Vsee Health, Inc.: Form 10-K for the period ended Dec 31, 2023

Introduction

We are a blank check company incorporated as a Delaware corporation and formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses (the “initial business combination”). Our Sponsor is Digital Health Sponsor LLC, a Delaware limited liability company (“Sponsor”). While we may pursue an initial business combination target in any industry or geographic region, we intend to focus on established, technology and healthcare focused businesses that have an aggregate enterprise value of approximately $175 million to $500 million and would benefit from access to public markets and the operational and strategic expertise of our management team and board of directors. We will seek to capitalize on the significant experience of our management team in consummating an initial business combination with the ultimate goal of pursuing attractive returns for our stockholders.

The Registration Statement for our initial public offering was declared effective on November 3, 2021 (the “Initial Public Offering,” or “IPO”). On November 8, 2021, we consummated the Initial Public Offering of 11,500,000 units (the “Units”) at $10.00 per Unit including the full exercise of the underwriters’ over-allotment option, generating gross proceeds of $115,000,000, and incurring transaction costs of approximately $6,877,164, consisting of $1,955,000 of underwriting fees, $4,370,000 of deferred underwriting fees and $552,164 of other offering costs.

Simultaneously with the closing of the Initial Public Offering, we completed the private sale of 557,000 Units (the “Private Placement Units”) at a purchase price of $10.00 per Private Placement Unit (the “Private Placement”), to the Sponsor, generating gross proceeds of approximately $5,570,000.

Approximately $116,725,000 ($10.00 per Unit) of the net proceeds of the Initial Public Offering and certain of the proceeds of the Private Placement was placed in a trust account (the “Trust Account”) located in the United States with Continental Stock Transfer & Trust Company, and invested only in U.S. “government securities,” within the meaning set forth in Section 2(a)(16) of the Investment Company Act, with a maturity of one hundred eighty-five (185) days or less, or in money market funds meeting the conditions of paragraphs (d)(1), (d)(2), (d)(3) and (d)(4) of Rule 2a-7 under the Investment Company Act, which invest only in direct U.S. government treasury obligations, as determined by the Company, until the earlier of: (i) the completion of our initial business combination and (ii) the distribution of the Trust Account as otherwise permitted under our amended and restated certificate of incorporation. During the year ended December 31, 2023, we withdrew $6,796,063 from the Trust Account as a result of an aggregate of 579,157 shares of our common stock redeemed on November 7, 2023.

If we are unable to complete an initial business combination within thirty (30) months from the closing of the Initial Public Offering (as currently extended), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten (10) business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. On November 6, 2023, at DHAC’s annual stockholder meeting, the stockholders of DHAC approved a proposal to amend DHAC’s amended and restated certificate of incorporation to extend the date by which DHAC must consummate a Business Combination up to four (4) times, each by an additional three (3) months, for an aggregate of twelve (12) additional months from the previously extended term (i.e., from November 8, 2023 up to November 8, 2024) or such earlier date as determined by the DHAC board of directors. In connection with such stockholder vote, an aggregate of 579,157 shares of DHAC’s common stock were redeemed leaving 3,603,966 shares issued and outstanding and entitled to vote as November 7, 2023. Currently, DHAC has until May 8, 2024 to complete the business combination.

Our Company

We are a blank check company recently incorporated as a Delaware corporation whose business purpose is to effect a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses, which we refer to throughout this prospectus as our initial business combination. To date, our efforts have been limited to organizational activities as well as activities related to the IPO and search for an initial business combination target. Our efforts to identify a prospective target business are be limited to any particular industry or geographic region, although we intend to focus on transactions with companies and assets which are technology-focused and positioned in the healthcare industry. As of the date of the report, we have not entered into a business combination agreement with any specific business combination target.

While we may pursue an initial business combination target in any industry or geographic region, we intend to focus on established, technology and healthcare focused businesses that have an aggregate enterprise value of approximately $175 million to $500 million and would benefit from access to public markets and the operational and strategic expertise of our management team and board of directors. We will seek to capitalize on the significant experience of our management team in consummating an initial business combination with the ultimate goal of pursuing attractive returns for our stockholders.

Our Management Team

Our management team is led by Scott Wolf, our Chief Executive Officer, Corporate Secretary and Chairman, Daniel Sullivan, our Chief Financial Officer, as well as our Board of Directors, all of whom have extensive experience in healthcare, medical technology and healthcare services.

Scott Wolf is a prolific medical device entrepreneur across a broad range of therapeutic areas. Dr. Wolf founded Aerin Medical to create non-surgical therapies to meet the enormous need of patients with the most common nasal airway problems, including nasal obstruction. Prior to founding Aerin Medical, he founded Zeltiq Aesthetics, the maker of CoolSculpting, the leading non-invasive method of fat reduction for bodysculpting. Dr. Wolf’s other startups include Endogastric Solutions and Cardiac Dimensions. He was previously a partner at Prospect Venture Partners and a vice-president at Frazier Healthcare Ventures, both leading life science venture capital firms. Dr. Wolf received his M.D. from George Washington University and his B.A. from the University of Pennsylvania.

Daniel Sullivan has been the President of PCN Enterprises, Inc. since 2003, which provides accounting related consulting services to public companies. He is also CFO for Spectrum Global Solutions, Inc. Mr. Sullivan received his B.S in accounting from the University of Massachusetts and an MBA from Southern New Hampshire University.

We believe we will greatly benefit from the experiences of our executive officers and directors as we seek to identify and consummate an initial business combination. Our team has extensive experience in the financial services sector as investors, managers, principals, advisors or directors of companies operating in the healthcare and technology sectors. They also have extensive experience in identifying, negotiating with and conducting due diligence on companies targeted for acquisition and consummating acquisitions in the healthcare and technology sectors. Prior to the consummation of our initial business combination, we intend to leverage the industry experience of our executive officers and board, including their extensive contacts, relationships and access to acquisition opportunities in telehealth. Past performance by our management team is not a guarantee of success with respect to locating a target business to acquire or any business combination we may consummate.

The past performance of the members of our management team or their affiliates is not a guarantee that we will be able to identify a suitable candidate for our initial business combination or of success with respect to any business combination we may consummate. You should not rely on the historical record of the performance of our management team or any of its affiliates’ performance as indicative of our future performance.

If any of our officers or directors becomes aware of a business combination opportunity that falls within the line of business of any entity to which he or she has pre-existing fiduciary or contractual obligations, he may be required to present such business combination opportunity to such entity prior to presenting such business combination opportunity to us.

Competition

In identifying, evaluating and selecting a target business for our initial business combination, we may encounter intense competition from other entities having a business objective similar to ours, including other blank check companies, private equity groups and leveraged buyout funds, and operating businesses seeking strategic acquisitions.

Many of these entities are well established and have significant experience identifying and effecting business combinations directly or through affiliates. Moreover, many of these competitors possess greater financial, technical, human and other resources than us. Our ability to acquire larger target businesses will be limited by our available financial resources. This inherent limitation gives others an advantage in pursuing the acquisition of a target business. Furthermore, the requirement that we acquire a target business or businesses having a fair market value equal to at least 80% of the value of the trust account (excluding any taxes payable) at the time of the agreement to enter into the business combination, our obligation to pay cash in connection with our public stockholders who exercise their redemption rights and the number of our outstanding warrants and the future dilution they potentially represent, may not be viewed favorably by certain target businesses. Any of these factors may place us at a competitive disadvantage in successfully negotiating our initial business combination.

Employees

We currently have two executive officers. These individuals are not obligated to devote any specific number of hours to our matters but they intend to devote as much of their time as they deem necessary to our affairs until we have completed our initial business combination. The amount of time they will devote in any time period will vary based on whether a target business has been selected for our initial business combination and the stage of the business combination process we are in. We do not intend to have any full time employees prior to the consummation of our initial business combination.

We are a SPAC with no business operations. Since our IPO, our sole business activity has been identifying, evaluating suitable acquisition transaction candidates and completing the merger with our target acquisition companies. Therefore, we do not consider that we face significant cybersecurity risk and have not adopted any cybersecurity risk management program or formal processes for assessing cybersecurity risk. Our board of directors is generally responsible for the oversight of risks from cybersecurity threats, if there is any. We have not encountered any cybersecurity incidents since our IPO.

We currently maintain our executive offices at 980 N Federal Hwy #304, Boca Raton, FL 33432. An affiliate of our sponsor is making this space available to us as part of a monthly administrative fee of $10,000. We consider our current office space adequate for our current operations.

We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. Except as disclosed below, we are also not aware of any other legal proceeding, investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business, financial condition or results of operations.

The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the notes related thereto which are included in “Item 8. Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Certain information contained in the discussion and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under “Special Note Regarding Forward-Looking Statements,” and elsewhere in this Annual Report on Form 10-K, and risk factors detailed in our filings with the SEC.

Overview

We are incorporated as a blank check company formed under the laws of the State of Delaware on March 30, 2021. DHAC was formed for the purpose of entering into a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. Our Sponsor is Digital Health Sponsor LLC, a Delaware limited liability company (“Sponsor”). While we may pursue an initial business combination target in any industry or geographic region, we intend to focus on established, technology and healthcare focused businesses that would benefit from access to public markets and the operational and strategic expertise of our management team and board of directors. We will seek to capitalize on the significant experience of our management team in consummating an initial business combination with the ultimate goal of pursuing attractive returns for our stockholders.

The Registration Statement for our initial public offering was declared effective on November 3, 2021 (the “Initial Public Offering,” or “IPO”). On November 8, 2021, we consummated the Initial Public Offering of 11,500,000 units (the “Units”) at $10.00 per Unit including the full exercise of the underwriters’ over-allotment option, generating gross proceeds of $115,000,000, and incurring transaction costs of $6,877,164, consisting of $1,955,000 of underwriting fees, $4,370,000 of deferred underwriting fees and $552,164 of other offering costs. Simultaneously with the closing of the Initial Public Offering, we completed the private sale of 557,000 Units (the “Private Placement Units”) at a purchase price of $10.00 per Private Placement Unit (the “Private Placement”), to the Sponsor, generating gross proceeds of approximately $5,570,000.

After deducting the underwriting discounts, offering expenses, and commissions from the IPO (including the over-allotment option) and the sale of the Private Placement Units, a total of $116,725,000 was deposited into the Trust Account, and the remaining $1,295,000 of the net proceeds were outside of the Trust Account and made available to be used for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses. The amounts held in the Trust Account may only be used by DHAC upon the consummation of a business combination, except that there can be released to DHAC, from time to time, any interest earned on the funds in the Trust Account that it may need to pay its tax obligations. The remaining interest earned on the funds in the Trust Account will not be released until the earlier of the completion of a business combination and DHAC’s liquidation.

In October 2022 and November 2023, our stockholders approved amendments to our certificate of incorporation, which extended the SPAC term. Under the Amended and Restated Certificate Of Incorporation, if we are unable to complete an initial business combination within thirty (30) months from the closing of the Initial Public Offering (which is May 8, 2024, as currently extended and as may be further extended in accordance with our Amended and Restated Certificate of Incorporation), we will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten (10) business days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to us to pay our franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses and net of taxes payable), divided by the number of then-outstanding Public Shares, which redemption will completely extinguish public stockholders’ rights as stockholders (including the right to receive further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption, subject to the approval of our remaining stockholders and our board of directors, dissolve and liquidate, subject in each case to our obligations under Delaware law to provide for claims of creditors and the requirements of other applicable law. In connection with stockholder votes to extend the term of DHAC on October 20, 2022 and November 6, 2023, an aggregate of 11,385,034 shares of DHAC’s common stock were redeemed.

Our Units, Common Stock, and Warrants are currently listed on the Nasdaq Capital Market, under the symbols “DHACU,” “DHAC,” and “DHACW,” respectively.

DHAC’s principal executive offices are located at 980 N Federal Hwy #304, Boca Raton, FL 33432, and its telephone number is (561) 672-7068.

NASDAQ Listing Rules Compliance

On March 31, 2023, DHAC received a letter from the staff (the “Staff”) at The Nasdaq Global Market (“Nasdaq Global”) notifying DHAC that for the 30 consecutive trading days prior to the date of the Letter, DHAC’s securities listed on the Nasdaq Global (including the Common Stock, Units and Warrants) (the “Securities”) had traded at a value below the minimum $50,000,000 “Market Value of Listed Securities” (“MVLS”) requirement set forth in Nasdaq Listing Rule 5450(b)(2)(A), which is required for continued listing of DHAC’s Securities on Nasdaq Global. In accordance with Nasdaq listing rule 5810I(3)I, DHAC had 180 calendar days, or until September 27, 2023, to regain compliance.

On May 23, 2023, DHAC received a second letter from the Staff notifying DHAC that for the prior 30 consecutive business days, DHAC’s market value of publicly held shares (“MVPHS”) was below the $15 million required for continued listing on the Nasdaq Global and therefore, DHAC no longer met Nasdaq Listing Rule 5450(b)(3)(C) (the “MVPHS Requirement”). In accordance with Nasdaq Listing Rule 5810I(3)(D), DHAC had 180 calendar days, or until November 20, 2023, to regain compliance.

On September 28, 2023, DHAC received a third letter from the Staff notifying DHAC that the Staff had determined to delist DHAC’s Securities because it had not regained compliance with the MVLS standard. Pursuant to the third letter, on October 4, 2023, DHAC requested a hearing (the “Hearing”) to appeal this determination and also applied to transfer the listing of its Securities from Nasdaq Global to the Nasdaq Capital Market (“NasdaqCM”).

On October 9, 2023, DHAC received a fourth letter from the Staff notifying DHAC that its not meeting the 400 total shareholders requirement under the Nasdaq Listing Rule 5450(a)(2) served as an additional basis for delisting DHAC’s Securities from Nasdaq Global.

On October 26, 2023, the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market notified DHAC in writing (the “Notice”) that its application to transfer the listing of its Securities to NasdaqCM had been approved. DHAC’s Securities were transferred to the NasdaqCM at the opening of business on October 30, 2023. On November 1, 2023, DHAC received a letter from the Nasdaq Global Hearing panel that due to DHAC’s transfer of its listed Securities to NasdaqCM, the Hearing on November 30, 2023 regarding non-compliance with the Nasdaq Global listing standards had been cancelled.

As of October 30, 2023, DHAC’s Securities are listed and traded on The Nasdaq Stock Market on NasdaqCM and will continue to be listed and traded on NasdaqCM.

The Business Combination Agreement

On June 15, 2022, DHAC entered into the Original Business Combination Agreement with DHAC Merger Sub I, Inc., a Delaware corporation and wholly owned subsidiary of DHAC (“Merger Sub I”), DHAC Merger Sub II, Inc., a Texas corporation and wholly owned subsidiary of DHAC (“Merger Sub II”), VSee Lab, Inc., a Delaware corporation (“VSee”), and iDoc Virtual Telehealth Solutions, Inc., a Texas corporation (“iDoc”). On August 9, 2022, the parties to the Original Business Combination Agreement, entered into the First Amended and Restated Business Combination Agreement, pursuant to which the Original Business Combination Agreement was amended and restated in its entirety. The parties to the First Business Combination Agreement entered into the Second Amended and Restated Business Combination Agreement on October 6, 2022, pursuant to which the First Amended and Restated Business Combination Agreement was amended and restated in its entirety, which was subsequently amended by the First Amendment to the Second Amended and Restated Business Combination Agreement dated November 3, 2022. On November 21, 2023, DHAC, Merger Sub I, Merger Sub II, VSee and iDoc entered into the Third Amended and Restated Business Combination Agreement, which was subsequently amended by the First Amendment to the Third Amended and Restated Business Combination Agreement on February 13, 2024 (as amended, the “Business Combination Agreement”) and concurrently entered into various transactions that provide financing for DHAC, VSee, iDoc and the combined company after the business combination (the “Combined Company,” together with the other agreements and transactions contemplated by the Business Combination Agreement, the “Business Combination”). Pursuant to the terms of the Business Combination Agreement, upon the closing (the “Closing”) of the transactions contemplated in the Business Combination Agreement, Merger Sub I will merge with and into VSee (the “VSee Merger”), with VSee surviving the VSee merger as a wholly owned subsidiary of DHAC, and Merger Sub II will merge with and into iDoc (the “iDoc Merger” and, together with the VSee Merger, the “Mergers”), with iDoc surviving the iDoc Merger as a wholly owned subsidiary of DHAC.. The DHAC Board has (i) approved and declared advisable the Business Combination Agreement, the Business Combination and the other transactions contemplated thereby and (ii) resolved to recommend approval of the Business Combination Agreement and related matters by the stockholders of DHAC.

The Merger Consideration

The Business Combination implies a $53.9 million post-closing equity value and a current combined equity value of VSee and iDoc at $110 million. At the Closing, each of VSee and iDoc will convert each share of VSee and iDoc capital stock (excluding shares of the holders who perfect rights of appraisal under Delaware or Texas law, as the case may be) into the right to receive the applicable merger consideration as further described below. The estimated net cash per share of DHAC Common Stock that is being contributed by DHAC to the Combined Company is less than the $10.00 per share ascribed to such shares in the Business Combination Agreement or the amount per share that holders of DHAC Common Stock would be entitled to receive upon exercise of their redemption rights.

• VSee Merger Consideration

The aggregate merger consideration that the holders of VSee Class A Common Stock (including the holders of VSee Preferred Stock as converted and holders of VSee Class A Common Stock in connection with the TAD Exchange) as of the Effective Time are entitled to receive in the Business Combination, referred to as the “VSee Class A Consideration,” is an amount equal to (1) $60,500,000, minus (2) an amount equal to the Effective Time Option Grants multiplied by $10.00, minus (3) the aggregate amount of VSee’s transaction expenses. “Effective Time Option Grants” refers to the stock options with an exercise price of $10.00 per share pursuant to the VSee Incentive Plan to the individuals, in the amounts, and on the terms set forth on Exhibit E to the Business Combination Agreement. 100% of the VSee Closing Consideration will be paid in shares of Company Common Stock in accordance with the terms of the Business Combination Agreement and subject to deductions for the VSee Indemnity Escrow Amount. The “VSee Per Share Class A Consideration” refers to a number of shares of Common Stock equal to (a) (1) the VSee Class A Closing Consideration, divided by (2) the total number of VSee Class A Outstanding Shares, divided by (b) 10. “VSee Class A Outstanding Shares” refers to the total number of shares of VSee Class A Common Stock outstanding immediately prior to the Effective Time, expressed on a fully-diluted and as-converted to VSee Class A Common Stock basis, and including, without limitation or duplication, the number of shares of VSee Class A Common Stock issuable upon conversion of the VSee Preferred Stock and upon closing of the TAD Exchange, which refers to a transaction where This American Doc, Inc. becomes a wholly-owned subsidiary of VSee immediately prior to the consummation of the Business Combination.

• iDoc Merger Consideration

The aggregate merger consideration that the holders of iDoc Class A Common Stock as of the Effective Time are entitled to receive in the Business Combination, referred to as the “iDoc Class A Closing Consideration,” is an amount equal to (1) $49,500,000, minus (2) the aggregate amount of iDoc’s transaction expenses. 100% of the iDoc Closing Consideration will be paid in shares of Company Common Stock in accordance with the terms of the Business Combination Agreement and subject to deductions for the iDoc Indemnity Escrow Amount as described below. The “iDoc Per Share Class A Consideration” refers to a number of shares of Common Stock equal to (a) (1) the iDoc Class A Closing Consideration, divided by (2) the total number of iDoc Class A Outstanding Shares, divided by (b) 10. “iDoc Class A Outstanding Shares” refers to the total number of shares of iDoc Class A Common Stock outstanding immediately prior to the Effective Time, expressed on a fully-diluted and as-converted to iDoc Class A Common Stock basis.

Business Combination Related Financing Transactions

Bridge Financing

On October 5, 2022, DHAC, VSee and iDoc entered into a securities purchase agreement (the “Original Bridge SPA”) with an accredited and institutional investor, who is also an investor in our Sponsor (the “Bridge Investor”), pursuant to which DHAC, VSee and iDoc each issued and sold to such investor promissory notes in the respective principal amount of $888,889 (the “DHAC Bridge Note”), $666,667 (the “VSee Bridge Note”) and $666,667 (the “iDoc Bridge Note”) for an aggregate principal amount of $2,222,222 (the “Bridge Notes”). The Bridge Notes bear guaranteed interest at a rate of 10% per annum and are convertible into shares of DHAC common stock under certain conditions. In connection with the purchase of the Bridge Notes, DHAC issued the investor (i) 173,913 warrants (the “Bridge Warrants”), each representing the right to purchase one share of DHAC common stock at an initial exercise price of $11.50, subject to certain adjustments and (ii) 30,000 shares of DHAC common stock.

On November 21, 2023, DHAC, VSee and iDoc entered into an amendment to the Original Bridge SPA (the “Bridge Amendment”), pursuant to which the Bridge Investor agreed to purchase additional promissory notes (the “Additional Bridge Notes”) in the aggregate principal amount of $166,667 (with an aggregate subscription amount of $150,000) from DHAC with (1) a $111,111 note purchased at signing of the Bridge Amendment, which will mature on May 21, 2025 and (2) a $55,556 note purchased at a later date mutually agreed upon by DHAC and the Bridge Investor, which is currently expected to be upon the filing of an amendment to DHAC’s Registration Statement on Form S-4 in connection with the Business Combination. The Additional Bridge Notes bear guaranteed interest at a rate of 8% per annum and are convertible into shares of DHAC common stock, par value $0.0001 at a fixed conversion price of $10.00 per share. The conversion price of the Additional Bridge Notes is subject to reset if DHAC’s common stock trades below $10.00 on the 10th business day after the conversion shares are registered or may otherwise be freely resold, and every 90th day thereafter, to a price equal to the greater of (x) 95% of the average lowest VWAP of the DHAC common stock in the 10 trading dates prior to the measurement date and (y) $2.00. In addition, optional prepayment of the Additional Bridge Notes requires the payment of 110% of the outstanding obligations, including the guaranteed minimum interest. If an event of default occurs, the Additional Bridge Notes would bear interest at a rate of 24% per annum and require the payment of 125% of the outstanding obligations, including the guaranteed minimum interest.

On November 21, 2023, DHAC, VSee and iDoc entered into an exchange agreement (the “Exchange Agreement”) with the Bridge Investor, pursuant to which the amounts currently due and owing under (i) the DHAC Bridge Note, (ii) the VSee Bridge Note other than $600,000 of the principal amount thereof, and (iii) the iDoc Bridge Note other than $600,000 of the principal amount thereof, will be exchanged at the Closing for a promissory note (the “Exchange Note”) with an aggregate principle value of $2,523,744, which will be guaranteed by each of DHAC, VSee and iDoc. The Exchange Note will bear interest at a rate of 8% per annum and will be convertible into shares of common stock of the Combined Company at a fixed conversion price of $10.00 per share. The conversion price of the

Exchange Note is subject to reset if DHAC’s common stock trades below $10.00 on the 10th business day after the conversion shares are registered or may otherwise be freely resold, and every 90th day thereafter, to a price equal to the greater of (x) 95% of the average lowest VWAP of DHAC’s common stock in the 10th trading dates prior to the measurement date and (y) $2.00. In addition, optional prepayment of the Exchange Note requires the payment of 110% of the outstanding obligations. If an event of default occurs, the Exchange Note would bear interest at a rate of 24% per annum and require the payment of 125% of the outstanding obligations.

In connection with Exchange Agreement, the sponsor of DHAC and certain directors and officers of DHAC will enter into a lock-up agreement in a form under the Exchange Agreement at the Closing, pursuant to which each will agree, from the date of the lock-up agreement until the 180 days after the Closing, subject to certain customary exceptions, to not offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended with respect to any shares of DHAC common stock or securities convertible, exchangeable or exercisable into, shares of DHAC common stock beneficially owned, held or hereafter acquired by the person signing the lock-up agreement.

Pursuant to the Exchange Agreement and the Conversion SPAs (as defined below) with the Bridge Investor, DHAC will enter into a registration rights agreement at the Closing, pursuant to which it will agree to register (i) the shares of DHAC common stock underlying the Exchange Note; (ii) the shares of DHAC common stock issuable as interest or principal on the Exchange Note; (iii) the applicable Loan Conversion Common Shares; (iv) the shares of DHAC common stock issuable pursuant to any anti-dilution or any remedies provisions of the Exchange Note; and (iv) any securities issued or then issuable upon any stock split, dividend or other distribution, recapitalization or similar event. In addition, in connection with the Original Bridge SPA, DHAC entered into a registration rights agreement (the “Bridge RRA”) with the Bridge Investor, dated October 5, 2022, and as amended further on January 22, 2024, which provides that DHAC will file a registration statement to register the shares of Common Stock underlying the Bridge Notes, the Additional Bridge Notes and the Bridge Warrants and the 30,000 commitment shares.

Quantum Financing

On November 21, 2023, DHAC entered into a convertible note purchase agreement (the “Quantum Purchase Agreement”), pursuant to which an institutional and accredited investor (the “Quantum Investor”) subscribed for and will purchase, and DHAC will issue and sell to the Quantum Investor, at the Closing, a 7% original issue discount convertible promissory note (the “Quantum Note”) in the aggregate principal amount of $3,000,000 (the “Quantum Financing”). The Quantum Note will bear interest at rate of 12% per annum and are convertible into shares of Common Stock of DHAC at (1) a fixed conversion price of $10.00 per share; or (2) 85% of the lowest daily VWAP (as defined in the Quantum Note) during the seven (7) consecutive trading days immediately preceding the date of conversion or other date of determination. The conversion price of the Quantum Note is subject to reset if the average of the daily VWAPs for the three (3) trading days prior to the 30th-day anniversary of the Quantum Note issuance date (the “Average Price”) is less than $10.00, to a price equal to the Average Price but in no event less than $2.00. In addition, the Company at its option can redeem early a portion or all amounts outstanding under the Quantum Note if the Company provides the Quantum Note holder a notice at least ten (10) trading days prior to such redemption and on the notice day the VWAP of the Company’s Common Stock is less than $10.00. If an event of default occurs, the Quantum Note would bear interest at a rate of 18% per annum. Concurrently with the consummation of the transactions contemplated by the Quantum Purchase Agreement, the Company will enter into a registration rights agreement pursuant to which it will agree to register the shares of DHAC common stock underlying the Quantum Note.

The Quantum Investor is a Delaware LLC that is owned 33% by SCS Capital Partners, an entity owned by Lawrence Sands who is a beneficial owner of founder shares and the manager of our Sponsor, 33% by the Bridge Investor and 33% by M2B Funding Corp.

A.G.P. Financing

DHAC executed a Securities Purchase Agreement with A.G.P./Alliance Global Partners (“A.G.P.”) on November 3, 2022 and as amended on November 21, 2023 (the “A.G.P. Securities Purchase Agreement”) whereby A.G.P. subscribed for and will purchase, and DHAC will issue and sell, at the closing of the Business Combination, 4,370 shares (“A.G.P. Series A Shares”) of Series A Preferred Stock, par value $0.0001 per share, of the Combined Company (the “Series A Preferred Stock”) at a per share price of $1,000 (the “A.G.P. Financing”). A.G.P. will not receive deferred underwriting commissions of $4,370,000 which it has agreed to take as the A.G.P. Series A Shares.

The Series A Preferred Stock is convertible at any time on or after the earlier of (i) 12 months from the date of issuance of the shares of Series A Preferred Stock and (ii) the date on which no shares of Series A Preferred Stock remain outstanding. The initial conversion price of the Series A Preferred Stock of $10.00 is subject to reset to an “Alternate Conversion Price,” which means the lowest of (i) the applicable conversion price as in effect on the applicable conversion date, and (ii) the greater of (x) $10.00 (or (i) $5.00, after the later of (x) 90 days after issuance of the shares of Series A Preferred Stock or (y) the earlier of the date the shares underlying the shares of Series A Preferred Stock are eligible to be resold pursuant to Rule 144 or the date a resale registration statement is declared effective, or (ii) $2.00, after the earlier of (x) the date the VWAP of the Combined Company common stock trades at less than $5.00 for 10 consecutive trading days and (y) the first anniversary of issuance) and (y) 90% of the price computed as the quotient of (I) the sum of the VWAP of the Common Stock for each of the three (3) trading days with the lowest VWAP of the Common Stock during the ten (10) consecutive trading day period ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, divided by three (3), as appropriately adjusted for any stock dividend, stock split, stock combination, reclassification or similar transaction.

Loan Conversions

On November 21, 2023, DHAC, VSee, and/or iDoc, as applicable, entered into respective securities purchase agreements on November 21, 2023, certain of which were amended and restated on February 13, 2024 and as may be amended from time to time (the “Conversion SPAs”), with various lenders of each of DHAC, VSee and iDoc, which include the Bridge Investor and entities affiliated with Marc Munro, a significant beneficial owner of the Sponsor, pursuant to which (1) certain indebtedness owed by DHAC will be converted into Series A Preferred Stock at the Closing; (2) certain indebtedness owed by VSee will be converted into Series A Preferred Stock of the Combined Company at the Closing; (3) certain indebtedness owed by iDoc will be converted into Series A Preferred Stock of the Combined Company at the Closing; (4) the $600,000 balance of the VSee Bridge Note not included in the Exchange Note will be assumed by the Combined Company and converted into Combined Company common stock following the Closing; and (5) the $600,000 balance of the iDoc Bridge Note not included in the Exchange Note and certain indebtedness owed by iDoc to Tidewater will be assumed by the Combined Company and converted into Combined Company common stock following the Closing (together with the VSee Bridge Note assumed by the Combined Company, the “Assumed Notes”).

Equity Financing

On November 21, 2023, DHAC entered into an equity line of credit (the “ELOC”) purchase agreement (the “Equity Purchase Agreement”) with an affiliate of the Bridge Investor pursuant to which DHAC may sell and issue to the investor, and the investor is obligated to purchase from DHAC, up to $50,000,000 of its newly issued shares of the Combined Company’s common stock, from time to time over a 36-month period beginning from the sixth (6th) trading day following the Closing, provided that certain conditions are met. DHAC also agreed to file a resale registration statement to register shares of common stock to be purchased under the Equity Purchase Agreement with the SEC within 45 days following the Equity Purchase Effective Day, and shall use commercially reasonable efforts to have such registration statement declared effective by the SEC within 30 days of such filing. On the Equity Purchase Effective Day, the Combined Company will issue to the investor, as a commitment fee, a senior unsecured convertible note in a principal amount of $500,000 that is convertible into shares of the Combined Company’s common stock at a fix conversion price of $10.00 per share.

Extension Financing

On May 5, 2023, DHAC entered into a securities purchase agreement (the “Extension Purchase Agreement”) with an unaffiliated institutional investor pursuant to which DHAC issued and sold to such investor a promissory note (the “Extension Note”) in the aggregate principal amount of $250,000. The Extension Note will bear guaranteed interest at a rate of 10% per annum. In connection with the purchase of the Extension Note, DHAC issued the investor (i) 26,086 warrants (the “Extension Warrants”), each representing the right to purchase one share of DHAC common stock at an initial exercise price of $11.50, subject to certain adjustments and (ii) 7,000 commitment shares (the “Extension Shares”) as additional consideration for the purchase of the Extension Note and Extension Warrants. 110% of all unpaid principal under the Extension Note and guaranteed interest of 10% are due and payable at the Closing. The issuance of the Extension Note and related Extension Warrants and Extension Shares pursuant to the Extension Securities Purchase Agreement is hereby referred as “Extension Financing.” In connection with the Extension Financing, DHAC entered into a registration rights agreement (the “Extension RRA”) with the investor, dated May 5, 2023, which provides that DHAC will file a registration statement to register the shares of Common Stock underlying the Extension Warrants and the Extension Shares 30 days after the effective date of the resale registration statement to be filed with respect to the Bridge Financing on the terms set forth therein. The obligations of DHAC under the Extension Note and Extension Securities Purchase Agreement are guaranteed by VSee and iDoc and all such obligations are subordinated to the obligations of DHAC, VSee and iDoc under the Bridge Financing.

Results of Operations

Our entire activity from inception to December 31, 2023, was in preparation for our formation, our initial public offering, and since the closing of our initial public offering, a search for business combination candidates. We will not generate any operating revenues until the closing and completion of our initial business combination. We generate non-operating income in the form of interest income on investments held in trust account. We expect to incur increased expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the year ended December 31, 2023, we had a net loss of $4,413,866 which consisted of $2,593,765 in general and administrative expenses, default interest expense related to Bridge Notes of $1,579,927, interest expense related to Bridge Notes of $429,007, interest expense related to Additional Bridge Notes of $12,642, interest expense related to the M2B Funding Corp. note of $22,958, interest expense related to the Extension Note of $133,748, initial fair value of ELOC of $204,039, change in fair value of Additional Bridge Notes of $2,726, change in fair value of Exchange Note of $97,814, partially offset by change in fair value of the Extension Note embedded derivative of $1,630, income from our investments held in the trust account of $358,767, change in fair value of PIPE forward contract derivative of $170,666, change in fair value of Bridge note embedded derivative of $120,267, change in fair value of ELOC of $319 and initial fair value of Additional Bridge Notes of $11,111.

For the year ended December 31, 2022, we had a net loss of $3,242,501 which consisted of $3,594,967 operational costs, provision for incomes taxes of $187,225, a change in fair value of Bridge Note - Bifurcated Derivative of $86,307, a change in fair value of the PIPE Forward Contract Derivative of $170,666 and interest expenses on the Bridge Notes of $125,980, which is partially offset by income from our investments held in the Trust Account of $922,644.

Liquidity and Capital Resources

As of December 31, 2023, we had $1,863 in cash and no cash equivalents.

Our liquidity needs up to the Initial Public Offering were satisfied through receipt of a $25,000 capital contribution from our Sponsor and certain of our executive officers, directors, and advisors in exchange for the issuance of the founder shares, and loans from our Sponsor for an aggregate amount of $602,720 to cover organizational expenses and expenses related to the Initial Public Offering pursuant to promissory notes (the “Notes”).

On November 8, 2021, we consummated the Initial Public Offering of 11,500,000 Units, including the full exercise of the underwriters’ over-allotment option, at a price of $10.00 per Unit, generating gross proceeds of $115 million. Simultaneously with the closing of the Initial Public Offering, we completed the private sale of 557,000 Units (the “Private Placement Units”) at a purchase price of $10.00 per Private Placement Unit (the “Private Placement”), to the Sponsor, generating gross proceeds of $5,570,000. As of November 8, 2021, we received $3,680,000 from the proceeds of the Private Placement and recorded $1,890,000 in subscription receivable. The Sponsor paid the subscription in full on November 12, 2021.

Following the Initial Public Offering and the Private Placement, a total of $116,725,000 was placed in the Trust Account and we had $9,478 of cash held outside of the Trust Account, after payment of costs related to the Initial Public Offering, and available for working capital purposes. We incurred $6,877,164 in transaction costs, consisting of $1,955,000 of underwriting fees, $4,370,000 of deferred underwriting fees and $552,164 of other offering costs. On October 20, 2022 in connection with our stockholders meeting to approve the extension, 10,805,877 shares of our common stock were redeemed leaving 694,123 shares subject to redemption. In connection with the redemption we withdrew $110,472,254 from the Trust Account. On November 6, 2023, in connection with the stockholders meeting to approve the extension, 579,157 shares of DHAC’s common stock were redeemed leaving 114,966 shares subject to redemption.

On October 6, 2022, in connection with the execution of the Second Amended and Restated Business Combination Agreement, DHAC, VSee and iDoc entered into the Bridge SPA, pursuant to which DHAC, VSee and iDoc each issued and sold to such investor 10% original issue discount senior secured promissory notes due October 5, 2023 in the aggregate principal amount of $2,222,222. $888,889 of the Bridge Note was allocated to DHAC. The Bridge Notes will be assumed by DHAC in connection with the closing of the Business Combination. The Bridge Notes bear guaranteed interest at a rate of 10% per annum. In connection with the purchase of the Bridge Notes, DHAC issued the investor (i) 173,913 warrants, each representing the right to purchase one share of DHAC common stock at an initial exercise price of $11.50, subject to certain adjustments and (ii) 30,000 shares of DHAC common stock as additional consideration for the purchase of the Bridge Notes and Bridge Warrants. DHAC as a result received $738,200 in proceeds for working capital purposes. On October 4, 2023 DHAC defaulted on the Bridge Note and accordingly the default provision were allocated and applied resulting in the triggering of 125% mandatory default penalty, a 10% late fee and default interest from the date of default of 24% and the Company assumed the penalties and interest which were due and payable under the VSee and iDoc portion of the note, resulting in total amount due of $2,523,744. As a result of the default, the Company entered into an Exchange Agreement on November 21, 2023 with the holder and recognized $1,579,927 in default interest.

On October 26, 2022, the Company issued an unsecured promissory note in the aggregate principal amount of $350,000 to Digital Health Sponsor LLC, the Company’s “Sponsor.” The Company deposited to the trust account all of the loan amount and extended the amount of time it has available to complete a business combination from November 8, 2022 to February 8, 2023. The promissory note does not bear interest and will be repaid only upon closing of a business combination by the Company.

In February 2023, SCS Capital Partners LLC issued an unsecured promissory note to the Company, pursuant to which the Company may borrow up to an aggregate principal amount of $250,000. The promissory note was non-interest bearing and shall be used to pay for general operating expenses. On August 17, 2023, the promissory note was amended and restated to allow for an additional $315,000, in the aggregate of $565,000.

On May 5, 2023, the Company issued a promissory note to SCS Capital Partners LLC in the aggregate principal amount of $200,000 (the “SCS Note”). The SCS Note bears interest at a rate of 10% per annum and is due and payable on May 5, 2024. If the Company’s PIPE financing closes in connection with the closing of its business combination, 100% of all unpaid principal under the SCS Note and any accrued but unpaid interest are due and payable at the closing of the PIPE financing. In connection with the termination of the PIPE financing on July 11, 2023, this note was terminated, and advances were allocated to the amended note for $565,000 on August 17, 2023, as discussed above.

On May 5, 2023, the Company entered into a securities purchase agreement (the “May 2023 SPA”) with an institutional investor (the “Holder”). Pursuant to the May 2023 SPA, the Company issued the Holder a 16.67% original issue discount promissory note, in favor of the Holder, in the aggregate principal amount of $300,000 (the “Extension Note”). The Extension Note bears guaranteed interest at a rate of 10% per annum and is due and payable on May 5, 2024.

Between April 2023 to October 2023, SCS, LLC, a Sponsor affiliate, advanced an aggregate amount of approximately $153,000 to DHAC.

On October 4, 2023, the Company issued a promissory note in the aggregate principal amount of $165,000 to M2B Funding Corp., an affiliate of the Sponsor for a purchase price of $150,000 and included $5,000 in legal fees. The note original issued discount of $15,000 plus $5,000 of offering cost were recorded as a debt discount and amortized over the term of the note. The note had a maturity date of January 5, 2024. The Company defaulted on the note and amended the note on February 8,2024. As a result of the amendment the Company was to repay the remaining amount due by February 8, 2024. On January 31, 2024 the note was paid in full for a total of $190,750.

On November 21, 2023, DHAC, VSee and iDoc entered into an amendment to the Original Bridge SPA, pursuant to which the Bridge Investor agreed to purchase the Additional Bridge Notes in the aggregate principal amount of $166,667 (with an aggregate subscription amount of $150,000) from DHAC with (1) a $111,111 note purchased at signing of the Bridge Amendment, which will mature on May 21, 2025 and (2) a $55,556 note purchased at a later date mutually agreed upon by DHAC and the Bridge Investor, which is currently expected to be upon the filing of an amendment to DHAC’s Registration Statement on Form S-4 in connection with the Business Combination. The Additional Bridge Notes bear guaranteed interest at a rate of 8% per annum and are convertible into shares of DHAC common stock, par value $0.0001 at a fixed conversion price of $10 per share. The conversion price of the Additional Bridge Notes is subject to reset if DHAC’s common stock trades below $10.00 on the 10th business day after the conversion shares are registered or may otherwise be freely resold, and every 90th day thereafter, to a price equal to the greater of (x) 95% of the average lowest VWAP of the DHAC common stock in the 10 trading dates prior to the measurement date and (y) $2.00. In addition, optional prepayment of the Additional Bridge Notes requires the payment of 110% of the outstanding obligations, including the guaranteed minimum interest. If an event of default occurs, the Additional Bridge Notes would bear interest at a rate of 24% per annum and require the payment of 125% of the outstanding obligations, including the guaranteed minimum interest. As of December 31, 2023, $100,000 has been funded.

On November 21, 2023, DHAC, VSee and iDoc entered into the Exchange Agreement with the Bridge Investor, pursuant to which the amounts currently due and owing under (i) the DHAC Bridge Note, (ii) the VSee Bridge Note other than $600,000 of the principal amount thereof, and (iii) the iDoc Bridge Note other than $600,000 of the principal amount thereof, will be exchanged at the Closing for the “Exchange Note with an aggregate principle value of $2,523,744, which will be guaranteed by each of DHAC, VSee and iDoc. The Exchange Note will bear interest at a rate of 8% per annum and will be convertible into shares of common stock of the Combined Company at a fixed conversion price of $10.00 per share. The conversion price of the Exchange Note is subject to reset if DHAC’s common stock trades below $10.00 on the 10th business day after the conversion shares are registered or may otherwise be freely resold, and every 90th day thereafter, to a price equal to the greater of (x) 95% of the average lowest VWAP of DHAC’s common stock in the 10th trading dates prior to the measurement date and (y) $2.00. In addition, optional prepayment of the Exchange Note requires the payment of 110% of the outstanding obligations. If an event of default occurs, the Exchange Note would bear interest at a rate of 24% per annum and require the payment of 125% of the outstanding obligations.

On November 21, 2023, DHAC entered into the “Quantum Purchase Agreement, pursuant to which the Quantum Investor subscribed for and will purchase, and DHAC will issue and sell to the Quantum Investor, at the Closing, a 7% original issue discount Quantum Note in the aggregate principal amount of $3,000,000. The Quantum Note will bear interest at rate of 12% per annum and are convertible into shares of Common Stock of DHAC at (1) a fixed conversion price of $10.00 per share; or (2) 85% of the lowest daily VWAP (as defined in the Quantum Note) during the seven (7) consecutive trading days immediately preceding the date of conversion or other date of determination. The conversion price of the Quantum Note is subject to reset if the average of the daily VWAPs for the three (3) trading days prior to the 30th-day anniversary of the Quantum Note issuance date is less than $10.00, to a price equal to the Average Price but in no event less than $2.00. In addition, the Company at its option can redeem early a portion or all amounts outstanding under the Quantum Note if the Company provides the Quantum Note holder a notice at least ten (10) trading days prior to such redemption and on the notice day the VWAP of the Company’s Common Stock is less than $10.00. If an event of default occurs, the Quantum Note would bear interest at a rate of 18% per annum. Concurrently with the consummation of the transactions contemplated by the Quantum Purchase Agreement, the Company will enter into a registration rights agreement pursuant to which it will agree to register the shares of DHAC common stock underlying the Quantum Note.

DHAC executed the A.G.P. Securities Purchase Agreement with A.G.P./Alliance Global Partners (“A.G.P.”) on November 3, 2022 and as amended on November 21, 2023 whereby A.G.P. subscribed for and will purchase, and DHAC will issue and sell, at the closing of the Business Combination, 4,370 shares of Series A Preferred Stock, par value $0.0001 per share, of the Combined Company at a per share price of $1,000. A.G.P. will not receive deferred underwriting commissions of $4,370,000 which it has agreed to take as the A.G.P. Series A Shares.

On November 21, 2023, DHAC, VSee, and/or iDoc, as applicable, entered into respective Conversion SPAs on November 21, 2023, certain of which were amended and restated on February 13, 2024 and as may be amended from time to time, with various lenders of each of DHAC, VSee and iDoc, which include the Bridge Investor and entities affiliated with Marc Munro, a significant beneficial owner of the Sponsor, pursuant to which (1) certain indebtedness owed by DHAC will be converted into Series A Preferred Stock at the Closing; (2) certain indebtedness owed by VSee will be converted into Series A Preferred Stock of the Combined Company at the Closing; (3) certain indebtedness owed by iDoc will be converted into Series A Preferred Stock of the Combined Company at the Closing; (4) the $600,000 balance of the VSee Bridge Note not included in the Exchange Note will be assumed by the Combined Company and converted into Combined Company common stock following the Closing; and (5) the $600,000 balance of the iDoc Bridge Note not included in the Exchange Note and certain indebtedness owed by iDoc to Tidewater will be assumed by the Combined Company and converted into Combined Company common stock following the Closing.

On November 21, 2023, DHAC entered into an equity line of purchase agreement (the “Equity Purchase Agreement”) with an affiliate of the Bridge Investor pursuant to which DHAC may sell and issue to the investor, and the investor is obligated to purchase from DHAC, up to $50,000,000 of its newly issued shares of the Combined Company’s common stock, from time to time over a 36-month period beginning from the sixth (6th) trading day following the Closing, provided that certain conditions are met.

For the year ended December 31, 2023, cash used in operating activities was $1,165,762. Net loss of $4,413,866 was primarily comprised of initial loss on Additional Bridge Note of $11,111, change in fair value of Exchange note of $97,814, change in fair value of Additional Bridge Note of $2,726. change in fair value of Bridge note bifurcated derivative of $120,267, change in fair value of Extension Note bifurcated derivative of $1,630, change in fair value of PIPE forward contract derivative of $170,666, and interest earned on investments held in Trust Account of $358,767. Changes in operating assets and liabilities provided $3,810,005 of cash for operating activities.

For the year ended December 31, 2022, cash used in operating activities was $1,391,213. Net loss of $3,242,501 was primarily comprised of change in fair value of bride note bifurcated derivative of $86,307, change in fair value of PIPE forward contract derivative of $170,666, and interest earned on investments held in Trust Account of $922,644. Changes in operating assets and liabilities provided $2,516,959 of cash for operating activities.

We intend to use substantially all of the net proceeds of the Initial Public Offering, including the funds held in the Trust Account and the net proceeds from the above described financing transactions, to acquire VSee and iDoc and to pay our expenses relating thereto. To the extent that our share capital is used in whole or in part as consideration to affect our initial business combination, the remaining proceeds held in the Trust Account as well as any other net proceeds not expended will be used as working capital to finance the operations of the target business. Such working capital funds could be used in a variety of ways including continuing or expanding the target business’ operations, for strategic acquisitions and for marketing, research, and development of existing or new products. Such funds could also be used to repay any operating expenses or finders’ fees which we had incurred prior to the completion of our initial business combination if the funds available to us outside of the Trust Account were insufficient to cover such expenses.

In addition, in the short term and long term, in connection with a business combination, our Sponsor or an affiliate of our Sponsor, or certain of our officers and directors may, but are not obligated to, loan us funds as may be required.

Going Concern

The Company may raise additional capital through loans or additional investments from the Sponsor or its stockholders, officers, directors, or third parties. The Company’s officers and directors and the Sponsor may but are not obligated to (except as described above), loan the Company funds, from time to time, in whatever amount they deem reasonable in their sole discretion, to meet the Company’s working capital needs. Based on the foregoing, the Company believes it will have sufficient working capital and borrowing capacity from the Sponsor or an affiliate of the Sponsor, or certain of the Company directors to meet its needs through the earlier of the consummation of a Business Combination or at least one year from the date that the financial statements were issued.

As of December 31, 2023, the Company had a cash balance of $1,863 and a working capital deficiency of $7,982,537 net of $0 of allowable interest withdraws from trust to cover income and franchise taxes. In addition, in connection with the Company’s assessment of going concern considerations in accordance with ASC 205-40 Presentation of Financial Statements – Going Concern, management has determined that the liquidity, mandatory liquidation and subsequent dissolution raises substantial doubt about the Company’s ability to continue as a going concern. No adjustments have been made to the carrying amounts of assets or liabilities of the Company as of December 31, 2023. The Company intends to complete a Business Combination before the mandatory liquidation date or file for an extension.

Critical Accounting Estimates

Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our financial information. We describe our significant accounting policies in Note 2 – Significant Accounting Policies, of the Notes to Consolidated Financial Statements included in this report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. Certain of our accounting policies require that management apply significant judgments in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and in accordance with U.S. GAAP. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. The most significant accounting estimates were the assumptions used to fair value the PIPE Forward Contract (as defined in financial statement Note 6 - Commitments), the Extension Note Bifurcated Derivative (as explained in financial statement Note 10 – Fair Value Measurements), the Bridge Note Bifurcated Derivative (as defined in financial statement Note 2), the Additional Bridge Note and the Exchange Note. However, by their nature, judgments are subject to an inherent degree of uncertainty, and, therefore, actual results could differ from our estimates.

Common stock subject to possible redemption

We account for the common stock subject to possible redemption in accordance with the guidance in ASC 480, Distinguishing Liabilities from Equity. Common stock subject to mandatory redemption are classified as a liability instrument and are measured at fair value. Conditionally redeemable common stock (including common stock that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified as temporary equity. At all other times, common stock is classified as stockholders’ deficit. The Company’s common stock features certain redemption rights that are considered to be outside of our control and subject to occurrence of uncertain future events. The Company recognizes changes in redemption value immediately as they occur and adjusts the carrying value of redeemable common stock to equal the redemption value at the end of each reporting period. Increases or decreases in the carrying amount of shares of redeemable common stock are affected by charges against additional paid-in capital or accumulated deficit if additional paid-in capital is zero. Accordingly, at December 31, 2023, 114,966 shares of our common stock subject to possible redemption is presented, at redemption value, as temporary equity, outside of the stockholders’ equity section of the Company’s balance sheet.

Warrant Instruments

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in FASB ASC 480, “Distinguishing Liabilities from Equity” (“ASC 480”), and ASC 815, “Derivatives and Hedging” (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter. The Company has analyzed the Public Warrants, Private Warrants, Bridge Note Warrants and the Extension Warrants and determined they are considered to be freestanding instruments and do not exhibit any of the characteristics in ASC 480 and therefore are not classified as liabilities under ASC 480. The warrants meet all of the requirements for equity classification under ASC 815 and therefore are classified in equity.

Financial Instruments

The Company evaluates its financial instruments to determine if such instruments should be accounted for as a liability under ASC 480 or if they are derivatives or contain features that qualify as bifurcated derivatives in accordance with ASC 815.

Derivative instruments are recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date. The Company has determined the PIPE financing agreement is a derivative instrument, the Bridge Note and the Extension Note’s early redemption provisions are embedded feature that are required to be bifurcated as a derivative. FASB ASC 470-20, “Debt with Conversion and Other Options,” addresses the allocation of proceeds from the issuance of debt into its debt and bifurcated derivative components. The Company applies this guidance to allocate the Bridge Note and the Extension Note proceeds between the Bridge Note and the Extension Note, respectively and the respective Bifurcated Derivative, using the residual method by allocating the principal first to fair value of the bifurcated derivative and then to the debt.

The Senior Secured Convertible Promissory Notes (the “Exchange Note” and the “Additional Bridge Note” represent share-settled debt that requires or may require the Company to settle the debt instrument by delivering a variable number of shares with a then-current fair value equal to the principal amount of the note plus accrued and unpaid interest. As a result, the Senior Secured Convertible Promissory Note is required to be accounted for as a liability under ASC 480. As required under ASC 480, the liability will be re-measured at fair value at each reporting period with the changes in the fair value of the liability recognized in earnings.

Recent Accounting Standards

We do not believe that any recently issued, but not yet effective, accounting pronouncements, if currently adopted, would have a material impact on our consolidated financial statements.

Evaluation of Disclosure Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. Our management evaluated, with the participation of our current chief executive officer and chief financial officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of December 31, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of December 31, 2023, our disclosure controls and procedures were effective.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Management’s Report on Internal Controls Over Financial Reporting

As required by SEC rules and regulations implementing Section 404 of the Sarbanes-Oxley Act, our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes in accordance with GAAP. Our internal control over financial reporting includes those policies and procedures that:

(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company,

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect errors or misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate. Management assessed the effectiveness of our internal control over financial reporting at December 31, 2023. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013). Based on our assessments and those criteria, management determined that we maintain effective internal control over financial reporting as of December 31, 2023.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to our status as an emerging growth company under the JOBS Act.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.