References in this report (the "Quarterly Report") to "we," "us" or the
"Company" refer to Digital Health Acquisition Corp. References to our
"management" or our "management team" refer to our officers and directors, and
references to the "Sponsor" refer to Digital Health Sponsor LLC. The following
discussion and analysis of the Company's financial condition and results of
operations should be read in conjunction with the financial statements and the
notes thereto contained elsewhere in this Quarterly Report. Certain information
contained in the discussion and analysis set forth below includes
forward-looking statements that involve risks and uncertainties.
Overview
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 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.
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.
If we are unable to complete an initial business combination within twelve
(12) months from the closing of the Initial Public Offering, 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.
Results of Operations
Our entire activity since inception up to June 30, 2022 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.
22
Table of Contents
For the three months ended June 30, 2022, we had a net loss of $659,459 which
consisted of $722,162 in general and administrative expenses, partially offset
by income from our investments held in the trust account of $62,703.
For the six months ended June 30, 2022, we had a net loss of $1,186,819 which
consisted of $1,265,341 in general and administrative expenses, partially offset
by income from our investments held in the trust account of $78,522.
For three months ended June 30, 2021 and for the period from March 5, 2021
(inception) through June 30, 2021, we had a net loss of $5,000 which consisted
of formation and operational costs.
Liquidity and Capital Resources
As of June 30, 2022, we had $191,125 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, the
Company 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.
We intend to use substantially all of the net proceeds of the Initial Public
Offering, including the funds held in the Trust Account, to acquire a target
business or businesses and to pay our expenses relating thereto. To the extent
that our share capital is used in whole or in part as consideration to effect
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.
Based on the foregoing, management believes that we will have sufficient working
capital and borrowing capacity from our sponsor or an affiliate of our sponsor
or our officers and directors to meet our needs through the earlier of the
consummation of our initial business combination or one year from the date of
this filing. Over this time period, we will be using these funds for paying
existing accounts payable, identifying and evaluating prospective initial
business combination candidates, performing due diligence on prospective target
businesses, paying for travel expenditures, selecting the target business to
merge with or acquire, and structuring, negotiating and consummating the
Business Combination.
Liquidity and Going Concern
In order to finance transaction costs in connection with a Business Combination,
the Sponsor or an affiliate of the Sponsor, or certain of the Company's officers
and directors may, but are not obligated to, provide the Company Working Capital
Loans (as defined below) (see Note 5). As of June 30, 2022 and December 31,
2021, there were no amounts outstanding under any Working Capital Loans.
23
Table of Contents
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 condensed consolidated financial
statements were issued.
As of June 30, 2022, the Company had a cash balance of $191,125 and a working
capital deficiency of $231,787. In addition, in connection with the Company's
assessment of going concern considerations in accordance with FASB Accounting
Standards Update 2014-15, "Disclosures of Uncertainties about an Entity's
Ability to Continue as a 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 should the
Company liquidate after June 30, 2022.
Contractual Obligations
We do not have any long-term debt, capital lease obligations, operating lease
obligations or long-term liabilities, other than as described below.
Registration Rights
The holders of our founder shares which were issued in a private placement prior
to the closing of the Initial Public Offering, as well as the holders of the
private placement units (and underlying securities), will be entitled to
customary registration rights pursuant to an agreement to registration rights
agreement. The holders of a majority of these securities are entitled to make up
to two demands that we register such securities. The holders of the majority of
these securities can elect to exercise these registration rights at any time on
or after the date we consummate a business combination. In addition, the holders
have certain "piggy-back" registration rights with respect to registration
statements filed subsequent to our consummation of a business combination. We
will bear the expenses incurred in connection with the filing of any such
registration statements.
Underwriting Agreement and Deferred Underwriting Commission
The company paid an underwriting discount of $0.17 per Unit, or $1,955,000 in
the aggregate, at the closing of the Initial Public Offering. An additional fee
equal to 3.8% of the gross proceeds of the Initial Public Offering, or
$4,370,000, will be payable to A.G.P./Alliance Global Partners (the
"Representative") as a deferred underwriting commission in connection with the
business combination. This deferred underwriting commission will become payable
to the Representative from the amounts held in the Trust Account solely in the
event that the Company completes an initial business combination, subject to the
terms of the underwriting agreement dated November 3, 2021.
Administrative Services Agreement
Commencing on the date that our securities were first listed on The Nasdaq
Global Market and continuing until the earlier of our consummation of an initial
business combination or our liquidation, we have agreed to pay an affiliate of
our Sponsor a total of $10,000 per month for office space, utilities,
secretarial support and administrative services, subject to deferral until
consummation of our initial business combination. We recorded administrative
services expenses of $30,000 and $60,000 for the three months and six months
ended June 30, 2022, respectively. We have not incurred administrative services
expenses of for the period from March 5, 2021 (inception) through June 30, 2021,
respectively, in general and administrative expenses in connection with the
related agreement in the accompanying condensed consolidated statement of
operations.
Critical Accounting Policies
The preparation of financial statements and related disclosures in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and expenses during the
periods reported. Actual results could materially differ from those estimates.
We have identified the following critical accounting policies:
24
Table of Contents
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' equity. 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.
Net Loss per common stock
The Company complies with accounting and disclosure requirements of FASB ASC
Topic 260, "Earnings Per Share". Net loss per common stock is computed by
dividing net loss by the weighted average number of common stocks outstanding
for the period. This presentation contemplates a Business Combination as the
most likely outcome, in which case, both classes of common stocks share pro rata
in the loss of the Company. Accretion associated with the redeemable shares of
common stock is excluded from net loss per common stock as the redemption value
approximates fair value.
Recent Accounting Pronouncements
We do not believe that any recently issued, but not yet effective, accounting
pronouncements, if currently adopted, would have a material impact on our
financial statements except for the following:
Off-Balance Sheet Arrangements
As of June 30, 2022, we did not have any off-balance sheet arrangements as
defined in Item 303(a)(4)(ii) of Regulation S-K.
Emerging Growth Company Status
On April 5, 2012, the Jumpstart Our Business Startups Act of 2012 (the "JOBS
Act") was signed into law. The JOBS Act contains provisions that, among other
things, relax certain reporting requirements for qualifying public companies. We
qualify as an "emerging growth company" under the JOBS Act and are allowed to
comply with new or revised accounting pronouncements based on the effective date
for private (not publicly traded) companies. We elected to delay the adoption of
new or revised accounting standards, and as a result, we may not comply with new
or revised accounting standards on the relevant dates on which adoption of such
standards is required for non-emerging growth companies. As a result, our
financial statements may not be comparable to companies that comply with new or
revised accounting pronouncements as of public company effective dates.
As an "emerging growth company," we are not required to, among other things,
(i) provide an auditor's attestation report on our system of internal controls
over financial reporting, (ii) provide all of the compensation disclosure that
may be required of non-emerging growth public companies, (iii) comply with any
requirement that may be adopted by the Public Company Accounting Oversight Board
regarding mandatory audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the financial statements
(auditor discussion and analysis), and (iv) disclose comparisons of the CEO's
compensation to median employee compensation. These exemptions will apply for a
period of five (5) years following the completion of our Initial Public Offering
or until we otherwise no longer qualify as an "emerging growth company."
© Edgar Online, source Glimpses
DIGITAL HEALTH ACQUISITION CORP. 
