[Preliminary Information](index=3&type=section&id=Preliminary%20Information) This section provides initial context, including cautionary notes on forward-looking statements and a summary of key risk factors [Cautionary Note on Forward-Looking Statements & Risk Factors](index=3&type=section&id=Cautionary%20Note%20on%20Forward-Looking%20Statements%20%26%20Risk%20Factors) This section highlights that forward-looking statements are subject to uncertainties and outlines various risks, including competition, demand, potential losses, and financial fluctuations - Forward-looking statements are based on current management expectations and are inherently subject to uncertainties and changes in circumstances that may cause actual results to differ materially[6](index=6&type=chunk)[7](index=7&type=chunk) - Key risks include operating in a competitive industry, high uncertainty regarding demand for software and solutions, potential for future losses, and challenges in evaluating the rapidly evolving nature of the business[7](index=7&type=chunk)[8](index=8&type=chunk) - Operational and strategic risks encompass long and unpredictable sales cycles, potential medical malpractice risks, dependence on maintaining and expanding the telemedicine network, and challenges in developing new solutions or managing growth effectively[11](index=11&type=chunk)[12](index=12&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk)[18](index=18&type=chunk) - Financial risks include the likely requirement for additional capital from equity or debt financings and potential volatility in the price of Common Stock and Public Warrants[21](index=21&type=chunk) [PART I — FINANCIAL INFORMATION](index=8&type=section&id=PART%20I%20%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=8&type=section&id=Item%201.%20Financial%20Statements) This section presents unaudited condensed consolidated financial statements, including balance sheets, operations, equity, and cash flows, with notes - The financial statements are unaudited and prepared in accordance with U.S. GAAP, with certain disclosures condensed or omitted for interim reporting[48](index=48&type=chunk) - The Business Combination on June 24, 2024, resulted in VSee Lab being the accounting acquirer, with historical comparative financial information prior to this date being that of VSee Lab[42](index=42&type=chunk)[130](index=130&type=chunk) [Condensed Consolidated Balance Sheets](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section presents the company's financial position, including assets, liabilities, and equity, as of specified dates Condensed Consolidated Balance Sheets | Metric | Sep 30, 2024 | Dec 31, 2023 | | :----------------------------------- | :----------- | :----------- | | Total Assets | $25,029,730 | $830,791 | | Total Liabilities | $20,270,718 | $4,243,438 | | Total Stockholders' Equity (Deficit) | $4,759,012 | $(3,412,647)$ | | Cash | $2,327,337 | $118,734 | - Total assets increased significantly by **2913% to $25,029,730** as of September 30, 2024, from $830,791 as of December 31, 2023, primarily due to the iDoc acquisition and related financing activities[26](index=26&type=chunk) [Condensed Consolidated Statements of Operations](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's revenues, expenses, and net loss for the specified interim periods Metric (3 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Total Revenues | $3,354,437 | $1,451,471 | $1,902,966 | 131% | | Gross Margin | $2,413,049 | $973,072 | $1,439,977 | 148% | | Total Operating Expenses | $59,479,147 | $1,247,428 | $58,231,719 | 4668% | | Net Loss | $(51,751,525)$ | $(98,581)$ | $(51,652,944)$ | (52396)% | | Basic & Diluted Loss Per Share | $(3.43)$ | $(0.01)$ | $(3.42)$ | (34200)% | Metric (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Total Revenues | $6,561,998 | $4,337,962 | $2,224,036 | 51% | | Gross Margin | $4,747,717 | $2,809,954 | $1,937,763 | 69% | | Total Operating Expenses | $62,958,678 | $4,332,582 | $58,626,096 | 1353% | | Net Loss | $(52,084,317)$ | $(983,181)$ | $(51,101,136)$ | (5198)% | | Basic & Diluted Loss Per Share | $(6.24)$ | $(0.10)$ | $(6.14)$ | (6140)% | - Net loss significantly widened for both the three and nine months ended September 30, 2024, primarily due to **$54,984,000 in goodwill impairment charges** and increased operating expenses[27](index=27&type=chunk) [Condensed Consolidated Statements of Shareholders' Equity (Deficit)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Equity%20(Deficit)) This section outlines changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Metric | Metric | Sep 30, 2024 | Dec 31, 2023 | Change | % Change | | :----------------------------------- | :----------- | :----------- | :----------- | :------- | | Total Stockholders' Equity (Deficit) | $4,759,012 | $(3,412,647)$ | $8,171,659 | 239.4% | | Common Shares Outstanding | 15,362,278 | 4,639,643 | 10,722,635 | 231.1% | | Additional Paid-In Capital | $66,282,056 | $6,027,153 | $60,254,903 | 999.7% | | Accumulated Deficit | $(61,524,581)$ | $(9,114,985)$ | $(52,409,596)$ | 575% | - The company's total stockholders' equity shifted from a deficit of **$(3,412,647) to a positive $4,759,012**, primarily due to the Business Combination and related equity issuances, despite a significant increase in accumulated deficit[28](index=28&type=chunk)[30](index=30&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 cash inflows and outflows from operating, investing, and financing activities Metric (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :----------- | :------- | | Net Cash Used in Operating Activities | $(2,815,248)$ | $(523,436)$ | $(2,291,812)$ | 437.9% | | Net Cash Used in Investing Activities | $(21,384)$ | $(2,690)$ | $(18,694)$ | 693.5% | | Net Cash Provided by Financing Activities | $5,045,235 | $455,000 | $4,590,235 | 1008.8% | | Net Change in Cash and Cash Equivalents | $2,208,603 | $(71,126)$ | $2,279,729 | (3205)% | | Cash and Cash Equivalents, End of Period | $2,327,337 | $159,538 | $2,167,799 | 1358.8% | - Cash used in operating activities increased significantly by **437.9% to $(2,815,248)** for the nine months ended September 30, 2024, while cash provided by financing activities surged by **1008.8% to $5,045,235**, leading to a positive net change in cash[33](index=33&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of the accounting policies, significant transactions, and financial disclosures [Note 1 Organization and Description of Business](index=13&type=section&id=Note%201%20Organization%20and%20Description%20of%20Business) This note describes the company's operations, its telehealth platform, and the recent business combination with VSee Lab and iDoc - VSee Health, Inc. (formerly Digital Health Acquisition Corp.) operates a telehealth software platform, offering end-to-end encrypted video streaming integrated with medical device data and EMRs for virtual healthcare delivery[34](index=34&type=chunk) - On June 24, 2024, the company completed a business combination with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc., with VSee Lab treated as the accounting acquirer[35](index=35&type=chunk)[42](index=42&type=chunk)[130](index=130&type=chunk) - The business combination involved the re-designation of DHAC common stock and warrants, conversion of VSee Lab and iDoc shares into VSee Health common stock, and conversion of certain indebtedness into Series A preferred stock and common stock[36](index=36&type=chunk)[37](index=37&type=chunk)[38](index=38&type=chunk) [Note 2 Summary of Significant Accounting Policies](index=17&type=section&id=Note%202%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines the key accounting principles and methods used in preparing the condensed consolidated financial statements [Basis of Presentation and Consolidation](index=17&type=section&id=Basis%20of%20Presentation%20and%20Consolidation) This section details the basis for financial statement preparation and the entities included in the consolidated financial reporting - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim reporting, with certain disclosures condensed or omitted[48](index=48&type=chunk) - The consolidated entities include VSee Health, Inc. and its wholly-owned subsidiaries: VSee Lab, Inc., iDoc Virtual Telehealth Solutions, Inc., Encompass Healthcare Billing, LLC, and This American Doc, Inc. (TAD)[49](index=49&type=chunk) - Historical comparative financial information prior to June 24, 2024, is that of VSee Lab, as it is the accounting acquirer in the business combination[42](index=42&type=chunk)[50](index=50&type=chunk) [Implications of Being an Emerging Growth Company](index=18&type=section&id=Implications%20of%20Being%20an%20Emerging%20Growth%20Company) This section explains the reduced reporting requirements and accounting standard adoption choices as an emerging growth company - VSee Health is an 'emerging growth company' and 'smaller reporting company,' allowing it to take advantage of reduced reporting requirements[51](index=51&type=chunk)[53](index=53&type=chunk) - The company has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, aligning with private company adoption dates[52](index=52&type=chunk) [Segments](index=19&type=section&id=Segments) This section identifies the company's operating segments, Healthcare Technology and Telehealth Services, and their evaluation - The company operates with two consolidated operating segments: Healthcare Technology (VSee Lab, Inc.) and Telehealth Services (iDoc Virtual Telehealth Solutions, Inc.)[56](index=56&type=chunk) - Management evaluates these segments to allocate resources and assess performance[55](index=55&type=chunk) [Use of Estimates](index=20&type=section&id=Use%20of%20Estimates) This section highlights the reliance on management estimates and assumptions in financial statement preparation - Financial statement preparation requires significant management estimates and assumptions, including those for revenue recognition, goodwill impairment, credit losses, fair value of financial instruments, and income taxes[57](index=57&type=chunk) - Estimates are based on historical experience and reasonable assumptions, but actual results could differ from these estimates[58](index=58&type=chunk) [Income Taxes](index=20&type=section&id=Income%20Taxes) This section describes the accounting for income taxes, including deferred tax assets, liabilities, and valuation allowances - Income taxes are accounted for using the asset and liability method, recognizing deferred tax assets and liabilities for future tax consequences[59](index=59&type=chunk) - Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized, based on the likelihood of sustaining income tax positions[61](index=61&type=chunk) [Revenue Recognition](index=20&type=section&id=Revenue%20Recognition) This section details the company's revenue recognition policies, including the five-step process and various revenue sources - Revenue is recognized in accordance with ASC 606, depicting the transfer of promised goods or services to customers in an amount reflecting the expected consideration[62](index=62&type=chunk)[408](index=408&type=chunk) - The five-step process for revenue recognition involves identifying contracts, performance obligations, transaction price, allocating price to obligations, and recognizing revenue upon satisfaction of performance obligations[63](index=63&type=chunk)[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk)[69](index=69&type=chunk)[410](index=410&type=chunk)[413](index=413&type=chunk)[414](index=414&type=chunk)[415](index=415&type=chunk)[416](index=416&type=chunk) - Revenue sources include subscription fees, professional services, technical engineering fees, patient fees (from Medicare, Medicaid, commercial insurers), telehealth fees, and institutional fees (e.g., EEG interpretation services)[71](index=71&type=chunk)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[90](index=90&type=chunk)[418](index=418&type=chunk)[430](index=430&type=chunk)[431](index=431&type=chunk)[432](index=432&type=chunk)[433](index=433&type=chunk)[434](index=434&type=chunk)[437](index=437&type=chunk) [Cost of Goods Sold](index=29&type=section&id=Cost%20of%20Goods%20Sold) This section outlines the primary components of cost of goods sold, including cloud hosting, personnel, and third-party services - Cost of goods sold primarily consists of expenses related to cloud hosting, personnel for customer success teams, third-party software services and contractors, and compensation for telehealth service providers[95](index=95&type=chunk)[456](index=456&type=chunk) [Transaction Expenses](index=29&type=section&id=Transaction%20Expenses) This section details the professional fees and other costs incurred in relation to the recent business combination - Transaction expenses related to the business combination totaled **$646,303** for the three months and **$1,653,448** for the nine months ended September 30, 2024, primarily for professional fees[96](index=96&type=chunk) [Net Loss Per Common Share](index=29&type=section&id=Net%20Loss%20Per%20Common%20Share) This section explains the calculation of basic and diluted loss per common share, excluding anti-dilutive securities - Basic and diluted loss per common share are computed, but potentially dilutive securities are excluded from diluted EPS calculations when a net loss is reported, as their inclusion would be anti-dilutive[97](index=97&type=chunk)[98](index=98&type=chunk) Potentially Dilutive Securities Excluded from EPS Calculation (as of Sep 30, 2024) | Security Type | Three Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2024 | | :---------------------------- | :------------------------------ | :----------------------------- | | Public Warrants | 11,500,000 | 11,500,000 | | Private Warrants | 557,000 | 557,000 | | Bridge Warrants | 173,913 | 173,913 | | Extension Warrants | 26,086 | 26,086 | | September 2024 Warrants | 740,741 | 740,741 | | Quantum Convertible Note | 1,881,600 | 1,881,600 | | Additional Bridge Notes | 78,465 | 78,465 | | Exchange Note | 1,023,207 | 1,023,207 | | ELOC Commitment Fee Note | 50,000 | 50,000 | | September 2024 Note | 1,277,778 | 1,277,778 | | Series A Preferred Stock Equivalents | 3,079,000 | 3,079,000 | | Stock Options Granted | 803,646 | 803,646 | [Cash](index=31&type=section&id=Cash) This section defines cash and cash equivalents, noting the absence of cash equivalents for the reported periods - The company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents; there were no cash equivalents as of September 30, 2024, and December 31, 2023[99](index=99&type=chunk) [Accounts Receivable and Credit losses](index=31&type=section&id=Accounts%20Receivable%20and%20Credit%20losses) This section describes the accounting for accounts receivable, including the allowance for credit losses using the CECL approach - Accounts receivable are carried at net realizable value, with an allowance for credit losses estimated using a forward-looking Current Expected Credit Losses (CECL) approach[100](index=100&type=chunk) Allowance for Credit Losses | Metric | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------------------------------------------------------------ | :----------- | :----------- | | Beginning allowance for credit losses | $32,457 | $0 | | Allowance for credit losses, due to acquisition | $1,696,553 | $0 | | Allowance for credit losses | $342,634 | $32,457 | | Less: Accounts receivable write-off included in allowance for credit losses above | $(9,200)$ | $0 | | Ending allowance for credit losses | $2,062,444 | $32,457 | - The allowance for credit losses significantly increased from **$32,457** at December 31, 2023, to **$2,062,444** at September 30, 2024, largely due to the iDoc acquisition[102](index=102&type=chunk) [Prepaid Assets](index=32&type=section&id=Prepaid%20Assets) This section defines prepaid assets as costs paid in advance and expensed as they are consumed over time - Prepaid assets represent costs that have been paid but are not yet used up or expired, and are expensed as they are consumed[103](index=103&type=chunk) [Leases](index=32&type=section&id=Leases) This section details the accounting for operating and finance leases under ASC Topic 842, including right-of-use assets and liabilities - The company accounts for leases under ASC Topic 842, recognizing operating and finance lease right-of-use assets and liabilities at the present value of future lease payments[104](index=104&type=chunk) - The company has elected not to apply the recognition provisions of ASC 842 to short-term leases (12 months or less), instead recognizing lease payments on a straight-line basis[105](index=105&type=chunk) [Fair Value of Financial Instruments](index=32&type=section&id=Fair%20Value%20of%20Financial%20Instruments) This section defines fair value, its three-level hierarchy, and how various financial instruments are measured - Fair value is defined as the price received or paid in an orderly transaction between market participants, categorized into a three-level hierarchy (Level 1: quoted prices in active markets, Level 2: observable inputs other than quoted prices, Level 3: unobservable inputs)[106](index=106&type=chunk)[107](index=107&type=chunk)[108](index=108&type=chunk) - The carrying amounts for cash, due from related party, and accounts payable approximate fair value due to their short-term nature[107](index=107&type=chunk) [Derivative Financial Instruments](index=34&type=section&id=Derivative%20Financial%20Instruments) This section explains the accounting for derivative instruments, recorded at fair value with changes reported in operations - Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in fair value reported in the condensed consolidated statements of operations[111](index=111&type=chunk) [Warrant Instruments](index=34&type=section&id=Warrant%20Instruments) This section describes the classification of warrants as either equity or liability based on specific terms and accounting guidance - Warrants are classified as either equity-classified or liability-classified based on specific terms and applicable authoritative guidance (ASC 480 and ASC 815)[112](index=112&type=chunk) - The company's Public, Private, Bridge, Extension, and September 2024 Warrants are classified as equity, meeting the requirements for equity classification under ASC 815[113](index=113&type=chunk) [Fixed Assets](index=34&type=section&id=Fixed%20Assets) This section details the accounting for fixed assets, including historical cost, depreciation methods, and recent additions - Fixed assets are recorded at historical cost, less accumulated depreciation, calculated on the straight-line method over estimated useful lives of three to ten years[114](index=114&type=chunk) - The acquisition of iDoc resulted in significant additions to office and medical equipment and furniture fixed assets[114](index=114&type=chunk) [Goodwill](index=35&type=section&id=Goodwill) This section explains the accounting for goodwill, including impairment testing and the significant impairment charge recorded - Goodwill is evaluated for impairment at the reporting unit level by assessing whether the fair value of a reporting unit exceeds its carrying value, using both income and market-based models[115](index=115&type=chunk) - A non-cash goodwill impairment charge of **$54,984,000** was recorded for the Telehealth Services reporting unit for the three and nine months ended September 30, 2024, due to triggering events like a decline in stock price and market capitalization[115](index=115&type=chunk)[120](index=120&type=chunk) - As of the Business Combination closing on June 24, 2024, the fair value of goodwill was **$59,900,694**, with accumulated impairment charges of **$54,984,000** as of September 30, 2024[115](index=115&type=chunk) [Intangible Assets](index=36&type=section&id=Intangible%20Assets) This section describes the company's intangible assets, their amortization, and their net carrying value - Intangible assets, primarily developed technology and customer lists acquired from iDoc, are presented at fair value, net of amortization[116](index=116&type=chunk) - Developed technology is amortized over five years, and customer relationships over ten years[116](index=116&type=chunk) Intangible Assets, Net (Sep 30, 2024) | Asset Type | Amount | | :--------------------- | :----------- | | Customer relationships | $2,100,000 | | Developed technology | $10,000,000 | | Total | $12,100,000 | | Less: Accumulated amortization | $(552,500)$ | | Intangible Assets, Net | $11,547,500 | [Impairment of Long-lived and Intangible Assets](index=38&type=section&id=Impairment%20of%20Long-lived%20and%20Intangible%20Assets) This section outlines the company's policy for reviewing long-lived assets for impairment and the goodwill impairment charge - The company regularly reviews the carrying amount of long-lived assets for impairment based on anticipated undiscounted cash flows[119](index=119&type=chunk) - A non-cash goodwill impairment charge of **$54,984,000** was recorded for the Telehealth Services reporting unit for the three and nine months ended September 30, 2024, triggered by a sustained decline in stock price and market capitalization[120](index=120&type=chunk) [Original Issue Discount on Debt](index=38&type=section&id=Original%20Issue%20Discount%20on%20Debt) This section explains how debt discounts are recorded and amortized as interest expense over the life of notes payable - When notes payable are issued with a face value higher than the proceeds received, the difference is recorded as a debt discount and amortized as interest expense over the life of the underlying note payable[121](index=121&type=chunk) [Loss Contingencies and Litigation](index=38&type=section&id=Loss%20Contingencies%20and%20Litigation) This section describes the accounting for loss contingencies and the company's involvement in a lawsuit - Loss contingencies are recorded if probable and estimable; if not, but a material loss is reasonably possible, it is disclosed[122](index=122&type=chunk) - The company is involved in a lawsuit for alleged breach of contract and unjust enrichment, but the range of potential loss cannot be reasonably estimated as of September 30, 2024, so no reserve was established[273](index=273&type=chunk)[274](index=274&type=chunk) [Going Concern](index=38&type=section&id=Going%20Concern) This section addresses the significant doubt about the company's ability to continue as a going concern and management's plans - Significant doubt exists about the company's ability to continue as a going concern due to persistent operating losses and a deteriorating liquidity position[123](index=123&type=chunk)[125](index=125&type=chunk) - Management is implementing revenue enhancement strategies (new contracts, market expansion) and has secured an Equity Line of Credit (ELOC) for up to **$50,000,000** to address these concerns[123](index=123&type=chunk)[124](index=124&type=chunk) - There is no assurance that the measures taken will be successful or successful within one year after the financial statements are issued[126](index=126&type=chunk) [Recent Accounting Pronouncements](index=40&type=section&id=Recent%20Accounting%20Pronouncements) This section discusses the company's evaluation of recently issued accounting standards updates - The company is evaluating ASU No. 2023-07, 'Improvements to Reportable Segment Disclosures,' effective for annual periods beginning after December 15, 2023[127](index=127&type=chunk) - The company is also reviewing ASU No. 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' effective for annual periods beginning after December 15, 2024[128](index=128&type=chunk) [Note 3 Business Combination](index=40&type=section&id=Note%203%20Business%20Combination) This note details the Business Combination, including the acquisition of iDoc and the resulting goodwill - On June 24, 2024, VSee Health completed the Business Combination, acquiring iDoc Telehealth Solutions, Inc. and undergoing a reverse recapitalization with DHAC, with VSee Lab as the accounting acquirer[130](index=130&type=chunk)[146](index=146&type=chunk) - The acquisition of iDoc resulted in **$59,900,694 in goodwill**, primarily related to plans to harness scale and grow the platform for all stakeholders[134](index=134&type=chunk)[140](index=140&type=chunk) iDoc Purchase Consideration (June 24, 2024) | 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 (convertible into 150,000 common shares at $12.11 per share) | $1,816,500 | | **Total Purchase Consideration** | **$68,936,175** | Pro Forma Financial Information (Combined VSee Health & iDoc) | Metric (3 Months Ended Sep 30) | 2024 | 2023 | | :----------------------------- | :--------- | :----------- | | Total Revenues | $3,354,437 | $3,076,235 | | Net Loss | $(368,063)$ | $(1,322,199)$ | | Basic & Diluted Net Loss Per Share | $(0.02)$ | $(0.09)$ | [Note 4 Fixed Assets](index=46&type=section&id=Note%204%20Fixed%20Assets) This note provides a detailed breakdown of fixed assets, including additions from the iDoc acquisition and depreciation Fixed Assets, Net | Asset Type | Sep 30, 2024 | Dec 31, 2023 | | :--------------------- | :----------- | :----------- | | Office equipment | $23,259 | $3,335 | | Medical equipment | $123,095 | $1,000 | | Furniture | $5,045 | $0 | | Leased equipment | $736,624 | $0 | | Leasehold improvements | $6,604 | $0 | | Total Fixed Assets | $894,627 | $4,335 | | Less: Accumulated depreciation | $(99,939)$ | $(678)$ | | Fixed Assets, Net | $794,688 | $3,657 | - Depreciation expense was **$7,253** (three months) and **$9,735** (nine months) for 2024, while amortization expenses were **$85,986** (three months) and **$89,526** (nine months) for 2024, primarily due to the iDoc acquisition[151](index=151&type=chunk) [Note 5 Leases](index=47&type=section&id=Note%205%20Leases) This note details the company's operating and finance leases, including right-of-use assets and liabilities assumed from iDoc - The company assumed operating leases for office space and finance leases for office equipment from iDoc as part of the business combination[153](index=153&type=chunk)[161](index=161&type=chunk) Operating Lease Right-of-Use Assets and Liabilities (Sep 30, 2024) | Metric | Amount | | :---------------------------- | :---------- | | Office lease ROU assets | $433,173 | | Less: Accumulated amortization | $(15,338)$ | | **Right-of-use assets, net** | **$417,835** | | Office lease liability | $358,221 | | Less: Current portion | $(68,958)$ | | **Long-term portion** | **$289,263** | Finance Lease Right-of-Use Assets and Liabilities (Sep 30, 2024) | Metric | Amount | | :---------------------------- | :---------- | | Equipment lease ROU assets | $736,624 | | Less: Accumulated amortization | $(89,526)$ | | **Leased equipment, net** | **$647,098** | | Equipment lease liability | $372,642 | | Less: Current portion | $(191,330)$ | | **Long-term portion** | **$181,312** | [Note 6 Factoring Payable](index=51&type=section&id=Note%206%20Factoring%20Payable) This note describes the factoring payable liabilities assumed from iDoc, including their balances and collateralization - The company assumed several factoring payable liabilities from iDoc, totaling **$208,788** as of September 30, 2024[26](index=26&type=chunk) - These agreements involve the sale of future receipts with weekly collections, and some are collateralized by the company's assets[169](index=169&type=chunk)[175](index=175&type=chunk) Factoring Payable Balances (Sep 30, 2024) | Agreement Date | Balance (Sep 30, 2024) | | :------------- | :--------------------- | | June 21, 2023 | $69,027 | | June 28, 2023 | $26,371 | | Oct 13, 2023 (1) | $92,916 | | Oct 13, 2023 (2) | $14,099 | | Jan 11, 2024 | $6,375 | | **Total** | **$208,788** | [Note 7 Line of Credit and Notes Payable, Net of Discount](index=53&type=section&id=Note%207%20Line%20of%20Credit%20and%20Notes%20Payable%2C%20Net%20of%20Discount) This note details the company's various notes payable, lines of credit, and their fair value accounting Notes Payable, Net of Discount (Sep 30, 2024) | Note Description | Sep 30, 2024 | Dec 31, 2023 | | :------------------------------- | :----------- | :----------- | | Note payable issued Nov 29, 2021 | $336,983 | $0 | | Note payable issued Dec 1, 2021 | $1,500,600 | $0 | | Note payable issued Jan 12, 2023 | $0 | $220,000 | | Note payable issued Aug 18, 2023 | $64,000 | $0 | | Note payable issued Nov 13, 2023 | $22,000 | $0 | | Note payable issued Jan 14, 2024 | $16,200 | $0 | | **Total Notes Payable** | **$1,939,783** | **$220,000** | | Less: Current portion | $(439,183)$ | $(220,000)$ | | Less: Fair value adjustment | $(906,659)$ | $0 | | **Total Notes Payable, Net** | **$593,941** | **$0** | - Several notes payable assumed from iDoc, including a **$336,983** promissory note (Nov 2021) and a **$1,500,600** promissory note (Dec 2021), are currently in default[181](index=181&type=chunk)[182](index=182&type=chunk) - The company secured **$2,700,000** from the Quantum Convertible Note and **$2,000,000** from the September 2024 Convertible Note during the nine months ended September 30, 2024[33](index=33&type=chunk)[220](index=220&type=chunk)[234](index=234&type=chunk) - Key financing instruments like the Exchange Note, Additional Bridge Notes, Quantum Convertible Note, ELOC, ELOC Commitment Fee Note, and September 2024 Convertible Note are accounted for as liabilities at fair value due to variable share settlement features[203](index=203&type=chunk)[208](index=208&type=chunk)[220](index=220&type=chunk)[226](index=226&type=chunk)[231](index=231&type=chunk)[240](index=240&type=chunk) [Note 8 Related Party](index=73&type=section&id=Note%208%20Related%20Party) This note discloses transactions and balances with related parties, including former CEOs and a Sponsor affiliate - VSee Lab had promissory notes with its former CEO, Milton Chen, totaling **$121,000, $132,000, and $77,000**, many of which are in default with increased interest rates[250](index=250&type=chunk)[252](index=252&type=chunk)[253](index=253&type=chunk) - iDoc had a **$795,380** balance due from its former CEO, Imoigele Aisiku, and a **$245,500** note receivable from him, both unsecured and non-interest-bearing[255](index=255&type=chunk)[256](index=256&type=chunk) - The company entered into a Consulting Services Agreement with SCS, LLC (a Sponsor affiliate) for **$12,500/month** for consulting and **$2,500/month** for office space, and issued shares as compensation[266](index=266&type=chunk)[268](index=268&type=chunk) - Working capital funds of **$405,000** advanced by SCS, LLC were converted into **202,500 shares of Common Stock** on November 8, 2024, with approximately **$52,000** remaining due[270](index=270&type=chunk)[389](index=389&type=chunk) [Note 9 Commitments, Contingencies, and Concentration Risk](index=79&type=section&id=Note%209%20Commitments%2C%20Contingencies%2C%20and%20Concentration%20Risk) This note outlines the company's legal proceedings, contractual commitments, and customer/vendor concentration risks - The company is a defendant in a lawsuit for alleged breach of contract and unjust enrichment, but the range of potential loss cannot be reasonably estimated as of September 30, 2024[273](index=273&type=chunk)[274](index=274&type=chunk) - Commitments include a reseller agreement for **$1,049,985** (unpaid **$82,677**) and a purchase agreement for 20 Telepresence Robots for **$711,900** (unpaid **$179,900**)[275](index=275&type=chunk)[278](index=278&type=chunk) - As of September 30, 2024, there was no single customer concentration over **10%** of total receivables, but one customer accounted for **10%** of total revenue for the three months ended September 30, 2024[286](index=286&type=chunk)[287](index=287&type=chunk) - One vendor represented **29%** of the company's total accounts payable and accrued liabilities as of September 30, 2024[288](index=288&type=chunk) [Note 10 Income Taxes](index=83&type=section&id=Note%2010%20Income%20Taxes) This note details the company's income tax accounting, including deferred tax assets, valuation allowances, and effective tax rate - The company maintains a full valuation allowance against deferred tax assets due to the uncertainty of realizing future tax benefits from net operating loss carry-forwards and other deferred tax assets[289](index=289&type=chunk) - For the nine months ended September 30, 2024, the company recorded an income tax benefit of **$2,791,238**, with an effective tax rate of **5.1%** that varied from the statutory federal rate due to state income taxes, adjustments, goodwill impairment, and fair value changes[291](index=291&type=chunk) [Note 11 Equity](index=85&type=section&id=Note%2011%20Equity) This note describes the company's equity structure, including Series A Preferred Stock, Common Stock, and stock options - The company has Series A Convertible Preferred Stock outstanding (**6,158 shares** as of September 30, 2024) with specific voting, dividend, liquidation, and conversion rights[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - As of September 30, 2024, there were **15,362,278 shares of Common Stock** outstanding, with holders entitled to one vote per share, ratable dividends (if declared), and a ratable share of assets upon liquidation[305](index=305&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk)[309](index=309&type=chunk) - **803,646 stock options** were granted at the Business Combination closing under the 2024 Equity Incentive Plan, with **174,302 unvested options** subject to compensation expense recognition over a one-year service period[311](index=311&type=chunk)[314](index=314&type=chunk) - Share-based compensation expense of **$349,095** and **$381,084** was recognized for the three and nine months ended September 30, 2024, respectively[316](index=316&type=chunk) [Note 12 Warrants](index=91&type=section&id=Note%2012%20Warrants) This note details the company's outstanding warrants, their classification, exercise prices, and redemption provisions - All Public, Private, Bridge, Extension, and September 2024 Warrants are classified as equity instruments, meeting the requirements under ASC 815[317](index=317&type=chunk) Warrants Outstanding (Sep 30, 2024) | Warrant Type | Number Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Life (Years) | | :-------------------- | :----------------- | :------------------------------ | :-------------------------------------- | | Public Warrants | 11,500,000 | $11.50 | 4.73 | | Private Warrants | 557,000 | $11.50 | 4.73 | | Bridge Warrants | 173,913 | $11.50 | 3.01 | | Extension Warrants | 26,086 | $11.50 | 3.60 | | September 2024 Warrants | 740,741 | $2.25 | 5.00 | | **Total** | **12,997,740** | **$9.65** | **4.22** | - Warrants are generally exercisable for one common stock share at **$11.50**, with the September 2024 Warrants at **$2.25**, and include provisions for redemption and cashless exercise under certain conditions[319](index=319&type=chunk)[321](index=321&type=chunk)[324](index=324&type=chunk)[353](index=353&type=chunk) [Note 13 Reportable Segments](index=105&type=section&id=Note%2013%20Reportable%20Segments) This note provides financial information for the company's two reportable segments: Technology and Telehealth - The company has two reportable operating segments: Technology (VSee Lab) and Telehealth (iDoc), and a non-operating corporate segment, with the Co-CEOs serving as the chief operating decision makers[105](index=105&type=chunk)[363](index=363&type=chunk) Revenues by Segment (9 Months Ended Sep 30) | Segment | 2024 | 2023 | | :--------- | :----------- | :----------- | | Technology | $5,385,359 | $4,337,962 | | Telehealth | $1,176,638 | $0 | | **Total** | **$6,561,998** | **$4,337,962** | Loss from Operations by Segment (9 Months Ended Sep 30) | Segment | 2024 | 2023 | | :---------------------- | :--------------- | :--------------- | | Technology | $23,942 | $(1,522,628)$ | | Telehealth | $(55,972,646)$ | $0 | | Non-operating corporate | $(2,262,256)$ | $0 | | **Total** | **$(58,210,961)$** | **$(1,522,628)$** | [Note 14 Fair Value Measurements](index=108&type=section&id=Note%2014%20Fair%20Value%20Measurements) This note details the fair value measurements of financial liabilities, classified as Level 3, and the valuation models used - Financial liabilities measured at fair value, including various convertible notes and ELOC instruments, are classified as Level 3 due to the use of unobservable inputs[371](index=371&type=chunk) Fair Value of Financial Liabilities (Sep 30, 2024) | Liability Type | Fair Value | Level | | :------------------------------ | :----------- | :---- | | Quantum Convertible Note | $2,985,000 | 3 | | ELOC | $177,000 | 3 | | ELOC Commitment Fee Note | $495,000 | 3 | | Additional Bridge Notes | $122,000 | 3 | | Exchange Note | $1,851,000 | 3 | | September 2024 Convertible Note | $2,000,000 | 3 | - The fair values are determined using models such as Monte Carlo and Black-Scholes, with significant changes in fair value recognized in the condensed consolidated statement of operations[372](index=372&type=chunk)[376](index=376&type=chunk)[378](index=378&type=chunk)[381](index=381&type=chunk)[383](index=383&type=chunk)[385](index=385&type=chunk)[387](index=387&type=chunk) [Note 15 Subsequent Events](index=113&type=section&id=Note%2015%20Subsequent%20Events) This note discloses significant events that occurred after the reporting period, including equity sales and conversions - As of October 21, 2024, the Bridge Investor purchased **$200,000** worth of common stock from the company pursuant to the Equity Purchase Agreement[388](index=388&type=chunk) - On November 8, 2024, **$405,000** of working capital funds advanced by SCS, LLC were converted into **202,500 shares of Common Stock**[389](index=389&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=115&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and results, analyzing revenue, expenses, net loss, cash flows, and the Business Combination impact [Overview](index=115&type=section&id=Overview) This section provides an overview of VSee Health's business, including its telehealth platform and the iDoc acquisition - VSee Health completed a Business Combination on June 24, 2024, integrating VSee Lab's telehealth software platform and iDoc's high acuity patient care solutions[392](index=392&type=chunk)[393](index=393&type=chunk)[398](index=398&type=chunk) - The company's core platform is a highly scalable, API-driven technology for virtual healthcare delivery, offering configurable software building blocks and workflow templates[393](index=393&type=chunk)[395](index=395&type=chunk) - iDoc provides elite physician services in intensive care units, including neuro-critical care and general critical care, aiming to address physician burnout and patient access to quality intensive care[398](index=398&type=chunk)[399](index=399&type=chunk) [Performance Factors](index=117&type=section&id=Performance%20Factors) This section discusses key factors influencing the company's performance, including market growth and innovation - The telehealth market is characterized by rapid transformation and strong future growth potential, offering an attractive value proposition to health systems and medical groups[400](index=400&type=chunk) - The company plans to leverage industry relationships to expand its customer base and market share within the growing telehealth market[401](index=401&type=chunk) - Innovation and new product offerings are critical for long-term success, addressing existing limitations in telehealth technology such as lack of healthcare-specific tools and integration issues[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk) [Critical Accounting Estimates](index=119&type=section&id=Critical%20Accounting%20Estimates) This section highlights management's critical accounting estimates, including revenue recognition, goodwill, and asset impairment - Management's critical accounting estimates include revenue recognition (following ASC 606), fair value of financial instruments (using a three-level hierarchy), goodwill impairment, and impairment of long-lived and intangible assets[406](index=406&type=chunk)[408](index=408&type=chunk)[442](index=442&type=chunk)[444](index=444&type=chunk)[445](index=445&type=chunk) - A non-cash goodwill impairment charge of **$54,984,000** was recorded for the Telehealth Services reporting unit for the three and nine months ended September 30, 2024, due to a decline in stock price and market capitalization[444](index=444&type=chunk)[448](index=448&type=chunk) [Financial Statement Components](index=131&type=section&id=Financial%20Statement%20Components) This section provides a detailed analysis of the components of the company's financial statements [Revenue](index=131&type=section&id=Revenue) This section analyzes the company's revenue performance, detailing changes across subscription, technical, and professional fees Revenue Performance (3 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Total Revenues | $3,354,437 | $1,451,471 | $1,902,966 | 131% | | iDoc Acquisition Revenue | $1,114,069 | $0 | $1,114,069 | 100% | | Technical & Engineering Fees | $806,456 | $219,978 | $586,478 | 267% | | Professional & Other Fees | $396,455 | $283,968 | $112,487 | 40% | | Subscription Revenue | $1,037,457 | $947,525 | $89,932 | 9% | Revenue Performance (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Total Revenues | $6,561,998 | $4,337,962 | $2,224,036 | 51% | | iDoc Acquisition Revenue | $1,176,638 | $0 | $1,176,638 | 100% | | Technical & Engineering Fees | $1,159,345 | $444,315 | $715,030 | 161% | | Professional & Other Fees | $1,145,930 | $762,300 | $383,630 | 50% | | Subscription Revenue | $3,080,085 | $3,131,347 | $(51,262)$ | (2)% | - Revenue increased by **131%** for the three months and **51%** for the nine months ended September 30, 2024, primarily driven by the iDoc acquisition and higher technical/professional fees[454](index=454&type=chunk)[455](index=455&type=chunk) [Cost of Goods Sold](index=133&type=section&id=Cost%20of%20Goods%20Sold) This section analyzes the company's cost of goods sold, detailing the impact of the iDoc acquisition and other expenses Cost of Goods Sold Performance (3 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Cost of Goods Sold | $941,388 | $478,399 | $462,989 | 97% | | iDoc Acquisition Impact | $423,382 | $0 | $423,382 | 100% | | VSee Lab Compensation Expenses | $127,289 | $71,500 | $55,789 | 78% | | VSee Lab Software & Hosting Costs | $(85,664)$ | $285,500 | $(371,164)$ | (30)% | Cost of Goods Sold Performance (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Cost of Goods Sold | $1,814,281 | $1,528,008 | $286,273 | 19% | | iDoc Acquisition Impact | $448,713 | $0 | $448,713 | 100% | | VSee Lab Hosting Costs | $(154,613)$ | $672,000 | $(826,613)$ | (23)% | | VSee Lab Software Costs | $(91,871)$ | $213,000 | $(304,871)$ | (43)% | - Cost of goods sold increased by **97%** for the three months and **19%** for the nine months ended September 30, 2024, primarily due to the iDoc acquisition and higher compensation expenses, partially offset by lower software and hosting costs[457](index=457&type=chunk)[458](index=458&type=chunk) [Operating Expenses](index=133&type=section&id=Operating%20Expenses) This section analyzes the company's operating expenses, highlighting the impact of goodwill impairment and administrative costs Operating Expenses Performance (3 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Total Operating Expenses | $59,479,147 | $1,247,428 | $58,231,719 | 4668% | | Goodwill Impairment Charges | $54,984,000 | $0 | $54,984,000 | 100% | | General & Administrative | $2,170,217 | $224,874 | $1,945,343 | 865% | | Transaction Expenses | $646,303 | $9,066 | $637,237 | 7029% | Operating Expenses Performance (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Total Operating Expenses | $62,958,678 | $4,332,582 | $58,626,096 | 1353% | | Goodwill Impairment Charges | $54,984,000 | $0 | $54,984,000 | 100% | | General & Administrative | $2,830,615 | $832,513 | $1,998,102 | 240% | | Transaction Expenses | $1,653,448 | $66,411 | $1,587,037 | 2389% | - Operating expenses dramatically increased by **4,668%** for the three months and **1,353%** for the nine months ended September 30, 2024, primarily driven by a **$54,984,000 goodwill impairment charge** and increased general and administrative and transaction expenses[461](index=461&type=chunk)[462](index=462&type=chunk) [Other Income (Expense)](index=135&type=section&id=Other%20Income%20(Expense)) This section analyzes other income and expenses, focusing on fair value changes, interest expense, and extinguishment losses Other Income (Expense) Performance (3 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :-------------------------------------------- | :----------- | :----------- | :----------- | :------- | | Total Other Income (Expense) | $4,764,543 | $(57,941)$ | $4,822,484 | (8323)% | | Change in Fair Value of Financial Instruments | $5,737,606 | $(21,629)$ | $5,759,235 | (26638)% | | Interest Expense | $(232,082)$ | $(36,312)$ | $(195,770)$ | 539% | | Loss on Extinguishment | $(740,979)$ | $0 | $(740,979)$ | 100% | Other Income (Expense) Performance (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :-------------------------------------------- | :----------- | :----------- | :----------- | :------- | | Total Other Income (Expense) | $3,335,406 | $(51,507)$ | $3,386,913 | (6576)% | | Change in Fair Value of Financial Instruments | $6,285,706 | $92,448 | $6,193,258 | 6700% | | Interest Expense | $(591,087)$ | $(163,574)$ | $(427,513)$ | 261% | | Loss on Issuance of Financial Instruments | $(1,618,234)$ | $0 | $(1,618,234)$ | 100% | - Other income (expense) saw a significant increase in income for both periods, primarily driven by a substantial gain on the change in fair value of debt and derivative financial instruments, partially offset by higher interest expense and losses on extinguishment[463](index=463&type=chunk)[464](index=464&type=chunk) [Net Loss](index=135&type=section&id=Net%20Loss) This section analyzes the company's net loss, primarily driven by goodwill impairment and financial instrument fair value changes Net Loss Performance (3 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Net Loss | $(51,751,525)$ | $(98,581)$ | $(51,652,944)$ | (52396)% | Net Loss Performance (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :----------------------------- | :----------- | :----------- | :----------- | :------- | | Net Loss | $(52,084,317)$ | $(983,181)$ | $(51,101,136)$ | (5198)% | - Net loss significantly increased for both periods, primarily driven by the substantial goodwill impairment charges and losses on extinguishment and issuance of financial instruments, partially offset by gains from fair value changes[464](index=464&type=chunk)[465](index=465&type=chunk) [Cash Flows](index=135&type=section&id=Cash%20Flows) This section analyzes the company's cash flows from operating, investing, and financing activities for the period Cash Flow Summary (9 Months Ended Sep 30) | Metric | 2024 | 2023 | Change | % Change | | :------------------------------------ | :----------- | :----------- | :----------- | :------- | | Net Cash Used in Operating Activities | $(2,815,248)$ | $(523,436)$ | $(2,291,812)$ | 437.9% | | Net Cash Used in Investing Activities | $(21,384)$ | $(2,690)$ | $(18,694)$ | 693.5% | | Net Cash Provided by Financing Activities | $5,045,235 | $455,000 | $4,590,235 | 1008.8% | | Net Change in Cash | $2,208,603 | $(71,126)$ | $2,279,729 | (3205)% | - Cash used in operating activities for the nine months ended September 30, 2024, was **$2,815,248**, driven by net loss adjusted for non-cash items like goodwill impairment and fair value changes[469](index=469&type=chunk) - Cash provided by financing activities for the nine months ended September 30, 2024, was **$5,045,235**, primarily from proceeds of the Quantum Note (**$2.7M**), September 2024 Convertible Note (**$2.0M**), and cash from the DHAC recapitalization (**$1.3M**)[472](index=472&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=137&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This item is marked as 'Not applicable' for the company - The company states that quantitative and qualitative disclosures about market risk are 'Not applicable' for this report[474](index=474&type=chunk) [Item 4. Controls and Procedures](index=137&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were ineffective due to material weaknesses in internal control over financial reporting, with remediation plans underway - As of September 30, 2024, the company's disclosure controls and procedures were deemed 'not effective' due to material weaknesses in internal control over financial reporting[477](index=477&type=chunk) - The material weakness is related to delays in filing and the ability to identify and appropriately apply complex accounting standards on a timely basis[478](index=478&type=chunk)[481](index=481&type=chunk) - Remediation plans include providing enhanced access to accounting literature, research materials, and increasing communication among personnel and third-party professionals[481](index=481&type=chunk) [PART II — OTHER INFORMATION](index=139&type=section&id=PART%20II%20%E2%80%94%20OTHER%20INFORMATION) This section provides disclosures on legal proceedings, equity sales, defaults, and other miscellaneous information [Item 1. Legal Proceedings](index=139&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no legal proceedings under this item - The company reports 'None' for legal proceedings under this item[482](index=482&type=chunk) [Item 1A. Risk Factors](index=139&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, no disclosures are required, and no material changes to prior risk factors occurred - As a smaller reporting company, the company is not required to make disclosures under this item[483](index=483&type=chunk) - There have been no material changes to the risk factors disclosed in previous registration statements on Form S-1[483](index=483&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=140&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered sales of equity securities, including shares granted to vendors and converted from advances - On August 5, 2024, the company granted **227,500 shares of common stock** to certain vendors as consideration for services rendered[484](index=484&type=chunk) - On November 8, 2024, **$405,000** of working capital funds advanced by SCS, LLC (a Sponsor affiliate) were converted into **202,500 shares of Common Stock**[485](index=485&type=chunk) [Item 3. Defaults Upon Senior Securities](index=141&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reports no defaults upon senior securities - The company reports 'None' for defaults upon senior securities[487](index=487&type=chunk) [Item 4. Mine Safety Disclosures](index=141&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company reports no mine safety disclosures - The company reports 'None' for mine safety disclosures[487](index=487&type=chunk) [Item 5. Other Information](index=141&type=section&id=Item%205.%20Other%20Information) The company reports no other information under this item - The company reports 'None' for other information[487](index=487&type=chunk) [Item 6. Exhibits](index=141&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed or incorporated by reference into the Quarterly Report on Form 10-Q - The report includes various exhibits such as warrants, convertible notes, equity purchase agreements, and certifications, filed as part of or incorporated by reference into the Form 10-Q[486](index=486&type=chunk)[488](index=488&type=chunk) [SIGNATURES](index=144&type=section&id=SIGNATURES) This section contains the official signatures certifying the submission of the report in accordance with Exchange Act requirements [Signatures](index=144&type=section&id=Signatures) The report is signed by the Co-Chief Executive Officer and Chief Financial Officer on November 14, 2024 - 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 November 14, 2024[491](index=491&type=chunk)

Company Update [Business Highlights](index=1&type=section&id=Business%20Highlights) VSee Health completed its de-SPAC transaction, became publicly traded, enhanced acute care, formed key partnerships, and secured major contracts - Successfully completed de-SPAC transaction, becoming publicly traded and enhancing acute care and tele-intensivist services[2](index=2&type=chunk)[3](index=3&type=chunk) - Partnered with Ava Robotics for a VSee Health-powered robot to extend remote personalized care to hospital ICUs[2](index=2&type=chunk) - Launched Aimee, an innovative virtual healthcare, labs, and prescription drug service providing low-cost access to quality healthcare[2](index=2&type=chunk) - Contracted with Seven Corners Correctional Health to offer accessible, quality specialty care to inmates in 24 federal prisons[2](index=2&type=chunk)[3](index=3&type=chunk) - Expanded telehealth and billing services to major healthcare clients through a partnership with SkywardRx[2](index=2&type=chunk) - Secured a virtual care purchasing agreement with Premier, Inc., expanding market reach and penetration[2](index=2&type=chunk) [Management Commentary](index=1&type=section&id=Management%20Commentary) Management emphasized commitment to innovative virtual care B2B solutions, highlighting public listing and merger completion as catalysts for growth - Public listing and merger completion (VSee Lab and iDoc) are significant milestones for accelerating growth, investing in technology, and scaling customer acquisition[3](index=3&type=chunk) - VSee Health aims to be recognized as a trusted brand by developing robust telemedicine solutions that easily integrate into existing healthcare systems[3](index=3&type=chunk) - Strategic partnerships, such as with Stand Together for Aimee, are helping develop local community centers into healthcare hubs providing high-quality physician access at affordable levels[3](index=3&type=chunk) Financial Results - GAAP [Second Quarter Financial Results](index=1&type=section&id=Second%20Quarter%20Financial%20Results) VSee Health reported a 33% increase in Q2 2024 revenue to $1.7 million, with net loss decreasing by 16% to $0.3 million due to a tax benefit Second Quarter 2024 Key Financials (GAAP) | Metric | Q2 2024 | Q2 2023 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue | $1.7 million | $1.3 million | 33% | | Net Loss | $(0.3) million | $(0.4) million | (16%) | | Net Loss per Share | $(0.06) | $(0.09) | (33%) | [Revenue Analysis (Q2)](index=1&type=section&id=Q2%20Revenue%20Analysis) Q2 2024 total revenue increased by 33% to $1.7 million, driven by significant growth in professional and technical engineering fees Q2 2024 Revenue Breakdown | Revenue Category | Q2 2024 | Q2 2023 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Total Revenue | $1,711,566 | $1,290,223 | 33% | | Professional services and other fees | $421,632 | $218,942 | 93% | | Technical engineering fees | $189,939 | $48,650 | 290% | | Subscription fees | $1,037,426 | $1,022,631 | 1.4% | | Patient fees | $31,520 | $0 | N/A | | Telehealth fees | $30,569 | $0 | N/A | | Institutional fees | $480 | $0 | N/A | [Operating Expenses (Q2)](index=2&type=section&id=Q2%20Operating%20Expenses) Operating expenses increased 69% year-over-year in Q2, primarily due to higher transaction costs associated with the business combination - Operating expenses increased **69% YoY**, driven by higher transaction expenses (legal, professional, advisory, consulting fees) related to the business combination[6](index=6&type=chunk) - General and administrative expenses increased due to higher reseller fees, partially offset by lower software costs from reduced headcounts[6](index=6&type=chunk) - Compensation and related benefits decreased primarily from lower utilization of independent contractors and employee headcount reduction[6](index=6&type=chunk) [Net Loss and EPS (Q2)](index=2&type=section&id=Q2%20Net%20Loss%20and%20EPS) Net loss decreased by 16% to $(0.36) million in Q2 2024, with basic and diluted loss per share improving to $(0.06) Q2 2024 Net Loss and EPS | Metric | Q2 2024 | Q2 2023 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Net Loss | $(361,961) | $(428,581) | (16%) | | Basic and Diluted Loss per Share | $(0.06) | $(0.09) | (33%) | - Decrease in net loss primarily driven by a tax benefit related to valuation allowance changes from the business combination and higher revenue[7](index=7&type=chunk) [Six Month Financial Results](index=2&type=section&id=Six%20Month%20Financial%20Results) For the first half of 2024, revenue increased 11% to $3.2 million, and net loss significantly decreased by 62% to $0.3 million First Half 2024 Key Financials (GAAP) | Metric | H1 2024 | H1 2023 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Revenue | $3.2 million | $2.9 million | 11% | | Net Loss | $(0.3) million | $(0.9) million | (62%) | | Net Loss per Share | $(0.07) | $(0.19) | (63%) | - Cash and cash equivalents stood at **$1.1 million** as of June 30, 2024[10](index=10&type=chunk) [Revenue Analysis (H1)](index=2&type=section&id=H1%20Revenue%20Analysis) H1 2024 total revenue increased by 11% to $3.2 million, driven by professional and technical engineering fees, despite a decline in subscription revenue H1 2024 Revenue Breakdown | Revenue Category | H1 2024 | H1 2023 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Total Revenue | $3,207,561 | $2,886,491 | 11% | | Professional services and other fees | $749,475 | $478,332 | 57% | | Technical engineering fees | $352,889 | $224,337 | 57% | | Subscription fees | $2,042,628 | $2,183,822 | (6%) | | Patient fees | $31,520 | $0 | N/A | | Telehealth fees | $30,569 | $0 | N/A | | Institutional fees | $480 | $0 | N/A | - Subscription revenue declined **6%** due to churned enterprise customers in 2024, as some clients gradually shifted back to face-to-face consultations[8](index=8&type=chunk) [Operating Expenses (H1)](index=2&type=section&id=H1%20Operating%20Expenses) Operating expenses for H1 increased 13% year-over-year, primarily due to business combination transaction expenses and iDoc acquisition costs - Operating expenses increased **13% YoY**, driven by higher transaction expenses related to the business combination and increased general and administrative expenses from the iDoc acquisition and higher reseller fees[9](index=9&type=chunk) - These increases were partially offset by lower software and business service costs from lower headcounts[9](index=9&type=chunk) [Net Loss and EPS (H1)](index=2&type=section&id=H1%20Net%20Loss%20and%20EPS) Net loss for H1 2024 significantly decreased by 62% to $(0.33) million, with basic and diluted loss per share improving to $(0.07) H1 2024 Net Loss and EPS | Metric | H1 2024 | H1 2023 | Change (%) | | :-------------------------------- | :---------- | :---------- | :--------- | | Net Loss | $(332,792) | $(884,600) | (62%) | | Basic and Diluted Loss per Share | $(0.07) | $(0.19) | (63%) | - Decrease in net loss primarily driven by an income tax benefit related to valuation allowance changes from the business combination and higher revenue[10](index=10&type=chunk) Financial Results - Pro Forma [Pro Forma Financial Results](index=2&type=section&id=Pro%20Forma%20Financial%20Results) Unaudited pro forma results show slight revenue decreases for Q2 and H1 2024, with Q2 net loss increasing and H1 net loss remaining stable Pro Forma Financial Information | Metric | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :-------------------------------- | :---------- | :---------- | :---------- | :---------- | | Total Revenue | $2,701,485 | $2,769,241 | $5,837,245 | $6,314,200 | | Net Loss | $(1,791,264) | $(1,030,910) | $(2,002,771) | $(2,106,741) | | Net Loss per Share (Basic & Diluted) | $(0.12) | $(0.07) | $(0.14) | $(0.14) | Financial Statements [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets significantly increased to $79.0 million as of June 30, 2

```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)

Financial Position - As of September 30, 2023, total assets amounted to $8,137,649, an increase from $7,634,367 as of December 31, 2022[12]. - Current liabilities increased to $5,022,029 from $3,295,614, primarily due to higher accounts payable and accrued expenses[13]. - Total stockholders' deficit as of September 30, 2023, was $(9,148,594), an increase from $(7,426,596) as of December 31, 2022[14]. - The Company had cash of $507 at the end of the period, a significant decrease from $44,970 at the end of September 30, 2022[21]. - As of September 30, 2023, the Company had a cash balance of $507 and a working capital deficiency of $8,154,992[57]. - The Company has significant cash balances at financial institutions, which did not exceed the federally insured limit of $250,000[77]. Net Loss and Earnings - The net loss for the three months ended September 30, 2023, was $78,287, compared to a net loss of $820,759 for the same period in 2022[15]. - For the nine months ended September 30, 2023, the net loss was $1,552,805, a decrease from a net loss of $2,007,578 for the same period in 2022, representing a 22.5% improvement[21]. - Basic and diluted net income per share for the three months ended September 30, 2023, was $0.02, while it was $(0.05) for the same period in 2022[15]. Business Combination and Future Operations - The company anticipates future operations will be influenced by the completion of the Proposed Business Combination, although risks remain[9]. - The Company has extended the deadline for completing its initial Business Combination to November 8, 2024, allowing for additional time to identify a target business[32]. - The Company has entered into a Business Combination agreement with VSee Lab, Inc. and iDoc Virtual Telehealth Solutions, Inc.[36]. - The Company has not yet completed the initial Business Combination and has waived certain redemption rights related to this process[34]. - The Business Combination is subject to stockholder approvals from DHAC, VSee, and iDoc, as well as regulatory conditions[110]. Trust Account and Proceeds - The company’s investments held in the Trust Account increased to $8,119,642 from $7,527,369[12]. - The Trust Account held an anticipated amount of $10.65 per public share as of October 26, 2022, following a deposit of $350,000 for an extension[32]. - Approximately $116,725,000 of the net proceeds from the Initial Public Offering and certain proceeds from the Private Placement were placed in a Trust Account, invested in U.S. government securities[203]. Compliance and Listing - As of September 30, 2023, the Company received a notification from Nasdaq indicating that its market value of listed securities was below the $50 million requirement for continued listing[38]. - The Company has until November 20, 2023, to regain compliance with the market value of publicly held shares requirement of $15 million[41]. - The Company is subject to potential delisting from Nasdaq Global due to non-compliance with listing standards[42]. Initial Public Offering - 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[25]. - The Company recorded transaction costs of $6,877,164 related to its Initial Public Offering, which included underwriting fees and other offering costs[27]. - The Company sold 11,500,000 units in its Initial Public Offering at a purchase price of $10.00 per unit, including a full exercise of the underwriters' over-allotment option of 1,500,000 units[87]. Debt and Financing - The Company issued a promissory note to SCS Capital Partners LLC in the amount of $565,000, which is due at the closing of the business combination[48]. - The Company issued an unsecured promissory note to the Sponsor for $350,000, which was deposited into the trust account to extend the time available for completing a business combination[94]. - The Company recorded an amortizable debt discount of $443,665 related to the Bridge Notes, including various components such as financing costs and fair value of shares and warrants[126]. Shareholder Information - The Company redeemed 10,805,877 shares of common stock in connection with a stockholder meeting, leaving 4,156,123 shares issued and outstanding[29]. - The Company has 2,875,000 founder shares outstanding after the forfeiture of 1,437,500 shares[90]. - The company has 12,057,000 warrants issued and outstanding as of September 30, 2023, each warrant entitles the holder to purchase one share of common stock at a price of $11.50[146]. Tax and Regulatory Matters - The effective tax rate for the three months ended September 30, 2023, was 0.0%, compared to 11.25% for the same period in 2022[70]. - The Inflation Reduction Act of 2022 imposes a 1% excise tax on stock repurchases by publicly traded corporations, effective January 1, 2023, which may impact the Company's cash available for business combinations[85]. Risk Factors - The Company has substantial doubt about its ability to continue as a going concern due to mandatory liquidation and dissolution on February 8, 2024[57]. - Management continues to evaluate the impact of the COVID-19 pandemic and current wars on the industry, noting potential negative effects on financial position and operations[84].

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 quarter ended June 30, 2023 ☐ 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 DIGITAL HEALTH ACQUISITION CORP. (Exact Name of Registrant as Specified in Its Charter) | --- | |-------| | | | | | ...

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 quarter ended March 31, 2023 ☐ 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 DIGITAL HEALTH ACQUISITION CORP. (Exact Name of Registrant as Specified in Its Charter) | --- | |------------------ ...

Table of Contents | --- | --- | --- | |----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------|-------------------------------------------------------------------------| | Title of each class | Trading Symbol | Name of each exchange on which registered | | Units, each consisting of one share of Common Stock and one Redeemable Warrant | DHACU | ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) (I.R.S. Employer Identification No.) 980 N Federal Hwy #304 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended September 30, 2022 ☐ 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 DIGITAL HEALTH ACQUISITION CORP. (Exact Name of Reg ...