10-Q: QHSLab Reports Q3 Loss Amid Revenue Growth, Default Concerns
Quarterly Report
QHSLab, Inc. reported a net loss of $99,156 for the nine months ended September 30, 2025, despite a 31.9% revenue increase, as it grapples with significant debt defaults and going concern doubts.
Summary
- A net loss of $99,156 was reported for the nine months ended September 30, 2025, a significant shift from a net income of $28,350 in the prior year period.
- Total revenue increased by 31.9% to $1,987,931 for the nine months ended September 30, 2025, compared to $1,505,945 in the same period of 2024.
- Integrated Service Program (ISP) revenue surged by 74.9% to $785,506, and Immunotherapy Treatment Sales grew by 43.7% to $348,691 for the nine-month period.
- Gross margin improved to 66.5% for the nine months ended September 30, 2025, from 62.8% in the prior year, driven by product mix and clinical study revenue.
- Operating expenses increased across sales and marketing, general and administrative, and research and development, reflecting investments in growth and operations.
- Interest expense nearly doubled to $194,894 for the nine months, primarily due to default interest on convertible notes.
- The company is in default on its Acquisition Note and Original Issue Discount (OID) Notes, with no guarantee of continued forbearance from lenders.
- Disclosure controls and procedures were deemed ineffective due to a lack of adequate personnel.
Sentiment
Score: 3
Explanation: While revenue growth and gross margin improvement are positive, the significant net loss, substantial debt defaults, going concern warning, and ineffective internal controls present severe financial and operational challenges, indicating a highly precarious situation.
Positives
- Total revenue increased by 31.9% to $1,987,931 for the nine months ended September 30, 2025, compared to $1,505,945 in the prior year.
- Integrated Service Program (ISP) revenue showed strong growth, increasing by 74.9% to $785,506 for the nine months ended September 30, 2025.
- Immunotherapy Treatment Sales increased by 43.7% to $348,691 for the nine months ended September 30, 2025.
- Gross margin improved to 66.5% for the nine months ended September 30, 2025, up from 62.8% in the same period of 2024.
- Cash and cash equivalents slightly increased to $158,391 as of September 30, 2025, from $157,168 at December 31, 2024.
Negatives
- Reported a net loss of $99,156 for the nine months ended September 30, 2025, a significant decline from a net income of $28,350 in the prior year period.
- Accumulated deficit increased to $4,430,506 as of September 30, 2025.
- Interest expense increased by 86.8% to $194,894 for the nine months ended September 30, 2025, largely due to default interest rates on convertible notes.
- Net operating income decreased to $95,738 for the nine months ended September 30, 2025, from $132,661 in the prior year.
- Subscription revenue decreased by 24.4% for the nine months ended September 30, 2025.
Risks
- Substantial doubt exists about the ability to continue as a going concern due to incurred losses, high leverage, and inconsistent cash generation from operations.
- Dependence on future issuances of equity or other financings, which may not be available on commercially reasonable terms, if at all.
- Currently in default of obligations under the Acquisition Note and Original Issue Discount (OID) Notes.
- No guarantee that the holders of the OID Notes (Catheter Precision, Inc.) and the Acquisition Note will continue to forbear from exercising their rights, including seeking to foreclose upon liens on assets.
- If lenders demand immediate payment, it would have a material adverse effect on the business and jeopardize continued operations.
- Increased interest and penalties would be payable if the holders of the defaulted notes elect to exercise their rights.
- Disclosure controls and procedures were deemed ineffective due to a lack of adequate personnel, including individuals with experience in financial reporting.
- Future utilization of net operating loss carryforwards of $4,430,506 may be subject to substantial annual limitation due to ownership change limitations, with expiration beginning in 2027.
- Additional issuances of equity or convertible debt securities will result in dilution to current shareholders, could require issuance at prices below true value, and could cause the common stock price to decrease.
- Additional borrowings could require granting lenders a security interest or other rights that impede the ability to operate as deemed best for shareholders.
- Any default under a loan agreement could result in an action which could force the company to seek bankruptcy protection.
- Ability to obtain funds through the issuance of debt or equity is dependent upon the state of the financial markets, which may be adversely impacted by global events such as wars and inflation.
Future Outlook
The company intends to increase revenues by charging physicians a monthly subscription fee for the use of its QHSLab platform and soliciting additional primary care physicians (PCPs) to use its QHSLab and AllergiEnd products. It also plans to introduce additional point-of-care diagnostics, treatments, and digital medicine programs. Sales and marketing expenses are expected to continue increasing to support customer base growth and new product launches, while R&D expenses will also rise as the company invests in expanding operations and developing new products and services.
Management Comments
- "We are a medical device technology and software as a service (SaaS) company focused on enabling primary care physicians (PCPs) to increase their revenues by providing them with relevant, value-based tools to evaluate and treat chronic disease as well as provide preventive care through reimbursable procedures."
- "More health insurers have realized that Artificial Intelligence (AI) enabled digital medicine technologies such as those provided through our proprietary internally-developed QHSLab platform software (QHSLab) can provide the necessary encounters to foster patient compliance in between visits to a physician."
- "We expect our sales and marketing expenses to continue to increase as we seek to build our customer base and launch additional products."
- "We expect that our R&D expenses will continue to increase as we invest in and expand our operations and further develop new products and services as part of our growth strategy."
- "Our chief executive officer/chief financial officer concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report. Many of these deficiencies stem from a lack of adequate personnel, including individuals with experience in financial reporting."
Industry Context
The company operates in the value-based healthcare, informatics, and algorithmic personalized medicine sectors, including digital therapeutics and remote patient monitoring. It aligns with the broader industry trend where regulators and insurance companies increasingly recognize the value of frequent, short encounters for chronic condition management, often supported by AI-enabled digital medicine technologies. The focus on enabling primary care physicians to offer reimbursable procedures for chronic and preventive care positions the company within a growing market segment aiming to shift care from specialists to PCPs.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control Effectiveness | Disclosure controls and procedures were deemed ineffective as of September 30, 2025, due to a lack of adequate personnel, including individuals with experience in financial reporting. | September 30, 2025 | Raises concerns about the reliability of financial reporting and the company's ability to accurately record, process, summarize, and report financial information. |
| Accounting Standard Adoption | Adopted ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures) for interim periods. | March 31, 2025 | Requires expanded disclosures about reportable segments and enhanced income tax disclosures, improving transparency. |
Related Party Transactions
- Amounts due to related parties (principal shareholder) totaled $968 as of September 30, 2025, bearing no interest and due on demand.
- The company's CEO and principal shareholder is a minority shareholder of MedScience Research Group and provides compensated services to MedScience.
- A Convertible Promissory Note (Note 1) in the principal amount of $100,000 was issued to a shareholder.
Stakeholder Impact
- Shareholders: Potential for significant dilution from future equity raises, risk of share price decrease, and uncertainty regarding the company's going concern status and debt defaults.
- Creditors (Note Holders): Risk of non-payment on defaulted notes, potential for enforcement actions including foreclosure on assets, and uncertainty regarding restructuring discussions.
- Employees: Potential impact on job security and operational stability due to going concern doubts and financial challenges.
- Customers (PCPs): Continued access to QHSLab platform and AllergiEnd products, but potential for service disruption if financial issues escalate.
Next Steps
- Increase revenues by charging monthly subscription fees for the QHSLab platform.
- Solicit additional primary care physicians (PCPs) to use QHSLab and AllergiEnd products.
- Introduce additional point-of-care diagnostics and treatments.
- Introduce new digital medicine programs for PCPs.
- Continue to upgrade QHSLab to increase product sales and usage fees.
- Invest in more sales and marketing activities to support increasing ISP revenue and build the customer base.
- Invest in and expand operations and further develop new products and services (R&D).
- Engage in discussions with Catheter Precision, Inc. to restructure the OID Notes.
- Implement corrective actions for identified weaknesses in disclosure controls and procedures, including adding personnel and improving review procedures.
- Explore options to raise additional capital or borrow additional funds if needed.
Key Dates
| Date | Description |
|---|---|
| 2021-05-07 | Issuance of Convertible Promissory Note (Note 1) in the principal amount of $100,000 to a shareholder. |
| 2021-06-21 | Articles of Incorporation and By-Laws filed. |
| 2021-06-23 | Acquisition of trademark, patent, and web domain from MedScience Research Group; Promissory Note for $750,000 issued as part of the purchase agreement. |
| 2021-08-10 | Company entered into a Securities Purchase Agreement and issued an Original Issue Discount Secured Convertible Promissory Note (the $806,000 Note) and warrants. |
| 2021-09-23 | Company changed its state of incorporation from Delaware to Nevada. |
| 2021-11-11 | Mercer Street Global Opportunity Fund, LLC converted $50,000 of the $806,000 Note principal into common stock. |
| 2021-12-29 | Certificate of Designation authorizing the issuance of the Series A-2 Preferred Stock. |
| 2022-04-19 | Company changed its name to QHSLab, Inc. |
| 2022-07-19 | Company entered into a Securities Purchase Agreement and issued an Original Issue Discount Secured Convertible Promissory Note (the $440,000 Note) and warrants. |
| 2022-07-27 | Mercer Street Global Opportunity Fund, LLC converted $50,000 of the $806,000 Note principal into common stock. |
| 2022-08-10 | Original maturity date of the $806,000 Note. |
| 2023-07-19 | Original maturity date of the $440,000 Note. |
| 2023-10-05 | Conversion price for $10,500 of the $806,000 Note reduced to $0.025 per share at Mercer Fund's request. |
| 2024-03-04 | Conversion price for $12,000 of the $806,000 Note reduced to $0.025 per share at Mercer Fund's request. |
| 2024-08-09 | Warrants issued in connection with the $806,000 Note expired. |
| 2024-08-12 | Company entered into a fixed-fee short-term loan with its merchant bank. |
| 2024-12-31 | Comparative balance sheet date; Note 1 maturity extended to this date (and further to 2025). |
| 2025-01-06 | Mercer Fund converted $25,000 of the $806,000 Note principal into common stock. |
| 2025-01-13 | Mercer Fund converted $50,000 of the $806,000 Note principal into common stock. |
| 2025-02-19 | Company received a Notice of Default from Mercer Fund in connection with the $806,000 Note. |
| 2025-02-20 | Company received a Notice of Default from Mercer Fund in connection with the $440,000 Note. |
| 2025-03-20 | Most recent notice of forbearance received from MedScience Research Group for the Acquisition Note. |
| 2025-03-31 | Company adopted ASU 2023-07 and ASU 2023-09 for interim disclosures. |
| 2025-05-12 | Mercer Fund assigned all its interest in the $806,000 Note and $440,000 Note to Catheter Precision, Inc. |
| 2025-07-18 | Warrants issued in connection with the $440,000 Note expired. |
| 2025-09-30 | End of the current reporting period for the Form 10-Q. |
| 2025-11-13 | Filing date of this 10-Q report; date 11,281,527 shares of common stock were outstanding. |
| 2025-12-31 | Extended maturity date of Note 1 (shareholder note). |
Recommendation
strong sellThe company faces severe financial distress, evidenced by a net loss, an increasing accumulated deficit, and explicit 'going concern' doubts. It is in default on multiple significant debt obligations, which have been assigned to a new holder (Catheter Precision, Inc.), and there is no guarantee of continued forbearance, raising the risk of immediate payment demands or asset foreclosure. The ineffective disclosure controls and procedures further highlight operational and governance weaknesses. While revenue is growing, the underlying financial instability and high leverage make the stock a high-risk investment with significant downside potential, warranting a strong sell recommendation until these fundamental issues are resolved.
Keywords
QHSLab, 10-Q, SEC filing, medical device technology, SaaS, healthcare informatics, algorithmic personalized medicine, digital therapeutics, remote patient monitoring, chronic care, preventive medicine, allergy diagnostics, immunotherapy, going concern, debt default, convertible notes, revenue growth, net loss, financial reporting, internal controls, Catheter Precision
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