Vsee Health, Inc 10-Q for FY2025 Q3
Vsee Health, Inc. (VSEED)
About this 10-Q
Vsee Health, Inc filed this 10-Q on November 14, 2025, covering the quarter ended September 30, 2025 (FY2025 Q3).
Headline figures
Quarter ended September 30, 2025, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $3.98M
- up 18.7% from $3.35M a year earlier
- Net loss
- $289.75K
- compared with a net loss of $53.92M a year earlier
- Diluted EPS
- -$0.02
- compared with -$3.58 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
or
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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, 2024 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.
(FKA DIGITAL HEALTH ACQUISITION CORP.)
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | ||||||||
| Accounts receivable, net of allowance for credit losses of $ | ||||||||
| Due from related party | ||||||||
| Prepaids and other current assets | ||||||||
| Total current assets | $ | $ | ||||||
| Right-of-use assets, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Fixed assets, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Deferred revenue | ||||||||
| Due to related parties | ||||||||
| Operating lease liabilities | ||||||||
| Finance lease liabilities | ||||||||
| Factoring payable | ||||||||
| Encompass Purchase Liability | ||||||||
| Equity Line of Credit | ||||||||
| Quantum convertible note, related party at fair value | ||||||||
| September 2024 Convertible Note, at fair value | ||||||||
| Loan payable, related party | ||||||||
| Line of credit | ||||||||
| Notes payable, net of discount | ||||||||
| Exchange Note, at fair value | ||||||||
| Common stock issuance obligation | ||||||||
| Total current liabilities | $ | $ | ||||||
| Notes payable, less current portion, net of discount | ||||||||
| Operating lease liabilities, less current portion | ||||||||
| Deferred revenue, net of current portion | ||||||||
| Deferred tax liabilities, net | ||||||||
| Total liabilities | $ | $ | ||||||
| Commitments, Contingencies, and Concentration Risk (Note 10) | ||||||||
| STOCKHOLDERS’ DEFICIT | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ( | ) | |||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
VSEE HEALTH, INC.
(FKA DIGITAL HEALTH ACQUISITION CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025, AND 2024 (UNAUDITED)
| For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Restated) | (Restated) | |||||||||||||||
| Revenues | ||||||||||||||||
| Subscription fees | $ | $ | $ | $ | ||||||||||||
| Professional services and other fees | ||||||||||||||||
| Technical engineering fees | ||||||||||||||||
| Patient fees | ||||||||||||||||
| Telehealth fees | ||||||||||||||||
| Institutional fees | ||||||||||||||||
| Total revenues | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Compensation and related benefits | ||||||||||||||||
| Goodwill impairment charges | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Transaction expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (expense) income, net | ( | ) | ( | ) | ||||||||||||
| Change in fair value of financial instruments | ||||||||||||||||
| Loss on extinguishment of loan | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss on issuance of financial instruments | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expense), net | ( | ) | ||||||||||||||
| Loss before (provision for) benefit from income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| (Provision for) benefit from income taxes | ( | ) | ( | ) | ||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Basic and diluted loss per common share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding, basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
VSEE HEALTH, INC.
(FKA DIGITAL HEALTH ACQUISITION CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT ) EQUITY
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025
| Series A Preferred Stock | Common Stock | Additional Paid- | Accumulated | Non- controlling | Total Stockholders’ (Deficit) | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In Capital | Deficit | Interest | Equity | |||||||||||||||||||||||||
| Balance - December 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Net loss for the three months ended March 31, 2025 | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Payment to shareholder | - | - | - | - | ( | ) | - | - | ( | ) | ||||||||||||||||||||||
| Issuance during the period | - | - | - | - | ||||||||||||||||||||||||||||
| Share based compensation | - | - | - | - | - | |||||||||||||||||||||||||||
| Balance - March 31, 2025 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Net loss for the three months ended June 30, 2025 | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Share based compensation | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Balance - June 30, 2025 | $ | $ | $ | $ | ( | ) | $ | - | $ | ( | ) | |||||||||||||||||||||
| Net loss for the three months ended September 30, 2025 | - | - | - | - | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Issuance during the period | - | - | - | - | ||||||||||||||||||||||||||||
| Balance - September 30, 2025 | $ | | $ | $ | $ | ( | ) | $ | | $ | ) | |||||||||||||||||||||
3
VSEE HEALTH, INC.
(FKA DIGITAL HEALTH ACQUISITION CORP.)
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT ) EQUITY
(UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
| Series A Preferred Stock | Common Stock | Additional Paid-In | Accumulated | Non-controlling | Total Stockholders’ (Deficit) | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Equity | |||||||||||||||||||||||||
| Balance, December 31, 2023 (Restated) | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Net income | — | — | — | — | — | |||||||||||||||||||||||||||
| Balance, March 31, 2024 (Restated) | — | $ | — | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Shares issued to non-controlling interest holders in TAD to obtain | — | — | ( | ) | — | — | ||||||||||||||||||||||||||
| Escrow shares released from stock payable | — | — | — | — | ||||||||||||||||||||||||||||
| Shares issued as conversion of debt of VSee debt holders | — | — | — | — | ||||||||||||||||||||||||||||
| Reverse recapitalization | — | — | ( | ) | — | — | ( | ) | ||||||||||||||||||||||||
| Shares issued as consideration to iDoc shareholders | — | — | — | — | ||||||||||||||||||||||||||||
| Shares issued as conversion of iDoc debt as part of the consideration in the acquisition | — | — | — | — | ||||||||||||||||||||||||||||
| Preferred shares issued as conversion of iDoc debt as part of the consideration in the acquisition | — | — | — | — | — | |||||||||||||||||||||||||||
| Shares issued as conversion of VSee debt with Dominion in connection with the Exchange agreement | — | — | — | — | ||||||||||||||||||||||||||||
| Preferred shares issued as conversion of VSee debt as contemplated by the business combination transaction | — | — | — | — | — | |||||||||||||||||||||||||||
| Preferred shares issued as conversion of DHAC sponsor debt as contemplated by the business combination transaction | — | — | — | — | — | |||||||||||||||||||||||||||
| Preferred shares issued as conversion of Underwriting Fee as contemplated by the business combination transaction | — | — | — | — | ||||||||||||||||||||||||||||
| Shares issued to settled iDoc debt holders | — | — | — | — | ||||||||||||||||||||||||||||
| Stock based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||
| Balance, June 30, 2024 (Restated) | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Shares issued upon conversion of portion of Additional Bridge Notes | — | — | — | — | ||||||||||||||||||||||||||||
| Shares issued as part of stock grants to vendors | — | — | — | — | ||||||||||||||||||||||||||||
| Shares issued upon conversion of portion of Exchange Note | — | — | — | — | ||||||||||||||||||||||||||||
| Warrants and commitment shares issued in connection with the September 2024 Note | — | — | ( | ) | — | — | — | |||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | ) | — | ( | ) | ||||||||||||||||||||||
| Balance, September 30, 2024 (Restated) | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
VSEE HEALTH, INC.
(FKA DIGITAL HEALTH ACQUISITION CORP.)
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine months Ended September 30, 2025
| For the Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| (Restated) | ||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Goodwill impairment charges | ||||||||
| Shares issued as part of stock grants to vendors | ||||||||
| Loss on issuance of financial instruments | ||||||||
| Original issue discount and interest accrued on Quantum Convertible Note | ||||||||
| Change in fair value of financial instruments | ( | ) | ( | ) | ||||
| Loss on extinguishment of loan | ||||||||
| Deferred income tax assets and liabilities | ( | ) | ||||||
| Amortization of discount on note payable | ||||||||
| Allowance for expected credit losses | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Amortization of right-of-use assets | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Due from related party | ||||||||
| Prepaids and other current assets | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Deferred revenue | ( | ) | ||||||
| Due to related parties | ( | ) | ||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Income tax payable | ||||||||
| Net cash used in operating activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Cash acquired from Business Combination- iDoc | ||||||||
| Purchases of fixed assets | ( | ) | ( | ) | ||||
| Net cash used in investing activities | $ | ( | ) | $ | ( | ) | ||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from Quantum Convertible Note | ||||||||
| Proceeds from September 2024 Convertible Note | ||||||||
| Proceeds from reverse recapitalization with DHAC | ||||||||
| Repayment on advances of related party | ( | ) | ||||||
| Repayment on Extension Note | ( | ) | ||||||
| Repayment on Additional Bridge Financing | ( | ) | ||||||
| Repayment on Encompass Purchase liability | ( | ) | ||||||
| Repayment on note payable | ( | ) | ( | ) | ||||
| Payment to shareholder | ( | ) | ||||||
| Proceeds from issuance of common stock | ||||||||
| Proceeds from notes issued during the period | ||||||||
| Payments on factoring payable | ( | ) | ( | ) | ||||
| Payments due on acquisition purchase | ( | ) | ||||||
| Payments on financing lease liability | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | $ | $ | ||||||
| NET CHANGE IN CASH | ||||||||
| Cash, Beginning of the period | ||||||||
| CASH, END OF THE PERIOD | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest expense | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Net liabilities acquired in reverse merger | $ | $ | ( | ) | ||||
| Shares issued to DHAC Sponsor group for debt conversion | $ | $ | ||||||
| Shares issued to A.G.P. Underwriter for debt conversion | $ | $ | ||||||
| Shares issued to VSee debt holders for debt conversion | $ | $ | ||||||
| Fair value of shares issued in iDoc acquisition | $ | $ | ||||||
| Shares issued as principal payment of Additional Bridge Notes | $ | $ | ||||||
| Shares issued as principal payment of Exchange Note | $ | $ | ||||||
| Shares issued to acquire non-controlling interest in TAD | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
VSEE HEALTH, INC.
(FKA DIGITAL HEALTH ACQUISITION CORP.)
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 health information, offering customizable and white-labeled solutions for healthcare providers, employers, and hospital systems.
On June 24, 2024, the Company
completed a business combination (the “Business Combination”) with VSee Lab, Inc. (“Vsee Lab”) and iDoc Virtual
Telehealth Solutions, Inc (“iDoc”). As part of the transaction, Digital Health Acquisition Corp. changed its name to VSee
Health, Inc. The transaction was accounted for as a reverse recapitalization, with VSee Lab, Inc. identified as the accounting acquirer.
Various equity and debt instruments were converted into common and preferred shares, and the Company entered into an equity line of credit
agreement for up to $
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. Refer to Note 4 for additional details.
Going Concern
As disclosed in the prior year’s consolidated financial statements, there were significant doubts about the Company’s ability to continue as a going concern due to persistent operating losses during the past two years, and a deteriorating liquidity position from the Company generating negative operating cash.
Management has undertaken a series of measures to address these concerns, which include:
| ● | Revenue Enhancement Strategies: The Company including the acquisition of iDoc on June 24, 2024 (See Note 4 - Business Combination) won new contracts with larger hospitals and entered new markets, demonstrating the Company’s ability to generate positive revenue growth from its robust pipeline. During the third quarter, service commenced to a client in the new market, driving positive future revenue growth. |
| ● | Additional Financing: The Company is in negotiations with an investor for additional financing, which is expected to support its working capital needs and fund its growth initiatives. |
| ● | ELOC Financing: The Company has an equity line of credit purchase agreement (“ELOC Agreement) dated November 21, 2023, with the right to issue and sell to the investor listed therein, from time to time, and the investor shall purchase from the Company, up to the lesser of (i) $ |
Management has determined
that the liquidity condition and historical operating losses raises substantial doubt about its ability to continue as a going concern
for a period of time of least
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.
6
Note 2 Restatement of Previously Issued Financial Statements
Restatement of the Interim Condensed Consolidated Financial Statements of VSee Health, Inc. as of September 30, 2024
During the preparation of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, the Company identified certain errors with the recognition and measurement of certain assets and liabilities in the condensed consolidated balance sheet of the Company as of September 30, 2024 and the proper recognition and measurement of certain transactions in the condensed consolidated statements of operations for the three and nine months ended September 30, 2024. The Company determined that the previously issued condensed consolidated interim financial statements of the Company on Form 10-Q for the period ended September 30, 2024 are materially misstated and should no longer be relied upon. The identified errors impacting the Company’s previously issued Form 10-Q for the period ended September 30, 2024 include:
| ● | The failure to identify and accrue for sales and use taxes in relation to its revenue-generating transactions to taxable customers, as described in the 2023 financial statement restatement matters above. As a result of correcting this error, the Company recorded an accrual of $ |
| ● | The incorrect cutoff of a revenue transaction with a customer as of December 31, 2023, as described in the 2023 financial statement restatement matters above. Correcting this error did not have an impact on the condensed consolidated balance sheet as of September 30, 2024. As the related contract was completed during March 2024, the Company recognized all deferred revenue from prior periods related to the arrangement in this period. This resulted in an increase of $ |
| ● | The incorrect recognition of accrued expenses of DHAC as of the Business Combination date (June 24, 2024). The Company identified a total of $ |
| ● | The incorrect recognition of accrued expenses of iDoc as of the Business Combination date (June 24, 2024). The Company identified a total of $ |
| ● | The incorrect recognition of certain compensation-related obligations of iDoc as of the Business Combination date (June 24, 2024). The Company identified a total of $ |
7
| ● | The incorrect recognition of a commitment fee incurred in relation to the ELOC as a deferred expense and an accrued liability as of June 30, 2024. The commitment fee was payable in the form of a convertible note which was issued during July 2024, however, the Company determined that the fee was not earned by the counterparty or payable by the Company until July 2024 and as such should not have been recognized as of June 30, 2024. Additionally, the Company determined that the commitment fee should have been expensed when incurred, as the related ELOC financial instrument is classified as a liability in the Company’s consolidated balance sheets. In correcting this error, the Company recorded an adjustment of $ |
| ● | The incorrect classification of the acquisition of the remaining non-controlling interest of TAD within equity as of the Business Combination date. On June 24, 2024, the Company acquired the remaining interests in TAD. In derecognizing the non-controlling interest upon the acquisition, the Company incorrectly recorded the derecognition to accumulated deficit and not additional paid-in capital. In correcting this error, the Company recorded an adjustment to decrease additional paid-in capital and to decrease the accumulated deficit by $ |
| ● | The incorrect recognition of accrued interest related to certain convertible note obligations that were recorded at fair value in the Company’s financial statements. The Company identified that it was accruing interest on these obligations (included in accounts payable and accrued liabilities) and also including accrued interest in the fair value estimate of the respective convertible note obligations (as part of the remeasurement of each instrument at fair value at each reporting date). In correcting this error, the Company recorded an adjustment to decrease accrued interest and to decrease the accumulated deficit by $ |
| ● | The incorrect recognition of grant date fair value for certain options issued as of June 24, 2024. The Company determined that it utilized an incorrect expected term assumption in the valuation of the stock options granted on this date, which upon correction also resulted in an adjustment to other inputs (risk-free rate, volatility) that were related to the expected term assumption. The changes to these fair value measurement inputs results in a change in the grant date fair value of stock options that were fully vested at issuance from $ |
| ● | The incorrect recognition and measurement of accounts receivable balances acquired from iDoc as of the Business Combination date. The Company identified an additional $ |
| ● | The incorrect recognition of certain income tax-related balances as of the Business Combination date. The Company identified an aggregate $ |
| ● | The incorrect recognition and measurement of income tax-related
balances as of and for the period ended September 30, 2024, as a result of the aggregate income tax effect of the restatement adjustments
described above. In order to properly recognize the income tax effect, the Company recorded a $ |
8
The following tables summarize the effect of the above restatement items on each financial statement line item in the VSee Health condensed consolidated financial statements for the quarter ended September 30, 2024. While not presented below, the Company’s condensed consolidated statement of changes in stockholders’ equity (deficit) has also been restated to reflect the cumulative adjustments to the condensed consolidated balance sheet and condensed consolidated statement of operations as described above:
| Consolidated Balance Sheet as of September 30, 2024 | As Reported | Adjustment | As Restated | |||||||||
| Accounts receivable | $ | $ | ( | ) | $ | |||||||
| Prepaids and other current assets | ( | ) | ||||||||||
| Total current assets | ( | ) | ||||||||||
| Total assets | ( | ) | ||||||||||
| Accounts payable and accrued liabilities | ||||||||||||
| Common stock issuance obligation | ||||||||||||
| Income taxes payable | ( | ) | ||||||||||
| Total current liabilities | ||||||||||||
| Deferred tax liability | ||||||||||||
| Total liabilities | ||||||||||||
| Additional paid-in capital | ( | ) | ||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total stockholders’ equity (deficit) | ( | ) | ||||||||||
| Total liabilities and stockholders’ equity (deficit) | $ | $ | ( | ) | $ | |||||||
| Consolidated Statement of Operations for the three months ended September 30, 2024 | As Reported | Adjustment | As Restated | |||||||||
| Revenues, technical engineering fees | $ | $ | $ | |||||||||
| Total Revenue | ||||||||||||
| Cost of revenues | ( | ) | ||||||||||
| Gross margin | ||||||||||||
| Compensation and related benefits | ||||||||||||
| General and administrative expenses | ||||||||||||
| Goodwill impairment charges | ||||||||||||
| Transaction expenses | ( | ) | ||||||||||
| Total operating expenses | ||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Loss on extinguishment | ( | ) | ( | ) | ||||||||
| Loss on issuance of financial instruments | ( | ) | ( | ) | ||||||||
| Total other income (expense) | ( | ) | ||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Benefit (provision) from income tax | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Net loss attributable to stockholders | ( | ) | ( | ) | ( | ) | ||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Consolidated Statement of Operations for the nine months ended September 30, 2024 | As Reported | Adjustment | As Restated | |||||||||
| Revenues, technical engineering fees | $ | $ | $ | |||||||||
| Total Revenue | ||||||||||||
| Cost of revenues | ||||||||||||
| Gross margin | ||||||||||||
| Compensation and related benefits | ||||||||||||
| General and administrative expenses | ||||||||||||
| Goodwill impairment charges | ||||||||||||
| Transaction expenses | ( | ) | ||||||||||
| Total operating expenses | ||||||||||||
| Net operating loss | ( | ) | ( | ) | ( | ) | ||||||
| Interest expense | ( | ) | ( | ) | ||||||||
| Loss on extinguishment | ( | ) | ( | ) | ||||||||
| Loss on issuance of financial instruments | ( | ) | ( | ) | ( | ) | ||||||
| Total other income (expense) | ( | ) | ||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Benefit from income tax | ( | ) | ||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||
| Net loss attributable to stockholders | ( | ) | ( | ) | ( | ) | ||||||
| Basic and diluted net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
9
| Consolidated Statement of Cash Flows for the nine months ended September 30, 2024 | As Reported | Adjustment | As Restated | |||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Goodwill impairment charges | ||||||||||||
| Loss on extinguishment | ( | ) | ||||||||||
| Loss on issuance of financial instruments | ||||||||||||
| Stock-based compensation | ||||||||||||
| Deferred tax asset and liabilities | ( | ) | ( | ) | ||||||||
| Accounts receivable | ( | ) | ( | ) | ( | ) | ||||||
| Prepaids and other current assets | ( | ) | ( | ) | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ( | ) | ||||||
| Income tax payable | $ | $ | ( | ) | $ | |||||||
Note 3 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. For periods prior to the Business Combination as disclosed in Note 1 above, the reported share and per share amounts have been retroactively converted by the applicable exchange ratio. See Note 12 - Equity for additional information.
The unaudited condensed consolidated
financial statements include the accounts of VSee Health, Inc. and its subsidiaries, VSee Lab and iDoc, which are both
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 September 30, 2025, and December 31, 2024, its results of operations, changes in stockholders’ (deficit) equity, and statements of cash flows for the three and nine months ended September 30, 2025, and 2024, in conformity with U.S. GAAP. The interim results for the three and nine months ended September 30, 2025, are not necessarily indicative of the results to be expected for the year ending December 31, 2025 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, 2024 (the “December 31, 2024 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 in December 31, 2024 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.
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.
10
Management has determined
that the Company has
The Company’s reporting segments are Healthcare Technology (“Technology”) and Telehealth Services (“Telehealth”). VSee Lab is included in Technology, while iDoc is included in Telehealth.
Use of Estimates
The preparation of the Company’s 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 fair value of the ELOC Agreement, the Exchange Note, the Additional Bridge Note, the Quantum Convertible Note, and the September 2024 Convertible Note (each of these notes as defined in Note 8 Line of Credit and Notes Payable, Net of Discount), 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, 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, which 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 Company derives revenue from business services associated with direct tele-physician provider patient fee services, telehealth services, professional services and technical engineering services, subscription 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.
11
Contractual terms for subscription
services are typically
The Company also has service contracts with hospitals or hospital systems, physician practice groups, and other users. These customer contracts typically range from to 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 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 stand alone 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.
Subscription Service Contracts and Performance Obligation
The Company recognizes subscription revenue over time as customers receive and consume services. Each module is a distinct performance obligation, delivered consistently each month. Revenue begins when access is provided and is recognized using a time-based output method.
Upfront non-refundable fees are deferred and amortized over the subscription term, as they do not represent separate performance obligations. Deferred revenue consists of the unamortized balance of nonrefundable upfront fees which are classified as current or non-current based on the timing company expects to recognize revenue.
Modules are distinct and not interdependent, allowing standalone benefit. Pricing is fixed per user and based on the most likely amount expected to be collected. Implementation fees are typically paid upfront.
Professional Services and Technical Engineering Fees and Performance Obligation
Performance obligations under contracts for professional services may include maintenance, hardware, clinician fees, and technical engineering services. These services are generally distinct in the context of the contract and are accounted for as separate performance obligations.
For technical engineering services, performance obligations are typically satisfied over time based on the specified quantity of professional service hours provided to the customer. For maintenance, hardware, and clinician fees, revenue is recognized either over time or at a point in time or when control transfers to the customer. Maintenance and clinician fees are generally recognized over time as services are rendered, while hardware revenue is recognized at a point in time when control transfers to the customer.
12
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.
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 transaction price is based on standard charges, adjusted for third-party payor agreements and implicit price concessions for uninsured patients.
Revenue is presented net of estimated contractual adjustments, service credits, and expected credit losses. These adjustments reflect the difference between billed amounts and expected consideration, based on historical collection experience, market conditions, and other factors. The Company monitors receivables and records estimated allowances to account for these differences. Actual results may differ materially from estimates.
All telemedicine contracts for patient reimbursement fees are directly billed to payors by the Company. The Company earns patient fees by providing high acuity patient care solutions. Performance obligations are met when the Company’s physicians provide professional medical services to patients at the client site, which is deemed a transfer of goods and services to respective patients. Revenue is determined based on telemedicine billing code(s) associated with the professional service rendered.
The Company earns revenue 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.
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 for telemedicine care are based on services delivered through hardware and software integration, including multi-participant video conferencing and electronic communication available 24 hours per day, seven days per week for the duration of the contract. The Company provides administrative, hardware, software support, and physician coverage ranging from 12 to 24 hours per day. Revenue from telemedicine care services is included in telehealth fees in the condensed consolidated financial statements.
Revenue is recognized when the Company provides administrative, business, and medical records and reports as required. Variable consideration is estimated using the expected value or most likely amount method, based on legal enforceability, performance, and available information. Management estimates revenue based on expected customer life or performance period.
13
Revenue recognition begins when tele-physician service hours are provided. Start-up nonrefundable payments for training, hardware/software setup, and integration are recognized upon completion of implementation. These start-up services are separable and recognized over time using the input method.
Institutional Fees Service Contracts and Performance Obligation
Contract For Electroencephalogram (“EEG”) Professional Interpretation Services
Performance obligations are based on the number of EEG interpretations provided monthly, which are distinct and separately identifiable within the contract. The Company’s physicians use EEG telemedicine equipment supplied by the Company to deliver these services. Revenue is recognized monthly based on the number of interpretations performed and contractual rates and is included in institutional fees in the condensed consolidated financial statements.
Most contracts, including those with the Company’s top customers, involve fixed monthly fees covering telemedicine consultations, EEG interpretation, platform software, and hardware. These fees include predetermined physician coverage hours and agreed-upon rates for interpretation and software services. The Company also provides equipment, training, maintenance, and support for service delivery.
The Company commences revenue recognition on EEG professional interpretation services when the Company satisfies its performance obligation to provide professional interpretation monthly.
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 dilutive 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.
| Three months Ended September 30, | Nine months Ended September 30, | |||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| (Restated) | (Restated) | |||||||||||||||
| Net loss | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||
| Weighted average shares outstanding – basic and diluted | ||||||||||||||||
| Net loss per share – basic and diluted | $ | ( | ) | ( | ) | $ | ( | ) | ( | ) | ||||||
| Excluded securities:(1) | ||||||||||||||||
| Public Warrants | ||||||||||||||||
| Private Warrants | ||||||||||||||||
| Bridge Warrants | ||||||||||||||||
| Extension Warrants | ||||||||||||||||
| September 2024 Warrants | ||||||||||||||||
| Quantum Convertible Note, related party (2) | ||||||||||||||||
| Additional Bridge Notes (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) | ||||||||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
| (6) |
14
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
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 a result of the acquisition of iDoc and at the closing
of the Business Combination on June 24, 2024, the Company assumed the allowance for credit losses of $
As of September 30, 2025,
and December 31, 2024, respectively, the allowance for credit losses was $ and $
The following table presents the Company’s allowance for credit losses at September 30, 2025, and December 31, 2024:
| For the period ended | ||||||||
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| Beginning allowance for credit losses | $ | $ | ||||||
| Allowance for credit losses, due to acquisition | ||||||||
| Provision for credit losses | ||||||||
| 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.
15
Deferred Revenue
The timing of revenue recognition, billing, and cash collections results in billed accounts receivable and deferred revenue, primarily attributable to the unamortized balance of nonrefundable upfront fees related to subscription services, which are classified as current and non-current based on the timing of when the Company expects to recognize revenue on the condensed consolidated balance sheets. Accounts receivable are recognized in the period in which the Company’s right to the consideration is unconditional. Contract liabilities consist of billing in excess of revenue recognized primarily related to deferred revenue.
As of September 30, 2025
and December 31, 2024, the Company had $
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 15 for additional information on assets and liabilities measured at fair value.
Warrant Instruments
The Company classifies warrants as equity or liability instruments based on their terms and guidance under ASC 480 (Distinguishing Liabilities from Equity) and ASC 815 (Derivatives and Hedging). This assessment considers whether warrants are freestanding financial instruments, meet liability definitions, and qualify for equity classification.
The evaluation is performed at issuance and each quarter-end. Warrants meeting equity criteria are recorded in additional paid-in capital. Those not meeting equity criteria are recorded at fair value initially and remeasured each reporting period.
The Company has determined that its Public warrants, private warrants, Bridge Warrants, September 2024 Warrants and Extension Warrants are freestanding and meet equity classification under ASC 815 (Derivatives and Hedging) and are therefore classified in equity.
16
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 its 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 its 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 list (See Note 4 – Business Combination). Developed technology and customer relationships
are amortized using the straight-line method over the
| Estimated | September 30, | December 31, | ||||||||
| Useful Life | 2025 | 2024 | ||||||||
| Customer relationships | ||||||||||
| Developed technology | ||||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||||
Expected amortization expense is as follows:
| Year ending December 31, 2025 (Remaining three months) | $ | |||
| Year ending December 31, 2026 | ||||
| Year ending December 31, 2027 | ||||
| Year ending December 31, 2028 | ||||
| Year ending December 31, 2029, and thereafter | ||||
| Total | $ |
For the three months ended
September 30, 2025 and September 30, 2024, the Company recorded amortization expense of $
17
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.
Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Effective
ASU 2023-09: In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”), which will require the Company to disclose specified additional information in its income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 will also require the Company to disaggregate its income taxes paid disclosure by federal, state and foreign taxes, with further disaggregation required for significant individual jurisdictions. ASU 2023-09 will become effective for annual periods beginning after December 15, 2024. The Company is still reviewing the impact of ASU 2023-09.
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.
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.
The Company continues to evaluate the impact of new accounting pronouncements, including enhanced disclosure requirements, on its business processes, controls and systems.
Note 4 Business Combination
Acquisition of iDoc Telehealth Solutions, Inc.
On June 24, 2024, VSee Health, Inc. (formerly Digital Health Acquisition Corp.) completed the Business Combination with VSee Lab and iDoc, a provider of tele-intensive acute and neurocritical care services. The overall transaction was accounted for as a reverse recapitalization between DHAC and VSee Lab, with VSee Lab identified as the accounting acquirer. Separately, the acquisition of iDoc was treated as a business combination under Accounting Standards Codification 805, with VSee Lab as the accounting acquirer and iDoc as the acquiree.
The acquisition enhanced the Company’s platform by integrating iDoc’s clinical capabilities in managing critically ill patients with complex neurological, cardiac, and pulmonary conditions. The transaction supported the Company’s strategy to expand its telehealth offerings in a rapidly evolving market.
18
At closing of the Business
Combination, the Company issued
This represents a total of
The purchase price was allocated
to assets including developed technology ($
Note 5 Leases
Operating Leases
Operating lease right-of-use assets are summarized below.
| September 30, 2025 | December 31, 2024 | |||||||
| Office lease | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use assets, net | $ | $ | ||||||
Operating lease liabilities are summarized below:
| September 30, 2025 | December 31, 2024 | |||||||
| Office lease | $ | $ | ||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long term portion | $ | $ | ||||||
As of September 30, 2025
and December 31, 2024, $
Future minimum rent payments under the operating lease are as follows:
| Total | ||||
| Year ending December 31, 2025 (Remaining three months) | $ | |||
| Year ending December 31, 2026 | ||||
| Year ending December 31, 2027 | ||||
| Year ending December 31, 2028 | ||||
| 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 nine months ended September 30, 2025, which are included in general and administrative expenses on the condensed consolidated statements of operations are set forth below.
| For the Three Months Ended | ||||||||
| September 30, 2025 | September 30, 2024 | |||||||
| Operating lease expense: | ||||||||
| Operating lease expense | $ | $ | ||||||
| Total operating lease expense | $ | $ | ||||||
| For the Nine Months Ended | ||||||||
| September 30, 2025 | September 30, 2024 | |||||||
| Operating lease expense: | ||||||||
| Operating lease expense | $ | $ | ||||||
| Total operating lease expense | $ | $ | ||||||
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The weighted average remaining lease term and the weighted average discount rate on the operating leases are set forth below.
| September 30, 2025 | December 31, 2024 | |||||||
| 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. Subsequently, 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. The remaining balance on the forbearance agreement is due
December 10, 2025.
| September 30, 2025 | December 31, 2024 | |||||||
| Equipment lease | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Leased equipment, net | $ | $ | ||||||
Finance lease liabilities are summarized below:
| September 30, 2025 | December 31, 2024 | |||||||
| Equipment lease | $ | $ | ||||||
| Less: current portion | ( | ) | ( | ) | ||||
| Long term portion | $ | $ | ||||||
Future minimum payments under the finance lease are as follows:
| Total | ||||
| Year ending December 31, 2025 (Remaining three months) | $ | |||
| Total future minimum lease payments | ||||
| Less imputed interest | ( |
) | ||
| Present value of payments | $ | |||
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Total finance lease cash
payments made during the three and nine months ended September 30, 2025, were $
Expenses incurred with respect to the Company’s finance leases during the three and nine months ended September 30, 2025, which are included in the condensed consolidated statements of operations are set forth below.
| For the Three Months Ended | ||||||||
| September 30, 2025 | September 30, 2024 | |||||||
| Finance lease amortization | $ | $ | ||||||
| Finance lease interest | ||||||||
| Total finance lease expense | $ | $ | ||||||
| For the Nine Months Ended | ||||||||
| September 30, 2025 | September 30, 2024 | |||||||
| Finance lease amortization | $ | $ | ||||||
| Finance lease interest | ||||||||
| Total finance lease expense | $ | $ | ||||||
The weighted average remaining lease term and the weighted average discount rate on the finance leases are set forth below.
| September 30, 2025 | December 31, 2024 | |||||||
| Weighted average remaining lease term (years)* | ||||||||
| Weighted average discount rate | % | % | ||||||
| * |
Note 6 Accounts Payable and Accrued Liabilities
The components of accounts payable and accrued liabilities are summarized as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued compensation and benefits | ||||||||
| Accrued interest | ||||||||
| Accrued sales and use tax | ||||||||
| Accrued financing lease | ||||||||
| Other accrued liabilities | ||||||||
| $ | $ | |||||||
Note 7 Factoring 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 factoring payable liabilities
from iDoc (See Note 4 – Business Combination). 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.
| 1. | A Future Receipts Sale Agreement, which iDoc entered on June 21, 2023, pursuant to which iDoc sold $ |
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| 2. | A Future Receipts Sale Agreement, which iDoc entered on June 28, 2023, pursuant to which iDoc sold $ |
| 3. | A Future Receipts Sale Agreement, which iDoc entered on October 13, 2023, pursuant to which iDoc sold $ |
Note 8 Line of Credit and Notes Payable, net of discount
The following is a summary of the notes payable as of September 30, 2025 and December 31, 2024:
| September 30, | December 31, | |||||||
| Notes Payable | 2025 | 2024 | ||||||
| Note payable issued November 29, 2021 | $ | $ | ||||||
| Note payable issued December 1, 2021 | ||||||||
| Note payable issued August 18, 2023 | ||||||||
| Note payable issued November 29, 2023 | ||||||||
| May 2025 convertible note | ||||||||
| March 2025 promissory note | ||||||||
| March 2025 convertible note | ||||||||
| September 2025 promissory note | ||||||||
| Total notes payable and line of credit | ||||||||
| 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, 2025 (Remaining three months) | $ | |||
| Year Ending December 31, 2026 | ||||
| Year Ending December 31, 2027 | ||||
| Year Ending December 31, 2028 | ||||
| Year ending December 31, 2029 | ||||
| Thereafter | ||||
| Total | $ |
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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 (See Note 4 – Business Combination).
| (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 $ |
| (3) | On August 3, 2023, iDoc issued a |
| (4) | On August 18, 2023, iDoc issued a |
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Furthermore, on January 12,
2023, VSee Lab issued a
March 2025 Convertible Note
On March 20, 2025, the Company
entered into a Convertible Note Purchase Agreement (the “March 2025 SPA”) with an accredited institutional investor, 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) $
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 of 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.
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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 $
As of September 30, 2025,
and December 31, 2024, the March 2025 Convertible Note’s fair value was $
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 matures 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 Convertible 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 $
25
April 2025 Promissory Note
On April 15, 2025, the Company
issued an unsecured promissory note to FWE CAPITAL LLC (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 $
Refer to the note on May 2025 Convertible Note below.
May 2025 Convertible Note
On May 30, 2025, the Company
issued the May 2025 Convertible Note, which is
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.
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The 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 Note into common stock at a conversion price equal to the lowest Trading Price of a share of the Company’s common stock at any time after the Original Issue Date, with respect to the prepayment amount. 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 May 2025 Convertible Note is not paid when due, the Company shall pay a late fee equal to ten percent (
The May 2025 Convertible Note states that the amount due and owing under the previously outstanding April 2025 Promissory Note is consolidated with the new May 2025 Convertible Note under the terms and conditions set forth therein; this consolidation led to a modification and extinguishment of the original April 2025 Promissory Note, as disclosed separately. Refer to the note above, related to the April 2025 Promissory Note for details.
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 $
As on September 3, 2025
the May 2025 Convertible Note was amended and the principal amount was increased by $
As of September 30, 2025,
the May 2025 Convertible Note’s fair value was $
September 2025 promissory note
On
September 5, 2025, the Company entered into a Master Business Loan Agreement (the “MBLA”) with Change Capital Holdings I,
LLC (“Change Capital”), whereby Change Capital 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, Change Capital made an initial Advance of $
The
MBLA Note may be prepaid at any time by payment of an amount equal to the Initial Advance plus
As of September 30, 2025,
and December 31, 2024, the outstanding balance on the September 2025 Promissory Note is $
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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. As of September
30, 2025, and December 31, 2024, the Company had an outstanding balance of $
Loan Conversions
On November 21, 2023, DHAC, VSee Lab, and/or iDoc, as applicable, entered into Securities Purchase Agreements (the “Conversion SPAs”), certain of which were further amended and restated on February 13, 2024 (the “A&R Loan Conversion SPAs”) with various lenders of each of DHAC, VSee and iDoc, pursuant to which certain indebtedness owed by DHAC, VSee Lab and iDoc would be converted into shares of Series A Preferred Stock pursuant to the Conversion SPAs or shares of common stock of the Company pursuant to the A&R Loan Conversion SPAs at the closing of the Business Combination as further described and set forth below.
| ● | On November 21, 2023, DHAC and VSee Lab entered into a Conversion SPA with Whacky Ventures LLC (“Whacky”), pursuant to which certain loans incurred by VSee Lab to Whacky in the aggregate amount of $ |
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| ● | On November 1, 2023, DHAC and iDoc, entered into a Conversion SPA with Mark E. Munro Charitable Remainder Unitrust (“Munro Trust”) , pursuant to which certain loans incurred by iDoc to Munro Trust in the aggregate amount of $ |
| ● | On November 21, 2023, and as further amended and restated on February 13, 2024, DHAC, VSee Lab and the Bridge Investor, entered into an A&R Loan Conversion SPA, pursuant to which certain loans incurred by VSee Lab to the Bridge Investor in the aggregate amount of $ |
| ● | On November 21, 2023, and as further amended and restated on February 13, 2024, DHAC, iDoc and Tidewater Ventures, LLC (“Tidewater”), entered into an A&R Loan Conversion SPA, pursuant to which certain loans incurred by iDoc to Tidewater in the aggregate amount of $ |
| ● | On November 21, 2023, and as further amended and restated on February 13,2024, DHAC, iDoc and the Bridge Investor, entered into an A&R Loan Conversion SPA, pursuant to which certain loans incurred by iDoc to the Bridge Investor in the aggregate amount of $ |
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
29
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.
For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed the Exchange Note due to the reverse merger with DHAC on June 24, 2024.
As a result of the Business
Combination, the fair value of the Exchange Note on June 24, 2024, was $
On August 8, 2024, $
On November 26, 2024, $
On September 3, 2025, $
As of September 30, 2025,
and December 31, 2024, the Exchange Note’s fair value was $
Additional Bridge Financing
On November 21, 2023, DHAC,
VSee Lab and iDoc entered into an amendment to the Original Bridge SPA (the “Bridge Amendment”), pursuant to which the Bridge
Investor agreed to purchase additional promissory note in the aggregate principal amount 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 Additional Bridge
Notes (each, an “Amortization Payment”). As a result, the Additional Bridge 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 Payment provided for in in
the Additional Bridge Notes, or, subject to the Company complying with the equity conditions listed in the Additional Bridge Notes on
the date of such Amortization Payment, in common stock issued at
30
The Additional Bridge 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 Additional Bridge Notes are 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.
For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed the Additional Bridge Notes due to the reverse merger with DHAC on June 24, 2024.
As a result of the Business
Combination, the fair value of the Additional Bridge Notes on June 24, 2024, was $
On August 2, 2024, holders
of the Additional Bridge Notes converted an aggregate $
On November 26, 2024, the
remaining $
Extension Note
On May 5, 2023, DHAC
entered into a securities purchase agreement (the “Extension Purchase Agreement”) with an institutional investor (the “Holder”).
Pursuant to the Extension Purchase Agreement, the Company issued the holder a
For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed certain Extension Note due to the reverse merger with DHAC on June 24, 2024. The Extension Note was paid off in full by the Company in June 2024 and was no longer outstanding as of September 30, 2025.
The Company reviewed the Extension Warrants and Extension Shares issued in connection with the Extension Purchase Agreement under ASC 815 and concluded that the Extension Warrants are not in scope of ASC 480 and are not subject to the Derivative guidance under ASC 815. The Extension Warrants and the Extension Shares should be recorded as equity. As such the principal value of the Extension Note was allocated using the relative fair value basis of all three instruments. As the Extension Warrants were issued with various instruments the purchase price needs to be allocated using the relative fair value method (i.e., warrant at its fair value and the common stock at its fair value, the promissory note at its principal value allocated using the relative fair value of the proceeds received and applied proportionally to the equity classified stock, warrants and promissory note).
The Company reviewed the
contingent early repayment option granted in the Extension Note under ASC 815 and concluded that as a result of the significant
discount granted in the note the contingent repayment provision is therefore considered an embedded derivative that should be bifurcated
from the debt host. Accordingly, in accordance with ASC 470-20, the Company allocated the Extension Note proceeds between the Extension
Note and the Bifurcated Derivative, using the residual method by allocating the principal first to fair value of the embedded derivative
and then to the debt. Accordingly, the fair value of the embedded derivative at June 24, 2024, was $
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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 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 $
As of September 30, 2025,
and December 31, 2024, the Quantum Convertible Note’s fair value was $
ELOC / Equity Financing
On November 21, 2023,
DHAC entered into the ELOC Agreement 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 $
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For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed the ELOC Agreement due to the reverse merger with DHAC and iDoc on June 24, 2024.
The Company has analysed 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 $
As a result of the Business
Combination, the fair value of the ELOC Agreement on June 24, 2024, was $
During the year ended December
31, 2024, pursuant to the ELOC Agreement and the Company’s purchase notices thereof, the Bridge Investor purchased an aggregate
of
On March 20, 2025, the Company
entered into Amendment No. 1 to the ELOC Agreement, originally dated November 21, 2023, which modifies the floor price to $
The ELOC Agreement continues to be treated as a liability measured at fair value, with ongoing remeasurement at each reporting date until settlement. The amendment does not introduce any new obligations or penalties for non-usage.
The fair value of the equity
contract was $
ELOC Commitment Fee Note
Pursuant to the ELOC Agreement,
DHAC agreed to issue to the investor, as a commitment fee for this equity purchase transaction, a senior unsecured note in a principal
amount of $
On July 2, 2024, the Company issued to the Bridge Investor the “ELOC Commitment Fee Note”. The original maturity date of the ELOC Commitment Fee Note was September 22, 2024. The conversion right is exercisable by the Bridge Investor at any time after issuance and includes certain standard antidilution adjustments. Upon the occurrence of an event of default, the Bridge Investor may require repayment in cash or in shares at its discretion, in an amount representing the greater of the outstanding principal balance and any accrued unpaid fees, or the value of the conversion shares issuable multiplied by the highest closing price for the Company’s common stock during the period from the event of default to conversion.
The Company elected to account
for the ELOC Commitment Fee Note at fair value under the fair value option and estimated its fair value to be $
On September 30, 2024, the Company and the Bridge Investor mutually agreed to extend the maturity date of the ELOC Commitment Fee Note from September 23, 2024 to December 31, 2024. The Company accounted for the extension of the maturity date as an extinguishment.
33
In December 2024, the Bridge
Investor fully converted this note into
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 Convertible Note, the Company also issued a warrant to the investor to purchase up to
During the year ended December
31, 2024, the Company incurred approximately $
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 $
As of September 30, 2025 and
December 31, 2024, the September Note’s fair value was $
Encompass Purchase Liability
As a result of the acquisition
of iDoc and at the closing of the Business Combination on June 24, 2024, the Company assumed the principal balance on an acquisition purchase.
On January 1, 2022, iDoc acquired
34
Note 9 Related Party
Related Party Transactions by VSee Labs
Notwithstanding the legal form of the business combination pursuant to the Business Combination Agreement, since the Business Combination was accounted for as a reverse recapitalization between VSee Lab and DHAC, and VSee lab as the accounting acquirer and iDoc as the accounting acquiree and the historical comparative financial information prior to June 24, 2024 as presented in this quarterly report is that of VSee Lab, the following related party transactions incurred by VSee Lab were reported hereby.
| (1) | During the year ended December 31, 2022, employees
subscribed $ |
| (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 |
Related Party Transactions by iDoc
For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed the following related party transactions incurred by iDoc due to acquisition of iDoc on June 24, 2024 (See Note 4 – Business Combination).
| (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 September 30, 2025 and were $ |
| (2) | A note receivable that was issued and sold on September 1, 2022, from iDoc to the then CEO of iDoc, Imoigele Aisiku, with a principal balance of $ |
35
| (3) | iDoc issued a promissory note on May 15, 2023, with a principal balance of $ |
| (4) | On March 28, 2024, iDoc issued and sold a secured convertible promissory note in the principal amount of $ |
Related Party Transactions by DHAC
For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed the following related party transactions incurred by DHAC due to the reverse merger with DHAC on June 24, 2024 (See Note 12 – Equity).
| (1) | On October 24, 2022, DHAC issued and sold an unsecured promissory note in the aggregate principal amount of $ |
| (2) | On February 2, 2023, SCS Capital Partners LLC, a Sponsor affiliate issued a $ |
| (3) | SCS, LLC, as the administrator of DHAC, incurred monthly office management and other operating expenses since the inception of DHAC. As of November 21, 2023, a total of $ |
| (4) | 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 |
| (5) | 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 $ |
36
| (6) | On June 24, 2024, DHAC owed the Sponsor and certain Sponsor affiliates $ |
| (7) | On December 13, 2024, the Company issued |
Note 10 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.
On July 25, 2024, the Company was notified of a lawsuit filed against it. The plaintiffs’ claims arose out of an alleged breach of contract and unjust enrichment. The plaintiffs are seeking payment under the promissory notes, payments related to the breach of the Encompass Acquisition Agreement, prejudgment and post judgment interest, and reasonable attorneys’ fees. In response to this lawsuit, the Company, through its attorney, denied all allegations of breach of contract and unjust enrichment, and filed a counterclaim seeking breach of contract on the part of plaintiffs for failure to pay amounts owed to Encompass for services it rendered to plaintiffs, and breach of contract for failure to pay a corporate credit card bill, promissory estoppel, and unjust enrichment. The lawsuit is currently pending in federal court before the US District Court for the District of Colorado. The parties began engaging in settlement discussions shortly after the complaint was served and are still actively engaged in such discussions.
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 unfavourable outcome is probable and can be reasonably assessed, it establishes the necessary accruals.
37
For accounting purposes, it was treated that the Company (as the successor of VSee Lab for accounting purposes) acquired and assumed the following commitments by iDoc due to the reverse merger with DHAC and iDoc on June 24, 2024 (See Note 4 – Business Combination).
| (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 $ |
| (4) | On November 1, 2023, the iDoc entered a forbearance agreement related to the promissory note and line of credit issued by a bank on November 29, 2021, and its finance leases. (See Note 8 – Line of Credit and Notes Payable). Pursuant to the forbearance agreement, effective November 1, 2023, the interest rate on the promissory note and the line of credit is payable monthly at |
| (5) | VSee Lab has a reseller agreement with a vendor to generate revenue opportunities in the international market. As of September 30, 2025, and December 31, 2024, the Company (as the successor of VSee Lab for accounting purposes) has an unpaid commitment of $ |
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 Incentive 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 September 30, 2025, and December 31, 2024, the Company was unaware of any material asserted or unasserted claims concerning these indemnity obligations.
Concentrations of Credit Risk
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.
38
Major Customer Concentration
The Company has
The Company has
Major Vendor Concentration
The Company had
Note 11 Income Taxes
The components of our income/ (loss) before income taxes were as follows:
| For the nine months ended | ||||||||
| September 30, 2025 |
September 30, 2024 (Restated) |
|||||||
| United States | $ | ( |
) | $ | ( |
) | ||
| Total | $ | ( |
) | $ | ( |
) | ||
| For the three months ended | ||||||||
| September 30, 2025 |
September 30, 2024 (Restated) |
|||||||
| United States | $ | ( |
) | $ | ( |
) | ||
| Total | $ | ( |
) | $ | ( |
) | ||
For the nine months ended
September 30, 2025, and September 30, 2024, the Company recorded income tax benefit/ (provision) of $
For the three months ended
September 30, 2025, and September 30, 2024, the Company recorded income tax benefit/ (provision) of $
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.
The Company does not have any uncertain income tax positions as at September 30, 2025, and December 31, 2024.
39
Note 12 Equity
Preferred Stock
The Company has
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.
Common Stock
The Company is authorized
to issue
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 September 30, 2025,
there was no unrecognized compensation cost. The value of the fully vested options which were included as part of the recapitalization
were valued at $
40
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 September 30, 2025 and
December 31, 2024,
NOTE 13 Warrants
DHAC Assumed Warrants
The Company has analysed 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 | Total | |||||||||||||||||||
| Outstanding, December 31, 2024 | ||||||||||||||||||||||||
| Issued | ||||||||||||||||||||||||
| Exercised | ||||||||||||||||||||||||
| Outstanding, September 30, 2025 | ||||||||||||||||||||||||
| Exercisable, September 30, 2025 | ||||||||||||||||||||||||
| 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
No fractional shares will be issued upon exercise of the warrants. If, upon exercise of the warrants, a holder would be entitled to receive a fractional interest in a share, the Company will, upon exercise, round up to the nearest whole number the number of shares of common stock to be issued to the warrant holder.
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
NOTE 14 Reportable segments
Subsequent to the Business
Combination in June 2024 (see Note 4 - Business Combination), the Company has
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The CODM reviews gross margin and income (loss) from operations from our reportable segments to evaluate budgets and forecasts, assess actual performance and allocate resources. The CODM 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 CODM also reviews the operating segment’s assets, which mainly includes review of the accounts receivable accounts.
Our reportable segments are described below. The Company has no inter-segment revenues.
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.
Healthcare Technology - The 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. The 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. The 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 accounting policies of our reportable segments are 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.
Revenue and costs are generally
directly attributed to our segments, based on the historical separation of these
Summary information regarding the Company’s operating segments along with the reconciliation of the Company’s consolidated segment operating income to consolidated earnings before income taxes is as follows for the nine months ended September 30, 2025 and September 30, 2024:
| For the nine months ended September 30, 2025 | Technology | Telehealth | Total | |||||||||
| Revenues: | ||||||||||||
| Subscription fees | ||||||||||||
| Professional services and other fees | ||||||||||||
| Technical engineering fees | ||||||||||||
| Patient fees | ||||||||||||
| Telehealth fees | ||||||||||||
| Institutional fees | ||||||||||||
| Total revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Segment gross margin | $ | $ | $ | |||||||||
| Less (1): | ||||||||||||
| Compensation and related benefits | ||||||||||||
| General and administrative | ||||||||||||
| Segment operating loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Reconciliation to loss before income taxes: | ||||||||||||
| Unallocated corporate overhead expenses | ( | ) | ||||||||||
| Interest expense | ( | ) | ||||||||||
| Other income, net | ||||||||||||
| Change in fair value of financial instruments | ||||||||||||
| Loss on extinguishment of loan | ( | ) | ||||||||||
| Loss on issuance of financial instruments | ( | ) | ||||||||||
| Loss before provision for income taxes | $ | ( | ) | |||||||||
| (1) |
43
| For the nine months ended September 30, 2024 | Technology | Telehealth | Total | |||||||||
| Revenues: | ||||||||||||
| Subscription fees | ||||||||||||
| Professional services and other fees | ||||||||||||
| Technical engineering fees | ||||||||||||
| Patient fees | ||||||||||||
| Telehealth fees | ||||||||||||
| Institutional fees | ||||||||||||
| Total revenues | $ | $ | $ | |||||||||
| Cost of revenues | ||||||||||||
| Segment gross margin | $ | $ | $ | |||||||||
| Less (1): | ||||||||||||
| Compensation and related benefits | ||||||||||||
| General and administrative expenses | ||||||||||||
| Goodwill impairment charges | ||||||||||||
| Transaction expenses | ||||||||||||
| Segment operating income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Reconciliation to loss before income taxes: | ||||||||||||
| Unallocated corporate overhead expenses | ( | ) | ||||||||||
| Interest expense | ( | ) | ||||||||||
| Change in fair value of financial instruments | ||||||||||||
| Loss on extinguishment of loan | ( | ) | ||||||||||
| Loss on issuance of financial instruments | ( | ) | ||||||||||
| Loss before benefit from income taxes | $ | ( | ) | |||||||||
| (1) | The significant expense categories and amounts align with the segment-level information that is regularly provided to the CODM. |
The summary information regarding the reportable segment total assets at September 30, 2025, and December 31, 2024, are as follows:
| September 30, 2025 | December 31, 2024 | |||||||
| Total assets | ||||||||
| Technology | ||||||||
| Telehealth | ||||||||
| Non-operating corporate | ||||||||
| Total | $ | $ | ||||||
| September 30, 2025 | December 31, 2024 | |||||||
| Total Goodwill | ||||||||
| Technology | ||||||||
| Telehealth | ||||||||
| Non-operating corporate | ||||||||
| Total | $ | $ | ||||||
Some additional summary information regarding the reportable segment depreciation and amortization, capital expenditures and interest expense at September 30, 2025, and 2024 are as follows:
| September 30, 2025 | September 30, 2024 | |||||||
| Depreciation and Amortization | ||||||||
| Technology | ||||||||
| Telehealth | ||||||||
| Total | $ | $ | ||||||
44
| September 30, 2025 | September 30, 2024 | |||||||
| Capital Expenditures | ||||||||
| Technology | ||||||||
| Telehealth | ||||||||
| Total | $ | $ | ||||||
| September 30, 2025 | September 30, 2024 | |||||||
| Interest Expense | ||||||||
| Technology | ||||||||
| Telehealth | ||||||||
| Non-Operating corporate | ||||||||
| Total | $ | $ | ||||||
NOTE 15 Fair Value Measurements
The following tables present fair value information as of September 30, 2025, and December 31, 2024, the date of the Business Combination. 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:
| September 30, 2025 | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Liabilities: | ||||||||||||||||
| Exchange Note | $ | $ | $ | $ | ||||||||||||
| Equity line of credit | $ | $ | $ | $ | ||||||||||||
| Quantum Convertible Note, related party | $ | $ | $ | $ | ||||||||||||
| September 2024 Convertible Note | $ | $ | $ | $ | ||||||||||||
| Common stock issuance obligation | $ | $ | $ | $ | ||||||||||||
| March 2025 Convertible Note | $ | $ | $ | $ | ||||||||||||
| May 2025 Convertible Note | $ | $ | $ | $ | ||||||||||||
| December 31, 2024 | Fair Value | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
| Liabilities: | ||||||||||||||||
| Exchange Note | $ | $ | $ | $ | ||||||||||||
| Equity line of credit | $ | $ | $ | $ | ||||||||||||
| Quantum Convertible Note, related party | $ | $ | $ | $ | ||||||||||||
| September 2024 Convertible Note | $ | $ | $ | $ | ||||||||||||
| Common stock issuance obligation | $ | $ | $ | $ | ||||||||||||
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 September 30, 2025 and December 31, 2024, 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, 2024, and September 30, 2025, was recognized in the statement of operations under change in fair value of financial instruments.
45
The Quantum Convertible Note was classified within Level 3 of the fair value hierarchy at September 30, 2025 and December 31, 2024, due to the use of unobservable inputs. The key inputs into the MCM model for the Quantum Convertible Note were as follows at September 30, 2025, and at December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
| Debt discount rate* | % | % | ||||||
| * |
Exchange Note
The Company established the initial fair value for the Exchange Note as of June 24, 2024, the date the Business combination closed. As of September 30, 2025 and December 31, 2024, the fair value was remeasured. The Company uses the MCM that fair values the early termination/repayment features of the debt. The MCM was used to value the Exchange Note for the initial periods and subsequent measurement periods up to December 31, 2024. For September 30, 2025, the Company has determined the fair value under a default scenario, wherein the expected payout is primarily based on the assumption that settlement will occur on the contractual maturity date. The change in fair value between December 31, 2024 and September 30, 2025, was recognized in the statement of operations under change in fair value of financial instruments.
The Exchange Note was classified within Level 3 of the fair value hierarchy at September 30, 2025 and December 31, 2024, due to the use of unobservable inputs. The key inputs into the valuation models for the Exchange Note were as follows at September 30, 2025, and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
| Debt discount rate* | % | % | ||||||
| * |
ELOC/Purchase Agreement
The Company established the initial fair value for the ELOC Agreement as of June 24, 2024, the date the Business combination closed. As of September 30, 2025 and December 31, 2024, the fair value was remeasured. As such, the Company used the MCM that fair values the early termination/repayment features of the debt. The MCM was used to value the ELOC Agreement for the initial periods and subsequent measurement periods. The change in fair value between December 31, 2024 and September 30, 2025, was recognized in the condensed consolidated statement of operations under change in fair value of financial instruments.
The ELOC Agreement was classified within Level 3 of the fair value hierarchy at September 30, 2025 and December 31, 2024, due to the use of unobservable inputs. The key inputs into the MCM model for the ELOC Agreement were as follows at September 30, 2025 and at December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
September 2024 Convertible Note
The Company established the
initial fair value for the September 2024 Convertible Note as of September 30, 2024, which was the date the note was funded. As of September
30, 2025, and December 31, 2024, the fair value was remeasured. For December 31, 2024, the Company used a probability-weighted
scenario model that accounts for three scenarios, (a) repayment in accordance with terms of the note through maturity, (b) the occurrence
of a change in control, and (c) the occurrence of event of default. Under the repayment at maturity scenario, the Company considers the
potential settlement value of the September 2024 Convertible Note based on the defined repayment schedule. On each repayment date, the
analysis considers whether the holder would exercise its conversion option in relation to the principal to be repaid, in the event that
the value obtained upon conversion would exceed the value of the cash payable per the repayment schedule. Under a default scenario, the
Company estimates that the lender would recover approximately
46
The change in fair value between December 31, 2024 and September 30, 2025, was recognized in the condensed consolidated statements of operations under change in fair value of financial instruments.
The September 2024 Convertible Note was classified within Level 3 of the fair value hierarchy at September 30, 2025 and December 31, 2024, due to the use of unobservable inputs. The key inputs into the valuation models for the September 2024 Convertible Note were as follows at September 30, 2025, and December 31, 2024:
| September 30, 2025 | December 31, 2024 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
| Market discount rate* | % | % | ||||||
| * |
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 (See discussion in Note 2, Restatement of Previously Issued Financial Statements). As of September 30, 2025, and December 31, 2024, 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 September 30, 2025, and December 31, 2024. The change in fair value between December 31, 2024, and September 30, 2025, was recognized as compensation expense within cost of revenues in the condensed consolidated statement of operations.
March 2025 Convertible Note
The Company established the initial fair value for the March 2025 Convertible Note as of March 20, 2025, which was the date the March 2025 Convertible was funded. As of September 30, 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 March 2025 Convertible Note for the initial periods and subsequent measurement periods. The change in fair value between March 20, 2025 and September 30, 2025, was recognized in the condensed consolidated statement of operations under change in fair value of financial instruments.
The March 2025 Convertible Note was classified within Level 3 of the fair value hierarchy as of March 20, 2025 and September 30, 2025, due to the use of unobservable inputs. The key inputs into the MCM model for the March 2025 Convertible Note were as follows at September 30, 2025 and at March 20, 2025:
| September 30, 2025 | March 20, 2025 | |||||||
| Risk-free interest rate | % | % | ||||||
| Expected term (years) | ||||||||
| Volatility | % | % | ||||||
| Stock price | $ | $ | ||||||
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 September 30, 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 May 2025 Convertible Note for the initial periods and subsequent measurement periods.
47
The May 2025 Convertible Note was classified within Level 3 of the fair value hierarchy as of May 30, 2025 and September 30, 2025, due to the use of unobservable inputs. The key inputs into the MCM model for the March 2025 Convertible Note were as follows at September 30, 2025 and at May 30, 2025:
| September 30, 2025 | May 30, 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, 2024, through September 30, 2025, is summarized as follows:
Level 3 Changes in Fair Value of Derivatives for the period from December 31, 2024, through September 30, 2025:
| 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 | ||||||||||||||||||||||||||||
| Conversion | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Additions to principal | ||||||||||||||||||||||||||||
| (Gain) Loss on change in fair value | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Fair value as of September 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
Note 16 Subsequent Events
The Company evaluated subsequent events from the date of the unaudited condensed consolidated balance sheets as of September 30, 2025 through the date of the release of the unaudited condensed consolidated financial statements.
48
On
October 9, 2025, the Company entered into a note purchase agreement (the “10/9/25 Purchase Agreement”) with an accredited
institutional investor (the “10/9/25 Investor”) pursuant to which the Company issued to the 10/9/25 Investor a secured note
in the aggregate principal amount of $
Between
October 16, 2025 and October 21, 2025, the Bridge Investor converted $
Between
October 16, 2025 and October 30, 2025, the Quantum Investor converted the full balance of the Quantum Convertible Note (an aggregate of
$
On
October 20, 2025, the Company entered into a note purchase agreement (the “10/20/25 Purchase Agreement”) with an accredited
institutional investor (the “10/20/25 Investor”) pursuant to which the Company issued to the 10/20/25 Investor a secured note
in the aggregate principal amount of $
On
October 21, 2025, the holder of the March 2025 Convertible Note converted the full balance of the March 2025 Convertible Note (an aggregate
of $
On
October 21, 2025, the Company entered into an Amendment No. 1 to the September 2024 Convertible Note, with the accredited and institutional
investor. The amendment revised the definition of “Conversion Price” as set forth in the September 2024 Convertible Note
to be equal to $
Between
October 22, 2025 and October 29, 2025, the holder of the September 2024 Convertible Note converted the full balance of the September 2024
Convertible Note (an aggregate of $
On
October 29, 2025, the Company entered into a warrant exchange agreement with an accredited institutional investor, whereby the investor
agreed to exercise approximately
On October 29, 2025, the Company
entered into a convertible note purchase agreement (the “10/29/2025 Purchase Agreement”) with an accredited institutional
investor (the “10/29/2025 Investor”), whereby the 10/29/2025 Investor purchased a convertible promissory note in the initial
principal amount of $
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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 months ended September 30, 2025 and 2024, 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, 2024 and the section herein entitled “Cautionary Note Regarding Forward-Looking Statements. Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been impacted by the restatement described in the Explanatory Note to this Annual Report and in Note 2 to our consolidated financial statements entitled “Restatement of Previously Issued Financial Statements. “Certain of the financial and other information provided in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” has been amended to give effect to such restatement adjustments.”
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.
Our wholly-owned subsidiary VSee Lab is a telehealth software platform. VSee Lab’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 VSee Lab 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.
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.
Through VSee Lab, we offer a set of telehealth software building blocks, data connectors, and workflow templates that can be rapidly configured into the client’s workflows. Our offerings allow clinicians without programming experience to configure our building blocks into their existing workflow without requiring programmers - i.e. - no code. In addition, our building blocks allow programmers to increase their productivity with simple coding to piece together our building blocks - i.e. - low code. At the core of our platform is a comprehensive set of software building blocks for telehealth that include on-demand visits, scheduling appointments, in-take forms, signature for consent and compliance, team coordination, unified communication, remote exam and remote patient monitoring, payments including insurance processing, clinical notes, and administrative control panels and analytics. These set of building blocks can connect to electronic medical record systems such as EPIC and Cerner via HL7, FHIR, and SFTP. Lastly, we provide a set of templates to make creating telehealth workflow fast and easy. The entire telehealth platform sits on a scalable server architecture and is HIPAA compliant and SOC2 externally audited. VSee Lab is also GDPR compliant and supports single-sign-on (SSO) and multi-factor-authentication (MFA).
The Company’s 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 Teleneurocritical care, epileptology, and teleneurology. In addition to standard interventions, our Neurocritical care experts will offer specific care including monitoring intracranial pressure, cerebral hemodynamics, advanced multimodal neuro monitoring (brain oximetry, cerebral microdialysis and continuous electroencephalography).
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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 serves 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.
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.
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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. |
| ● | 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.
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 nine-month period ended September 30, 2025 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.
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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 goods and services to be transferred and the payment terms for the goods and 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.
Contractual terms for subscription services are typically 12 months. Contracts are generally cancellable with a 30-day notice period, and customers are billed in annual, quarterly, or monthly installments in advance of the service period of the subscription. The Company is not required to refund any prorated prepayment fees invoiced to cover services that were provided.
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, and revenue for goods and services transferred prior to cancellation is not refundable or creditable.
2) Identify the performance obligations in the contract
Performance obligations promised in a contract are identified based on the goods and 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.
3) Determine the transaction price
Total transaction price is based on the amount to which the Company is entitled to base on the contracts with its customers. The Company believes the quoted transaction prices in the customer contracts represent the standalone selling prices for each of the separate performance obligations which are distinct and priced separately within the contract. Consideration promised in the Company’s contracts includes both fixed and variable amounts. The Company’s variable consideration is based on fixed unit price for promised services, though the total consideration is dependent upon the actual amounts of promised services used by the customers. If necessary, the Company estimates the total variable consideration based on the information available to management, and updates such estimates each financial period when needed.
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 standalone selling price (“SSP”). The determination of a SSP for each distinct performance obligation requires judgment. Where applicable, the Company establishes standalone selling prices based on the observable prices of the good or service when the Company sells that good or service separately in similar circumstances and to similar customers. If a standalone selling price is not directly observable, the Company estimates the standalone selling price using the expected cost plus a margin approach.
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 are transferred to the customer in an amount that reflects the consideration that the Company expects to receive 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, subscription services and institutional services provided to our clients.
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Subscription Service Contracts and Performance Obligation
Subscriptions Services
Subscriptions represent a series of distinct goods or services because the performance obligations are satisfied over time as customers simultaneously receive and consume the benefits related to the services the Company performs. In the case of module specific subscriptions, a consistent level of service is provided during each monthly period of subscription to the Company’s platform. The Company commences revenue recognition when the customer is provided with platform subscription for the initial monthly period and revenue is recognized over time as a consistent level of subscription service during the subsequent period is delivered. The Company’s obligation for its integrated subscriptions is to stand-ready throughout the subscription period; therefore, the Company considers an output method of time to measure progress toward satisfaction of its obligations with revenue commencing upon the beginning of the subscription period. Deferred revenue consists of the unamortized balance of nonrefundable upfront fees which are classified as current and non-current based on the timing of when the Company expects to recognize revenue.
The Company treats each subscription to a specific module as a distinct performance obligation because each module is capable of being distinct as the customer can benefit from the subscription to each module on its own and each subscription can be sold standalone.
Furthermore, the subscriptions to individual modules are distinct in the context of the contract as (1) the Company is not integrating the services with other services promised in the contract into a bundle of services that represent a combined output, (2) the subscriptions to specific modules do not significantly modify or customize the subscription to another module, and (3) the specific modules are not highly interdependent or highly interrelated. The subscription to each module is treated as a series of distinct performance obligations because it is distinct and substantially the same, satisfied over time, and has the same measure of progress.
The transaction price is determined based on the consideration the Company expects to be entitled to in exchange for transferring services to the customer. Under the contracts, the clients pay a fixed rate per user per subscription service. Prior to the start of a contract, clients generally make upfront nonrefundable payments to the Company when contracting for implementation services.
Professional Services and Technical Engineering Fees and Performance Obligation
Performance obligations under contracts for professional services may include maintenance, hardware, clinician fees, and technical engineering services. These services are generally distinct in the context of the contract and are accounted for as separate performance obligations.
For technical engineering services, performance obligations are typically satisfied over time based on the specified quantity of professional service hours provided to the customer. For maintenance, hardware, and clinician fees, revenue is recognized either over time or at a point in time or when control transfers to the customer. Maintenance and clinician fees are generally recognized over time as services are rendered, while hardware revenue is recognized at a point in time when control transfers to the customer.
The Company evaluates the nature of each professional services arrangement to determine the appropriate timing of revenue recognition, ensuring that revenue is recognized in a manner that faithfully depicts the transfer of goods or services to the customer.
Patient Fees Services and Performance Obligation
Patient Fee Services
Patient fees represent a series of distinct services because the 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 Company commences revenue recognition on patient services when the Company satisfies its performance obligation to provide professional medical services to patients.
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 pay the Company based on contracted rates or the entities’ billed charges. Payments received from third-party payors are generally less than billed charges. 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.
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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 allowance for doubtful accounts receivable. 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. The Company’s 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 12-24 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.
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The Company commences revenue recognition when the Company satisfies its performance obligation to provide the contractual tele-physician hours services monthly. 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 hospital existing 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 provides monthly. 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 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 15 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 its 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 its 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. During the year ended December 31, 2024, the Company determined there were triggering events that required the Company to perform a quantitative analysis. Based on the analysis, the Company concluded the fair value of the Telehealth Services reporting unit was less than it’s carrying value. As a result, the Company recorded non-cash goodwill impairment charges of $56,675,210 on the consolidated statement of operations for the year ended December 31, 2024. For the three and nine months ended September 30, 2025, 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.
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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 carryforwards. 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.
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 September 30, 2025 and 2024 Results of Operations
The following table presents VSee Health’s results of operations for the three months ended September 30, 2025 and 2024:
| For the three months ended September 30, | ||||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| Revenue | $ | 3,980,655 | $ | 3,354,437 | $ | 626,218 | 19 | % | ||||||||
| Cost of revenues | 1,907,359 | 569,734 | 1,337,625 | 235 | % | |||||||||||
| Gross margin | 2,073,296 | 2,784,703 | (711,407 | ) | 26 | % | ||||||||||
| Operating expenses | 4,130,817 | 61,079,702 | (56,948,885 | ) | 93 | % | ||||||||||
| Other income (expense) | 1,767,776 | 4,381,240 | (2,613,464 | ) | 60 | % | ||||||||||
| Net loss before taxes | (289,745 | ) | (53,913,759 | ) | 53,624,014 | 99 | % | |||||||||
| Income tax benefit | — | (8,802 | ) | 8,802 | 100 | % | ||||||||||
| Net loss | $ | (289,745 | ) | $ | (53,922,561 | ) | $ | 53,632,816 | 99 | % | ||||||
Nine months Ended September 30, 2025 and 2024 Results of Operations
The following table presents VSee Health’s results of operations for the nine months ended September 30, 2025 and 2024:
| For the nine months ended September 30, | ||||||||||||||||
| 2025 | 2024 | Change | % | |||||||||||||
| Revenue | $ | 10,692,259 | $ | 6,686,998 | $ | 4,005,261 | 60 | % | ||||||||
| Cost of revenues | 5,170,500 | 1,890,557 | 3,279,943 | 173 | % | |||||||||||
| Gross margin | 5,521,759 | 4,796,441 | 725,318 | 15 | % | |||||||||||
| Operating expenses | 11,665,338 | 63,919,903 | (52,254,565 | ) | 82 | % | ||||||||||
| Other income (expense) | (700,900 | ) | 2,959,963 | (3,660,863 | ) | 124 | % | |||||||||
| Net loss before taxes | (6,844,479 | ) | (56,163,499 | ) | 49,319,020 | 88 | % | |||||||||
| Income tax benefit | (17,989 | ) | 1,669,586 | (1,687,575 | ) | 101 | % | |||||||||
| Net loss | $ | (6,862,468 | ) | $ | (54,493,913 | ) | $ | 47,631,445 | 87 | % | ||||||
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Revenue
Through our wholly-owned subsidiary VSee Lab, the Company generates revenue from subscription services to its software platform. Subscriptions represent a series of distinct goods or services because the performance obligations are satisfied over time as customers simultaneously receive and consume the benefits related to the services as VSee Lab performs. Through our wholly-owned subsidiary iDoc, the Company establishes management and administrative services contracts with hospitals or hospital systems to provide telehealth physician services to acute patients of the hospitals or hospital systems. iDoc also generate revenue by directly billing the insurance companies for care provided at hospitals or hospital systems. iDoc’s contracts typically range in length from two to three years, with an automatic renewal process.
Revenue for the three months ended September 30, 2025, was $3,980,665, an increase of $626,218, or 19%, compared to $3,354,437 for the same period in 2024. The increase was primarily driven by continued growth from the Company’s iDoc acquisition, completed in June 2024, which contributed $1,204,853, representing a 108% increase over the prior-year period. This growth was fueled by higher telehealth service volume and patient fees of $950,422 and $259,331, respectively. Professional services and other fees increased $207,241, or 52%, due to higher medical device sales and services associated with the new HHS contract. These increases were partially offset by a $642,933, or 80%, decrease in technical engineering services resulting from lower client utilization, and a $142,943, or 14%, decline in subscription revenue due to reduced recurring enterprise-level subscriptions.
Revenue for the nine months ended September 30, 2025, was $10,692,259, an increase of $4,005,261, or 60%, compared to $6,686,998 for the same period in 2024. The increase was primarily driven by continued growth from the Company’s iDoc acquisition, completed in June 2024, which contributed $3,395,089, representing a 289% increase over the prior-year period. This growth was fueled by higher telehealth service volume and patient fees of $1,983,122 and $1,418,847, respectively. Professional services and other fees increased $1,378,923, or 120%, due to higher medical device sales and services associated with the new HHS contract. These increases were partially offset by a $477,899, or 16%, decline in subscription revenue resulting from reduced recurring enterprise-level subscriptions, and a $290,852, or 23%, decrease in technical engineering services due to lower client utilization.
Cost of Goods Sold
VSee Lab’s cost of revenues consists primarily of expenses related to cloud hosting, personnel-related expenses for VSee’s customer success team, costs for third-party software services and contractors, and other services. iDoc’s cost of goods sold is primarily comprised of personnel-related expenses for our employee and consulting physicians and other medical providers, and the costs for third-party software services and hardware used in connection with delivery of high acuity patient care solution when providing elite physician services in the intensive care units of our major hospital systems and other customers.
The cost of goods sold for the three months ended September 30, 2025, increased by $1,337,625 or 235%, compared to September 30, 2024. The increase was also primarily driven by $1,293,604, or 379%, higher compensation expenses, mainly resulting from the higher utilization of independent medical providers during the current quarter and compensation adjustments reducing the cost in the prior year within the iDoc’s business. There was an increase in software expenses of $50,454, or 226%, primarily driven by the deployment of MFA and FedRAMP-compliant cloud infrastructure, the deployment of the GovCloud Production environment, and the expansion of the Dev environment to support the HHS contract. These increases were offset by $6,425 reduction in other costs.
The cost of goods sold for the nine months ended September 30, 2025, increased by $3,279,943, or 173%, compared to the same period in 2024. The increase was also primarily driven by $2,440,978, or 216%, higher compensation expenses, mainly resulting from additional headcount allocations to support the HHS contract, which drove $956,899 of higher expenses and $1,484,079 in higher costs from the iDoc acquisition in June of last year. Higher procurement of medical devices for the HHS project also drove the increase by $632,767 or 477%. There was an increase in software and hosting expenses of $194,240, or 31%, primarily driven by the deployment of MFA and FedRAMP-compliant cloud infrastructure, the deployment of the GovCloud Production environment, and the expansion of the Dev environment to support the HHS contract. The increase was also driven by $11,958 of other costs.
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Operating Expenses
VSee Lab’s operating expenses include all operating costs not included in the cost of revenues. These costs consist of general and administrative expenses composed primarily of all payroll and payroll-related expenses, professional fees, and other costs related to the administration of its business. iDoc’s operating expenses include all operating costs not included in cost of revenues. These costs consist of compensation, general and administrative expenses composed primarily of all payroll and payroll- related expenses, professional fees, insurance, software costs, occupancy expenses related to iDoc’s operations, including utilities, depreciation and amortization, and other costs related to the administration of its business.
Operating expenses for the three months ending September 30, 2025, decrease by $56,948,885 or 93% compared to the same period last year. The decline was due to the absence of goodwill impairment charges during the current quarter end, resulting in a reduction of $56,675,210 or 100%, compared to the same period last year. The decline in operating expenses was also driven by $516,691, or 30% lower compensation-related expenses, mainly from $408,433 of lower compensation in the VSee Lab entity, driven by $400,837 from lower stock-based compensation and $108,259 of lower compensation expenses related to the iDoc entity. The decrease was also due to the absence of transaction expenses during the current quarter, resulting in a reduction of $455,834, or 100%, compared to the same period in the previous year. These declines were offset by higher general and administrative expenses of $698,850, a 32% increase, primarily due to $636,928 of higher professional fees, primarily from higher audit fees, and $40,968 of higher other operating expenses.
Operating expenses for the nine months ending September 30, 2025, decreased by $52,254,565 or 82% compared to the same period last year. The decline was due to the absence of goodwill impairment charges during the current quarter end, resulting in a reduction of $56,675,210 or 100%, compared to the same period last year. The decrease was also due to the absence of transaction expenses during the current quarter, resulting in a reduction of $710,479 or 100%, compared to the same period last year. These decreases were offset by higher general and administrative expenses of $4,124,677, an increase of 138%, primarily from higher amortization and depreciation expenses of $1,289,892, general business expenses of $524,021, insurance related expenses of $144,460, bad debt expenses of $181,903, which were primarily driven by the acquisition of iDoc, and an increase in professional services fees of $1,901,739, primarily from higher costs for audit, valuation, tax and accounting services, and by $305,000 of financial instrument issuance cost. The decline in operating expenses was also offset by $1,006,447 or 28% higher compensation-related expenses, $805,410 from the acquisition of iDoc and recapitalization with DHAC, and $201,037 of compensation in the VSee Lab business, mainly from stock-based compensation.
Other Income (Expense)
Other income during the three months ended September 30, 2025, decrease $2,613,464 or 60%. The decrease was primarily driven by the $2,908,959 or 51% change in fair value of financial instruments in the current period compared to the prior period. The decrease was driven by $640,481, representing a 555% increase in interest expenses primarily from default interest penalties on the Company’s convertible loans. These decreases were offset by the reduction in the loss on issuance of the debt and derivative financial instruments by $290,000, and loss on the extinguishment of the loan of $645,979 during the same period last year, compared to none during the current period.
Other income during the nine months ended September 30, 2025, decreased $3,660,863 or 124%. The decrease was primarily driven by the loss on change in fair value of the debt and derivative financial instruments of $4,873,355, and the increase in the interest expense of $1,260,580, primarily due to the conversion of the total interest due on the Quantum note, new loan agreements entered into in 2025, and default interest incurred during the current quarter. These decreases in other income were offset by the improvement in loss on the extinguishment of the loan of $519,854 during the current period, compared to the prior period last year. These decreases in other income were also reduced by the net change of $1,770,214 in Loss on issuance of debt and derivative financial instrument for the previous period, compared to none during the current period, and $183,005 of other income, primarily driven by the United States Employee Retention Credit (ERC) received by the iDoc business.
Net Loss
Net loss for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, decreased by $53,632,816 or 99%. The decrease in the Company’s net loss was driven by the $56,237,478 improvement in the Company’s net operating loss, primarily from the $56,675,210 of goodwill impairment charges during the same period last year, compared to no impairment in the current period. This was slightly offset by the $2,613,464 reduction in other income during the current period compared to the same period last year.
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Net loss for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, decreased by $47,631,445, or 87%. The decrease in the Company’s net loss was driven by the $52,979,883 improvement in the Company’s net operating loss, primarily from the $56,675,210 of goodwill impairment charges during the same period last year, compared to no impairment charges in the current period, and slightly offset by $4,124,677 of higher operating expenses from the acquisition of iDoc and the recapitalization with DHAC last year. The decrease was also due to the $725,318 of higher gross margin contribution. These reductions to the Company’s net loss were slightly offset by the $3,660,863 reduction in other income during the current period compared to the previous period, and the $1,687,575 year-over-year decrease in the Company’s income tax benefit that resulted from the business acquisition of iDoc during the prior year.
Cash Flows
The following table presents selected captions from VSee Health’s consolidated statements of cash flows for the nine months ended September 30, 2025 and 2024:
| For the nine months ended September 30, | ||||||||
| 2025 | 2024 | |||||||
| Net cash used in operating activities | $ | (1,519,632 | ) | $ | (2,815,248 | ) | ||
| Net cash used in from investing activities | $ | (22,776 | ) | $ | (21,384 | ) | ||
| Net cash provided by financing activities | $ | 1,689,052 | $ | 5,045,235 | ||||
| Change in cash | $ | 146,644 | $ | 2,208,603 | ||||
VSee Health’s principal sources of liquidity are cash and cash equivalents, totalling $472,759 and $2,327,337 as of September 30, 2025 and 2024, respectively.
VSee Health’s 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 was $1,519,632 for the nine months ended September 30, 2025. Cash used in operating activities consists of a net loss of $6,862,468, adjusted for non-cash items of $2,142,488 and $3,200,348 increase in net changes in operating assets and liabilities. The increases in accounts payable and deferred revenue primarily drove the increase in operating assets and liabilities.
Cash used in operating activities was $2,815,248 for the nine months ended September 30, 2024. The change in operating activities presents changes for VSee Lab for the nine months ending September 30, 2024, and changes for iDoc and DHAC from the Business Combination date of June 24, 2024, to the end of the quarter, September 30, 2024. Cash used in operating activities consists of a net loss of $54,493,913 adjusted for non-cash items of $53,585,022 driven primarily by fair value changes, and a $1,906,357 decrease in net changes in operating assets and liabilities. The decrease in net changes in operating assets was primarily driven by the decreases in accounts payable and accrued liabilities and due to related party and slightly offset by the reduction in accounts receivable and the increase in deferred revenue.
Cash Used in Investing Activities
Cash used for investing activities for the nine months ended September 30, 2025, was $22,776, and was driven by the purchase of fixed assets.
Cash used for investing activities for the nine months ended September 30, 2024, was $21,384, driven primarily by $50,507 for the purchase fixed assets and was slightly offset by $29,123 of cash acquired from the acquisition of iDoc.
Cash Provided by Financing Activities
Cash provided by financing activities for the nine months ended September 30, 2025, was $1,689,052, primarily consisting of $1,907,791 and $541,184 proceeds from notes issued during the period and issuance of common stock and offset by $10,000, $56,787, $44 and $668,092 of payments to shareholder, for factoring payables, due on acquisition purchase and repayment on note payable.
Cash provided by financing activities for the nine months ended September 30, 2024, was $5,045,235, primarily consisting of $2,700,000 proceeds from the Quantum Note, $1,323,362 cash from the recapitalization with DHAC, and offset by $365,750, $47,800 and $150,616 for repayment on the Extension Note, advances from a related party and factoring payable , respectively.
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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 September 30, 2025, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officers concluded that, as of September 30, 2025, our disclosure controls and procedures were not effective.
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.
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, 2024, which could materially affect our business, financial condition, or future operating results and cash flows. 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, 2024. 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, 2024 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
For this fiscal quarter ended September 30, 2025, 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 nine months ended September 30, 2025, 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) |
63
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: November 14, 2025 | By: | /s/ Imoigele Aisiku |
| Name: | Imoigele Aisiku | |
| Title: | Co-Chief Executive Officer and Chairman of the Board | |
| (Principal Executive Officer) | ||
| Date: November 14, 2025 | 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: November 14, 2025 | |
| /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: November 14, 2025 | |
| /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 September 30, 2025 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: November 14, 2025 | By: | /s/ Imoigele Aisiku |
| Imoigele Aisiku | ||
| Chief Executive Officer and Chairman | ||
| (Principal executive officer) | ||
| Date: November 14, 2025 | By: | /s/ Jerry Leonard |
| Jerry Leonard | ||
| Chief Financial Officer | ||
| (Principal financial and accounting officer) |