Vsee Health, Inc 10-Q for FY2026 Q2
Vsee Health, Inc. (VSEED)
About this 10-Q
Vsee Health, Inc filed this 10-Q on August 14, 2026, covering the quarter ended June 30, 2026 (FY2026 Q2).
Headline figures
Quarter ended June 30, 2026, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.56M
- up 48.0% from $1.06M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For
the quarterly period ended
or
For the transition period from to
Commission
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(Exact name of registrant as specified in its charter)
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Securities registered pursuant to Section 12(b) of the Act:
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Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
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Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
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Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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| ☒ | Smaller reporting company | Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
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As of August 12, 2026, there were
TABLE OF CONTENTS
i
As used in this Quarterly Report on Form 10-Q, unless otherwise indicated, VSee Health, Inc., together with its consolidated subsidiaries, is hereinafter referred to as “VSee Health,” the “Registrant,” “us,” “we,” “our” or the “Company.”
Cautionary Note on Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements appear in a number of places in this Form 10-Q including, without limitation, in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on the current expectations of our management and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may These risks and uncertainties include, but are not limited to, those factors described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed by us with the Securities and Exchange Commission (“SEC”).
These and other factors could cause actual results to differ from those implied by the forward-looking statements. Forward-looking statements are not guarantees of performance and speak only as of the date hereof. The forward-looking statements are based on the current and reasonable expectations of our management but are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date of such statements. There can be no assurance that future developments will be those that have been anticipated or that we will achieve or realize these plans, intentions or expectations.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
In addition, statements of belief and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this filing, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.
ii
PART I —FINANCIAL INFORMATION
Item 1. Financial Statements
VSEE HEALTH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| June 30, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Due from related party | ||||||||
| Prepaids and other current assets | ||||||||
| Current assets from discontinued operations | ||||||||
| Total current assets | ||||||||
| Non-current assets | ||||||||
| Long-term investments | ||||||||
| Right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Fixed assets, net | ||||||||
| Non-Current assets from discontinued operations | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Due to related party | ||||||||
| Operating lease liabilities | ||||||||
| Financing lease liabilities | ||||||||
| Encompass Purchase Liability | ||||||||
| Convertible notes, at fair value | ||||||||
| Loan payable, related party, net of discount | ||||||||
| Line of credit | ||||||||
| Notes payable, net of discount | ||||||||
| Common stock issuance obligation | ||||||||
| Current liabilities from discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Non-current liabilities | ||||||||
| Notes payable, less current portion, net of discount | ||||||||
| SEPA liability | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Deferred tax liabilities, net | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments and Contingencies (Note 11) | ||||||||
| STOCKHOLDERS' EQUITY | ||||||||
| Series A Preferred stock, $ | ||||||||
| Series B Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements
1
VSEE HEALTH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026, AND 2025 (UNAUDITED)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenues | ||||||||||||||||
| Patient fees | $ | $ | $ | $ | ||||||||||||
| Telehealth fees | ||||||||||||||||
| Institutional fees | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Compensation and related benefits | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income, net | ||||||||||||||||
| Change in fair value of financial instruments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on extinguishment of financial instruments | ( | ) | ( | ) | ||||||||||||
| Gain on extinguishment of financial liabilities | ||||||||||||||||
| Loss on issuance of SEPA | ( | ) | ( | ) | ||||||||||||
| Loss on issuance of financial instruments | ( | ) | ||||||||||||||
| Total other income (expense), net | ( | ) | ( | ) | ( | ) | ||||||||||
| - | - | |||||||||||||||
| Loss from continuing operations before provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Benefit from (provision for) income taxes for continuing operations | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss from continuing operations, net of tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Income (loss) from discontinued operations before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes for discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from discontinued operations, net of tax | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Basic loss per common share- continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic income (loss) per common share- discontinued operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Diluted loss per common share- continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Diluted income (loss) per common share- discontinued operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average number of common shares outstanding, basic and diluted - continuing operations | ||||||||||||||||
| Weighted average number of common shares outstanding, basic - discontinued operations | ||||||||||||||||
| Weighted average number of common shares outstanding, diluted - discontinued operations | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
VSEE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2026
| Series
A Preferred Stock | Series
B Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders' | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance - December 31, 2025 | $ | - | $ | - | $ | $ | | $ | ( | ) | $ | |||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2026 - Continuing operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2026 - Discontinued operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Shares issued on the exercise of pre-funded warrants | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Shares issued on conversion of preferred stock | ( | ) | - | - | - | ( | ) | - | - | |||||||||||||||||||||||||||
| Shares issued as part of stock grants to vendors | - | - | - | |||||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Shares issued during the period | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Balance - March 31, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2026 - Continuing operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net income for the three months ended June 30, 2026 - Discontinued operations | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Shares issued on conversion of Series A preferred stock | ( | ) | - | - | - | ( | ) | - | - | |||||||||||||||||||||||||||
| Shares issued on conversion of Series B preferred stock | - | - | ( | ) | ( | ) | ( | ) | - | - | ||||||||||||||||||||||||||
| Repurchase of common stock in connection with sale of VSee Labs (Refer Note 3) | - | - | - | - | ( | ) | ( | ) | ( | ) | - | ( | ) | |||||||||||||||||||||||
| Shares issued on conversion of Quantum loan | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Shares issued on exercise of pre- funded warrants | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Stock based compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Balance - June 30, 2026 | $ | - | $ | - | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||
3
VSEE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
FOR THE SIX MONTHS ENDED JUNE 30, 2025
| Series
A Preferred Stock | Series
B Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Total Stockholders' | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance - December 31, 2024 | $ | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2025 - Continuing operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss for the three months ended March 31, 2025 - Discontinued operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Payment to Michelle Griffith | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||
| Issuance during the period | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Share based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Balance - March 31, 2025 | $ | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2025 - Continuing operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss for the three months ended June 30, 2025 - Discontinued operations | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||
| Issuance during the period | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||
| Share based compensation | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Balance - June 30, 2025 | $ | - | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
VSEE HEALTH, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2026
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) from discontinued operations | ( | ) | ||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash used in operating activities: | ||||||||
| Allowance for expected credit losses | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of right-of-use assets | ||||||||
| Loss on issuance of SEPA | ||||||||
| Loss on extinguishment of loan | ||||||||
| Loss on issuance of financial instruments | ||||||||
| Change in fair value of financial instruments | ||||||||
| Gain on extinguishment of financial liabilities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Due from related party | ( | ) | ||||||
| Prepaids and other current assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Net cash used in operating activities - continuing operations | ( | ) | ( | ) | ||||
| Net cash (used in) provided by operating activities - discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of long-term investments | ( | ) | ||||||
| Net cash used in investing activities- continuing operations | ( | ) | ||||||
| Net cash used in investing activities- discontinued operations | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Repayment of notes payable | ( | ) | ||||||
| Payment to shareholder | ( | ) | ||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from notes issued during the period | ||||||||
| Proceeds from factoring payable | ||||||||
| Proceeds from pre-funded warrants, net of issuance costs | ||||||||
| Proceeds from convertible notes issued during the period | ||||||||
| Payments on Encompass acquisition liability | ( | ) | ( | ) | ||||
| Payments on financing lease liability | ( | ) | ( | ) | ||||
| Payments on line of credit | ( | ) | ||||||
| Net cash (used in) provided by financing activities - continuing operations | ( | ) | ||||||
| Net cash used in financing activities - discontinued operations | ( | ) | ||||||
| Net cash (used in) provided by financing activities | $ | ( | ) | $ | ||||
| NET CHANGE IN CASH | ( | ) | ( | ) | ||||
| Cash, Beginning of Period | ||||||||
| CASH, END OF THE PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Common stock issued on conversion of notes payable | $ | $ | ||||||
| Common stock issued on conversion of Quantum note | $ | $ | ||||||
| Common stock issued to settle directors’ compensation payable | $ | $ | ||||||
| Common stock issued to settle executives’ compensation payable | $ | $ | ||||||
| Common stock issued to settle employees and consultants’ compensation payable | $ | $ | ||||||
| Common stock issued as consideration for investment in GoMyRX Inc. | $ | $ | ||||||
| Common and preferred stock issued to settle accounts payable | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
VSEE HEALTH, INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(all amounts in USD, except number of shares and per share data)
Note 1 Organization and Description of Business
VSee Health, Inc., (formerly known as Digital Health Acquisition Corp., a Delaware Corporation) (the “Company”, “we”, “our”, “VSee Health” or “us”) is a Delaware-based telehealth software company that provides a scalable, application programming interface-driven platform for virtual healthcare delivery. The platform integrates secure video streaming with medical device data, electronic medical records, and other sensitive data, with multiple other interactive functionalities that enable teamwork that VSee believes are not available from any other system worldwide. Our company’s core platform is a highly scalable, integrated, application program interface (“API”) driven technology platform, for virtual healthcare delivery, with multiple real-time integrations spanning the healthcare ecosystem. Our platform’s APIs power external connectivity and deep integration with a wide range of payors, electronic medical records, third-party applications, and other interfaces with employers, hospital systems, and health systems, which we believe uniquely positions us as a long-term partner meeting the unique needs of the rapidly changing healthcare industry. Our company will also be able to white label our solutions, so they fit into the plans and strategies of our clients, all on a platform that is high-performance and highly scalable.
The Company was formed in Delaware on March 30, 2021, under the name Digital Health Acquisition Corp. (“DHAC”) as a “blank check company” for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, recapitalization or other similar business transaction, one or more operating businesses or assets. On June 24, 2024 (the “Closing Date”), the parties consummated the business combination by and among DHAC, DHAC Merger Sub I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of DHAC (“Merger Sub I”), DHAC Merger Sub II, Inc., a Texas corporation and a direct, wholly owned subsidiary of DHAC (“Merger Sub II”), VSee Lab Inc., a Delaware corporation (“VSee Lab”), and iDoc Virtual Telehealth Solutions, Inc., a Texas corporation (“iDoc”), (the “Business Combination”). In connection with the Business Combination, DHAC changed its name from Digital Health Acquisition Corp. to VSee Health, Inc. Furthermore, unless otherwise stated or unless the context otherwise requires, references to “DHAC” refer to Digital Health Acquisition Corp., a Delaware corporation, prior to the Closing Date. The transaction was accounted for as a reverse recapitalization, with VSee Lab, Inc. identified as the accounting acquirer.
iDoc, provides high-acuity patient care solutions through elite physician services in ICUs using a proprietary technology platform. It delivers neuro-critical care and tele-critical care services to a wide range of customers, including hospital systems, LTACs, and correctional facilities. Staffed by board-certified intensivists, neurointensivists, neurologists, and advanced practice providers, iDoc offers 24/7 care for acute neurological conditions and supports multidisciplinary treatment plans. Its services include teleneurocritical care, teleneurology, epileptology, and advanced monitoring such as intracranial pressure, cerebral hemodynamics, brain oximetry, microdialysis, and continuous EEG.
VSee Lab, is a telehealth software platform offering a scalable, API-driven solution for virtual healthcare delivery. Its proprietary, modular system enables plug-and-play telehealth services with end-to-end encrypted video, integrated with medical devices, EMRs, and other sensitive data.
For financial reporting purposes, historical financial data prior to June 24, 2024, reflects the operations of VSee Lab, Inc. The acquisition of iDoc Virtual Telehealth Solutions, Inc. was treated as a business combination under Accounting Standards Codification 805, Business Combinations, with the excess purchase consideration recorded as goodwill.
On May 31, 2026, the Company
divested VSee Lab by selling
Going Concern
Management has determined that principal conditions including the Company’s liquidity condition and historical operating losses raise substantial doubt about the Company’s ability to continue as a going concern for a period of time of at least one year after the date that the accompanying consolidated financial statements are issued.
6
The
Company has incurred multiple years of losses resulting in an accumulated deficit of $
Management has undertaken a series of measures to address these concerns, which include:
| ● | Revenue Enhancement Strategies: The Company won new contracts with larger hospitals and entered new markets, demonstrating the Company’s ability to generate positive revenue growth from its robust pipeline. |
| ● | Additional Financing: Management is actively engaged with various investors to raise capital and is pursuing a Letter of Intent (LOI) arrangement related to a merger that includes raising additional capital. These initiatives are expected to support the Company's liquidity position and fund future growth plans. |
Management has determined that the liquidity condition and historical operating losses raise a substantial doubt about its ability to continue as a going concern for a period of time of least one year after the date that the accompanying condensed consolidated financial statements are issued.
There is no assurance that the Company’s plans to alleviate such concerns will be successful or successful within one year after the date the condensed consolidated financial statements are issued. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Note 2 Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The
unaudited condensed consolidated financial statements include the accounts of VSee Health, Inc. and its wholly owned subsidiary, iDoc
Virtual Telehealth Solutions, Inc. ("iDoc"). In addition, the consolidation includes Encompass Healthcare Billing, LLC, a wholly
owned subsidiary of iDoc. All intercompany balances and transactions have been eliminated in consolidation. On May 31, 2026, the Company
divested VSee Lab, Inc. through the sale of its entire ownership interest, and VSee Lab is no longer included in the Company’s
consolidated financial statements subsequent to the divestiture date. Prior to June 24, 2024, the historical financial statements reflected
the accounts of VSee Lab, Inc. and its
The accompanying unaudited condensed consolidated financial statements reflect adjustments (including normal, recurring adjustments) necessary to present fairly the financial position of the Company as of June 30, 2026, and December 31, 2025, its results of operations, changes in stockholders’ equity (deficit), and statements of cash flows for the three and six months ended June 30, 2026, and 2025, in conformity with U.S. GAAP. The interim results for the three and six months ended June 30, 2026, are not necessarily indicative of the results to be expected for the year ending December 31, 2026, or for any future interim periods. These financial statements should be read in conjunction with the audited condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 (the “December 31, 2025, Condensed Consolidated Financial Statements”), as filed with the SEC. The significant accounting policies and estimates used in preparing these Condensed Consolidated Financial Statements were applied on a basis consistent with those reflected on December 31, 2025, Condensed Consolidated Financial Statements.
Certain reclassifications have been made to the amounts in prior periods to conform to the current period’s presentation primarily consisting of the breakout of revenue by category and the retroactive application of the recapitalization. These presentation changes did not impact the Company’s consolidated net loss, consolidated cash flows, total assets, total liabilities or total stockholders’ equity.
7
Segments
The Company determined its reporting units in accordance with ASC 280, Segment Reporting (“ASC 280”). Management evaluates a reporting unit by first identifying operating segments under ASC 280. The Company then evaluates each operating segment to determine if it includes one or more components that constitute a business. If there are components within an operating segment that meet the definition of a business, the Company evaluates those components to determine if they must be aggregated into one or more reporting units. If applicable, when determining if it is appropriate to aggregate different operating segments, the Company determines if the segments are economically similar and, if so, the operating segments are aggregated.
Management has determined that the Company has one reportable segment. The Company's reporting segment reflects the manner in which its Chief Executive Officer, who serves as the Chief Operating Decision Maker ("CODM"), reviews results and allocates resources.
The Company’s operating and reporting segment is Telehealth Services (“Telehealth”). iDoc Virtual Telehealth Solutions, Inc. is included in Telehealth. Prior to the divestiture of VSee Lab on May 31, 2026, the Company's operations included a Healthcare Technology business. Following the disposition of VSee Lab, the Company no longer conducts Healthcare Technology operations, and the results of continuing operations is reported through the Telehealth segment.
Use of Estimates
The preparation of the Company’s condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts stated in the condensed consolidated financial statements and accompanying notes. These judgments, estimates, and assumptions are used for, but not limited to, the determination of estimated provision for contractual adjustments from third-party payors in the recognition of patient fee contracts, revenue, cost of revenues, goodwill and intangible asset impairment analysis, allowance for credit losses, the Quantum Convertible Note, the May 2025 Convertible Note, the ADI Funding Convertible Note, Vanquish Funding Convertible Note and ClearThink Convertible Note (each of these instruments are defined in Note 8 Convertible debt, at fair value), stock-based compensation, incremental borrowing rate determination, useful life of intangibles, reserve for income tax uncertainties and other contingencies, and valuation of deferred tax asset.
The Company bases its estimates and judgments on historical experience and on various other assumptions that it believes are reasonable under the circumstances. However, future events are subject to change and best estimates and judgments routinely require adjustment. Actual results could differ from those estimates.
Income Taxes
The Company applies ASC 740-10, Accounting for Income Taxes (“ASC 740-10”), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax basis and operating loss, capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. The Company’s federal tax return and any state tax returns are not currently under examination.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services. The core principle of ASC 606 is to recognize revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services.
The Company derives revenue from business services associated with direct tele-physician provider patient fee services, telehealth services and institutional services provided to our clients.
The Company determines revenue recognition in accordance with ASC 606, through the following five steps:
1) Identify the contract with a customer
The Company considers the terms and conditions of its contracts and the Company’s customary business practices in identifying its contracts under ASC 606. The Company determines it has a contract with a customer when the contract has been approved by both parties, it can identify each party’s rights regarding the services to be transferred and the payment terms for the services, it has determined the customer to have the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s payment history or, in the case of a new customer, credit and financial information pertaining to the customer.
8
The Company also has service contracts with hospitals or hospital systems, physician practice groups, and other users. These customer contracts typically range from to , with an automatic renewal process. The Company either invoices these customers for the monthly fixed fee in advance or at the end of the month, depending on the contract terms.
The contracts typically contain cancellation clauses with advance notice; therefore, the Company does not believe that it has any material outstanding commitment for future revenues beyond one year from the end of a reporting period.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. The Company’s contracts typically contain cancellation clauses with advance notice; therefore, the Company does not believe that they have any material outstanding commitments for future revenues beyond one year from the end of a reporting period.
3) Determine the transaction price
The total transaction price is based on the amount to which the Company is entitled to based on the contracts with its customers. The Company believes the quoted transaction prices in the customer contracts represent the stand-alone selling prices for each of the separate performance obligations which are distinct and priced separately within the contract. The transaction price for each service provided is independent and established in the contract and based on the duration of service provided or for a rate for service provided. Fees are established based on the service transferred to the client.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative stand-alone selling price (“SSP”). The determination of a SSP for each distinct performance obligation requires judgment. The Company believes the quoted transaction prices in the customer contracts represent the standalone selling prices for each of the separate performance obligations that are distinct and priced separately within the contract.
5) Recognize revenue when or as the Company satisfies a performance obligation
Revenue is recognized when or as control of the promised goods or service is transferred to the customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.
9
Patient Fees Services and Performance Obligation
Patient Fee Services
Patient fees represent a series of distinct services because performance obligations are met when the Company’s physicians provide professional medical services to patients at the client site. The patient benefits from professional services when care is rendered by the Company’s medical professionals. Revenue recognition commences when the Company satisfies its performance obligation to provide professional medical services to patients.
The Company acts as the principal in these arrangements because it controls the medical services before they are transferred to the patient. This control is evidenced by the Company’s primary responsibility for fulfilling the service and its direct authority over the affiliated physicians, including the right to direct their clinical activities and administrative protocols.
Patient Fee Contracts Involving Third-Party Payors
The Company receives payments from patients, third-party payors, and others for patient fee services. Third-party payors reimburse based on contracted rates or billed charges, which are generally lower than billed amounts. The Company determines the transaction price on patient fees based on standard charges for services provided, reduced by adjustments provided to third-party payors, and implicit price concessions provided to uninsured patients. The Company monitors its revenue and receivables from third-party payors and records an estimated contractual allowance to properly account for the differences between billed and collected amounts.
Revenue from third-party payors is presented net of an estimated provision for contractual adjustments. Patient revenues are net of service credits and service adjustments, and expected credit losses. These adjustments and implicit price concessions represent the difference between the amount billed and the estimated consideration the Company expects to receive, based on historical collection experience, market conditions and other factors. Although the Company believes that its approach to estimates and judgments as described herein is reasonable, actual results could differ, from estimated amounts and such difference could be material.
All of the Company’s telemedicine contracts for patient reimbursement fees are directly billed to the payors by the Company. The Company earns patient fees by providing high acuity patient care solutions. For patient fees, performance obligations are met when the Company’s physicians provide professional medical services to patients at the client site as this is deemed as transfer of goods and services to respective patients. The patient benefits from the professional services when care is rendered by the Company’s medical professionals. The revenue is determined based on the telemedicine billing code(s) associated with the respective professional service rendered to patients.
The Company earns primarily from reimbursement from the following third-party payors:
Medicare
The Company’s affiliated provider network is reimbursed by the Medicare Part B and Part C programs for certain of the telemedicine services it provides to Medicare beneficiaries. Medicare coverage for telemedicine services is treated distinctly from other types of professional medical services and is limited by federal statute and subject to specific conditions of participation and payment pursuant to Medicare regulations, policies and guidelines, including the location of the patient, the type of service, and the modality for delivering the telemedicine service, among others.
Medicaid
Medicaid programs are funded jointly by the federal government and the states and are administered by states (or the state’s designated managed care or other similar organizations) under approved plans. Our affiliated provider network is reimbursed by certain State Medicaid programs for certain of the telemedicine services it provides to Medicaid beneficiaries. Medicaid coverage for telemedicine services varies by state and is subject to specific conditions of participation and payment.
10
Commercial Insurance Providers
The Company is reimbursed by commercial insurance carriers. The basis for payment to the commercial insurance providers is consistent with Medicare reimbursement fee structure guidelines and the Company is in-network or out-of-network with the commercial insurance carriers based on state and insurer requirements.
Telehealth Fees Service Contracts and Performance Obligation
Contract For Telemedicine Care Services
Performance obligations in the contract for telemedicine care are based on services provided via the use of hardware and software integration that includes multi-participant video conferencing, and electronic communication for 24 hours per day, seven days per week for the duration of the contract. The Company provides administrative support for the tele-physician services and coordinates the services of its clinicians’ network through administrative support, hardware support, and software support and provider coverage availability. The Company provides coverage availability of its physician services ranging from 12 to 24 hours per day. Performance obligations in the contract for these services transferred to the customer are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from patient services and institutional services obligations. Performance obligations are met when the Company provides administrative, business, and medical records and reports related to their professional services rendered pursuant to the agreement in such format and upon such interval as hospitals may require. Revenue from telemedicine care services is included in telehealth fees in the condensed consolidated financial statements.
The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration, using the expected value or the most likely amount method, whichever is expected to better predict the amount. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessments of legal enforceability, performance, and all information that is reasonably available to the Company. The determination of the amount of revenue the Company can recognize each accounting period requires management to make estimates and judgments on the estimated expected customer life or expected performance period.
The Company commences revenue recognition when the Company satisfies its performance obligation to provide the contractual tele-physician hours services. Prior to the commencement of services, customers generally make initial start-up nonrefundable payments to the Company when contracting for Company training, hardware and software installation and integration, which includes a onetime setup of software security, API interfaces, and compatibility between existing hospital equipment and hardware and software. The Company recognizes revenue upon completion of the implementation when the performance obligation of equipment setup and initial training is completed. The start-up fees do not significantly modify or customize the other goods in the contract. As the start-up service primarily covers initial administrative services for which the Company’s clients can cancel future services upon completion, management considers it to be separable from the ongoing business services, and the Company records start-up fees as revenue when the start-up service is completed over time, using the input method to measure progress each financial period.
Institutional Fees Service Contracts and Performance Obligation
Contract For Electroencephalogram (“EEG”) Professional Interpretation Services
Performance obligations in the contract for EEG professional interpretation services are based on the number of professional services EEG interpretation the Company provides. The performance obligation in the contract for these services transferred to the customer is distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To facilitate the delivery of the EEG professional interpretation services, the Company’s physicians use EEG telemedicine equipment provided by the Company. The performance obligation is satisfied based on the number of EEG professional interpretations performed by the Company’s physicians. The number of professional interpretations is traced monthly by both parties and used to determine the revenue earned based on established contractual rates and is included in institutional fees in the condensed consolidated financial statements.
Under
most of the Company’s contracts, including contracts with its
11
The Company commences revenue recognition on EEG professional interpretation services when the Company satisfies its performance obligation to provide professional interpretation monthly.
Disaggregation of revenue
The following table provides information about disaggregated revenue from continuing operations by timing of revenue recognition:
| For the three months ended | For the six months ended | |||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Timing of revenue recognition | ||||||||||||||||
| Products and services transferred over time | $ | $ | $ | $ | ||||||||||||
| Products and services transferred at a point in time | ||||||||||||||||
| Total Revenue | $ | $ | $ | $ | ||||||||||||
Net Loss Per Common Share
The Company computes income (loss) per common share, in accordance with ASC Topic 260, Earnings Per Share, which requires dual presentation of basic and diluted earnings per share. Basic income or loss per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding during the period. No potential diluted common shares are included in the computation of any diluted per share amount when a loss is reported. Diluted income or loss per common share is computed by dividing net income or loss by the weighted average number of common shares outstanding.
The following table presents basic and diluted earnings per share attributable to continuing operations for the three and six months ended June 30, 2026, and 2025.
| Three months ended | Six months ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Net loss from continuing operations - basic and diluted, net of tax | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding – basic and diluted | ||||||||||||||||
| Net loss per share from continuing operations – basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Excluded securities: (1) | ||||||||||||||||
| Public Warrants | ||||||||||||||||
| Private Warrants | ||||||||||||||||
| Bridge Warrants | ||||||||||||||||
| Extension Warrants | ||||||||||||||||
| September 2024 Warrants | ||||||||||||||||
| Quantum Convertible Note, related party (2) | ||||||||||||||||
| Exchange Note (2) | ||||||||||||||||
| September 2024 Convertible Note (3) | ||||||||||||||||
| Series A Preferred stock common stock equivalents (4) | ||||||||||||||||
| Stock options granted | ||||||||||||||||
| Common stock issuance obligation | ||||||||||||||||
| March 2025 Convertible Note (5) | ||||||||||||||||
| May 2025 Convertible Note (6) | ||||||||||||||||
| Common Stock Warrants | ||||||||||||||||
| ClearThink Convertible Note (7) | ||||||||||||||||
| (1) |
12
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
| (7) |
The following table presents basic and diluted earnings (loss) per share attributable to discontinued operations for the three and six months ended June 30, 2026, and 2025
| Three months ended | Six months ended | |||||||||||||||
| June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | |||||||||||||
| Net income (loss) from discontinued operations - basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average shares outstanding – basic | ||||||||||||||||
| Net income (loss) per share from discontinued operations – basic | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income (loss) from discontinued operations - diluted | ( | ) | ( | ) | ||||||||||||
| Weighted average shares outstanding – diluted | ||||||||||||||||
| Net income (loss) per share from discontinued operations – diluted | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Excluded securities: (1) | ||||||||||||||||
| Public Warrants | ||||||||||||||||
| Private Warrants | ||||||||||||||||
| Bridge Warrants | ||||||||||||||||
| Extension Warrants | ||||||||||||||||
| September 2024 Warrants | ||||||||||||||||
| Quantum Convertible Note, related party (2) | ||||||||||||||||
| Exchange Note (2) | ||||||||||||||||
| September 2024 Convertible Note (3) | ||||||||||||||||
| Series A Preferred stock common stock equivalents (4) | ||||||||||||||||
| Stock options granted | ||||||||||||||||
| Common stock issuance obligation | ||||||||||||||||
| March 2025 Convertible Note (5) | ||||||||||||||||
| May 2025 Convertible Note (6) | ||||||||||||||||
| Common Stock Warrants | ||||||||||||||||
| (1) |
| (2) | Includes
the interest amount thereon and assumes the floor conversion price of $ |
| (3) |
| (4) |
| (5) |
| (6) |
13
Cash
The
Company considers all highly liquid investments with maturities of three months or less at the time of acquisition to be cash equivalents.
The Company had
Periodically,
the Company may carry cash balances at financial institutions more than the federally insured limit of $
Accounts Receivable and Credit losses
The Company carries its accounts receivable at net realizable value. The Company maintains an allowance for credit losses for the estimated losses resulting from the inability of the Company’s clients to pay their invoices. Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables.
As
of June 30, 2026, and December 31, 2025, respectively, the allowance for credit losses was $
The following table presents the Company’s allowance for credit losses on June 30, 2026, and December 31, 2025:
| June 30, 2026 | December 31, 2025 | |||||||
| Beginning allowance for credit losses | $ | $ | ||||||
| Add: Credit loss expense | ||||||||
| Less: Accounts receivable write-off included in allowance for credit losses above | ( | ) | ( | ) | ||||
| Ending allowance for credit losses | $ | $ | ||||||
Leases
The Company accounts for leases under ASC 842, Leases. Based on this standard, the Company determines if an agreement is a lease at inception. Operating leases are included in right-of-use assets and operating lease liabilities, less current portion on the Company’s condensed consolidated balance sheets. Finance leases are included in fixed assets and finance lease liabilities on the Company’s condensed consolidated balance sheets. Operating and finance lease right-of-use assets and liabilities are initially recognized based on the present value of lease payments over the lease term calculated using our incremental borrowing rate generally applicable to the location of the lease right-of-use asset, unless an implicit rate is readily determinable. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. As we do not have any outstanding public debt, we estimated the incremental borrowing rate based on our estimated credit rating and available market information. The incremental borrowing rate is subsequently reassessed upon a modification to the lease agreement.
As permitted under ASC 842, the Company has made an accounting policy election not to apply the recognition provisions of ASC 842 to short-term leases (leases with a lease term of 12 months or less that do not include an option to purchase the underlying asset that the lessee is reasonably certain to exercise); instead, the Company will recognize the lease payments for short-term leases on a straight-line basis over the lease term.
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation-Stock Compensation. Under the fair value recognition provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as an expense on a straight-line basis over the requisite service period, based on the terms of the awards. The Company estimates the fair value of share options using the Black-Scholes option-pricing model, utilizing assumptions related to the contractual term of the instruments, estimated volatility of the price of the Common Stock, and current interest rates. The Company accounts for forfeitures as they occur.
14
Fair Value of Financial Instruments
“Fair value” is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value.
The carrying amounts are reflected in the accompanying balance sheets for cash, due from related party, and accounts payable approximate fair value due to their short-term nature. The three levels of the fair value hierarchy under ASC 820 are as follows:
| ● | “Level 1”, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; |
| ● | “Level 2”, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and |
| ● | “Level 3”, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. |
In some cases, the inputs used to measure fair value might fall within different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the investment is categorized in its entirety is determined based on the lowest level input that is significant to the investment. Assessing the significance of a particular input to the valuation of an investment in its entirety requires judgment and considers factors specific to the investment. The categorization of an investment within the hierarchy is based upon the pricing transparency of the investment and does not necessarily correspond to the perceived risk of that investment.
See Note 16 - Fair Value Measurements for additional information on assets and liabilities measured at fair value.
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 ASC 480, Distinguishing Liabilities from Equity and ASC 815 (Derivatives and Hedging). 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 determined that its Public warrants, Private warrants, Bridge warrants, September 2024 warrants, Pre-funded warrants, Common Stock warrants and Extension warrants are freestanding and meet equity classification under ASC 815 (Derivatives and Hedging) and are therefore classified in equity.
.
Long – term Investments
For equity investments that do not have readily determinable fair values, the Company measures the equity investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the Company. The Company periodically evaluates the carrying value of the equity investment, or when events and circumstances indicate that the carrying amount of an asset may not be recovered.
On
January 16, 2026, the Company entered into a Stock Purchase Agreement with GoMyRx, Inc., a Wyoming corporation (“GoMRx”),
and Go Biz Holdings, LLC, a Wyoming limited liability company (“GBiz”), pursuant to which the Company agreed to acquire an
approximately
As
of the reporting date, the Company has funded $
The Company does not have the ability to exercise significant influence over GoMRx and, accordingly, this investment is not accounted for under the equity method. The investment is accounted for as an equity investment in a private company, measured at cost, less impairment, with adjustments for observable price changes, if any.
15
Fixed Assets
Fixed
assets are recorded at historical cost, less accumulated depreciation. The Company expenses fixed assets purchased that are less than
$
Goodwill
Goodwill
represents the excess of purchase price in a business combination over the fair value of the net identifiable assets acquired. We evaluate
goodwill for impairment at the reporting unit level by assessing whether it is more likely than not that the fair value of a reporting
unit exceeds it carrying value. If this assessment concludes that it is more likely than not that the fair value of a reporting unit
exceeds its carrying value, then goodwill is not considered impaired and no further impairment testing is required. Conversely, if the
assessment concludes that it is more likely than not that the fair value of a reporting unit is less than it carrying value, a goodwill
impairment test is performed to compare the fair value of the reporting unit to its carrying value. The Company determines fair value
of the
Intangible Assets
Intangible
assets are presented at their historical costs, net of amortization. Historical cost of intangible assets acquired in a business combination
represents the fair value at acquisition. The fair value at acquisition is determined based on the appraised value of the asset. Intangible
assets are comprised of developed technology and customer relationships.
| Estimated | June 30, | December 31, | ||||||||
| Useful Life | 2026 | 2025 | ||||||||
| Customer relationships | ||||||||||
| Developed technology | ||||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||||
Expected amortization expense is as follows:
| Year ending December 31, 2026 (remaining six months) | ||||
| Year ending December 31, 2027 | ||||
| Year ending December 31, 2028 | ||||
| Year ending December 31, 2029 | ||||
| Year ending December 31, 2030 | ||||
| Thereafter | ||||
| Total | $ |
For the three months ended
June 30, 2026, and June 30, 2025, the Company recorded amortization expense of $
Original Issue Discount on Debt
When the Company issues notes payable with a face value higher than the proceeds it receives, it records the difference as a debt discount and amortizes the discount as interest expense over the life of the underlying note payable.
Loss Contingencies and Litigation
The Company records reserve for loss contingencies if (a) information available prior to issuance of the condensed consolidated financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the condensed consolidated financial statements and (b) the amount of loss can be reasonably estimated. If one or both criteria for accrual are not met, but there is at least a reasonable possibility that a material loss will occur, the Company does not record and reserve for a loss contingency but describes the contingency within a note and provides detail, when possible, of the estimated potential loss or range of loss. If an estimate cannot be made, a statement to that effect is made.
16
Recent Accounting Pronouncements
Recent Accounting Standards Adopted by the Company
ASU 2024-04: In November 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20)—Induced Conversions of Convertible Debt Instruments. The ASU clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion. The standard is effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods, with early adoption permitted for all entities that have adopted the amendments in ASU 2020-06. We adopted this standard during the first quarter of 2026 on a prospective basis. The adoption did not have a material impact on the Company’s condensed consolidated financial statements presented.
ASU 2025-05: In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurements of Credit Losses for Accounts Receivable and Contract Assets (ASU 2025-05). The amendments in this update provide a practical expedient related to the estimation of expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606. Under ASU 2025-05, an entity is required to disclose whether it has elected to use the practical expedient. An entity that makes the accounting policy election is required to disclose the date through which subsequent cash collections are evaluated. The standard is effective for annual periods beginning after December 15, 2025, and interim periods within those annual periods, with early adoption permitted. The Company adopted this standard during the first quarter of 2026 on a prospective basis. The adoption did not have a material impact on the Company’s condensed consolidated financial statements presented.
Accounting Pronouncements Not Yet Effective
ASU 2024-03: In November 2024, the FASB issued ASU No. 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of ASU 2024-03 on its disclosures in the condensed consolidated financial statements.
ASU 2025-03: In May 2025, the FASB issued Accounting Standards Update No. 2025-03, Business Combinations (Topic 805), and Consolidation (Topic 810): Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity (“ASU 2025-03”). ASU 2025-03 changes how companies determine the accounting acquirer in certain business combinations involving variable interest entities. The new guidance requires considering the factors used for other acquisition transactions to assess which party is the accounting acquirer. ASU 2025-03 is effective for the Company’s annual reporting periods beginning on January 1, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its condensed financial statements and related disclosures.
ASU 2025-04: In May 2025, the FASB issued Accounting Standards Update No. 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer (“ASU 2025-04”). ASU 2025-04 revises the definition of a performance condition, eliminates the forfeiture policy election for service conditions, and clarifies that the variable consideration constraint in Topic 606 does not apply to share-based consideration payable to customers. The new guidance requires entities to consistently account for share-based awards granted to customers by clarifying the treatment of vesting conditions and ensuring alignment with Topic 606 and Topic 718. ASU 2025-04 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of adopting this new accounting guidance on its condensed financial statements and related disclosures.
ASU 2025-06: In September 2025, the FASB issued ASU 2025-06- Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (ASU 2025-06), which is intended to simplify the capitalization guidance for internal-use software by removing references to project stages and clarifying when the capitalizing of eligible costs is required. ASU 2025-06 is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its disclosures in the condensed consolidated financial statements.
ASU 2025-11: In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, which clarifies the guidance in Topic 270 to improve the consistency of interim financial reporting. The ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for fiscal years beginning after December 15, 2027, including interim periods within those fiscal years, with early adoption permitted. The Company is in the process of evaluating the impact of this new guidance on its disclosures in the condensed consolidated financial statements.
ASU 2025-12: In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. The Company is in the process of evaluating the impact of this new guidance on its disclosures in the condensed consolidated financial statements.
17
Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s condensed consolidated financial statements.
All other new accounting pronouncements issued, but not yet effective or adopted have been deemed to be not relevant to the Company and, accordingly, are not expected to have a material impact once adopted. The Company continues to evaluate the impact of new accounting pronouncements, including enhanced disclosure requirements, on its business processes, controls and systems.
Note 3 Discontinued Operations
On
May 31, 2026, the Company entered into and consummated a Stock Purchase Agreement with Milton Chen, the Company's then co-Chief Executive
Officer, Chairman of the Board, and Chief Executive Officer of VSee Lab, pursuant to which the Company sold all of its equity interests
in VSee Lab, to Milton Chen. As consideration for the transaction and the mutual release of certain liabilities under the agreement,
Milton Chen transferred to the Company
The Company accounted for
the
No assets or liabilities were classified as held for sale as of June 30, 2026, as the sale of VSee Lab was completed on May 31, 2026. The revenues and expenses of VSee Lab have been separately presented as discontinued operations in the accompanying condensed consolidated financial statements.
The following table represents the major components of the results of discontinued operations for the year ended December 31, 2025:
| Balance sheet - Discontinued operations | December 31, 2025 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash | $ | |||
| Accounts receivable, net of allowance for credit losses of $ | ||||
| Prepaids and other current assets | ||||
| Current assets from discontinued operations | ||||
| Non-current assets: | ||||
| Fixed assets, net | ||||
| Non-current assets from discontinued operations | ||||
| Total assets from discontinued operations | $ | |||
| LIABILITIES | ||||
| Accounts payable and accrued liabilities | $ | ( | ) | |
| Deferred revenue | ( | ) | ||
| Loan payable, related party | ( | ) | ||
| Total liabilities from discontinued operations | $ | ( | ) | |
18
The following table represents the major components of the results of discontinued operations for the three and six months ended June 30, 2026, and 2025:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| Statement of operations - Discontinued operations | June 30, 2026 | June 30, 2025 | June 30, 2026 | June 30, 2025 | ||||||||||||
| Revenue | ||||||||||||||||
| Subscription fees | $ | $ | $ | $ | ||||||||||||
| Professional services and other fees | ||||||||||||||||
| Technical engineering fees | ||||||||||||||||
| Total revenue from discontinued operations | $ | $ | $ | $ | ||||||||||||
| Less : | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Compensation and related benefits | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Other income, net | ( | ) | ( | ) | ||||||||||||
| Gain on sale of discontinued operations | ( | ) | ( | ) | ||||||||||||
| Income (loss) from discontinued operations before provision for income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income/(loss) from discontinued operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Note 4 Leases
Operating Leases
The Company has operating lease for real estate. Operating lease right-of-use assets are summarized below.
| June 30, 2026 | December 31, 2025 | |||||||
| Office lease | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use assets, net | $ | $ | ||||||
Operating lease liabilities are summarized below:
| June 30, 2026 | December 31, 2025 | |||||||
| Office lease | $ | $ | ||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long term portion | $ | $ | ||||||
19
Future minimum rent payments under the operating lease are as follows:
| Total | ||||
| Year ending December 31, 2026 (remaining 6 months) | ||||
| Year ending December 31, 2027 | ||||
| Total future minimum lease payments | ||||
| Less: Imputed interest | ( | ) | ||
| Present value of payments | $ | |||
Expenses incurred with respect to the Company’s operating leases during the three and six months ended June 30, 2026, which are included in general and administrative expenses on the condensed consolidated statements of operations are set forth below.
| For the Three Months Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Operating lease expense | $ | $ | ||||||
| Total operating lease expense | $ | $ | ||||||
| For the Six Months Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Operating lease expense | $ | $ | ||||||
| Total operating lease expense | $ | $ | ||||||
The weighted average remaining lease term and the weighted average discount rate on the operating leases are set forth below.
| June 30, 2026 | December 31, 2025 | |||||||
| Weighted average remaining lease term (years) | ||||||||
| Weighted average discount rate | % | % | ||||||
Finance Leases
On November 1, 2023, iDoc entered into a forbearance agreement with a maturity date of January 10, 2024. On December 13, 2024, the Company revised the forbearance agreement with a maturity date of June 2025. On August 27, 2025, the Company revised the forbearance agreement and agreed to a payment on September 5, 2025, and a further payment on November 30, 2025.
Pursuant
to a settlement agreement, the Company paid $
Accordingly, the finance lease liabilities have been fully settled as of June 30, 2026.
| June 30, 2026 | December 31, 2025 | |||||||
| Equipment lease | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Leased equipment, net | $ | $ | ||||||
20
Finance lease liabilities are summarized below:
| June 30, 2026 | December 31, 2025 | |||||||
| Equipment lease | $ | $ | ||||||
| Less: current portion | ( | ) | ||||||
| Long-term portion | $ | $ | ||||||
Total
finance lease cash payments made during the three and six months ended June 30, 2026, were $
Expenses incurred with respect to the Company’s finance leases during the three and six months ended June 30, 2026, which are included in the condensed consolidated statements of operations are set forth below.
| For the Three Months Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Amortization expense | $ | $ | ||||||
| Interest expense | ||||||||
| Total finance lease expense | $ | $ | ||||||
| For the Six Months Ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Amortization expense | $ | $ | ||||||
| Interest expense | ||||||||
| Total finance lease expense | $ | $ | ||||||
The weighted average remaining lease term and the weighted average discount rate on the finance leases are set forth below.
| June 30, 2026 | December 31, 2025 | |||||||
| Weighted average remaining lease term (years)* | ||||||||
| Weighted average discount rate* | % | % | ||||||
| * | The finance leases obligations of the Company have been fully settled as of June 30, 2026. |
Note 5 Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities are summarized as follows:
| June 30, 2026 | December 31, 2025 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued compensation and benefits | ||||||||
| Accrued interest | ||||||||
| Accrued financing lease | ||||||||
| Other accrued liabilities | ||||||||
| $ | $ | |||||||
21
Note 6 Factoring Payable
The Company has entered into certain factoring payable agreements. Except as specifically set forth below, the factoring purchase agreements are not collateralized by a general security agreement over iDoc’s personal property and interests. interest rate is associated with these factoring purchase transactions and no time during which the amount sold must be collected because the weekly amount is subject to adjustment based on future receipts generated by iDoc or the Company
| 1. | A
Future Receipts Sale Agreement, which iDoc entered into on June 21, 2023, pursuant to which iDoc sold $ |
| 2. | A Future Receipts Sale Agreement, which iDoc entered into on June 28, 2023, pursuant to which iDoc sold $140,000 of future receipts for a net purchase price of $100,000 and under which iDoc authorized the factoring purchaser to collect $5,000 weekly. The factoring payable under the June 28, 2023, Future Receipts Sale Agreement was fully repaid during the year ended December 31, 2025. |
| 3. | A
Future Receipts Sale Agreement, which iDoc entered into on October 13, 2023, pursuant to which iDoc sold $ |
22
Note 7 Line of Credit and Notes Payable, net of discount
The following is a summary of the notes payable as of June 30, 2026 and December 31, 2025:
| Notes Payable | June 30, 2026 | December 31, 2025 | ||||||
| Note payable issued November 29, 2021 | $ | $ | ||||||
| Note payable issued December 1, 2021 | ||||||||
| Note payable issued August 18, 2023 | ||||||||
| Note payable issued August 3, 2023 | ||||||||
| September 2025 Promissory Note | ||||||||
| Encompass SBA loan | ||||||||
| First Insurance Funding loan | ||||||||
| Total notes payable | ||||||||
| Less: Current portion | ( | ) | ( | ) | ||||
| Less: Fair value adjustment for debt | ( | ) | ( | ) | ||||
| Total notes payable, net of current portion | $ | $ | ||||||
Required principal payments under the Company’s notes payable are as follows:
| Year Ending December 31, 2026 (Remaining 6 months) | $ | |||
| Year Ending December 31, 2027 | ||||
| Year Ending December 31, 2028 | ||||
| Year ending December 31, 2029 | ||||
| Year ending December 31, 2030 | ||||
| Thereafter | ||||
| Total | $ |
Description of Notes Payable
As a result of the acquisition of iDoc and at the closing of the Business Combination on June 24, 2024, the Company assumed the following outstanding notes payable liabilities from iDoc.
| (1) | On
November 29, 2021, the iDoc issued a $ |
| (2) | On
December 1, 2021, iDoc issued a promissory note to a bank in the amount of $ |
23
| (3) | On
August 3, 2023, iDoc issued a |
| (4) | On
August 18, 2023, iDoc issued an |
March 2025 Promissory Note
On
March 20, 2025, the Company entered into Amendment No. 1 to the Securities Purchase Agreement, originally dated as of September 30, 2024
(the “Purchase Agreement”), pursuant to which the Company issued and sold a senior secured convertible promissory note in
the principal amount of $
The March 2025 Promissory
Note matured on November 1, 2025, and provides for a minimum interest amount equal to
The March 2025 Promissory Note is prepayable at any time (unless an event of default has occurred) with advance notice and is mandatorily prepayable upon the occurrence of a subsequent offering, with the redemption amount paid from the financing proceeds. The note can be accelerated upon an event of default either automatically or at the option of the note holder, depending on the nature of the event. Upon an uncured event of default, the Holder may accelerate the note and require immediate payment of all outstanding principal and accrued interest.
If
any payment due under the March 2025 Promissory Note is not paid when due, the Company shall pay a late fee equal to ten percent (
The March 2025 Promissory Note is secured by substantially all of the Company’s assets and includes certain covenants which restrict the Company’s ability to enter into certain agreements or transactions without the lender’s consent.
In
connection with the second closing under the Purchase Agreement and the March 2025 Promissory Note, the Company also issued
The
Company identified certain embedded features within the March 2025 Promissory Note that would require bifurcation. However, the value
of such embedded derivatives was de minimis and, accordingly, the March 2025 Promissory Note is accounted for at amortized cost using
the effective interest method. The proceeds from the issuance of the March 2025 Promissory Note were allocated between the March 2025
Promissory Note and the common shares on a relative fair value basis. The amount allocated to the March 2025 Promissory Note was $
On
November 11, 2025, the March 2025 Promissory Note consisting of principal of $
Following
this transaction, the March 2025 Promissory Note was fully settled, and no principal remained outstanding as of June 30, 2026, and December
31, 2025. The interest expense recognized for the three and six months ended June 30, 2026, was $
24
September 2025 Promissory Note
On
September 5, 2025, the Company entered into a Master Business Loan Agreement (the “MBLA”) whereby the investor agreed to,
for a period of up to three years, make advances to the Company (each, an “Advance”) in the aggregate amount of $
On
September 5, 2025, the investor made an initial Advance of $
The
September 2025 Promissory Note may be prepaid at any time by payment of an amount equal to the Initial Advance plus
As
of June 30, 2026, and December 31, 2025, the outstanding balance on the September 2025 Promissory Note is $
October Promissory Note - 1
On
October 9, 2025, the Company entered into a note purchase agreement (the “October Promissory Note - 1 Purchase Agreement”)
with an accredited institutional investor (the “October Promissory Note - 1 Investor”) pursuant to which the Company issued
to the October Promissory Note - 1 Investor a secured note in the aggregate principal amount of $
On
December 10, 2025, the October Promissory Note - 1 was entirely paid off by the Company. The interest expense recognized on the October
Promissory Note - 1 for the three and six months ended June 30, 2025, was $
October Promissory Note - 2
On
October 20, 2025, the Company entered into a note purchase agreement (the “October Promissory Note - 2 Purchase Agreement”)
with an accredited institutional investor (the “October Promissory Note - 2 Investor”) pursuant to which the Company issued
to the October Promissory Note - 2 Investor a secured note in the aggregate principal amount of $
On
December 10, 2025, the October Promissory Note - 2 was entirely paid off by the Company. The interest expense recognized on the October
Promissory Note - 2 for the three and six months ended June 30, 2025, was $
25
First Insurance Funding Agreement
The Company entered into a Premium Finance Agreement, effective January 1, 2026, with First Insurance Funding (“First Insurance”), to finance insurance premiums related to a management liability insurance policy.
Under
the agreement, First Insurance financed insurance premiums and related taxes and fees totaling approximately $
The
Company made a down payment of $
If
any payment due under the Premium Finance Agreement is not paid when due, a late charge will be assessed on any installment at least
5 days in default, and the late charge will equal
As
of June 30, 2026, and December 31, 2025, the Company had an outstanding balance of $
Line of credit
On
November 29, 2021, iDoc received a revolving line of credit from the same bank that issued the $
On
December 13, 2024, the Company revised the forbearance agreement. Under the revised forbearance, the Company agreed to monthly payments
of $
On
August 27, 2025, the Company revised the forbearance agreement and agreed to a payment of $
As
a result of the acquisition of iDoc and at the closing of the Business Combination on June 24, 2024, the Company assumed the revolving
line of credit. On January 15, 2026, the Company entered into a settlement agreement with bank related to its outstanding loan obligations.
Pursuant to a settlement agreement, the Company paid $
The
Company recorded $
Encompass SBA Loan
As
part of the settlement agreement entered on February 16, 2026, the Company assumed an SBA Economic Injury Disaster Loan with a principal
balance of $
As
on June 30, 2026, the outstanding balance of the Encompass SBA Loan is $
Note 8 Convertible notes, at fair value
March 2025 Convertible Note
On
March 20, 2025, the Company entered into a Convertible Note Purchase Agreement (the “March 2025 SPA”), pursuant to which
the Company issued and sold a senior secured convertible promissory note in the principal amount of $
The March 2025 Convertible
Note is convertible into shares of the Company’s common stock at any time after three months from issuance (or earlier upon prepayment)
by the holder, at a conversion price equal to the greater of (i) $
26
The
March 2025 Convertible Note is prepayable at any time (unless an event of default has occurred) at
The March 2025 Convertible Note is secured by substantially all the Company’s assets and includes certain covenants which restrict the Company’s ability to incur additional indebtedness, grant liens, pay dividends, or dispose of assets without the lender’s consent.
In
connection with the March 2025 SPA and March 2025 Convertible Note, the Company also issued
After
analyzing the terms of the March 2025 Convertible Note and its embedded features, the Company elected to account for the March 2025 Convertible
Note at fair value under the allowable fair value option election. As such, the Company initially recognized the March 2025 Convertible
Note at its fair value of $
On
October 21, 2025, the March 2025 Convertible Note consisting of principal amount of $
Following this transaction, the March 2025 Convertible Note was fully settled, and no principal remained outstanding as of June 30, 2026, and December 31, 2025.
The
interest expense recognized on the March 2025 Convertible Note for the three and six months ended June 30, 2025, was $
April 2025 Promissory Note
On
April 15, 2025, the Company issued an unsecured promissory note to an institutional investor (the “April 2025 Promissory Note”),
with a principal balance of $
Upon
an event of default, the interest rate increases to the greater of
On
May 30, 2025, the Company issued a convertible promissory note (“May 2025 Convertible Note”) with a principal amount of $
The
May 2025 Convertible Note states that the amount due and owing under the original April 2025 Promissory Note is consolidated with the
new May 2025 Convertible Note under the terms and conditions set forth therein; and hence, this consolidation leads to a modification
of the original debt arrangement. The modification involved changes to the terms and cash flows of the debt. The present value of the
cash flows under the new May 2025 Convertible Note differed by more than
In accordance with ASC 470-50, the original April 2025 Promissory Note was derecognized, and the new May 2025 Convertible Note was recognized at its fair value. Any gain or loss resulting from the extinguishment was recognized in earnings for the period.
The
Company recognized the May 2025 Convertible Note at fair value at $
May 2025 Convertible Note
On May 30, 2025, the Company
issued the May 2025 Convertible Note, which is one of a series of duly authorized and validly issued promissory notes of the Company,
issued and sold by the Company pursuant to the September 2024 Securities Purchase Agreement, dated as of March 31, 2025. The principal
amount of the May 2025 Convertible Note is $
27
The May 2025 Convertible Note is convertible into shares of the Company’s common stock at any time while outstanding, at a conversion price equal to the lowest trading price of the Company’s common stock at any time after the original issue date.
The May 2025 Convertible Note is prepayable at any time (unless an event of default has occurred) with advance notice and is mandatorily prepayable upon the occurrence of a subsequent offering, with the redemption amount paid from the financing proceeds. Before any prepayment can be made, the holder has the option to convert the May 2025 Convertible Note into common stock at a conversion price equal to the lowest Trading Price (as defined in the May 2025 Convertible Note) of a share of the Company’s common stock at any time after the Original Issue Date, with respect to the prepayment amount. The May 2025 Convertible Note can be accelerated upon an event of default either automatically or at the option of the Holder, depending on the nature of the event. Upon an uncured event of default, the Holder may accelerate the note and require immediate payment of all outstanding principal and accrued interest.
If
any payment due under the May 2025 Convertible Note is not paid when due, the Company shall pay a late fee equal to ten percent (
The
Company elected to account for the May 2025 Convertible Note at fair value under the allowable fair value option election. As such, the
Company initially recognized the May 2025 Convertible Note at its fair value of $
On
September 3, 2025, the May 2025 Convertible Note was amended, and the principal amount was increased by $
On
February 23, 2026, the May 2025 Convertible Note having a fair value of $
Following this transaction, the May 2025 Convertible Note was fully settled, and no principal remained outstanding as of June 30, 2026.
The
interest expense recognized on the May 2025 Promissory Note for the three and six months ended June 30, 2026, and 2025 was $
October 2025 Convertible Note
On
October 29, 2025, the Company entered into a convertible note purchase agreement (the “October 2025 Convertible Note Agreement”)
with an accredited institutional investor (the “October 2025 Convertible Note Investor”), whereby the October 2025 Convertible
Note Investor purchased a convertible promissory note in the initial principal amount of $
On
December 18, 2025, the Company made a payment of $
28
Exchange Note
In
connection with a securities purchase agreement by and among DHAC, VSee Lab, iDoc and an investor (the “Bridge Investor”)
dated October 5, 2022 (the “Original Bridge SPA”), DHAC, VSee Lab, and iDoc each issued to the Bridge Investor a
The
Exchange Note bears interest at a rate of
The
monetary amount of the obligation is a fixed monetary amount known at inception as represented by the Amortization of Principal Schedule
in the Exchange Note (each, an “Amortization Payment”). As a result, the Exchange Note represents a debt instrument
that the Company must or may settle by issuing a variable number of its equity shares as each Amortization Payment shall, at the option
of the Company, be made in whole or in part, in immediately available Dollars equal to the sum of the Amortization Payments provided
for in the Exchange Note or, subject to the Company complying with the equity conditions provided for in the Exchange Note on the date
of such Amortization Payment, in common stock issued at
The Exchange Note represents 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 Exchange 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.
On
August 8, 2024, $
On
November 26, 2024, $
On
September 3, 2025, $
In
October 2025, $
Following this transaction, the Exchange Note was fully settled, and no principal remained outstanding as of June 30, 2026, and December 31, 2025.
The
Company recognized an interest expense of $
29
Quantum Financing Purchase Agreement
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 purchased, and DHAC would issue
and sell to the Quantum Investor, at the closing of the Business Combination, a
The
Quantum Convertible Note was issued and sold to the Quantum Investor subsequent to the closing of the Business Combination on June 25,
2024. The Quantum Convertible Note was further amended on July 3, 2024, whereby the maturity date of the Quantum Convertible Note was
changed from June 25, 2025, to June 30, 2026, and that
On
June 25, 2024, $
On
July 3, 2024, the Company and the Quantum Investor agreed to modify certain terms of the Quantum Convertible Note. The modifications
included the extension of the maturity date from June 25, 2025, to June 30, 2026, and an interest guarantee whereby the Quantum Investor
would receive
On
April 4, 2025, the Company issued
On
August 28, 2025, the Company agreed to issue
On
August 28, 2025, the Company and the Quantum Investor agreed to modify certain terms of the Quantum Convertible Note. The modifications
included the increase in the aggregate principal amount of the note from $
In
October 2025, the Quantum Convertible Note consisting of $
In
May 2026, the Quantum Convertible Note consisting of $
As of June 30, 2026, and December
31, 2025, the Quantum Convertible Note’s fair value was $
30
September 2024 Security Purchase Agreement
On
September 30, 2024, the Company entered into a securities purchase agreement (the “September 2024 SPA”) with an accredited
and institutional investor, pursuant to which the Company issued and sold to the investor promissory notes for an aggregate principal
amount of $
The
September 2024 Convertible Note is convertible into shares of the Company’s common stock at any time at an initial fixed conversion
price of $
The September 2024 Convertible Note is secured by substantially all of the Company’s assets and includes certain covenants which restrict the Company’s ability to enter into certain agreements or transactions without the lender’s consent.
In
connection with the September 2024 SPA and September 2024 Convertible Note, the Company also issued a warrant to the investor to purchase
up to
After
analysing the terms of the September 2024 Convertible Note and its embedded features, the Company elected to account for the September
2024 Convertible Note at fair value under the allowable fair value option election. As such, the Company initially recognized the September
2024 Convertible Note at its fair value and will subsequently measure the note at fair value with changes in fair value recorded in current
period earnings (or other comprehensive income, if specific to Company credit risk). The Company initially recorded the September 2024
Convertible Note at its estimated issuance date fair value of $
In
October 2025, outstanding principal of $
Following
this transaction, the September 2024 Convertible Note was fully settled, and no principal remained outstanding as of December 31, 2025.
The Company accounted for the conversion as a change in fair value of $
The Company recognized interest
expense of $
ADI Funding Convertible Note
On
June 8, 2026, the Company entered into a Securities Purchase Agreement with ADI Funding, LLC (“ADI Funding”), pursuant to
which the Company issued a secured promissory note with an aggregate principal amount of $
31
The
outstanding balance under the ADI Funding Convertible Note is due on November 30, 2026, unless earlier prepaid, accelerated upon an event
of default, or converted in accordance with its terms. The Company may voluntarily prepay all or any portion of the outstanding balance
at any time, provided that no event of default exists, at a redemption price equal to
Upon
the occurrence and continuation of an event of default, the interest rate automatically increases to the lesser of
After
evaluating the terms of the ADI Funding Convertible Note, including its conversion, redemption and default provisions, the Company elected
the fair value option pursuant to ASC 825, Financial Instruments. Accordingly, the ADI Funding Convertible Note was initially recorded
at fair value and will be subsequently remeasured at fair value at each reporting date, with changes in fair value recognized in the
condensed consolidated statements of operations. The Company initially recorded the ADI Funding Convertible Note at its estimated issuance
date fair value of $
As
of June 30, 2026, and December 31, 2025, the ADI Funding Convertible Note’s fair value was $
ClearThink Convertible Note
On June 22, 2026, the Company
entered into a Securities Purchase Agreement with ClearThink Capital Partners, LLC (“ClearThink”), pursuant to which the Company
issued an unsecured promissory note with a principal amount of $
The
ClearThink Convertible Note is convertible, at the Holder's option, into shares of the Company's common stock beginning 180 days after
issuance. The conversion price is equal to
Upon
the occurrence and continuation of an event of default, including non-payment, breaches of covenants, bankruptcy-related events, delisting
of the Company's common stock, or failure to comply with Exchange Act reporting obligations, the outstanding amount becomes immediately
due and payable. Upon an event of default, ClearThink is entitled to receive a default amount equal to
After
evaluating the terms of the ClearThink Convertible Note, the Company elected the fair value option pursuant to ASC 825, Financial
Instruments. Accordingly, the ClearThink Convertible Note was initially recorded at fair value and will subsequently be remeasured
at fair value at each reporting date, with changes in fair value recognized in the condensed consolidated statements of operations. The
Company initially recorded the ClearThink Convertible Note at its issuance date fair value of $
As of June 30, 2026, and December
31, 2025, the ClearThink Convertible Note’s fair value was $
32
Vanquish Funding Convertible Note
On
June 18, 2026, the Company entered into a bridge note financing arrangement with Vanquish Funding Group Inc. (“Vanquish Funding”),
pursuant to which the Company issued a bridge promissory note with an aggregate principal amount of $
Outstanding
principal and interest under the Vanquish Funding
The
Vanquish Funding Convertible Note may be prepaid by the Company at any time, subject to payment of a specified percentage of the then-outstanding
balance. The applicable prepayment percentage ranges from
Upon
the occurrence of an event of default, the outstanding principal and interest balance of the Vanquish Funding Convertible Note is increased
to
At closing, the Company agreed
to pay $
As
of June 30, 2026, and December 31, 2025, the Vanquish Funding Convertible Note’s fair value was $
Other instruments
ELOC / Equity Financing
On
November 21, 2023, DHAC entered into the equity line of credit purchase agreement (“ELOC Agreement”) dated November
21, 2023 with the Bridge Investor pursuant to which DHAC may sell and issue to the Bridge Investor, and the Bridge Investor is obligated
to purchase from DHAC, up to $
The Company has analyzed the ELOC Agreement and determined that the contract should be recorded as a liability under ASC 815 and measured at fair value. As a result of the ASC 815 liability classification, the Company is required to re-measure the liability at fair value at each reporting period until the liability is settled.
The
Company has determined that the fair value of the ELOC Agreement is based upon management’s expected usage of the facility. The
contract provides no scenario in which the Company may exercise the contract at above market rates (i.e., sell shares at a price above
which the shares are currently trading in the active market except that when the Company’s per share stock price drops below $
33
On
March 20, 2025, the Company entered Amendment No. 1 to the ELOC Agreement, originally dated November 21, 2023, which modified the floor
price to $
The ELOC Agreement continued to be treated as a liability measured at fair value, with ongoing remeasurement at each reporting date until settlement. The amendment did not introduce any new obligations or penalties for non-usage.
On
October 18, 2025, the Company terminated the ELOC Agreement. Upon termination, no further shares may be sold under the ELOC Agreement,
and the Company has no remaining obligations under the Equity Purchase Agreement. In accordance with ASC 815, the termination represents
a settlement event, and as such the Company has written off the ELOC Agreement liability through earnings as of the termination date.
The Company recorded a gain on extinguishment of the ELOC Agreement liability amounting to $
As a result of the Company’s
termination of the ELOC Agreement on October 18, 2025, the fair value of the equity contract was reduced to $
Note 9 Standby Equity Purchase Agreement
On
June 2, 2026, the Company entered into a Standby Equity Purchase Agreement ("SEPA") with YA II PN, Ltd. (the "Investor"),
pursuant to which the Company has the right, but not the obligation, to sell to the Investor up to $
The
SEPA became effective upon execution of the agreement on June 2, 2026. As of June 30, 2026, no advances had been requested or completed
under the SEPA. Accordingly, the SEPA liability was initially recognized at fair value upon issuance. On June 2, 2026, the Company recorded
a SEPA liability with a fair value of $
The
SEPA liability is remeasured at fair value at each reporting date, with changes in fair value recognized in earnings. As of June 30,
2026, the fair value of the SEPA liability remained $
As of June 30, 2026, the SEPA remained outstanding and available for future use by the Company, subject to the terms and conditions of the agreement.
Note 10 Related Party
Related Party Transactions by iDoc
For accounting purposes, it was treated that the Company acquired and assumed the following related party transactions incurred by iDoc due to acquisition of iDoc on June 24, 2024.
| (1) | A
related party balance due from the then CEO of iDoc, Imoigele Aisiku, for cash transferred through a company controlled by him. The balance
due from the related party on June 30, 2026, and December 31, 2025, were $ |
| (2) | iDoc issued a promissory note on May 15, 2023, with a principal balance of $ |
34
Related Party Transactions by VSee Health (DHAC)
For accounting purposes, it was treated that the Company acquired and assumed the following related party transactions incurred by DHAC due to the reverse merger with DHAC on June 24, 2024 (See Note 13 – Equity).
| (1) | On
November 21, 2023, DHAC entered into a convertible note purchase agreement, pursuant to which an institutional and accredited investor,
the Quantum Investor, subscribed for and purchased, and the Company issued and sold to the Quantum Investor, after the Closing of the
Business Combination on June 25, 2024, and as further amended on July 3, 2024, a |
| (2) | On
June 21, 2024, we entered into a Consulting Services Agreement with SCS, LLC (“SCS”), who is an affiliate of our Sponsor,
pursuant to which we shall pay SCS $ |
| (3) | On June 24, 2024, DHAC owed the Sponsor and certain Sponsor affiliates $ |
| (4) | On May 31, 2026, the Company entered into and consummated a Stock Purchase Agreement with Milton Chen, the Company's then co-Chief Executive Officer, Chairman of the Board, and Chief Executive Officer of VSee Lab, pursuant to which the Company sold all of its equity interests in VSee Lab, to Milton Chen and Milton Chen transferred to the Company |
* Related Party Transactions by VSee Labs
As VSee Lab was divested on May 31, 2026, the following related party transactions are presented solely for historical comparative purposes and relate to VSee Lab prior to its divestiture. (See Note 3 – Discontinued Operations)
| (1) | During
the year ended December 31, 2022, employees subscribed $ |
35
| (2) | During
the year ended December 31, 2022, VSee Lab received a loan of $ |
| (3) | On
March 29, 2023, VSee Lab received a |
| (4) | On
December 26, 2023, VSee Lab received a |
Note 11 Commitments, Contingencies, and Concentration Risk
Litigation
We are currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights.
Depending on the nature of the proceeding, claim, or investigation, we may be subject to settlement awards, monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect the Company’s business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, the Company believes based on its current knowledge that the resolution of the sole pending matter will not, either individually or in the aggregate, have a material adverse effect on the business, results of operations, cash flows or financial condition.
36
On
April 21, 2026, Toppan Merrill LLC filed a lawsuit in the Superior Court in the County of Middlesex, Massachusetts. The plaintiff alleges
that the Company owes $
Encompass Purchase Liability
On
January 1, 2022, iDoc acquired
As
of June 30, 2026, and December 31, 2025, the value of purchase liability related to the Encompass Acquisition agreement was $
Contingencies
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450, Contingencies. Litigation and contingency accruals are based on the Company’s assessment, including advice of legal counsel, regarding the expected outcome of litigation or other dispute resolution proceedings. If the Company determines that an unfavorable outcome is probable and can be reasonably assessed, it establishes the necessary accruals.
As of June 30, 2026, the Company has the following contractual commitments:
| (1) | iDoc
entered into a purchase agreement with a vendor to purchase twenty ( |
| (2) | iDoc
has a promissory note with a principal balance of $ |
| (3) | On
May 12, 2023, iDoc entered in a partnership agreement with an accredited investor to agree and collaborate in the development of telepresence
robots for telehealth solutions. The investor pledged to pay $ |
37
VSee Health, Inc. Incentive Plan
DHAC
approved and adopted the VSee Health, Inc. 2024 Equity Incentive Plan (the “2024 Plan”) to be effective as of one day
prior to the closing Business Combination. The 2024 Plan provides for an initial share reserve equal to
Indemnities
The Company generally indemnifies its customers for the services it provides under its contracts and other specified liabilities, which may subject the Company to indemnity claims, liabilities, and related litigation. As of June 30, 2026, and December 31, 2025, the Company was unaware of any material asserted or unasserted claims concerning these indemnity obligations.
Other Matters
The
Company continues to analyze potential sales tax exposure using a state-by-state assessment. In accordance with ASC 450, Contingencies,
the Company estimated and recorded a liability of $
Credit Risk and Major Customers/Supplier Concentration
Financial instruments potentially subject the Company to credit risk concentrations consisting of cash and trade accounts receivables. The Company maintains all its cash in commercial depository accounts, insured by the Federal Deposit Insurance Corporation. At times, cash deposits may exceed federally insured limits. Any loss incurred or lack of access to such funds could have an adverse impact on the Company’s financial condition, results of operations, and cash flows.
In
aggregate, the Company had two customers whose accounts receivable represented
The
Company has one customer whose revenue accounted for approximately
The
Company had
Note 12 Income Taxes
The components of our income (loss) before income taxes were as follows:
| For the six months ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| United States | $ | ( | ) | $ | ( | ) | ||
| Total | $ | ( | ) | $ | ( | ) | ||
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| For the three months ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| United States | $ | $ | ( | ) | ||||
| Total | $ | $ | ( | ) | ||||
The components of income tax expense (benefit) were as follows:
| For the six months ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Continuing operations | $ | $ | ||||||
| Discontinued operations | ||||||||
| Total | $ | $ | ||||||
| For the three months ended | ||||||||
| June 30, 2026 | June 30, 2025 | |||||||
| Continuing operations | $ | ( | ) | $ | ||||
| Discontinued operations | ||||||||
| Total | $ | ( | ) | $ | ||||
The Company evaluates and updates the estimated annual effective income tax rate on a quarterly basis based on current and forecasted operating results and tax laws. Consequently, based upon the mix and timing of the Company’s actual earnings compared to annual projections, the effective tax rate may vary quarterly and may make quarterly comparisons not meaningful. The quarterly income tax provision is generally comprised of tax expense on income or benefit on loss at the most recent estimated annual effective tax rate. The tax effect of discrete items is recognized in the period in which they occur at the applicable statutory rate.
For the six-month periods ended June 30, 2026,
and June 30, 2025, the Company recorded income tax expense of $
For the three-month periods
ended June 30, 2026, and June 30, 2025, the Company recorded income tax benefit of $(
The Company does not have any uncertain income tax positions as of June 30, 2026, and December 31, 2025.
Note 13 Equity
Preferred Stock
The Company has
39
Series A Preferred Stock
The Series A Preferred has the following rights and privileges:
Voting
– Series A preferred stockholders are permitted to vote with the same voting rights as common stockholders in any actions to be
taken by the stockholders of the Company, including any action with respect to the election of directors to the Board of Directors of
the Company. With respect to any vote with the class of Common Stock, each Preferred Share shall entitle the holder thereof to cast that
number of votes per share as is equal to the number of shares of Common Stock into which it is then convertible (subject to the ownership
limitations specified
Dividends – Series A preferred stockholders shall be entitled to receive cumulative participating dividends when and if declared. Dividends are prior and in preference to any declaration or payment of any dividend to the common stockholders of the Company.
Liquidation – In the event of a Liquidation Event, the Holders shall be entitled to receive in cash out of the assets of the Company, whether from capital or from earnings available for distribution to its stockholders (the “Liquidation Funds”), before any amount shall be paid to the holders of any of shares of Junior Stock, but junior with respect to any Senior Preferred Stock then outstanding, an amount per Preferred Share equal to the amount per share such Holder would receive if such Holder converted such Preferred Share into Common Stock immediately prior to the date of such payment.
Conversion
– Series A preferred stock is convertible into common stock at the option of the holder, at any time after the earlier of (i)
Redemption
– The Company shall have the right to redeem all, or any portion, of the Series A preferred stock then outstanding at a price equal
to
The Company reviewed the Series A Preferred Stock under ASC 480 and ASC 815 and concluded that Series A Preferred Stock did not include any elements that would preclude them from equity treatment and therefore are not subject to the liability treatment under ASC 480 or derivative guidance under ASC 815.
Series B Preferred Stock
The Series B Preferred Stock has the following rights and privileges:
Ranking – The Series B Preferred Stock rank (i) senior to the common stock, and any other class or series of capital stock of the Company creates hereafter, the terms of which specifically provide that such class or series shall rank junior to the Series B Preferred Stock (“Junior Securities”), (ii) on parity with the Company’s outstanding Series A Preferred Stock as well as any class or series of capital stock of the Company created specifically ranking by its terms on parity with the Series B Preferred Stock (“Parity Securities”), and (iii) junior to any class or series of capital stock of the Company hereafter created specifically ranking by its terms senior to the Series B Preferred Stock.
Dividends – Holders of the Series B Preferred Stock participate on dividends and any other distributions of the Company’s assets as if such holder had held the number of shares of common stock acquirable upon complete conversion of the Series B Preferred Stock immediately prior to the date on which a record is taken for such dividend or distribution, subject to certain limitations on beneficial ownership.
Conversion
Rights – The number of shares of common stock into which the Series B Preferred Stock are convertible (the “Conversion
Rate”) is equal to the Stated Value ($
Purchase Rights – If at any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then each holder of Series B Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of common stock acquirable upon complete conversion of all the Series B Preferred Shares held by such holder immediately prior to the date as of which the record holders of shares of common stock are to be determined for the grant, issue or sale of such Purchase Rights; subject to certain limitations on beneficial ownership.
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Automatic
Cancellation – When the gross proceeds received by the holder in connection with the sale of
Rights Upon Issuance of Other Securities; Adjustment of Conversion Price upon Subdivision or Combination of Common Stock – If the Company at any time subdivides (or combines) one or more classes of its outstanding shares of common stock into a greater (or lesser) number of shares, the Conversion Price will be proportionately reduced (or increased).
Adjustment of Conversion Price – The Company may, with the prior written consent of the holders of Series B Preferred Stock, reduce the Conversion Price to any amount and for any period of time deemed appropriate by the Board of Directors.
Voting Rights – The holders of Series B Preferred Stock are entitled to notice of all stockholder meetings at which holders of common stock shall be entitled to vote. Except as otherwise provided in the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock, or as otherwise required by Delaware Law, the holders of Series B Preferred Stock shall have no voting rights.
Reservation Requirements – So long as any Series B Preferred Stock remains outstanding, the Company shall at all times reserve not less than such aggregate number of shares of the common stock as shall be issuable (taking into account the adjustments and restrictions of Section 7 of the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock) upon the conversion of the then outstanding shares of Series B Preferred Stock (assuming any such conversions are made without regard to any limitations on conversion set forth in the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock).
Liquidation – Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, the holders of the Series B Preferred Stock shall be entitled to receive out of the assets legally available for distribution to stockholders, prior and in preference to any distribution of any of the assets or surplus funds of the Company to the holders of the common stock and Junior Securities and pari passu with any distribution to holders of Parity Securities, an amount equal to the Stated Value of for each share of Series B Preferred Stock and an amount equal to any accrued and unpaid dividends thereon, and thereafter holders of Series B Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of common stock would receive if the Series B Preferred Stock were fully converted (disregarding for such purposes any conversion limitations set forth in the Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock).
The Company reviewed the Series B Preferred Stock under ASC 480 and ASC 815 and concluded that Series B Preferred Stock did not include any elements that would preclude them from equity treatment and therefore are not subject to the liability treatment under ASC 480 or derivative guidance under ASC 815.
Common Stock
The
Company is authorized to issue
The
Company issued
Stock Options
In
June 2024, the DHAC board of directors and stockholders approved the 2024 Plan. There are currently
The 2024 Plan provides for the grant of stock options, including options that are intended to qualify as “incentive stock options” under Section 422 of the Code, as well as non-qualified stock options. Each award is set forth in a separate agreement with the person who received the award which indicates the type, terms and conditions of the award.
As of June 30, 2026, and December
31, 2025, there was no unrecognized compensation cost. Stock-based compensation expense of $
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Common Stock Issuance Obligation
In
connection with the Business Combination on June 24, 2024, the Company agreed to assume an obligation by iDoc to issue
As
of June 30, 2026, and December 31, 2025,
Note 14 Warrants
DHAC Assumed Warrants
The Company has analyzed the public warrants, private warrants, Bridge Warrants (as defined below), September 2024 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. Below is a summary of the warrants issued and outstanding:
| Public | Private | Bridge | Extension | September 2024 Warrants | Pre-funded Warrants | Common Stock Warrants | Total | |||||||||||||||||||||||||
| Outstanding, December 31, 2025 | ||||||||||||||||||||||||||||||||
| Issued | ||||||||||||||||||||||||||||||||
| Exercised | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Outstanding, June 30, 2026 | ||||||||||||||||||||||||||||||||
| Exercisable, June 30, 2026 | ||||||||||||||||||||||||||||||||
| Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||
| Weighted Average Remaining Life in Years | ||||||||||||||||||||||||||||||||
Public and Private Warrants
The
“fair market value” for this purpose will mean the average reported last sale price of the shares of common stock for the
The
private warrants are identical to the warrants underlying the units in the Initial Public Offering. The Company may call the warrants
for redemption, in whole and not in part, at a price of $
| ● | at any time after the warrants become exercisable; |
| ● | upon
not less than |
| ● | if,
and only if, the reported last sale price of the shares of common stock equals or exceeds $ |
| ● | if, and only if, there is a current registration statement in effect with respect to the shares of common stock underlying such warrants. |
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The
exercise price and number of shares of common stock issuable on exercise of the warrants may be adjusted in certain circumstances including
in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger or consolidation. However, except
as described below, the warrants will not be adjusted for issuances of shares of common stock at a price below their respective exercise
prices. If (x) the Company issues additional shares of common stock or equity-linked securities for capital raising purposes in
connection with the closing of the initial business combination at an issue price or effective issue price of less than $
Warrant
holders may elect to be subject to a restriction on the exercise of their warrants such that an electing warrant holder would not be
able to exercise their warrants to the extent that, after giving effect to such exercise, such holder would beneficially own in excess
of
Bridge Warrants
In
connection with the Business Combination, the Company assumed
Extension Warrants
In
connection with the Business Combination, the Company assumed
September 2024 Warrants
On
September 30, 2024, the Company issued
Warrant Exchange Agreement
On
October 29, 2025, the Company also entered into a warrant exchange arrangement with Alta Partners (“Alta”) relating to holdings
of its Public Warrants, which were issued in connection with the Company’s initial public offering. Pursuant to the arrangement,
Alta exchanged a total of
43
Private Placement with Armistice
On
November 25, 2025, the Company entered into a securities purchase agreement with Armistice Capital (“Armistice”) pursuant
to which Armistice agreed to purchase an aggregate of
During
the six months ended June 30, 2026, a total of
Note 15 Reportable segment
Historically, the Company
had two reportable segments, Telehealth and Healthcare Technology. These reportable segments reflect the manner in which the Company's
Chief Executive Officer, who serves as the chief operating decision maker ("CODM"), regularly reviews financial information,
allocates resources, and assesses performance. As of June 30, 2026, the Company’s Chief Executive Officer was the sole CODM. As
of December 31, 2025, the Company’s CODM role was shared between the
Following the disposition of VSee Lab, the Company no longer conducts Healthcare Technology operations, and the results of continuing operations is reported through the Telehealth segment. Therefore, as of June 30, 2026, the Company has one reportable segment: Telehealth Services.
The CODM reviews gross margin and net loss from our reportable segment to evaluate budgets and forecasts, assess actual performance and allocate resources. The CODM’s review focuses on month to month and quarter to quarter changes in these profit measures in order to identify potential future liquidity issues, evaluate performance and need for potential cost reductions and identify potential vendor sourcing changes. The measure of segment assets is reported on the balance sheet as total consolidated assets.
Our reportable segment is described below.
Telehealth Services – The Company’s proprietary technology platform and modular software solution empower users to plug and play telehealth services with end-to-end encrypted video streaming integrated with medical device data, electronic medical records, and other sensitive data, with multiple other interactive functionalities that enable teamwork that the Company believes are not available from any other system worldwide.
The accounting policies of our reportable segment is the same as those described in the “Summary of Significant Accounting Policies” for the Company. In addition, the Company currently operates in one primary geographic area (the United States) and as such, the disclosures below are attributable to that geographic area.
The following table summarizes total revenue and significant expense categories and amounts for the Company's reportable segment that aligns with the segment level information that is regularly provided to the CODM:
| For the Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Revenues: | ||||||||
| Patient fees | $ | $ | ||||||
| Telehealth fees | ||||||||
| Institutional fees | - | |||||||
| Total revenues | $ | $ | ||||||
| Cost of revenues | ||||||||
| Segment gross margin | $ | $ | ||||||
| Less: | ||||||||
| Compensation and related benefits | ||||||||
| General and administrative | ||||||||
| Interest expense | ||||||||
| Other segment items, net (1) | ( | ) | ||||||
| Income tax expense | ||||||||
| Segment operating loss | $ | ( | ) | $ | ( | ) | ||
| Reconciliation to net loss | ||||||||
| Income (loss) from discontinued operations, net of tax | ( | ) | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| (1) |
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Note 16 Fair Value Measurements
The following tables present fair value information as of June 30, 2026, and December 31, 2025. The Company’s financial liabilities that were accounted for at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
| June 30, 2026 | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Liabilities: | ||||||||||||||||
| ADI Funding Convertible Note | $ | $ | $ | $ | ||||||||||||
| ClearThink Convertible Note | $ | $ | $ | $ | ||||||||||||
| Vanquish Funding Convertible Note | $ | $ | $ | $ | ||||||||||||
| Common stock issuance obligation | $ | $ | $ | $ | ||||||||||||
| SEPA liability | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Liabilities: | ||||||||||||||||
| Quantum Convertible Note, related party | $ | $ | $ | $ | ||||||||||||
| Common stock issuance obligation | $ | $ | $ | $ | ||||||||||||
| May 2025 Convertible Note | $ | $ | $ | $ | ||||||||||||
Measurement
Quantum Convertible Note
The Company established the initial fair value for the Quantum Convertible Note as of June 25, 2024, which was the date the Quantum Convertible Note was funded. As of June 30, 2026 and December 31, 2025, the fair value was remeasured. As such, the Company used the Monte Carlo model (“MCM”) that fair values the debt. The MCM was used to value the Quantum Convertible Note for the initial periods and subsequent measurement periods. The initial value in excess of proceeds on June 25, 2024, was recognized in the statement of operations under loss on issuance of financial instruments. The change in fair value between December 31, 2025, and June 30, 2026, was recognized in the statement of operations under change in fair value of financial instruments.
The
Quantum Convertible Note was classified within Level 3 of the fair value hierarchy on June 30, 2026 and December 31, 2025, due to
the use of unobservable inputs.
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
Common Stock Issuance Obligation
The Company established the initial fair value for the common stock issuance obligation to certain employees of the historical iDoc entity as of June 24, 2024, the date the Business Combination closed. As of June 30, 2026, and December 31, 2025, the fair value was remeasured. As the obligation is to issue shares of the Company’s common stock, the Company estimated the fair value of the obligation based on the shares of common stock expected to be issued and the closing price of the Company’s common stock on the date of the fair value measurement. As the key inputs into this fair value estimate are observable, the Company classified the common stock issuance obligation within Level 1 of the fair value hierarchy as of June 30, 2026, and December 31, 2025. The change in fair value between December 31, 2025, and June 30, 2026, was recognized as compensation expense within cost of revenues in the condensed consolidated statements of operations.
May 2025 Convertible Note
The Company established the initial fair value for the May 2025 Convertible Note as of May 30, 2025, which was the date the May 2025 Convertible was funded. As of June 30, 2026 and December 31, 2025, the fair value was remeasured. As such, the Company used the MCM that fair values the debt. The MCM was used to value the May 2025 Convertible Note for the initial periods and subsequent measurement periods. The change in fair value between December 31, 2025, and June 30, 2026, was recognized in the statement of operations under change in fair value of financial instruments.
45
The
May 2025 Convertible Note was classified within Level 3 of the fair value hierarchy as of June 30, 2026, and December 31, 2025, due to
the use of unobservable inputs.
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
ADI Funding Convertible Note
The Company established the initial fair value for the ADI Funding Convertible Note as of June 8, 2026, which was the date the ADI Funding Convertible Note was funded. As of June 30, 2026, the fair value was remeasured. As such, the Company used the MCM that fair values the debt. The MCM was used to value the ADI Funding Convertible Note for the initial periods and subsequent measurement periods. The change in fair value between June 8, 2026, and June 30, 2026, was recognized in the statement of operations under change in fair value of financial instruments.
The ADI Funding Convertible
Note was classified within Level 3 of the fair value hierarchy as of June 30, 2026, due to the use of unobservable inputs.
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
ClearThink Convertible Note
The Company established the initial fair value for the ClearThink Convertible Note as of June 22, 2026, which was the date the ClearThink Convertible Note was funded. As of June 30, 2026, the fair value was remeasured. As such, the Company used the MCM that fair values the debt. The MCM was used to value the ClearThink Convertible Note for the initial periods and subsequent measurement periods.
The
ClearThink Convertible Note was classified within Level 3 of the fair value hierarchy as of June 30, 2026, due to the use of unobservable
inputs.
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
Vanquish Funding Convertible Note
The Company established the initial fair value for the Vanquish Funding Convertible Note as of June 18, 2026, which was the date the Vanquish Funding Convertible Note was funded. As of June 30, 2026, the fair value was remeasured. As such, the Company used the MCM that fair values the debt. The MCM was used to value the Vanquish funding Convertible Note for the initial periods and subsequent measurement periods.
46
The
Vanquish funding Convertible Note was classified within Level 3 of the fair value hierarchy as of June 30, 2026, due to the use of unobservable
inputs.
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
SEPA liability
The Company established the initial fair value for the SEPA liability as of June 18, 2026, which was the date the agreement was entered. As of June 30, 2026, the fair value was remeasured. As such, the Company used the MCM that fair values the debt. The MCM was used to value the SEPA liability for the initial periods and subsequent measurement periods.
The
SEPA liability was classified within Level 3 of the fair value hierarchy as of June 30, 2026, due to the use of unobservable inputs.
| June 30, 2026 | December 31, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
Level 3 Changes in Fair Value
The change in the fair value of the Level 3 financial liabilities for the period from December 31, 2025, through June 30, 2026, is summarized as follows:
| Quantum Convertible Note | May 2025 Convertible Note | ADI Funding Convertible Note | ClearThink Convertible Note | Vanquish Funding Convertible Note | SEPA Liability | Total | ||||||||||||||||||||||
| Fair value as of December 31, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Initial fair value at issuance | ||||||||||||||||||||||||||||
| Conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Interest accrued | ||||||||||||||||||||||||||||
| Change in fair value | ( | ) | ||||||||||||||||||||||||||
| Fair value as of June 30, 2026 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
The change in the fair value of the Level 3 financial liabilities for the period from December 31, 2024, through June 30, 2025, is summarized as follows:
| Quantum | September | March 2025 | May 2025 | |||||||||||||||||||||||||
| Convertible Note | Exchange Note | ELOC | Convertible Note | Convertible Note | Convertible Note | Total | ||||||||||||||||||||||
| Fair value as of December 31, 2024 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
| Initial fair value at issuance | ||||||||||||||||||||||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||||||||||||||||||
| Fair value as of June 30, 2025 | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||
Transfers
to/from Levels 1, 2 and 3 are recognized at the end of the reporting period in which a change in valuation technique or methodology
occurs. There were
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Note 17 Subsequent Events
The Company evaluated subsequent events from the date of the condensed consolidated balance sheets as of June 30, 2026, through the date of the release of the condensed consolidated financial statements.
On July 21, 2026, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) with ADI Funding LLC (“ADI Funding”) and M2B Funding Corp. (“M2B”). As previously disclosed, on June 12, 2026, the Company received notice from ADI Funding Convertible Note, dated June 11, 2026, alleging an event of default occurred under the ADI Funding Convertible Note and other transaction documents between the Company and ADI Funding due to the Company’s alleged failure to file a resale registration statement on Form S-1 to register shares for resale pursuant to an equity line of credit financing with M2B, failure to file a Form 8-K related to the equity line of credit financing with M2B and failure to issue transfer agent instructions for the issuance of commitment shares to M2B pursuant to the equity line of credit financing, in each case no later than June 11, 2026. The Settlement Agreement resolves all disputes among the Company, ADI Funding and M2B on the principal terms described herein and in the Settlement Agreement.
Pursuant to the terms of the Settlement Agreement, in consideration for the mutual promises contained therein, the Company agreed to:
| ● | repay the ADI Funding Convertible Note on the earlier of ninety (90) days following the execution of the Settlement Agreement or immediately upon the Company receiving proceeds from any Financing Transaction (as defined in the Settlement Agreement); |
| ● | apply fifty percent (50%) of all gross process received from any Financing Transaction toward repayment of the ADI Funding Convertible Note until the ADI Funding Convertible Note has been repaid in full, except for the equity line of credit financing with M2B, which will pay 100% of proceeds to ADI Funding until repayment of the ADI Funding Convertible Note in full; |
| ● | within three (3) business days following execution of the Settlement Agreement, pay ADI Funding $50,000 in cash; if such amount is not received by ADI Funding by the third business day, the unpaid amount shall accrue contractual late charge of five hundred dollars ($500) per day until paid, with no applicable cure period (the “ADI Settlement Cash Consideration”); |
| ● | issue ADI Funding a promissory note in the principal amount of $50,000, which such note shall mature in six (6) months from issuance, will bear no interest prior to maturity, will have no original issue discount and will permit repayment at any time without premium or penalty and, if unpaid at maturity, will accrue interest automatically at eighteen percent (18%) per annum retroactive to the original issuance date; and ADI Funding may convert the outstanding balance into shares of the Company’s common stock at seventy-five percent (75%) of the lowest VWAP during the twenty (20) trading days immediately preceding conversion (the “ADI Settlement Note”); |
| ● | issue ADI Funding five hundred thousand (500,000) shares of restricted common stock with piggyback registration rights (the “ADI Settlement Shares”); |
| ● | issue M2B a promissory note in the principal amount of one hundred and twenty-five thousand dollars ($125,000), with a maturity date of six (6) months after issuance, bearing no interest prior to maturity, having no original issue discount and will permit prepayment without penalty; and, if unpaid at maturity, will accrue interest automatically at eighteen percent (18%) per annum retroactive to the original issuance date; and M2B may convert the outstanding balance into shares of common stock of the Company at seventy-five percent (75%) of the lowest VWAP during the twenty (20) trading days immediately preceding conversion (the “M2B Settlement Note” and together with the ADI Settlement Note, the “Settlement Notes”); and |
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| ● | issue M2B five hundred thousand (500,000) shares of restricted common stock with piggyback registration rights (the “M2B Settlement Shares” and together with the ADI Settlement Shares, the “Settlement Shares”). |
Each
of the following constitutes an event of default under the Settlement Agreement: (i) failure to timely make any payment under the Settlement
Agreement; (ii) failure to issue the Settlement Shares; (iii) failure to issue the Settlement Notes; and (iv) breach of any material covenant
in the Settlement Agreement. Upon an event of default under the Settlement Agreement, all obligations accelerate immediately, all unpaid
notes accrue interest at
Labrys Convertible Promissory Note Financing
On July 8, 2026, the Company, entered into a securities purchase
agreement (the “Labrys SPA”) with an institutional investor (“Labrys”). Pursuant to the Labrys SPA, the Company
issued to Labrys an unsecured convertible promissory note in the aggregate principal amount of $
Nasdaq Low Bid Price Non-Compliance and Delisting
As previously
reported, on September 24, 2025, the Company, received a written notice from the Listing Qualifications Department (the “Staff”)
of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that the Company was not in compliance with the continued listing requirement
set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Rule”), which requires listed companies to maintain a minimum
bid price of at least $
On
July 30, 2026, the Company received a subsequent written notice (the “Notice”) from the Staff of Nasdaq indicating that it
has determined that, as of July 29, 2026, the Company’s securities had a closing bid price of $
The Company is not aware of any other events or transactions that would require recognition or disclosure in the condensed consolidated financial statements.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF VSEE HEALTH
The following discussion and analysis provide information that VSee Health’s management believes is relevant to an assessment and understanding of the results of operations and financial of VSee Health, Inc. (“VSee Health” and for purposes of this section only, referred to as the “Company”, “we,” “us” and “our”). The discussion and analysis should be read together with VSee Health’s consolidated financial statements as of and for the three and six months ended June 30, 2026 and 2025, and the related respective notes thereto. This discussion may contain forward-looking statements based upon VSee Health’s current expectations, estimates and projections that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements due to, among other considerations, the matters discussed under “Risk Factors” in the Annual Report for the year ended December 31, 2025, and the section herein entitled “Cautionary Note Regarding Forward-Looking Statements.
Overview
Prior to June 24, 2024, we were a blank check company incorporated in the State of Delaware organized for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. On June 24, 2024, we completed the Business Combination pursuant to the Business Combination Agreement dated as of November 21, 2023, as amended by the first amendment dated February 13, 2024, and the second amendment dated April 17, 2024 (as amended, the “Business Combination Agreement”) that we entered into with VSee Lab and iDoc. Upon the completion of the Business Combination, we changed our name to “VSee Health, Inc.” and the business of VSee Lab and iDoc became our business. On May 31, 2026, the Company divested VSee Lab by selling 100% of its ownership interest to Milton Chen, the Company’s former co-Chief Executive Officer. Following the divestiture, VSee Lab became an independent standalone business and is no longer a subsidiary of VSee Health. Accordingly, VSee Lab has been classified as a discontinued operation for periods subsequent to the divestiture date, where applicable. (See Note 3 – Discontinued Operations). Mr. Chen also resigned as the Company’s co-Chief Executive Officer and Chairman of the Board of Directors in connection therewith.
We put telehealth software tools in the hands of clinicians to enable them to make changes without programming so that they can achieve the best patient outcomes. We provide our clients with capabilities specifically built to enable them to collaborate with their clinical and non-clinical colleagues, securely coordinate patient care, conduct virtual patient visits including remote physical exam and remote patient monitoring, and an analytical dashboard to manage their entire telehealth operations from patient satisfaction score to patient wait time to staffing allocations. We empower clinicians to create the workflow they want without waiting for IT; where today, most clinicians feel helpless given that IT departments often cannot give clinicians what they want.
Our wholly owned subsidiary iDoc is a high acuity patient care solution providing elite physician services in intensive care units of our major hospital systems and other customers. iDoc delivers neuro-critical care through a proprietary technology platform. iDoc serves a diverse range of customers from large hospital systems to small/micro hospitals, long-term acute care (LTAC) facilities, correctional facilities and others. In addition to the specialization of neuro critical care, iDoc provides general tele-critical care services, and specialty e-consults to large organizations such as correctional facilities. iDoc has an experienced team of board-certified intensivists, neurointensivists, neurologists, and advanced practice providers that treat and coordinate care for acutely ill patients 24/7 in the Neurointensive Care Unit (“NICU”) and Intensive Care Unit (“ICU”) for stroke, brain trauma, spinal cord, and all other neurological conditions. Our Neurocritical care experts will also help develop multidisciplinary plans of care to optimally treat neurological conditions in relation to their overall medical needs. Our Neuro Critical care service delivery will focus on physicians and provider services in tele neurocritical care, epileptology, and tele neurology. In addition to standard interventions, our Neurocritical care experts will offer specific care including monitoring intracranial pressure, cerebral hemodynamic, advanced multimodal neuro monitoring (brain oximetry, cerebral micro dialysis and continuous electroencephalography).
We strive to be the solutions provider of access to the shortage of intensivists across the care continuum utilizing sophisticated telehealth solutions to bridge the care gap. In a post Covid, physician burnout health care system, we aim to provide a solution to physician burnout and to a lack of patient access to quality intensive care. By using the sophisticated leading telehealth software and hardware devices, we provide access to highly skilled physicians in the highest acuity in patient setting, the ICU. We provide elite physician services in the Intensive care units of major hospital systems and other customers. Our core service delivers general critical care, neurology, EEG reading, and neuro critical care through a custom internal virtual health care technology platform. We also serve a diverse range of customers from large hospital systems to small/micro hospitals, to long-term acute care (LTAC) facilities to the federal prison system and others. We connect critically ill patients to high-quality Neurointensivists, general and cardiac intensivists and specialty specific e-consultations and helps to improve outcomes for patients as well as improved productivity and physician burnout while reduced costs for health systems. We have developed a unique quality control program in collaboration with each hospital by development of a hospital specific reporting dashboard to monitor and achieve high-quality critical care quality. In addition, current workflows and protocols are evaluated to adjust to incorporate critical care. Continuous process improvement and readjustment of target metrics with the ICU team to maximize patient safety and improve outcomes.
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Implications of Being an Emerging Growth Company
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”), as modified by the Jumpstart Our Business Startups Act of 2012(the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The Jobs Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s financial statements with another public company which is neither an emerging growth company nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.
The Company is also a “smaller reporting company,” meaning that either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) the market value of our shares held by non-affiliates is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. The Company may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million. The Company may take advantage of certain of the scaled disclosures available to smaller reporting companies.
Performance Factors
We believe that our future performance will depend on many factors, including the following:
The Rapid Transformation of the Telehealth Market
The Telehealth market today is one characterized by rapid transformation, with major customers and hospital systems looking to build or add capabilities and major legacy competitors looking to shore up historical limitations. We believe that the rapid transformation of the telehealth market indicates strong future growth of the market, and our current offerings provide an attractive value proposition to health systems, medical groups, and individual medical practitioners, driving higher market share. We plan to continue to harness our scale to further grow the value proposition of our platform for all stakeholders.
Ability to Expand Within the Market and Attract New Customers
Telehealth is still in its total infancy stages in terms of utilization, scope, and services. Most of the growth is expected within hospital systems, definition, and segmentation structure, and we believe our software platform and services have significant potential. We plan to leverage our industry relationships with government, hospital systems and insurance providers to increase our customer base.
Innovation and New Product Offerings
Despite the rapid advancements in technology, growth in virtual healthcare delivery, and improvement in decision support algorithms and machine learning tools, Telehealth Technology Solutions have not fully penetrated medicine and hospital systems to become the standard methodology of care and represent less than 1% of total healthcare spending according to Grandview Research. Major reasons for Telehealth solutions not capturing its full potential include:
| ● | Many of the existing video and hardware and software used in telehealth are repurposed businesses that are not healthcare specific. |
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| ● | Remote monitoring/diagnostic devices do not readily integrate into telehealth systems limiting doctors real time metrics to enable diagnostics and assessment. |
| ● | Backend software coordination is not optimized for telehealth use and connectivity, resulting in significant greater complexity and costs for implementation. |
| ● | The software and code foundations of the early telemedicine companies have major functionality limitations and arduous implementation and incremental coding/connectivity requirements adding significant cost and reducing functionality. |
We believe our technology solutions meet the performance and compliance standards in healthcare, increase the sharing of patient history, files and scheduling are integrated into the video view for doctors, create sophisticated video engagement between patients, staff and doctors and seamlessly integrate patients’ records to provide more comprehensive telehealth care. We believe our ability to invest in new technology and develop new features, modules, and solutions will be critical to our long-term success.
Significant Accounting Policies and Critical Accounting Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP. The preparation of consolidated financial statements also requires we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, balance sheet, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving our management’s judgments and estimates. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our balance sheet and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the amounts reported in those consolidated financial statements and accompanying notes. Although we believe that the estimates we use are reasonable, due to the inherent uncertainty involved in making those estimates, actual results reported in future periods could differ from those estimates. Our significant accounting policies are described in Note 2 to our Unaudited Condensed Consolidated Financial Statements for the three-month and six-month period ended June 30, 2026 included elsewhere in this report. Our critical accounting policies are described below.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). ASC 606 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers in an amount that reflects the expected consideration received in exchange for those goods or services. The core principle of ASC 606 is to recognize revenue to depict the transfer of promised goods or services to clients in an amount that reflects the consideration the entity expects to be entitled in exchange for those goods or services.
The Company derives revenue from business services associated with direct tele-physician provider patient fee services, telehealth services and institutional services provided to our clients.
The Company determines revenue recognition in accordance with ASC 606 through the following five steps:
1) Identify the contract with a customer
The Company considers the terms and conditions of its contracts and the Company’s customary business practices in identifying its contracts under ASC 606. The Company determines it has a contract with a customer when the contract has been approved by both parties, it can identify each party’s rights regarding the services to be transferred and the payment terms for the services, it has determined the customer to have the ability and intent to pay, and the contract has commercial substance. The Company applies judgment in determining the customer’s ability and intent to pay, which is based on a variety of factors, including the customer’s payment history or, in the case of a new customer, credit and financial information pertaining to the customer.
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The Company also has service contracts with hospitals or hospital systems, physician practice groups, and other users. These customer contracts typically range from two to three years, with an automatic renewal process. The Company either invoices these customers for the monthly fixed fee in advance or at the end of the month, depending on the contract terms.
The contracts typically contain cancellation clauses with advance notice; therefore, the Company does not believe that it has any material outstanding commitment for future revenues beyond one year from the end of a reporting period.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. The Company’s contracts typically contain cancellation clauses with advance notice; therefore, the Company does not believe that they have any material outstanding commitments for future revenues beyond one year from the end of a reporting period.
3) Determine the transaction price
The total transaction price is based on the amount to which the Company is entitled to based on the contracts with its customers. The Company believes the quoted transaction prices in the customer contracts represent the stand-alone selling prices for each of the separate performance obligations which are distinct and priced separately within the contract. The transaction price for each service provided is independent and established in the contract and based on the duration of service provided or for a rate for service provided. Fees are established based on the service transferred to the client.
4) Allocate the transaction price to performance obligations in the contract
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative stand-alone selling price (“SSP”). The determination of a SSP for each distinct performance obligation requires judgment. The Company believes the quoted transaction prices in the customer contracts represent the standalone selling prices for each of the separate performance obligations that are distinct and priced separately within the contract.
5) Recognize revenue when or as the Company satisfies a performance obligation
Revenue is recognized when or as control of the promised goods or service is transferred to the customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.
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Patient Fees Services and Performance Obligation
Patient Fee Services
Patient fees represent a series of distinct services because performance obligations are met when the Company’s physicians provide professional medical services to patients at the client site. The patient benefits from professional services when care is rendered by the Company’s medical professionals. Revenue recognition commences when the Company satisfies its performance obligation to provide professional medical services to patients.
The Company acts as the principal in these arrangements because it controls the medical services before they are transferred to the patient. This control is evidenced by the Company’s primary responsibility for fulfilling the service and its direct authority over the affiliated physicians, including the right to direct their clinical activities and administrative protocols.
Patient Fee Contracts Involving Third-Party Payors
The Company receives payments from patients, third-party payors, and others for patient fee services. Third-party payors reimburse based on contracted rates or billed charges, which are generally lower than billed amounts. The Company determines the transaction price on patient fees based on standard charges for services provided, reduced by adjustments provided to third-party payors, and implicit price concessions provided to uninsured patients. The Company monitors its revenue and receivables from third-party payors and records an estimated contractual allowance to properly account for the differences between billed and collected amounts.
Revenue from third-party payors is presented net of an estimated provision for contractual adjustments. Patient revenues are net of service credits and service adjustments andexpected credit losses. These adjustments and implicit price concessions represent the difference between the amount billed and the estimated consideration the Company expects to receive, based on historical collection experience, market conditions and other factors. Although the Company believes that its approach to estimates and judgments as described herein is reasonable, actual results could differ, from estimated amounts and such difference could be material.
All of the Company’s telemedicine contracts for patient reimbursement fees are directly billed to the payors by the Company. The Company earns patient fees by providing high acuity patient care solutions. For patient fees, performance obligations are met when the Company’s physicians provide professional medical services to patients at the client site as this is deemed as transfer of goods and services to respective patients. The patient benefits from the professional services when care is rendered by the Company’s medical professionals. The revenue is determined based on the telemedicine billing code(s) associated with the respective professional service rendered to patients.
The Company earns primarily from reimbursement from the following third-party payors:
Medicare
The Company’s affiliated provider network is reimbursed by the Medicare Part B and Part C programs for certain of the telemedicine services it provides to Medicare beneficiaries. Medicare coverage for telemedicine services is treated distinctly from other types of professional medical services and is limited by federal statute and subject to specific conditions of participation and payment pursuant to Medicare regulations, policies and guidelines, including the location of the patient, the type of service, and the modality for delivering the telemedicine service, among others.
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Medicaid
Medicaid programs are funded jointly by the federal government and the states and are administered by states (or the state’s designated managed care or other similar organizations) under approved plans. Our affiliated provider network is reimbursed by certain State Medicaid programs for certain of the telemedicine services it provides to Medicaid beneficiaries. Medicaid coverage for telemedicine services varies by state and is subject to specific conditions of participation and payment.
Commercial Insurance Providers
The Company is reimbursed by commercial insurance carriers. The basis for payment to the commercial insurance providers is consistent with Medicare reimbursement fee structure guidelines and the Company is in-network or out-of-network with the commercial insurance carriers based on state and insurer requirements.
Telehealth Fees Service Contracts and Performance Obligation
Contract For Telemedicine Care Services
Performance obligations in the contract for telemedicine care are based on services provided via the use of hardware and software integration that includes multi-participant video conferencing, and electronic communication for 24 hours per day, seven days per week for the duration of the contract. The Company provides administrative support for the tele-physician services and coordinates the services of its clinicians’ network through administrative support, hardware support, and software support and provider coverage availability. The Company provides coverage availability of its physician services ranging from 12 to 24 hours per day. Performance obligations in the contract for these services transferred to the customer are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from patient services and institutional services obligations. Performance obligations are met when the Company provides administrative, business, and medical records and reports related to their professional services rendered pursuant to the agreement in such format and upon such interval as hospitals may require. Revenue from telemedicine care services is included in telehealth fees in the condensed consolidated financial statements.
The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration, using the expected value or the most likely amount method, whichever is expected to better predict the amount. The Company’s estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on assessments of legal enforceability, performance, and all information that is reasonably available to the Company. The determination of the amount of revenue the Company can recognize each accounting period requires management to make estimates and judgments on the estimated expected customer life or expected performance period.
The Company commences revenue recognition when the Company satisfies its performance obligation to provide the contractual tele-physician hours services. Prior to the commencement of services, customers generally make initial start-up nonrefundable payments to the Company when contracting for Company training, hardware and software installation and integration, which includes a onetime setup of software security, API interfaces, and compatibility between existing hospital equipment and hardware and software. The Company recognizes revenue upon completion of the implementation when the performance obligation of equipment setup and initial training is completed. The start-up fees do not significantly modify or customize the other goods in the contract. As the start-up service primarily covers initial administrative services for which the Company’s clients can cancel future services upon completion, management considers it to be separable from the ongoing business services, and the Company records start-up fees as revenue when the start-up service is completed over time, using the input method to measure progress each financial period.
Institutional Fees Service Contracts and Performance Obligation
Contract For Electroencephalogram (“EEG”) Professional Interpretation Services
Performance obligations in the contract for EEG professional interpretation services are based on the number of professional services EEG interpretation the Company provides. The performance obligation in the contract for these services transferred to the customer is distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. To facilitate the delivery of the EEG professional interpretation services, the Company’s physicians use EEG telemedicine equipment provided by the Company. The performance obligation is satisfied based on the number of EEG professional interpretations performed by the Company’s physicians. The number of professional interpretations is traced monthly by both parties and used to determine the revenue earned based on established contractual rates and is included in institutional fees in the condensed consolidated financial statements.
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Under most of the Company’s contracts, including contracts with its two top customers, the customer pays fixed monthly fees for telemedicine consultation services, EEG professional interpretation services, platform software services, and hardware fees. The fixed monthly fee provides for a predetermined number of daily, monthly, or annual physician hours of coverage and agreed-upon rates for interpretation and software services. To facilitate the delivery of the consultation services, the facilities use telemedicine equipment and the Company’s virtual healthcare platform, which is provided and installed by the Company. The Company also provides the hospitals with user training, maintenance and support services for the telemedicine equipment used to perform the consultation services.
The Company commences revenue recognition on EEG professional interpretation services when the Company satisfies its performance obligation to provide professional interpretation monthly.
Fair Value of Financial Instruments
“Fair value” is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. ASC 820 establishes a fair value hierarchy that prioritizes and ranks the level of observability of inputs used to measure investments at fair value. The observability of inputs is impacted by a number of factors, including the type of investment, characteristics specific to the investment, market conditions and other factors. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets will typically have a higher degree of input observability and a lesser degree of judgment applied in determining fair value.
See Note 16 - Fair Value Measurements of the financial statements for additional information on assets and liabilities measured at fair value.
Goodwill
Goodwill represents the excess of purchase price in a business combination over the fair value of the net identifiable assets acquired. We evaluate goodwill for impairment at the reporting unit level by assessing whether it is more likely than not that the fair value of a reporting unit exceeds it carrying value. If this assessment concludes that it is more likely than not that the fair value of a reporting unit exceeds its carrying value, then goodwill is not considered impaired and no further impairment testing is required. Conversely, if the assessment concludes that it is more likely than not that the fair value of a reporting unit is less than it carrying value, a goodwill impairment test is performed to compare the fair value of the reporting unit to its carrying value. The Company determines fair value of the two reporting units using both income and market-based models. Our models contain significant assumptions and accounting estimates about discount rates, future cash flows, and terminal values that could materially affect our operating results or financial position if they were to change significantly in the future and could result in an impairment. We perform our goodwill impairment assessment whenever events or changes in facts or circumstances indicate that impairment may exist and during the fourth quarter each year. The cash flow estimates and discount rates incorporate management’s best estimates, using appropriate and customary assumptions and projections at the date of evaluation. For the three and six months ended June 30, 2026, the Company performed qualitative analysis by assessing that no adverse economic, industry, operational, or regulatory indicators were identified that would suggest impairment. Based on the qualitative assessment of relevant factors, the Company concludes that no impairment indicators exist determined that there were no triggering events that required the Company to perform a quantitative analysis.
Impairment of Long-lived and Intangible Assets Other than Goodwill
In accordance with ASC 360-10, the Company, on a regular basis, reviews the carrying amount of long-lived assets, including fixed assets, right-of-use assets and intangible assets, for the existence of facts or circumstances, both internally and externally, that suggest impairment. The Company determines if the carrying amount of a long-lived asset is impaired based on anticipated undiscounted cash flows, before interest, from the use of the asset. In the event of impairment, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the asset. Fair value is determined based on the appraised value of the assets or the anticipated cash flows from the use of the asset, discounted at a rate commensurate with the risk involved.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and the respective tax basis and operating loss, capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
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The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. The Company’s federal tax return and any state tax returns are not currently under examination.
The Company applies ASC 740-10, Accounting for Income Taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Financial Statement Components
Three Months Ended June 30, 2026, and 2025 Results of Operations
The following table presents VSee Health’s results of operations for the three months ended June 30, 2026 and 2025:
| For the three months ended June 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Revenue | $ | 1,561,884 | $ | 1,055,191 | $ | 506,693 | 48 | % | ||||||||
| Cost of revenues | 1,355,731 | 440,147 | 915,584 | 208 | % | |||||||||||
| Gross margin | 206,153 | 615,044 | (408,891 | ) | (66 | )% | ||||||||||
| Operating expenses | 2,903,479 | 2,171,111 | 732,368 | 34 | % | |||||||||||
| Other income (expense) | (401,015 | ) | (346,138 | ) | (54,877 | ) | 16 | % | ||||||||
| Net loss before taxes | (3,098,341 | ) | (1,902,205 | ) | (1,196,136 | ) | 63 | % | ||||||||
| Income tax benefit | 17,899 | (1,728 | ) | 19,627 | (1,136 | )% | ||||||||||
| Net loss | $ | (3,080,442 | ) | $ | (1,903,933 | ) | $ | (1,176,509 | ) | 62 | % | |||||
Six Months Ended June 30, 2026, and 2025 Results of Operations
The following table presents VSee Health’s results of operations for the six months ended June 30, 2026, and 2025:
| For the six months ended June 30, | ||||||||||||||||
| 2026 | 2025 | Change | % | |||||||||||||
| Revenue | $ | 3,441,177 | $ | 2,252,805 | $ | 1,188,372 | 53 | % | ||||||||
| Cost of revenues | 2,507,612 | 827,523 | 1,680,089 | 203 | % | |||||||||||
| Gross margin | 933,565 | 1,425,282 | (491,717 | ) | (34 | )% | ||||||||||
| Operating expenses | 5,290,424 | 4,528,415 | 762,009 | 17 | % | |||||||||||
| Other income (expense) | 17,891 | (2,424,701 | ) | 2,442,592 | (101 | )% | ||||||||||
| Net loss before taxes | (4,338,968 | ) | (5,527,834 | ) | 1,188,866 | (22 | )% | |||||||||
| Income tax benefit | (5,260 | ) | (15,233 | ) | 9,973 | (65 | )% | |||||||||
| Net loss | $ | (4,344,228 | ) | $ | (5,543,067 | ) | $ | 1,198,839 | (22 | )% | ||||||
Revenue
We generate revenue through management and administrative services contracts with hospitals and hospital systems to provide telehealth physician services, teleradiology services, and acute care patient services. We also generate revenue by directly billing insurance companies for care provided at hospitals and hospital systems. Revenue streams include telehealth fees, patient fees, teleradiology fees, and institutional fees. These contracts typically range from two to three years and are subject to automatic renewal.
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Revenue was $1,561,884 and $3,441,177 for the three and six months ended June 30, 2026, respectively, compared to $1,055,191 and $2,252,805 for the corresponding periods in 2025, representing increases of $506,693, or 48%, and $1,188,372, or 53%, respectively. The increases were primarily driven by growth in telehealth fees and patient fees.
Patient fees increased by $125,320, or 26%, to $601,092 for the three months ended June 30, 2026, from $475,772 for the comparable prior-year period. For the six months ended June 30, 2026, patient fee revenue also increased compared to the prior-year period. The increase was driven by services provided to two larger hospital networks during the current-year period, compared to a smaller hospital footprint in the prior-year period.
Telehealth fees increased by $381,373, or 66%, to $960,792 for the three months ended June 30, 2026, from $579,419 for the comparable prior-year period. The increase was driven primarily by approximately $834,000 of higher teleradiology revenue, reflecting a full period of operations in the current year, as well as approximately $19,500 of higher prison telehealth revenue resulting from increased service volume. These increases were partially offset by declines of approximately $440,000 in Tele-ICU services revenue and $32,000 in hardware and software revenue, primarily due to client attrition experienced during 2025.
For the six months ended June 30, 2026, telehealth fees increased by $895,476, or 84%, to $1,958,745, from $1,063,269 for the comparable prior-year period. The increase was driven primarily by approximately $1.8 million of higher teleradiology revenue, as the service line was in its early stages during the prior-year period, as well as approximately $37,000 of higher prison telehealth revenue resulting from increased service volume. These increases were partially offset by declines of approximately $878,000 in Tele-ICU services revenue and $58,000 in hardware and software revenue, primarily due to client attrition experienced during 2025.
As a result of these factors, revenue increased 48% and 53% for the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.
Cost of Goods Sold
Cost of revenues consists primarily of physician contractor fees, personnel-related costs for clinical and operational support teams, costs associated with teleradiology services, and other costs directly associated with the delivery of telehealth and patient care services.
Cost of revenues was $1,355,731 and $2,507,612 for the three and six months ended June 30, 2026, respectively, compared to $440,147 and $827,523 for the corresponding periods in 2025, respectively, representing increases of $915,584, or 208%, and $1,680,089, or 203%, respectively. The increases were primarily attributable to the expansion of the Company's teleradiology service line.
For the three months ended June 30, 2026, the increase in cost of revenues was driven primarily by approximately $1.1 million of higher independent contractor fees associated with the Company's teleradiology services, partially offset by approximately $148,000 of lower salaries and wages, reflecting a shift away from internally staffed clinical delivery toward the contracted teleradiology model.
For the six months ended June 30, 2026, the increase in cost of revenues was driven primarily by approximately $2.1 million of higher independent contractor fees associated with the Company's teleradiology services, which expanded significantly during 2026. These services utilize independent radiologists to provide diagnostic interpretations under hospital contracts and therefore carry a higher direct cost structure than the Company's legacy service offerings. The increase was partially offset by approximately $352,000 of lower salaries and wages and approximately $66,000 of lower telehealth platform peripheral device costs.
As a result of the higher-cost teleradiology services as a percentage of total revenue, gross margin decreased to 13% and 27% for the three and six months ended June 30, 2026, respectively, from 58% and 63% for the corresponding periods in 2025. Gross profit was $206,153 and $933,565 for the three and six months ended June 30, 2026, respectively, compared to $615,044 and $1,425,282 for the corresponding periods in 2025, representing decreases of $408,891, or 66%, and $491,717, or 34%, respectively.
Operating Expenses
Operating expenses include all operating costs not included in cost of revenues. These costs consist of compensation and related benefits and general and administrative expenses composed primarily of payroll and payroll-related expenses, professional fees, insurance, software costs, occupancy expenses, depreciation and amortization, and other costs related to the administration of our business.
Operating expenses were $2,903,479 and $5,290,424 for the three and six months ended June 30, 2026, respectively, compared to $2,171,111 and $4,528,415 for the corresponding periods in 2025, representing increases of $732,368, or 34%, and $762,009, or 17%, respectively.
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General and administrative expenses increased by $804,536, or 22%, for the six months ended June 30, 2026, driven primarily by a $625,239 increase in bad debt expense on aged receivables; a $381,400 increase in business consulting expenses related to stock-based consulting arrangements and a new capital advisory engagement; $165,936 in higher legal fees, driven by SEC- and shareholder-meeting-related legal costs and higher utilization of corporate legal services; an $82,006 increase in advisory services fees; and a $102,247 increase in investor relations and transfer agency fees.
These increases were offset by decreases of $259,270 in audit fees due to the change in audit service provider, $157,781 in accounting and tax-related fees from using lower-cost providers, $70,481 in lease expense from the termination of an office space in Boston, and $67,540 in loan servicing fees from reduced loan funding activity.
Compensation and related benefits decreased by $42,527, or 5%, for the six months ended June 30, 2026, primarily due to a $198,336 gain from the settlement of a previously recorded liability in the prior year. This decrease was partially offset by a $113,790 increase in net salary, wages, and bonus expenses, reflecting higher current-year bonus costs, partially offset by lower salaries and wages, primarily due to a change in executive staff arrangements expense, and a $42,019 increase in contractor-based accounting support.
Other Income (Expense)
Other income (expense), net, was $(401,015) and $17,891 for the three and six months ended June 30, 2026, respectively, compared to $(346,138) and $(2,424,701) for the corresponding periods in 2025. This represents an increase in expense of $54,877, or 16%, for the three-month period and a decrease in expense of $2,442,592, or 101%, for the six-month period.
The increase in other expense during the three months ended June 30, 2026, was primarily attributable to a $145,174 loss on the issuance of a Simple Agreement for Future Equity ("SEPA"), partially offset by a decrease in interest expense resulting from a lower outstanding debt balance following significant debt-to-equity conversions completed during the fourth quarter of 2025. The current-year period also did not include the $126,125 loss on extinguishment of financial instruments recorded in the prior-year period.
For the six months ended June 30, 2026, the significant improvement in other (income) expense was primarily driven by substantially lower interest expense resulting from the reduction of the Company's debt obligations following the debt-to-equity conversions completed in late 2025. In addition, the prior-year period included non-recurring charges related to changes in the fair value of financial instruments and losses associated with the extinguishment of financial instruments that did not recur in the current-year period.
Net Loss
Net loss was $3,080,442 and $4,344,228 for the three and six months ended June 30, 2026, respectively, compared to $1,903,933 and $5,543,067 for the corresponding periods in 2025. Net loss increased by $1,176,509, or 62%, for the three-month period, primarily due to lower gross profit resulting from higher physician contractor costs associated with the expansion of the Company's teleradiology service line and increased operating expenses. For the six-month period, net loss decreased by $1,198,839, or 22%, primarily due to a significant reduction in other expense, driven by lower interest expense following debt-to-equity conversions completed in late 2025 and the absence of certain non-recurring financing-related charges recorded in the prior-year period.
Cash Flows
The following table presents selected captions from VSee Health’s consolidated statements of cash flows for the six months ended June 30, 2026, and 2025:
| For the six months ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net cash used in operating activities - continuing operations | $ | (2,504,301 | ) | $ | (1,207,482 | ) | ||
| Net cash used in investing activities - continuing operations | (100,000 | ) | - | |||||
| Net cash (used in) provided by financing activities - continuing operations | (842,626 | ) | 837,492 | |||||
| Change in cash due to continuing operations | $ | (3,446,927 | ) | $ | (369,990 | ) | ||
| Change in cash due to discontinued operations | (1,150,367 | ) | 335,470 | |||||
| NET CHANGE IN CASH | $ | (4,597,294 | ) | $ | (34,520 | ) | ||
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Our principal sources of liquidity are cash and cash equivalents, totaling $454,151 and $291,595 as of June 30, 2026, and 2025, respectively.
Our future capital requirements will depend on many factors, including our growth rate, contract renewal activity, number of subscription renewals, the continuing market acceptance of telehealth, and debt funding.
Cash Used in Operating Activities
Cash used in operating activities from continuing operations was $2,504,301 for the six months ended June 30, 2026, compared to $1,207,482 for the six months ended June 30, 2025. The increase in cash used was primarily attributable to a net loss from continuing operations of $4,344,228 in 2026, partially offset by non-cash adjustments of $2,617,212. Changes in operating assets and liabilities resulted in a net cash outflow of approximately $777,285 during the 2026 period.
Cash Used in Investing Activities
Cash used in investing activities from continuing operations was $100,000 for the six months ended June 30, 2026, compared to $0 for the six months ended June 30, 2025. The cash outflow in 2026 was primarily attributable to the purchase of long-term investments.
Cash (Used in) Provided by Financing Activities
Cash used in financing activities from continuing operations was $842,626 for the six months ended June 30, 2026, compared to cash provided by financing activities of $837,492 for the six months ended June 30, 2025. During the six months ended June 30, 2026, financing cash outflows consisted primarily of repayments of notes payable of $780,290, payments on financing lease liabilities of $591,118, repayments under the line of credit of $348,952, and payments related to the Encompass acquisition liability of $50,000. These outflows were partially offset by proceeds from convertible notes issued of $750,000, proceeds from notes issued during the period of $176,750, and proceeds from pre-funded warrants, net of issuance costs, of $984. For the six months ended June 30, 2025, financing cash inflows consisted primarily of proceeds from notes issued during the period of $726,237, proceeds from the issuance of common stock of $90,634, and proceeds from factoring payables of $55,665. These inflows were partially offset by payments on financing lease liabilities of $25,000, payments to a shareholder of $10,000, and payments due on the Encompass acquisition liability of $44.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.
Item 4. Controls and Procedures
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 June 30, 2026, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of June 30, 2026, our disclosure controls and procedures were not effective.
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Management concluded that material weaknesses in internal control over financial reporting existed relating to the lack of sufficient number of personnel within the accounting function to adequately segregate duties, we did not have a designed and implemented effective Information Technology General Controls (“ITGC”) related to access controls to financial accounting system, we did not have a formalized control environment and oversite of controls over financial reporting, and we lack proper accounting for significant or non-recurring transactions. Such material weaknesses contributed to our inability to timely file this Quarterly Report on Form 10-Q. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We lack the resources to employ additional personnel to help mitigate these material weaknesses and we foresee that these material weaknesses will not be remediated until we receive additional funding to support our accounting department.
We cannot assure you that these or other measures will fully remediate the material weakness in a timely manner. Notwithstanding the identified material weakness, our management believes that the consolidated financial statements included in this report fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.
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.
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.
Subsequent to the quarter end, in light of the material weakness as described above, we have enhanced our processes to identify and appropriately apply applicable accounting requirements to better evaluate and understand the nuances of the complex accounting standards that apply to our financial statements on a timely basis. Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our personnel and third-party professionals with whom we consult regarding application and financial reporting. The elements of our remediation plan can only be accomplished over time, and we can offer no assurance that these initiatives will ultimately have the intended effects.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
We are from time to time subject to claims, lawsuits and other legal and administrative proceedings arising in the ordinary course of business. Defending such proceedings is costly and can impose a significant burden on management and employees. The results of any future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. We are not presently a party to any litigation the outcome of which, we believe, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, cash flows or financial condition.
On April 21, 2026, Toppan Merrill LLC filed a lawsuit in the Superior Court in the County of Middlesex, Massachusetts. The plaintiff alleges that the Company owes $845,891 for services rendered by the plaintiff. The plaintiff is also seeking a preliminary injunction enjoining the Company from disposing assets outside of the ordinary course of business. The Company intends to vigorously defend itself against these allegations. The Company has accrued an amount it believes to be reasonable related to this matter based on the services reflected in its accounts payable balance, which differs from the amount claimed by the plaintiff.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, which could materially affect our business, financial condition, or future operating results and cash flows. Other than as described below, we do not believe that there have been any material changes to the risk factors disclosed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The risks described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025 and other reports we file with the SEC are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem immaterial also may materially adversely affect our business, financial condition, operating results and/or cash flows.
The Company is currently subject to a delisting determination by the staff of Nasdaq, and trading of its common stock was halted on August 6, 2026. The Company expects that after its common stock is delisted from Nasdaq, its common stock will begin trading on the OTC Pink Limited Market, which may affect the market price and liquidity of the shares and could limit the Company’s ability to raise additional capital.
The Nasdaq Stock Market LLC requires listed companies to comply with certain standards in order to remain listed. On September 24, 2025, the Company received notice from the Listing Qualifications Staff (the “Staff”) of Nasdaq that the bid price of its common stock had not maintained a minimum closing bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). In accordance with Listing Rule 5810(c)(3)(A), the Company was provided 180 calendar days, or until March 27, 2026, to regain compliance with the Minimum Bid Price Requirement. The Company was granted an additional 180 calendar day compliance period, or until September 21, 2026, to regain compliance with the Minimum Bid Price Requirement.
On July 30, 2026, the Company received notice (the “Notice”) from Nasdaq that the Staff has determined that as of July 29, 2026, the Company’s common stock had a closing bid price of $0.10 or less for ten consecutive trading days, triggering application of Listing Rule 5810(c)(3)(A)(iii) which states in part: if during any compliance period specified in Rule 5810(c)(3)(A), a company’s security has a closing bid price of $0.10 or less for ten consecutive trading days, the Listing Qualifications Department shall issue a Staff Delisting Determination under Rule 5810 with respect to that security. Accordingly, the Company’s securities were delisted from the Nasdaq Capital Market, trading of the Company’s common stock and warrants were suspended at the opening of business on August 6, 2026 and a Form 25-NSE will be filed with the Securities and Exchange Commission, which will remove the Company’s securities from listing and registration on the Nasdaq Capital Market.
The Company currently expects that its common stock will begin trading on the OTC Pink Limited Market maintained by OTC Markets. The Company is also considering having its shares posted for trading on the OTCQB Venture Market (“OTCQB”), though no assurance can be provided that the Company will be able to satisfy the criteria for trading on the OTCQB or that the staff of OTC Markets will approve the posting of the Company’s shares for trading on the OTCQB.
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Delisting from the Nasdaq could make trading our common stock more difficult for investors, potentially leading to declines in our share price and liquidity. In addition, without a Nasdaq market listing, shareholders may have a difficult time getting a quote for the sale or purchase of our shares, the sale or purchase of our shares would likely be made more difficult and the trading volume and liquidity of our shares could decline. Delisting from Nasdaq could also result in negative publicity and make it more difficult for us to raise additional capital. The absence of such a listing may adversely affect the acceptance of our common stock as transaction consideration or the value accorded our common stock by other parties. Further, following delisting, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our shareholders to sell our common stock in the secondary market. Our shares of common stock also may come within the definition of “penny stock” as defined in the Exchange Act and would be covered by Rule 15g-9 of the Exchange Act. Such rule imposes additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors.
If we are unable to resume trading, investors will face further limitations in the liquidity of our common stock, and our ability to raise capital, continue as a going concern, and maintain investor confidence could be materially and adversely affected. If our common stock is unable to resume trading on any market, we may also face cash payment obligations and trigger defaults under some of our existing financing arrangements, which could further strain our liquidity position and ability to continue as a going concern.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For this fiscal quarter ended June 30, 2026, there were no unregistered securities to report which have not been previously included in a Quarterly Report on Form 10-Q, Annual Report on Form 10-K, or a Current Report on Form 8-K.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended
June 30, 2026, none of our directors or officers (as defined in Rule 16a-1(f) of the Exchange Act) informed us of the
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith (furnished herewith with respect to Exhibit 32.1) |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| VSEE HEALTH, INC. | ||
| Date: August 14, 2026 | By: | /s/ Imoigele Aisiku |
| Name: | Imoigele Aisiku | |
| Title: | Chief Executive Officer and Chairman of the Board | |
| (Principal Executive Officer) | ||
| Date: August 14, 2026 | By: | /s/ Jerry Leonard |
| Name: | Jerry Leonard | |
| Title: | Chief Financial Officer and Secretary | |
| (Principal Financial and Accounting Officer) | ||
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Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Imoigele Aisiku, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of VSee Health, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 14, 2026 | |
| /s/ Imoigele Aisiku | |
| Imoigele Aisiku | |
| Chief Executive Officer and Chairman | |
| (Principal executive officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jerry Leonard, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of VSee Health, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; and |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 14, 2026 | |
| /s/ Jerry Leonard | |
| Jerry Leonard | |
| Chief Financial Officer | |
| (Principal financial and accounting officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of VSee Health, Inc. (the “Company”) on Form 10-Q for the fiscal quarter ended June 30, 2026, as filed with the Securities and Exchange Commission (the “Report”), each of the undersigned officers of the Company, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company. |
| Date: August 14, 2026 | By: | /s/ Imoigele Aisiku |
| Imoigele Aisiku | ||
| Chief Executive Officer and Chairman | ||
| (Principal executive officer) | ||
| Date: August 14, 2026 | By: | /s/ Jerry Leonard |
| Jerry Leonard | ||
| Chief Financial Officer | ||
| (Principal financial and accounting officer) |