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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
(Mark One)
For
the Quarterly period ended
For the transition period from to
Commission
file number
(formerly known as Clinigence Holdings, Inc.)
(Exact name of registrant as specified in its charter)
| (State
or other jurisdiction of incorporation or organization) |
(I.R.S.
Employer Identification No.) |
(Address of principal executive offices) (zip code)
With Copies to:
2455 East Sunrise Blvd., Suite 1204, Fort Lauderdale, FL 33304
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller
reporting company | |
| (Do not check if a smaller reporting company) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) |
Name of each exchange on which registered | ||
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐
As of May 13, 2022, there were shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.
| 1 |
Explanatory Note
On April 1, 2022, subsequent to the fiscal quarter ended March 31, 2022, the fiscal quarter to which this Quarterly Report on Form 10-Q (this “Quarterly Report”) relates, Clinigence Holdings, Inc. (now known as Nutex Health Inc.), a publicly traded Delaware corporation (the “Company”) that is our predecessor, consummated the previously announced business combination (the “Business Combination”) with Nutex Health Holdco LLC (“Nutex”) pursuant to that certain Agreement and Plan of Merger, dated as of November 23, 2021 (as amended, modified, supplemented or waived, the “Merger Agreement”), by and among Nutex, Clinigence Holdings, Inc., Nutex Acquisition LLC (“Merger Sub”), Micro Hospital Holding LLC (solely for the purposes of certain sections), Nutex Health LLC (solely for the purposes of certain sections) and Thomas T. Vo, solely in his capacity as the representative of the equityholders of Nutex. Pursuant to the Merger Agreement, following the approval by the stockholders of Clinigence Holdings Inc. on March 16, 2022, Merger Sub merged with and into Nutex, with Nutex surviving as a wholly owned subsidiary of the Company (the “Merger”).
Unless stated otherwise, this Quarterly Report contains information about Clinigence Holdings, Inc. before the Business Combination. References to the “Company,” “our,” “us” or “we” in this Quarterly Report refer to Clinigence Holdings, Inc. and its consolidated subsidiaries before the consummation of the Business Combination and to Nutex Health Inc. and its consolidated subsidiaries after the Business Combination, as the context suggests.
Except as otherwise expressly provided herein, the information in this Quarterly Report does not reflect the consummation of the Business Combination, which, as discussed above, occurred subsequent to the period covered hereunder.
| 2 |
NUTEX HEALTH INC.
(FORMERLY
KNOWN AS CLINIGENCE HOLDINGS, INC.)
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2022
TABLE OF CONTENTS
| Introductory Note | 4 | |
| Note About Forward-Looking Statements | 4 | |
| Part I — Financial Information | 5 | |
| Item 1. | Financial Statements (Unaudited) | 5 |
| Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 | 5 | |
| Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 (Unaudited) | 6 | |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2022 and 2021 (Unaudited) | 7 | |
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited) | 8 | |
| Unaudited Condensed Notes to Consolidated Financial Statements | 9 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 29 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 34 |
| Item 4. | Controls and Procedures | 34 |
| Part II — Other Information | ||
| Item 1. | Legal Proceedings | 35 |
| Item 1A. | Risk Factors | 35 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 35 |
| Item 3. | Defaults upon Senior Securities | 35 |
| Item 4. | Mine Safety Disclosures | 35 |
| Item 5. | Other Information | 35 |
| Item 6. | Exhibits | 36 |
| 3 |
INTRODUCTORY NOTE
Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Nutex Health, Inc. (formerly known as Clinigence Holdings, Inc.), a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “Nutex” refers to Nutex Health, Inc.
Trade names and trademarks of the Company and its subsidiaries referred to herein, and their respective logos, are our property. This Quarterly Report on Form 10-Q may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
NOTE ABOUT 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”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, , any statements about our business (including the impact of the COVID-19 pandemic on our business), financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, or otherwise, and our future liquidity, including cash flows; any statements of any plans, strategies, and objectives of management for future operations, such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases, or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.
Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations, and certain assumptions of management. Some or all of such beliefs, expectations, and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental, and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K, for the year ended December 31, 2021, filed with the Securities and Exchange Commission (the “SEC”) on March 31, 2022, including the risk factors discussed under the heading “Risk Factors” in Part I, Item IA thereof. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes, and results to differ materially from those indicated by such statements. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
| 4 |
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements
NUTEX HEALTH INC. AND SUBSIDIARIES
(F/K/A CLINIGENCE HOLDINGS, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| MARCH 31, | DECEMBER 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Accounts receivable - ACMG sale of investment | ||||||||
| Stock subscriptions receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset, net | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued interest on notes payable | ||||||||
| Due to related parties | ||||||||
| Lease liability - current | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable, net of debt discount | ||||||||
| Current portion of notes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Lease liability - long term | ||||||||
| Deferred tax liabilities | ||||||||
| Notes payable | ||||||||
| Total liabilities | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock, $ par value; authorized - shares; issued and outstanding - shares as of March 31, 2021 and December 31, 2021, respectively | ||||||||
| Common stock, $ par value; authorized - shares; and shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Total stockholders' equity | ||||||||
| Total liabilities and stockholders' equity | $ | $ | ||||||
| See accompanying notes to the consolidated financial statements. | ||||||||
| 5 |
NUTEX HEALTH INC. AND SUBSIDIARIES
(F/K/A CLINIGENCE HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
| 2022 | 2021 | |||||||
| Sales | ||||||||
| Capitation revenue, net | $ | $ | ||||||
| SaaS revenue | ||||||||
| Management service revenue, net | ||||||||
| Total sales | ||||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Research and development | ||||||||
| Sales and marketing | ||||||||
| General and administrative expenses | ||||||||
| Amortization | ||||||||
| Total operating expenses | ||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||
| Other income (expenses) | ||||||||
| Income from forgiveness of debt | ||||||||
| Interest income | ||||||||
| Interest expense - debt obligations | ( | ) | ( | ) | ||||
| Interest expense - accretion of debt discount | ( | ) | ||||||
| Total other income (expenses) | ( | ) | ( | ) | ||||
| Loss from operations before income tax benefit | ( | ) | ( | ) | ||||
| Income tax benefit - current | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Net income attributable to noncontrolling interest | ( | ) | ||||||
| Net income (loss) attributable to Clinigence Holdings, Inc. | $ | ( | ) | $ | ( | ) | ||
| Basic and fully diluted income (loss) per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding - basic and fully diluted | ||||||||
| See accompanying notes to the consolidated financial statements. | ||||||||
| 6 |
NUTEX HEALTH INC. AND SUBSIDIARIES
(F/K/A CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2022 AND 2021
UNAUDITED
| Common stock | ||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interest | Totals | |||||||||||||||||||
| Balances, December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Notes payable converted to common stock | ||||||||||||||||||||||||
| Exercise of warrants for the issuance of common stock | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Financing cost for capital raise | — | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balances, March 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Balances, December 31, 2020 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||
| Common stock issued in business acquisitions | $ | |||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Balances, March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| See accompanying notes to the consolidated financial statements. | ||||||||||||||||||||||||
| 7 |
NUTEX HEALTH INC. AND SUBSIDIARIES
(F/K/A CLINIGENCE HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Interest expense associated with debt discount | ||||||||
| Non cash interest expense | ||||||||
| Purchase price adjustment to investments in subsidiaries | ( | ) | ||||||
| Income from forgiveness of debt | ( | ) | ||||||
| Stock-based compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ( | ) | ||||
| Accrued interest on notes payable | ||||||||
| Lease liability | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchases of property and equipment | ( | ) | ||||||
| Distributions to AHP shareholders for period prior to acquisition | ( | ) | ||||||
| Preacquisition loans from subsidiary | ||||||||
| Cash acquired from acquisitions | ||||||||
| NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES | ( | ) | ||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from common stock subscriptions receivable | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from issuance of notes and convertible notes payable | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Payments of financing costs for capital raise | ( | ) | ||||||
| NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES | ( | ) | ||||||
| NET (DECREASE) INCREASE IN CASH | ( | ) | ||||||
| CASH - BEGINNING OF PERIOD | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Goodwill for distributions payable to AHP shareholders preacquisition | $ | $ | ||||||
| Notes payable converted to common stock | ||||||||
| Common stock issued for acquisition of subsidiaries | ||||||||
| Related party loans converted to common stock | ||||||||
| Notes payable converted to accounts payable | ||||||||
| Deferred tax liability recorded on intangible assets | ||||||||
| See accompanying notes to the consolidated financial statements. | ||||||||
| 8 |
NUTEX HEALTH INC.
(F/K/A CLINIGENCE HOLDINGS, INC.)
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Three Months Ended March 31, 2022 and 2021
Note 1 - Organization and Basis of Presentation
The consolidated financial statements presented are those of Nutex Health Inc., formerly known as Clinigence Holdings, Inc., (the “Company”) and its wholly-owned subsidiaries, Accountable Healthcare America, Inc. (“AHA”), AHP Management, Inc. (“AHP”), Clinigence Health, Inc. (“Clinigence”), and Procare Health, Inc. (“Procare”). The Company’s name was changed to Nutex Health Inc. on April 1, 2022 in connection with a reverse merger. In October 2018, Clinigence was incorporated as a wholly-owned subsidiary of Clinigence LLC. The Company is a population health analytics company that provides turnkey SaaS solutions that enable connected intelligence across the care continuum by transforming massive amounts of data into actionable insights. The Company’s solutions help healthcare organizations throughout the United States improve the quality and cost-effectiveness of care, enhance population health management and optimize provider networks. The Company enables risk-bearing healthcare organizations achieve their objectives on the path to value-based care. The Company’s platform automatically extracts and delivers targeted data insights from its cloud-based analytics engine directly to the workflows and technologies of its customers. This enhances end-user workflows with actionable analytics, seamlessly delivers data from disparate sources to the point of engagement, automates the delivery of data to ensure on-time access, and reduces dependency on non-essential applications from the end-user’s workflow. All of this allows the healthcare organization to enable population health management, manage cost and utilization, improve quality, identify gaps in care, risk stratify and target patients, increase collaboration among providers and to optimize network provider performance.
AHA was organized to acquire a series of companies providing a broad array of health and managed care services to Medicare members. AHA’s initial focus is on acquiring Accountable Care Organizations (“ACO’s”), Managed Service Organizations (“MSO’s”) and Primary Care Physician Practices (“PCP’s”) with significant numbers of Medicare members.
AHP is a privately held medical management company and provider network that manages its affiliated medical group, AHP Independent Physicians Association.
ProCare is a leading management services organization (“MSO”) that currently provides services for one health maintenance organization (“HMO”) and three independent physician associations (“IPAs”) in Southern and Northern California.
Interim Financial Statements
The following (a) condensed consolidated balance sheet as of December 31, 2021, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2022 are not necessarily indicative of results that may be expected for the year ending December 31, 2022. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022.
Business Acquisitions
Merger With Procare Health, Inc.
On October 15, 2021, Clinigence Holdings, Inc., a Delaware corporation (“Parent” or the “Company”), Clinigence Procare Health Inc, a Delaware corporation (“Merger Sub”), Procare Health, Inc., a California corporation (“Procare”), Anh Nguyen (“Majority Stockholder”), and Tram Nguyen (“Minority Stockholder” and together with Majority Stockholder, the “Stockholders”) entered into an agreement and plan of merger (the “Merger Agreement”). The transactions contemplated by the Merger Agreement were consummated on October 15, 2021 (the “Procare Closing”).
| 9 |
The Merger Agreement provided for the merger of Merger Sub with and into Procare, hereafter referred to as the “Procare Acquisition.” As a result of the Procare Acquisition, Merger Sub ceased to exist, and Procare became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of Procare, the Stockholders, have a direct equity ownership in Clinigence. Merger Sub was renamed Procare Health, Inc. Merger Sub was originally incorporated in Delaware on September 30, 2021 and had no operating activity prior to the reported transaction.
Merger With AHP Health Management Services Inc.
On February 25, 2021, Clinigence Holdings, Inc., a Delaware corporation (“Parent” or the “Company”), AHP, Inc., a California corporation (“AHP”), AHP Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub”), and Robert Chan (the “Shareholders’ Representative”) entered into an agreement and plan of merger (the “AHP Merger Agreement”). The transactions contemplated by the AHP Merger Agreement were consummated on February 26, 2021 (the “AHP Closing”).
The AHP Merger Agreement provided for the merger of Merger Sub with and into AHP, hereafter referred to as the “AHP Acquisition.” As a result of the Acquisition, Merger Sub ceased to exist, and AHP became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of AHP (the “AHP Stockholders”) have a direct equity ownership in Clinigence. Merger Sub was renamed AHP Health Management Services Inc. Merger Sub was originally incorporated in Delaware on January 26, 2021 and had no operating activity prior to the reported transaction.
AHP was a privately held company with controlling interest in its’ affiliate Associated Hispanic Physicians of Southern California IPA, a California Medical corporation, (“AHPIPA”). A key term of the AHP Merger Agreement is that at Closing, AHP Management Inc entered into a Management Services Agreement with AHPIPA (the “Management Services Agreements”) making AHPIPA a Variable Interest Entity (VIE) of Clinigence.
Merger With Accountable Healthcare America, Inc.
On February 25, 2021, Clinigence Holdings, Inc., a Delaware corporation (“Parent” or the “Company”), Accountable Healthcare America, Inc., a Delaware corporation (“AHA”), and AHA Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub”) entered into an agreement and plan of merger (the “AHA Merger Agreement”). The transactions contemplated by the AHA Merger Agreement were consummated on February 26, 2021 (the “AHA Closing”).
The AHA Merger Agreement provided for the merger of Merger Sub with and into AHA, hereafter referred to as the “AHA Acquisition.” As a result of the Acquisition, Merger Sub ceased to exist, and AHA became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of AHA (the “AHA Stockholders”) have a direct equity ownership in Clinigence. Merger Sub was renamed Accountable Healthcare America, Inc. Merger Sub was originally incorporated in Delaware on January 2, 2020 and had no operating activity prior to the reported transaction.
| 10 |
The following table presents the preliminary allocation of the value of the common shares issued for Procare to the acquired identifiable assets, liabilities assumed and goodwill:
| Fair Value | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Property and equipment | ||||
| Management contracts | ||||
| Trademarks | ||||
| Accounts payable | ( | ) | ||
| Deferred tax liability - intangibles | ( | ) | ||
| Goodwill | ||||
| Purchase price | $ | |||
The following table presents the allocation of the value of the common shares issued for AHA to the acquired identifiable assets, liabilities assumed and goodwill:
| Fair Value | ||||
| Cash | $ | |||
| Other current assets | ||||
| Investment in ACMG | ||||
| PHP technology | ||||
| Loan to Clinigence | ||||
| Accounts payable | ( | ) | ||
| Due to related party | ( | ) | ||
| Notes payable | ( | ) | ||
| Deferred tax liability - intangibles | ( | ) | ||
| Goodwill | ||||
| Purchase price | $ | |||
On
December 24, 2021, the AHA Investment in ACMG was sold for $
The following table presents the allocation of the value of the common shares issued for AHP to the acquired identifiable assets, liabilities assumed and goodwill:
| Fair Value | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Deposits and other assets | ||||
| Member relationships | ||||
| Trademarks | ||||
| Accounts payable | ( | ) | ||
| Distribution payable | ( | ) | ||
| Deferred tax liability - intangibles | ( | ) | ||
| Goodwill | ||||
| Purchase price | $ | |||
| 11 |
On
September 30, 2021, the Company paid out an arbitration settlement on behalf of AHP. Pursuant to the merger agreement with AHP this triggered
the release of 1,076,372 common shares that were subject to a holdback provision pending the outcome of the arbitration case (the “AHP
Litigation Holdback Shares”) back to the Company. As a result of the release of the AHP Litigation Holdback shares to Clinigence
Holdings, Inc. goodwill was decreased by $
Liquidity and Management Plans
The
Company has an accumulated deficit of $
Historically, the Company’s major sources of cash have been comprised of proceeds from various public and private offerings of its common stock, debt financings, and option and warrant exercises. During the year ended December 31, 2021, the Company raised approximately $14.4 million in gross proceeds from various public and private offerings of its common stock.
As of March 31, 2022, the Company had approximately $12.7 million in cash and cash equivalents. Although the Company expects to have sufficient capital to fund its obligations, as they become due, in the ordinary course of business until at least December 31, 2022, the actual amount of cash that it will need to operate is subject to many factors. During the year ended December 31, 2022, the Company expects to collect the receivable of $1.3 million from the sale of its ACMG investment. The Company also decreased its debt in 2021. With the funds raised and the other mitigating factors the Company believes that it has enough cash to fund its operations for one year from the date of filing. Therefore, such conditions of substantial doubt as of March 31, 2022 have subsequently been alleviated.
The Company recognizes it will need to raise additional capital in order to continue to execute its business plan in the future. There is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company or whether the Company will become profitable and generate positive operating cash flow. If the Company is unable to raise sufficient additional funds, it will have to further scale back its operations.
Note 2 – Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Clinigence Health, Inc., Accountable Healthcare America Inc., AHP Management Inc., and Procare Health, Inc. All intercompany accounts and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.
| 12 |
Variable Interest Entities
On an ongoing basis, as circumstances indicate the need for reconsideration, the Company evaluates each legal entity that is not wholly-owned by the Company in accordance with the consolidation guidance. The evaluation considers all of the Company’s variable interests, including equity ownership, as well as management services agreements. To fall within the scope of the consolidation guidance, an entity must meet both of the following criteria:
| • | The entity has a legal structure that has been established to conduct business activities and to hold assets; such entity can be in the form of a partnership, limited liability company, or corporation, among others; and |
| • | The Company has a variable interest in the legal entity – i.e., variable interests that are contractual, such as equity ownership, or other financial interests that change with changes in the fair value of the entity’s net assets. |
If an entity does not meet both criteria above, the Company applies other accounting guidance, such as the cost or equity method of accounting. If an entity does meet both criteria above, the Company evaluates such entity for consolidation under either the variable interest model if the legal entity meets any of the following characteristics to qualify as a VIE, or under the voting model for all other legal entities that are not VIEs.
A legal entity is determined to be a VIE if it has any of the following three characteristics:
1. The entity does not have sufficient equity to finance its activities without additional subordinated financial support;
2. The entity is established with non-substantive voting rights (i.e., where the entity deprives the majority economic interest holder(s) of voting rights); or
3. The equity holders, as a group, lack the characteristics of a controlling financial interest. Equity holders meet this criterion if they lack any of the following:
a. The power, through voting rights or similar rights, to direct the activities of the entity that most significantly influence the entity’s economic performance, as evidenced by:
i. Substantive participating rights in day-to-day management of the entity’s activities; or
ii. Substantive kick-out rights over the party responsible for significant decisions;
iii. The obligation to absorb the entity’s expected losses; or
iv. The right to receive the entity’s expected residual returns.
If the Company determines that any of the three characteristics of a VIE are met, the Company will conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.
Variable interest model
If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company – that is, the Company (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary. Refer to Note 15 – “Variable Interest Entities (VIEs)” to the consolidated financial statements for information on the Company’s consolidated VIEs. If there are variable interests in a VIE but the Company is not the primary beneficiary, the Company may account for the investment using the equity method of accounting.
| 13 |
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. The Company does not have any cash equivalents as of March 31, 2022 and December 31, 2021. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.
Accounts Receivable
The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of March 31, 2022, no customers represented more than 10% of total accounts receivable.
Property and equipment and depreciation
Property and equipment are stated at cost. Maintenance and repairs are charged to expense when incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is credited or charged to income. Depreciation for both financial reporting and income tax purposes is computed using combinations of the straight line and accelerated methods over the estimated lives of the respective assets as follows:
| Office equipment and fixtures | ||||
| Computer hardware | ||||
| Computer software | ||||
| Development equipment |
Amortization
Intangible assets are amortized using the straight line method over the estimated lives of the respective assets as follows:
| Population Health Platform technology | ||||
| Member relationships | ||||
| Management contracts 15 years | ||||
| Trademarks |
Goodwill
Goodwill represents the net identifiable assets acquired and the liabilities assumed of Procare, AHA and AHP and the fair market value of the common shares issued by the Company for the acquisition of Procare, AHA and AHP. In accordance with ASC Topic No. 350 “Intangibles – Goodwill and Other”), the goodwill is not being amortized, but instead will be subject to an annual assessment of impairment by applying a fair-value based test, and will be reviewed more frequently if current events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the asset’s carrying amount, an impairment loss is charged to expense in the period identified. No impairment was recorded during the three months ended March 31, 2022.
| 14 |
Long-Lived Assets
The Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, the Company determines whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows.
Deferred Revenue
Deposits
from customers are not recognized as revenues, but as liabilities, until the following conditions are met: revenues are realized when
cash or claims to cash (receivable) are received in exchange for goods or services or when assets received in such exchange are readily
convertible to cash or claim to cash or when such goods/services are transferred. When such income item is earned, the related revenue
item is recognized, and the deferred revenue is reduced. To the extent revenues are generated from the Company’s support and maintenance
services, the Company recognizes such revenues when services are completed and billed. The Company has received deposits from its various
customers that have been recorded as deferred revenue and presented as current liabilities in the amount of $
The Company accounts for its stock-based awards granted under its employee compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest. The Company uses the Black-Scholes option pricing model to estimate the fair value of its stock options and warrants. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock, the risk free interest rate at the date of grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants. Changes in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options and warrants.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.
The Company applies the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements. In accordance with this provision, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position.
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
| 15 |
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. The Company’s investment in AHA was valued at level 3 input.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
Revenue Recognition
Revenue is generated by software licenses, training, and consulting. Software licenses are provided as SaaS-based subscriptions that grants access to proprietary online databases and data management solutions. Training and consulting are project based and billable to customers on a monthly-basis or task-basis.
Revenue from training and consulting are generally recognized upon delivery of training or completion of the consulting project. The duration of training and consulting projects are typically a few weeks or months and last no longer than 12 months.
SaaS-based subscriptions are generally marketed under multi-year agreements with annual, semi-annual, quarterly, or month-to-month renewals and revenue is recognized ratably over the renewal period with the unearned amounts received recorded as deferred revenue. For multiple-element arrangements accounted for in accordance with specific software accounting guidance, multiple deliverables are segregated into units of accounting which are delivered items that have value to a customer on a standalone basis.
| 16 |
On January 1, 2019, the Company adopted the new revenue recognition standard Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using the modified retrospective method. The modified retrospective adoption used by the Company did not result in a material cumulative effect adjustment to the opening balance of accumulated deficit. Revenue from substantially all the Company’s contracts with customers continues to be recognized over time as performance obligations are satisfied.
The Company provides its customers with software licensing, training, and consulting through SaaS-based subscriptions. This subscription revenue represents revenue earned under contracts in which the Company bills and collects the charges for licensing and related services. The Company determines the measurement of revenue and the timing of revenue recognition utilizing the following core principles:
1. Identifying the contract with a customer;
2. Identifying the performance obligations in the contract;
3. Determining the transaction price;
4. Allocating the transaction price to the performance obligations in the contract; and
5. Recognizing revenue when (or as) the Company satisfies its performance obligations.
Revenues from subscriptions are deferred and recorded as deferred revenue when cash payments are received in advance of the satisfaction of the Company’s performance obligations and recognized over the period in which the performance obligations are satisfied. The Company completes its contractual performance obligations through providing its customers access to specified data through subscriptions for a service period, and training on consulting associated with the subscriptions. The Company primarily invoices its customers on a monthly basis and does not provide any refunds, rights of return, or warranties to its customers.
AHA’s performance obligation is to manage ACO participants who provide healthcare services to CMS’s members for the purpose of generating shared savings. If achieved, the Company receives shared savings payments from CMS, which represents variable consideration. The shared savings payments are recognized using the most likely methodology. However, as the Company does not have sufficient insight from CMS into the financial performance of the shared risk pool because of unknown factors related to shifting patient count, risk adjustment factors and benchmark adjustments, among other factors, an estimate cannot be developed. Therefore, these amounts are considered to be fully constrained and only recorded in the months when such payments are known and/or received. The Company generally receives payment within ten months after the fiscal year-end.
AHP negotiates fixed per-member, per-month (PMPM) rates (Capitation) with third-party insurers for a fixed period of time. The Independent Physicians Association (“IPA”) recognizes capitation payments received in advance from third-party insurers as revenue on a monthly basis without regard to the frequency, extent, or nature of the medical services actually furnished.
Procare’s revenue is generated primarily through management fees that are received based on Gross Capitation Revenues of the IPA/Physician Groups. Revenue is paid monthly and is a flat fixed rate determined by the agreement. In addition to Management Fees, there is revenue generated through consultant services that are charged as a flat fixed rate and represent a small portion of the total revenue.
Advertising Costs
The
Company expenses advertising costs as incurred. Advertising costs of $
Recent Accounting Pronouncements
We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.
| 17 |
Note 3 – Property and Equipment
Property and equipment are carried at cost and consist of the following at March 31, 2022 and December 31, 2021:
| 2022 | 2021 | |||||||
| Office equipment and fixtures | $ | $ | ||||||
| Computer hardware | ||||||||
| Computer software | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, Plant and Equipment, Net | $ | $ | ||||||
Depreciation
expense of $
Note 4 – Intangible Assets
The following tables provide detail associated with the Company’s acquired identifiable intangible assets:
| As of March 31, 2022 | ||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Useful Life (in years) | |||||||||||||
| Amortized intangible assets: | ||||||||||||||||
| Member relationships | $ | $ | ( | ) | $ | |||||||||||
| Management contracts | ( | )) | ||||||||||||||
| Trademarks | ( | ) | ||||||||||||||
| PHP technology | ( | ) | ||||||||||||||
| Total | $ | $ | ( | $ | ||||||||||||
| Aggregate Amortization Expense: | ||||||||
| For the three months ended March 31, 2022 | $ |
Note 5 – Investment in ACMG
In
connection with the acquisition of Accountable Care Medical Group of Florida, Inc. (“ACMG”), AHA defaulted on its payment
obligations of $
| 18 |
Note 6 – Operating Lease
The Company determines if a contract is, or contains, a lease at contract inception. Operating leases are included in operating lease right-of-use ("ROU") assets, current portion of operating lease liabilities and operating lease liabilities, net of current portion in the Company's consolidated balance sheets. Finance leases are included in property and equipment, current portion of finance lease obligations and finance lease obligations, net of current portion in the Company's audited consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. In addition, ROU assets include initial direct costs incurred by the lessee as well as any lease payments made at or before the commencement date and exclude lease incentives. The Company used the implicit rate in the lease in determining the present value of lease payments. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of one year or less are generally not included in ROU assets and liabilities.
Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheet as follows:
| March 31, | ||||
| 2022 | ||||
| Operating Lease: | ||||
| Operating lease right-of-use assets, net | $ | |||
| Current portion of operating lease liabilities | ||||
| Operating lease liabilities, net of current portion | ||||
As
of December 31, 2021, the weighted-average remaining lease term of the operating lease was
The following table summarizes maturities of operating lease liabilities based on lease term as of March 31, 2022:
| 2022 | $ | |||
| 2023 | ||||
| 2024 | ||||
| Total lease payments | ||||
| Less: Imputed interest | ||||
| Present value of lease liabilities | $ |
At March 31, 2022, the Company had the following future minimum payments due under the non-cancelable lease:
| 2022 | $ | ||||
| 2023 | |||||
| 2024 | |||||
| Total minimum lease payments | $ |
Consolidated
rental expense for all operating leases was $
The following table summarizes the cash paid and related right-of-use operating lease recognized for the three months ended March 31, 2022.
| Three Months Ended | ||||
| March 31, 2022 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | |||
| Right-of-use lease assets obtained in the exchange for lease liabilities: | ||||
| Operating leases | ||||
| 19 |
The Company calculates net income (loss) per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net earnings (loss) per common share was determined by dividing net earnings (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s potentially dilutive shares, which include outstanding common stock options, common stock warrants, and convertible debt have not been included in the computation of diluted net loss per share for the three months ended March 31, 2022 and 2021 as the result would be anti-dilutive.
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2022 | 2021 | |||||||
| Stock options | ||||||||
| Stock warrants | ||||||||
| Total shares excluded from calculation | ||||||||
Options
In 2019, the Company adopted the 2019 Omnibus Equity Incentive Plan (the "2019 Plan"). Awards granted under the 2019 Plan have a ten-year term and may be incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units or performance shares. The awards are granted at an exercise price equal to the fair market value on the date of grant and generally vest over a four-year period.
3,624,000 options were granted on March 16, 2022 when the Company’s shareholders approved the merger with Nutex resulting in a stock compensation expense of $14.2 million in the current period.
Stock option activity during the three months ended March 31, 2022 and 2021 follows:
| Options Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Options outstanding at December 31, 2020 | $ | |||||||||||
| Options granted | ||||||||||||
| Options assumed in merger | ||||||||||||
| Options outstanding at March 31, 2021 | $ | |||||||||||
| Options outstanding at December 31, 2021 | $ | |||||||||||
| Options granted | ||||||||||||
| Options outstanding at March 31, 2022 | $ | |||||||||||
| 20 |
Options outstanding at March 31, 2022 consist of:
| Date Issued | Number Outstanding | Number Exercisable | Exercise Price | Expiration Date | ||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| Total | ||||||||||||||
Warrants
In 2018, the Company issued fully vested warrants to investors as part of a private placement offering. Each unit offered in the private placement consisted of one share of common stock, and a warrant convertible into 0.4 shares of common stock at an exercise of $1.50 per whole share. The warrants are exercisable for a period of five years from the date of issuance. The warrants were cancelled on March 1, 2019 and reissued upon the Qualmetrix acquisition and are each convertible into one share of common stock at an exercise price of $6.67 per share until December 31, 2024.
In November 2019, the Company issued fully vested warrants to investors as part of private placement subscription agreements pursuant to which the Company issued convertible promissory notes. Each noteholder received warrants to purchase common stock of 50% of the principal at an exercise price of $5.56 per share with an expiration date of October 31, 2025.
Warrant activity during the three months ended March 31, 2022 and 2021 follows:
| Warrants Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Warrants outstanding at December 31, 2020 | $ | |||||||||||
| Warrants assumed in merger | ||||||||||||
| Warrants outstanding at March 31, 2021 | $ | |||||||||||
| Warrants outstanding at December 31, 2021 | $ | |||||||||||
| Warrants granted | ||||||||||||
| Warrants exercised | ( | ) | ||||||||||
| Warrants outstanding at December 31, 2021 | $ | |||||||||||
| 21 |
Warrants outstanding at March 31, 2022 consist of:
| Date Issued | Number Outstanding | Number Exercisable | Exercise Price | Expiration Date | ||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| Total | ||||||||||||||
| 22 |
Note 9 – Convertible Notes Payable
Convertible notes payable consisted of the following at March 31, 2022 and December 31, 2021:
| 2022 | 2021 | |||||||
| Notes payable convertible into Nutex common shares at $1.55 per share; bearing interest at a rate of 10%; net of debt discount of $3,771,858 and $3,904,221, respectively; maturing in July 2022 | $ | $ | ||||||
Included
in the liabilities assumed in the AHA merger are convertible promissory notes to various individuals totaling $
The
debt discount of $
At
the time of issuance of these notes based on independent valuation, debt discounts were calculated and allocated based on the relative
values of $
Note 10 – Notes Payable
Notes payable consisted of the following at March 31, 2022 and December 31, 2021:
| 2022 | 2021 | |||||||
| SBA Paycheck Protection Program notes payable issued in April 2020 and February 2021 with maturity dates through August 2023 and interest rate of 1% | $ | $ | ||||||
| SBA Economic Injury Disaster Loan note payable issued in May 2020 with a maturity date of May 2051 and interest rate of 3.75% | ||||||||
| Note payable with a maturity date of January 31, 2023 and interest rate of 12.9% | ||||||||
| Total notes payable | ||||||||
| Current portion | ( | ) | ( | ) | ||||
| Total notes payable, net | $ | $ | ||||||
| 23 |
The Company’s long-term debt is comprised of promissory notes pursuant to the Paycheck Protection Program and Economic Injury Disaster Loan (see below), under Coronavirus Aid, Relief and Economic Security Act (“CARES ACT”) enacted on March 27, 2020 and revised under the provisions of the PayCheck Protection Flexibility Act of 2020 on June 5, 2020 and administered by the United States Small Business Administration (“SBA”).
On
May 22, 2020, the Company received loan proceeds of $
On
February 25, 2021, the Company received a second PPP loan of $
Under
the terms of the loan, a portion or all of the loan is forgivable to the extent the loan proceeds are used to fund qualifying payroll,
rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven.
The Company has utilized the proceeds of the PPP loan in a manner which has enabled qualification as a forgivable loan. On February 22,
2022, the second PPP loan in the amount of $
The
Company assumed a note payable in the AHA merger transaction that AHA entered into with an individual investor on October 24, 2019. AHA
issued a note with a principal amount of $
Effective
February 1, 2021, an Amended and Restated Note was entered into in which the principal amount increased to $
| 24 |
Note 11 – Stock Transactions
Common Stock Issued
In
connection with the convertible notes payable (see Note 9 above) various noteholders converted $
On
March 16, 2022, various shareholders exercised warrants in exchange for common shares for proceeds of $
Note 12 – Concentrations and Credit Risk
Sales and Accounts Receivable
The
Company had sales to two customers which accounted for approximately
No
customer accounted for
Cash
Cash
is maintained at a major financial institution. Accounts held at U.S. financial institutions are insured by the FDIC up to $
Note 13 - Related Party Transactions
Due to Related Parties
Due
to related parties with a balance of $
Note 14 – Commitments and Contingencies
Employment Arrangements With Executive Officers
The
Company entered into 3-year employment agreements with Elisa Luqman and Dr. Lawrence Schimmel. Pursuant to the employment agreements
with Ms. Luqman and Dr. Schimmel, each is entitled to receive a base annual salary of $
Pursuant to the employment agreements with the named officers, upon termination, each such individual would be entitled to receive payment of all salary and benefits accrued up to the termination date of his or her employment in all employment termination events. Thereafter, Ms. Luqman would be entitled to receive twelve (12) months of base salary as a severance payment, Dr. Schimmel would be entitled to receive twenty-four (24) months of base salary as a severance payment, Dr. Hosseinion would be entitled to receive twenty four (24) months of base salary as a severance payment, Mr. Sternberg would be entitled to receive twenty four (24) months of base salary as a severance payment Mr. Bowen would be entitled to receive twelve (12) months of base salary as a severance payment, and Mr. Barnett would each be entitled to the balance of the remaining months under his employment agreement of base salary as a severance payment, upon termination of his or her employment by the Company without cause or by such individual for good reason.
| 25 |
Note 15 - Variable Interest Entities (VIEs)
A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE.
The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. See Note 2 to the accompanying consolidated financial statements for information on how the Company determines VIEs and its treatment.
The following table includes assets that can only be used to settle the liabilities of AHPIPA and the creditors of AHPIPA have no recourse to the Company. These assets and liabilities are included in the accompanying consolidated balance sheets.
| March 31, | ||||
| 2022 | ||||
| ASSETS | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Prepaid expenses and other assets | ||||
| Total Current Assets | ||||
| Other Assets | ||||
| Goodwill | ||||
| Right of use asset, net | ||||
| Intangible assets, net | ||||
| Total Other Assets | ||||
| Total Assets | $ | |||
| Current Liabilities | ||||
| Accounts payable and accrued expenses | $ | |||
| Lease liability - current | ||||
| Total Current Liabilities | ||||
| Long-term Liabilities | ||||
| Lease liability – long-term | ||||
| Total Liabilities | $ | |||
| 26 |
Note 16 – Subsequent Events
The Company evaluated its March 31, 2022 condensed consolidated financial statements for subsequent events through the date the condensed consolidated financial statements were issued.
Notes Payable Transactions
From
April 2, 2022 through the date of the report, various noteholders converted $
Stock Transactions
On
May 9, 2022, the Company issued restricted common stock awards, valued at $
Options and Warrants
From
April 2, 2022 through the date of the report, various stockholders exercised options for common shares for total proceeds of $
From
April 2, 2022 through the date of the report, various stockholders exercised warrants for common shares for total proceeds of
$
Business Acquisition
On April 1, 2022, Nutex Health Inc. (formerly Clinigence Holdings, Inc.), a Delaware corporation (the “Company”), completed its business combination with Nutex Health Holdco LLC (“Nutex”) following the satisfaction or waiver of the conditions set forth in the Agreement and Plan of Merger, dated as of November 23, 2021, among the Company, Nutex Acquisition LLC (“Merger Sub”), Micro Hospital Holding LLC (solely for the purposes of certain sections), Nutex Health LLC (solely for the purposes of certain sections) and Thomas T. Vo, solely in his capacity as the representative of the equityholders of Nutex (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Nutex, with Nutex surviving as a wholly owned subsidiary of the Company (the “Merger”).
In connection with the Merger and as of the effective time of the Merger (the “Effective Time”) each unit representing an equity interest in Nutex issued and outstanding immediately prior to the Effective Time of the Merger (a“Nutex Membership Interest”) was converted into the right to receive 3.571428575 (the “Exchange Ratio”) shares of common stock of the Company, par value $ per share (the “Company Common Stock”), as adjusted as set forth in the Merger Agreement, that results in the former Nutex equityholders (“Former Nutex Equityholders”) having a right to receive an aggregate of shares of Company Common Stock.
The aggregate number of Nutex Membership Interests outstanding immediately prior to the Effective Time of the Merger was equal to (a) with respect to the facilities operating for less than 24 months (the “Ramping Hospitals”) and the facilities operating for more than 24 months (the “Mature Hospitals”), the aggregate EBITDA of Nutex based on the contributed percentages of the Ramping Hospitals and Mature Hospitals for the trailing 12-month period ended September 30, 2021 (“TTM EBITDA”) and (b) with respect to the facilities not yet open (the “Under Construction Hospitals”), the aggregate capital contribution amounts received from the contributing owners of the Under Construction Hospitals.
The
aggregate number of shares of Company Common Stock issued in the Merger was equal to (x) with respect to the Ramping Hospitals and Mature
Hospitals, (i) ten times TTM EBITDA (minus (A) the aggregate debt of the Nutex subsidiaries and Nutex facilities outstanding as of closing,
excluding guarantees of mortgage debt of the noncontrolled real estate entities and finance lease obligations reported as indebtedness
under GAAP but including any new debt incurred to finance any redemptions of Nutex Membership Interests, plus (B) up to $
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In addition, owners of the Under Construction Hospitals and Ramping Hospitals are eligible, in the future and based on attainment of the performance thresholds set forth below, to receive a one-time additional issuance of Company Common Stock. Specifically, on the 24-month anniversary of the opening date of the applicable Ramping Hospital, such owner is eligible to receive such owner’s pro rata share of a number of shares of Company Common Stock equal to (a)(i) the TTM EBITDA of the applicable Ramping Hospital times (ii) ten minus (iii) the initial equity value received at the closing of the Merger Agreement minus (iv) such owner’s pro rata share of the aggregate debt of the applicable Ramping Hospital outstanding as of the closing of the Merger divided by (b) the greater of (i) the price of the Company Common Stock and (ii) $2.80. On the 24-month anniversary of the opening date of the applicable Under Construction Hospital, such owner is eligible to receive such owner’s pro rata share of a number of shares of Company Common Stock equal to (a)(i) the TTM EBITDA of the applicable Under Construction Hospital times (ii) ten minus (iii) the aggregate amount of such owner’s capital contribution minus (iv) such owner’s pro rata share of the aggregate Debt of the applicable Under Construction Hospital outstanding as of the Closing of the Merger divided by (b) the greater of (i) the price of the Company Common Stock at the time of determination and (ii) $2.80.
Lock-Up Agreement. Also on April 1, 2022, each member of Nutex Holdco entered into a Lock-Up Agreement agreeing not to, without the prior written consent of the Company and except in limited circumstances (i) offer, pledge, sell, contract to sell, sell any option or contract purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of their shares of Company Common Stock received in the Merger or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of such shares.
The lock-up restrictions terminate with respect to one-third of the shares of Company Common Stock issued in connection with the Merger immediately following each of (i) six months after the Effective Time of the Merger, (ii) twelve months after the Effective Time of the Merger and (iii) eighteen months after the Effective Time of the Merger.
Registration Rights Agreement. Pursuant to a Registration Rights Agreement dated as of April 1, 2022, among Nutex Health Inc., Nutex Holdco and the Former Nutex Equityholders (the “Registration Rights Agreement”) the Company has agreed to file a resale registration statement to register the shares of Company Common Stock received by the Former Nutex Equityholders as promptly as possible but in no event more than three months following the Effective Time of the Merger and to use its commercially reasonable efforts to have it declared effective no later than six months after the Effective Time of the Merger. The Company has agreed to use its commercially reasonable efforts to maintain the effectiveness of the resale registration statement continuously until the date that is the earlier of (i) two years following the effectiveness of the resale registration statement or (ii) the date that is the earlier of (A) the date that all securities covered by the resale registration statement may be sold by the holders under Rule 144 (and without the requirement for the Company to be in compliance with the current public information requirements under Rule 144(c)(1) (or Rule 144(i)(2), if applicable)) or (B) the date on which the holders no longer hold any securities covered by the resale registration statement.
The Registration Rights Agreement terminates on the earlier of (i) the date when there are no shares subject to the Registration Rights Agreement or (ii) the dissolution or liquidation of the Company.
The Nutex transaction will be accounted for as a reverse business combination whereby Nutex is deemed the accounting acquirer. The assets and liabilities of Clinigence will be recorded at fair value with the excess purchase price recorded as intangibles and goodwill.
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. In addition, reference is made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022.
Overview
The Company is a technology-enabled healthcare services company with two divisions: a Hospital Division and a Population Health Management Division.
The Hospital Division implements and operates innovative health care models, including micro-hospitals, specialty hospitals, and hospital outpatient departments (HOPDs). This division owns and operates 21 facilities in 8 states.
The Population Health Management Division owns and operates provider networks such as Independent Physician Associations (IPAs). Our Management Services Organizations (MSOs) provide management, administrative, and other support services to our affiliated hospitals and physician groups. Our cloud-based proprietary technology platform aggregates data across multiple information systems, settings, and sources to create a holistic view of each patient and provider, allowing us to deliver greater quality care more efficiently.
Recent Developments
Merger with Nutex Health Holdco LLC
On April 1, 2022, the Compny completed its business combination with Nutex Health Holdco LLC (“Nutex”) following the satisfaction or waiver of the conditions set forth in the Agreement and Plan of Merger, dated as of November 23, 2021, among the Company, Nutex Acquisition LLC (“Merger Sub”), Micro Hospital Holding LLC (solely for the purposes of certain sections), Nutex Health LLC (solely for the purposes of certain sections) and Thomas T. Vo, solely in his capacity as the representative of the equityholders of Nutex (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Nutex, with Nutex surviving as a wholly owned subsidiary of the Company (the “Merger”).
In connection with the Merger and as of the effective time of the Merger (the “Effective Time”) each unit representing an equity interest in Nutex issued and outstanding immediately prior to the Effective Time of the Merger (a“Nutex Membership Interest”) was converted into the right to receive 3.571428575 (the “Exchange Ratio”) shares of common stock of the Company, par value $0.001 per share (the “Company Common Stock”), as adjusted as set forth in the Merger Agreement, that results in the former Nutex equityholders (“Former Nutex Equityholders”) having a right to receive an aggregate of 592,791,712 shares of Company Common Stock.
The aggregate number of Nutex Membership Interests outstanding immediately prior to the Effective Time of the Merger was equal to (a) with respect to the facilities operating for less than 24 months (the “Ramping Hospitals”) and the facilities operating for more than 24 months (the “Mature Hospitals”), the aggregate EBITDA of Nutex based on the contributed percentages of the Ramping Hospitals and Mature Hospitals for the trailing 12-month period ended September 30, 2021 (“TTM EBITDA”) and (b) with respect to the facilities not yet open (the “Under Construction Hospitals”), the aggregate capital contribution amounts received from the contributing owners of the Under Construction Hospitals.
The aggregate number of shares of Company Common Stock issued in the Merger was equal to (x) with respect to the Ramping Hospitals and Mature Hospitals, (i) ten times TTM EBITDA (minus (A) the aggregate debt of the Nutex subsidiaries and Nutex facilities outstanding as of closing, excluding guarantees of mortgage debt of the noncontrolled real estate entities and finance lease obligations reported as indebtedness under GAAP but including any new debt incurred to finance any redemptions of Nutex Membership Interests, plus (B) up to $10,000,000 of cash held by the Nutex subsidiaries at closing ) divided by (ii) $2.80 plus (y) with respect to the Under Construction Hospitals, (a) the aggregate capital contribution amounts received from the contributing owners of the Under Construction Hospitals divided by (b) $2.80 (collectively the “Merger Consideration”). The Merger Consideration was increased by 2,500,000 shares of Company Common Stock, shared pro rata among the Former Nutex Equityholders, in an amount equal to the shares of Company Common Stock issued to a certain consultant as required under the Merger Agreement.
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In addition, owners of the Under Construction Hospitals and Ramping Hospitals are eligible, in the future and based on attainment of the performance thresholds set forth below, to receive a one-time additional issuance of Company Common Stock. Specifically, on the 24-month anniversary of the opening date of the applicable Ramping Hospital, such owner is eligible to receive such owner’s pro rata share of a number of shares of Company Common Stock equal to (a)(i) the TTM EBITDA of the applicable Ramping Hospital times (ii) ten minus (iii) the initial equity value received at the closing of the Merger Agreement minus (iv) such owner’s pro rata share of the aggregate debt of the applicable Ramping Hospital outstanding as of the closing of the Merger divided by (b) the greater of (i) the price of the Company Common Stock and (ii) $2.80. On the 24-month anniversary of the opening date of the applicable Under Construction Hospital, such owner is eligible to receive such owner’s pro rata share of a number of shares of Company Common Stock equal to (a)(i) the TTM EBITDA of the applicable Under Construction Hospital times (ii) ten minus (iii) the aggregate amount of such owner’s capital contribution minus (iv) such owner’s pro rata share of the aggregate Debt of the applicable Under Construction Hospital outstanding as of the Closing of the Merger divided by (b) the greater of (i) the price of the Company Common Stock at the time of determination and (ii) $2.80.
The Merger was disclosed on the Company’s current report on Form 8-K filed on April 1, 2022.
Key Financial Measures and Indicators
Operating Revenues
Our revenue primarily consists of capitation revenue and SaaS subscription services. The form of billing and related risk of collection for such services may vary by type of revenue and the customer.
Operating Expenses
Our largest expense is the patient care cost paid to contracted physicians, and the cost of providing management and administrative support services to our affiliated physician groups. These services include providing utilization and case management, physician practice billing, revenue cycle services, physician practice management, administrative oversight, coding services, and other consulting services.
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Results of operation
NUTEX HEALTH INC. AND SUBSIDIARIES
(F/K/A CLINIGENCE HOLDINGS, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
| 2022 | 2021 | |||||||
| Sales | ||||||||
| Capitation revenue, net | $ | 5,386,064 | $ | 1,594,712 | ||||
| SaaS revenue | 333,445 | 419,633 | ||||||
| Management service revenue, net | 489,666 | — | ||||||
| Total sales | 6,209,175 | 2,014,345 | ||||||
| Cost of sales | 4,492,930 | 1,587,473 | ||||||
| Gross profit | 1,716,245 | 426,872 | ||||||
| Operating expenses | ||||||||
| Research and development | 73,750 | 76,720 | ||||||
| Sales and marketing | 11,055 | 9,739 | ||||||
| General and administrative expenses | 17,782,908 | 4,426,292 | ||||||
| Amortization | 216,453 | 64,044 | ||||||
| Total operating expenses | 18,084,166 | 4,576,795 | ||||||
| Income (loss) from operations | (16,367,921 | ) | (4,149,923 | ) | ||||
| Other income (expenses) | ||||||||
| Income from forgiveness of debt | 260,087 | — | ||||||
| Interest income | 368 | 114 | ||||||
| Interest expense - debt obligations | (186,916 | ) | (334,331 | ) | ||||
| Interest expense - accretion of debt discount | (283,692 | ) | — | |||||
| Total other income (expenses) | (210,153 | ) | (334,217 | ) | ||||
| Loss from operations before income tax benefit | (16,578,074 | ) | (4,484,140 | ) | ||||
| Income tax benefit - current | 8,889 | — | ||||||
| Net loss | (16,569,185 | ) | (4,484,140 | ) | ||||
| Net income attributable to noncontrolling interest | 193,856 | (39,581 | ) | |||||
| Net income (loss) attributable to Clinigence Holdings, Inc. | $ | (16,763,041 | ) | $ | (4,444,559 | ) | ||
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Revenue
Our revenue for the three months ended March 31, 2022, was $6,209,175, as compared to $2,014,345 for the three months ended March 31, 2021. The increase was primarily attributable to the AHP and Procare acquisitions.
Cost of Services
Expenses related to cost of services for the three months ended March 31, 2022, were $4.5 million, as compared to $1.6M for the same period in 2021. The overall increase was primarily due to the AHP acquisition.
Sales and Marketing
Sales and Marketing expense for the three months ended March 31, 2022, was $11,055, compared to $9,739 for the three months ended March 31, 2021. The increase was primarily attributable to press releases issue during the quarter.
Research and Development
Research and Development expense for the three months ended March 31, 2022, was $73,750 compared to $76,720 for the three months ended March 31, 2021. The increase was primarily attributable to the increase of research and development efforts for our Clinigence Health subsidiary.
General and Administrative Expenses
General and administrative expenses for the three months ended March 31, 2022, were $17.8 million, as compared to $4.4 million for the same period in 2021. The increase was primarily attributable to $14.2 million in stock based compensation and $1.24 million in legal, accounting and filing fees related to the Nutex Merger.
Amortization
Amortization expense for the three months ended March 31, 2022, was $216,453 as compared to $64,044 for the same period in 2021. This amount includes the amortization of intangible assets acquired from AHP, AHA and Procare.
Interest Expense
Interest expense for the three months ended March 31, 2022, was $470,609 as compared to $334,331 for the same period in 2021. The Interest expense reflected was primarily for accretion of debt combined with interest incurred on convertible debt related to the acquisition of AHA.
Interest Income
Interest income for the three months ended March 31, 2022, was $368 as compared to $114 for the three months ended March 31, 2021. Interest income reflects interest earned on cash held in deposit accounts.
Income from Forgiveness of Debt
Income from forgiveness of debt was $260,087 for the for the three months ended March 31, 2022, as a result of the forgiveness of payment protection plan loan.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $193,856 for the three months ended March 31, 2022 and compared toa net loss of $39,581 for the three months ended March 31, 2021. The was due to income from AHP VIE.
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LIQUIDITY AND CAPITAL RESOURCES
General
We had cash of $12,716,228 for the three months ended March 31, 2021, compared to $ 15,314,328 as of December 31, 2021, a decrease of $2,598,100.
We generate cash primarily from capitations, risk pool settlements and incentives, fees for medical management services provided to our physician groups, as well as FFS reimbursements and recurring SaaS Subscriptions.
Historically, the Company’s has experienced significant losses and the major sources of cash have been comprised of proceeds from various public and private offerings of its common stock, debt financings, and option and warrant exercises. During the year ended December 31, 2021, the Company raised approximately $14.4 million in gross proceeds from various public and private offerings of its common stock. Although the Company expects to have sufficient capital to fund its obligations, as they become due, in the ordinary course of business until at least December 31, 2022, the actual amount of cash that it will need to operate is subject to many factors. During the year ended December 31, 2022, the Company expects to collect the receivable of $1.3 million from the sale of its ACMG investment. The Company also decreased its debt in 2021. With the funds raised and the other mitigating factors the Company believes that it has enough cash to fund its operations for one year from the date of filing.
Cash Flow Activity
Cash used in operating activities for the three months ended March 31, 2022, was $2,378,658 as compared to cash used in operating activities of $567,063 for the three months ended March 31, 2021. The increase in cash used in operating activities was primarily driven by our operating revenues not being sufficient to cover our on-going obligations. Additional contributing factors include an increase in accounts receivable of $146,621, an increase in account payable and accrued expenses of $121,168, a decrease in customer deposits of $1,960, a decrease in prepaid expenses and other current assets of $173,891, income from forgiveness of debt of $260,087, amortization and depreciation expense of $229,036, interest expense associated with debt discount of $283,692, accrued interest of $2,731, lese liability of $11,291, deferred revenue of $81,808 and stock-based compensation expense of $14,196,876.
Cash used in investing activities during the three months ended March 31, 2022, was $184,442 primarily due to distributions to the AHP shareholders for period prior to acquisition, compared to cash provided by investing activities of $3,888,267from acquisitions during the three months ended March 31, 2021.
Cash used in financing activities for the three months ending March 31, 2022, was $35,000 and consisted of proceeds from the sale of common stock of $100,000, proceeds from the exercise of warrants of $25,000 offset by payments on notes payable of $150,000 and payments of financing costs for capital raise of $10,000.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires our management to make judgments, assumptions, and estimates that affect the amounts of revenue, expenses, income, assets, and liabilities, reported in our consolidated financial statements and accompanying notes. Actual results and the timing of recognition of such amounts could differ from those judgments, assumptions, and estimates. In addition, judgments, assumptions, and estimates routinely require adjustment based on changing circumstances and the receipt of new or better information. Understanding our accounting policies and the extent to which our management uses judgment, assumptions, and estimates in applying these policies, therefore, is integral to understanding our financial statements. Critical accounting policies and estimates are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. We summarize our most significant accounting policies in relation to the accompanying consolidated financial statements in Note 2 thereto. Please also refer to the Critical Accounting Policies section of Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
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Off-Balance Sheet Arrangements
As of March 31, 2022, we had no off-balance sheet arrangements that are or have been reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are material to investors.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of March 31, 2022, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act, were effective as of March 31, 2022, to ensure that information required to be disclosed by us in this Quarterly Report on Form 10-Q or submitted under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under Exchange Act) during our first fiscal quarter of 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
From time-to-time, the Company is involved in various civil actions as part of its normal course of business. The Company is not a party to any litigation that is material to ongoing operations as defined in Item 103 of Regulation S-K as of the period ended March 31, 2022.
Item 1A. Risk Factors.
Our business, financial condition, and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or the healthcare industry, as well as risks that affect businesses in general. In addition to the information and risk factors set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022. The risks disclosed in such Annual Report and in this Quarterly Report could materially adversely affect our business, financial condition, cash flows, or results of operations and thus our stock price. We believe there have been no material changes in our risk factors from those disclosed in the Annual Report. However, additional risks and uncertainties not currently known or which we currently deem to be immaterial may also materially adversely affect our business, financial condition, or results of operations.
These risk factors may be important to understanding other statements in this Quarterly Report and should be read in conjunction with the consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. Because of such risk factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business, reputation, financial condition, and operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None for the three months ended March 31, 2022.
Item 3. Defaults upon Senior Securities.
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information.
None
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Item 6. Exhibits
| Exhibit No. | Description | |
| 31.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 31.2 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
| 32.1 | Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) | |
| 32.2 | Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on May 13, 2022.
| Nutex
Health, Inc. |
|
| /s/ Thomas Vo | |
| Thomas Vo | |
| Chief Executive Officer | |
| /s/ Michael Bowen | |
| Michael Bowen | |
| Chief Financial Officer | |
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Exhibit Index
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