Note 11 Commitments, Contingencies, and Concentration Risk

Litigation

We are currently involved in, and may in the future be involved in, legal proceedings, claims, and government investigations in the ordinary course of business. These include proceedings, claims, and investigations relating to, among other things, regulatory matters, commercial matters, intellectual property, competition, tax, employment, pricing, discrimination, consumer rights, personal injury, and property rights.

Depending on the nature of the proceeding, claim, or investigation, we may be subject to settlement awards, monetary damage awards, fines, penalties, or injunctive orders. Furthermore, the outcome of these matters could materially adversely affect the Company’s business, results of operations, and financial condition. The outcomes of legal proceedings, claims, and government investigations are inherently unpredictable and subject to significant judgment to determine the likelihood and amount of loss related to such matters. While it is not possible to determine the outcomes, the Company believes based on its current knowledge that the resolution of the sole pending matter will not, either individually or in the aggregate, have a material adverse effect on the business, results of operations, cash flows or financial condition.

On April 21, 2026, Toppan Merrill LLC filed a lawsuit in the Superior Court in the County of Middlesex, Massachusetts. The plaintiff alleges that the Company owes $845,891 for services rendered by the plaintiff. The plaintiff is also seeking a preliminary injunction enjoining the Company from disposing assets outside of the ordinary course of business. The Company intends to vigorously defend itself against these allegations. The Company has accrued an amount it believes to be reasonable related to this matter based on the services reflected in its accounts payable balance, which differs from the amount claimed by the plaintiff.

Encompass Purchase Liability

On January 1, 2022, iDoc acquired 100% of Encompass Healthcare Billing, LLC. (“Encompass”) with a stock purchase agreement to acquire the equity interests of Encompass, according to the acquisition agreement (“Encompass Acquisition Agreement”). Per the Encompass Acquisition Agreement, iDoc acquired all the outstanding shares of Encompass for a cash payment of $300,000, due upon the closing of the Business Combination. On January 9, 2023, iDoc agreed to an additional obligation of $45,000, which was accounted for as interest expense and reflected in accounts payable and accrued liabilities as of December 31, 2024.

On February 16, 2026, the Company entered into a settlement agreement to fully settle the Encompass Purchase liability for an aggregate amount of $650,000. The settlement consists of (i) a cash payment of $50,000, (ii) issuance of Company shares with an aggregate fair value of $400,000, and (iii) assignment of a loan liability of $200,000. The Company paid $50,000 per the settlement agreement and recognized a loan liability of $200,000 during the six months ended June 30, 2026. The issuance of Company shares with an aggregate fair value of $400,000 remains pending as of June 30, 2026.

As of June 30, 2026, and December 31, 2025, the value of purchase liability related to the Encompass Acquisition agreement was $400,000 and $650,000, respectively.

Contingencies

During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450, Contingencies. Litigation and contingency accruals are based on the Company’s assessment, including advice of legal counsel, regarding the expected outcome of litigation or other dispute resolution proceedings. If the Company determines that an unfavorable outcome is probable and can be reasonably assessed, it establishes the necessary accruals.

As of June 30, 2026, the Company has the following contractual commitments:

VSee Health, Inc. Incentive Plan

DHAC approved and adopted the VSee Health, Inc. 2024 Equity Incentive Plan (the “2024 Plan”) to be effective as of one day prior to the closing Business Combination. The 2024 Plan provides for an initial share reserve equal to 15% of the number of shares of Company common stock outstanding (including shares of Company common stock issuable upon conversion of the outstanding Series A Preferred Stock) following the closing after giving effect to the Business Combination. As of June 30, 2026, the Company reserved 2,544,021 shares of its common stock for issuance under the 2024 Plan. On December 30, 2025, the Company’s stockholders approved the VSee Health, Inc. 2025 Equity Incentive Plan (the “2025 Plan”). The 2025 Plan provides for an initial share reserve equal to 2,553,403 shares of Company common stock. The number of shares of common stock available for issuance under the 2025 Plan automatically increases on January 1st of each year until the completion of the term of the 2025 Plan, so that the amount of shares of common stock of the Company issuable under the 2025 Plan will be equal to fifteen percent (15%) of the total number of outstanding shares of the Company’s common Stock as of December 31st of the preceding calendar year. 

Indemnities

The Company generally indemnifies its customers for the services it provides under its contracts and other specified liabilities, which may subject the Company to indemnity claims, liabilities, and related litigation. As of June 30, 2026, and December 31, 2025, the Company was unaware of any material asserted or unasserted claims concerning these indemnity obligations.

Other Matters

The Company continues to analyze potential sales tax exposure using a state-by-state assessment. In accordance with ASC 450, Contingencies, the Company estimated and recorded a liability of $0 and $1.2 million as of June 30, 2026, and December 31, 2025, respectively, which is included within current liabilities from discontinued operations on the condensed consolidated balance sheets. The entire sales tax accrual recorded in the prior period related to VSee Lab.

Credit Risk and Major Customers/Supplier Concentration 

Financial instruments potentially subject the Company to credit risk concentrations consisting of cash and trade accounts receivables. The Company maintains all its cash in commercial depository accounts, insured by the Federal Deposit Insurance Corporation. At times, cash deposits may exceed federally insured limits. Any loss incurred or lack of access to such funds could have an adverse impact on the Company’s financial condition, results of operations, and cash flows.

In aggregate, the Company had two customers whose accounts receivable represented 23% of the Company’s total accounts receivable as of June 30, 2026. In the aggregate, the Company had three customers whose accounts receivable represented 43% of the Company’s total accounts receivable as of December 31, 2025.

The Company has one customer whose revenue accounted for approximately 46% and 43% of the Company’s total revenue for the three months ended June 30, 2026, and six months ended June 30, 2026, respectively. The Company has one customer whose revenue accounted for approximately 29% and 28% of the Company’s total revenue for the three months ended June 30, 2025, and six months ended June 30, 2025, respectively. Although the Company seeks to reduce dependence on those customers, the partial or complete loss of certain of these customers could have at least a temporary adverse effect on the Company’s results of operations.

The Company had two vendors whose accounts payable and accrued liabilities represented 78% of the Company’s total accounts payable and accrued liabilities as of June 30, 2026. The Company had two vendors whose accounts payable and accrued liabilities represented 31% of the Company’s total accounts payable and accrued liabilities as of December 31, 2025.