10-Q/A: VSee Health's Net Loss Soars 1050% Amid Liquidity Crisis

Sentiment:

Quarterly Report Amendment 20 November 2025 5:14 PM

VSee Health reported a 1050% increase in net loss to $6.57 million for the first half of 2025 despite a 101% revenue surge, driven by higher operating expenses and fair value losses on financial instruments.

Delay expectedThe company defaulted on a forbearance agreement related to a promissory note and line of credit at the end of December 2023.The maturity date for the Extension Note was amended from May 5, 2024, to March 31, 2025.The company was unable to timely file this Quarterly Report on Form 10-Q due to material weaknesses in internal control over financial reporting.The forbearance agreement for the promissory note and line of credit was revised multiple times, with the remaining balance due December 10, 2025, after initial defaults.

Capital raiseThe company has an Equity Line of Credit (ELOC) agreement for up to $50,000,000 over a 36-month period.The company is in negotiations with an investor for additional financing to support working capital and growth initiatives.On August 28, 2025, the Quantum Convertible Note was amended to provide $380,000 in additional cash proceeds.On September 5, 2025, the company entered into a Master Business Loan Agreement (MBLA) for advances up to $2,500,001, with an initial advance of $525,000.On October 9, 2025, the company issued a secured note (October 2025 Note) for $133,333 for a purchase price of $120,000.

Worse than expectedNet loss increased by 1050% for the six months ended June 30, 2025, compared to the prior year.Operating expenses surged by 165%, significantly outpacing revenue growth.Cash and cash equivalents decreased substantially, indicating deteriorating liquidity.Total liabilities increased while stockholders' deficit worsened significantly.The company explicitly states "significant doubts about its ability to continue as a going concern."

Summary

Net loss for the six months ended June 30, 2025, increased by 1050% to $6,572,723, compared to $571,352 in the prior year.
Total revenues grew by 101% to $6,711,604 for the six months ended June 30, 2025, up from $3,332,561 in the same period last year.
Revenue growth was primarily driven by the iDoc acquisition (3,501% increase in iDoc revenue, mainly patient and telehealth fees) and the HHS contract (156% increase in professional services, 74% in technical engineering fees).
Gross margin increased by 71% to $3,448,463 for the six months ended June 30, 2025.
Operating expenses surged by 165% to $7,534,521, largely due to increased general and administrative expenses (440% increase) and compensation-related benefits (84% increase).
Cash and cash equivalents decreased significantly to $291,595 as of June 30, 2025, from $1,105,971 a year prior.
Total liabilities increased to $23,946,344 as of June 30, 2025, from $20,010,976 as of December 31, 2024.
The company continues to face significant doubts about its ability to continue as a going concern due to persistent operating losses and deteriorating liquidity.

Sentiment

Score: 2

Explanation: The company reported a massive increase in net loss and a significant decline in cash, coupled with increasing liabilities and explicit "going concern" doubts. While revenue grew, it was overshadowed by surging operating expenses and fair value losses on financial instruments. The identified material weaknesses in internal controls and multiple debt defaults further contribute to a highly negative sentiment.

Positives

Total revenues increased by 101% to $6,711,604 for the six months ended June 30, 2025.
iDoc acquisition significantly boosted patient and telehealth fees, with iDoc revenue increasing by 3,501%.
Secured new contracts with larger hospitals and entered new markets, demonstrating ability to generate positive revenue growth.
Gross margin increased by 71% to $3,448,463 for the six months ended June 30, 2025.
Received $167,470 in other income, net, for the three months ended June 30, 2025, primarily from the United States Employee Retention Credit (ERC).

Negatives

Net loss increased by 1050% to $6,572,723 for the six months ended June 30, 2025.
Operating expenses surged by 165% to $7,534,521, outpacing revenue growth.
General and administrative expenses increased by 440% due to iDoc acquisition, recapitalization, amortization, depreciation, bad debt, and insurance.
Cash and cash equivalents decreased to $291,595 as of June 30, 2025, from $1,105,971 a year prior.
Total liabilities increased to $23,946,344 as of June 30, 2025, from $20,010,976 as of December 31, 2024.
Total stockholders deficit significantly worsened to $(5,736,303) as of June 30, 2025, from $(18,488) as of December 31, 2024.
Significant negative change in fair value of financial instruments, resulting in a loss of $1,416,296 for the six months ended June 30, 2025.
Several promissory notes and lines of credit are currently in default.
Subscription revenue declined by 18% due to a decrease in recurring enterprise-level subscriptions.

Risks

Significant doubts about the company's ability to continue as a going concern due to persistent operating losses and deteriorating liquidity.
Material weaknesses in internal control over financial reporting, including insufficient accounting personnel, ineffective ITGC, lack of formalized control environment, and improper accounting for complex transactions.
Dependence on a few major customers, with two customers representing 35% of accounts receivable and one customer accounting for 29% of total revenue for Q2 2025.
Exposure to litigation, including a pending lawsuit for alleged breach of contract and unjust enrichment.
Default on several promissory notes and lines of credit, which could lead to acceleration of payments.
Inability to assure that remediation plans for internal control weaknesses will be successful or timely.
The company is prohibited from incurring additional indebtedness (other than ordinary course trade debt) and paying dividends under the Master Business Loan Agreement.

Future Outlook

The company anticipates future performance will depend on the rapid transformation of the telehealth market, its ability to expand market share and attract new customers, and its continued investment in innovation and new product offerings. Management believes its current offerings provide an attractive value proposition and that its software platform and services have significant potential within hospital systems.

Management Comments

"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 one year after the date that the accompanying condensed consolidated financial statements are issued."
"There is no assurance that the Company’s plans to alleviate such concerns will be successful or successful within one year after the date the condensed consolidated financial statements are issued."
"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."
"We plan to leverage our industry relationships with government, hospital systems and insurance providers to increase our customer base."
"We believe our ability to invest in new technology and develop new features, modules, and solutions will be critical to our long-term success."
"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."

Industry Context

The telehealth market is characterized by rapid transformation and strong future growth, with significant potential within hospital systems. The company aims to address physician burnout and lack of patient access to quality intensive care by utilizing sophisticated telehealth solutions. It believes existing video/hardware/software in telehealth are often repurposed and lack healthcare-specific integration, which its platform aims to overcome.

Comparison to Industry Standards

Telehealth solutions have not fully penetrated medicine and hospital systems, representing less than 1% of total healthcare spending, indicating significant untapped market potential.
Many existing telehealth video and hardware/software are repurposed and not healthcare-specific, unlike the company's platform designed for performance and compliance.
The company's platform offers superior integration with EMR systems like EPIC and Cerner via HL7, FHIR, and SFTP, addressing a common industry limitation.
The company empowers clinicians with 'no-code' and 'low-code' tools to create workflows, differentiating from competitors that often require extensive IT support.

Management Changes

Role	Previous Person	New Person	Effective Date	Reason
Board Member	NA	Mr. David L. Wickersham	2024-07-17	Became a member of the Company's board of directors.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Equity Incentive Plan Adoption	Approved and adopted the VSee Health, Inc. 2024 Equity Incentive Plan, reserving 2,544,021 shares of common stock for issuance.	2024-06-24	Aims to incentivize employees and align interests with shareholders, but also leads to stock-based compensation expense.
Internal Control Weaknesses	Identified material weaknesses in internal control over financial reporting, including insufficient accounting personnel, ineffective ITGC, lack of formalized control environment, and improper accounting for complex transactions.	2025-06-30	Raises concerns about the reliability of financial reporting and could lead to future misstatements or delays in filings. Remediation plans are in place but success is not assured.

Legal Proceedings

A lawsuit was filed on July 25, 2024, against the company for alleged breach of contract and unjust enrichment, seeking payment under promissory notes and the Encompass Acquisition Agreement.
The company denied allegations and filed a counterclaim for breach of contract, promissory estoppel, and unjust enrichment.
Settlement discussions are actively ongoing in federal court.

Related Party Transactions

Loans from CEO Milton Chen totaling $323,000 (principal) with default interest rates of 26% are outstanding and in default.
A balance of $241,122 is due from Co-CEO Imoigele Aisiku as of June 30, 2025, which is unsecured and non-interest-bearing.
A $200,000 promissory note from a board member, with payments based on 80% of monthly revenue from specific telepresence robots, had an outstanding balance of $141,651 as of June 30, 2025.
SCS Capital Partners LLC (Sponsor affiliate) owns approximately 40.74% of the Quantum Investor, which holds a $3,000,000 convertible note.
Consulting Services Agreement with SCS, LLC (Sponsor affiliate) for $12,500/month for services and $2,500/month for office space, plus stock issuances.
Advances due to Sponsor and affiliates of $51,900 remain outstanding as of June 30, 2025.
Co-CEO Imo Aisiku and Milton Chen, along with CFO Jerry Leonard, personally guaranteed the Master Business Loan Agreement with Change Capital Holdings I, LLC.
Co-CEO Imo Aisiku pledged his shares in the company as security for the MBLA.

Stakeholder Impact

Shareholders: Significant dilution risk from convertible notes and equity line of credit, increased net loss, deteriorating financial position, and going concern doubts could negatively impact share price and investment value. Personal guarantees by management and share pledges by Co-CEO Aisiku indicate high personal risk for key executives.
Employees: Increased headcount for new contracts (e.g., HHS) suggests job growth in some areas, but overall financial instability and going concern doubts could create job insecurity. Stock-based compensation is a significant component.
Customers: Expansion of telehealth offerings and new contracts (e.g., HHS) suggest improved service capabilities and reach. However, financial instability could raise concerns about long-term service continuity.
Suppliers/Creditors: Multiple notes in default and increasing liabilities pose significant credit risk. Personal guarantees by management on new loans may offer some comfort to new lenders but highlight the company's precarious financial state.
Regulatory Authorities: Material weaknesses in internal controls and restatement indicate compliance challenges, potentially leading to increased scrutiny.

Next Steps

Continue revenue enhancement strategies, including securing new contracts and expanding into new markets.
Pursue additional financing to support working capital needs and growth initiatives.
Remediate identified material weaknesses in internal control over financial reporting, including providing enhanced access to accounting literature, research materials, and increasing communication among personnel and third-party professionals.
Engage in ongoing settlement discussions for the pending lawsuit.
Make scheduled payments under revised forbearance agreements for defaulted notes and lines of credit.
File a resale registration statement for shares to be purchased under the ELOC Agreement within 45 days of the Equity Purchase Effective Day.

Key Dates

Date	Description
2021-11-29	iDoc issued a $654,044 promissory note to a bank.
2021-11-29	iDoc received a revolving line of credit from a bank.
2021-12-01	iDoc issued a $500,000 promissory note to a bank.
2022-01-01	iDoc acquired 100% of Encompass Healthcare Billing, LLC.
2022-02-25	iDoc received an extension of $1,000,600 on the December 1, 2021 promissory note.
2022-09-01	iDoc issued a $336,000 note receivable to its then CEO, Imoigele Aisiku.
2022-10-05	DHAC, VSee Lab, iDoc, and the Bridge Investor entered into the Original Bridge SPA.
2022-10-06	173,913 Bridge Warrants issued to the Bridge Investor.
2022-10-24	DHAC issued an unsecured promissory note of $350,000 to Digital Health Sponsor, LLC.
2023-01-09	iDoc agreed to an additional $45,000 obligation related to the Encompass Acquisition Agreement.
2023-01-12	VSee Lab issued a 10.00% OID promissory note of $220,000 to an accredited investor.
2023-02-02	SCS Capital Partners LLC issued a $250,000 interest-free loan to DHAC.
2023-03-29	VSee Lab revised terms of a loan from CEO Milton Chen to a 10.00% OID promissory note with a principal balance of $121,000.
2023-03-29	VSee Lab received a 10.00% OID promissory note with a principal balance of $132,000 from CEO Milton Chen.
2023-05-05	DHAC entered into the Extension Purchase Agreement and issued Extension Note and 26,086 Extension Warrants.
2023-05-05	SCS Capital Partners, LLC issued another $200,000 loan to DHAC.
2023-05-12	iDoc entered into a partnership agreement with an accredited investor for telepresence robots.
2023-05-15	iDoc issued a $200,000 promissory note to a board member.
2023-06-21	iDoc entered into a Future Receipts Sale Agreement for $299,000.
2023-06-28	iDoc entered into a Future Receipts Sale Agreement for $140,000.
2023-08-03	iDoc issued a 10.00% OID promissory note of $33,000 to an accredited investor.
2023-08-17	SCS Capital Partners LLC amended and restated a loan to DHAC to include an additional $315,000.
2023-08-18	iDoc issued an 8.5% OID promissory note of $64,000 to an accredited investor.
2023-10-13	iDoc entered into a Future Receipts Sale Agreement for $186,250.
2023-11-01	iDoc entered into a forbearance agreement related to promissory note and line of credit.
2023-11-01	DHAC and iDoc entered into a Conversion SPA with Munro Trust for $300,000 loan conversion.
2023-11-13	iDoc agreed to make a $20,000 payment under the forbearance agreement.
2023-11-21	DHAC, VSee Lab, and iDoc entered into Securities Purchase Agreements (Conversion SPAs) for debt conversion.
2023-11-21	DHAC entered into the ELOC Agreement with the Bridge Investor.
2023-11-21	DHAC entered into the Quantum Purchase Agreement for a $3,000,000 convertible note.
2023-11-30	iDoc agreed to make an $80,000 payment under the forbearance agreement.
2023-12-26	VSee Lab received a 10.00% OID promissory note of $77,000 from CEO Milton Chen.
2024-01-25	A $55,556 Additional Bridge Note was purchased by the Bridge Investor.
2024-03-28	iDoc issued a $224,000 secured convertible promissory note to Mr. David L. Wickersham.
2024-04-17	Company and investor entered into Extension Letter Agreement, amending Extension Note maturity to March 31, 2025.
2024-06-21	Company entered into Consulting Services Agreement with SCS, LLC.
2024-06-24	Company completed Business Combination with VSee Lab and iDoc, changing name to VSee Health, Inc.
2024-06-24	DHAC owed Sponsor and affiliates $504,659 in advances.
2024-06-24	Company reserved 2,544,021 shares for issuance under the 2024 Equity Incentive Plan.
2024-06-24	Company granted 803,646 stock options with an exercise price of $12.11.
2024-06-25	Quantum Convertible Note in the principal amount of $3,000,000 was funded to the Company.
2024-06-25	$47,800 of advances from Sponsor and affiliates were repaid in cash.
2024-06-30	iDoc's promissory note to Mr. David L. Wickersham was fully satisfied by issuing 114,000 shares of common stock.
2024-07-02	Company issued the ELOC Commitment Fee Note ($500,000 principal) to the Bridge Investor.
2024-07-03	Quantum Convertible Note amended to change maturity date to June 30, 2026, and guarantee 18 months of interest.
2024-07-25	Company notified of a lawsuit filed against it.
2024-08-02	Holders of Additional Bridge Notes converted $41,417 principal into 14,199 shares of common stock.
2024-08-08	$566,740 outstanding principal on the Exchange Note converted into 213,759 shares of Common Stock.
2024-09-30	Company entered into a securities purchase agreement (September 2024 SPA) for $2,222,222 convertible note and issued 740,741 warrants.
2024-09-30	ELOC Commitment Fee Note maturity date extended from September 23, 2024, to December 31, 2024.
2024-11-08	Sponsor affiliate, SCS, and Company executed a securities purchase agreement converting $405,000 of working capital advances into 202,500 shares of Common Stock.
2024-11-26	$500,000 of outstanding principal and $11,693 accrued interest on the Exchange Note converted into 255,847 shares of common stock.
2024-11-26	Remaining $92,593 principal on Additional Bridge Notes converted into 46,565 shares of common stock, settling notes in full.
2024-12-13	Company issued 50,000 shares to Dominion Capital to settle the ELOC Commitment Fee Note upon conversion.
2024-12-13	Company revised the forbearance agreement for the promissory note and line of credit.
2024-12-31	Goodwill impairment charge of $56,675,210 recorded for the Telehealth Services reporting unit.
2025-03-20	Company entered into a Convertible Note Purchase Agreement for a $108,696 senior secured convertible promissory note (March 2025 Convertible Note).
2025-03-20	Company entered into Amendment No. 1 to the Securities Purchase Agreement, issuing a $555,556 senior secured convertible promissory note (March 2025 Promissory Note).
2025-03-20	Company entered into Amendment No. 1 to the ELOC Agreement, modifying the floor price to $1.25.
2025-04-15	Company issued an unsecured promissory note of $70,000 to FWE CAPITAL LLC (April 2025 Promissory Note).
2025-05-30	Company issued a convertible promissory note (May 2025 Convertible Note) with a principal amount of $216,871, resulting in extinguishment of April 2025 Promissory Note.
2025-06-30	End of the reporting period for this 10-Q/A.
2025-08-27	Company revised the forbearance agreement for the promissory note and line of credit, agreeing to payments on September 5, 2025, and November 30, 2025, with remaining balance due December 10, 2025.
2025-09-05	Company entered into a Master Business Loan Agreement (MBLA) with Change Capital Holdings I, LLC for advances up to $2,500,001, with an initial advance of $525,000.
2025-10-09	Company entered into a note purchase agreement for a secured note of $133,333 (October 2025 Note) for a purchase price of $120,000.
2025-10-14	17,022,690 shares of common stock outstanding.
2025-11-20	Date of signing for the 10-Q/A by Co-CEO and CFO.

Recommendation

strong sell

The company exhibits severe financial distress, marked by a 1050% increase in net loss, rapidly declining cash reserves, and a substantial increase in liabilities, leading to an explicit "going concern" warning. Multiple debt instruments are in default, and while revenue growth is present, it is overshadowed by unsustainable operating expenses and significant fair value losses on financial instruments. Material weaknesses in internal controls further undermine confidence in financial reporting. Despite efforts to secure new financing, the overall financial health is highly precarious, indicating a high risk of further value erosion for investors.

Keywords

Telehealth, VSee Health, SEC filing, 10-Q/A, financial results, net loss, revenue growth, operating expenses, going concern, internal controls, debt, convertible notes, related party transactions, healthcare technology, iDoc, Q2 2025

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