UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 2022.

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from to

Commission file number 000-53862

NUTEX HEALTH INC.

(formerly known as Clinigence Holdings, Inc.)

(Exact name of registrant as specified in its charter)

Delaware		11-3363609
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6030 S. Rice Ave., Suite C, Houston, Texas 77081

(Address of principal executive offices) (zip code)

With Copies to:

2455 East Sunrise Blvd., Suite 1204, Fort Lauderdale, FL 33304

(954) 449-4703

(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.

Yes ☒ No ☐

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).

Yes ☒ No ☐

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 ☐	Non-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

Common Stock, $0.001 par value

NUTX

NASDAQ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

As of May 13, 2022, there were 645,361,540 shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.

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.

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

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.

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	$	12,716,228		$	15,314,328
Accounts receivable		793,946			647,325
Accounts receivable - ACMG sale of investment		1,333,130			1,333,130
Stock subscriptions receivable		—			100,000
Prepaid expenses and other current assets		127,384			301,275
Total current assets		14,970,688			17,696,058

Long-term assets
Property and equipment, net		14,793			14,935
Right of use asset, net		86,989			98,008
Intangible assets, net		10,369,139			10,585,592
Goodwill		57,891,411			57,338,935
Total assets	$	83,333,020		$	85,733,528

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses	$	3,680,691		$	3,505,197
Customer deposits		—			1,960
Accrued interest on notes payable		157,233			154,502
Due to related parties		128,176			128,176
Lease liability - current		47,773			46,593
Deferred revenue		92,111			173,919
Convertible notes payable, net of debt discount		3,771,858			3,904,221
Current portion of notes payable		553,150			727,182
Total current liabilities		8,430,992			8,641,750

Long-term liabilities
Lease liability - long term		43,465			55,906
Deferred tax liabilities		1,747,250			1,747,250
Notes payable		—			150,000
Total liabilities		10,221,707			10,594,906

Stockholders' equity
Preferred stock, $.001 par value; authorized - 100,000,000 shares; issued and outstanding - 0 shares as of March 31, 2021 and December 31, 2021, respectively		—			—
Common stock, $.001 par value; authorized - 800,000,000 shares; 48,461,109 and 48,232,076 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		48,461			48,232
Additional paid-in capital		120,530,510			106,977,976
Accumulated deficit		(48,651,518	)		(31,888,477	)
Noncontrolling interest		194,747			891
Total stockholders' equity		73,111,313			75,138,622
Total liabilities and stockholders' equity	$	83,333,020		$	85,733,528

See accompanying notes to the consolidated financial statements.

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	)

Basic and fully diluted income (loss) per common share	$	(.35	)	$	(.24	)
Weighted average common shares outstanding - basic and fully diluted		48,270,427			18,571,298

See accompanying notes to the consolidated financial statements.

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	48,232,076	$	48,232	$	106,977,976		$	(31,888,477	)	$	891		$	75,138,622
Notes payable converted to common stock	212,903		213		329,787			—						330,000
Exercise of warrants for the issuance of common stock	16,130		16		24,984			—						25,000
Stock-based compensation	—		—		14,196,876			—						14,196,876
Financing cost for capital raise	—		—		(10,000	)		—						(10,000	)
Net loss								(16,763,041	)		193,856			(16,569,185	)
Balances, March 31, 2022	48,461,109	$	48,461	$	120,530,510		$	(48,651,518	)	$	194,747		$	73,111,313
Balances, December 31, 2020	5,282,545	$	5,282	$	17,079,885		$	(18,218,962	)	$	—			(1,133,795	)
Stock-based compensation	978,721		979		3,881,658			—						3,882,637
Common stock issued in business acquisitions	33,009,382		33,010		67,966,329			—					$	67,999,339
Net loss								(4,444,559	)		(39,581	)		(4,484,140	)
Balances, March 31, 2021	39,270,648	$	39,271	$	88,927,872		$	(22,663,521	)	$	(39,581	)	$	66,264,041

See accompanying notes to the consolidated financial statements.

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	$	(16,569,185	)	$	(4,484,140	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		1,564			1,054
Amortization		227,472			64,044
Interest expense associated with debt discount		283,692			—
Non cash interest expense		—			476,619
Purchase price adjustment to investments in subsidiaries		(72,794	)		—
Income from forgiveness of debt		(260,087	)		—
Stock-based compensation expense		14,196,876			3,852,637
Changes in operating assets and liabilities:
Accounts receivable		(146,621	)		(59,390	)
Prepaid expenses and other current assets		173,891			70,912
Accounts payable and accrued expenses		(121,168	)		(439,298	)
Customer deposits		(1,960	)		(26,651	)
Accrued interest on notes payable		2,731			—
Lease liability		(11,261	)		—
Deferred revenue		(81,808	)		(22,850	)
NET CASH USED IN OPERATING ACTIVITIES		(2,378,658	)		(567,063	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(1,422	)		—
Distributions to AHP shareholders for period prior to acquisition		(183,020	)		—
Preacquisition loans from subsidiary		—			85,000
Cash acquired from acquisitions		—			3,803,267
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES		(184,442	)		3,888,267

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from common stock subscriptions receivable		100,000			—
Proceeds from exercise of warrants		25,000			—
Proceeds from issuance of notes and convertible notes payable		—			410,088
Payments on notes payable		(150,000	)		(16,765	)
Payments of financing costs for capital raise		(10,000	)		—
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(35,000	)		393,323
NET (DECREASE) INCREASE IN CASH		(2,598,100	)		3,714,527

CASH - BEGINNING OF PERIOD		15,314,328			26,931
CASH - END OF PERIOD	$	12,716,228		$	3,741,458

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	184,187		$	11,127

Non-cash investing and financing activities:
Goodwill for distributions payable to AHP shareholders preacquisition	$	296,662		$	—
Notes payable converted to common stock		330,000			—
Common stock issued for acquisition of subsidiaries		—			67,999,339
Related party loans converted to common stock		—			30,000
Notes payable converted to accounts payable		—			228,518
Deferred tax liability recorded on intangible assets		—			2,429,500

See accompanying notes to the consolidated financial statements.

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”).

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.

Pursuant to the Procare Merger Agreement, at the Closing, the former Procare Stockholders were entitled to receive an aggregate of 759,036 Company Shares, 607,229 shares of which were valued at $4.00 per share with the remaining 151,807 shares valued at $446,018, are being held back and will be released subject to Procare achieving certain earnings milestones. Pursuant to the AHP Merger Agreement, at the Closing, the former AHP Stockholders were entitled to receive 19,000,000 Company Shares valued at $2.06 per share, inclusive of outstanding AHP options and warrants assumed by the Company, which constitutes 45% of the outstanding Company Shares on a fully diluted basis inclusive of outstanding options and warrants. For each share of AHP Shares, each former AHP Stockholder was entitled to receive 19,000,000 shares of Company Shares valued at $2.06 per share. Pursuant to the AHA Merger Agreement, at the Closing, the former AHA Stockholders were entitled to receive 14,034,472 Company Shares, inclusive of certain outstanding AHA options and warrants assumed by the Company, which constitutes 35% of the outstanding Company Shares on a fully diluted basis inclusive of outstanding options and warrants.

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	$	81,316
Accounts receivable		284,847
Property and equipment		7,192
Management contracts		1,864,530
Trademarks		226,230
Accounts payable		(95,236	)
Deferred tax liability - intangibles		(439,060	)
Goodwill		945,115
Purchase price	$	2,874,934

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	$	697,191
Other current assets		2,100
Investment in ACMG		7,134,000
PHP technology		2,183,000
Loan to Clinigence		85,000
Accounts payable		(1,143,106	)
Due to related party		(128,176	)
Notes payable		(1,784,155	)
Deferred tax liability - intangibles		(545,750	)
Goodwill		22,789,787
Purchase price	$	29,289,591

On December 24, 2021, the AHA Investment in ACMG was sold for $5,887,806. Cash of $4,554,676 was received at Closing, and a receivable of $1,333,130 was recorded. The Stock Purchase Agreement (SPA) also contains additional earn out consideration payments upon which AHA is expected to receive its pro-rata portion (“Additional Contingent Consideration”), However, we cannot assign a definitive value to the Additional Contingent Consideration at this time and we have determined to write down the remainder of the investment in ACMG to zero upon receipt of the Closing payment, and Goodwill was increased by $1,246,194, the difference between the initial investment in ACMG of $7,134,000 and the sales price of $5,887,806.

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	$	3,105,877
Accounts receivable		269,315
Deposits and other assets		26,178
Member relationships		6,444,000
Trademarks		545,000
Accounts payable		(2,683,896	)
Distribution payable		(300,000	)
Deferred tax liability - intangibles		(1,747,250	)
Goodwill		33,480,776
Purchase price	$	39,140,000

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 $1,122,636.

Liquidity and Management Plans

The Company has an accumulated deficit of $48,651,518 and approximately $5.4 million in convertible debt that matures within the current year. As a result, the Company has suffered recurring losses and requires significant cash resources to execute its business plans. These losses are expected to continue for an extended period of time. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern.

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 $12,716,22812.7 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.

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.

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			5 - 7 years
Computer hardware			5 years
Computer software			3 years
Development equipment			5 years

Amortization

Intangible assets are amortized using the straight line method over the estimated lives of the respective assets as follows:


Population Health Platform technology			11 years
Member relationships			15 years
Management contracts 15 years			15 years
Trademarks			6-10 years

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.

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 $92,111 and $173,919 as of March 31, 2022 and December 31, 2021, respectively.

Stock-Based Compensation

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.

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.

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 $11,055 and $9,739 were charged to operations for the three months ended March 31, 2022 and 2021, respectively.

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.

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	$	5,300		$	5,300
Computer hardware		54,420			52,998
Computer software		16,121			16,121
Less: Accumulated depreciation		(61,048	)		(59,484	)
Property, Plant and Equipment, Net	$	14,793		$	14,935

Depreciation expense of $1,564 and $1,054 was charged to operations for the three months ended March 31, 2022 and 2021, respectively.

Note 4 – Intangible Assets

The following tables provide detail associated with the Company’s acquired identifiable intangible assets:

Schedule of 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	$	6,444,000	$	(465,400	)	$	5,978,600	15
Management contracts		1,864,530		(62,151	))		1,802,379	15
Trademarks		771,230		(109,714	)		661,516	6 - 10
PHP technology		2,183,000		(256,356	)		1,926,644	11
Total	$	11,262,760	$	(893,621		$	10,369,139


Aggregate Amortization Expense:
For the three months ended March 31, 2022	$	216,453

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 $15,000,000 by the extended payment due date of November 15, 2020. Accordingly, AHA was required to return 71% of its ownership to the shareholders of ACMG in full settlement of the default. Consequently, AHA deconsolidated its reporting of ACMG. The Company recognized that AHA held a non-controlling 29% equity ownership interest in ACMG as of February 28, 2021 that was required to be measured at fair value. The Company determined through the services of an independent valuation under ASC 805 using an income approach, market approach, and asset-based approach that the fair value of its 29% equity ownership interest in ACMG is $7,134,000. On November 12, 2021, ACMG was sold to Genuine Health Group, LLC for a purchase price of $30 million less costs and adjustments. The Company’s share of the proceeds was $5,887,806 of which $1,333,130 was held back in escrow subject to further purchase price adjustments and is reported as a current asset. Although the settlement agreement provided that all parties had no further rights and claims, the Company negotiated and received a settlement paid for monies owed for 2020 MSSP profits.

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	$	86,989
Current portion of operating lease liabilities		47,773
Operating lease liabilities, net of current portion		43,465

As of December 31, 2021, the weighted-average remaining lease term of the operating lease was 1.8 years. The weighted-average discount rate for the operating lease was 6.75%.

The following table summarizes maturities of operating lease liabilities based on lease term as of March 31, 2022:


2022	$	38,945
2023		53,354
2024		4,457
Total lease payments		96,756
Less: Imputed interest		5,518
Present value of lease liabilities	$	91,238

At March 31, 2022, the Company had the following future minimum payments due under the non-cancelable lease:


2022	$	38,945
2023		53,354
2024		4,457
Total minimum lease payments	$	96,756

Consolidated rental expense for all operating leases was $27,611 and $11,663 for the three months ended March 31, 2022 and 2021, respectively.

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	$	12,856
Right-of-use lease assets obtained in the exchange for lease liabilities:
Operating leases		11,261

Note 7 - Earnings (Loss) Per Common Share

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		6,500,010		2,890,431
Stock warrants		12,401,240		6,092,386
Total shares excluded from calculation		18,901,250		8,982,817

Note 8 – Stock Based Compensation

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:

Schedule of stock option activities
	Options Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2020		1,174,814	$	1.61		8.11
Options granted		1,225,000		1.61
Options assumed in merger		490,617		2.00
Options outstanding at March 31, 2021		2,890,431	$	1.68		7.64
Options outstanding at December 31, 2021		2,876,010	$	1.69		6.90
Options granted		3,624,000		2.78
Options outstanding at March 31, 2022		6,500,010	$	2.30		6.62

Options outstanding at March 31, 2022 consist of:

Schedule of stock options outstanding
Date Issued	Number Outstanding		Number Exercisable		Exercise Price		Expiration Date
August 5, 2019		40,480		40,480	$	5.56	August 5, 2029
October 29, 2019		3,600		3,600	$	0.0725	June 6, 2027
January 27, 2020		307,884		307,884	$	1.50	January 27, 2030
January 27, 2020		225,000		225,000	$	1.50	January 27, 2027
February 29, 2020		95,794		95,794	$	1.25	February 28, 2030
May 11, 2020		380,000		380,000	$	1.50	May 11, 2027
June 30, 2020		122,056		122,056	$	1.45	June 30, 2030
January 28, 2021		1,000,000		1,000,000	$	1.61	January 28, 2031
January 28, 2021		225,000		225,000	$	1.61	January 28, 2028
February 25, 2021		201,196		201,196	$	2.00	March 15, 2025
February 25, 2021		200,000		200,000	$	2.00	February 25, 2031
August 16, 2021		75,000		75,000	$	2.51	August 16, 2027
March 16, 2022		2,975,000		2,975,000	$	2.75	September 7, 2027
March 16, 2022		492,000		492,000	$	2.75	September 27, 2027
March 16, 2022		157,000		157,000	$	3.50	December 17, 2027
Total		6,500,010		6,500,010

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:

Schedule of Warrants, Activity
	Warrants Outstanding			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Warrants outstanding at December 31, 2020		557,873		$	6.77		3.79
Warrants assumed in merger		5,534,513			—
Warrants outstanding at March 31, 2021		6,092,386		$	2.27		4.52
Warrants outstanding at December 31, 2021		12,383,550		$	2.04		4.64
Warrants granted		33,820			1.51
Warrants exercised		(16,130	)		1.55
Warrants outstanding at December 31, 2021		12,401,240		$	2.04		4.65

Warrants outstanding at March 31, 2022 consist of:

Schedule of Outstanding Warrants
Date Issued	Number Outstanding		Number Exercisable		Exercise Price		Expiration Date
March 21, 2019		96,433		96,433	$	6.67	December 31, 2024
April 30, 2019		3,598		3,598	$	6.67	December 31, 2024
May 13, 2019		14,393		14,393	$	6.67	December 31, 2024
May 28, 2019		199,703		199,703	$	6.67	December 31, 2024
June 5, 2019		7,197		7,197	$	6.67	December 31, 2024
June 25, 2019		208,361		208,361	$	6.67	December 31, 2024
September 6, 2019		25,188		25,188	$	6.67	December 31, 2024
October 29, 2019		1,500		1,500	$	25.00	February 5, 2023
October 29, 2019		1,500		1,500	$	25.00	April 27, 2023
November 19, 2019		16,250		16,250	$	1.25	October 31, 2025
February 25, 2021		1,650,443		1,650,443	$	1.55	October 31, 2025
February 25, 2021		500,000		500,000	$	4.00	February 26, 2026
February 25, 2021		1,456,452		1,456,452	$	1.55	February 1, 2027
February 25, 2021		2,694,190		2,694,190	$	1.55	July 31, 2026
May 14, 2021		651,429		651,429	$	1.75	May 30, 2027
May 28, 2021		228,571		228,571	$	1.75	May 30, 2027
June 11, 2021		182,857		182,857	$	1.75	May 30, 2027
June 22, 2021		137,143		137,143	$	1.75	May 30, 2027
June 24, 2021		169,143		169,143	$	1.75	May 30, 2027
June 28, 2021		45,714		45,714	$	1.75	May 30, 2027
June 29, 2021		45,714		45,714	$	1.75	May 30, 2027
July 6, 2021		28,571		28,571	$	1.75	May 31, 2027
July 22, 2021		12,857		12,857	$	1.75	May 31, 2027
July 29, 2021		57,142		57,142	$	1.75	May 31, 2027
August 6, 2021		157,143		157,143	$	1.75	May 31, 2027
August 10, 2021		14,286		14,286	$	1.75	May 31, 2027
August 11, 2021		128,571		128,571	$	1.75	May 31, 2027
August 12, 2021		42,857		42,857	$	1.75	May 31, 2027
August 16, 2021		14,286		14,286	$	1.75	May 31, 2027
August 17, 2021		14,286		14,286	$	1.75	May 31, 2027
August 27, 2021		28,571		28,571	$	1.75	May 31, 2027
August 31, 2021		71,429		71,429	$	1.75	May 31, 2027
September 1, 2021		228,572		228,572	$	1.75	May 31, 2027
September 3, 2021		50,000		50,000	$	1.75	May 31, 2027
September 9, 2021		88,571		88,571	$	1.75	May 31, 2027
September 17, 2021		14,286		14,286	$	1.75	May 31, 2027
September 20, 2021		422,856		422,856	$	1.75	May 31, 2027
September 22, 2021		1,328,002		1,328,002	$	1.75	May 31, 2027
September 23, 2021		500,000		500,000	$	3.50	May 31, 2027
October 8, 2021		564,069		564,069	$	1.75	May 31, 2027
October 22, 2021		281,964		281,964	$	1.75	May 31, 2027
March 18, 2022		17,142		17,142	$	1.75	May 31, 2027
Total		12,401,240		12,401,240

Note 9 – Convertible Notes Payable

Convertible notes payable consisted of the following at March 31, 2022 and December 31, 2021:

Schedule of Convertible notes payable
	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	$	3,771,858	$	3,904,221

Included in the liabilities assumed in the AHA merger are convertible promissory notes to various individuals totaling $3,771,858 at March 31, 2022. The face value of the notes at issuance was $7,565,375. The noteholders were granted warrants to purchase the Company’s common stock at $1.55 per share in an amount equal to 50% of the shares to be received upon conversion of the Note.

The debt discount of $7,565,375 is being accreted over 20 months. The accreted balance as of March 31, 2022 is $3,771,858. During the three months ended March 31, 2022, various noteholders converted principal balances of $330,000 into 212,903 common shares.

At the time of issuance of these notes based on independent valuation, debt discounts were calculated and allocated based on the relative values of $2,658,960 for the value of the warrants and $4,906,415 related to a beneficial conversion feature. The total debt discount of $3,703,134 is being accreted over 20 months. The accreted balance as of March 31, 2022 is $1,086,095.

Note 10 – Notes Payable

Notes payable consisted of the following at March 31, 2022 and December 31, 2021:

Notes payable
	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%	$	—		$	260,087
SBA Economic Injury Disaster Loan note payable issued in May 2020 with a maturity date of May 2051 and interest rate of 3.75%		—			150,000
Note payable with a maturity date of January 31, 2023 and interest rate of 12.9%
Total notes payable		553,150			877,172
Current portion		(553,150	)		(727,182	)
Total notes payable, net	$	—		$	150,000

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 $150,000 pursuant to the U.S. Small Business Administration (“SBA”) COVID-19 Economic Injury Disaster Loan (EIDL) program. Under the terms of the loan, Borrower must pay principal and interest payments of $731 every month beginning Twenty four (24) months from the date of the Note. The SBA will apply each installment payment first to pay interest accrued to the day the SBA receives the payment and will then apply any remaining balance to reduce principal. All remaining principal and accrued interest is due and payable Thirty (30) years from the date of the Note. Borrower may prepay this Note in part or in full at any time, without notice or penalty. The Company repaid the principal balance of $150,000 on March 9, 2022.

On February 25, 2021, the Company received a second PPP loan of $260,087. The loan accrue interest at a rate of 1% and has an original maturity date of two years which can be extended to five years by mutual agreement of the Company and SBA. The PPP loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.

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 $260,087 was forgiven by the SBA and reported as other income in the condensed consolidated statements of operations.

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 $700,000 and a six-year warrant to purchase an aggregate 1,506,452 shares at a purchase cost $50,000 of AHA’s common stock at an exercise price of $1.55 per share, in exchange for $750,000 of total cash proceeds. The Note bears interest at 12.9% and is subject to optional prepayment by the Company. The Note matured on April 29, 2021.

Effective February 1, 2021, an Amended and Restated Note was entered into in which the principal amount increased to $840,000 (original Note plus the principal amount of Series D Convertible Shares owned by the Investor) which bears interest at 12.9% and matures on January 31, 2023. The debt premium of $840,000 is being accreted over 23 months. The accreted balance as of December 31, 2021 is $553,150.

Note 11 – Stock Transactions

Common Stock Issued

In connection with the convertible notes payable (see Note 9 above) various noteholders converted $330,000 of principal balance to 212,903 shares of common stock on March 17, 2022. The stock issued was determined based on the terms of the convertible notes.

On March 16, 2022, various shareholders exercised warrants in exchange for 16,130 common shares for proceeds of $25,000.

Note 12 – Concentrations and Credit Risk

Sales and Accounts Receivable

The Company had sales to two customers which accounted for approximately 19% and 16%, respectively of total sales for the three months ended March 31, 2022. The two customers accounted for less than 10%, respectively of accounts receivable at March 31, 2022.

No customer accounted for 10% or more of sales for the three months ended March 31, 2021.

Cash

Cash is maintained at a major financial institution. Accounts held at U.S. financial institutions are insured by the FDIC up to $250,000. Cash balances could exceed insured amounts at any given time, however, the Company has not experienced any such losses. The Company did not have any interest-bearing accounts at March 31, 2022 and December 31, 2021, respectively.

Note 13 - Related Party Transactions

Due to Related Parties

Due to related parties with a balance of $128,176 at March 31, 2022 and December 31, 2021, respectively, does not bear interest and is payable on demand. The Company’s former subsidiary, Arcmail owed amounts on a credit card that is guaranteed by the husband of the Company’s Chief Financial Officer, who was held personally responsible by the credit card company for the unpaid balance. The balance of $128,176 was included in the assumed liabilities of the AHA merger transaction.

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 $150,000 and 180,000, respectively, during the term, which continue to be obligations of the Company at Closing. Dr. Hosseinion entered into a 5-year employment agreement with the Company which became effective at Closing and pursuant to which Dr. Hosseinion is entitled to receive a base salary of $250,000 during the term. AHP had entered into a 2-year employment agreement with Michael Bowen and a 5-year employment agreements with Fred Sternberg and Andrew Barnett. Pursuant to the employment agreements with Mr. Sternberg, Mr. Bowen, and Mr. Barnett, each is entitled to receive a base annual salary of $250,000, $150,000 and $250,000, respectively, during the term, which became obligations of the Company at Closing.

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.

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.

Schedule of consolidated balance sheets
	March 31,
	2022
ASSETS
Current Assets
Cash and cash equivalents	$	3,252,646
Accounts receivable		685,428
Prepaid expenses and other assets		16,860
Total Current Assets		3,954,934

Other Assets
Goodwill		32,213,208
Right of use asset, net		86,989
Intangible assets, net		6,425,197
Total Other Assets		38,725,394
Total Assets	$	42,680,328

Current Liabilities
Accounts payable and accrued expenses	$	3,091,572
Lease liability - current		47,773
Total Current Liabilities		3,139,345

Long-term Liabilities
Lease liability – long-term		43,465
Total Liabilities	$	3,182,810

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 $1,125,375 of principal to 726,045 shares of the Company’s common stock, valued at $

SEC Form 10-Q filed by Nutex Health Inc.