VSee Health, Inc.(VSEE) - 2023 Q4 - Annual Report

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 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][12][13] - The target enterprise value for a business combination is approximately $175 million to $500 million[7][13] 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][15][16][17] - The company faces intense competition from other blank check companies, private equity groups, and operating businesses for acquisition targets[20][21][22] ITEM 1A. RISK FACTORS 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] ITEM 1B. UNRESOLVED STAFF COMMENTS This item is not applicable to DHAC - This item is not applicable[24] ITEM 1C. CYBERSECURITY 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] - The company does not consider itself to face significant cybersecurity risk and has not adopted a formal cybersecurity risk management program[25] - The board of directors is generally responsible for oversight of cybersecurity threats, and no incidents have occurred since the IPO[25] ITEM 2. PROPERTIES 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] - An affiliate of the sponsor provides the office space for a monthly administrative fee of $10,000[26] ITEM 3. LEGAL PROCEEDINGS 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] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to DHAC - This item is not applicable[27] 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 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][43] - 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][44][45][46][47][48][49] 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] - 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][37] ITEM 6. [RESERVED] This item is reserved and contains no information ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS DHAC, a blank check company, has focused solely on organizational activities and identifying a business combination target since its IPO in November 2021 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] 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] NASDAQ Listing Rules Compliance 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][45][47] - DHAC successfully applied to transfer its securities listing from Nasdaq Global Market to the Nasdaq Capital Market (NasdaqCM)[46][48] - DHAC's securities began trading on NasdaqCM on October 30, 2023, and the delisting hearing was subsequently cancelled[48][49] The Business Combination Agreement 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] - Upon closing, VSee and iDoc will merge into DHAC's subsidiaries, and DHAC will be renamed VSee Health, Inc[50] 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][321] Business Combination Related Financing Transactions 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] - 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][60] Results of Operations 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] 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 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] - The company experienced significant redemptions: $110,472,254 withdrawn from the Trust Account in October 2022 and $6,796,063 in November 2023[74] - 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][76] 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 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] - 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][207][253] - 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][252] - The company intends to complete a Business Combination before the mandatory liquidation date or file for an extension[95][253] Critical Accounting Estimates 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] - 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][258] - Judgments are based on historical experience, contract terms, industry trends, and external information, but actual results may differ due to inherent uncertainty[96][258] Common stock subject to possible redemption 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][262] - 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][263] 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 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][276] - Public Warrants, Private Warrants, Bridge Warrants, and Extension Warrants are considered freestanding instruments and meet all requirements for equity classification under ASC 815[99][277] - Warrants meeting equity classification criteria are recorded as a component of additional paid-in capital at issuance[99][277] Financial Instruments 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][278] - 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][279] - 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][280] Recent Accounting Standards 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][282] - 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][283] ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 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] ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 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] ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 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] ITEM 9A. CONTROLS AND PROCEDURES 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] - Management assessed and determined that internal control over financial reporting was effective as of December 31, 2023, using the COSO 2013 framework[108] - 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][254] - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter[110] ITEM 9B. OTHER INFORMATION This item reports that there is no other information to disclose - No other information to report[110] ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS This item is not applicable to DHAC - This item is not applicable[110] 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 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][119] - Four directors (Kevin Lowdermilk, Frank Ciufo, George McNellage, Scott Metzger) are independent, meeting Nasdaq requirements[121] - 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][123][127][130] - George McNellage, Kevin Lowdermilk, and Frank Ciufo qualify as 'audit committee financial experts' under SEC rules[126] - A code of ethics has been adopted, applying to all executive officers, directors, and employees[132] ITEM 11. EXECUTIVE COMPENSATION 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][136] - Executive officers and directors are reimbursed for out-of-pocket expenses related to identifying target businesses and due diligence[136] - 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] ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 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] 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][145] ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 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][153][154] - 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][158][159][160][161][162][164][165] - 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][159][160][162][163][164][165][166] - 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][168][174][176][177][178] - An administrative services agreement requires a $10,000 monthly payment to an affiliate of the Sponsor for office space and services[181] - 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][186] ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES WithumSmith+Brown, PC served as DHAC's independent registered public accounting firm - WithumSmith+Brown, PC is the independent registered public accounting firm[190] 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] 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 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][206] 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][199][200] 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 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] - 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] - The audit was conducted in accordance with PCAOB standards, but an audit of internal control over financial reporting was not performed[209] Consolidated Balance Sheets 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 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 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 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] - Cash provided by investing activities in 2023 was mainly from $6,796,063 withdrawn from the Trust Account in connection with redemptions[220] - 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] Notes to Consolidated Financial Statements 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 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] 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][248][249] - 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][242][243] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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][251] - 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] - 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][255] - 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][263] - 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][279][280] - 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][287] NOTE 3. INITIAL PUBLIC OFFERING 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 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] - Private placement units are identical to IPO units but are not redeemable, and proceeds were placed in the Trust Account[289] - 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] NOTE 5. RELATED PARTY TRANSACTIONS 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] - 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][295][296][297] - 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][299][343][344] - 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][306][307] - An administrative services agreement with a Sponsor affiliate results in a $10,000 monthly fee for office space and services[308] - All related-party transactions are subject to prior approval by independent directors to ensure fair terms[311] NOTE 6. COMMITMENTS 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] - 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] - 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][316][317] - The PIPE Securities Purchase Agreement and related Backstop Agreement were terminated on July 11, 2023, due to unmet closing conditions[333][337] 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 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] 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][369] - Insiders have waived their rights to share in any liquidation distribution from the Trust Account[367] NOTE 8. WARRANTS 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] - 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] - 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][381][385][390][397][402] NOTE 9. INCOME TAX 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] 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] NOTE 10. FAIR VALUE MEASUREMENTS 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][281] 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][419] - 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][416][419][422][425][427] NOTE 11. SUBSEQUENT EVENTS 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] - The business combination deadline was extended to May 8, 2024, on February 2, 2024, marking the second of four possible three-month extensions[434] - 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][436] - 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]