.00** or **85% lowest VWAP**, subject to reset | | **A.G.P. Financing** (Nov 2022, amended Nov 2023) | **4,370 Series A Preferred Stock** (**$4,370,000**) in lieu of **deferred underwriting commissions**, convertible at **$10.00**, subject to reset | | **Loan Conversions** (Nov 2023) | Various indebtedness of **DHAC**, VSee, and iDoc to be converted into **Series A Preferred Stock** or **common stock** at closing | | **Equity Financing** (**ELOC**) (Nov 2023) | Up to **$50,000,000** of **common stock** over **36 months** post-closing, with a **$500,000 convertible commitment note** | | **Extension Financing** (May 2023) | **$250,000 promissory note**, **10% interest**, issued with **26,086 warrants** and **7,000 commitment shares** | - The **Quantum Investor** is **33% owned** by SCS Capital Partners, an entity owned by Lawrence Sands, a **beneficial owner** of **founder shares** and manager of **DHAC**'s Sponsor[62](index=62&type=chunk) - **Lock-up agreements** are in place for the sponsor and certain directors/officers for **180 days** post-closing, with **registration rights** granted for various securities[59](index=59&type=chunk)[60](index=60&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) **DHAC**, a **blank check company**, has not generated operating revenues - **DHAC** has not generated any operating revenues since inception, with activities limited to formation, **IPO**, and searching for **business combination** candidates[68](index=68&type=chunk) Financial Performance Summary | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |---|---|---| | **Net Loss** | **$(4,413,866)** | **$(3,242,501)** | | **General and Administrative Expenses** | **$2,593,765** | **$3,594,967** | | **Default Interest Expense – Bridge Note** | **$1,579,927** | **$0** | | **Interest Expense – Bridge Note** | **$429,007** | **$125,980** | | **Interest Earned on Investments in Trust Account** | **$358,767** | **$922,644** | [Liquidity and Capital Resources](index=22&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2023, **DHAC** had a **cash balance of $1,863** and a **working capital deficiency of $7,982,537** Balance Sheet Summary | Metric | As of December 31, 2023 | |---|---| | **Cash Balance** | **$1,863** | | **Working Capital Deficiency** | **$(7,982,537)** | | **Investments Held in Trust Account** | **$1,368,637** | | **Total Liabilities** | **$12,354,400** | | **Total Stockholders' Deficit** | **$(12,265,857)** | - Initial liquidity was provided by a **$25,000 capital contribution** from the Sponsor and **$602,720 in loans from the Sponsor**[72](index=72&type=chunk) - The company experienced significant **redemptions**: **$110,472,254** withdrawn from the **Trust Account** in October 2022 and **$6,796,063** in November 2023[74](index=74&type=chunk) - A **$2,222,222 Bridge Note defaulted** on October 4, 2023, triggering a **125% mandatory default penalty**, a **10% late fee**, and **24% default interest**, resulting in **$1,579,927 in default interest recognized** and an **Exchange Agreement** for a **$2,523,744 Exchange Note**[75](index=75&type=chunk)[76](index=76&type=chunk) Cash Flow Summary | Cash Flow Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |---|---|---| | **Net Cash Used in Operating Activities** | **$(962,042)** | **$(1,391,213)** | | **Net Cash Provided by Investing Activities** | **$6,517,499** | **$110,122,253** | | **Net Cash Used in Financing Activities** | **$(5,660,592)** | **$(109,384,054)** | [Going Concern](index=28&type=section&id=Going%20Concern) **DHAC**'s limited **cash balance of $1,863**, a **working capital deficiency of $7,982,537**, and the mandatory liquidation date of November 8, 2024, if a **business combination** is not completed, raise substantial doubt about its ability to continue as a **going concern** - As of December 31, 2023, **DHAC** had a **cash balance of $1,863** and a **working capital deficiency of $7,982,537**[95](index=95&type=chunk) - The liquidity condition, mandatory liquidation, and subsequent dissolution on November 8, 2024, raise substantial doubt about the company's ability to continue as a **going concern**[95](index=95&type=chunk)[207](index=207&type=chunk)[253](index=253&type=chunk) - Management believes it will have sufficient **working capital** and **borrowing capacity** from the Sponsor or affiliates to meet its needs through the earlier of a **Business Combination** or at least one year from the financial statement issuance date[94](index=94&type=chunk)[252](index=252&type=chunk) - The company intends to complete a **Business Combination** before the mandatory liquidation date or file for an extension[95](index=95&type=chunk)[253](index=253&type=chunk) [Critical Accounting Estimates](index=28&type=section&id=Critical%20Accounting%20Estimates) Management's financial estimates rely on **significant judgments**, particularly in **fair valuing complex financial instruments** - **Significant judgments** are applied in defining assumptions for financial estimates, which are reviewed regularly[96](index=96&type=chunk) - The most significant **accounting estimates** involve the **fair value** of the **PIPE Forward Contract**, **Extension Note Bifurcated Derivative**, **Bridge Note Bifurcated Derivative**, **Additional Bridge Note**, and **Exchange Note**[96](index=96&type=chunk)[258](index=258&type=chunk) - **Judgments** are based on historical experience, contract terms, industry trends, and external information, but actual results may differ due to inherent uncertainty[96](index=96&type=chunk)[258](index=258&type=chunk) [Common stock subject to possible redemption](index=28&type=section&id=Common%20stock%20subject%20to%20possible%20redemption) **Common stock subject to possible redemption** is classified as **temporary equity** and measured at its **redemption value**, as the **redemption rights** are outside the company's control or subject to uncertain future events - **Common stock subject to possible redemption** is classified as **temporary equity** and measured at **fair value** in accordance with **ASC 480**[97](index=97&type=chunk)[262](index=262&type=chunk) - Redeemable **common stock** is adjusted to equal the **redemption value** at the end of each reporting period, with changes affecting **additional paid-in capital** or **accumulated deficit**[97](index=97&type=chunk)[263](index=263&type=chunk) Common Stock Subject to Redemption | Metric | December 31, 2023 | December 31, 2022 | |---|---|---| | **Common Stock Subject to Possible Redemption** | **$1,281,957** | **$7,395,349** | | Shares Issued and Outstanding at **Redemption Value** | **114,966 shares** at **$11.15/share** | **694,123 shares** at **$10.65/share** | [Warrant Instruments](index=29&type=section&id=Warrant%20Instruments) **DHAC** classifies its **warrants** (**Public**, **Private**, **Bridge**, and **Extension Warrants**) as **equity instruments**, not liabilities, after assessing their terms against **ASC 480** and **ASC 815** - **Warrants** are classified as either **equity-classified** or **liability-classified** based on an assessment of specific terms and applicable guidance (**ASC 480** and **ASC 815**)[98](index=98&type=chunk)[276](index=276&type=chunk) - **Public Warrants**, **Private Warrants**, **Bridge Warrants**, and **Extension Warrants** are considered **freestanding instruments** and meet all requirements for **equity classification** under **ASC 815**[99](index=99&type=chunk)[277](index=277&type=chunk) - **Warrants** meeting **equity classification** criteria are recorded as a component of **additional paid-in capital** at issuance[99](index=99&type=chunk)[277](index=277&type=chunk) [Financial Instruments](index=30&type=section&id=Financial%20Instruments) **DHAC** evaluates its **financial instruments** under **ASC 480** and **ASC 815** to determine liability or **derivative classification** - **Financial instruments** are evaluated under **ASC 480** and **ASC 815** for liability or **derivative classification**[100](index=100&type=chunk)[278](index=278&type=chunk) - **Derivative instruments** (e.g., **PIPE financing agreement**, bifurcated features of **Bridge Notes** and **Extension Note**) are recorded at **fair value**, with changes reported in the statements of operations[101](index=101&type=chunk)[279](index=279&type=chunk) - The **Exchange Note** and **Additional Bridge Note** are classified as **share-settled debt liabilities** under **ASC 480** and re-measured at **fair value** each reporting period[102](index=102&type=chunk)[280](index=280&type=chunk) [Recent Accounting Standards](index=30&type=section&id=Recent%20Accounting%20Standards) **DHAC** adopted **ASU 2016-13** (**Financial Instruments – Credit Losses**) on January 1, 2023, with no material impact on its financial statements - **ASU 2016-13**, '**Financial Instruments – Credit Losses**,' was adopted on January 1, 2023, with no material impact on consolidated financial statements[103](index=103&type=chunk)[282](index=282&type=chunk) - **ASU 2023-09**, '**Income Taxes**,' effective for annual periods after December 15, 2024, will require additional **income tax rate reconciliation** and **disaggregated tax payment disclosures**; the impact is currently under review[103](index=103&type=chunk)[283](index=283&type=chunk) [ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=30&type=section&id=ITEM%207A.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a **smaller reporting company**, **DHAC** is not required to provide disclosures under this item - Disclosures about **market risk** are not required for **smaller reporting companies**[103](index=103&type=chunk) [ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA](index=30&type=section&id=ITEM%208.%20FINANCIAL%20STATEMENTS%20AND%20SUPPLEMENTARY%20DATA) This item refers to the **financial statements and supplementary data** provided in the subsequent F-pages of the report - **Financial statements and supplementary data** are included following Item 15 of this Report[103](index=103&type=chunk) [ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE](index=30&type=section&id=ITEM%209.%20CHANGES%20IN%20AND%20DISAGREEMENTS%20WITH%20ACCOUNTANTS%20ON%20ACCOUNTING%20AND%20FINANCIAL%20DISCLOSURE) **DHAC** reports no **changes in or disagreements with its accountants on accounting and financial disclosure** matters - There are no **changes in or disagreements with accountants on accounting and financial disclosure**[104](index=104&type=chunk) [ITEM 9A. CONTROLS AND PROCEDURES](index=31&type=section&id=ITEM%209A.%20CONTROLS%20AND%20PROCEDURES) **DHAC**'s management, including its Certifying Officers, concluded that the company's **disclosure controls and procedures** were effective as of December 31, 2023 - **Disclosure controls and procedures** were evaluated and deemed effective as of December 31, 2023[105](index=105&type=chunk) - Management assessed and determined that **internal control over financial reporting** was effective as of December 31, 2023, using the **COSO 2013 framework**[108](index=108&type=chunk) - As an **emerging growth company**, **DHAC** does not include an **attestation report** from its independent registered public accounting firm on **internal control over financial reporting**[109](index=109&type=chunk)[254](index=254&type=chunk) - No **material changes** in **internal control over financial reporting** occurred during the most recent fiscal quarter[110](index=110&type=chunk) [ITEM 9B. OTHER INFORMATION](index=33&type=section&id=ITEM%209B.%20OTHER%20INFORMATION) This item reports that there is no **other information** to disclose - No **other information** to report[110](index=110&type=chunk) [ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS](index=33&type=section&id=ITEM%209C.%20DISCLOSURE%20REGARDING%20FOREIGN%20JURISDICTIONS%20THAT%20PREVENT%20INSPECTIONS) This item is not applicable to **DHAC** - This item is not applicable[110](index=110&type=chunk) PART III This part outlines **DHAC**'s corporate governance, executive compensation policies, beneficial ownership, **related party transactions**, and auditor fees [ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE](index=33&type=section&id=ITEM%2010.%20DIRECTORS%2C%20EXECUTIVE%20OFFICERS%20AND%20CORPORATE%20GOVERNANCE) **DHAC**'s leadership includes Scott Wolf (**CEO**, Corporate Secretary, **Chairman**) and Daniel Sullivan (**CFO**), supported by a five-member board of directors Executive Officers and Directors | Name | Age | Position | |---|---|---| | Scott Wolf | **58** | **Chief Executive Officer**, Corporate Secretary, and **Chairman** | | Daniel Sullivan | **65** | **Chief Financial Officer** | | Kevin Lowdermilk | **60** | **Director** | | Frank Ciufo | **63** | **Director** | | George McNellage | **63** | **Director** | | Scott Metzger | **56** | **Director** | - The board consists of five directors, with terms expiring at the first annual meeting of stockholders; officers serve at the discretion of the board[118](index=118&type=chunk)[119](index=119&type=chunk) - Four directors (Kevin Lowdermilk, Frank Ciufo, George McNellage, Scott Metzger) are **independent**, meeting Nasdaq requirements[121](index=121&type=chunk) - The board has an **Audit Committee** (Chair: Kevin Lowdermilk), a **Compensation Committee** (Chair: George McNellage), and a **Nominating Committee** (Chair: Scott Metzger), all composed of **independent directors**[122](index=122&type=chunk)[123](index=123&type=chunk)[127](index=127&type=chunk)[130](index=130&type=chunk) - George McNellage, Kevin Lowdermilk, and Frank Ciufo qualify as '**audit committee financial experts**' under **SEC** rules[126](index=126&type=chunk) - A **code of ethics** has been adopted, applying to all executive officers, directors, and employees[132](index=132&type=chunk) [ITEM 11. EXECUTIVE COMPENSATION](index=42&type=section&id=ITEM%2011.%20EXECUTIVE%20COMPENSATION) **DHAC** has not entered into **employment agreements** with its executive officers, and no **cash compensation** has been paid for services rendered - No **employment agreements** are in place with executive officers, and no **cash compensation** has been paid for services rendered[135](index=135&type=chunk)[136](index=136&type=chunk) - Executive officers and directors are reimbursed for **out-of-pocket expenses** related to identifying target businesses and due diligence[136](index=136&type=chunk) - A **clawback policy** was adopted in November 2023, covering current and former executive officers, to recover excess **incentive compensation** in case of a **material financial restatement**[138](index=138&type=chunk) [ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS](index=43&type=section&id=ITEM%2012.%20SECURITY%20OWNERSHIP%20OF%20CERTAIN%20BENEFICIAL%20OWNERS%20AND%20MANAGEMENT%20AND%20RELATED%20STOCKHOLDER%20MATTERS) As of April 12, 2024, **DHAC** had **3,603,966 shares of common stock outstanding** - As of April 12, 2024, **DHAC** had **3,603,966 shares of common stock issued and outstanding**[140](index=140&type=chunk) Beneficial Ownership | Name and Address of **Beneficial Owner** | Number of Shares of **DHAC Common Stock Beneficially Owned** | **% of Class** | |---|---|---| | Digital Health Sponsor LLC (our sponsor) | **3,187,250** | **76.60 %** | | SCS Capital Partners, LLC | **500,000** | **13.87 %** | | Alto Opportunity Master Fund, **SPC** – Segregated Master Portfolio B | **200,000** | **5.55 %** | | Scott Wolf | **175,000** | **4.86 %** | | Daniel Sullivan | **75,000** | **2.08 %** | | Frank Ciufo | **8,625** | * | | George McNellage | **8,625** | * | | Scott Metzger | **8,625** | * | | Kevin Lowdermilk | — | — | - Lawrence Sands, manager of the Sponsor and SCS Capital Partners, LLC, may be deemed to have **sole voting and investment discretion** over shares held by these entities[143](index=143&type=chunk)[145](index=145&type=chunk) [ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE](index=45&type=section&id=ITEM%2013.%20CERTAIN%20RELATIONSHIPS%20AND%20RELATED%20TRANSACTIONS%2C%20AND%20DIRECTOR%20INDEPENDENCE) **DHAC** has several **related party transactions**, including the initial purchase of **founder shares** by the Sponsor and certain directors/officers, subject to **lock-up agreements** - **Founder shares** were initially purchased by the Sponsor and certain directors/officers, subject to **lock-up agreements** and a **Sponsor Support Agreement**[149](index=149&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) - **DHAC** has received **working capital loans and advances** from the Sponsor and its affiliates (e.g., SCS Capital Partners LLC, M2B Funding Corp., Whacky, Munro Trust, Tidewater) for operational and extension fees[156](index=156&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk)[162](index=162&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk) - Many of these **related-party loans and advances** are structured to be converted into **Series A Preferred Shares** or **common stock** of the Combined Company upon the closing of the **business combination**[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - Key **financing transactions**, including **Bridge Financing**, **Quantum Financing**, and **Equity Financing** (**ELOC**), involve the **Bridge Investor** and **Quantum Investor**, both with affiliations to the Sponsor[167](index=167&type=chunk)[168](index=168&type=chunk)[174](index=174&type=chunk)[176](index=176&type=chunk)[177](index=177&type=chunk)[178](index=178&type=chunk) - An **administrative services agreement** requires a **$10,000 monthly payment** to an affiliate of the Sponsor for office space and services[181](index=181&type=chunk) - All ongoing and future **related-party transactions** require prior approval by a majority of **uninterested independent directors** to ensure terms are no less favorable than those available from **unaffiliated third parties**[184](index=184&type=chunk)[186](index=186&type=chunk) [ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES](index=55&type=section&id=ITEM%2014.%20PRINCIPAL%20ACCOUNTANT%20FEES%20AND%20SERVICES) WithumSmith+Brown, **PC** served as **DHAC**'s **independent registered public accounting firm** - WithumSmith+Brown, **PC** is the **independent registered public accounting firm**[190](index=190&type=chunk) Principal Accountant Fees | Fee Type | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |---|---|---| | **Audit Fees** | **$84,200** | **$84,200** | | **Audit-Related Fees** | **$0** | **$0** | | **Tax Fees** | **$0** | **$0** | | All Other Fees | **$0** | **$0** | - The **audit committee pre-approves** all **auditing and permitted non-audit services**[194](index=194&type=chunk) PART IV This part provides a comprehensive list of **financial statements** and exhibits filed as part of the report [ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES](index=56&type=section&id=ITEM%2015.%20EXHIBITS%20AND%20FINANCIAL%20STATEMENT%20SCHEDULES) This section lists the **financial statements** and exhibits filed as part of the Form **10-K** - The Form **10-K** includes audited **consolidated financial statements** for the years ended December 31, 2023 and 2022[195](index=195&type=chunk)[206](index=206&type=chunk) Financial Statements and Schedules | Document | Page Number | |---|---| | **Report of Independent Registered Public Accounting Firm** | F-2 | | **Consolidated Balance Sheets** | F-3 | | **Consolidated Statements of Operations** | F-4 | | **Consolidated Statements of Changes in Stockholders' Deficit** | F-5 | | **Consolidated Statements of Cash Flows** | F-6 | | **Notes to Consolidated Financial Statements** | F-7 to F-39 | - A detailed **Exhibit Index** lists various agreements, certificates, and policies, including the **Business Combination Agreement**, Certificate of Incorporation, Bylaws, **Warrant Agreement**, and several **financing-related agreements**[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) Financial Statements This part presents **DHAC**'s audited **consolidated financial statements**, including the auditor's report, balance sheets, income statements, cash flows, and detailed accounting notes [Report of Independent Registered Public Accounting Firm](index=65&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) WithumSmith+Brown, **PC**, as the **independent registered public accounting firm**, issued an **unqualified opinion** on **DHAC**'s **consolidated financial statements** for the years ended December 31, 2023 and 2022 - WithumSmith+Brown, **PC** provided an **unqualified opinion** on the **consolidated financial statements** for 2023 and 2022[206](index=206&type=chunk) - The report emphasizes a '**Going Concern**' matter, citing substantial doubt about the company's ability to continue due to **liquidity issues** and the **mandatory liquidation date** of November 8, 2024, if a **business combination** is not completed[207](index=207&type=chunk) - The audit was conducted in accordance with **PCAOB standards**, but an audit of **internal control over financial reporting** was not performed[209](index=209&type=chunk) [Consolidated Balance Sheets](index=66&type=section&id=Consolidated%20Balance%20Sheets) As of December 31, 2023, **DHAC** reported **total assets of $1,370,500**, significantly down from **$7,634,367** in 2022, primarily due to a decrease in **investments held in the Trust Account** Balance Sheet Summary | Metric | December 31, 2023 | December 31, 2022 | |---|---|---| | **Cash** | **$1,863** | **$106,998** | | **Investments held in Trust Account** | **$1,368,637** | **$7,527,369** | | **Total Assets** | **$1,370,500** | **$7,634,367** | | **Accounts payable and accrued expenses** | **$3,303,836** | **$1,886,312** | | **Exchange Note** | **$2,621,558** | **$0** | | **Promissory note – related party** | **$926,500** | **$350,000** | | **Deferred underwriting fee payable** | **$4,370,000** | **$4,370,000** | | **Total Liabilities** | **$12,354,400** | **$7,665,614** | | **Common stock subject to possible redemption** | **$1,281,957** | **$7,395,349** | | **Total Stockholders' Deficit** | **$(12,265,857)** | **$(7,426,596)** | [Consolidated Statements of Operations](index=67&type=section&id=Consolidated%20Statements%20of%20Operations) **DHAC** reported a **net loss of $4,413,866** for the year ended December 31, 2023, an increase from **$3,242,501** in 2022 Financial Performance Summary | Metric | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |---|---|---| | **General and administrative expenses** | **$2,593,765** | **$3,594,967** | | **Default interest expense – Bridge Note** | **$1,579,927** | **$0** | | **Interest expense – Bridge Note** | **$429,007** | **$125,980** | | **Interest earned on investments held in Trust Account** | **$358,767** | **$922,644** | | **Net Loss** | **$(4,413,866)** | **$(3,242,501)** | | **Basic and diluted net loss per common share** | **$(1.08)** | **$(0.25)** | [Consolidated Statements of Changes in Stockholders' Deficit](index=68&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Deficit) **DHAC**'s **total stockholders' deficit** increased from **$(7,426,596)** at December 31, 2022, to **$(12,265,857)** at December 31, 2023 Stockholders' Deficit Changes | Metric | December 31, 2023 | December 31, 2022 | |---|---|---| | **Total Stockholders' Deficit** | **$(12,265,857)** | **$(7,426,596)** | | **Net Loss** | **$(4,413,866)** | **$(3,242,501)** | | **Accretion of common stock subject to redemption value** | **$(682,671)** | **$(1,142,603)** | | **Issuance of shares for legal claim** | **$214,200** | **$0** | | **Issuance of shares and warrants with Extension Note** | **$115,472** | **$0** | | **Excise tax payable attributable to redemption** | **$(72,396)** | **$0** | [Consolidated Statements of Cash Flows](index=69&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the year ended December 31, 2023, **DHAC used $962,042 in operating activities**, primarily driven by **net loss** and various **interest expenses**, partially offset by changes in operating assets and liabilities Cash Flow Summary | Cash Flow Activity | Year Ended Dec 31, 2023 | Year Ended Dec 31, 2022 | |---|---|---| | **Net Cash Used in Operating Activities** | **$(962,042)** | **$(1,391,213)** | | **Net Cash Provided by Investing Activities** | **$6,517,499** | **$110,122,253** | | **Net Cash Used in Financing Activities** | **$(5,660,592)** | **$(109,384,054)** | | **Net Change in Cash** | **$(105,135)** | **$(653,014)** | | **Cash – End of Year** | **$1,863** | **$106,998** | - **Cash used in operating activities** in 2023 was primarily due to **net loss**, **default interest on Bridge Note** (**$1,579,927**), and accrued interest, partially offset by changes in **accounts payable and accrued expenses**[220](index=220&type=chunk) - **Cash provided by investing activities** in 2023 was mainly from **$6,796,063** withdrawn from the **Trust Account** in connection with **redemptions**[220](index=220&type=chunk) - **Non-cash investing and financing activities** in 2023 included **common stock issued for legal settlement** (**$214,200**) and the **settlement of Bridge Promissory Note with Exchange Note** (**$2,279,300**)[220](index=220&type=chunk) [Notes to Consolidated Financial Statements](index=71&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The **Notes to Consolidated Financial Statements** provide detailed disclosures on **DHAC**'s organization, **significant accounting policies**, and **financial instruments** [NOTE 1. DESCRIPTION OF ORGANIZATION AND BUSINESS OPERATIONS](index=71&type=section&id=NOTE%201.%20DESCRIPTION%20OF%20ORGANIZATION%20AND%20BUSINESS%20OPERATIONS) Digital Health Acquisition Corp. (**DHAC**) is a Delaware-incorporated **blank check company** formed in March 2021 to pursue a **business combination** - **DHAC** is a **blank check company** formed on March 30, 2021, to effect a **Business Combination**[221](index=221&type=chunk) Key Corporate Events | Event | Date | Details | |---|---|---| | **IPO** Consummation | November 8, 2021 | **11,500,000 units** at **$10.00/unit**, generating **$115,000,000 gross proceeds** | | **Private Placement** | Simultaneously with **IPO** | **557,000 units** at **$10.00/unit** to Sponsor, generating **$5,570,000 gross proceeds** | | **Trust Account** Deposit | Post-**IPO** | **$116,725,000** deposited into the **Trust Account** | | **Business Combination Deadline** | Extended to May 8, 2024 | Approved by stockholders in Oct 2022 and Nov 2023 | | **Common Stock Redemptions** | Oct 20, 2022 & Nov 6, 2023 | **10,805,877** and **579,157 shares redeemed**, respectively | - **DHAC** transferred its listing from **Nasdaq Global Market** to **Nasdaq Capital Market** on October 30, 2023, due to non-compliance with listing rules[246](index=246&type=chunk)[248](index=248&type=chunk)[249](index=249&type=chunk) - A **Business Combination Agreement** with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc. was amended on November 21, 2023, with **DHAC** to be renamed VSee Health, Inc. upon closing[241](index=241&type=chunk)[242](index=242&type=chunk)[243](index=243&type=chunk) [NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=77&type=section&id=NOTE%202.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines **DHAC**'s **significant accounting policies**, including its basis of presentation in **U.S. GAAP** and principles of consolidation - The consolidated financial statements are prepared in accordance with **U.S. GAAP** and include the accounts of **DHAC** and its wholly-owned subsidiaries[250](index=250&type=chunk)[251](index=251&type=chunk) - Substantial doubt about **DHAC**'s ability to continue as a **going concern** exists due to a **cash balance of $1,863**, a **working capital deficit of $7,982,537**, and a **mandatory liquidation date** of November 8, 2024[253](index=253&type=chunk) - **DHAC** is an '**emerging growth company**' and has elected to use the **extended transition period** for complying with new or revised financial **accounting standards**[254](index=254&type=chunk)[255](index=255&type=chunk) - **Common stock subject to possible redemption** is classified as **temporary equity** and measured at **redemption value**, as **redemption rights** are outside the company's control[262](index=262&type=chunk)[263](index=263&type=chunk) - **Warrants** are classified as **equity instruments**, while certain **financial instruments** (e.g., **PIPE financing agreement**, bifurcated features of **Bridge Notes** and **Extension Note**) are treated as **derivatives** or **share-settled debt liabilities** (**Exchange Note**, **Additional Bridge Note**) and re-measured at **fair value**[277](index=277&type=chunk)[279](index=279&type=chunk)[280](index=280&type=chunk) - The **Inflation Reduction Act of 2022** may subject **redemptions** to a **1% excise tax**, with **DHAC** booking a **$72,396 liability** for shares redeemed in 2023[286](index=286&type=chunk)[287](index=287&type=chunk) [NOTE 3. INITIAL PUBLIC OFFERING](index=88&type=section&id=NOTE%203.%20INITIAL%20PUBLIC%20OFFERING) **DHAC** consummated its **Initial Public Offering** on November 8, 2021, selling **11,500,000 units** at **$10.00 per unit**, generating **$115,000,000 in gross proceeds** Initial Public Offering Details | Metric | Value | |---|---| | **Units Sold** | **11,500,000** | | **Price Per Unit** | **$10.00** | | **Gross Proceeds** | **$115,000,000** | | **Warrants Issued** | **11,500,000** (one per unit) | | **Warrant Exercise Price** | **$11.50 per share** | | **Warrant Exercisability** | Later of **30 days** post-**business combination** or **12 months** post-**IPO** | | **Warrant Expiration** | Five years post-**business combination** | [NOTE 4. PRIVATE PLACEMENT](index=88&type=section&id=NOTE%204.%20PRIVATE%20PLACEMENT) Simultaneously with the **IPO**, **DHAC** completed a **private placement** of **557,000 units** to its Sponsor at **$10.00 per unit**, generating **$5,570,000 in gross proceeds** - The Sponsor purchased **557,000 private placement units** at **$10.00 per unit**, generating **$5,570,000 gross proceeds**, simultaneously with the **IPO**[289](index=289&type=chunk) - **Private placement units** are identical to **IPO units** but are not redeemable, and proceeds were placed in the **Trust Account**[289](index=289&type=chunk) - The Sponsor, advisors, officers, and directors have waived **redemption rights** for their **founder and public shares** and agreed to vote in favor of the initial **business combination**[290](index=290&type=chunk) [NOTE 5. RELATED PARTY TRANSACTIONS](index=89&type=section&id=NOTE%205.%20RELATED%20PARTY%20TRANSACTIONS) **DHAC** has engaged in various **related party transactions**, including the initial purchase of **founder shares** by the Sponsor and affiliates - **Founder shares** were purchased by the Sponsor and certain directors/officers for **$25,000**, with **2,875,000 shares outstanding** after forfeitures[291](index=291&type=chunk) - **DHAC** has received various **loans and advances from related parties**, including the Sponsor, SCS Capital Partners LLC, and M2B Funding Corp., totaling **$926,500 in promissory notes from related parties** as of Dec 31, 2023[293](index=293&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - The **Bridge Notes**, issued to an investor affiliated with the Sponsor, **defaulted** on October 4, 2023, leading to a **$1,579,927 default interest charge** and subsequent exchange for a **$2,523,744 Exchange Note**[298](index=298&type=chunk)[299](index=299&type=chunk)[343](index=343&type=chunk)[344](index=344&type=chunk) - **Post-Business Combination Financing Transactions**, including **Loan Conversions**, **Quantum Financing**, and **Equity Financing**, involve **related parties** and aim to convert existing indebtedness or provide new capital[301](index=301&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk) - An **administrative services agreement** with a Sponsor affiliate results in a **$10,000 monthly fee** for office space and services[308](index=308&type=chunk) - All **related-party transactions** are subject to prior approval by **independent directors** to ensure **fair terms**[311](index=311&type=chunk) [NOTE 6. COMMITMENTS](index=96&type=section&id=NOTE%206.%20COMMITMENTS) **DHAC** has several **significant commitments**, including **registration rights** for its **founder shares** and **private placement units** - Holders of **founder shares** and **private placement units** have **registration rights**[312](index=312&type=chunk) - A **deferred underwriting commission of $4.37 million** will be converted into **4,370 Series A Preferred Stock** for **A.G.P.** upon the **business combination** closing[314](index=314&type=chunk) - The **Business Combination Agreement** with VSee and iDoc, last amended on November 21, 2023, outlines the merger of VSee and iDoc into **DHAC** subsidiaries, with a **combined equity value of $110 million**[315](index=315&type=chunk)[316](index=316&type=chunk)[317](index=317&type=chunk) - The **PIPE Securities Purchase Agreement** and related **Backstop Agreement** were **terminated** on July 11, 2023, due to unmet closing conditions[333](index=333&type=chunk)[337](index=337&type=chunk) Business Combination Related Financing Transactions | Financing Type | Details | |---|---| | **Bridge Financing** | | | Original **Bridge Notes** (Oct 2022) | **$2,222,222 principal**, **10% OID**, **10% interest**, convertible. **Defaulted** Oct 2023 | | **Exchange Note** (Nov 2023) | **$2,523,744 principal**, **8% interest**, convertible, **share-settled debt** under **ASC 480** | | **Additional Bridge Notes** (Nov 2023) | **$166,667 principal** (funded **$100,000**), **10% OID**, **8% interest**, convertible, **share-settled debt** under **ASC 480** | | **Extension Financing** (May 2023) | **$300,000 principal**, **16.67% OID**, **10% interest**, issued with **warrants** and **commitment shares** | | **Quantum Financing** (Nov 2023) | **$3,000,000 principal**, **7% OID**, **12% interest**, convertible, **share-settled debt** under **ASC 480** | | **Equity Financing** (**ELOC**) (Nov 2023) | Up to **$50,000,000** of **common stock** over **36 months** post-closing, with a **$500,000 convertible commitment note** | [NOTE 7. STOCKHOLDERS' DEFICIT](index=112&type=section&id=NOTE%207.%20STOCKHOLDERS%27%20DEFICIT) **DHAC** is authorized to issue **50,000,000 common shares** - **DHAC** is authorized to issue **50,000,000 common shares** with a **par value of $0.0001 per share**[366](index=366&type=chunk) Common Stock Summary | Metric | December 31, 2023 | December 31, 2022 | |---|---|---| | **Common Shares Issued and Outstanding** (excluding redeemable) | **3,489,000** | **3,462,000** | | **Shares Subject to Redemption** | **114,966** | **694,123** | - **Public stockholders** have **redemption rights** in connection with an initial **business combination** or amendments to the certificate of incorporation[368](index=368&type=chunk)[369](index=369&type=chunk) - Insiders have waived their rights to share in any **liquidation distribution** from the **Trust Account**[367](index=367&type=chunk) [NOTE 8. WARRANTS](index=114&type=section&id=NOTE%208.%20WARRANTS) **DHAC** has various **warrants outstanding**, including **12,057,000 IPO warrants**, **Private Placement Warrants**, **Bridge Warrants** (**173,913 issued** in Oct 2022), and **Extension Warrants** (**26,086 issued** in May 2023) Warrant Summary | Warrant Type | Number Outstanding (Dec 31, 2023) | **Exercise Price** | **Exercisability** | **Expiration** | |---|---|---|---|---| | **Initial Public Offering Warrants** | **12,057,000** | **$11.50** | Later of **30 days** post-**BC** or **12 months** post-**IPO** | **5 years** post-**BC** | | **Private Placement Warrants** | Included in **IPO Warrants** | **$11.50** | Later of **30 days** post-**BC** or **12 months** post-**IPO** | **5 years** post-**BC** | | **Bridge Warrants** | **173,913** | **$11.50** | Upon issuance | **5 years** from issuance | | **Extension Warrants** | **26,086** | **$11.50** | Upon issuance | **5 years** from issuance | - **Warrants** may be called for **redemption** by the company at **$0.01 per warrant** if the **common stock price** equals or exceeds **$18.00** for **20 trading days** within a **30-day period**, and a current **registration statement** is in effect[374](index=374&type=chunk) - **Warrants** may be exercised on a **cashless basis** if a **registration statement** covering the underlying **common stock** is not effective within a specified period[373](index=373&type=chunk) - **Exercise price** and number of shares issuable are subject to adjustment for **stock dividends**, splits, reorganizations, or certain **equity issuances** below **$9.20 per share**[380](index=380&type=chunk)[381](index=381&type=chunk)[385](index=385&type=chunk)[390](index=390&type=chunk)[397](index=397&type=chunk)[402](index=402&type=chunk) [NOTE 9. INCOME TAX](index=123&type=section&id=NOTE%209.%20INCOME%20TAX) **DHAC**'s **net deferred tax assets** were fully offset by a **valuation allowance**, resulting in **zero net deferred tax assets** as of December 31, 2023 and 2022 - **Net deferred tax assets** were fully offset by a **valuation allowance**, resulting in **zero net deferred tax assets** as of December 31, 2023 and 2022[405](index=405&type=chunk) Income Tax Summary | Metric | December 31, 2023 | December 31, 2022 | |---|---|---| | **Total Deferred Tax Assets** | **$2,084,492** | **$961,918** | | **Valuation Allowance** | **$(2,084,492)** | **$(961,918)** | | **Deferred Tax Assets, Net of Allowance** | **$0** | **$0** | | **Effective Tax Rate** | **0.0%** | **6.1%** | | **Statutory Federal Income Tax Rate** | **21.0%** | **21.0%** | | **U.S. Federal and State NOL Carryovers** | **$1,822,738** | **$0** | - No **unrecognized tax benefits** or amounts accrued for **interest and penalties** were reported as of December 31, 2023 and 2022[407](index=407&type=chunk) [NOTE 10. FAIR VALUE MEASUREMENTS](index=124&type=section&id=NOTE%2010.%20FAIR%20VALUE%20MEASUREMENTS) **DHAC** measures financial assets and liabilities at **fair value** using a **three-tier hierarchy** - **Fair value measurements** are categorized into a **three-tier hierarchy** (**Level 1**, **2**, **3**) based on observability of inputs[410](index=410&type=chunk)[281](index=281&type=chunk) Fair Value Measurements | Asset/Liability | December 31, 2023 **Fair Value** | December 31, 2022 **Fair Value** | Level | |---|---|---|---| | **Investments held in Trust Account** (**Money Market Funds**) | **$1,368,637** | **$7,527,369** | **1** | | **Extension Note – Bifurcated Derivative** | **$22,872** | **$0** | **3** | | **ELOC** | **$203,720** | **$0** | **3** | | **Additional Bridge Note** | **$102,726** | **$0** | **3** | | **Exchange Note** | **$2,621,558** | **$0** | **3** | | **PIPE Forward Contract** | **$0** | **$170,666** | **3** | | **Bridge Note – Bifurcated Derivative** | **$0** | **$364,711** | **3** | - The **PIPE Forward Contract** and **Bridge Note Bifurcated Derivative** were **derecognized** in 2023 due to termination or extinguishment[414](index=414&type=chunk)[419](index=419&type=chunk) - **Valuation models** used for **Level 3 instruments** include **Probability Weighted Expected Return Method** (**PWERM**), **Discounted Cash Flow** (**DCF**), and **Monte Carlo Model** (**MCM**), relying on **unobservable inputs** like **risk-free rates**, volatility, **stock price**, and probabilities of **business combination** completion or early termination[414](index=414&type=chunk)[416](index=416&type=chunk)[419](index=419&type=chunk)[422](index=422&type=chunk)[425](index=425&type=chunk)[427](index=427&type=chunk) [NOTE 11. SUBSEQUENT EVENTS](index=129&type=section&id=NOTE%2011.%20SUBSEQUENT%20EVENTS) **Subsequent events** after December 31, 2023, include the **repayment of the M2B Funding Corp. promissory note** for **$190,750** on January 31, 2024 - The **M2B Funding Corp. promissory note** was paid in full for **$190,750** on January 31, 2024[432](index=432&type=chunk) - The **business combination deadline** was extended to May 8, 2024, on February 2, 2024, marking the second of four possible three-month extensions[434](index=434&type=chunk) - On February 13, 2024, **amendments** were made to the **Third Amended and Restated Business Combination Agreement** and certain **Conversion SPAs** to modify the **conversion of VSee and iDoc indebtedness into DHAC common stock post-closing**[435](index=435&type=chunk)[436](index=436&type=chunk) - The company amended a **registration rights agreement** with the **Bridge Investor** and purchased a **second Additional Bridge Note** for **$55,556** in January 2024[433](index=433&type=chunk)