UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM Form 10-K10-K/A

Amendment No. 1

☒xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended fiscal year ended December 31,, 2021 2022

OR

OR

☐¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to ___________

Commission file number 001-41346

Commission File Number: 000-53862NUTEX HEALTH INC.

CLINIGENCE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware11-3363609
(State or other jurisdiction of
incorporation or organization)		(I.R.S. Employer
Identification No.)

2455 East Sunrise Blvd.6030 S. Rice Ave, Suite 1204C

,
Fort LauderdaleHouston, FLTexas 3330477081

(Address of Principal Executive Offices) (Zip Code)

(954)449-4703

(Issuer’s
Telephone Number Including Area Code)(713) 660-0557

Securities registered underpursuant to Section 12(b) of the Exchange Act:

Title of each classTrading Symbol(s)SymbolName of each exchange on which registered
Common Stock, $0.001 par valueCLNHNUTXOTCMKTSNASDAQ Capital Market

 

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐¨ No ☒x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.

Yes ☐¨  No ☒x

Indicate by check mark whether the registrant: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 ☒x No ☐¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive DateData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section(§ 232.405 of thethis chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒x No ☐¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

xAccelerated filer ☐¨
Non-accelerated filer ☒¨Smaller reporting company☒¨
Emerging growth company☐¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant has filed a report on and attestation to its management’smanagement's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐x

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ¨

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-212b-2 of the act):

Act). Yes ☐¨ No ☒x

The aggregate market value of the voting and non-voting common equitystock held by non-affiliates of the registrant as ofat June 30, 2021 (the last day of the registrant’s most recently completed second fiscal quarter) based on the closing sale price as reported on the OTCQB Market as2022 was approximately $86.251.034 million. For purposes of calculating the aggregate market value of shares held by non-affiliates, we have assumed that all outstanding shares are held by non-affiliates, except for shares held by each of our executive officers, directors and 5% or greater stockholders. In the case of 5% or greater stockholders, we have not deemed such stockholders to be affiliates unless there are facts and circumstances which would indicate that such stockholders exercise any control over our company, or unless they hold 10% or more of our outstanding common stock. These assumptions should not be deemed to constitute an admission that all executive officers, directors and 5% or greater stockholders are, in fact, affiliates of our company, or that there are not, other persons who may be deemed to be affiliates of our company. Further information concerning shareholdings of our officers, directors and principal stockholders is included or incorporated by reference in Part III, Item 12 of this Annual Report on Form 10-K.

As ofbillion. At March 31, 2022,2, 2023, there were 48,444,979650,926,125 shares of the Registrant’s $0.001 par value common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NoneREFERENCE

Not applicable.

Auditor NameMarcum LLP
Auditor LocationHouston, Texas
Auditor Firm ID688

1

 

Clinigence Holdings, Inc.
FORM 10-K — FOR THE YEAR ENDED DECEMBER 31, 2019EXPLANATORY NOTE

TABLE OF CONTENTS

Page No.
PART I4
Item 1 Business4
Item 1A Risk Factors8
Item 1B Unresolved Staff Comments32
Item 2 Properties32
Item 3 Legal Proceedings32
Item 4 (Removed and Reserved)32
PART II33
Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities33
Item 6 (Removed and Reserved)34
Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations34
Item 7A Quantitative and Qualitative Disclosure About Market Risk46
Item 8 Financial Statements and Supplementary Data46
Item 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure46
Item 9A Controls and Procedures46
Item 9B Other Information47
PART III48
Item 10 Directors, Executive Officers and Corporate Governance48
Item 11 Executive Compensation54
Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters58
Item 13 Certain Relationships, Related Transactions and Director Independence59
Item 14 Principal Accountant Fees and Services59
PART IV61
Item 15 Exhibits and Financial Statement Schedules61

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INTRODUCTORYNOTE

This annual report on Form 10-K is for the year ended December 31, 2021. The Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference” information that we file with the SEC, which means that we can disclose important information to you by referring you directly to those documents. Information incorporated by reference is considered to be part of this annual report. In addition, information that we file with the SEC in the future will automatically update and supersede information contained in this annual report. In this annual report,Nutex Health Inc. (the “Company,” “Nutex,” “we,” “us” andor “our” refer) is filing this Amendment No. 1 on Form-10-K/A (this “Amendment No. 1”) to Clinigence Holdings, Inc. andamend its subsidiaries.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company has based these forward-looking statements on the Company’s current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us and the Company’s subsidiaries that may cause the Company’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In many cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,” “predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,” “guidance,” “outlook,” “effort,” “target” and other similar words. However, the absence of these words does not mean that the statements are not forward-looking. Factors that might cause or contribute to a material difference include, but are not limited to, those discussed elsewhere in this Annual Report, including the section entitled “Risk Factors” and the risks discussed in the Company’s other Securities and Exchange Commission filings. These forward-looking statements present our estimates and assumptions only as of the date of this Annual Report on Form 10-K and are subject to change. The following discussion should be read in conjunction with the Company’s audited Consolidated Financial Statements and related Notes thereto included elsewhere in this report.

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PART I

ITEM 1.BUSINESS

OUR COMPANY

Introduction

Clinigence Holdings, Inc, is a technology-enabled, risk-bearing population health management company that manages provider networks. Headquartered in Fort Lauderdale, Florida, with the recent acquisitions of Accountable Healthcare Americas, Inc. (“AHA”), AHP Management, Inc. (“AHP”) and Procare Health, Inc. (“Procare”) our subsidiaries include management services organizations (“MSOs”), affiliated independent practice associations (“IPAs”), and a healthcare information technology company providing a cloud-based platform that enables healthcare organizations to provide value-based care and population health management (PHM).

Clinigence and its subsidiaries, and consolidated variable interest entities (“VIEs”), generate revenue by providing administrative, medical management and clinical services to affiliated IPAs and medical groups The administrative services cover billing, collection, accounting, administrative, quality assurance, marketing, compliance and education. Additionally, we provide Software as a Service (SaaS) to health care practices, including accountable care organizations (“ACOs”), 7 Managed Services Organizations (“MSOs”), health plans, hospitals, and individual providers.

We implement and operate different innovative health care models, primarily including the following integrated operations:

•IPAs, which contract with physicians and provide care to Medicare, Medicaid, commercial and dual-eligible patients on a risk- and value-based fee basis;
•MSOs, which provide management, administrative and other support services to our affiliated physician groups such as IPAs;

Subsidiaries

We operate through our subsidiaries, including:

Clinigence Health, Inc. (CHI)

Based in Fort Lauderdale, FL, CHI is a healthcare information technology company providing a cloud-based platform that enables healthcare organizations to provide value-based care and population health management (PHM). Our proprietary cloud-based PHM platform extracts claims and clinical data from multiple claims and EHR systems, which it then uses to report clinical quality measures (GPRO, MIPS, etc.), gaps in care, risk-stratification of patients, generates a utilization dashboard on every provider, has predictive analytics and a provider scorecard. The CHI platform provides SaaS solutions that enable connected intelligence across the care continuum by transforming massive amounts of data into actionable insights. CHI’s solutions help healthcare organizations improve the quality and cost effectiveness of care, enhance population health management and optimize provider networks.

AHP Health Management Services, Inc. (AHP)

Based in Los Angeles, California, AHP’s affiliated IPA, AHISP currently provides care for 22,065 patients, including approximately 1800 Medicare Advantage patients, through a network of 141 primary care physicians and 660 specialists. An IPA is an association of independent physicians, or other organization that contracts with independent physicians, and provides services to HMOs, which are medical insurance groups that provide health services generally for a fixed annual fee, on a negotiated per capita rate, flat retainer fee, or negotiated FFS basis.

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Procare Health Inc. (Procare)

Based in Garden Grove, California, Procare is a management services organization (“MSO”) that currently provides services for one health maintenance organization (“HMO”) and three IPAs in Southern and Northern California. MSOs are business organizations that provide the necessary administrative infrastructure and technology for risk-bearing IPAs to function successfully in their relationships with contracted payors and regulatory agencies. MSOs enable physician organizations to succeed in the assumption of financial and population risk, to improve the organization’s performance in care delivery and to provide actionable data analytics. Procare provides claims administration, compliance, credentialing, quality management, utilization management, contracting, provider relations, member services, care management, coding optimization and financial reporting services, among other services.

Investments

Accountable Healthcare America, Inc. (AHA)

Based in Ft. Lauderdale, FL, AHA is a medical management platform company that had an investment in an accountable care organization with approximately (Accountable Care Medical Group of Florida, Inc.” or “ACMG”) 16,000 Medicare members through a network of over 65 providers. Through its investment, AHA provides a suite of services for its providers, including care coordination, high-risk care managers, documentation improvement and medical coding programs, medical management best practices programs, health management programs such as annual wellness visits and chronic care management, and performance improvement plans.

On November 12, 2021, ACMG was sold to Genuine Health Group, LLC for a purchase price of $30 million less costs and adjustments. AHA’s share of the proceeds was $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 also contains additional earn out consideration payments upon which AHA is expected to receive its pro-rata portion, however, we cannot assign a definitive value to the contingent consideration at this time

Our Revenue Streams

Our revenue reflected in the accompanying consolidated financial statements includes revenue generated by our subsidiaries and consolidated entities. Revenue generated by consolidated entities, however, does not necessarily result in available or distributable cash for the Company. Our revenue streams flow from various multi-year renewable contractual arrangements that vary by type of business operation as follows:

Capitation Revenue

Our capitation revenue comes from our AHP subsidiary and consists primarily of capitated fees for medical services its VIE AHISP provides under capitated arrangements made directly with various managed care providers including HMOs. Capitation revenues are typically prepaid monthly to us based on the number of enrollees selecting us as their healthcare provider. Capitation is a fixed payment amount per patient per unit of time paid in advance for the delivery of health care services, whereby the service providers are generally liable for excess medical costs. The actual amount paid is determined by the ranges of services provided, the number of patients enrolled, and the period of time during which the services are provided. Capitation rates are generally based on local costs and average utilization of services. Because Medicare pays capitation using a “risk adjustment model,” which compensates managed care providers based on the health status (acuity) of each individual enrollee, managed care providers with higher acuity enrollees receive more, and those with lower acuity enrollees receive less, capitation that can be allocated to service providers. Under the risk adjustment model, capitation is paid on an interim basis based on enrollee data submitted for the preceding year and is adjusted in subsequent periods after the final data is compiled.

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Per member per month (“PMPM”) managed care contracts generally have a term of one year or longer. All managed care contracts have a single performance obligation that constitutes a series for the provision of managed healthcare services for a population of enrolled members for the duration of the contract. The transaction price for PMPM contracts is variable as it primarily includes PMPM fees associated with unspecified membership that fluctuates throughout the term of the contract. In certain contracts, PMPM fees also include adjustments for items such as performance incentives, performance guarantees and risk shares.

SaaS Subscriptions Revenue

Our SaaS revenue comes from our CHI subsidiary. 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.

Management Fee Income

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.

Our Key Payors

A limited number of payors represent a significant portion of our net capitation revenue. For thefiscal year ended December 31, 2021, two payors accounted for an aggregate of 23% of our total net capitation revenue and in 2022, we expect to derive a significant portion of our revenues from these two payors.

Our Key Customers

In 2020, the largest two SaaS customers represented 24% of revenues during that period.

Our Strengths and Advantages

The combination of the four companies fuses a healthcare information technology company with medical management companies to form a unique, scalable operating platform that we believe is well positioned for the ongoing transition of U.S. healthcare from fee-for-service payments to value-based reimbursements, including full-risk, global capitation models. The platform also addresses another major theme in U.S. healthcare: faced with mounting costs, shifting regulations and burdensome billing, reporting and technology requirements, many physicians and medical groups have been selling their practices to larger hospital systems. The strategy of the combined company is to be one of the few, technology-enabled national medical groups by acquiring and/or operating medical groups, independent practice associations (“IPAs”), accountable care organizations (“ACOs”), management services organizations (“MSOs”) and individual practices, allowing providers to focus on providing the best quality of care to their patients.

Regulatory Environment

The healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes and regulations govern the manner in which we provide and bill for services and collect reimbursement from governmental programs and private payors, our contractual relationships with our providers, vendors and clients, our marketing activities and other aspects of our operations. Of particular importance are:

•the federal physician self-referral law, commonly referred to as the Stark Law;
•the federal Anti-Kickback Act;
•the criminal healthcare fraud provisions of HIPAA;
•the federal False Claims Act;
•reassignment of payment rules that prohibit certain types of billing and collection;
•similar state law provisions pertaining to anti-kickback, self-referral and false claims issues;
•state laws that prohibit general business corporations, such as us, from practicing medicine;
•laws that regulate debt collection practices as applied to our debt collection practices;

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Patient Protection and Affordable Care Act or PPACA

Our revenue will be dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare industry is subject to changing political, regulatory and other influences. The Patient Protection and Affordable Care Act or PPACA made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to the uninsured and underinsured population of the United States.

Protected Health Information (PHI)

HIPAA establishes a set of basic national privacy and security standards for the protection of protected health information, or PHI, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services, which includes us.

Because of the extreme sensitivity of the PHI we store and transmit, the security features of our technology platform are very important. If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive client and patient data, including HIPAA-regulated PHI.

Corporate Practice of Medicine

Our consolidated financial statements include our subsidiaries and VIE. Some states have laws that prohibit business entities with non-physician owners, such as Clinigence and its subsidiaries, from practicing medicine, employing physicians to practice medicine, or exercising control over medical decisions by physicians. These laws are generally referred to as corporate practice of medicine laws. States that have corporate practice of medicine laws permit only physicians to practice medicine, exercise control over medical decisions or engage in certain arrangements, such as fee-splitting, with physicians. In these states, a violation of the corporate practice of medicine prohibition constitutes the unlawful practice of medicine, which is a public offense punishable by fines and other criminal penalties. In addition, any physician who participates in a scheme that violates the state’s corporate practice of medicine prohibition may be punished for aiding and abetting a lay entity in the unlawful practice of medicine.

California is a corporate practice of medicine state, and we operate our California based subsidiary AHP by maintaining a long-term MSA with our affiliated IPA, which is owned and operated by physicians only, and employs or contracts with additional physicians to provide medical services. Under the MSA, our wholly owned MSO is contracted to provide non-medical management and administrative services such as financial and risk management as well as information systems, marketing and administrative support to the IPA. The MSA has an initial term of 20 years and is generally not terminable by our affiliated IPA except in the case of bankruptcy, gross negligence, fraud, or other illegal acts by the contracting MSO.

Through the MSA, we have exclusive authority over all non-medical decisions related to the ongoing business operations of the affiliated IPA. Consequently, Clinigence consolidates the revenue and expenses of the affiliated IPA as their primary beneficiary from the date of execution of the MSA.

Under this arrangement our MSO performs only non-medical functions, does not represent to offer medical services, and does not exercise influence or control over the practice of medicine by physicians. The California Medical Board, as well as other states' regulatory bodies, has taken the position that MSAs that confer too much control over a physician practice to MSOs may violate the prohibition against corporate practice of medicine. Some of the relevant laws, regulations, and agency interpretations in California and other states that have corporate practice prohibitions have been subject to limited judicial and regulatory interpretation. Moreover, state laws are subject to change and regulatory authorities. Other parties, including our affiliated IPA, may assert that, despite these arrangements, Clinigence and its subsidiaries are engaged in the prohibited corporate practice of medicine or that such arrangements constitute unlawful fee-splitting between physicians and non-physicians. If this occurred, we could be subject to civil or criminal penalties, our MSA could be found legally invalid and unenforceable in whole or in part, and we could be required to restructure arrangements with our affiliated IPA. If we were required to change our operating structures due to determination that a corporate practice of medicine violation existed, such a restructuring might require revising our MSA terms.

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Employees

We presently have 24 total employees all of whom are full-time for operations.

Our Corporate Information

 Our principal corporate office is located at 2455 East Sunrise Blvd. Suite 1204 Fort Lauderdale FL, 33304. We maintain a website at www.clinigencehealth.con and make available there, free of charge, our periodic reportsoriginally filed with the Securities and Exchange Commission (SEC)(the “SEC”) on March 3, 2023 (the “Original Filing”), as soon asto include the information required by Items 10 through 14 of Part III of Form 10-K. This information was previously omitted from the Original Filing in reliance on General Instruction G(3) of Form 10-K, which permits such information to be incorporated by reference in the Form 10-K from the Company’s definitive proxy statement if such proxy statement is reasonably practicablefiled no later than 120 days after filing. The SEC maintains a website at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers such as us that file electronically with the SEC.

ITEM 1A.RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with allend of the otherCompany’s fiscal year. The Company is filing this Amendment No. 1 to include the information in this Annual Report on Form 10-K, including the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” inrequired by Part II, Item 7, and our consolidated financial statements and related notes, before making a decision to invest in our common stock The risks and uncertainties described below may not be the only ones we face. If anyIII of the risks actually occur, our business, financial condition, operating results, and prospects could be materially and adversely affected. In that event, the market price of our common stock could decline, and you could lose part or all of your investment.

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties, discussed in more detail in the following section. These risks include, among others, the following key risks:

•The ongoing coronavirus (COVID-19) pandemic may negatively impact certain aspects of our business, financial condition, results of operations, and growth.
•Potential changes in laws, accounting principles, and regulations related to VIEs could impact our consolidation of total revenues derived from our affiliated physician groups.
•The arrangements we have with our VIEs are not as secure as direct ownership of such entities.
•We currently derive a substantial portion of our revenues in California and are vulnerable to changes in that state.
•Our business strategy involves acquisitions and strategic partnerships, which can be costly, risky, and complex.
•We may encounter difficulties in managing our growth, and the nature of our business and rapid changes in the healthcare industry make it difficult to reliably predict future growth and operating results.
•We could experience significant losses under capitation contracts if our expenses exceed revenues.
•If our agreements with affiliated physician groups are deemed invalid or are terminated under applicable law, our results of operations and financial condition will be materially impaired.
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•Our revenues and operations are dependent on a limited number of key payors.
•We may be impacted by a shift in payor mix, including eligibility changes to government and private insurance programs.
•Many of our agreements with hospitals and medical groups have limited durations, may be terminated without cause by them, and prohibit us from acquiring physicians or patients from or competing with them.
•Changes to federal, state, and local healthcare law, including the ACA and/or the adoption of a primarily publicly funded healthcare system, may negatively impact our business.
•Laws regulating the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business and the failure to comply with such laws could subject us to penalties and restructuring.
•The healthcare industry is intensely regulated at the federal, state, and local levels, and government authorities may determine that we fail to comply with applicable laws or regulations and take actions against us.
•Controls designed to reduce inpatient services and associated costs may reduce our revenues.
•If our affiliated physician groups are not able to satisfy California financial solvency regulations, they could become subject to sanctions and their ability to do business in California could be limited or terminated.

Risks Related to Our General Business and Operations

If our internal controls over financial reporting are not considered effective, our business and stock price could be adversely affected.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and the rules and regulations of the applicable listing standards.. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs; make some activities more difficult, time-consuming, and costly; and strain our personnel, systems, and resources.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are also required to make a formal assessment and provide an annual management report on the effectiveness of our internal control over financial reporting. In order to maintain the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, resources, including accounting-related costs and management oversight.

Additionally, current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, additional weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to maintain or develop effective controls or any difficulties encountered in their implementation or improvement could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting.

Uncertain or adverse economic conditions could adversely impact us.

A downturn in economic conditions could have a material adverse effect on our results of operations, financial condition, business prospects, and stock price. Historically, government budget limitations have resulted in reduced spending. Given that Medicaid is a significant component of state budgets, an economic downturn would put continued cost containment pressures on Medicaid outlays for healthcare services in California. The existing federal deficit and continued deficit spending by the federal government can lead to reduced government expenditures, including for government-funded programs in which we participate such as Medicare. An economic downturn and sustained unemployment may also impact the number of enrollees in managed care programs and the profitability of managed care companies, which could result in reduced reimbursement rates. Although we attempt to stay informed, any sustained failure to identify and respond to these trends could have a material adverse effect on our results of operations, financial condition, business, and prospects.

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Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and results of operations and the price of our common stock.

From time to time, the global credit and financial markets have experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. There can be no assurance that future deterioration in credit and financial markets and confidence in economic conditions will not occur. Our business strategy and performance may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the conflict between Russia and Ukraine, terrorism or other geopolitical events. Sanctions imposed by the United States and other countries in response to such conflicts, including the conflict in Ukraine, may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability. If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our business, financial condition and results of operations and the price of our common stock.

The ongoing COVID-19 pandemic may impact certain aspects of our business, financial condition, results of operation, and growth.

The global spread of the COVID-19 pandemic and measures introduced by local, state, and federal governments to contain the virus and mitigate its public health effects have created significant impact to the global economy. We expect the evolving COVID-19 pandemic to continue to impact certain aspects of our business, results of operations, and financial condition and liquidity, but given the uncertainty around the duration and severity of the pandemic, we cannot accurately predict at this time the future potential impact on our business, results of operations, financial condition, and liquidity

Throughout the pandemic, COVID-19 impacted certain aspects of our business as community self-isolation practices and shelter-in-place requirements reduced our inpatient visits. Continued shelter-in-place, quarantine, executive order, or related measures to combat the spread of COVID-19, as well as the perceived need by individuals to continue such practices to avoid infection, among other factors, have impacted and are expected to continue to impact certain aspects of our results of operations, business, and financial condition. These measures and practices resulted in temporary closures of outpatient clinics, and may result in delays in entry into new markets and expansion in existing markets. Governmental authorities in California began reopening and lifting or relaxing shelter-in-place and quarantine measures only to revert back to such restrictions in the face of increases in new COVID-19 cases. In addition, due to the shelter-in-place orders across the country, we have implemented work-from-home policies for many employees, which may impact productivity and disrupt our business operations.

Healthcare organizations around the world, including our medical offices, have faced, and will continue to face, substantial challenges in treating patients with COVID-19, such as the diversion of hospital staff and resources from ordinary functions to the treatment of COVID-19, supply, resource, and capital shortages, and overburdening of staff and resource capacity. In the United States, governmental authorities have also recommended, and in certain cases required, that elective, specialty, and other procedures and appointments, including certain primary care services, be suspended or canceled to avoid non-essential patient exposure to medical environments and potential infection with COVID-19, and to focus limited resources and personnel capacity toward the treatment of COVID-19. Some of these measures and challenges will likely continue for the duration of the pandemic, which is uncertain, and will harm the results of operations, liquidity, and financial condition of these healthcare organizations, including certain of our health network partners. We cannot accurately predict at this time the ultimate severity or duration that the foregoing measures and challenges may have on these healthcare organizations, including us and our health network partners.

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The COVID-19 pandemic and similar crises could also diminish the public’s trust in healthcare facilities, especially facilities that fail to accurately or timely diagnose, or are treating (or have treated) patients affected by infectious diseases. As certain of our medical offices treat patients with COVID-19 or other infectious disease, patients may be discouraged from visiting our offices, including cancelling appointments.

Our affiliated physician groups also face an increased risk of infection with COVID-19, which may result in staffing shortages at our offices or increased workers’ compensation claims. While the potential economic impact brought by and the duration of COVID-19 may be difficult to assess or predict, the widespread pandemic has resulted in, and may continue to result in, significant disruption of global financial markets, potentially reducing our ability to access capital, which could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business and the value of our common stock.

The global outbreak of COVID-19 continues to rapidly evolve. The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change. We cannot at this time precisely predict what effects the COVID-19 outbreak will have on certain aspects of our business, results of operations, and financial condition, including due to uncertainties relating to the severity of the disease, the duration of the pandemic, and the governmental responses to the pandemic.

If there is a change in accounting principles or the interpretation thereof affecting consolidation of VIEs, it could impact our consolidation of total revenues derived from our affiliated physician groups.

Our financial statements are consolidated and include the accounts of our majority-wholly owned AHP subsidiary and non-owned affiliated physician group that is a VIE, which consolidation is effectuated in accordance with applicable accounting rules promulgated by the Financial Accounting Standards Board (“FASB”). Such accounting rules require that, under some circumstances, the VIE consolidation model be applied when a reporting enterprise holds a variable interest (e.g., equity interests, debt obligations, certain management, and service contracts) in a legal entity. Under this model, an enterprise must assess the entity in which it holds a variable interest to determine whether it meets the criteria to be consolidated as a VIE. If the entity is a VIE, the consolidation framework next identifies the party, if one exists, that possesses a controlling financial interest in the VIE, and then requires that party to consolidate as the primary beneficiary. An enterprise’s determination of whether it has a controlling financial interest in a VIE requires that a qualitative determination be made and is not solely based on voting rights. If an enterprise determines the entity in which it holds a variable interest is not subject to the VIE consolidation model, the enterprise should apply the traditional voting control model which focuses on voting rights.

In our case, the VIE consolidation model applies to our controlled, but not owned, physician-affiliated entity. Our determination regarding the consolidation of our affiliate, however, could be challenged, which could have a material adverse effect on our operations. In addition, in the event of a change in accounting rules or FASB’s interpretations thereof, or if there were an adverse determination by a regulatory agency or a court or a change in state or federal law relating to the ability to maintain present agreements or arrangements with our affiliated physician group, we may not be permitted to continue to consolidate the revenues of our VIE.

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Our business will be subject to the risks of earthquakes, fire, floods and other natural catastrophic events, health epidemics or pandemics, and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or terrorism. 

We expect to have facilities located in the Southeast United States, including Florida, a region known for hurricane activity and Los Angeles California, a region known for earthquakes and wildfires. A significant natural disaster, such as a hurricane, earthquake, wildfire,or flood, occurring at our headquarters, at one of our other facilities or where a business partner is located could adversely affect our business, results of operations and financial condition. Further, if a natural disaster, health epidemics or pandemic, or man-made problem were to affect our network service providers or Internet service providers, this could adversely affect the ability of our customers to use our products and platform. In addition, health epidemics or pandemics, natural disasters and acts of terrorism could cause disruptions in our business, or the businesses of our customers or service providers. We also expect to rely on our network and third-party infrastructure and enterprise applications and internal technology systems for our engineering, sales and marketing and operations activities. Although we maintain incident management and disaster response plans, in the event of a major disruption caused by a health epidemic or pandemic, natural disaster or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, any of which could adversely affect our business, results of operations and financial condition. 

Breaches or compromises of our information security systems or our information technology systems or infrastructure could result in exposure of private information, disruption of our business, and damage to our reputation, which could harm our business, results of operation, and financial condition

As a routine part of our business, we utilize information security and information technology systems and websites that allow for the secure storage and transmission of proprietary or private information regarding our patients, employees, vendors, and others, including individually identifiable health information. A security breach of our network, hosted service providers, or vendor systems, may expose us to a risk of loss or misuse of this information, litigation, and potential liability. Hackers and data thieves are increasingly sophisticated and operate large-scale and complex automated attacks, including on companies within the healthcare industry. Although we believe that we take appropriate measures to safeguard sensitive information within our possession, we may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks targeted at us, our patients, or others who have entrusted us with information. Actual or anticipated attacks may cause us to incur costs, including costs to deploy additional personnel and protection technologies, train employees, and engage third-party experts and consultants. We invest in industry-standard security technology to protect personal information. Advances in computer capabilities, new technological discoveries, or other developments may result in the technology used by us to protect personal information or other data being breached or compromised. In addition, data and security breaches can also occur as a result of non-technical failures. To our knowledge, we have not experienced any material breach of our cybersecurity systems. If we or our third-party service providers systems fail to operate effectively or are damaged, destroyed, or shut down, or there are problems with transitioning to upgraded or replacement systems, or there are security breaches in these systems, any of the aforementioned could occur as a result of natural disasters, software or equipment failures, telecommunications failures, loss or theft of equipment, acts of terrorism, circumvention of security systems, or other cyberattacks, we could experience delays or decreases in service, and reduced efficiency of our operations. Additionally, any of these events could lead to violations of privacy laws, loss of customers, or loss, misappropriation or corruption of confidential information, trade secrets or data, which could expose us to potential litigation, regulatory actions, sanctions, or other statutory penalties, any or all of which could adversely affect our business and cause it to incur significant losses and remediation costs.

We rely on complex software systems and hosted applications to operate our business, and our business may be disrupted if we are unable to successfully or efficiently update these systems or convert to new systems.

We are increasingly dependent on technology systems to operate our business, reduce costs, and enhance customer service. These systems include complex software systems and hosted applications that are provided by third parties. Software systems need to be updated on a regular basis with patches, bug fixes, and other modifications. Hosted applications are subject to service availability and reliability of hosting environments. We also migrate from legacy systems to new systems from time to time. Maintaining existing software systems, implementing upgrades, and converting to new systems are costly and require personnel and other resources. The implementation of these systems upgrades, and conversions is a complex and time-consuming project involving substantial expenditures for implementation activities, consultants, system hardware and software, often requires transforming our current business and processes to conform to new systems, and therefore, may take longer, be more disruptive, and cost more than forecast and may not be successful. If the implementation is delayed or otherwise is not successful, it may hinder our business operations and negatively affect our financial condition and results of operations. There are many factors that may materially and adversely affect the schedule, cost, and execution of the implementation process, including, without limitation, problems in the design and testing of new systems; system delays and malfunctions; the deviation by suppliers and contractors from the required performance under their contracts with us; the diversion of management attention from our daily operations to the implementation project; reworks due to unanticipated changes in business processes; difficulty in training employees in the operation of new systems and maintaining internal control while converting from legacy systems to new systems; and integration with our existing systems. Some of such factors may not be reasonably anticipated or may be beyond our control.

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We may be unable to renew our leases on favorable terms or at all as our leases expire, which could adversely affect our business, financial condition, and results of operations.

We operate several leased premises. There is no assurance that we will be able to continue to occupy such premises in the future. We may be unable to timely renew such leases or renew them on favorable terms, if at all. If any current lease is terminated or not renewed, we may be required to relocate our operations at

substantial costs or incur increased rental expenses, which could adversely affect our business, financial condition, and results of operations.

We currently derive a substantial portion of our revenues in California and are vulnerable to changes in that state.

We primarily operate in California. Any material changes with respect to consumer preferences, taxation, reimbursements, financial requirements, or other aspects of the healthcare delivery in California or the state’s economic conditions could have an adverse effect on our business, results of operations, and financial condition.

Our success depends, to a significant degree, upon our ability to adapt to the ever-changing healthcare industry and continued development of additional services.

Although we expect to provide a broad and competitive range of services, there can be no assurance of acceptance of current services by the marketplace. Our ability to procure new contracts may be dependent upon the continuing results achieved at the current facilities, upon pricing and operational considerations, and the potential need for continuing improvement to our existing services. Moreover, the markets for our new services may not develop as expected nor can there be any assurance that we will be successful in marketing any such services

Risks related to the Healthcare Industry

The healthcare industry is highly competitive.

We compete directly with national, regional, and local providers of inpatient healthcare for patients and physicians. There are many other companies and individuals currently providing healthcare services, many of which have been in business longer and/or have substantially more resources. Since there are virtually no substantial capital expenditures required for providing healthcare services, there are few financial barriers to entry the healthcare industry. Other companies could enter the healthcare industry in the future and divert some or all of our business. We also compete with physician groups and privately-owned healthcare companies in local markets. In addition, our relationships with governmental and private third-party payors are not exclusive and our competitors have established or could seek to establish relationships with such payors to serve their covered patients. Competitors may also seek to compete with us for acquisitions, which could have the effect of increasing the price and reducing the number of suitable acquisitions, which would have an adverse impact on our growth strategy. Individual physicians, physician groups, and companies in other healthcare industry segments, including those with which we have contracts, and some of which have greater financial, marketing, and staffing resources, may become competitors in providing healthcare services, and this competition may have a material adverse effect on our business operations and financial position.

We therefore may be unable to compete successfully and even after we expend significant resources.

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New physicians and other providers must be properly enrolled in governmental healthcare programs before we can receive reimbursement for their services, and there may be delays in the enrollment process.

Each time a new physician joins us or our affiliated groups, we must enroll the physician under our applicable group identification number for Medicare and Medicaid programs and for certain managed care and private insurance programs before we can receive reimbursement for services the physician renders to beneficiaries of those programs. The estimated time to receive approval for the enrollment is sometimes difficult to predict and, in recent years, the Medicare program carriers often have not issued these numbers to our affiliated physicians in a timely manner. These practices result in delayed reimbursement that may adversely affect our cash flows.

Changes associated with reimbursements by third-party payors may adversely affect our operations.

The medical services industry is undergoing significant changes with government and other third-party payors that are taking measures to reduce reimbursement rates or, in some cases, denying reimbursement altogether. There is no assurance that government or other third-party payors will continue to pay for the services provided by our affiliated medical groups. Furthermore, there has been, and continues to be, a great deal of discussion and debate about the repeal and replacement of existing government reimbursement programs, such as the ACA. As a result, the future of healthcare reimbursement programs is uncertain, making long-term business planning difficult and imprecise. The failure of government or other third-party payors to cover adequately the medical services provided by us could have a material adverse effect on our business, results of operations, and financial condition.

Our business may be significantly and adversely affected by legislative initiatives aimed at or having the effect of reducing healthcare costs associated with Medicare and other government healthcare programs and changes in reimbursement policies. In order to participate in the Medicare program, we must comply with stringent and often complex enrollment and reimbursement requirements. These programs generally provide for reimbursement on a fee-schedule basis rather than on a charge-related basis. As a result, we cannot increase our revenue by increasing the amount that we and our affiliates charge for services. To the extent that our costs increase, we may not be able to recover the increased costs from these programs. In addition, cost containment measures in non-governmental insurance plans have generally restricted our ability to recover, or shift to non-governmental payors, these increased costs. In attempts to limit federal and state spending, there have been, and we expect that there will continue to be, a number of proposals to limit or reduce Medicare reimbursement for various services. For example, the Medicare Access and CHIP Reauthorization Act of 2015 made numerous changes to Medicare, Medicaid, and other healthcare-related programs, including new systems for establishing annual updates to Medicare rates for physicians’ services.

We may have difficulty collecting payments from third-party payors in a timely manner.

We derive significant revenue from third-party payors, and delays in payment or refunds to payors may adversely impact our net revenue. We assume the financial risks relating to uncollectible and delayed payments. In particular, we rely on some key governmental payors. Governmental payors typically pay on a more extended payment cycle, which could require us to incur substantial expenses prior to receiving corresponding payments. In the current healthcare environment, as payors continue to control expenditures for healthcare services, including through revising their coverage and reimbursement policies, we may continue to experience difficulties in collecting payments from payors that may seek to reduce or delay such payments. If we are not timely paid in full or if we need to refund some payments, our revenues, cash flows, and financial condition could be adversely affected.

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Decreases in payor rates could adversely affect us.

Decreases in payor rates, either prospectively or retroactively, could have a significant adverse effect on our revenues, cash flows, and results of operations.

Federal and state laws may limit our ability to collect monies owed by patients.

We use third-party collection agencies whom we do not control to collect from patients any co-payments and other payments for services that our physicians provide. The federal Fair Debt Collection Practices Act of 1977 (the “FDCPA”) restricts the methods that third-party collection companies may use to contact and seek payment from consumer debtors regarding past due accounts. State laws vary with respect to debt collection practices, although most state requirements are similar to those under the FDCPA. Therefore, such agencies may not be successful in collecting payments owed to us and our affiliated physician groups. If practices of collection agencies utilized by us are inconsistent with these standards, we may be subject to actual damages and penalties. These factors and events could have a material adverse effect on our business, results of operations, and financial condition.

We have established reserves for our potential medical claim losses, which are subject to inherent uncertainties, and a deficiency in the established reserves may lead to a reduction in our assets or net incomes.

We establish reserves for estimated IBNR claims. IBNR estimates are developed using actuarial methods and are based on many variables, including the utilization of healthcare services, historical payment patterns, cost trends, product mix, seasonality, changes in membership, and other factors. The estimation methods and the resulting reserves are periodically reviewed and updated.

Many of our contracts are complex in nature and may be subject to differing interpretations regarding amounts due for the provision of various services. Such interpretations may not come to light until a substantial period of time has passed. The inherent difficulty in interpreting contracts and estimating necessary reserves could result in significant fluctuations in our estimates from period to period. Our actual losses and related expenses therefore may differ, even substantially, from the reserve estimates reflected in our financial statements. If actual claims exceed our estimated reserves, we may be required to increase reserves, which would lead to a reduction in our assets or net income.

Competition for qualified physicians, employees, and management personnel is intense in the healthcare industry, and we may not be able to hire and retain qualified physicians and other personnel.

We depend on our affiliated physicians to provide services and generate revenue. We compete with many types of healthcare providers, including teaching, research and government institutions, hospitals, and other practice groups, for the services of clinicians and management personnel. The limited number of residents and other licensed providers on the job market with the expertise necessary to provide services within our business makes it challenging to meet our hiring needs and may require us to train new employees, contract temporary physicians, or offer more attractive wage and benefit packages to experienced professionals, which could decrease our profit margins. The limited number of available residents and other licensed providers also impacts our ability to renew contracts with existing physicians on acceptable terms. As a result, our ability to provide services could be adversely affected. Even though our physician turnover rate has remained stable over the last three years, if the turnover rate were to increase significantly, our growth could be adversely affected. Moreover, unlike some of our competitors who sometimes pay additional compensation to physicians who agree to provide services exclusively to that competitor, our affiliated IPAs have historically not entered into such exclusivity agreements and have allowed our affiliated physicians to affiliate with multiple IPAs. This practice may place us at a competitive disadvantage regarding the hiring and retention of physicians relative to those competitors who do enter into such exclusivity agreements.

The healthcare industry is increasingly reliant on technology, which could increase our risks.

The role of technology is greatly increasing in the delivery of healthcare, which makes it difficult for traditional physician-driven companies, such as us, to adopt and integrate electronic health records, databases, cloud-based billing systems, and many other technology applications in the delivery of healthcare services. Additionally, consumers are using mobile applications and care and cost research in selecting and usage of healthcare services. We may need to incur significant costs to implement these technology applications and comply with applicable laws. For example, the nature of our business and the requirements of healthcare privacy laws impose significant obligations on us to maintain privacy and protection of patient medical information. We rely on employees and third parties with technology knowledge and expertise and could be at risk if technology applications are not properly established, maintained, or secured. Any cybersecurity incident, even unintended, could expose us to significant fines and remediation costs and materially impair our business operations and financial position.

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If we are unable to effectively adapt to changes in the healthcare industry, including changes to laws and regulations regarding or affecting the U.S. healthcare reform, our business may be harmed.

Due to the importance of the healthcare industry in the lives of all Americans, federal, state, and local legislative bodies frequently pass legislation and promulgate regulations relating to healthcare reform or that affect the healthcare industry. As has been the trend in recent years, it is reasonable to assume that there will continue to be increased government oversight and regulation of the healthcare industry in the future. We cannot assure our stockholders as to the ultimate content, timing, or effect of any new healthcare legislation or regulations, nor is it possible at this time to estimate the impact of potential new legislation or regulations on our business. It is possible that future legislation enacted by Congress or state legislatures, or regulations promulgated by regulatory authorities at the federal or state level, could adversely affect our business or could change the operating environment of the hospitals and other facilities where our affiliated physicians provide services. It is possible that the changes to the Medicare, Medicaid, or other governmental healthcare program reimbursements may serve as precedent to possible changes in other payors’ reimbursement policies in a manner adverse to us. Similarly, changes in private payor reimbursements could lead to adverse changes in Medicare, Medicaid, and other governmental healthcare programs, which could have a material adverse effect on our business, financial condition, and results of operations.

Although we do not anticipate that a single-payer national health insurance system will be enacted by the current Congress, several legislative initiatives have been proposed by members of Congress and presidential candidates that would establish some form of a single public or quasi-public agency that organizes healthcare financing, but under which healthcare delivery would remain private. If enacted, such a system could adversely affect our business.

Consolidation in the healthcare industry could have a material adverse effect on our business, financial condition, and results of operations.

Many healthcare industry participants and payers are consolidating to create larger and more integrated healthcare delivery systems with greater market power. We expect regulatory and economic conditions to result in additional consolidation in the healthcare industry in the future. As consolidation accelerates, the economies of scale of our partners’ organizations may grow. If a partner experiences sizable growth following consolidation, it may determine that it no longer needs to rely on us and may reduce its demand for our products and services. In addition, as healthcare providers consolidate to create larger and more integrated healthcare delivery systems with greater market power, these providers may try to use their market power to negotiate fee reductions for our products and services. Finally, consolidation may also result in the acquisition or future development by our partners of products and services that compete with our products and services. Any of these potential results of consolidation could have a material adverse effect on our business, financial condition and results of operations.

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Risks Relating to Regulatory Compliance

Laws regulating the corporate practice of medicine could restrict the manner in which we are permitted to conduct our business and the failure to comply with such laws could subject us to penalties and restructuring.

Some states have laws that prohibit business entities from practicing medicine, employing physicians to practice medicine, exercising control over medical decisions by physicians (also known collectively as the corporate practice of medicine) or engaging in some arrangements, such as fee-splitting, with physicians. In some states these prohibitions are expressly stated in a statute or regulation, while in other states the prohibition is a matter of judicial or regulatory interpretation. California is one of the states that prohibit the corporate practice of medicine.

In California, we operate by maintaining contracts with our affiliated physician group, which is each owned and operated by physicians and which employ or contract with additional physicians to provide physician services. Under this arrangement, our subsidiary provides management services, receives a management fee for providing management services, does not represent to offer medical services, and does not exercise influence or control over the practice of medicine by the physician or the affiliated physician groups. Accordingly, we do not directly own any equity interests in out affiliated physician group in California. In the event that the affiliated physician group arrangement is terminated, we are unable to enforce such arrangement, or the arrangement is invalidated under applicable laws, there could be a material adverse effect on our business, results of operations, and financial condition and we may have to restructure our organization and change our arrangements with our affiliated physician group, which may not be successful.

We conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations or experience adverse publicity, which could have a material adverse effect on our business, financial condition, and results of operations.

The healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes and regulations govern the manner in which we provide and bill for services and collect reimbursement from governmental programs and private payors, our contractual relationships with our providers, vendors and clients, our marketing activities and other aspects of our operations. Of particular importance are:

•the False Claims Act, that provides for penalties against entities and individuals who knowingly or recklessly make claims to Medicare, Medicaid, and other governmental healthcare programs, as well as third-party payors, that contain or are based upon false or fraudulent information;
•a provision of the Social Security Act, commonly referred to as the “Anti-Kickback Statute,” that prohibits the knowing and willful offering, payment, solicitation, or receipt of any bribe, kickback, rebate, or other remuneration, in cash or in kind, in return for the referral or recommendation of patients for items and services covered, in or in part, by federal healthcare programs such as Medicare and Medicaid;
•a provision of the Social Security Act, commonly referred to as the Stark Law or physician self-referral law, that (subject to limited exceptions) prohibits physicians from referring Medicare patients to an entity for the provision of specific “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship with the entity, and prohibits the entity from billing for services arising out of such prohibited referrals;
•a provision of the Social Security Act that provides for criminal penalties on healthcare providers who fail to disclose known overpayments;
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•a provision of the Social Security Act that provides for civil monetary penalties on healthcare providers who fail to repay known overpayments within 60 days of identification or the date any corresponding cost report was due, if applicable, and also allows improper retention of known overpayments to serve as a basis for False Claims Act violations;
•provisions of the Social Security Act (emanating from the DRA) that require entities that make or receive annual Medicaid payments of $5 million or more from a single Medicaid program to provide its employees, contractors, and agents with written policies and employee handbook materials on federal and state false claims acts and related statutes, that establish a new Medicaid Integrity Program designed to enhance federal and state efforts to detect Medicaid fraud, waste, and abuse, and that increase financial incentives for both states and individuals to bring fraud and abuse claims against healthcare companies;
•state law provisions pertaining to anti-kickback, self-referral, and false claims issues;
•provisions of, and regulations relating to, HIPAA that provide penalties for knowingly and willfully executing a scheme or artifice to defraud a healthcare
•benefit program or falsifying, concealing, or covering up a material fact or making any material false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items, or services;
•provisions of HIPAA and the Health Information Technology for Economic and Clinical Health Act of 2009 (“HITECH”) limiting how covered entities, business associates, and business associate sub-contractors may use and disclose PHI and the security measures that must be taken in connection with protecting that information and related systems, as well as similar or more stringent state laws;
•federal and state laws that provide penalties for providers for billing and receiving payments from a governmental healthcare program for services unless the services are medically necessary and reasonable, adequately and accurately documented, and billed using codes that accurately reflect the type and level of services rendered;
•state laws that provide for financial solvency requirements relating to risk-bearing organizations (“RBOs”), plan operations, plan-affiliate operations and transactions, plan-provider contractual relationships, and provider-affiliate operations and transactions, such as California Business & Professions Code Section 1375.4 (§ 1375.4; Cal. Code Regs., tit. 28, § 1300.75.4 et seq.);
•federal laws that provide for administrative sanctions, including civil monetary penalties for, among other violations, inappropriate billing of services to federal healthcare programs, payments by hospitals to physicians for reducing or limiting services to Medicare or Medicaid patients, or employing or contracting with individuals or entities who/which are excluded from participation in federal healthcare programs;
•federal and state laws and policies that require healthcare providers to enroll in the Medicare and Medicaid programs before submitting any claims for services, to promptly report certain changes in its operations to the agencies that administer these programs, and to re-enroll in these programs when changes in direct or indirect ownership occur or in response to revalidation requests from Medicare and Medicaid;
•state laws that prohibit general business entities from practicing medicine, controlling physicians’ medical decisions or engaging in certain practices, such as splitting fees with physicians;
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•state laws that require timely payment of claims, including §1371.38, et al, of the California Health & Safety Code, which imposes time limits for the payment of uncontested covered claims and required healthcare service plans to pay interest on uncontested claims not paid promptly within the required time period;
•laws in some states that prohibit non-domiciled entities from owning and operating medical practices in such states;
•federal and state laws and regulations restricting the techniques that may be used to collect past due accounts from consumers, such as our patients, for services provided to the consumer; and
•state laws that require healthcare providers that assume professional and institutional risk (i.e., global risk) to either obtain a license under the Knox-Keene Health Care Service Plan Act of 1975 or receive an exemption from the California Department of Managed Healthcare (“DMHC”) for the contract(s) under which the entity assumes global risk.

Any violation or alleged violation of any of these laws or regulations by us or our affiliates could have a material adverse effect on our business, financial condition and results of operations.

Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. Achieving and sustaining compliance with these laws may prove costly. Failure to comply with these laws and other laws can result in civil and criminal penalties such as fines, damages, overpayment recoupment loss of enrollment status and exclusion from the Medicare and Medicaid programs. The risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are sometimes open to a variety of interpretations. Our failure to accurately anticipate the application of these laws and regulations to our business or any other failure to comply with regulatory requirements could create liability for us and negatively affect our business. Any action against us for violation of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and result in adverse publicity.

To enforce compliance with the federal laws, the U.S. Department of Justice and the OIG, have recently increased their scrutiny of healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. In addition, because of the potential for large monetary exposure under the federal False Claims Act, which provides for treble damages and mandatory minimum penalties of $5,500 to $11,000 per false claim or statement, healthcare providers often resolve allegations without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded in litigation proceedings. Such settlements often contain additional compliance and reporting requirements as part of a consent decree, settlement agreement or corporate integrity agreement. Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigating healthcare providers’ compliance with the healthcare reimbursement rules and fraud and abuse laws.

The laws, regulations and standards governing the provision of healthcare services may change significantly in the future. We cannot assure you that any new or changed healthcare laws, regulations or standards will not materially adversely affect our business. We cannot assure you that a review of our business by judicial, law enforcement, regulatory or accreditation authorities will not result in a determination that could adversely affect our operations.

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The impact of recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending in the US is currently unknown, but may adversely affect our business, financial condition and results of operations.

Our revenue will be dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare industry is subject to changing political, regulatory and other influences. The Patient Protection and Affordable Care Act or ACA made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to the uninsured and underinsured population of the United States.

The ACA, among other things, increased the number of individuals with Medicaid and private insurance coverage, implemented reimbursement policies that tie payment to quality, facilitated the creation of accountable care organizations that may use capitation and other alternative payment methodologies, strengthened enforcement of fraud, and abuse laws and encouraged the use of information technology. Several of these changes require implementing regulations which have not yet been drafted or have been released only as proposed rules.

Such changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue. 

In addition, certain provisions of the ACA authorize voluntary demonstration projects, which include the development of bundling payments for acute, inpatient hospital services, physician services and post-acute services for episodes of hospital care. Further, the ACA may adversely affect payors by increasing medical costs generally, which could have an effect on the industry and potentially impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. The full impact of these changes on us cannot be determined at this time.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could adversely affect our business, financial condition and results of operations.

Compliance with federal and state privacy and data security laws is expensive, and we may be subject to government or private actions due to privacy and security breaches.

Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability and integrity of personally identifiable information, or PII, including protected health information. These laws and regulations include HIPAA. HIPAA establishes a set of basic national privacy and security standards for the protection of protected health information, or PHI, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business associates with whom such covered entities contract for services, which includes us.

HIPAA requires healthcare providers like us to develop and maintain policies and procedures with respect to PHI that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information. HIPAA also implemented the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims.

HIPAA imposes mandatory penalties for certain violations. Penalties for violations of HIPAA and its implementing regulations start at $100 per violation and are not to exceed $50,000 per violation, subject to a cap of $1.5 million for violations of the same standard in a single calendar year. However, a single breach incident can result in violations of multiple standards. HIPAA also authorizes state attorneys general to file suit on behalf of their residents. Courts are able to award damages, costs and attorneys’ fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits such as those for negligence or recklessness in the misuse or breach of PHI.

In addition, HIPAA mandates that the Secretary of Health and Human Services, or HHS conduct periodic compliance audits of HIPAA covered entities or business associates for compliance with the HIPAA Privacy and Security Standards. It also tasks HHS with establishing a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil Monetary Penalty fine paid by the violator.

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HIPAA further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more, it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site. Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.

Numerous other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI. These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for us and our Clients and potentially exposing us to additional expense, adverse publicity and liability.

New health information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could have a significant effect on the manner in which we must handle healthcare related data, and the cost of complying with standards could be significant. If we do not comply with existing or new laws and regulations related to PHI, we could be subject to criminal or civil sanctions.

Because of the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important. If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to obtain access to sensitive client and patient data, including HIPAA-regulated PHI. As a result, our reputation could be severely damaged, adversely affecting client and patient confidence. Members may curtail their use of or stop using our services or our client base could decrease, which would cause our business to suffer. In addition, we could face litigation, damages for contract breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significant costs for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach could also result in increased costs associated with liability for stolen assets or information, repairing system damage that may have been caused by such breaches, incentives offered to clients or other business partners in an effort to maintain our business relationships after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional personnel and protection technologies, training employees and engaging third-party experts and consultants. While we maintain insurance covering certain security and privacy damages and claim expenses in the amount of at least $3.0 million, we may not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would not address the reputational damage that could result from a security incident.

We outsource important aspects of the storage and transmission of Client and Member information, and thus rely on third parties to manage functions that have material cyber-security risks. We attempt to address these risks by requiring outsourcing subcontractors who handle client and patient information to sign business associate agreements contractually requiring those subcontractors to adequately safeguard personal health data to the same extent that applies to us and in some cases by requiring such outsourcing subcontractors to undergo third-party security examinations. In addition, we periodically hire third-party security experts to assess and test our security posture. However, we cannot assure you that these contractual measures and other safeguards will adequately protect us from the risks associated with the storage and transmission of client and patient’s proprietary and protected health information.

In addition, various states have enacted laws governing the privacy of personal information collected and used by businesses online. For example, California has recently adopted the California Consumer Privacy Act of 2018, which went into effect on January 1, 2020. This law, in part, requires that companies make certain disclosures to consumers via their privacy policies, or otherwise at the time the personal data is collected. The Company will have to determine what personal data it is collecting from individuals and for what purposes, and to update its privacy policy every 12 months to make the required disclosures, among other things. Since this law is newly enacted and has not yet gone into effect, it is unclear whether it will have any material impact on the Company’s business and operations.

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Healthcare providers could be subject to federal and state investigations and payor audits.

Due to our affiliates’ participation in government and private healthcare programs, we are from time to time involved in inquiries, reviews, audits, and investigations by governmental agencies and private payors of our business practices, including assessments of our compliance with coding, billing, and documentation requirements. Federal and state government agencies have active civil and criminal enforcement efforts against healthcare companies, and their executives and managers. The DRA, which provides a financial incentive to states to enact their own false claims acts, and similar laws encourage investigations against healthcare companies by different agencies. These investigations could also be initiated by private whistleblowers. Responding to audit and investigative activities are costly and disruptive to our business operations, even when the allegations are without merit. If we are subject to an audit or investigation, a finding could be made that we or our affiliates erroneously billed or were incorrectly reimbursed, and we may be required to repay such agencies or payors, may be subjected to pre-payment reviews, which can be time-consuming and result in non-payment or delayed payments for the services we or our affiliates provide, and may be subject to financial sanctions or required to modify our operations.

Controls designed to reduce inpatient services and associated costs may reduce our revenues.

Controls imposed by Medicare, Medicaid, and private payors designed to reduce admissions and lengths of stay, commonly referred to as “utilization review,” have affected and are expected to continue to affect our operations. Federal law contains numerous provisions designed to ensure that services rendered by hospitals and other care providers to Medicare and Medicaid patients meet professionally recognized standards and are medically necessary and that claims for reimbursement are properly filed. These provisions include a requirement that a sampling of admissions of Medicare and Medicaid patients must be reviewed by quality improvement organizations, which review the appropriateness of Medicare and Medicaid patient admissions and discharges, the quality of care provided, and the appropriateness of cases of extraordinary length of stay or cost on a post-discharge basis. Quality improvement organizations may deny payment for services or assess fines and also have the authority to recommend to the HHS that a provider is in substantial non-compliance with the standards of the quality improvement organization and should be excluded from participation in the Medicare program. The ACA potentially expands the use of prepayment review by Medicare contractors by eliminating statutory restrictions on its use, and, as a result, efforts to impose more stringent cost controls are expected to continue. Utilization review is also a requirement of most non-governmental managed care organizations and other third-party payors. Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payor-required pre-admission authorization and utilization review and by third party payor pressure to maximize outpatient and alternative healthcare delivery services for less acutely ill patients. Although we are unable to predict the effect these controls and any changes thereto may have on our operations, significant limits on the scope of our services reimbursed and on reimbursement rates and fees could have a material, adverse effect on our business, financial position, and results of operations.

We do not have a Knox-Keene license.

The Knox-Keene Health Care Service Plan Act of 1975 was passed by the California State Legislature to regulate California managed care plans and is currently administered by the DMHC. A Knox-Keene Act license is required to operate a healthcare service plan, e.g., an HMO, or an organization that accepts global risk, i.e., accepts full risk for a patient population, including risk related to institutional services, e.g., hospital, and professional services. Applying for and obtaining such a license is a time consuming and detail-oriented undertaking. We currently do not hold any Knox-Keene license. If the DMHC were to determine that we have been inappropriately taking risk for institutional and professional services as a result of our various hospital and physician arrangements without having any Knox-Keene license or applicable regulatory exemption, we may be required to obtain a Knox-Keene license and could be subject to civil and criminal liability, any of which could have a material adverse effect on our business, results of operations, and financial condition.

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A Knox-Keene Act license or exemption from licensure, where applicable, is required to operate a healthcare service plan, e.g., an HMO, or an organization that accepts global risk, i.e., accepts full risk for a patient population, including risk related to institutional services, e.g., hospital, and professional services.

If our affiliated physician group is not able to satisfy California financial solvency regulations, they could become subject to sanctions and their ability to do business in California could be limited or terminated.

The DMHC has instituted financial solvency regulations. The regulations are intended to provide a formal mechanism for monitoring the financial solvency of a RBO in California, including capitated physician groups. Under current DMHC regulations, our affiliated physician groups, as applicable, are required to, among other things:

•Maintain, at all times, a minimum “cash-to-claims ratio” (which means the organization’s cash, marketable securities, and certain qualified receivables, divided by the organization’s total unpaid claims liability) of 0.75; and
•Submit periodic reports to the DMHC containing various data and attestations regarding their performance and financial solvency, including IBNR calculations and documentation and attestations as to whether or not the organization (i) was in compliance with the “Knox-Keene Act” requirements related to claims payment timeliness, (ii) had maintained positive tangible net equity (“TNE”), and (iii) had maintained positive working capital.

In the event that a physician group is not in compliance with any of the above criteria, it would be required to describe in a report submitted to the DMHC the reasons for non-compliance and actions to be taken to bring it into compliance. Under such regulations, the DMHC can also make some of the Information contained in the reports, public, including, but not limited to, whether or not a particular physician organization met each of the criteria. In the event any of our affiliated physician groups are not able to meet certain of the financial solvency requirements, and fail to meet subsequent corrective action plans, it could be subject to sanctions, or limitations on, or removal of, its ability to do business in California. There can be no assurance that our affiliated physician group, such as our IPA, will remain in compliance with DMHC requirements or be able to timely and adequately rectify non-compliance. To the extent that we need to provide additional capital to our affiliated physician group in the future in order to comply with DMHC regulations, we would have less cash available for other parts of our operations.

Our revenue will be negatively impacted if our physicians fail to appropriately document their services.

We rely upon our affiliated physicians to appropriately and accurately complete necessary medical record documentation and assign appropriate reimbursement codes for their services. Reimbursement is conditioned upon, in part, our affiliated physicians providing the correct procedure and diagnosis codes and properly documenting the services themselves, including the level of service provided and the medical necessity for the services. If our affiliated physicians have provided incorrect or incomplete documentation or selected inaccurate reimbursement codes, this could result in non-payment for services rendered or lead to allegations of billing fraud. This could subsequently lead to civil and criminal penalties, including exclusion from government healthcare programs, such as Medicare and Medicaid. In addition, third-party payors may disallow, in whole or in part, requests for reimbursement based on determinations that certain amounts are not covered, services provided were not medically necessary, or supporting documentation was not adequate. Retroactive adjustments may change amounts realized from third-party payors and result in recoupments or refund demands, affecting revenue already received.

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Primary care physicians may seek to affiliate with our and our competitors’ IPAs at the same time.

It is common in the medical services industry for primary care physicians to be affiliated with multiple IPAs. Our affiliated IPA therefore may enter into agreements with physicians who are also affiliated with our competitors. However, some of our competitors at times have agreements with physicians that require the physician to provide exclusive services. Our affiliated IPA often has no knowledge, and no way of knowing, whether a physician is subject to an exclusivity agreement without being informed by the physician. Competitors could initiate lawsuits against us alleging in part interference with such exclusivity arrangements. An adverse outcome from any such lawsuit could adversely affect our business, cash flows and financial condition.

If we inadvertently employ or contract with an excluded person, we may face government sanctions.

Individuals and entities can be excluded from participating in the Medicare and Medicaid programs for violating certain laws and regulations, or for other reasons such as the loss of a license in any state, even if the person retains other licensure. This means that the excluded person and others are prohibited from receiving payments for such person’s services rendered to Medicare or Medicaid beneficiaries, and if the excluded person is a physician, all services ordered (not just provided) by such physician are also non-covered and non-payable. Entities that employ or contract with excluded individuals are prohibited from billing the Medicare or Medicaid programs for the excluded individual’s services and are subject to civil penalties if it does. The U.S. Department of Health and Human Services Office of the Inspector General maintains a list of excluded persons. Although we have instituted policies and procedures to minimize such risks, there can be no assurance that we will not inadvertently hire or contract with an excluded person, or that our employees or contracts will not become excluded in the future without our knowledge. If this occurs, we may be subject to substantial repayments and civil penalties which could adversely affect our business, cash flows, and financial condition.

We may be subject to liability for failure to fully comply with applicable corporate and securities laws.

We are subject to various corporate and securities laws. Any failure to comply with such laws could cause government agencies to take action against us, which could restrict our ability to issue securities and result in fines or penalties. Any claim brought by such an agency could also cause us to expend resources to defend ourselves, divert the attention of our management from our business and could significantly harm our business, operating results, and financial condition, even if the claim is resolved in our favor. We received six (6) shareholder demand letters from multiple plaintiffs’ securities law firms in connection with the Company’s proxy statement filed with the SEC on February 14, 2022. This demand letters requested certain additional disclosures in connection with the proposed Nutex Merger. We did not provide any further disclosures. As of this Annual Report on Form 10-K, no further action has been taken by these shareholders and no lawsuit has been filed against us by these firms.

We cannot preclude the possibility that claims or lawsuits brought relating to any alleged securities law violations or breaches of fiduciary duty in connection with the proposed Nutex Merger could potentially require significant time and resources to defend and/or settle and distract our management and board of directors from focusing on our business.

We may face lawsuits not covered by insurance and related expenses may be material. Our failure to avoid, defend, and accrue for claims and litigation could negatively impact our results of operations or cash flows.

We are exposed to and become involved in various litigation matters arising out of our business, including from time to time, actual or threatened lawsuits. Malpractice lawsuits are common in the healthcare industry. The medical malpractice legal environment varies greatly by state. The status of tort reform, availability of non-economic damages, or the presence or absence of other statutes, such as elder abuse or vulnerable adult statutes, influence the incidence and severity of malpractice litigation. We may also be subject to other types of lawsuits, such as those initiated by our competitors, stockholders, employees, service providers, contractors, or by government agencies, including when we terminate relationships with them, which may involve large claims and significant defense costs. Many states have joint and several liabilities for providers who deliver care to a patient and are at least partially liable. As a result, if one provider is found liable for medical malpractice for the provision of care to a particular patient, all other providers who furnished care to that same patient, including possibly us and our affiliated physicians, may also share in the liability, which could be substantial individually or in aggregate.

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The defense of litigation, including fees of legal counsel, expert witnesses, and related costs, is expensive and difficult to forecast accurately. Such costs may be unrecoverable even if we ultimately prevail in litigation and could consume a significant portion of our limited capital resources. To defend lawsuits, it may also be necessary for us to divert officers and other employees from our normal business functions to gather evidence, give testimony, and otherwise support litigation efforts. If we lose any material litigation, we could face material judgments or awards against them. An unfavorable resolution of one or more of the proceedings in which we are involved now or in the future could have a material adverse effect on our business, cash flows, and financial condition. We may also in the future find it necessary to file lawsuits to recover damages or protect our interests. The cost of such litigation could also be significant and unrecoverable, which may also deter us from aggressively pursuing even legitimate claims

Our affiliated physicians are required to carry first dollar coverage with limits of coverage equal to $1.0 million for all claims based on occurrence up to an aggregate of $3.0 million per year We cannot be certain that our insurance coverage will be adequate to cover liabilities arising out of claims asserted against us, our affiliated professional organizations, or our affiliated physicians. Liabilities incurred by us or our affiliates in excess of our insurance coverage, including coverage for professional liability and other claims, could have a material adverse effect on our business, financial condition, and results of operations. Insurance coverage generally must be renewed annually and may not continue to be available to us in future years at acceptable costs and on favorable terms, which could increase our exposure to litigation.

Risks Related to Our Growth Strategy and Business Model

Our growth strategy may not prove viable and we may not realize expected results. In order to grow our business, we plan to drive greater awareness of our affiliated providers and their offerings and adoption of our platform from enterprises across new vertical markets. We intend to increase our investment in sales and marketing, as well as in technological development, to meet evolving customer needs in these and other markets. There is no guarantee, however, that we will be successful in gaining new customers from any or all of these markets. We have limited experience in marketing and selling our products and services generally, and in particular in these new markets, which may present unique and unexpected challenges and difficulties.

If the costs of the new marketing channels we use increase dramatically, then we may choose to use alternative and less expensive channels, which may not be as effective as the channels we currently use. As we add to or change the mix of our marketing strategies, we may need to expand into more expensive channels than those we are currently in, which could adversely affect our business, results of operations and financial condition. In addition, we have limited experience marketing our products and platform and we may not be successful in selecting the marketing channels that will provide us with exposure to customers in a cost-effective manner. As part of our strategy to penetrate the new vertical markets, we will incur marketing expenses before we are able to recognize any revenue in such markets, and these expenses may not result in increased revenue or brand awareness. We have made in the past, and may make in the future, significant expenditures and investments in new marketing campaigns, and these investments may not lead to the cost-effective acquisition of additional customers. If we are unable to maintain effective marketing programs, then our ability to attract new customers or enter into new vertical markets could be adversely affected.

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We could experience significant losses under capitation contracts if our expenses exceed revenues.

Under a capitation contract, a health plan typically prospectively pays an IPA, periodic capitation payments based on a percentage of the amount received by the health plan. Capitation payments, in the aggregate, represent a prospective budget from which an IPA manages care-related expenses on behalf of the population enrolled with that IPA. If our affiliated IPA is able to manage care-related expenses under the capitated levels, we realize operating profits from capitation contracts. However, if care-related expenses exceed projected levels, our affiliated IPA may realize substantial operating deficits, which are not capped and could lead to substantial losses. Additionally, factors beyond our control, such as natural disasters, the potential effects of climate change, major epidemics, pandemics, or newly emergent viruses (such as COVID-19), could reduce our ability to effectively manage the costs of providing healthcare.

If our agreement with our affiliated physician group is deemed invalid or are terminated under applicable law, our results of operations and financial condition will be materially impaired.

There are various state laws, including laws in California, regulating the corporate practice of medicine, which prohibit us from directly owning medical professional entities. These prohibitions are intended to prevent unlicensed persons from interfering with or inappropriately influencing a physician’s professional judgment. These and other laws may also prevent fee-splitting, which is the sharing of professional service income with non-professional or business interests. The interpretation and enforcement of these laws vary significantly from state to state. We currently derive revenues from an MSA arrangement with our affiliated IPA, whereby we provide management and administrative services to them. If this agreement and arrangement is held to be invalid under laws prohibiting the corporate practice of medicine and other laws or if there are new laws that prohibit such agreements or arrangements, a significant portion of our revenues will be lost, resulting in a material adverse effect on our results of operations and financial condition.

The arrangements we have with our VIEs are not as secure as direct ownership of such entities.

Because of corporate practice of medicine laws, we entered into contractual arrangements to manage certain affiliated physician practice groups, which allow us to consolidate those groups for financial reporting purposes. We do not have direct ownership interests in any of our VIEs and are not able to exercise rights as an equity holder to directly change the members of the boards of directors of these entities so as to affect changes at the management and operational level. Under our arrangements with our VIEs, we must rely on their equity holders to exercise our control over the entities. If our affiliated entities or their equity holders fail to perform as expected, we may have to incur substantial costs and expend additional resources to enforce such arrangements.

Any failure by our affiliated entities or their owners to perform their obligations under their agreements with us would have a material adverse effect on our business, results of operations and financial condition.

Our affiliated physician practice group is owned by individual physicians who could die, become incapacitated, or become no longer affiliated with us. Although our MSA with this affiliate provides that they will be binding on successors of current owners, as the successors are not parties to the MSA, it is uncertain in case of the death, bankruptcy, or divorce of a current owner whether their successors would be subject to such MSA.

Our revenues and operations are dependent on a limited number of key payors.

Our operations are dependent on a concentrated number of payors. Two payors accounted for an aggregate of 23% our total net revenue for the year ended December 31, 2021, and two customers accounted for an aggregate 24% of our total net revenue for the year ended December 31, 2020, respectively. We believe that a majority of our revenues will continue to be derived from a limited number of key payors, which may terminate their contracts with us, or our physicians credentialed by them upon the occurrence of certain events. They may also amend the material terms of the contracts under certain circumstances. Failure to maintain such contracts on favorable terms, or at all, would materially and adversely affect our results of operations and financial condition.

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An exodus of our patients could have a material adverse effect on our results of operations. We may also be impacted by a shift in payor mix, including eligibility changes to government and private insurance programs.

A material decline, in the number of patients that we and our affiliated physician groups serve, whether a government or a private entity is paying for their healthcare, could have a material adverse effect on our results of operations and financial condition, which could result from increased competition, new developments in the healthcare industry, or regulatory overhauls. In light of the repeal of the individual mandate requirement under the Patient Protection and Affordable Care Act of 2010 (also known as Affordable Care Act or Obamacare) via the Tax Cuts and Jobs Act of 2017, some people are expected to lose their health insurance and thus may not continue to afford services by our managed medical groups. In addition, due to potential decreased availability of healthcare through private employers, the number of patients who are uninsured or participate in governmental programs may increase. A shift in payor mix, from managed care and other private payors to government payors or the uninsured may result in a reduction in our rates of reimbursement or an increase in our uncollectible receivables or uncompensated care, with a corresponding decrease our net revenue. Changes in the eligibility requirements for governmental programs could also change the number of patients who participate in such programs or the number of uninsured patients. For those patients who remain with private insurance, changes in those programs could increase patient responsibility amounts, resulting in a greater risk for uncollectible receivables. Such events could have a material adverse effect on our business, results of operations and financial condition.

We are dependent in part on referrals from third parties and preferred provider status with payors.

Our business relies in part on referrals from third parties for our services. We receive referrals from community medical providers, emergency departments, payors, and hospitals in the same manner as other medical professionals receive patient referrals. We do not provide compensation or other remuneration to referral sources for referring patients to us. A decrease in these referrals due to competition, concerns about our services and other factors could result in a significant decrease in our revenues and adversely impact our financial condition. Similarly, we cannot assure that we will be able to obtain or maintain preferred provider status with significant third-party payors in the communities where we operate. If we are unable to maintain our referral base or our preferred provider status with significant third-party payors, it may negatively impact our revenues and financial performance

Our business model depends on numerous complex management information systems, and any failure to successfully maintain these systems or implement new systems could undermine our ability to receive payments and otherwise materially harm our operations and may result in violations of healthcare laws and regulations.

We depend on a complex, specialized, integrated management information system and standardized procedures for operational and financial information, as well as for our billing operations. We may be unable to enhance existing management information systems or implement new management information systems when necessary. We may experience unanticipated delays, complications, or expenses in implementing, integrating, and operating our systems. Our management information systems may require modifications, improvements, or replacements that may require both substantial expenditures, as well as interruptions in operations. Our ability to create and implement these systems depends on the availability of technology and skilled personnel. Our failure to successfully implement and maintain all of our systems could undermine our ability to receive payments and otherwise have a material adverse effect on our business, results of operations, and financial condition. Our failure to successfully operate our billing systems could also lead to potential violations of healthcare laws and regulations.

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Consolidation in the health care industry could have a material adverse effect on our business, financial condition and results of operations. 

Many health care industry participants and payers are consolidating to create larger and more integrated health care delivery systems with greater market power. We expect regulatory and economic conditions to result in additional consolidation in the health care industry in the future. As consolidation accelerates, the economies of scale of our customers’ organizations may grow. If a customer experiences sizable growth following consolidation, it may determine that it no longer needs to rely on us and may reduce its demand for our products and services. In addition, as health care providers consolidate to create larger and more integrated health care delivery systems with greater market power, these providers may try to use their market power to negotiate fee reductions for our products and services. Finally, consolidation may also result in the acquisition or future development by our customers of products and services that compete with our products and services. Any of these potential results of consolidation could have a material adverse effect on our business, financial condition and results of operations.

Our use of “open source” software could adversely affect our ability to offer our services and subject us to possible litigation. 

We use open source software in connection with our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging the use of open source software and/or compliance with open source license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source softwareOriginal Filing to publicly disclose all or part of the source code to such software and/or make available any derivative works of the open source code, which could include valuable proprietary code of the user, on unfavorable terms or at no cost. While we monitor the use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, in part because open source license terms are often ambiguous. Any requirement to disclose our proprietary source code or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of operations and could help our competitors develop products and services that are similar to or better than ours. 

The security of our platform, networks or computer systems may be breached, and any unauthorized access to our customer data will have an adverse effect on our business and reputation. 

The use of our platform will involve the storage, transmission and processing of our clients’ private data, and this data may contain confidential and proprietary information of our clients or other personal or identifying information regarding our clients, their employees or other persons. Individuals or entities may attempt to penetrate our network or platform security, or that of our third-party hosting and storage providers, and could gain access to our clients’ private data, which could result in the destruction, disclosure or misappropriation of proprietary or confidential information of our clients’ or their customers, employees and business partners. If any of our clients’ private data is leaked, obtained by others or destroyed without authorization, it could harm our reputation, we could be exposed to civil and criminal liability, and we may lose our ability to access private data, which will adversely affect the quality and performance of our platform. 

In addition, our platform may be subject to computer malware, viruses and computer hacking, fraudulent use attempts and phishing attacks, all of which have become more prevalent in our industry. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, they may include the theft or destruction of data owned by us or our customers, and/or damage to our platform. Any failure to maintain the performance, reliability, security and availability of our products or services and technical infrastructure to the satisfaction of our customers may harm our reputation and our ability to retain existing customers and attract new users.

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While we will implement procedures and safeguards that are designed to prevent security breaches and cyber-attacks, they may not be able to protect against all attempts to breach our systems, and we may not become aware in a timely manner of any such security breach. Unauthorized access to or security breaches of our platform, network or computer systems, or those of our technology service providers, could result in the loss of business, reputational damage, regulatory investigations and orders, litigation, indemnity obligations, damages for contract breach, civil and criminal penalties for violation of applicable laws, regulations or contractual obligations, and significant costs, fees and other monetary payments for remediation. If customers believe that our platform does not provide adequate security for the storage of sensitive information or its transmission over the Internet, our business will be harmed. Customers’ concerns about security or privacy may deter them from using our platform for activities that involve personal or other sensitive information.

We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual property could adversely affect our business, results of operations and financial condition. 

Our success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under patent and other intellectual property laws of the United States and foreign jurisdictions so that we can prevent others from using our inventions and proprietary information. Clinigence Health Inc. owns U.S. Patent Application No. 15/882,688, which is a utility patent application currently pending before the United States Patent and Trademark Office. Any patents that have been applied for or that may be issued in the future may not provide significant protection for our intellectual property. If we fail to protect our intellectual property rights adequately, our competitors might gain access to our technology and our business, results of operations and financial condition may be adversely affected. 

The particular forms of intellectual property protection that we seek, or our business decisions about when to file patent applications and trademark applications, may not be adequate to protect our business. We could be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights, determine the validity and scope of our proprietary rights or those of others, or defend against claims of infringement or invalidity. Such litigation could be costly, time-consuming and distracting to management, result in a diversion of significant resources, lead to the narrowing or invalidation of portions of our intellectual property and have an adverse effect on our business, results of operations and financial condition. Our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that we infringe the counterclaimant’s own intellectual property. Any of our patents, patent applications, copyrights, trademarks or other intellectual property rights could be challenged by others or invalidated through administrative process or litigation. 

We expect to also rely, in part, on confidentiality agreements with our business partners, employees, consultants, advisors, customers and others in our efforts to protect our proprietary technology, processes and methods. These agreements may not effectively prevent disclosure of our confidential information, and it may be possible for unauthorized parties to copy our software or other proprietary technology or information, or to develop similar software independently without our having an adequate remedy for unauthorized use or disclosure of our confidential information. In addition, others may independently discover our trade secrets and proprietary information, and in these cases we would not be able to assert any trade secret rights against those parties. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and the failure to obtain or maintain trade secret protection could adversely affect our competitive business position. 

In addition, the laws of some countries do not protect intellectual property and other proprietary rights to the same extent as the laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying, transfer and use of our proprietary technology or information may increase.

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Our means of protecting our intellectual property and proprietary rights may not be adequate or our competitors could independently develop similar technology. If we fail to meaningfully protect our intellectual property and proprietary rights, our business, results of operations and financial condition could be adversely affected.

Assertions by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs and harm our business and operating results.

Our success depends upon our ability to refrain from infringing upon the intellectual property rights of others. Some companies, including some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against us. As we grow and enter new markets, we will face a growing number of competitors. As the number of competitors in our industry grows and the functionality of products in different industry segments overlaps, we expect that software and other solutions in our industry may be subject to such claims by third parties. Third parties may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us. We cannot assure you that infringement claims will not be asserted against us in the future, or that, if asserted, any infringement claim will be successfully defended. A successful claim against us could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, or require that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.

The information that we expect to provide to our clients could be inaccurate or incomplete, which could harm our business reputation, financial condition, and results of operations.

We expect to aggregate, process, and analyze healthcare-related data and information for use by our clients. Because data in the healthcare industry is fragmented in origin, inconsistent in format, and often incomplete, the overall quality of data received or accessed in the healthcare industry is often poor, the degree or amount of data which is knowingly or unknowingly absent or omitted can be material, and we frequently discover data issues and errors during our data integrity checks. If the analytical data that we expect to provide to our clients are based on incorrect or incomplete data or if we make mistakes in the capture, input, or analysis of these data, our reputation may suffer and our ability to attract and retain clients may be materially harmed.

In addition, we expect to assist our clients with the management and submission of data to governmental entities, including CMS. These processes and submissions are governed by complex data processing and validation policies and regulations. If we fail to abide by such policies or submit incorrect or incomplete data, we may be exposed to liability to a client, court, or government agency that concludes that our storage, handling, submission, delivery, or display of health information or other data was wrongful or erroneous.

Our proprietary applications may not operate properly, which could damage our reputation, give rise to a variety of claims against us, or divert our resources from other purposes, any of which could harm our business and operating results.

Proprietary software and application development is time-consuming, expensive, and complex, and may involve unforeseen difficulties. We may encounter technical obstacles, and it is possible that we discover additional problems that prevent our proprietary applications from operating properly. If our applications and services do not function reliably or fail to achieve client expectations in terms of performance, clients could assert liability claims against us and attempt to cancel their contracts with us. Moreover, material performance problems, defects, or errors in our existing or new applications and services may arise in the future and may result from, among other things, the lack of interoperability of our applications with systems and data that we did not develop and the function of which is outside of our control or undetected in our testing. Defects or errors in our applications might discourage existing or potential clients from purchasing services from us. Correction of defects or errors could prove to be time consuming, costly, impossible, or impracticable. The existence of errors or defects in our applications and the correction of such errors could divert our resources from other matters relating to our business, damage our reputation, increase our costs, and have a material adverse effect on our business, financial condition, and results of operations.

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If we are unable to hire, retain and motivate qualified personnel, our business will suffer.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. We believe that there is, and will continue to be, intense competition for highly skilled management, engineering, data science, sales and other personnel with experience in our industry. We must provide competitive compensation packages and a high-quality work environment to hire, retain and motivate employees. If we are unable to retain and motivate our existing employees and attract qualified personnel to fill key positions, we may be unable to manage our business effectively, including the development, marketing and sale of our products, which could adversely affect our business, results of operations and financial condition. To the extent we hire personnel from competitors, we also may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information. If we are unable to retain our employees, our business, results of operations and financial condition could be adversely affected. 

Our Board of Directors may change our strategies, policies, and procedures without stockholder approval, and we may become more highly leveraged, which may increase our risk of default under our debt obligations.

Our investment, financing, leverage, and dividend policies, and our policies with respect to all other activities, including growth, capitalization, and operations, are determined exclusively by our board of directors, and may be amended or revised at any time by our board of directors without notice to or a vote of our stockholders. This could result in us conducting operational matters, making investments, or pursuing different business or growth strategies than those contemplated in this private placement memorandum. Further, our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur. Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase our exposure to interest rate risk and liquidity risk. Changes to our policies with regards to the foregoing could materially adversely affect our financial condition, results of operations, and cash flow. 

Our solutions face intense competition in the marketplace. If we are unable to compete effectively, our operating results could be adversely affected.

The market for our solutions is increasingly competitive, rapidly evolving and fragmented, and is subject to changing technology and shifting customer needs. Although we believe that our platform and the solutions that it offers are unique, many vendors develop and market products and services that compete to varying extents with our offerings, and we expect competition in our market to continue to intensify. Moreover, industry consolidation may increase competition.

If we do not keep pace with technological changes, our solutions may become less competitive and our business may suffer.

Our market is expected to be characterized by rapid technological change, frequent product and service innovation and evolving industry standards. If we are unable to provide enhancements and new features for our existing solutions or new solutions that achieve market acceptance or that keep pace with these technological developments, our business could be adversely affected. The success of enhancements, new features and solutions depends on several factors, including the timely completion, introduction and market acceptance of the enhancements or new features or solutions. Failure in this regard may significantly impair our revenue growth. In addition, because our solutions are designed to operate on a variety of systems, we will need to continuously modify and enhance our solutions to keep pace with changes in internet-related hardware, software, communication, browser and database technologies. We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely fashion. Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing platforms or technologies, could increase our research and development expenses. Any failure of our solutions to keep pace with technological changes or operate effectively with future network platforms and technologies could reduce the demand for our solutions, result in customer dissatisfaction and adversely affect our business.

The Company’s success depends upon its ability to adapt to a changing market and its continued development of additional services.

Although the Company believes that it will provide a competitive range of products and services, there can be no assurance of acceptance by the marketplace. The procurement of new contracts by the Company may be dependent upon the continuing results achieved with current clients, upon pricing and operational considerations, as well as the potential need for continuing improvement to existing services. Moreover, the markets for such services may not develop as expected nor can there be any assurance that the Company will be successful in its marketing of any such services.

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ITEM 1B.UNRESOLVED STAFF COMMENTS

None.

ITEM 2.PROPERTIES

Our Clinigence and AHA operations office is located at 2455 East Sunrise Blvd. Suite 1204 Fort Lauderdale FL, 33304, AHP’s operations are located at 7422 Garvey Ave. Ste 101 Rosemead, CA 91755, and Procare operations are located at 12828 Harbor Blvd. Garden Grove, CA 92840 which we believe is sufficient to accommodate anticipated future growth. We do not own any real property and operate pursuant to leases on the properties described above. These leases require monthly rental payments ranging from approximately $2,500 to $4,000 and have terms that expire between 2021 and 2024. We believe our existing leased facilities are in good condition and suitable for the conduct of our business.

ITEM 3.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 December 31, 2021.

ITEM 4.MINE SAFETY DISCLOSURES

Reserved.

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PART II

ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

The information presented below is our historical data and not necessarily indicative of our future financial condition or results of operations.

Clinigence’s common stock is listed on the OTCMarketsPink. under the symbol “CLNH.”

Record Holders

 As of March 31, 2021, there are approximately 942 shareholders of record of our common stock based upon our transfer agent’s report. Because many of our shares of common stock are held by brokers and other nominees on behalf of stockholders, including in trust, we are unable to estimate the total number of stockholders represented by these record holders.

Dividends

To date we have not paid any cash dividends on our common stock, and we do not contemplate the payment of cash dividends thereon in the foreseeable future. Our future dividend policy will depend on our earnings, capital requirements, financial condition, and other factors relevant to our ability to pay dividends.

Recent Sales of Unregistered Securities

We sold 7,526,786 common shares valued at $1.75 per share to various investors for proceeds totaling $14,421,875 during the year ended December 31, 2021. The Company received $100,000 of the proceeds in the first quarter of 2022 for which a receivable was recorded at December 31, 2021.

We sold 1,250 common shares valued at $1.25 per share to a director for proceeds of $1,562 on September 28, 2021. We sold 1,000,000 common shares valued at $3.00 per share to a strategic investor for proceeds of $3,000,00 on September 30, 2021.

In connection with our convertible notes payable, various noteholders converted $2,395,000 of principal balance to 1,365,501 shares of common stock during the year ended December 31, 2021. The stock issued was determined based on the terms of the convertible notes.

During the year ended December 31, 2021, various shareholders exercised warrants in exchange for 106,578 common shares for proceeds of $153,424.

On December 14, 2021, a shareholder exercised options in exchange for 89,421 common shares valued at $2.00 per share for proceeds of $178,842.

In connection with the acquisition of Procare we issued 607,229 common shares valued at $4.00 per share and 151,807 common shares valued at $446,018 to the shareholders of Procare on October 1, 2021.

In connection with the acquisition of AHA we issued 14,218,248 common shares valued at $2.06 per share to the shareholders of AHA on February 25, 2021.In connection with the acquisition of AHP we issued 19,000,000 common shares valued at $2.06 per share to the shareholders of AHP on February 25, 2021. In connection with the AHA and AHP acquisitions, we issued 750,000 common shares valued at $2.06 per share for consulting services on February 25, 2021.

On January 28, 2021, we issued 182,567 common shares to officers and employees for deferred salaries and bonuses and reimbursed expenses, including 153,606 common shares issued to directors and officers, valued at $.65 per share. On January 28, 2021, we issued 46,154 common shares valued at $.65 per share to a former officer for payment of a note balance of $30,000.

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No underwriters were involved in the transactions described above. All of the securities issued in the foregoing transactions were issued by the Company in reliance upon the exemption from registration available under Section 4(2) of the Securities Act, including Regulation D and Regulation S promulgated thereunder, in that the transactions involved the issuance and sale of the Company’s securities to financially sophisticated individuals or entities that were aware of the Company’s activities and business and financial condition and took the securities for investment purposes and understood the ramifications of their actions, or were non-U.S. persons. The Company did not engage in any form of general solicitation or general advertising in connection with the transactions. The individuals represented that they were each and “accredited investor” as defined in Regulation D or non-U.S. person as defined in Regulation S at the time of issuance of the securities, and that it was acquiring such securities for its own account and not for distribution. All certificates representing the securities issued have a legend imprinted on them stating that the shares have not been registered under the Securities Act and cannot be transferred until properly registered under the Securities Act or an exemption applies.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6.SELECTED FINANCIAL DATA

Reserved.

ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis should be read in conjunction with the audited consolidated financial statements and the notes thereto included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

In this section, “we,” “our,” “ours” and “us” refer to Clinigence Holdings Inc.(“Clinigence”) and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”).

Overview

The Company, together with our recent acquisitions of AHP Health Management Services, Inc. (“AHP”), Accountable Healthcare America, Inc. (“AHA”) and Procare Health Inc. (‘Procare”) is a technology-enabled, risk-bearing population health management company that manages provider networks.

Headquartered in Fort Lauderdale, Florida, our subsidiaries include management services organizations (“MSOs”), affiliated independent practice associations (“IPAs”), and a healthcare information technology company providing a cloud-based platform that enables healthcare organizations to provide value-based care and population health management (PHM).

2021 Highlights

Merger with AHP Health Management Services Inc.

On February 25, 2021, we entered into an agreement and plan of merger (the “AHP Merger Agreement”) with AHP Health Management Services, Inc., a California corporation (“AHP”), AHP Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Clinigence Holdings, Inc. (“Merger Sub”), and Robert Chan (the “Shareholders’ Representative”). The transactions contemplated by the AHP Merger Agreement were consummated on February 26, 2021 (the “AHP Closing”).

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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 is a privately held company with controlling interest in its’ affiliate Associated Hispanic Physicians of Southern California IPA, a California Medical corporation, (“AHISP). A key term of the AHP Merger Agreement is that at Closing, AHP Management Inc entered into a Management Services Agreement with AHISP (the “Management Services Agreement”) making AHISP a Variable Interest Entity (VIE) of AHP.

California is a corporate practice of medicine state, and we operate by maintaining a long-term MSA with ASHISP. Under the MSA, our wholly owned AHP subsidiary is contracted to provide non-medical management and administrative services such as financial and risk management as well as information systems, marketing and administrative support to the AHISP. The MSA has an initial term of 20 years and is generally not terminable by AHISP except in the case of bankruptcy, gross negligence, fraud, or other illegal acts by AHP.

Through the MSA, we have exclusive authority over all non-medical decisions related to the ongoing business operations of AHISP. Consequently, the Company consolidates the revenue and expenses of AHISP as their primary beneficiary from the date of execution of the MSA.

The AHP Merger Agreement and Management Services Agreement was disclosed on the Company’s current report on Form 8-K filed on March 2, 2021.

Merger with Accountable Healthcare America, Inc.

On February 25, 2021, we entered into an agreement and plan of merger with 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.

The AHA Merger Agreement was disclosed on the Company’s current report on Form 8-K filed on March 2, 2021.

At the AHP Closing and the AHA Closing, hereafter collectively referred to as the “Closing”, all of the outstanding shares of AHP common stock (the “AHP Shares”) were converted solely into the right to receive a number of shares of Clinigence common stock (the “Company Shares”) such that the holders of outstanding equity of AHP immediately prior to the Closing own 45%, on a fully-diluted basis, of the outstanding equity of Clinigence immediately following the Closing, and all of the outstanding shares of AHA common stock (the “AHA Shares”) were converted solely into the right to receive a number of the Company Shares such that the holders of outstanding equity of AHA immediately prior to the Closing own 35%, on a fully-diluted basis, of the outstanding equity of Clinigence immediately following the Closing, and holders of outstanding equity of Clinigence immediately prior to the Closing own 20%, on a fully-diluted basis, of the outstanding equity of Clinigence. Additionally, the Company’s AHA Series E Preferred Stock investment was surrendered as part of the Acquisition of 100% of AHA.

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The preliminary accounting for our merger with AHP and AHA was disclosed on the Company’s current report on Form 8-K/A filed on May 21, 2021.

Acquisition of Procare Health Inc.

On October 15, 2021, we entered into an agreement and plan of merger (the “Procare Merger Agreement”) with 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”).

The Procare Merger Agreement provided for the merger of Merger Sub with and into Procare, hereafter referred to as the “Acquisition.” As a result of the 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.

Under the terms of the stock purchase agreement, the shares of Procare’s common stock issued and outstanding immediately prior to the Effective Time (other than Cancelled Shares) will be converted into the right to receive by the Stockholders an aggregate of 759,036 (the “Exchange Ratio”) shares of Parent’s common stock (“Stock Consideration”). Twenty Five percent of the Stock Consideration shall be held back and shall be released to Parent or Stockholders, as the case may be, in accordance with the procedures set forth in Section 3.2 the Merger Agreement. In the event that EBITDA is equal to or exceeds $316,265 (the “Minimum EBITDA Amount”) for the Fiscal Year ended December 31, 2021, Stockholders shall be entitled to receive fifty percent (50%) of the Holdback Shares. If the EBITDA for such period is less than $316,265, that portion of the Holdback Shares shall be released to the Parent. In addition, if the EBITDA for the Procare for the period ended December 31, 2022, equals or exceeds the Minimum EBITDA Amount, the remaining fifty percent (50%) of the Holdback Shares shall be released to the Stockholders. In the event that the Minimum EBITDA Amount is not achieved for such period, that portion of the Holdback Shares shall be returned to the Parent.

The Procare Merger Agreement was disclosed on the Company’s current report on Form 8-K filed on October 22, 2021, and the preliminary accounting for our merger with Procare was disclosed on the Company’s current report on Form 8-K/A filed on December 15, 2021.

Recent Developments

Reverse Merger with Nutex

On November 23, 2021, we entered into an Agreement and Plan of Merger (the “Nutex Merger Agreement”) among the Company, Nutex Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Merger Subsidiary”), Nutex Health Holdco LLC, a Delaware limited liability company (“Nutex”), Micro Hospital Holding LLC, a Texas limited liability company (“MHH”) (solely for the purposes of certain Sections), Nutex Health LLC (solely for the purposes of certain Sections) and Thomas Vo, M.D., not individually but in his capacity as the representative of the equityholders of Nutex (the “Nutex Representative”).

Under the terms of the Nutex Merger Agreement, Merger Subsidiary will merge with and into Nutex, with Nutex becoming a wholly-owned subsidiary of the Company (the “Nutex Merger”).

In connection with the Nutex Merger Agreement, Nutex has entered into certain Contribution Agreements with holders of equity interests (“Nutex Owners”) of subsidiaries and affiliates of Nutex and MHH (the “Nutex Subsidiaries”) pursuant to which such Nutex Owners have agreed to contribute certain equity interests in the Nutex Subsidiaries to Nutex in exchange for specified equity interests in Nutex (collectively, the “Contribution Transaction”).

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Pursuant to the Nutex Merger Agreement, each unit representing an equity interest in Nutex issued and outstanding immediately prior to the effective time of the Merger but after the Contribution Transaction (collectively, the “Nutex Membership Interests”) shall be converted into the right to receive 3.571428575 (the “Exchange Ratio”) shares of common stock (“Company Common Stock”) of the Company, par value $0.001 per share. The Exchange Ratio may be adjusted proportionally upward based on potential pre-Closing redemptions of Nutex Membership Interests taking into account any new debt incurred by Nutex to finance such redemptions.

The aggregate number of Nutex Membership Interests outstanding immediately prior to the Effective Time of the Merger will be equal to the aggregate EBITDA of Nutex and the contributing percentages of the Nutex Subsidiaries for the trailing 12-month period ended September 30, 2021 (“TTM EBITDA”). The aggregate number of shares of Company Common Stock to be issued in the Merger will be equal to (a) ten times TTM EBITDA (minus the aggregate debt of the Nutex Subsidiaries and Nutex facilities outstanding as of Closing, including any new debt incurred to finance the redemptions of Nutex Membership Interests divided by (b) $2.80 (the “Merger Consideration”).

The aggregate number of Nutex Membership Interests outstanding immediately prior to the Effective Time of the Merger will be equal to (a) with respect to ramping and mature hospitals the aggregate EBITDA of Nutex based on the contributed percentages of such hospitals for the trailing 12-month period ended September 30, 2021 (“TTM EBITDA”) and (b) with respect to 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 to be issued in the Merger will be equal to (x) with respect to the ramping 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 shall be increased by such number of shares of Company Common Stock as is equal to the number of shares of Company Common Stock as may be issued by Clinigence to a certain consultant as required under the Merger Agreement. In addition, under the terms of the Contribution Agreements owners of the under construction hospitals and ramping hospitals may be entitled to additional shares of Company Common Stock in the future.

The transaction was approved by the Board of Directors of the Company. Consummation of the Merger is subject to various closing conditions, including, among other things, listing of the Company Common Stock on the Nasdaq Capital Market.

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.

Results of operation

Our consolidated operating results for the year ended December 31, 2021, as compared to the year ended December 31, 2020 were as follows:

CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
  YEAR ENDED DECEMBER 31,
  2021 2020
Sales    
    Capitation revenue, net  16,620,488   —   
    SaaS revenue  1,653,806   1,585,952 
    Management services revenue, net  519,489   —   
Total sales  18,793,783   1,585,952 
         
Cost of sales  14,647,045   909,780 
Gross profit  4,146,738   676,172 
         
Operating expenses        
Research and development  285,880   557,257 
Sales and marketing  24,449   166,759 
General and administrative expenses  12,177,316   3,251,353 
Goodwill impairment loss  —     3,471,508 
Gain on sale of assets  —     (8,395,702)
Gain on lease termination  —     (25,174)
Loss on sale of fixed assets  —     54,819 
Amortization  677,168   222,032 
Total operating expenses  13,164,813   (697,148)
Income (loss) from operations  (9,018,075)  1,373,320 
         
Other income (expense)        
     Loss on extinguishment of debt      (167,797)
     Settlement payment from ACMG  522,000     
     Income from forgiveness of debt  636,807   —   
     Impairment of Series E investment  —     (6,402,278)
     Interest income  917   1,030 
     Interest expense – debt obligations  (784,012)    
     Interest expense – accretion of debt discount  (6,011,071)  (335,450)
Total other income (expenses)  (5,635,359)  (6,904,495)
         
Loss from continuing operations  (14,653,434)  (5,531,175)
         
Income tax benefit – deferred  984,810   —   
         
Loss from discontinued operations (including gain on disposal of $142,027 for the year ended December 31, 2020)  —     (118,992)
         
Net loss  (13,688,624)  (5,650,167)
         
Net income attributable to noncontrolling interests  891   —   
         
Net income (loss) attributable to Clinigence Holdings, Inc. $(13,669,515) $(5,650,167)

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Revenue

The increase was primarily attributable to the AHP acquisition.

Our total revenue in 2021 was $18.8 million, as compared to $1.5 million in 2020. The increase was primarily attributable to the following:

(i) an increase of $16.6 million in capitation revenue due to the acquisition of AHP Health Management Services, Inc. which was acquired as of February 21, 2021.

(ii) a decrease of $67,854 in SaaS revenue due to a decrease in the number customers subscribing to the technology platform.

(iii) an increase of $519,489 in management services fees due to the acquisitions of AHP health Management Services, Inc. which was acquired as of February 21, 2021 and Procare Health Inc which was acquired as of October 1, 2021.

Cost of Services

Expenses related to cost of services for the year ended December 31, 2021, were $14.6 million, as compared to $909,780 for the same year ended December 31, 2020. The overall increase was primarily due to the AHP acquisition.

Research and Development

Research and Development expense for year ended December 31, 2021, was $285,880 compared to $557,257 for year ended December 31, 2020. The decrease was primarily attributable to the reduction of research and development personnel for our Clinigence Health subsidiary.

Sales and Marketing

Sales and Marketing expense for the year ended December 31, 2021, was $24,449, compared to $166,759 for the year ended December 31, 2020. The decrease was primarily attributable to the reduction of sales and marketing personnel for our Clinigence Health subsidiary.

General and Administrative Expenses

General and administrative expenses for year ended December 31, 2021, were $12.1 million, as compared to $3.25 million for year ended December 31, 2020. The increase was primarily attributable to the AHP, AHA, Procare acquisitions and pending Nutex merger transactional costs as well as to stock-based compensation expenses.

Gain on Sale of Assets

For the year ended December 31, 2020, the Company recorded a gain on the sale of intellectual property of $8,395,702 pursuant to the AHP IP purchase agreement in 2020 with our subsidiary Clinigence Health Inc.

Gain on Lease Termination

For the year ended December 31, 2020, the Company recorded a gain on the termination of the operating lease of $25,174 for the termination of the Atlanta, Georgia office lease for our Clinigence Health subsidiary.

Loss on Sale of Fixed Assets

For the year ended December 31, 2020, the Company recorded a loss on the sale of fixed assets of $54,819 resulting from the termination of the Atlanta, Georgia office lease for our Clinigence Health subsidiary.

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Amortization

Amortization expense for the year ended December 31, 2021, was $677,168 as compared to $222,032 for the year ended December 31, 2020. This amount includes the amortization of intangible assets acquired from AHP and AHA.

Loss on extinguishment of debt

For the year ended December 31, 2020, we reported, a non-recurring loss on extinguishment of debt for related party convertible debt conversions of $167,797, which represents the write off of debt discount of the debt assumed by AHA in the IP purchase agreement.

Income from forgiveness of debt

For the year ended December 31, 2021, we had income from forgiveness of debt for the forgiveness of Paycheck Protection Plan (PPP) Loans of $461,125 and $175,682 for our subsidiaries CHI and AHA, respectively.

Impairment of Series E investment

Pursuant to the AHA IP purchase agreement in 2020 with our subsidiary CHI, we recorded a Series E Preferred Stock investment in AHA at $6,402,278 based on 1,252,892 shares outstanding at a fair value of $5.11 per share based on an appraised valuation of the AHA Series E Preferred Stock. As of December 31, 2020, we determined that the fair value of the AHA Series E Preferred Stock fell below its’ carrying value based on an independent valuation report and wrote off the investment in AHA. The Preferred Stock was surrendered pursuant to the AHA Merger Agreement.

Interest Income

Interest income for the year ended December 31, 2021, was $917 as compared to $1,030 for the year ended December 31, 2020. Interest income reflects interest earned on cash held in deposit accounts.

Interest Expense

Interest expense for the year ended December 31, 2021, was $6.8 million as compared to $335,450 for the year ended December 31, 2020. Interest expense was primarily for accretion of debt of $6,011,071 combined with $784,012 interest incurred on convertible debt related to the acquisition of AHA.

Income Tax Benefit

For the year ended December 31, 2021, income tax benefit was recorded for the valuation allowance against the deferred tax liability of $984,810 recorded on the intangible assets acquired from AHA and Procare.

Net Income (Loss) Attributable to Noncontrolling Interests

Net income attributable to noncontrolling interests was $891 for the year ended December 31, 2021, from our noncontrolling interest in the AHP VIE.

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LIQUIDITY AND CAPITAL RESOURCES

General

We had cash of $15,314,328 for the year ended December 31, 2021, compared to $26,931 as of December 31, 2020, an increase of $15,287,397.

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. Therefore, such conditions of substantial doubt as of December 31, 2021, have subsequently been alleviated.

Cash Flow Activity

Cash used in operating activities for the year ended December 31, 2021, was $6,703,530 as compared to cash used in operating activities of $1,475,075 for the year ended December 31, 2020. 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 $74,880, an increase in account payable and accrued expenses of $1,365,554, a decrease in customer deposits of $36,691, an increase in prepaid expenses of $161,155, income from forgiveness of debt of $633,125, deferred tax benefit of $984,810, amortization and depreciation expense of $713,779, interest expense associated with debt discount of $6,011,071, increase in accrued interest of $197,033, an AHP purchase price adjustment of $300,000, a settlement payment of $522,000 from ACMG , non-cash interest expense of $24,372, a decrease in deposits and other assets of $410, a decrease in lease liability of $27,472, an increase in deferred revenue of $97,232 and stock-based compensation expense of $4,026,884.

Cash provided by investing activities for the year ended December 31, 2021, was $7,951,570, primarily due to $4,554,676 from the proceeds of the sale of ACMG. $522,000 in a separation payment from the investment in ACMG and $3,884,583 of cash acquired in the acquisitions of AHP and Procare, and preacquisition loan from subsidiary of $85,000, offset by $1,094,689 in AHP litigation settlement, compared to cash used in investing activities of $60,900 for the year ended December 31, 2020.

Cash provided by financing activities for the year ended December 31, 2021, was $14,039,357, primarily due to $14,323,439 in proceeds from sale of common stock, $153,424 in proceeds from exercise of warrants, $178,842 in proceeds from exercise of options and $413,917 from issuance of notes and convertible notes payable, offset by $16,765 in payments on notes payable and $1,013,500 in payments of financing costs for capital raise.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements may require us to make estimates and assumptions that may affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements. We do not currently have any estimates or assumptions where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or the impact of the estimates and assumptions on financial condition or operating performance is material, except as described below.

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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.

Fair Value Measurements

We 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, accounts payable and accrued expenses 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.

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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.

Variable interest model

We perform a primary beneficiary analysis on all our identified variable interest entities, which comprises a qualitative analysis based on power and economics. We consolidate a VIE if both power and benefits belong to us – that is, we (i) have the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) have the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). We consolidate VIEs whenever it is determined that we are the primary beneficiary.

Noncontrolling Interests

We consolidate variable interest entities (VIEs) in which the Company is the primary beneficiary. Noncontrolling interests represent the amount of net income attributableintends to the VIEs and is disclosed in the consolidated statements of income.file such proxy statement.

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.

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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.

Cost of Sales

Our costs of sales primarily consist of cloud computing and storage costs, datasets, contracted and internal labor costs and contracted medical provider services.

Advertising Costs

We expense advertising costs as incurred. Advertising costs of $24,449 and $41,418 were charged to operations for the years ended December 31, 2021, and 2020, respectively.

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. We do not have any cash equivalents as of December 31, 2021, and 2020. We are 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.

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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 December 31, 2021, no customers represented more than 10% of total accounts receivable.

Inventory

Inventory consisting of finished products is stated at the lower of cost or net realizable value.

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 fixtures5 - 7 years
Computer hardware5 years
Computer software3 years
Development equipment5 years

Business Combinations

We use the acquisition method of accounting for all business combinations, which requires assets and liabilities of the acquiree to be recorded at fair value, to measure the fair value of the consideration transferred, including contingent consideration, to be determined on the acquisition date, and to account for acquisition related costs separately from the business combination.

Amortization

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

Developed technology13 years
Customer relationships10 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 year ended December 31, 2021.

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Long-Lived Assets

We assess the valuation of components of our property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. We base our 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, we determine 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, we recognize 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 our support and maintenance services, we recognize such revenues when services are completed and billed. We received deposits from our various customers that have been recorded as deferred revenue and presented as current liabilities in the amount of $173,919 and $76,687 as of December 31, 2021, and 2020, respectively.

Stock-Based Compensation

We account for our stock-based awards granted under our 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.  We use 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

We account 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.

We apply the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in our 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.

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.

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OFF BALANCE SHEET ARRANGEMENTS

We have no off balance-sheet arrangements.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.

ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements required by this Item 8 are included in this Report beginning on page F-1, as follows:

Report of Independent Registered Public Accounting Firm (PCAOB ID Number 688)F-1
Consolidated Balance Sheets as of December 31, 2021 and 2020F-2
Consolidated Statements of Income for the years ended December 31, 2021 and 2020F-3
Consolidated Statement of Changes in Stockholder’s Equity for the years ended December 31, 2021 and 2020F-4
Consolidated Statement of Cash Flows for the years ended December 31, 2021 and 2020F-5
Notes to Financial StatementsF-6

ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our senior management, including our chief executive officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e)Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), asItems 10 through 14 of Part III and Item 15 of Part IV of the endOriginal Filing have been amended and restated in their entirety. This Amendment No. 1 does not amend or otherwise update any other information in the Original Filing. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and with the Company’s other filings with the SEC subsequent to the Original Filing. In addition, this Amendment No. 1 does not reflect events that may have occurred subsequent to the Original Filing date.

Pursuant to Rule 12b-15 under the Exchange Act, this Amendment No. 1 also contains new certifications pursuant to Section 302 of the period covered bySarbanes-Oxley Act of 2002, which are attached hereto. Because no financial statements are included in this Annual Report on Form 10-K (the “Evaluation Date”). Based onAmendment No. 1 and this evaluation, our chief executive officer concluded asAmendment No. 1 does not contain or amend any disclosure with respect to Items 307 and 308 of Regulation S-K, paragraphs 3, 4, and 5 of the Evaluation Date that our disclosure controlscertifications have been omitted. In addition, because no financial statements are included in this Amendment No. 1, new certifications of the Company’s Chief Executive Officer and procedures were effective such thatChief Financial Officer pursuant to Section 906 of the information relating to usSarbanes-Oxley Act of 2002 are not required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our chief executive officer, as appropriate to allow timely decisions regarding required disclosureincluded with Amendment No. 1.

Changes in Internal Control over Financial Reporting


NUTEX HEALTH INC.

There were no changes in our internal control over financial reporting that occurred during the year ended December

AMENDMENT NO. 1 TO FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2021, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.2022

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PART IIITable4
Item 10. Directors, Executive Officers and Corporate Governance4
Item 11. Executive Compensation and Other Information11
Item 12. Security Ownership of ContentsCertain Beneficial Owners and Management and Related Stockholder Matters22
46
Item 13. Certain Relationships and Related Persons Transactions23
Item 14. Principal Accountant Fees and Services26
Item 15. Exhibits and Financial Statement Schedules27
SIGNATURES30

 


Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. With the participation of our chief executive officer and chief financial officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021, based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework.

Based upon such evaluation, our management concluded that we did maintain effective internal control over financial reporting as of December 31, 2021 based on the COSO framework criteria, as more fully described below.

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.

ITEM 9B.OTHER INFORMATION

None.

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PART III

ITEMItem 10. Directors, Executive Officers and Corporate GovernanceDIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE DIRECTORS AND EXECUTIVE OFFICERS

The following table shows information for the executive officers, directors and director nominees as of December ‎‎31, 2022. Directors hold office until their successors have been elected or qualified or until the earlier of their death, ‎resignation, removal or disqualification. Executive officers serve at the discretion of the b

Our boardoard of directors (the “Board”).‎

NameAgePosition
Executive Officers and Directors
Thomas T. Vo, M.D., MBA50Chief Executive Officer and Chairman of the Board
Warren Hosseinion M.D.51President and Director
Jon C. Bates53Chief Financial Officer
Michael Chang, M.D.52Chief Medical Officer
Elisa Luqman, ESQ., MBA58Chief Legal Officer (SEC)
Pamela Montgomery, R.N., J.D.57Chief Legal Officer (Healthcare & Secretary)
Mitchell Creem, MHA63Independent Director
Cheryl Grenas, R.N., M.S.N61Independent Director
Michael L. Reed, MPH64Independent Director
John Waters, CPA77Independent Director
Danniel Stites, M.D.42Director

Executive Directors

Our Board manages our business and affairs. Under our ArticlesAmended and Restated Certificate of Incorporation and ‎Second Amended and Restated Bylaws, the Board of directors must consist of one or more members and those members hold office‎office until the expiration of the term for which elected and until such director’s successor is elected and qualified or until‎until such director’s earlier death, resignation or removal. Currently, our Board consists of ten directors, of which seven directors were appointed to serve on October 29, 2019, three were appointed on February 26, 2021 and one was appointed on July 14, 2021.directors.‎

Warren Hosseinion,

Thomas T. Vo, M.D., MBA, Chief Executive Officer, Director and Chairman of the Board

Dr. Vo was appointed as the Company’s Chief Executive Officer on April 1, 2022 and Directorelected, effective April 1, ‎‎2022, as the Chairman of the Board. Since 2010, Dr. Vo has served as the founder and executive officer of ‎affiliates of the Company. Although no longer practicing, Dr. Vo worked as an emergency medicine physician in ‎Houston, Texas, for over twenty years. Between 2008 and 2011, Dr. Vo served as a founder and original partner at ‎the free-standing emergency health company, Neighbors Emergency Center. Since then, Dr. Vo has been involved ‎with the opening of over 40 freestanding emergency departments and micro hospitals. Dr. Vo holds a Bachelor of ‎Science in Life Sciences from Kent State University and received his Doctor of Medicine from North East Ohio ‎Universities College of Medicine. In 2004, Dr. Vo also received his Master of Business Administration from Rice ‎University. The Company believes that Dr. Vo’s unique background in the emergency hospital field and proven ‎management experience make him well qualified to serve as a director.‎

On

Warren Hosseinion, M.D., President and Director

Warren Hosseinion, M.D., is the President and a director of the Company, positions he has held since April 2022. ‎From February 26, 2021 to April 1, 2022, Dr. Hosseinion was appointed Chief Executive Officer of Clinigence Holdings, Inc. ‎‎(n/k/a Nutex Health Inc.). From April 2019 to April 2022, Dr. Hosseinion served as Chief Executive Officer and ‎Chairman of the board of directors of Clinigence Holdings, Inc. In addition, Dr. Hosseinion has served as the Non-‎Executive Chairman of the Board for Clinigenceboard of directors of Cardio Diagnostic Holdings, Inc. since April 2019.(“Cardio”) (NASDAQ: CDIO) ‎since the consummation of its business combination with Mana Capital Acquisition Corp. in October 2022. Cardio ‎was formed to further develop and commercialize a series of products for major types of cardiovascular disease ‎and associated co-morbidities including coronary heart disease, stroke, heart failure and diabetes, by leveraging our ‎proprietary Artificial Intelligence-driven Integrated Genetic-Epigenetic Engine™. Dr. Hosseinion is a Co-Founder of Apollo‎Apollo Medical Holdings, Inc. (Nasdaq: AMEH) (“ApolloMed”) and served as a member of the Boardboard of Directors of Apollo Medical Holdings, Inc. sincedirectors ‎of ApolloMed from July 2008 to March 2019, as the Chief Executive Officer of Apollo Medical Holdings, Inc.ApolloMed from July 2008 to December ‎‎2017, and as the Co-Chief Executive Officer of Apollo Medical Holdings, Inc.ApolloMed from December 2017 to March 2019. In 2001,ApolloMed is a ‎physician-centric, technology-powered, risk-bearing healthcare company with an integrated healthcare delivery ‎platform that enables providers to successfully participate in value-based care arrangements. Dr. Hosseinion co-founded ApolloMed Hospitalists. Dr. Hosseinion received‎received his B.S.Bachelor of Science in Biology from the University of San Francisco, his M.S.Master of Science in Physiology and Biophysics‎Biophysics from the Georgetown University Graduate School of Arts and Sciences, his Medical DegreeDoctor of Medicine from the Georgetown‎Georgetown University School of Medicine and completed his residency in internal medicine from the Los Angeles County-University‎County-University of Southern California Medical Center. Dr. Hosseinion’s qualifications to serve on our Board of Directors include‎include his position as our Chief Executive Officer of the Company.current President. In addition, Dr. HosseinionHosseinion’s experience as a physician, along with his background‎background at Apollo Medical Holdings, Inc.ApolloMed and Cardio, brings to our Board of Directors and our Company a depth of understanding of physician culture‎culture and the healthcare market, as well as a strong knowledge of the public markets.‎

Fred Sternberg, President and


Non-Management Directors

Mitchell Creem, MHA, Director, Compensation Committee Chairman

Mr. Sternberg has served as the CEO of Accountable Healthcare America, Inc. since 2014. Mr. Sternberg

Mitchell Creem, MHA has been instrumental in negotiating for and acquiring ACMG, the first ACO to be acquired by AHA. In 1996, Mr. Sternberg as a founder, was instrumental in forming Metropolitan Health Networks, Inc.  (MDF: AMEX). In February 2000, He became Chairmandirector of the Board of Directors, President and CEO, where he served through March 2003. Metropolitan was a Medical Services Organization that provides and coordinates medical care for approximately 87,500 Medicare Advantage, Medicaid, and other beneficiaries, primarily in Florida utilizing a primary care-centric business model. Metropolitan’s integrated care delivery systems include approximately 35 state-of-the-art primary care medical centers and a robust network of affiliated physicians serving mainly Humana members. Metropolitan Health Networks was sold to Humana for $850m. MetCare Health Plans which was also sold to Humana for $14m. Metcare Health Plans provided Medicare Advantage plan, called AdvantageCare, to about 7,000 beneficiaries in 13 Florida counties. Previously, as President of Sternco, Inc., Mr. Sternberg was providing consulting services to various healthcare companies in the managed care and related industries. In 1968, Mr. Sternberg acquired the J. Bird Moyer Co., Inc. and took it public. Later the name was changed to Moyco Technologies, Inc., a publicly traded dental products manufacturing company. Mr. Sternberg has also provided consulting services to Assisted Care living facilities and skilled nursing homes.

Michael Bowen, Chief Financial Officer

Mr. Bowen has served as the CFO of Accountable Healthcare America, Inc. since 2014. Mr. Bowen, has over 50 years of broad experience in the world of finance including public transactions such as Initial Public Offerings, mergers and acquisitions, private equity transactions and extensive experience of international securities markets. For the past 10 years, Mr. Bowen has been Chief Financial Officer for a predecessor company of AHA and for AHA. He began his career at Goldman, Sachs & Co.in 1965 where he became a Vice President of the Corporate Finance Department and latterly helped establish the Tokyo office for Goldman Sachs. In 1976, he joined Salomon Brothers with the task of helping establish their first Asian office located in Honk Kong. He then moved to London to rebuild the International Capital Markets business for Chase Manhattan Ltd, the merchant banking arm of Chase Manhattan Bank where he was responsible for all of the international securities business of the bank/merchant bank. Mr. Bowen ended his international career as a Main Board Director for Kleinwort Benson, a British merchant bank where he was responsible for corporate finance business within the USA. Mr. Bowen returned to the US and, after a period of semi-retirement, in 2004 became CFO of TruBamboo, Inc. an innovative company selling bamboo houseware products to large US retailers. In 2008 he joined Diversified Health & Fitness as CFO and in 2014 became CFO of AHA. Mr. Bowen has an MBA from the Darden School of the University of Virginia and a BA also from UVA

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Lawrence Schimmel, M.D., Chief Medical Information Officer

Dr. Schimmel is the Chief Medical Officer of Clinigence Holdings, Inc.Company since April 2019. Dr. Schimmel served as Chief Executive Officer of Clinigence Holdings, Inc. from July 2020 to February 2021. In 2013 he co-founded and served as Chief Medical Officer of QualMetrix, Inc., a healthcare analytics company headquartered in South Florida, until QualMetrix, Inc. merger with Clinigence LLC. Dr. Schimmel is also the founding Chairman of Professional Bank headquartered in South Florida from 2018 to present. Previously, Dr. Schimmel was the managing partner of Allied Health Advisors, LLC a boutique healthcare consulting company in Miami. Dr. Schimmel is a serial medical-related business entrepreneur having been Co-founder and CEO of Allied Health Group, a national medical management company, and Florida Specialty Network. Allied Health Group and Florida Specialty Network managed approximately $500 million in provider payments on behalf of managed care organizations for approximately 3 million lives during his time as CEO. Allied Health Group was a licensed TPA in Florida and Texas and acted as a third-party intermediary in other areas of the country. Previously, Dr. Schimmel was the Founding Chairman and served on the Board of Directors of Megabank and subsequently served on the Board of Directors of Executive National Bank in South Florida. Dr. Schimmel practiced General and Vascular Surgery in the Miami community for 18 years. In addition to his lengthy medical career as a general and vascular surgeon, he held a management role with the South Florida Surgical Group, and has consulted for physicians, hospitals, healthcare delivery systems, and Fortune 500 companies.

He received his B.A. from Rutgers College, received his Doctor of Medicine degree from the New Jersey College of Medicine and conducted his post graduate training at the University of Miami.

Elisa Luqman, Executive Vice President of Finance and General Counsel

Ms. Luqman served as the Chief Financial Officer and General Counsel of Clinigence Holdings, Inc since October 29, 2019 where Ms. Luqman was responsible for maintaining the corporation’s accounting records and statements all CLNH’s SEC filings and compliance requirements. Ms. Luqman also serves as a Director and Secretary of the Board for Clinigence Holdings, Inc. Ms. Luqman was the co-founder of bigVault Storage Technologies a cloud- based file hosting company acquired by Digi-Data Corporation in February 2006. From March 1, 2006 through February 28, 2009, Ms. Luqman was employed as Chief Operating Officer of the Vault Services Division of Digi-Data Corporation, and subsequently during her tenure with Digi-Data Corporation she became General Counsel for the entire corporation. In that capacity she was responsible for acquisitions, mergers, patents, customer, supplier, and employee contracts, and worked very closely with Digi-Data’s outside counsel firms. On March 1, 2009, Ms. Luqman rejoined iGambit Inc. (“IGMB”) as Chief Financial Officer and General Counsel. Ms. Luqman has overseen and been responsible for IGMB’s SEC filings, FINRA filings and public company compliance requirements from its initial Form10 filing with the SEC in 2010 through its’ Reverse Merger with Clinigence Holdings, Inc. on October 29, 2019. Ms. Luqman received a BA degree, a JD in Law, and an MBA Degree in Finance from Hofstra University. Ms. Luqman is a member of the bar in New York and New Jersey.

Andrew Barnett, Executive Vice President of Corporate Development

Mr. Barnett has served as Executive Vice President of Corporate Development for Accountable Healthcare America, Inc. since its inception in 2014. Throughout his career, Mr. Barnett has been engaged in various aspects of the health care industries. Mr. Barnett served as Vice President of Corporate Development of Dental Partners, Inc., a dental practice management company. At Dental Partners, he was responsible for establishing a $15 million bank line of credit, closing on $30 million of acquisitions, and selling the company. At Trident, a PPM, Mr. Barnett assisted in raising over $20 million through a private placement and assisted in $60 million of acquisitions. Prior to Trident, Mr. Barnett served as Executive Vice President and Director of Metropolitan Health Networks, Inc. (MDF: AMEX) where he was involved in raising capital, acquisitions, and the Company’s initial public offering. Mr. Barnett received a B.S. degree from Pennsylvania State University.

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Robert Chan, M.D., Director and President AHP

Dr. Chan has served as Chief Executive Officer and Chairman of the Board of AHP IPA since 2015. Dr. Chan is affiliated with several HMOs and IPAs. As a hospitalist physician, Dr. Chan is on the staff of multiple local hospitals. Dr. Chan received his B.S. in Biology from the University of California, Irvine, his Medical Degree from the University of California, Irvine College of Medicine, and completed his residency in internal medicine from the University of California, Los Angeles. Dr. Chan’s qualifications to serve on our Board of Directors include his position as Chief Executive Officer of AHP IPA. In addition, Dr. Chan as a physician along with his background at various healthcare organizations, brings to our Board of Directors and our Company a depth of understanding of physician culture and the healthcare markets.

Non-Management Directors

Terence Martin Breslin, Director

From 2016 to 2019 Mr. Breslin was the Chief Executive Officer of QualMetrix, Inc. and was responsible for charting QualMetrix, Inc.'s strategic direction to drive customer value for payer and provider organizations. In 2013 Mr. Breslin joined QualMetrix, Inc. as an investor and co-founder, later assuming the roles of chairman and Chief Executive Officer. He has extensive experience with technology companies that serve healthcare as well as other industries. Prior to QualMetrix, Inc., Mr. Breslin founded VSS Monitoring. VSS, which focused on the network packet broker market, quickly established itself as an industry leader and, in 2011, was recognized as the Silicon Valley's ninth-fastest-growing privately held company. Mr. Breslin later sold VSS to Danaher Corp. where he remained for two years serving as president of the VSS unit and as chief technology officer for Danaher's $1 billion in revenue communications division.

Mr. Breslin has played both executive and advisory roles at a number of technology start-ups, including a Switzerland-based healthcare technology firm. His experience there led to an interest in the application of advanced analytics in healthcare.

Mr. Breslin holds a Master of Business Administration from Golden Gate University of San Francisco. He received a Bachelor's degree in Engineering from the University of Ulster in Northern Ireland as well as a Bachelor's degree in Computer Science from National University of Ireland, Maynooth.

Mitchell Creem, Director

2022. Mr. Creem has spent over 30 years as a “C-level” executive of healthcare organizations, and he brings strong business evaluation and operational experience to the Company. Since July 2017, to Present Mr. Creem has served as President of The Bridgewater Healthcare Group, which provides hospital and health network management services and performance consulting. From October 2015 to July 2017, Mr. Creem served as the CEOChief Executive Officer of Verity Health System, a six-hospital system in California. Prior to this, he served as the CFOChief Financial Officer and Board Member of ApolloMed from October 2012 to October 2015. Prior to ApolloMed, he served as the CEOChief Executive Officer of the Keck Hospital of USCUniversity of Southern California (“USC”) and USC Norris Cancer Center. Prior to his tenure at USC, he served as the CFOChief Financial Officer and Associate Vice Chancellor of UCLAUniversity of California, Los Angeles (“UCLA”) Health Sciences, including UCLA Medical Center, the Geffen School of Medicine at UCLA, and UCLA Faculty Practice. Prior to UCLA, he served as CFOChief Financial Officer of Beth Israel Deaconess Medical Center, a Harvard University teaching hospital, and CFOChief Financial Officer of Tufts University Medical Center. Prior to this, he worked for several years in a senior management position at the healthcare practice group of PricewaterhouseCoopers, where he was responsible for numerous consulting engagements, financial statement audits and financial feasibility studies. He has been a guest lecturer at USC, UCLA and Harvard.Harvard University. Mr. Creem holds a B.S.Bachelor of Science in Accounting and Business Administration from Boston University and a Master’s degree inMaster of Health Administration from Duke University. The Company believes that Mr. Creem’s background and experience in healthcare management roles make him well qualified to serve as a director.

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Cheryl Grenas, R.N. M.S.N., Director ‎

Mark Fawcett, Director, Compensation Committee Chairman

Mr. FawcettCheryl Grenas, R.N., M.S.N. has been a director of the Company since April 1, 2022. Since March 2018, Ms. ‎Grenas has served as the Chief Nursing Officer at Behavioral Hospital of Bellaire. From July 2017 to March 2018, ‎she was a consultant to start-up and existing freestanding emergency departments in the Houston metropolitan ‎area. From August 2015 to July 2017, she was the Regional Facility Director at Neighbors Emergency Center (Free Standing ‎Emergency Departments). Ms. Grenas served in the United States Navy for 20 years, achieved the rank of Lieutenant ‎Commander, and is a veteran of two deployments in support of Operation Iraqi Freedom (2005) and Operation ‎Enduring Freedom (2011). She was awarded two Navy Commendation Medals and four Navy Achievement ‎Medals during her service. Ms. Grenas, holds a Bachelor of Science in Nursing and a Master of Science in nursing ‎from Prairie View A&M University. The Company believes that Ms. Grenas’ background and experience in ‎healthcare management roles make her well qualified to serve as a director.‎

Michael L. Reed, MPH. Director, Governance Committee Chairman

Michael L. Reed, MPH has been a director of the Company since April 1, 2022. Mr. Reed has been an independent ‎consultant providing advisory services in the areas of emergency medicine, hospitalist medicine, hospital ‎operations, risk-based payor contracts, value-based care, and physician practice operations and development since ‎January of 2018. From January 2019 to January 2020, Mr. Reed was Senior Vice President of Business ‎Development and TreasurerStrategic Partnerships of Fresenius Medical Care Holdings, Inc. (“FMCH”)the Oncology Institute, a value-based oncology care company. From ‎April 2018 to December 2018, Mr. Reed served as the Chief Executive Officer of Turtle Peak Customer Service, ‎LLC, a Las Vegas, Nevada-based privately-held customer service company. Since August 2017, Mr. Reed has ‎served as Senior Advisor to NueHealth, LLC, based in Leawood, Kansas, a privately-held developer and its subsidiaries. FMCH isinvestor in ‎lower-cost healthcare centers. ‎ From July 2009 to October 2013, Mr. Reed was President and Chief Executive ‎Officer of Team Health Hospital Medicine, a wholly-owned subsidiarydivision of Fresenius Medical Care AG & Co. KGaA (NYSE: FMS) (collectively with FMCHTeamHealth, a once publicly-traded company that was ‎acquired by Blackstone in 2017. In addition, from December 2001 to November 2004, he served as the Chief ‎Operating Officer of Pinnacle Health System, a health care solutions company providing outpatient, inpatient, ‎claims, billing, and their respective subsidiaries, “FMS”). FMS ismedical management. Mr. Reed holds a leading providerBachelor of chronic kidney failure productsScience in Health Services Management ‎from California State University and services. Priorreceived his Master of Public Health from UCLA. The Company believes that ‎Mr. Reed's long-standing career as a professional healthcare executive within the emergency medicine system and ‎value-based care make him well qualified to joining FMS, Mr. Fawcett wasserve as a director.‎


John Waters, CPA, Director, Audit Committee Chairman

John Waters, CPA has been a director of corporate finance at BankBoston beginning in 1997. Mr. Fawcett held various positions of increasing responsibility beginning in 1988 as an investment banker with Merrill Lynch in New York and London, and then at The Bank of New York. Mr. Fawcett has been a member of the board of directors of Apollo Medical Holdings, Inc. (Nasdaq: AMEH) (“ApolloMed”) since January 2016 and previously served as member of the BoardCompany and Chairman of our Audit Committee since April 1, 2022. ‎Prior thereto, Mr. Waters served as a director and the CompensationChairman of the Audit Committee of Clinigence Holdings, ‎Inc. starting October 29, 2019, the Company from October 2019 to June 2020. Mr. Fawcett graduated with a B.A. in psychology from Wesleyan University and a M.B.A. from Columbia Business School at Columbia University.

Jacob Margolin, Director

Mr. Margolin is a directordate of the closing of the reverse merger of Clinigence Holdings, Inc. Mr. Margolin served as Chief Executive Officer of Clinigence Holdings,with iGambit, Inc. from AprilFrom ‎‎2016 until October 29, 2019, to July 2020. Mr. Margolin is a successful serial entrepreneur with over 25 years’ experience in HIT, and is the Co-Founder of Clinigence, LLC. In the mid-1990’s, Mr. Margolin co-founded a pioneering Medical Imaging technology company and led its marketing, global business development and North American operations through a $50 million acquisition by Carestream Health (2004). In 2005, he joined Accelerad – a Georgia Tech Advanced Technology Development Center (ATDC) incubator company acquired in 2014 by Nuance Communications (NASDAQ: NUAN). In 2008, he started a consulting firm helping Israeli medical technologies enter the US market. In 2010, Mr. Margolin founded Clinigence, LLC with the vision that big data and business intelligence technologies would become crucial to the healthcare industry. Mr. Margolin holds an MS degree in medical physics (magna cum laude) and BS degrees in Mathematics and Physics (magna cum laude) from Tel-Aviv University in Israel. He is a board member of the American-Israeli Chamber of Commerce and a member of the Technology Association of Georgia (TAG) and HIMSS.

David Meiri, Director

Mr. Meiri was a member of the Board of Managers of Clinigence, LLC. Since 2014 Mr. Meiri has served as a Director of Software Engineering in the Xtremio Division of Dell EMC, has been leading a project for Native Replication of contents-based data storage, David has received multiple awards for innovation at Dell EMC, including the 2018 and 2019 prolific inventor awards, and holds close to a hundred patents. He has led several such projects for third parties resulting in the successful commercialization of products. Mr. Meiri has expertise in high-performance multi-threaded systems, storage arrays and data replication. Since 1997 he has developed, innovated, and led teams building products in diverse technologies such as synchronous and asynchronous remote replication, business continuity, high availability, clones & snapshots, active/active replication, and performance optimization. Mr. Meiri has researched virtualization technologies and integration of hypervisors with storage products. This led him to work on federation, cluster algorithms and cloud infrastructure. Other areas Mr. Meiri is interested in are caching, data reduction, encryption, data deduplication and compression. He holds 78 US issued patents with an additional 30 pending. Mr. Meiri holds a Ph.D. in Mathematics (Ergodic Theory), from the Hebrew University in Jerusalem, Israel.

Brandon Sim, Director

Mr. Sim is the Chief Operating Officer and Chief Technology Officer at ApolloMed,, where he is responsible for the Company's overall strategy, end-to-end service delivery, non-clinical operations, and all technology aspects of ApolloMed's business, including engineering, IT, data science, and more. He has been the CTO of ApolloMed and its subsidiary, Network Medical Management, since 2019. Prior to joining ApolloMed, Mr. Sim served as a Quantitative Researcher at Citadel Securities from 2015 to 2019. From 2012 to 2015, Mr. Sim co-founded and served as Chief Technology Officer at Theratech, a medical device company focused on developing a low-cost, simple-to-use patch for automated drug delivery. Mr. Sim received both his M.S. in computer science and engineering and B.A. in statistics and physics, magna cum laude with high honors, from Harvard University. Mr. Sim’s qualifications to serve on the Board include his extensive experience and expertise in healthcare management services and population health management technology, including as Chief Operating Officer and Chief Technology Officer of ApolloMed.

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John Waters, Director, Audit Committee Chairman

Mr. Waters is a former Senior Partner at Arthur Andersen (1967-2001) with exceptional leadership skills in mergers and acquisitions (particularly reverse mergers) and 1933 Act fillings with the SEC. In the last fifteen years with the firm Mr. Waters built three very successful businesses within Andersen in the areas of merger and acquisition, manufacturing and entertainment. In 2001, Mr. Waters started his own merger and acquisition advisory consulting business and has consummated the acquisition of three manufacturing companies with combined annual sales of $50 million. In 2003, he participated in a group that acquired A-1 Components Corp., a wholly owned subsidiary of United Technologies Corp. Mr. Waters led due diligence efforts and created a tax structure beneficial to both the buyer and seller. In September 2004 participated with a group of investors that acquired Metpar Corp., a $19 million manufacturer of metal sanitary and plastic plumbing fixtures. In October 2007, he participated with a group of investors that acquired World Dryer Corporation, a $20 million manufacturer of hand dryer products. He prepared pro-forma financial statements for the lenders and assisted in obtaining financing for these transactions. In July of 2004 he was appointed Chief Administrative Officer of Authentidate Holding Corp. and led a massive restructuring of the business and hired an entirely new executive management team. In January of 2006 he was appointed Chief Financial Officer of Avantair Inc., which was taken public through a merger with a Special Purpose Acquisition Company (SPAC) and raised $60 million in capital for this company. Mr. Waters served as an Advisor to the Boardboard of Directorsdirectors of iGambit Inc. Previously he‎‎ Mr. Waters was a member ofSenior Partner at Arthur Andersen from 1967 to 2001 with a focus on ‎mergers and acquisitions, particularly reverse mergers, and Securities Act (as defined below) filings with the Board of Directors of iGambit and servedSEC. For the past five years, he ‎has also worked as a member of the Audit Committee.consultant to various public companies. Mr. Waters is a Certified Public Accountant Member‎‎(“CPA”), a member of AICPAAmerican Institute of Certified Public Accountants (“AICPA”) and the New York State Society‎Society of CPA's andCPAs. He has a BBA degreeBachelor of Business Administration from Iona College.‎

The names, ages, positions and dates appointed of our current directors and executive officers are set forth below.

(1) NameAgePosition
Executive Officers and DirectorsDanniel Stites, M.D.
Dr. Warren Hosseinion49Chief Executive Officer and Chairman of the Board
Fred Sternberg76President, Director
Michael Bowen72Chief Financial Officer
Dr. Lawrence Schimmel72Chief Medical Information Officer
Elisa Luqman57General Counsel, EVP of Finance and Director
Andrew Barnett51Executive Vice President of Corporate Development
Dr. Robert Chan53President AHP Health Services, Inc., Director
Non-Management Directors
Martin Breslin49Director
Mitchell Creem61Director
Mark Fawcett49Director
Jacob Margolin53Director
David Meiri53Director
Brandon Sim29Director
John Waters75Director

(1) Unless otherwise noted, the address of record for the directors and officers is 2455 East Sunrise Blvd., Suite 1204 Fort Lauderdale, FL 33304

No director or executive officer is party to any arrangement or understanding with another person under which he or she

Danniel Stites, M.D. was selectedelected as a director or officer (as applicable).of the Company effective April 1, 2023. Dr. Stites is board certified in Emergency Medicine by the American Board of Emergency Medicine and is a Fellow of the American College of Emergency Physicians. Dr. Stites has been a practicing emergency medicine physician in Arizona for over 10 years. He has been the Managing Partner at Phoenix ER & Medical Hospital since March 2019 and the Chief Medical Officer since March 2020. He has also served as the Managing Partner and Chief Medical Officer of East Valley ER & Hospital since February 2022. Both hospital facilities are affiliates of the Company. Dr. Stites is one of only a few state certified EMS physicians and serves as Medical Director for several EMS and Law Enforcement agencies statewide. Dr. Stites has been the EMS and Prehospital Medical Director for a large, urban Level 1 trauma center since 2013. Additionally, Dr. Stites has worked as a Supervising Physician for hyperbaric oxygen therapy since 2020, Laboratory Clinical Consultant and Laboratory Director since 2020. Dr. Stites completed his emergency medicine residency at New York Hospital Queens/Weill Cornell Medical College, followed by a fellowship in Emergency Medical Services and Disaster Medicine from the University of New Mexico. Prior to his residency, he first earned his Doctor of Medicine from Ponce School of Medicine. Prior to this, he received a Bachelor of Science in Physiological Sciences from the University of Arizona. Dr. Stites’ passion for excellence in clinical care, along with his diverse clinical background and wealth of experience, make him well qualified to serve as a director.

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COMMITTEES OF THE BOARDExecutive Officers

Jon C. Bates

Jon Bates was appointed as the Company’s Chief Financial Officer effective June 30, 2022. From 2006 until June ‎‎2022, Mr. Bates served as Vice President of Accounting/Corporate Controller at U.S. Physical Therapy, Inc., ‎‎(NYSE: USPH), one of the largest publicly traded, pure-play national operators of outpatient physical ‎therapy clinics and provider of industrial injury prevention services.‎ Before joining USPH, Mr. Bates served as Chief Financial Officer and Chief Accounting Officer at Commerciant, ‎L.P., Chief Accounting Officer/Corporate Controller at National Alarm Technologies LLC, Assistant Corporate ‎Controller at American Residential Services, Inc., and a Senior Auditor at Arthur Andersen LLP. His areas of ‎expertise include strategic financial planning, risk assessment & evaluation, Internal Audit/SOX reporting, valuation ‎and deal acquisition, and many more. Mr. Bates is a Certified Public Accountant, holds a Bachelor of Business ‎Administration from University of Texas at Austin and also received his Master of Business Administration from ‎University of Houston. The Company believes that Mr. Bates extensive knowledge of Finance and Accounting, in ‎combination with his experience with public financial reporting with the SEC, makes him a valuable Chief Financial ‎Officer.‎


Michael Chang, M.D.‎

Michael Chang, M.D. ‎was appointed Chief Medical Officer of the Company effective April 1, 2022. ‎Since founding ‎Tyvan LLC, a medical billing company in 2012, he has served as principal of Tyvan LLC, which became a wholly ‎owned subsidiary of the Company in connection with the Merger (as defined below). Jointly with Dr. Vo, in 2008, he ‎also founded Neighbors ‎Emergency Center, a licensed and accredited full-service emergency room with several ‎location in the greater Houston area, and served as Executive Director of practice management as well as ‎Chairman of the Board. Further, Dr. Chang is founder and medical director for Hope ‎Restored Treatment Center, a ‎medical detox and rehab program as part of Nutex and Southeast Texas Hospital, a ‎subsidiary of the Company. In ‎addition, in 2018, he founded Synergy Wellness as a separate business focusing on ‎wellness practices and mental ‎health.‎

Elisa Luqman, ESQ., MBA

Ms. Luqman has served as the Chief Legal Officer (SEC) of our Company since April 1, 2022. She served as ‎the ‎Chief ‎Financial Officer, Executive Vice President Finance and General Counsel of Clinigence Holdings, Inc. from ‎October ‎‎2019 until the ‎Merger. She also served as a director of Clinigence Holdings, Inc. from October 2019 to ‎February 2021. At ‎Clinigence Holdings, Inc., Ms. ‎Luqman was responsible for maintaining the corporation’s ‎accounting records and statements, ‎preparing its SEC ‎filings and overseeing compliance requirements. She was an ‎integral member of the Clinigence Holdings, Inc. ‎team responsible for ‎obtaining its NASDAQ Stock Market LLC‎ ‎‎(“NASDAQ”) listing and completing the reverse merger with the Company. At ‎the Company, Ms. Luqman ‎‎continues to be responsible for preparing its SEC filings and overseeing compliance ‎requirements. Ms. Luqman ‎has ‎served as Chief Financial Officer of Cardio since March 2021. In addition, Ms. ‎Luqman co-founded bigVault ‎‎Storage Technologies, a cloud- based file hosting company acquired by Digi-Data ‎Corporation in February 2006. ‎‎From March 2006 through February 2009, Ms. Luqman was employed as Chief ‎Operating Officer of the Vault ‎‎Services Division of Digi-Data Corporation, and subsequently during her tenure with ‎Digi-Data Corporation she ‎‎became General Counsel for the entire corporation. In that capacity she was responsible ‎for acquisitions, mergers, ‎‎patents, customer, supplier, and employee contracts, and worked very closely with Digi-‎Data’s outside counsel ‎‎firms. In March 2009, Ms. Luqman rejoined iGambit Inc. (“IGMB”) as Chief Financial ‎Officer and General ‎‎Counsel. Ms. Luqman has overseen and been responsible for IGMB’s SEC filings, FINRA ‎filings and public ‎‎company compliance requirements from its initial Form 10 filing with the SEC in 2010 through its ‎reverse merger ‎‎with Clinigence Holdings, Inc. in October 2019. Ms. Luqman received a Bachelor of Arts, a Juris Doctor, and ‎a ‎‎Master of Business Administration with a specialization in Finance from Hofstra University. Ms. Luqman is a ‎‎member of the bar in New York and New ‎Jersey..‎

General

 TheOur Board has established anadopted a Code of Business Ethics Policy, and charters for our Audit Committee, and a Compensation Committee and Nominating and Governance Committee to assist the Board in the exercise of its responsibilities and Nominating Committee.to serve as a framework for the effective governance of the Company. You can access our current committee charters, our Code of Business Conduct and Ethics in the “Governance” section of the “Investor Relations” page of our web site located at https://www.nutexhealth.com/governance-documents/.

Audit Committee

The Audit Committee is responsible for monitoring and reviewing our financial statements and internal controls ‎‎over financial reporting. In addition, they recommend the selection of the independent auditors and consult with management‎both ‎management and ourthe independent auditors prior to the presentation of financial statements to stockholders and‎and the filing‎filing of our forms 10-Q and 10-K. The Audit Committee has adopted a charter and it is posted on our web site‎site at www.clinigencehealth.com.‎https://www.nutexhealth.com/governance-documents/.‎


The Audit Committee consists of Messrs. Mitchell Creem, Michael Reed, MPH, and John Waters, Mitchell Creem and Terence Breslin,CPA with Mr. Waters‎Waters serving as‎as Chairman. The Company’s Board of Directors has determined that Mr. Waters is an “audit committee financial expert” (as‎expert” ‎‎(as that term is defined under SEC rules implementing Section 407 of the Sarbanes-Oxley Act) and, each of the three‎the ‎three audit committee members are “independent” directors that satisfy the heightened audit committee ‎‎independence requirements under the NASDAQ Listing Rules and Rule 10A-3 of the Exchange Act.‎

Compensation Committee

The Compensation Committee consists of Messrs. Mitchell Creem, MHA, and Ms. Cheryl Grenas, R.N., M.S.N. and ‎‎Michael Reed, MPH, with Mitchell Creem, MHA serving as Chairman and is responsible for reviewing and recommending‎recommending to the Board the compensation and over-all‎over-all benefits of our executive officers. The Compensation Committee‎Committee may, but is not required to, consult with outside‎outside compensation consultants. The Compensation Committee‎Committee has adopted a charter and the charter is posted on‎on our web site at www.clinigencehealth.com.‎https://www.nutexhealth.com/governance-documents/.‎ ‎

Nominating and Governance Committee

The Compensation Committee consists of Messrs. Mark, Fawcett, David Meiri, John Waters, Mitchell Creem,‎Nominating and Terence Breslin.

Governance and Nominating Committee

The Governance and Nominating Committee activities are currently handled by the full board of directors. The Governance and Nominating Committee is responsible for assisting the Board in fulfilling its fiduciary responsibilities‎responsibilities with respect to the oversight of the Company’s affairs in the areas of corporate governance and Board membership matters.‎

LEGAL PROCEEDINGS INVOLVING OFFICERS AND DIRECTORSAdditionally, the Nominating and Governance Committee is responsible for overseeing the selection of persons to be nominated to serve on our Board. The Nominating and Governance Committee considers persons identified by its members, management, shareholders, investment bankers and others.

The guidelines for selecting nominees, which are specified in a charter adopted by us, generally provide that persons to be nominated:

•should have demonstrated notable or significant achievements in business, education or public service;

•should possess the requisite intelligence, education and experience to make a significant contribution to the Board and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and

•should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the shareholders.

NoneThe Nominating and Governance Committee considers a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a person’s candidacy for membership on the Board. The Nominating and Governance Committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The Nominating and Governance Committee does not distinguish among nominees recommended by shareholders and other persons. The Nominating and Governance Committee consists of Messrs. Mitchell Creem, MHA, Michael Reed, MPH, and Ms. Cheryl Grenas, R.N., M.S.N., with Michael Reed, MPH ‎serving as chairman‎. The Nominating and Governance Committee has adopted a charter and the charter is posted ‎on our web site https://www.nutexhealth.com/governance-documents/.

Board Composition

Our Board currently consists of seven members: Messrs. Thomas T. Vo M.D. MBA, Jon C. Bates, Warren ‎Hosseinion M.D., Danniel Stites, M.D., John Waters CPA, Michael Reed MPH, Mitchell Creem, MHA, and Ms. ‎Cheryl Grenas R.N., M.S.N. As set forth in our Certificate of Incorporation, the Board is currently divided into three ‎classes with staggered, three-year term. At each annual meeting of stockholders, the successors to directors whose ‎terms then expire will be elected to serve from the time of election and qualification until the third annual meeting ‎following election. Our Amended and Restated Certificate of Incorporation and Second Amended and Restated ‎Bylaws provide that the authorized number of directors may be changed only by resolution adopted by a majority ‎of the entire Board. Any additional directorships resulting from an increase in the number of directors will be ‎distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. ‎The division of our Board into three classes with staggered three-year terms may delay or prevent a change of our ‎management or a change in control of our Company. Our directors may be removed only for cause by the ‎affirmative vote of the holders of a majority in voting power of the outstanding shares of our capital stock entitled ‎to vote in the election of directors.‎


Director Independence

Ms. Grenas, R.N., M.S.N. and Messrs. Mitchell Creem, MHA, Michael Reed MPH, and John Waters, CPA each qualify as “independent” in accordance with the listing requirements of NASDAQ. The ‎NASDAQ independence definition includes a series of objective tests, including that the director is not, and has not ‎been for at least three years, one of our employees and that neither the director nor any of his family members has ‎engaged in various types of business dealings with us. ‎

In addition, as required by NASDAQ rules, our Board has made an affirmative determination as to each ‎independent director that no relationships exist, which, in the opinion of our Board, would interfere with the exercise ‎of independent judgment in carrying out the responsibilities of a director. In making these determinations, our ‎Board reviewed and discussed information provided by the directors and us with regard to each director’s business ‎and personal activities and relationships as they may relate to us and our management, including the beneficial ‎ownership of our capital stock by each director.

Messrs. Thomas T. Vo, M.D., MBA and Warren Hosseinion, M.D. are not considered independent because they are ‎officers of the Company. Danniel Stites, M.D. is not considered independent because he is the Chief Medical Officer and Managing Partner of both East Valley ER & Hospital and Phoenix ER & Medical Hospital, affiliates of the Company. Our Board also determined that each non-employee director who serves as a member of ‎the Audit, Compensation, and Nominating Committees satisfies the independence standards for such committee ‎established by the SEC and NASDAQ, as applicable.

Executive Sessions

Our independent directors meet in executive sessions without non-independent directors or management present on a regularly scheduled basis, but no less than twice per year. Each executive officers have been involved in anysession of the legal proceedings described in Item 401(f)independent directors is presided over by the Chair of Regulation S-K.the Nominating and Governance Committee.

COMPLIANCE WITH SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of Forms 3Director Candidates

The Nominating and 4 and amendments thereto furnishedGovernance Committee is primarily responsible for searching for qualified director candidates for election to the Board and filling vacancies on the Board. To facilitate the search process, the Nominating and Governance Committee may solicit current directors and executives of the Company under Rule 16a-3(e) underfor the Exchange Act during its most recent fiscal yearnames of potentially qualified candidates or ask directors and throughexecutives to pursue their own business contacts for the date hereofnames of potentially qualified candidates. The Nominating and Forms 5Governance Committee may also consult with outside advisors or retain search firms to assist in the search for qualified candidates, or consider director candidates recommended by our stockholders. Once potential candidates are identified, the Nominating and amendments thereto furnishedGovernance Committee reviews the backgrounds of those candidates, evaluates candidates’ independence from the Company and potential conflicts of interest and determines if candidates meet the qualifications desired by the Nominating and Governance Committee for candidates for election as a director. In evaluating the suitability of individual candidates (both new candidates and current Board members), the Nominating and Governance Committee, in recommending candidates for election, and the Board, in approving (and, in the case of vacancies, appointing) such candidates, may take into account many factors as set forth in our Corporate Governance Guidelines, including: personal and professional integrity, ethics and values; experience in corporate management, such as serving as an officer or former officer of a publicly held company; strong finance experience; relevant social policy concerns; experience relevant to the CompanyCompany’s industry; experience as a board member or executive officer of another publicly held company; relevant academic expertise or other proficiency in an area of the Company’s operations; diversity of expertise and experience in substantive matters pertaining to the Company’s business relative to other board members; diversity of background and perspective, including, but not limited to, with respect to its most recent fiscal yearage, gender, race, place of residence and specialized experience; practical and mature business judgment, including, but not limited to, the ability to make independent analytical inquiries; and any other relevant qualifications, attributes or skills. The Board evaluates each individual in the context of the Board as a whole, with the objective of assembling a group that can best perpetuate the success of the business and represent stockholder interests through the date hereof, and any written representationexercise of sound judgment using its diversity of experience in these various areas. Stockholders may recommend individuals to the CompanyNominating and Governance Committee for consideration as potential director candidates by submitting the names of the recommended individuals, together with appropriate biographical information and background materials, to the Nominating Committee, c/o Secretary, Nutex Health Inc., 6030 S. Rice Ave, Suite C, Houston, TX 77081. In the event there is a vacancy, and assuming that appropriate biographical and background material has been provided on a timely basis, the Nominating and Governance Committee will evaluate stockholder-recommended candidates by following substantially the same process, and applying substantially the same criteria, as it follows for candidates submitted by others.


Communications from Stockholders

The Board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. Our Secretary is primarily responsible for monitoring communications from stockholders and for providing copies or summaries to the reporting persondirectors as he considers appropriate.

Communications are forwarded to all directors if they relate to important substantive matters and include suggestions or comments that no Form 5our Secretary and Chairman of the Board consider to be important for the directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications. Stockholders who wish to send communications on any topic to the Board should address such communications to the Board in writing: Nutex Health Inc., 6030 S. Rice Ave, Suite C, Houston, TX 77081.

Board Leadership Structure

Our Second Amended and Restated Bylaws and Corporate Governance Guidelines provide our Board with flexibility to combine or separate the positions of Chairman of the Board and Chief Executive Officer in accordance with its determination that utilizing one or the other structure would be in the best interests of our Company. Currently, Dr. Vo serves as the Company’s Chairman and Chief Executive Officer. The Board may, however, make changes to its leadership structure in the future as it deems appropriate.

In addition, the Board may appoint a lead independent director. The lead independent director, if appointed, will preside over periodic meetings of independent directors, serve as a liaison between the Chairman and the independent directors and perform such additional duties as the Board may otherwise determine and delegate.

Role of the Board in Risk Oversight

Risk assessment and oversight are an integral part of our governance and management processes. Our Board encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the Board at regular Board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks. Our Board does not have a standing risk management committee, but rather administers this oversight function directly through the Board as a whole, as well as through various standing committees of the Board that address risks inherent in their respective areas of oversight. While our Board is required,responsible for monitoring and assessing strategic risk exposure, our Audit Committee is responsible for discussing the Form 3 for Mr. Barnett), Mr. Bowen and Ms. Nguyen (merger exchange) and Forms 4 for each of Messrs. Fawcett Hosseinion (merger exchange) were filed lateCompany’s policies with respect to risk assessment and risk management, including guidelines and policies to govern the fiscal year ended December 31, 2021.process by which the Company’s exposure to risk is handled. The Audit Committee also oversees management of financial and cybersecurity risks and potential conflicts of interest. Our Nominating and Governance Committee is responsible for overseeing the management of risks relating to the Company’s compensation plans, equity incentive plans and other compensatory arrangements as well as risks associated with the Company’s corporate governance framework. The Board does not believe that its role in the oversight of our risks affects the Board’s leadership structure.

Table of Contents53

 


CODE OF ETHICS

The Company has adopted a Code of Business ConductEthics

We have adopted a written code of business conduct and Ethicsethics that applies to itsour directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copyOur code of business conduct and ethics is available under the Corporate Governance section of our web site at https://www.nutexhealth.com/governance-documents/. In addition, we intend to post on our web site all disclosures that are required by law or the NASDAQ rules concerning any amendments to, or waivers from, any provision of the Codecode. The reference to our web site address does not constitute incorporation by reference of Business Conductthe information contained at or available through our web site, and Ethics isyou should not consider it to be a part of this proxy statement.

Anti-Hedging Policy

Our Board has adopted a Securities Trading Policy, which applies to all of our directors, officers and employees. The policy prohibits our directors, officers and employees and any entities they control from purchasing financial instruments such as prepaid variable forward contracts, equity swaps, collars, and exchange funds, or otherwise engaging in transactions that hedge or offset, or are designed to hedge or offset, any decrease in the market value of the Company’s equity securities, or that may cause an officer, director, or employee to no longer have the same objectives as the Company’s other stockholders.Our Securities Trading Policy can be found under the Corporate Governance section of our web site at https://www.nutexhealth.com/governance-documents.

Compensation Committee Interlocks and Insider Information

During 2022, the members of our Compensation Committee were Mitchell Creem, MHA, Cheryl Grenas, R.N., M.S.N. and Michael Reed, MPH‎, none of whom was during fiscal year 2022 an officer or employee of the Company or was formerly an officer of the Company. Related person transactions pursuant to Item 404(a) of Regulation S-K involving those who served on the Nominating and Governance Committee during 2022 are described in “Certain Relationships and Related Person Transactions.” During 2022, none of our executive officers served as a member of the Board or Compensation Committee (or other committee performing equivalent functions) of any entity that had one or more executive officers serving on our Board or Nominating and Governance Committee.

Attendance by Members of the Board at Meetings

There were 12 Board meetings during the fiscal year ended December 31, 2022.

Under our Corporate Governance Guidelines, which are available on our web site at https://www.nutexhealth.com/governance-documents, a director is expected to spend the Company’s websitetime and effort necessary to properly discharge his or her responsibilities. Accordingly, a director is expected to regularly prepare for and attend meetings of the Board and all committees on which the director sits (including separate meetings of the independent directors), with the understanding that, on occasion, a director may be unable to attend a meeting. A director who is unable to attend a meeting of the Board or a committee of the Board is expected to notify the Chairman of the Board or the Chairman of the appropriate committee in advance of such meeting, and, whenever possible, participate in such meeting via teleconference in the case of an in-person meeting. We do not maintain a formal policy regarding director attendance at www.clingencehealth.com.the Annual Meeting; however, it is expected that absent compelling circumstances directors will attend. Given the timing of the Closing of the Business Combinations, we did not hold an annual meeting in 2022.

Item 11. Executive Compensation and Other Information

Compensation Committee Report

The material in this report is not deemed soliciting material or filed with the SEC and is not to be incorporated by reference in any filing by us under the Securities Act of 1933, as amended (the “Securities Act”), or the  Exchange Act, whether made before or after the date of this Amendment No. 1 and irrespective of any general incorporation language in those filings.


The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of SEC Regulation S-K with management. Based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Form 10-K/A.

Respectfully
submitted by:

Mitchell Creem, MHA,
Cheryl Grenas, R.N., M.S.N.
Michael Reed, MPH

ITEM 11.EXECUTIVE COMPENSATIONExecutive Compensation

This section discusses the material components of the executive compensation for Nutex executive officers who are named in the “Summary Compensation TableTable.” As of December 31, 2022, the “named executive officers” (“NEOs”) and their positions with Nutex Health Inc. were as follows:

•Thomas T. Vo,‎ M.D. MBA, Chief Executive Officer;
•Warren Hosseinion, M.D., President;
•Jon C. Bates, Chief Financial Officer;
•Michael Bowen (Chief Financial Officer until June 30, 2022);
•Pamela Montgomery, Chief Legal Officer – Healthcare; and
•Elisa Luqman, Chief Legal Officer – SEC.

Compensation Philosophy and Objectives

Our compensation philosophy is to attract, motivate, and retain talented executives responsible for Nutex’s success, which operates in an extremely competitive and rapidly evolving industry. With this in mind, we strive to set our compensation programs within the appropriate competitive framework and based on the achievement of its overall financial results, individual contributions, performance by our employees, and each executive’s potential to enhance long-term stockholder value. Within this overall philosophy, Nutex’s objectives are to:

•motivate executives to achieve quantitative financial objectives and create a meaningful link between achievement of these objectives and individual executive compensation;
•align our executives’ financial interests with our stockholders’ financial interests by providing significant long term equity based incentives; and
•offer a competitive total compensation package that enables us to attract and retain top talent in a competitive external job market.

The compensation committee uses Nutex’s compensation philosophy and objectives as a guide in establishing the compensation programs, practices, and packages offered to our executives. The compensation committee also uses these objectives in assessing the proper allocation between long-term and short-term incentive compensation, and cash and non-cash compensation although Nutex has no formal policies requiring any specific allocation.

The compensation for the NEOs generally consists of three primary components: base salary, annual incentive bonus, and equity awards. Other compensation components include severance and change of control provisions, and generally available benefits such as health insurance, 401(k) retirement benefits, and participation in our 2022 Plan (as defined below).

The compensation committee considers the proper allocation between fixed and variable compensation and long-term and short-term incentives by considering the balance that is required to attract and retain executives and reward them for the short-term success of Nutex’s business, while appropriately motivating the executives to strive to achieve Nutex’s long-term goals. The compensation committee also considers the need to offer compensation packages that are comparable to those offered by companies competing with Nutex for executive talent. In allocating between cash and non-cash compensation, Nutex generally seeks to be in the middle of its peer group for cash compensation, and above average for equity-based compensation so as to align the interests of Nutex stockholders and its NEOs. Nutex also believes that generally available benefits should be competitive with the external job market, in order to allow it to attract and retain talent. The compensation committee, however, does not have a pre-established policy or target a specific percentile among our peers for the allocation between long-term and short-term incentive compensation and cash and non-cash compensation.


Role and Authority of the Board and Compensation Committee

Our Compensation Committee is responsible for the executive compensation programs for our executive officers and reports to our Board on its discussions, decisions and other actions. Our Chief Executive Officer makes recommendations for the respective executive officers that report to him to our Compensation Committee and typically attends compensation committee meetings. Our Chief Executive Officer makes such recommendations (other than with respect to himself) regarding base salary, and short-term and long-term compensation, including equity incentives, for our executive officers based on our results, an executive officer’s individual contribution toward these results, the executive officer’s role and performance of his or her duties and his or her achievement of individual goals. Our Compensation Committee then reviews the recommendations and other data, including various compensation survey data and publicly-available data of our peers, and makes decisions as to the target total direct compensation for each executive officer, as well as each individual compensation element. While our Chief Executive Officer typically attends meetings of the Compensation Committee, the Compensation Committee meets outside the presence of our Chief Executive Officer when discussing and approving his compensation and when discussing certain other matters, as well.

Our Compensation Committee is authorized to retain the services of one or more executive compensation advisors, as it sees fit, in connection with the establishment of our executive compensation programs and related policies. In fiscal year 2022, the Board and the Compensation Committee retained Mercer, a national compensation consulting firm, to provide it with market information, analysis and other advice relating to executive compensation on an ongoing basis. The Board and the Compensation Committee engaged Mercer to, among other things, assist in developing an appropriate group of peer companies to help us determine the appropriate level of overall compensation for our executive officers, as well as to assess each separate element of compensation, with a goal of ensuring that the compensation we offer to our executive officers, individually as well as in the aggregate, is competitive and fair. We do not believe the retention of, and the work performed by Mercer creates any conflict of interest.

This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt in the future could vary significantly from our historical practices and currently planned programs summarized in this discussion.


The following table sets forth information concerning the compensation of the NEOs for the year ended December 31, 2022, 2021, and 2020:

Summary Compensation Table

Current Officers Name & Principal
Position		 Year  Salary  Bonus  Stock (1)  Option
Awards (2)		  Non-equity
Incentive Plan
Compensation		  Change in
pension value
and
Nonqualified
Deferred
Compensation
Earnings		  All Other
Compensation		  Total 
       ($)   ($)   ($)   ($)   ($)   ($)   ($)   ($) 
   2022   931,841   0   0   0   0   0   6,384(8)   938,225 
Thomas T. Vo, MD, MBA,  2021   251,310   0   0   0   0   0   6,354   257,664 
Chief Executive Officer (4)  2020   151,310   0   0   0   0   0   7,536   158,846 
   2022   686,350   0   0   1,960,228   0   0   25,500(8)   2,672,078 
Warren Hosseinion MD,  2021   342,805   150,000   0   964,602   0   0   375,263(3)   1,307,407 
President (5)  2020   0   0   0   338,638   0   0   0   338,638 
   2022   150,000   0   0   0   0   0   2,912(8)   152,912 
Jon Bates,  2021   0   0   0   0   0   0   0   0 
Chief Financial Officer (6)  2020   0   0   0   0   0   0   0   0 
   2022   230,100   0   0   455,984   0   0   0   686,084 
   2021   167,509   50,000   0   0   0   0   0   217,509 
Michael Bowen (7)  2020   0   0   0   0   0   0   0   0 
   2022   247,596   12,500   0   0   0   0   15,259(8)   275,355 
Pamela Montgomery,  2021   143,872   86,402   0   0   0   0   14,034   244,308 
Chief Legal Officer - Healthcare  2020   143,872   62,018   0   0   0   0   8,786   214,676 
   2022   251,334   0   0   341,988   0   0   0   593,322 
Elisa Luqman,  2021   157,600   125,000   2,415   643,068   0   0   0   928,083 
Chief Legal Officer - SEC  2020   133,225   0   0   217,328   0   0   0   350,553 

(1)Discretionary stock grants made in 2021 for 2020 performance. These amounts reflect the grant date fair values of performance awards. The amounts reported do not reflect compensation actually received.


(2)Discretionary stock option grants made in 2022 for completion of Nutex merger, 2021 for completion of AHA and AHP Mergers and discretionary stock option grants made in 2020 for performance. These amounts reflect the grant date fair values of performance awards. The amounts reported do not reflect compensation actually received.

(3)Tax gross-up payment to Dr. Hosseinion for effect of stock option grants pursuant to the AHA AHP Mergers in light of his contributions and this tax being applicable due to Dr. Hosseinion receiving reduced amounts of compensation for his service prior to entering into the AHA and AHP Merger Agreement.

(4)Dr. Vo was appointed Chief Executive Officer of Nutex Health Inc. on April 1, 2022 with an annual base salary of $1,000,000. Prior to April 1,2022, Dr. Vo was Chief Executive Officer of an affiliate of Nutex Health Holdco LLC. In such capacity, he received an annual salary of $‎251,310‎ and 151,310 for each of 2021 and 2020, respectively.

(5)Dr. Hosseinion was appointed President of the Company on April 1, 2022 with an annual base salary of $750,000. Prior to April 1, 2022, and starting February 26, 2021, Dr. Hosseinion was Chief Executive Officer of Clinigence Holdings, Inc. with a base salary of $475,000.

(6)Jon Bates was appointed Chief Financial Officer of the Company effective June 30, 2022, with an annual base salary of $300,000.

(7)Michael Bowen served as the Company’s Chief Financial Officer from February 26, 2021 until June 30, 2022 with an annual base salary of $225,000. Pursuant to his Employment and Transition Agreement dated June 8, 2022, Mr. Bowen was paid $225,000 during fiscal year 2022.

(8)Reflects health, dental, and life insurance premiums paid for the applicable year.

Narrative to Summary Compensation Table

2022 Salaries

Nutex provides base salary to the NEOs and other employees to compensate them for services rendered on a day-to-day basis during the fiscal year.

The compensation committee reviews executive base salaries in conjunction with Nutex’s annual performance review process. During this process, Nutex’s Chief Executive Officer will review the performance of the NEOs (other than himself) and will report those findings to the Compensation Committee. A NEO’s personal performance will be judged in part on whether Nutex’s business objectives are being met. In setting base salary, management and the Compensation Committee considers each NEO’s experience, skills, knowledge, responsibilities, and performance, Nutex’s performance as a whole, and the report and recommendations of Nutex’s Chief Executive Officer (other than for himself). An assessment of a NEO’s personal performance is qualitative, with much reliance on our Chief Executive Officer’s subjective evaluation of a NEO’s personal performance (other than his own personal performance) and the Compensation Committee’s experience and knowledge regarding compensation matters. No specific weight is attributed to any of the factors considered by the Compensation Committee in setting base salary changes. For newly hired NEOs, the Compensation Committee also considers the base salary of the individual at his or her prior employment and any unique personal circumstances that motivated the executive to leave that prior position and join Nutex. The compensation committee aims to keep salaries in line with the external job market. Increases over the prior year’s base salary will be considered within the context of Nutex’s overall annual compensation adjustment budget to ensure that any increases are fiscally prudent and feasible for Nutex. The compensation committee does not apply specific formulas to determine increases. There is no process in setting these annual merit increase budgets other than the annual business planning process.

In 2022, the NEOs received an annual base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. The 2022 annual base salaries for our NEOs were $1,000,000 for Thomas T. Vo, M.D., MBA, $750,000 for Warren Hosseinion, M.D., $300,000 for Jon C. Bates, $225,000 for Michael Bowen, $250,000 for Pamela Montgomery and $250,000 for Elisa Luqman. The actual base salaries earned by our NEOs for services in 2022 are set forth above in the Summary Compensation Table in the column entitled “Salary”.


2022 Bonuses

Previously, Nutex has utilized incentive bonuses to reward performance achievements and has annual target incentive bonuses for certain of our executives, payable either in whole or in part, depending on the extent to which the financial performance goals set by the Compensation Committee are achieved. Our NEOs were eligible to earn cash bonuses for work performed in calendar year 2022, as determined by our Board and Compensation Committee (or a subcommittee thereof). In connection with the Closing of the Merger, our Chief Legal Officer- Healthcare was awarded a bonus of $12,500. ‎As of the Closing of the Merger, ‎the board/Compensation Committee elected not to award any cash bonus payments to any of the executive officers for theirfiscal 2022.

Equity Compensation Plan Information

Internal Revenue Code Section 409A

Internal Revenue Code Section 409A (“Section 409A”) imposes additional significant taxes in the event that an executive officer, director or service duringprovider receives “deferred compensation” that does not satisfy the years endedrequirements of Section 409A. Although Nutex does not maintain a traditional nonqualified deferred compensation plan, Section 409A does apply to certain severance and bonus arrangements and equity awards. Further, Nutex intends to structure its equity awards in a manner to either avoid the application of Section 409A or, to the extent doing so is not possible, comply with the applicable Section 409A requirements.

2019 Omnibus Equity Incentive Plan

In 2019, we 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 (“RSUs”), stock appreciation rights, performance units or performance shares. The awards were granted at ‎an exercise price equal to the fair market value on the date of grant and generally vest over a four-year period. The 2019 Plan has since been replaced by the 2022 Plan (as defined below).‎

2022 Equity Incentive Plan

On March 16, 2022, the shareholders of the Company approved the Amended and Restated Nutex Health Inc. ‎‎2022 Equity Incentive Plan (the “2022 Plan”) which amended and ‎replaced, in its entirety, the 2019 Plan upon the closing of the ‎merger by and 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 the Company (the “Merger Agreement”), ‎pursuant to which Merger Sub merged with and into the Company, with the Company surviving as a wholly owned ‎subsidiary of the Company (the “Merger”). Awards granted under the 2022 Plan have a ten-‎year term and may be ‎incentive stock options, non-statutory stock options, restricted stock, RSUs, ‎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. ‎ The Compensation Committee believes that unvested equity awards are a key factor in motivating and retaining executive personnel, as well as incentivizing executive personnel to preserve the current value and grow the future value of Nutex common stock, thereby furthering the interests of Nutex’s other stockholders.

The 2022 Plan can be found in its entirety as Exhibit 5.4 to the Company’s Annual Report on Form 10-K filed with ‎the SEC on March 3, 2023, and available at www.sec.gov.‎

In March of 2022, the Compensation Committee made grants of 3,624,000 Nonqualified Stock ‎Options to the executive ‎officers, consultants, and directors under the 2022 Plan.‎ In December 31, 2021 and December 31, 2020.

Current Officers Name & Principal Position Year Salary Bonus Stock(1) Option Awards(2) Non-equity Incentive Plan Compensation Nonqualified Deferred Compensation Earnings All Other Compensation Total
      ($)   ($)   ($)   ($)   ($)   ($)   ($)   ($) 
Warren Hosseinion, CEO  2021   342,805   150,000   0   964,602   0   0   375,263(3)  1,307,407 
  2020   0   0   0   338,638   0   0   0   338,638 
Fred Sternberg, President  2021   232,500   10,000   0   0   0   0   0   242,500 
  2020   0   0   0   0   0   0   0   0 
Michael Bowen, CFO  2021   167,509   50,000   0   0   0   0   0   217,509 
  2020   0   0   0   0   0   0   0   0 
Andrew Barnett, EVP Business Development  2021   242,500   10,000   0   0   0   0   0   252,500 
  2020   0   0   0   0   0   0   0   0 
Elisa Luqman EVP Finance GC  2021   157,600   125,000   2,415   643,068   0   0   0   928,083 
  2020   133,225   0   0   217,328   0   0   0   350,553 

(1) Discretionary stock grants made in 2021 for 2020 performance. These amounts reflect the grant date fair values of performance awards. The amounts reported do not reflect compensation actually received.

(2) Discretionary2022, 1,040,221 stock option grants madewere surrendered and cancelled.


Number of Awards Granted to Employees, Directors and Consultants in 2021 for completion2022

Plan category Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights		 Weighted-average exercise price of
outstanding options, warrants and rights		 Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))		 Notes 
   (a)   (b)   (c)     
Equity compensation plans approved by security holders  5,147,770   $2.32   1,352.240   

6,500,010 Original reserve when plan approved by security holders

 
Equity compensation plans not approved by security holders                
                 
Total  5,147,770   $2.32   1,352,240      

Stock Options. Both Incentive Stock Options (“ISOs”) (which are entitled to potentially favorable tax treatment) and nonqualified stock options (“NQSOs”) may be granted under the 2022 Plan. The committee will determine the vesting schedule and number of AHA and AHP Mergers and discretionaryshares covered by each stock option grants made in 2020granted to a participant. The stock option exercise price is determined at grant by the committee and must be at least 100% of the fair market value of a share of common stock on the date of grant (110% for performance. These amounts reflectISOs granted to stockholders who own more than 10% of the total outstanding shares of the company, its parent or any of its subsidiaries). The term of a stock option shall not exceed 10 years from the date of grant date fair values(or 5 years for ISOs granted to stockholders who own more than 10% of the total outstanding shares of the company, its parent or any of its subsidiaries).

Other Shares or Share-Based Awards. The committee may grant other forms of equity-based or equity-related awards other than stock options, restricted stock, or RSUs. Such awards may be based upon attainment of performance awards. Thegoals established by the administrator and may involve the transfer of actual shares to participants, or payment in cash or otherwise of amounts reportedbased on the value of shares.

Clawback Rights. Awards granted under the 2022 Plan will be subject to recoupment or clawback under the Company’s clawback policy or applicable law, both as in effect from time to time.

Change of Control of Company. Awards granted under the 2022 Plan do not reflect compensation actually received.automatically accelerate and vest, become exercisable (with respect to stock options), or have performance targets deemed earned at target level if there is a sale of the Company. The 2022 Plan provides flexibility to the committee to determine how to adjust awards at the time of a sale of the Company.

(3) Tax gross-up paymentNo Repricing. The 2022 Plan prohibits the amendment of the terms of any outstanding award, and any other action taken in a manner to Mr. Hosseinionachieve (i) the reduction of the exercise price of NQSOs, ISOs or stock appreciation rights (collectively, “Stock Rights”); (ii) the cancellation of outstanding Stock Rights in exchange for cash or other awards with an exercise price that is less than the exercise price or base price of the original award; (iii) the cancellation of outstanding Stock Rights with an exercise price or base price that is less than the then current fair market value of a share of common stock in exchange for other awards, cash or other property or (iv) otherwise effect a transaction that would be considered a “repricing” for the purposes of the stockholder approval rules of the applicable securities exchange or inter-dealer quotation system on which the common stock option grantsis listed or quoted without stockholder approval.


Transferability of Awards. Awards under the 2022 Plan generally are not transferable by the recipient other than by will or the laws of descent and distribution. Any amounts payable or shares issuable pursuant to an award generally will be paid only to the AHA AHP Mergers in light of his contributions and this tax being applicable due to Mr. Hosseinion receiving reduced amounts of compensation for his service prior to entering intorecipient or the AHA and AHP Merger Agreement.recipient’s beneficiary or representative.

Employment Arrangements with Named Executive OfficersAdjustments. As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2022 Plan and any outstanding awards, as well as the exercise price or base price of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, reverse stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the stockholders.

ClinigenceAmendment and Termination. The Board may amend, modify or terminate the 2022 Plan without stockholder approval, except that stockholder approval must be obtained for any amendment that, in the reasonable opinion of the board or the committee, constitutes a material change requiring stockholder approval under applicable laws, policies or regulations or the applicable listing or other requirements of a stock exchange on which shares of common stock are then listed. The 2022 Plan will terminate at the earliest of (i) termination of the 2022 Plan by the Board or (ii) the tenth anniversary of the board adoption of the 2022 Plan. Awards outstanding upon expiration of the 2022 Plan shall remain in effect until they have been exercised or terminated or have expired.

Benefits and Perquisites

Pension Benefits

None of the NEOs participates in or has account balances in qualified or non-qualified defined benefit plans sponsored by Nutex.

Nonqualified Deferred Compensation

None of the NEOs participates in or has account balances in non-qualified defined contribution plans or other deferred compensation plans maintained by Nutex.

Health and Welfare Plans

In 2022, we reimbursed our President for medical benefits pursuant to his employment agreement as set forth in the ‎executive compensation table above, and the remaining‎ NEOs participated in a 401(k) retirement savings plan maintained by Nutex. The Internal Revenue Code allows eligible employees to defer a portion of their compensation, within prescribed limits, on a pre-tax basis through contributions to the 401(k) plan. In 2022, the Company made matching contributions up to 3% under the 401(k) plan.

In 2022, the NEOs participated in standard health and welfare plans maintained by Nutex Health Inc. We believe the benefits described above are necessary and appropriate to provide a competitive compensation package to our NEOs.


Tax Gross-Ups

There were no gross up payments in 2022. Each employment agreement provides that if the compensation and benefits ‎payable under such agreement would constitute a “parachute payment” under Section 280G of the Internal Revenue Code, then the ‎employment agreement or award agreements, as the case may be, (would provide either the full amount or a lesser ‎amount such that no portion is partysubject to three (3) yearSection 280G, whichever provides the higher after-tax amount, including ‎the potential taxes under Section 4999.) ‎

Outstanding Equity Awards at Fiscal Year-End

The following table presents certain information concerning the outstanding option and RSU awards held as of December 31, 2022 by each NEO. The market values below are based on the reported closing market price of our common stock on Nasdaq as of December 30, 2022 ($1.90 per share).

  Option Awards  Stock Awards 
Name Number of
Securities
Underlying
Unexercised
Options(#):
Exercisable		  Number of
Securities
Underlying
Unexercised
Options (#):
Unexerciseable		  Option
Exercise
Price		  Option
Expiration
Date		  Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)		  Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)		  Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other Rights
That Have
Not Vested
($)		  Equity
Incentive Plan
Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other
Rights That
Have Not
Vested ($)		 
Thomas T. Vo  0   0   0   0   0   0   0   0 
Warren Hosseinion  1,659,779   1,659,779   (1)  (1)  0   0   0   0 
Jon C. Bates  0   0   0   0   0   0   0   0 
Michael Bowen  200,000   200,000  $2.75   9/9/2031   0   0   0   0 
Elisa Luqman  667,106   667,106   (2)  (2)  0   0   0   0 
Pamela Montgomery  0   0   0   0   0   0   0   0 

(1)Includes options to purchase 100,000 shares of common stock at $1.50 per share with an expiration date of 1/27/2030, options to purchase 100,000 shares of the common stock at $1.50 per share with an expiration date of 1/28/2031, options to purchase 600,000 shares of the common stock at $1.61 per share with an expiration date of 5/11/2027, and options to purchase 859,779 shares of the common stock at $2.75 per share with an expiration date of 9/9/2031.

(2)Includes options to purchase 67,106 shares of the commons stock at $1.50 per share with an expiration date of 1/27/2030, options to purchase 50,000 shares of the commons stock at $1.50 per share with an expiration date of 5/22/2027, options to purchase 400,000 shares of the common stock at $1.61 and per share with an expiration date of 1/28/2031 and options to purchase 150,000 shares of common stock at $2.75 per share with an expiration date of 9/9//2031.


Executive Compensation Arrangements

We have entered into offers of employment letters or employment agreements with Elisa Luqman,each of Drs. Vo and Hosseinion, as well as Jon Bates. The material terms of these agreements are described below.

Thomas T. Vo, M.D., MBA entered into an employment agreement with the Company (the “Vo Employment Agreement”) to serve as Chief Executive Officer of the Company for a five-year term following completion of the Merger. The Vo Employment Agreement provides for an annual base salary of $1,000,000, subject to a three percent minimum increase annually and review on at least an annual basis. Dr. Lawrence Schimmel dated October 29, 2019,Vo is eligible to receive an annual cash bonus, the decision to provide, amount and April 1, 2019, respectively. Pursuantterms of which are in the sole and absolute discretion of the Compensation Committee of the Board. In addition, Dr. Vo is entitled to participate in the 2022 Plan. Dr. Vo’s employment may be terminated at any time by Dr. Vo or the Company, subject to certain notice requirements. Upon termination of Dr. Vo’s employment by the Company without cause or Dr. Vo’s resignation for good reason and completion of a general release of claims, Dr. Vo will be entitled to receive (i) an amount equal to three times Dr. Vo’s most recent base salary, plus (ii) a proportional payment of any annual bonus amount Dr. Vo would have earned with respect to days employed during the year of termination, and (iii) treatment of any outstanding equity awards as determined in accordance with the terms of the applicable award agreements. In the event that Dr. Vo’s employment is terminated by the Company for cause, Dr. Vo will be entitled to receive any earned but unpaid base salary and annual bonus for services rendered through the date of termination and compensation or benefits vested subject to the terms of the applicable compensation or benefits program or arrangement. The Vo Employment Agreement also includes provisions regarding confidentiality, the assignment of intellectual property of the Company, participation in the Company’s employee benefit plans and reimbursement of expenses.

Warren Hosseinion, M.D. entered into an employment agreementsagreement with Ms. Luqmanthe Company (the “Hosseinion Employment Agreement”) to serve as President of the Company for a five-year term following completion of the Merger. The Hosseinion Employment Agreement provides for an annual base salary of $750,000, subject to a minimum three percent increase annually and review on at least an annual basis. Dr. Schimmel, eachHosseinion is eligible to receive an annual cash bonus, the decision to provide, amount and terms of which are in the sole and absolute discretion of the Board. In addition, Dr. Hosseinion is eligible to participate in any long-term incentive plan the Company makes available to its executives. Dr. Hosseinion’s employment may be terminated at any time by Dr. Hosseinion or the Company, subject to certain notice requirements. Upon termination of Dr. Hosseinion’s employment by the Company without cause or Dr. Hosseinion’s resignation for good reason and completion of a general release of claims, Dr. Hosseinion will be entitled to receive a cash payment equal to (i) two times Dr. Hosseinion’s most recent base salary, plus (ii) an amount equal to the premium amounts paid for group medical, dental and vision coverage of Dr. Hosseinion for a period of twelve months. In the event that Dr. Hosseinion’s employment is terminated by the Company for cause, Dr. Hosseinion will be entitled to receive any earned but unpaid base salary and annual bonus for services rendered through the date of termination and compensation or benefits vested subject to the terms of the applicable compensation or benefits program or arrangement. The Hosseinion Employment Agreement also includes provisions regarding confidentiality, the assignment of intellectual property of the Company, participation in the Company’s medical and similar insurance plans and reimbursement of expenses.

In connection with Jon Bates’ appointment as the Company’s Chief Financial Officer, on June 8, 2022, the Company entered into a two (2) year employment agreement with Mr. Bates (the “Bates Agreement”) pursuant to which Mr. Bates is entitled to receive a base annual salary of $225,000$300,000, subject to annual review by the Company’s Chief Executive Officer and 180,000, respectively, during the term. Dr. Hosseinion entered into a five (5) yearBoard. The employment agreement with the Company which became effective on February 26, 2021, and pursuant to which Dr. Hosseinion is entitled to receive a base salary of $475,000 during the term AHA is party to five (5) year employment agreements with each of Fred Sternberg. Michael Bowen and Andrew Barnett, all dated May 1, 2020. 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, $225,000, and $250,000, respectively, during the term. The employment agreements for all these officers containcontains automatic one-year extensions at the end of their respective termseach term unless 60-day advance notice of non-extension is delivered by either party.

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In the event Clinigencethe Company (or its successor) terminates an officer’sMr. Bates employment without cause or the officerMr. Bates resigns for good reason, severance benefits would be provided as follows:

Mr. Bowen and Ms. Luqman: twelve months of base salary (and for Ms. Luqmanand a cash subsidy for group medical, dental and vision programs for twelve months)

Dr. Schimmel, Dr. Hosseinion and Mr. Sternberg; twenty-four months base salary and cash subsidy for continued group medical, dental and vision programs.

Mr. Barnett: base salary for the remaining months of the then current term of his employment agreement. And a cash subsidy for group medical, dental and vision programs for a period of twenty-four (24) months

months. No severance is payable under the employment agreementsBates Agreements if an officer’sMr. Bates employment is terminated by the Company for cause (as defined in the officer’s employment agreement)Bates Agreement), Mr. Bates resigns without good reason (as defined in the officer’s employment agreement,Bates Agreement) or is unable to perform due to death or disability. An officerMr. Bates is entitled to receive payment of all salary and benefits accrued up to the termination date of his or her employment upon any termination of employment, unpaid expense reimbursements, and accrued but unused paid time off within thirty (30) days. Mr. Bates will also be eligible to receive an annual cash bonus (the “Annual Bonus”) in an amount of up to forty percent (40%) of his Base Salary. The amount of the Annual Bonus will be recommended by the Chief Executive Officer at his discretion and approved by the Company Board. Mr. Bates shall be eligible to participate in the Company’s long-term incentive plan that may be available to similarly positioned executives.

Additional Narrative Description of Arrangements


Other than Dr. Hosseinion, no named executive officer isMr. Bowen, who resigned as the Company’s Chief Financial Officer effective June 30, 2022, was entitled to a tax gross-up for golden parachute excise taxes in connection with the Merger. Each employment agreement provides that if the compensation and benefits payable under such agreement would constitute a “parachute payment” under Section 280G of the Code, then the employment agreement or award agreements, as the case may be, (would provide either the full amount or a lesser amount such that no portion is subject to Section 280G, whichever provides the higher after-tax amount, including the potential taxes under Section 4999.) The table above does not reflect any potential cutbacks under this provision. 

Early 2022 – New Employment Warren Hosseinion as per Merger

On January 20, 2022, the Compensation Committee of the Board of Directors of the Company approved a new five (5) year employment agreement with Dr. Warren Hosseinion (the “Hosseinion Employment Agreement”) to become effective upon the closing of the Nutex Merger pursuant to which Dr. Hosseinion is entitled to receive a base salary of $750,000 during the term. In the event Clinigence (or its successor) terminates Dr. Hosseinion’s$225,000 pursuant to his original employment without cause or Dr. Hosseinion resigns for good reason, Dr. Hosseinion shall receive twenty-four months base salaryagreement and cash subsidy for continued group medical, dental$250,000 pursuant to his Employment and vision programs as severance benefits.Transition Agreement, dated June 8, 2022.

Grant to Plan Based Awards table

Name Grant Date All other stock awards: Number of shares of stock or units (#) All other option awards;  Number of securities underlying options (#)) Exercise of base price of option awards ($/Sh) Grant date fair value of stock option awards
Warren Hosseinion 01/28/2021      600,000  $1.55  $964.602 
Warren Hosseinion 09/09/2021      1,900,000  $2.75  $5,260,014 
Elisa Luqman 01/28/2021  1,500   0   0  $2,415 
Elisa Luqman 01/28/2021      400,000  $1.55  $643.068 
Elisa Luqman 09/09/2021      150,000  $2.75  $415,264 

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Director Compensation

Equity Compensation Plan Information

In 2019, we 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.

New Plan Benefits

On March 16, 2022, the shareholders of the Company approved the 2022 Equity Plan which will amend and replace the 2019 Plan upon the closing of the Nutex Merger. Awards granted under the 2022 Plan will 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.

The 2022 Equity Plan can be found in its entirety in the Company’s proxy statement filed with the SEC on February 14, 2022, and available at www.sec.gov.

As set forth in the Company’s proxy statement filed with the SEC on February 14, 2022 we did make a Number of Contingent Awards Granted to Employees, Directors and Consultants in 2021.

In September and December of 2021, the Compensation Committee made grants of 3,624,000 Nonqualified Stock Options contingent upon shareholder approval of the 2022 Equity Plan (the “Contingent Awards”) to the executive officers, consultants, and directors under the 2022 Plan as described below.

Number of Contingent Awards Granted to Employees, Directors and Consultants in 2022

Participant Number of Nonqualified Stock Options 

Per Share

Exercise Price

Warren Hosseinion, M.D., CEO and Chairman of the Board  1,900,000  $2.75 
Fred Sternberg, President and Director  75,000  $2.75 
Michael Bowen, CFO  200,000  $2.75 
Elisa Luqman, EVP of Finance General Counsel  150,000  $2.75 
Andrew Barnett, Executive VP of M&A  150,000  $2.75 
Lawrence Schimmel, M.D., President and CMO Clinigence Health, Inc.  200,000  $2.75 
Paul Rothman,  100,000  $2.75 
Robert Chan, M.D. Director, CEO AHP Health Management Services, Inc.  50,000  $3.50(1)
Tam Doan  25,000  $3.50(1)
All Executive Officers, as a Group  2,850,000  $3.12 
All Director who are not Executive Officers as a Group  774,000  $3.12 
All Employees who are not Directors, as a Group  0   0 

(1) Options granted to Robert Chan and Tam Doan were granted on 12/17/2021. The share price, as of 12/17/2021, was $3.50.

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CompensationThe non-executive members of the Board are eligible to receive both cash and equity compensation for their service as board members. Members of Directorsmanagement who are on the Board are not eligible for additional compensation for service as board members. The Compensation Committee periodically reviews the Nutex compensation program and may, from time-to-time, recommend to the Board, changes to the program. The Compensation Committee may seek the advice of an independent compensation consultant to the extent it deems necessary or appropriate in the discharge of its duties.

Cash Retainers

We provide our non-executive directors with cash retainers, paid monthly. The annual cash retainer for each non-executive director is $150,000. Additionally, we provided the following annual cash retainers in fiscal 2022, which are prorated for partial years of service:

Additional Annual Retainer for Committee Membership   
Audit Committee Chairman $20,000 
Compensation Committee Chairman $15,000 
Nominating and Governance Committee Chairman $15,000 

In 2022, commencing April 1, 2022, we provided the following cash retainers to our non-executive directors:

John Waters, Audit Committee Chair $148,748 
Mitchell Creem, Compensation Committee Chair $144,375 
Michael Reed, Nominating and Governance Audit Committee Chair $144,375 
Cheryl Grenas, Director $131,250 


The following table sets forth thepresents compensation received by our non-executive directors during fiscal 2022. Drs. Vo and Hosseinion did not receive compensation for their service on the Board and the compensation paid to Drs. Vo and Hosseinion as directors, during the year ended December 31, 2021.

Name 

Fees earned or paid in cash

($)

 Stock awards ($) Option awards
($)		 Non-equity incentive plan compensation ($) Nonqualified deferred compensation earnings
($)		 All other compensation ($) Total
($)
Terence Martin Breslin  0   0   74,345(1)  0   0   0   74,345 
Mitchell Creem  0   0   74,345(1)  0   0   0   74,345 
Jacob Margolin  0   0   74,345(1)  0   0   0   0 
David Meiri  0   0   74,345(1)  0   0   0   74,345 
John Waters  0   0   74,345(1)  0   0   0   74,345 

(1) 45,000 Stock Options at an exercise priceemployees of $1.61. These amounts reflect the grant date fair values of performance awards. The amounts reported do not reflect compensation actually received.

Outstanding Equity Awards under the Plan

Plan category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted-average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) Notes
  (a) (b) (c)  
2019 Equity compensation plans approved by security holders  1,930,000  $1.57   70,000  2,000,000
Original reserve when plan approved.
2022 Equity compensation plan approved by security holders  3,624,000  $2,80   1,376,000  5,000,000 additional reserve  approved March 16, 2022
Total  5,554,000  $4.37   1,446,000   

The following table setsNutex are set forth the Outstanding Equity Awards received by our executive officers, for their service, during the year ended December 31, 2021 under the Existing Plan and New Plan.

  Option awards Stock awards
Name Number of securities underlying unexercised options (#) exercisable Number of securities underlying unexercised options (#) unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Option exercise price ($) Option expiration date Number of shares or units of stock that have not vested (#) Market value of shares of units of stock that have not vested ($) Equity Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Warren Hosseinion  600,000   0   0   1.61   1/28/2031   0   —     0   0 
Warren Hosseinion  0   0   1,900,000(1)  2.75   9/9/2031   —     —     0   0 
Elisa Luqman  400,000   0   0   1.61   1/28/2031   0   —     1,500   0 
Elisa Luqman  0   0   150,000(1)  2.75   9/9/2021   —     —     0   0 
Lawrence Schimmel  0   0   0   0   0   0   —     107,692   0 
Lawrence Schimmel  0   0   200,000(1)  2.75   9/9/2031   —     —     0   0 
Charles Kandzierski  0   0   0   0   0   0   —     14,321   0 
Charles Kandzierski  17,056   0   0   1.45   1/28/2031   0   —     0   0 

(1) In September and December of 2021, the Compensation Committee made grants of 3,624,000 Nonqualified Stock Options contingent upon shareholder approval of the 2022 Equity Plan (the “Contingent Awards”) to the executive officers, consultants, and directors under the 2022 Plan as described above in the “Number of Contingent Awards Granted to Employees, Directors and Consultants in 2022” table. On March 16, 2022 at the Special Meeting of Shareholders the 2022 Plan was approved.Summary Compensation Table:

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Name Fees Earned or
Paid
in Cash ($)		  Stock
Awards ($) (1)		  Total ($) 
John Waters  148,748   0   148,748 
Mitchell Creem  144,375   0   144,375 
Michael Reed  144,375   0   144,375 
Cheryl Grenas  131,250   0   131,250 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information known to us, as of December 31, 2021, relatingApril 4, 2023, with respect to the beneficial ownershipholdings of our common stock:

•stockholders who beneficially owned more than 5% of the outstanding shares of our common stock;

•each of our NEOs and directors; and

•all directors and executive officers as a group.

The number of shares of common stock by: (i)beneficially owned by each person whostockholder is knowndetermined under rules issued by usthe SEC and includes voting or investment power with respect to be the beneficial owner of more than 5% of the Company’s outstanding common stock; (ii) each director; (iii) each executive officer; and (iv) all executive officers and directors as a group. Under securities laws,securities. These rules generally provide that a person is considered to be the beneficial owner of securities owned by him (or certain persons whose ownership is attributedif such person has or shares the power to him)vote or securities that can be acquired by himdirect the voting thereof, or to dispose or direct the disposition thereof or has the right to acquire such powers within 60 days, including upondays.

Unless otherwise indicated, we believe, based on information provided to us, that each of the exercise of options, warrants or convertible securities. The Company determines a beneficial owner’s percentage ownership by assuming that options, warrants and convertible securities that are held by the beneficial owner and which are exercisable within 60 days, have been exercised or converted. The Company believes that all persons named in the table havestockholders listed below has sole voting and investment power with respect to allthe shares of common stock shown as beingbeneficially owned by them.the stockholder unless noted otherwise, subject to community property laws where applicable.

Director and Officers and 5% Beneficial Ownership Common Shares Options CD Warrants Total % Beneficial Ownership
Dominus Embree  6,473,483           500,000   6,973,483   14.39%
Robert Chan, Director  4,389,691               4,389,691   9.06%
Warren Hosseinion, Officer and Director  1,151,563   800,000       21,590   1,973,153(1)  4.07%
Fred Sternberg, Officer and Director  1,821,672               1,821,672   3.76%
Andrew Barnett, Officer  1,709,896               1,709,896   3.53%
Anh Nguyen, Officer  683,134               683,134   1.41%
Martin Breslin, Director  724,496   130,120           854,616(2)  1.76%
Jacob Margolin, Director  574,998   75,000           649,998(3)  1.34%
Elisa Luqman Officer and Director  12,870   517,106           529,976(4)  1.09%
Michael Bowen, Officer  447,105   0           447,105   0.92%
Larry Schimmel, Officer  234,047   36,288   19,597   9,799   299,731(5)  0.62%
John Waters, Director  81,746   147,800   64,516   48,508   342,570(6)  0.71%
David Meiri, Director  266,627   130,120           396,747(2)  0.82%
Mark Fawcett  277,259   85,120       3,598   365,977(7)  0.76%
Mitchell Creem, Director  31,746   130,120           161,866(2)  0.33%
Charles Kandzierski, Officer  77,379   17,056           94,435(8)  0.19%
   18,957,712   2,068,730   84,113   583,495   21,694,050(9)  44.78%

Name of Beneficial Owner Amount and Nature of Beneficial
Ownership		 Percent of Class 
Micro Hospital Holding LLC (1)​267,322,776​41.07%
Premier Macy Management Holdings, LLC(2)​41,964,832​6.45%
Michael L. Chang, Chief Medical Officer​12,008,523​1.84%
Warren Hosseinion, President and Director (3)​1,930,047​*​
Mitchell Creem, Director (4)​343,866​*​
Cheryl Y. Grenas, Director​—​*​
Michael L. Reed, Director​—​*​
John J. Waters, Director (5)​508,320​*​
Jon C. Bates, CFO​—​*​
Elisa Luqman, Chief Legal Officer (SEC) and Secretary (6)​679,976​*​
Pamela W. Montgomery, Chief Legal Officer (Healthcare)​—​*​
Executive Officers and Directors as a Group​324,758,340​49.89%

*Less than 1%.

1.‎(1)Micro Hospital Holding LLC (“MHH”) is the direct beneficial owner of 267,322,776 shares of common stock. Dr. Vo, the Chairman and Chief Executive Officer of the Company, as the 100% owner and sole manager of MHH, is deemed to be the indirect beneficial owner of such shares.


(2)Premier Macy Management Holdings, LLC is the direct beneficial owner of 41,964,832 shares of common stock. Each of Dr. Young and Cynthia J. Young, as co-trustees of the First Amended & Restated Matthew Stephen Young & Cynthia Jane Young Joint Living Trust, the 99% owner of Macy GP LLC, the 100% owner of Premier Macy Management Holdings, LLC, can be deemed to be the indirect beneficial owners of the shares reported herein.

(3)Includes options to purchase 200,000 shares of the common stock at $1.50 per share, and options to purchase 600,000 shares of the common stock at $1.61 per share, options to purchase 859,779 shares of the common stock at $2.75 per share and a warrant to purchase 21,590 shares of the common sharesstock at $5.56$6.67 per shareshare.

2.(4)Includes options to purchase 10,120 shares of the common stock at $5.56 per share, options to purchase 75,000 shares of common stock at $1.50 per share, and options to purchase 45,000 shares at $1.61.$1.61 and options to acquire 182,000 shares of common stock at $2.75 per share.

3.(5)Includes options to purchase 30,000102,800 shares of common stock at $1.50, 45,000 common shares at $1.61, per share, warrants to purchase 32,258 common shares at $1.55 per share and options to purchase 45,000acquire 182,000 shares of common stock at $1.61.$2.75 per share.

4.(6)Includes 1,370 shares of common stock held by Muhammad Luqman, Ms. Luqman’s husband, options to purchase 117,106 shares of the commons stock at $1.50 per share, and options to purchase 400,000 shares of the common stock at $1.61 per share.
5.Includesshare and options to purchase 6,288 shares of the common stock at $1.50 per share, options to purchase 30,000 shares of the common stock at $1.50 per share, convertible debenture to purchase 19,597 common shares at $1.55 and warrant to purchase 9,799 common shares at $1.55 per share.
6.Includes options to purchase 17,986 shares of the common stock at $5.56 per share, 52,800150,000 shares of common stock at $1.50$2.75 per share, 26,000 shares of common stock at $1.25 per share and convertible debenture to purchase 66,516 common shares at $1.55.share.
7.Includes options to purchase 10,120 shares of the common stock at $5.56 per share, options to purchase 75,000 shares of common stock at $1.50 per share and warrants to purchase shares 3,598 at $5.56.
8.Includes options to purchase 17,056 shares at $1.45.
9.Includes items 1, 2, 3, 4, 5, 6, 7 and 8 above.
Table of Contents58

 

Delinquent Section 16(a) Reports

 

Section 16(a) of the Exchange Act requires our officers and directors, and persons who beneficially own more than 10% of our common stock to file with the SEC reports of their ownership and changes in their ownership of our common stock. To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2022 filed with the SEC and on written representations by our directors and executive officers, all required Section 16 reports under the Exchange Act for our directors, officers and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2022 other than 11 Form 4s filed by John Waters, Warren Hosseinion, Lawrence Schimmel, Mitchell Creem, Michael Bowen, Elisa Luqman, Andrew Barnett, and Fredrick Sternberg, which were filed late.

ITEMItem 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE RELATED PARTY TRANSACTIONSCertain Relationships and Related Persons Transactions

 

Amounts DueOur Chief Executive Officer Thomas T. Vo., M.D., MBA has interests in the Physician LLCs (as defined ‎below) and Micro Hospital Holding LLC, an affiliate of the Company, which has been consolidated by the Company as ‎a variable interest entity (“VIE,” together with the other Physician LLCs, “VIEs”).‎

Most of our hospital division facilities, including the Physician LLC controlled by or affiliated with Dr. Vo, are leased from real estate ‎entities which are owned by ‎related parties (“Physician LLCs”). These leases are typically on a triple net basis where ‎our hospital division is ‎responsible for all operating costs, repairs and taxes on the facilities. During the years ended ‎December 31, 2022, 2021 and 2020, we ‎made cash payments for these lease obligations totaling $13,016,727, ‎‎$10,736,652 and ‎‎$5,492,007, respectively.‎ Currently, we consolidate real estate entities as VIEs when they do not ‎have sufficient equity at risk and ‎our hospital entities are guarantors or co-borrowers under their outstanding ‎mortgage loans. The ‎consolidated real estate entities have mortgage loans payable to Related Partiesthird parties which are ‎‎collateralized by the land and buildings.‎

We

While we have no direct ownership interest, we have historically provided support to the Physician LLCs in the ‎event of cash shortages and received the benefit of their cash ‎surpluses, the amounts due to related parties with balances of $30,000 and $128,477from Physician LLCs ‎totaled $0 at December 31, 20202022 and 2019, respectively. A shareholder$1,891,147 at ‎December 31, 2021. In 2022, we forgave certain amounts due ‎from Physician ‎LLCs for past advances made by us in support of their operations. We recognized a net expense of ‎‎‎$1,506,650 in the three months ended March 31, 2022 as general and former officer, Mihir Shah, madeadministrative expense in ‎the consolidated ‎statements of operations. No such expense was recognized subsequently.‎


Policies and Procedures for Approval of Related Person Transactions

Our Board has adopted a $30,000 non-interest bearing, loanwritten Related Person Transaction Policy, setting forth the policies and procedures for the review and approval or ratification of related person transactions. Under the policy, our legal team is primarily responsible for developing and implementing processes and procedures to obtain information regarding related persons with respect to potential related person transactions and then determining, based on the facts and circumstances, whether such potential related person transactions do, in fact, constitute related person transactions requiring compliance with the policy. If our legal team determines that a transaction or relationship is a related person transaction requiring compliance with the policy, our Chief Legal Officer (SEC) is required to present to the Company on December 31, 2020, which was repaid with common stock on January 28, 2021. The balance of $128,477 is dueAudit Committee all relevant facts and circumstances relating to the husbandrelated person transaction. Our Audit Committee must review the relevant facts and circumstances of each related person transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s length dealings with an unrelated third party and the extent of the former CFOrelated person’s interest in the transaction, take into account the conflicts of interest and corporate opportunity provisions of our Code of Business Conduct and Ethics, and either approve or disapprove the related person transaction. If advance Audit Committee approval of a related person transaction requiring the Audit Committee’s approval is not feasible, then the transaction may be preliminarily entered into by management upon prior approval of the Company and was included intransaction by the Assumed Liabilitieschairman of the AHA Asset Purchase Agreement.

DuringAudit Committee subject to ratification of the first quarter of 2019,transaction by the Chairman Warren Hosseinion madeAudit Committee at the Audit Committee’s next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. If a $300,000 equity investment andtransaction was issued 21,590 warrants pursuantnot initially recognized as a related person, then upon such recognition the transaction will be presented to the Equity Private Placement Memorandum.Audit Committee for ratification at the Audit Committee’s next regularly scheduled meeting; provided, that if ratification is not forthcoming, management will make all reasonable efforts to cancel or annul the transaction. Our management will update the Audit Committee as to any material changes to any approved or ratified related person transaction and will provide a status report at least annually of all then current related person transactions. No director may participate in approval of a related person transaction for which he or she is a related person.

During

Director Independence

For the first quarter of 2019, former Director Mark Fawcett made a $50,000 equity investment and was issued 3,598 warrants pursuantinformation required by this item relating to the Equity Private Placement Memorandum.

BOARD INDEPENDENCE

The Company has elected to use the independence standards of the NASDAQ Listing Rules in its determination of whether the members of its Board are independent.

Accordingly, our Board of Directors has evaluated the independence of its members based upon the rulesour directors please see “Directors, Executive Officers and Corporate Governance ” in Item 10 of NASDAQ and the SEC and the transactions referenced under “Certain this Amendment No. 1.


Relationships and Related Party Transactions” discussed above. Applying these standards, our BoardTransactions with Directors, Executive Officers and Significant Stockholders

Transactions in connection with the Business Combinations

Subscription Agreements

In November 2019, the Company issued fully vested warrants to investors as part of Directors determined that noneprivate placement subscription agreements pursuant to which the Company issued convertible promissory notes. Each noteholder received warrants to purchase common stock of 50% of the directors who currently serve, other than Messrs. Hosseinion and Sternberg and Madame Luqman, haveprincipal at an exercise price of $5.56 per share with an expiration date of October 31, 2025.

Common Stock Warrants.

Clinigence Holdings, Inc. had 12,401,240 common stock warrants outstanding as of the merger date. Warrant activity follows:

​ ​Warrants
Outstanding		  ​Weighted Average
Exercise Price		  ​Weighted Average
Remaining Contractual
Life (years)		 
Warrants outstanding at April 1, 2022 merger date  12,401,240  $2.04   4.65 
Warrants exercised  (2,187,225)  2.27   ​ 
Warrants cancellation of exercised  819,000   1.55   ​ 
Warrants outstanding at December 31, 2022  11,033,015  $1.96   3.80 

Warrants outstanding at December 31, 2022 consist of:

Expiration  Number  Number  Exercise 
Date  Outstanding  Exercisable  Price 
February 5, 2023   1,500   1,500  $25.00 
April 27, 2023   1,500   1,500   25.00 
December 31, 2024   554,873   554,873   6.67 
October 31, 2025   16,250   16,250   1.25 
October 31, 2025   1,566,451   1,566,451   1.55 
February 26, 2026   288,235   288,235   4.00 
July 31, 2026   2,532,900   2,532,900   1.55 
February 1, 2027   1,456,453   1,456,453   1.55 
May 31, 2027   4,614,853   4,614,853   1.75 
Total   11,033,015   11,033,015   ​ 

Private Placement

On April 12, 2022, the Company issued 500,000 shares of common stock to ApolloMed after the exercise for $3.50 per share on April 12, 2022 of the warrants issued on October 1, 2021 in a relationship that would interfereprivate placement in connection with an investment in the Company. On September 23, 2021, Clinigence Holdings, Inc. (n/k/a Nutex Health Inc.) had entered into an investment agreement with ApolloMed, pursuant to which the Company received a direct private investment of $3 million on October 1, 2021. In connection with the exercise of independent judgmentinvestment, the Company issued, in carrying out the responsibilities of a director and that Messrs. Breslin, , Creem, Fawcett, Margolin, Meiri, Sim and Waters “independent” as that term is definedprivate placement exempt from registration under NYSE Rule 407(a)(1). Messrs. Hosseinion, and Sternberg are not considered independent because they are officersSection 4(a)(2) of the Company. Our BoardSecurities Act of Directors also determined that each non-employee director who serves1933, as a memberamended, 1,000,000 shares of the Audit, Compensation,common stock to ApolloMed at $3.00 per share with and Nominating Committees satisfies the independence standards for such committee established by the SEC andNASDAQ, as applicable.warrants to purchase an additional 500,000 shares at $3.50 per share.


The Board has established an Audit Committee, a Compensation CommitteeItem 14. Principal Accountant Fees and a Governance and Nominating Committee.Services

FAMILY RELATIONSHIPS

Mr. Barnett is Mr. Sternberg’s son. There are no other family relationships amongst any of the Company’s executive officers and directors.

ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table shows what Marcum LLP fees were for the audit and other services for the year ended December 31, 2022 and 2021, and 2020, respectively.

  Year Ended Year Ended
  12/31/ 2021 12/31/2020
Audit Fees $142,623  $55,000 
Audit-Related Fees  —     —   
All Tax Fees  —     —   
Other Fees  —     —   
Total $142,623  $55,000 

Table of Contents59

 

  2022  2021 
Audit Fees  1,424,460   646,325 
Audit-Related Fees  29,355   25,750 
Tax Fees  0   0 
Other Fees  0   0 
Total  1,453,815   672,075 

Audit Fees — - This category includes the audit of the Company’s annual financial statements, review of financial statements included in the Company’s Form 10-Q Quarterly Reports and services that are normally provided by the independent auditors in connection with engagements for those years.

Audit-Related Fees — - This category includes assurance and related services by the independent auditor that are reasonably related to the performance of the audit or review of the Company’s financial statements and that are not reported under the caption “Audit Fees.”

Tax Fees — - This category includes services rendered by the independent auditor for tax compliance, tax advice, and tax planning.

All Other Fees — - This category includes products and services provided by the independent auditor other than the services reported under the captions “Audit Fees,” “Audit-Related Fees,” and “Tax Fees.”

Overview —- The Company’s Audit Committee, reviews, and in its sole discretion pre-approves, our independent auditors’ annual engagement letter including proposed fees and all audit and non-audit services provided by the independent auditors. Accordingly, all services described under “Audit Fees,” “Audit-Related Fees,” “Tax Fees,” and “All Other Fees” were pre-approved by our Company’s Audit Committee. The Audit Committee may not engage the independent auditors to perform the non-audit services proscribed by law or regulation. The Company’s Audit Committee may delegate pre-approval authority to a member of the BoardBoard.


Item 15. Exhibits and Financial Statement Schedules

(a)  The following documents are filed as part of Directors, and authority delegated in such manner must be reported at the next scheduled meeting of the Board of Directors.this Report:

Table of ContentsManagement Report on Internal Control Over Financial Reporting
60 

PART IV

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

ReportReports of Independent Registered Public Accounting Firm (PCAOB ID Number 688)F-1688)
Consolidated Balance Sheets as of December 31, 20212022 and 2020F-22021
Consolidated Statements of IncomeOperations for the years endedYears Ended December 31, 2022, 2021 and 2020
F-3
Consolidated StatementStatements of Changes in Stockholder’s Equity (Deficit) for the years endedYears Ended December 31, 2022, 2021 and 2020
F-4
Consolidated StatementStatements of Cash Flows for the years endedYears Ended December 31, 2022, 2021 and 2020
F-5
Notes to Consolidated Financial StatementsF-6


(b)  Exhibits:

    Incorporated by Reference (File
No. 000-53862)
Exhibit
No.		 Description Form Exhibit File Date
2.1 Agreement and Plan of Merger, dated as of February 25, 2021 by and among the Registrant, AHP, Merger Sub, and the Signing Stockholder 8- K 2.1 Mar. 2, 2021
2.2 Agreement and Plan of Merger, dated as of February 25, 2021 by and among the Registrant, AHA, and Merger Sub 8-K 2.3 Mar. 2, 2021
2.3 Agreement and Plan of Merger dated as of November 23, 2021 among Clinigence Holdings, Inc., Nutex Acquisition LLC, Nutex Health Holdco LLC, 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 in his capacity as the Nutex Representative 8-K 99.1 Nov. 24, 2021
2.4 Agreement and Plan of Merger dated effective as of October 21, 2021, by and between Clinigence Holdings, Inc., Clinigence Procare Health, Inc., Procare Health, Inc. Anh Nguyen and Tram Nguyen 8-K 2.1 Oct. 21, 2021
2.5 Form of Contribution Agreement (Under Construction Hospitals) as of November 23, 2021 by and among Nutex Health Holdco LLC and the owners listed on the signature pages thereto 10-Q 2.5 Aug. 22, 2022
2.6 Form of Contribution Agreement (Ramping Hospitals) as of November 23, 2021 by and among ‎Nutex Health Holdco LLC and the owners listed on the signature pages thereto 10-Q 2.6 Aug. 22, 2022
2.7 Form of Contribution Agreement (Mature Hospitals) as of November 23, 2021 by and among Nutex Health Holdco LLC and the owners listed on the signature pages thereto 10-Q 2.7 Aug. 22, 2022
3.1 Amended and Restated Certificate of Incorporation of Clinigence Holdings, Inc. filed April 1, 2022 10-Q 3.1 Aug. 22, 2022
3.2 Second Amended and Restated Bylaws 8-K 3.2 Apr. 4, 2022
4.1 Note Purchase Agreement dated May 15, 2019. 10-K 4.1 May 14, 2020
4.2 Form of Convertible Promissory Note November 18, 2019 8-K 10.2 Nov. 22. 2019
4.3 Form of Warrant November 18, 2019 8-K 10.3 Nov. 22. 2019
4.4 2019 Omnibus Equity Incentive Plan S-8 (333-267710) 10.2 Sep. 30, 2022
4.5 Amended and Restated Nutex Health Inc. 2022 Equity Incentive Plan S-8 (333-267710) 10.1 Sep. 30, 2022
4.6 Description of common stock 10-Q 4.6 Aug. 22, 2022
4.7 Registration Rights Agreement dated as of September 21, 2021 by and among Clinigence Holdings, Inc. and Apollo Medical Holdings, Inc. 10-Q 4.7 Aug. 22, 2022


4.8 Registration Rights Agreement dated as of April 1, 2022 by and among Nutex Health Inc. and the stockholders of Nutex Health Holdco LLC set forth on Schedule A thereto S-3 (333-267686) 4.4 Apr. 11, 2022
4.9 Amendment No. 1 dated as of July 1, 2022 to Registration Rights Agreement dated as of April 1, 2022 10-Q 4.9 Aug. 22, 2022
4.10 Registration Rights Agreement dated as of November 14, 2022 between Nutex Health Inc. and Lincoln Park Capital Fund, LLC 8-K 10.2 Nov. 18, 2022
10.1 Master Services Agreement dated as of February 25, 2021 by and between AHA Management, Inc. and AHPIPA 8-K 2.2 Mar. 2, 2021
10.2 Intellectual Property Asset Purchase Agreement, dated as of May 27, 2020 by and among the Registrant, Clinigence Health, AHA, and AHA Analytics 8-K 2.1 Jun. 3, 2020
10.3 Intellectual Property License Agreement, dated as of May 27, 2020 by and between Clinigence Health and AHA Analytics 8-K 2.2 Jun. 3, 2020
10.4 Managed Services Agreement, dated as of May 27, 2020 by and between Clinigence Health and AHA Analytics 8-K 2.3 Jun. 3, 2020
10.5 Securities Purchase Agreement between Clinigence Holdings, Inc. and Apollo Medical Holdings, Inc. dated as of September 21, 2021 8-K 3.02 Oct. 1, 2021
10.6 Form of Board Agreement 8-K 10.1 Apr. 26, 2022
10.7 Employment Agreement between Thomas T. Vo and Clinigence Holdings, Inc. (to be renamed Nutex Health Inc.) dated as of April 1, 2022 8-K 10.1 Apr. 4, 2022
10.8 Employment Agreement between Warren Hosseinion and Clinigence Health Holdings, Inc. (to be renamed Nutex Health Inc.) dated April 1, 2022 8-K 10.2 Apr. 4, 2022
10.9 Employment Agreement, dated as of June 8, 2022, between the Company and Jon Bates. 8-K 10.2 Jun. 10, 2022
10.10 Employment and Transition Agreement, dated as of June 8, 2022, between the Company and Michael Bowen 8-K 10.1 Jun. 10, 2022
10.11 Form of Commercial Lease Agreement (Hospital Entities) including Parent Guarantee (Nutex Health Inc.) 10-Q 10.11 Aug. 22, 2022
10.12 Form of Construction Loan Agreement (Hospital Entities) including Personal Guarantee (Related Parties) 10-Q 10.12 Aug. 22, 2022
10.13 Purchase Agreement dated as of November 14, 2022 between Nutex Health Inc. and Lincoln Park Capital Fund, LLC 8-K 10.1 Nov. 18, 2022
10.14 Form of Restricted Stock Award Rescission Agreement ​10-K 10.14​ March 3, 2023​
10.15 Partial Option Cancellation Agreement 8-K 10.1 Jan. 4, 2023
21.1 List of Subsidiaries 10-K 21.1 March 3, 2023
23.1 Consent of Marcum LLP 10-K 23.1 March 3, 2023
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. 10-K 32.1 March 3, 2023
32.2 Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 10-K 32.2 March 3, 2023
101.INS** XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.      
101.SCH XBRL Taxonomy Extension Schema Document.      
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.      
101.DEF XBRL Taxonomy Extension Definition Linkbase Document.      
101.LAB XBRL Taxonomy Extension Label Linkbase Document.      
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document.      
104** Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.      

* Filed herewith

Exhibit No.Description
3.1(i)**Certificate of Incorporation, filed with the Delaware Secretary of State on April 13, 2000 (1)
3.1(ii)Certificate of Merger, filed with the Delaware Secretary of State on April 18, 2000 (1)
3.1(iii)Certificate of Amendment Changing Name, filed with the Delaware Secretary of State on December 19, 2000 (1)
3.1(iv)Certificate of Merger filed with the Delaware Secretary of State on February 17, 2006 (1)
3.1(v)Certificate of Amendment Changing Name filed with the Delaware Secretary of State on April 5, 2006 (1)
3.1(vi)Certificate of Amendment Increasing Authorized Shares filed with the Delaware Secretary of State on August 8, 2018 (3)
3.1(vii)Certificate of Merger filed with the Delaware Secretary of State on October 29, 2019 (7)
3.1(viii)Certificate of Merger filed with the Delaware Secretary of State on February 26, 2021. (AHA)(8)
3.1(ix)Certificate of Merger filed with the Delaware Secretary of State on February 26, 2021. (AHP) (8)
3.1(x)Certificate of Merger filed with the Delaware Secretary of State on February 26, 2021. (AHA Analytics) (8)
3.1(xi)Certificate of Merger filed with the California Secretary of State on October 1, 2021. (Procare Health Inc) (10)
3.2  Amended and Restated Bylaws (2)
3.3(i)Certificate of Designation of Series A Preferred Stock of iGambit, Inc. (4)
3.3(ii)Withdrawal of Certificate of Designation of Series A Preferred Stock of iGambit, Inc. (7)
4.1(i)Form of Stock Certificate (5)
4.1(ii)Note Purchase Agreement dated May 15, 2019.
4.1 (iii)Form of Convertible Promissory Note November 18, 2019(6)
4.1(iv)Form of Warrant November 18, 2019(6)
10.1  2019 Omnibus Equity Incentive Plan (2)
10.2  Agreement and Plan of Merger, dated as of February 25, 2021 by and among the Registrant, AHP, Merger Sub, and the Signing Stockholder (8)
10.3  Master Services Agreement dated as of February 25, 2021 by and between AHA Management, Inc. and AHPIPA (8)
10.4  Agreement and Plan of Merger, dated as of February 25, 2021 by and among the Registrant, AHA, and Merger Sub (8)
10.5  Form of Intellectual Property Asset Purchase Agreement, dated as of May 27, 2020 by and among the Registrant, Clinigence Health, AHA, and AHA Analytics (9)
10.6  Form of Intellectual Property License Agreement, dated as of May 27, 2020 by and between Clinigence Health and AHA Analytics (9)
10.7 Form of Managed Services Agreement, dated as of May 27, 2020 by and between Clinigence Health and AHA Analytics (9)
10.82022 Equity Plan (11)
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. (ThisFurnished herewith. 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 other filing under the SecuritySecurities Act of 1933, as amended, or by the Security 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 incorporated by reference into any other filing under the Security Act of 1933, as amended, or by the Security Exchange Act of 1934, as amended.)


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

(1)April  6, 2023/s/ Thomas T. Vo
Incorporated by reference to Form 10 filed on December 31, 2009.Thomas T. Vo, M.D.
(2)Incorporated by reference to Form Def 14(c) filed on October 7, 2019.
(3)Incorporated by reference to Form Def 14(c) filed on September 27, 2018.
(4)Incorporated by reference to current Form 8-K filed on August 6, 2018.
(5)Incorporated by reference to Amendment No. 1 to Form 10 filed on June 11, 2010.
(6)Incorporated by reference to current Form 8-K filed on November 22, 2019.
(7)Incorporated by reference to current Form 8-K filed on November 1, 2019.
(8)Incorporated by reference to current Form 8-K filed on March 2, 2021.
(9)Incorporated by reference to current Form 8-K filed on June 3, 2020.
(10)Incorporated by reference to current Form 8-K filed on October 22, 2021.

Chief Executive Officer and Chairman of the Board

(principal executive officer)

(11)Incorporated by reference to definitive proxy statement of the Company’s board of directors that the Company filed with the SEC on February 14, 2022.

(12)We hereby agree to furnish the SEC with any omitted schedule or exhibit upon request.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of St Petersburg, FL, on March 31, 2021.

Clinigence Holdings, Inc.
 
March 31, 2021By:  /s/ Warren Hosseinion   
Warren Hosseinion, Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Annual Report on Form 10-Kreport has been signed below by the following persons on behalf of the registrant and in the capacities indicated:and on the dates indicated.

April 6, 2023/s/ Thomas T. Vo
Thomas T. Vo, M.D.
Signature​TitleDate

/s/ Warren Hosseinion

Warren Hosseinion

Chief Executive Officer and Chairman of the Board of Directors  

March 31, 2022(principal executive officer)

  
April 6, 2023/s/ Jon C. Bates
 Jon C. Bates
​

Chief Financial Officer

(principal financial officer and principal accounting officer)

  

April 6, 2023

/s/ Michael Bowen

Michal Bowen

Chief Financial OfficerMarch 31, 2022Warren Hosseinion
 Warren Hosseinion, M.D.

/s/ Fred Sternberg

Fred Sternberg

​President and Director
April 6, 2023/s/ Daniell Stites
Danniell Stites, M.D.
​March 31, 2022Director
  
April 6, 2023/s/ John Waters
 John Waters, CPA

/s/ Terence Martin Breslin

Terence Martin Breslin

​DirectorMarch 31, 2022
  
April 6, 2023/s/ Cheryl Grenas
 Cheryl Grenas, R.N., M.S.N.

/s/ John Waters

 John Waters

​Chairman, Audit Committee, DirectorMarch 31, 2022
  
April 6, 2023/s/ Michael L. Reed
 Michael L. Reed, MPH

/s/ Marl Fawcett

Mark Fawcett

​Chairman, Compensation Committee, DirectorMarch 31, 2022
  

April 6, 2023

/s/ Robert Chan

Robert Chan

DirectorMarch 31, 2022Mitchell Creem
 Mitchell Creem, MHA

/s/ Mitchell R. Creem

Mitchell R. Creem

​DirectorMarch 31, 2022

/s/ Jacob Margolin

Jacob Margolin

DirectorMarch 31, 2022

/s/ David Meiri

David Meiri

DirectorMarch 31, 2022

/s/ Brandon Sim

Brandon Sim

DirectorMarch 31, 2022

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

Clinigence Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Clinigence Holdings, Inc. (the “Company”) as of as of December 31, 2021 and 2020, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Assets and Liabilities Assumed in the Acquisitions of Accountable Healthcare America Inc.(“AHA”), AHP Management Inc.(“AHP”), and Procare Health, Inc.(Procare)

Description of the Matter

During the year ended December 31, 2021 the Company completed the acquisitions of three businesses, Accountable Healthcare America Inc.(“AHA”), AHP Management Inc.(“AHP”), and Procare Health, Inc.(Procare) for net aggregate consideration of approximately $29.2 million, $39.1 million, and $2.9 million respectively.

Accountable Healthcare America Inc.

As discussed in Note 1 to the consolidated financial statements, the Company completed its acquisition of AHA for $29.2 million on February 26, 2021. The Company accounted for this transaction under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $2.2 million and resulting goodwill of $22.8 million. The Company, with the assistance of a third party valuation specialist, estimated the fair values of the identified intangible assets using valuation models. Such valuation models require significant assumptions.The Company estimated the fair value of the intangible assets using the Developed Technology Royalty Rates (valuation method), which is a specific discounted cash flow method that required management to make significant estimates and assumptions related to future cash flows and the selection of implied rate of return and discount rates.

AHP Management Inc.

As discussed in Note 1 to the consolidated financial statements, the Company completed its acquisition of AHP for $39.1 million on February 26, 2021. The Company accounted for this transaction under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $6.9 million and resulting goodwill of $33.5 million. The Company, with the assistance of a third party valuation specialist, estimated the fair values of the identified intangible assets using valuation models. Such valuation models require significant assumptions. The Company estimated the fair value of the intangible assets using the Multi-Period Excess Earnings methodology (member relationships) and Relief from Royalty methodology (trade name/trademarks), which is a specific discounted cash flow method that required management to make significant estimates and assumptions related to future cash flows and the selection of implied rate of return and discount rates.

Procare Health, Inc.

As discussed in Note 1 to the consolidated financial statements, the Company completed its acquisition of Procare for $2.9 million on October 15, 2021. The Company accounted for this transaction under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated, to the assets acquired and liabilities assumed based on their respective fair values, including identified intangible assets of $2.1 million and resulting goodwill of $0.9 million. The Company, with the assistance of a third party valuation specialist, estimated the fair values of the identified intangible assets using valuation models. Such valuation models require significant assumptions. The Company estimated the fair value of the intangible assets using the Multi-Period Excess Earnings methodology (Management Contracts) and Relief from Royalty methodology (Trademarks), which is a specific discounted cash flow method that required management to make significant estimates and assumptions related to future cash flows and the selection of implied rate of return and discount rates.

How We Addressed the Matter in Our Audit

Auditing management’s assessment of fair value of the acquired assets and assumed liabilities is highly subjective and judgmental. Further changes in either the assumptions or method utilized may have a material impact on the fair value assigned to the acquired assets and liabilities assumed in the acquisitions. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s key assumptions used in developing the fair value estimates, such as: (i) Forecasted revenue growth rates (ii) Future cash flows and (iii) Weighted-average cost of capital (WACC) and (iv) Discount rate.

Our audit procedures included, amongst others:

•We evaluated the reasonableness of management’s forecasts of future revenue growth rates and cash flows by comparing the projections to historical results and certain peer companies.
•We compared the Company’s (1) forecasted revenue growth rates and EBITDA margins to each acquired company’s historical actual results to assess reasonableness of the Company’s forecasts.
•With the assistance of our valuation specialists, we evaluated the reasonableness of the valuation methodology and discount rates by using sensitivity analysis and ensuring the inputs to the valuations were reasonable for the methodology.

/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2020.

New York, NY

March 31, 2022

Table of ContentsF-1

CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,

         
  2021 2020
ASSETS  
Current assets        
Cash $15,314,328  $26,931 
Accounts receivable  647,325   18,283 
Accounts receivable – ACMG sale of investment  1,333,130     
Stock subscriptions receivable  100,000   0   
Prepaid expenses and other current assets  301,275   111,842 
Total current assets  17,696,058   157,056 
         
Long-term assets        
Property and equipment, net  14,935   12,391 
Right of use asset, net  98,008   0   
Intangible assets, net  10,585,592   0   
Goodwill  57,338,935   0   
Deposits and other assets  0     410 
Total assets $85,733,528  $169,857 
         
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)        
Current liabilities        
Accounts payable and accrued expenses $3,505,197  $695,424 
Customer deposits  1,960   38,651 
Accrued interest on notes payable  154,502   0   
Due to related parties  128,176   30,000 
Lease liability - current  46,593   0   
Deferred revenue  173,919   76,687 
Convertible notes payable, net of debt discount  3,904,221   0   
Current portion of notes payable  727,182   312,890 
Total current liabilities  8,641,750   1,153,652 
         
Long-term liabilities        
Lease liability - long term  55,906   0   
Deferred tax liabilities  1,747,250   —   
Notes payable  150,000   150,000 
Total liabilities  10,594,906   1,303,652 
         
Stockholders' equity (deficiency)        
Preferred stock, $.001 par value; authorized - 100,000,000 shares; issued and outstanding - 0 shares in 2021 and 2020, respectively  0     0   
Common stock, $.001 par value; authorized - 800,000,000 shares; 48,232,076 and 5,282,545 shares issued and outstanding as of December 31, 2021 and 2020, respectively  48,232   5,282 
Additional paid-in capital  106,977,976   17,079,885 
Accumulated deficit  (31,888,477)  (18,218,962)
Noncontrolling interest  891   0   
Total stockholders' equity (deficiency)  75,138,622   (1,133,795)
Total liabilities and stockholders' equity (deficiency) $85,733,528  $169,857 

See accompanying notes to the consolidated financial statements.

Table of ContentsF-2

CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,

         
  2021 2020
Sales        
Capitation revenue, net $16,620,488  $0   
SaaS revenue  1,653,806   1,585,952 
Management service revenue, net  519,489   0   
Total sales  18,793,783   1,585,952 
Cost of sales  14,647,045   909,780 
Gross profit  4,146,738   676,172 
         
Operating expenses        
Research and development  285,880   557,257 
Sales and marketing  24,449   166,759 
General and administrative expenses  12,177,316   3,251,353 
Goodwill impairment loss  0     3,471,508 
Gain on sale of assets  0     (8,395,702)
Gain on lease termination  0     (25,174)
Loss on sale of fixed assets  0     54,819 
Amortization  677,168   222,032 
Total operating expenses  13,164,813   (697,148)
Income (loss) from operations  (9,018,075)  1,373,320 
         
Other income (expenses)        
Loss on extinguishment of debt  0     (167,797)
Settlement payment from ACMG  522,000   0 
Income from forgiveness of debt  636,807   0   
Impairment of Series E investment  0     (6,402,278)
Interest income  917   1,030 
Interest expense – debt obligation  (784,012)  0 
Interest expense – accretion of debt discount  (6,011,071)  (335,450)
Total other income (expenses)  (5,635,359)  (6,904,495)
Loss from continuing operations  (14,653,434)  (5,531,175)
         
Income tax benefit – deferred  984,810   0   
         
Loss from discontinued operations (including gain on disposal of $142,027 for the year ended December 31, 2020)  0     (118,992)
Net loss  (13,668,624)  (5,650,167)
Net income attributable to noncontrolling interest  891   0   
Net income (loss) attributable to Clinigence Holdings, Inc. $(13,669,515) $(5,650,167)
         
Basic and fully diluted income (loss) per common share:        
Continuing operations $(.37) $(1.12)
Discontinued operations  0     (.02)
Net income (loss) per common share $(.37) $(1.14)
Weighted average common shares outstanding - basic and fully diluted  37,325,057   4,942,268 

See accompanying notes to the consolidated financial statements.

Table of ContentsF-3

CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 2021 AND 2020

                         
   Common stock                 
   Shares   Amount   Additional Paid-in Capital   Accumulated Deficit   Noncontrolling Interest   Totals 
Balances, December 31, 2019  4,649,179  $4,649  $14,422,579  $(12,568,795) $—    $1,858,433 
Common stock issued for cash  190,476   190   119,810   —         120,000 
Stock-based compensation  466,166   466   2,571,223   —         2,571,689 
Common stock cancelled  (23,276)  (23)  (33,727)  —         (33,750)
Net loss  —   —   —   (5,650,167)  —     (5,650,167)
Balances, December 31, 2020  5,282,545   5,282   17,079,885   (18,218,962)  —     (1,133,795)
Common stock issued for cash  7,470,894   7,471   14,315,968   —         14,323,439 
Common stock subscribed  57,142   57   99,943   —     —     100,000 
Financing cost for capital raise  —     —     (1,013,500)  —         (1,013,500)
Common stock issued for related party note payable  46,154   46   29,954   —         30,000 
Common stock issued in business acquisitions  33,793,503   33,793   70,892,153   —         70,925,946 
Notes payable converted to common stock  1,365,501   1,366   2,393,634   —         2,395,000 
Warrants converted to common stock  106,578   107   153,317   —         153,424 
Options converted to common stock  89,421   89   178,753   —         178,842 
Stock-based compensation  932,567   933   4,025,951   —         4,026,884 
Return of common stock held back in AHP acquisition  (1,076,372)  (1,076)  (2,216,250)  —         (2,217,326)
Debt discount on notes payable  —     —     659,755   —         659,755 
Adjustment to common stock issued in AHA acquisition  183,775   184   378,393   —         378,577 
Prior period adjustment to common stock  (19,632)  (20)  20   —         —   
Net loss  —   —   —   (13,669,515)  891   (13,668,624)
Balances, December 31, 2021  48,232,076  $48,232  $106,977,976  $(31,888,477) $891  $75,138,622 

See accompanying notes to the consolidated financial statements.

Table of ContentsF-4

CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,

         
  2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss $(13,668,624) $(5,650,167)
(Income) loss from discontinued operations  0     118,992 
Net loss from continuing operations  (13,668,624)  (5,531,175)
Adjustments to reconcile net loss to net cash used in operating activities        
Depreciation  4,648   14,514 
Amortization  709,131   94,761 
Interest expense associated with debt discount  6,011,071   0   
Non cash interest expense  24,372   474,344 
Purchase price adjustment to investment in AHP  (300,000)  0   
Settlement payment from ACMG  (522,000)  0 
Income from forgiveness of debt  (633,125)  0   
Deferred income tax benefit  (984,810)  0 
Stock-based compensation expense  4,026,884   2,571,689 
Goodwill impairment loss  0     3,471,508 
Gain on sale of assets  0     (8,395,702)
Impairment of investment  0     6,402,278 
Gain on lease termination  0     (25,174)
Loss on sale of assets  0     54,819 
Cancellation of common stock  0     (33,750)
Loss on extinguishment of debt  0     167,797 
Changes in operating assets and liabilities:        
Accounts receivable  (74,880)  71,900 
Prepaid expenses and other current assets  (161,155)  (65,467)
Deposits and other assets  410   10,411 
Accounts payable and accrued expenses  (1,365,554)  (648,475)
Customer deposits  (36,691)  38,651 
Accrued interest on notes payable  197,033   (21,730)
Lease liability  (27,472)  (37,401)
Deferred revenue  97,232   (88,873)
NET CASH USED IN OPERATING ACTIVITIES  (6,703,530)  (1,475,075)
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Proceeds from sale of investment in ACMG  4,554,676   0   
Distribution from investment in ACMG  522,000   0 
Advances to acquisition target  —     —   
(Increase) decrease in restricted cash  0     100,000 
Sale of property and equipment  0     500 
Payment to AHP shareholder for litigation settlement  (1,094,689)  0   
Preacquisition loans from subsidiary  85,000   0   
Cash acquired from acquisitions  3,884,583   0   
Net cash provided by in continuing investing activities  7,951,570   100,500 
Net cash used in discontinued investing activities  0     (161,400)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES  7,951,570   (60,900)
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from sale of common stock  14,323,439   120,000 
Proceeds from exercise of warrants  153,424   0   
Proceeds from exercise of options  178,842   0   
Proceeds from issuance of notes and convertible notes payable  413,917   461,125 
Payments on notes payable  (16,765)  —   
Payments of financing costs for capital raise  (1,013,500)  0   
Proceeds from related party loans  0     30,000 
Payments on notes and convertible notes payable  0     (113,653)
NET CASH PROVIDED BY FINANCING ACTIVITIES  14,039,357   497,472 
         
NET INCREASE (DECREASE) IN CASH  15,287,397   (1,038,503)
CASH - BEGINNING OF YEAR  26,931   1,065,434 
CASH - END OF YEAR $15,314,328  $26,931 
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:        
Cash paid during the year for:        
Interest $651,838  $18,077 
Non-cash investing and financing activities:        
Sale of software in consideration of Series E preferred stock, convertible notes and other liabilities assumed $0    $3,470,385 
Common stock issued for acquisition of subsidiaries  69,087,197   0   
Common stock issued for subscriptions receivable  100,000     
Purchase price adjustment to investment in AHA  1,246,194   0   
Related party loans converted to common stock  30,000   0   
Notes payable converted to accounts payable  228,518   0   
Notes payable converted to common stock  2,395,000   0   
Accrued interest converted to convertible notes payable  54,746   0   
Deferred tax liability recorded on intangible assets  2,868,560   0   
Debt discount on notes payable  659,755   0   
Right of use asset added for operating lease  129,971   0   

See accompanying notes to the consolidated financial statements.

Table of ContentsF-5

CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Years Ended December 31, 2021 and 2020

Note 1 - Organization and Basis of Presentation

The consolidated financial statements presented are those of Clinigence Holdings, Inc., formerly known as iGambit Inc., (the “Company”) and its wholly-owned subsidiaries, Accountable Healthcare America, Inc. (“AHA”), AHP Management, Inc. (“AHP”), Clinigence Health, Inc. (“Clinigence”), Procare Health, Inc. (“Procare”) and HealthDatix, Inc. (“HealthDatix”). The Company’s name was changed to Clinigence Holdings, Inc. on October 29, 2019 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.

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:

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed    
  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:

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed    
  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:

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed    
  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.

The results of operations of AHA and AHP for the period March 1, 2021 to December 31, 2021 have been included in the consolidated statements of operations for the year ended December 31, 2021. The following table presents unaudited pro forma results of operations of the Company and AHA and AHP as if the acquisitions had occurred at January 1, 2020. The pro forma condensed financial information is presented for informational purposes only. The unaudited pro forma results of operations are not necessarily indicative of results that would have occurred had the acquisition taken place at the beginning of the earliest period presented, or of future results.

Pro forma results of operation        
  December 31, December 31,
  2021 2020
Pro forma revenue $21,934,587  $20,776,209 
Pro forma gross profit $4,647,452  $4,182,625 
Pro forma loss from operations $(15,215,466) $(8,296,319)
Pro forma net loss $(12,346,906) $(6,368,689)
Pro forma net income (loss) per share $(0.33) $(1.29)
Weighted average number of shares outstanding  37,325,057   4,942,268 

Liquidity and Management Plans

The Company has an accumulated deficit of $31,888,477 and approximately $6 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 December 31, 2021, the Company had approximately $15.3 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 December 31, 2021 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 – Discontinued Operations

Sale of Business

On April 21, 2020 (effective March 1, 2020) the Company completed the sale of HealthDatix, Inc., a Florida corporation (“HDX FL”) to Jerry Robinson, Mary-Jo Robinson and Kathleen Shepherd  (“HDX Management”) in accordance with a Stock Purchase Agreement (the “Purchase Agreement”) by and between the Company and HDX Management.  Pursuant to the Purchase Agreement, the total consideration paid for the outstanding capital stock of HDX FL was the execution of Settlement and Release Agreements by HDX Management, releasing the Company from all obligations pursuant to certain HDX Management Employment Agreements dated April 1, 2017, and remittance of 1,000 shares of HDX common stock previously issued to HDX Management. As per the Purchase Agreement, the Company’s operations of HDX FL ended February 29, 2020 and HDX Management’s operation of the business is effective as of March 1, 2020.

The components of loss from discontinued operations presented in the consolidated statements of operations for the year ended December 31, 2020 are presented as follows:

Schedule of consolidated statements of operations    
Sales $5,958 
Cost of sales  (6,795)
General and administrative expenses  (101,100)
Depreciation and amortization  (75)
Interest expense  (263)
Loss from operations  (102,275)
Loss on disposal of HealthDatix  (16,717)
Loss from discontinued operations $(118,992)

Note 3 – 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 17 – “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 December 31, 2021 and 2020. 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 December 31, 2021, 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:

Schedule of estimated lives of respective assets
Office equipment and fixtures5 - 7 years
Computer hardware5 years
Computer software3 years
Development equipment5 years

Amortization

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

Schedule of estimated lives of the respective assets
Population Health Platform technology11 years
Member relationships15 Years
Management contracts 15 years15 Years
Trademarks6-10 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 year ended December 31, 2021.

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 $173,919 and $76,687 as of December 31, 2021 and 2020, 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 $24,449 and $41,418 were charged to operations for the years ended December 31, 2021 and 2020, 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 4 – Property and Equipment

Property and equipment are carried at cost and consist of the following at December 31, 2021 and 2020:

Schedule of property, plant and equipment        
  2021 2020
Office equipment and fixtures $5,300  $5,300 
Computer hardware  52,998   41,065 
Computer software  16,121   16,121 
Less: Accumulated depreciation  (59,484)  (50,095)
Property, Plant and Equipment, Net   $14,935  $12,391 

Depreciation expense of $4,648 and $14,514 was charged to operations for the years ended December 31, 2021 and 2020, respectively.

Note 5 – Intangible Assets

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

Schedule of intangible assets                
  As of December 31, 2021
   

Gross Carrying Amount

   

Accumulated Amortization

   

Net Carrying

Amount

   

Weighted Average Useful Life (in years)

 
Amortized intangible assets:                
Member relationships $6,444,000  $(358,000) $6,086,000   15 
Management contracts  1,864,530   (31,076)  1,833,454   15 
Trademarks  771,230   (81,350)  689,880   6 - 10 
PHP technology  2,183,000   (206,742)  1,976,258   11 
Total $11,262,760  $(677,168  $10,585,592    

Schedule of future amortization expenses  
Aggregate Amortization Expense:  
For the year ended December 31, 2021 $677,168 

Note 6 – 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. For the period March 1, 2021 through December 31, 2021, the Company received a settlement payment from ACMG of $522,000, which is reported as other income.

Note 7 – 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:

Schedule Operating lease ROU assets and operating lease liabilities    
  December 31,
  2021
Operating Lease:    
Operating lease right-of-use assets, net $98,008 
Current portion of operating lease liabilities  46,593 
Operating lease liabilities, net of current portion  55,906 

As of December 31, 2021, the weighted-average remaining lease term of the operating lease was 2.1 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 December 31, 2021:

Schedule summarizes maturities of operating lease liabilities    
   
2022 $51,800 
2023  53,354 
2024  4,457 
Total lease payments  109,611 
Less: Imputed interest  7,112 
Present value of lease liabilities $102,499 

At December 31, 2021, the Company had the following future minimum payments due under the non-cancelable lease:

Schedule minimum payments due under the non-cancelable lease   ��
2022 $51,800 
2023  53,354 
2024  4,457 
Total minimum lease payments $109,611 

Consolidated rental expense for all operating leases was $100,009 and $143,307 for the years ended December 31, 2021 and 2020, respectively.

The following table summarizes the cash paid and related right-of-use operating lease recognized for the year ended December 31, 2021.

Schedule of cash paid and related right-of-use operating lease recognized    
  Year Ended
  December 31, 2021
Cash paid for amounts included in the measurement of lease liabilities:    
Operating cash flows from operating leases $50,292 
Right-of-use lease assets obtained in the exchange for lease liabilities:    
Operating leases  27,472 

Effective October 15, 2020, the Company terminated the operating lease for its Atlanta, Georgia office that was set to expire in 2024. The lease termination agreement required the Company to forfeit its Letter of Credit and all of its furniture and fixtures to the landlord. The early termination resulted in a gain on lease termination of $25,174 for the year ended December 31, 2020, calculated as follows:

Schedule of gain on lease termination    
Current portion of operating lease liabilities at September 30, 2020 $54,564 
Operating lease liabilities, net of current portion at September 30, 2020  182,059 
Less: Operating lease right-of-use assets, net at September 30, 2020  211,449 
Gain on lease termination $25,174 

The balance of the Letter of Credit of $100,000 was charged to rent expense and the book value of the assets abandoned of $53,198 was charged to loss on sale of assets for the year ended December 31, 2020.

Note 8 - 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 years ended December 31, 2021 and 2020 as the result would be anti-dilutive.

Computation of diluted net income (loss) per share       
  Years Ended
  December 31,
  2021 2020
Stock options  2,876,010   1,174,814 
Stock warrants  12,383,550   557,873 
Total shares excluded from calculation  15,259,560   1,732,687 

Note 9 – 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.

Stock option activity during the years ended December 31, 2021 and 2020 follows:

Schedule of stock option activities            
  Options Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2019  48,854  $5.11   8.05 
Options granted  1,130,734   1.49     
Options expired  (400)  0.01     
Options cancelled  (4,374)  5.56     
Options outstanding at  December 31, 2020  1,174,814   1.61   8.11 
Options granted  1,300,000   1.66     
Options issued in merger  490,617   2.00     
Options exercised  (89,421)  2.00     
Options outstanding at  December 31, 2021  2,876,010  $1.69   6.90 

Options outstanding at December 31, 2021 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
Total  2,876,010   2,876,010       

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 years ended December 31, 2021 and 2020 follows:

Schedule of Warrants, Activity            
  Warrants Warrants Outstanding Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)
Warrants outstanding at December 31, 2019  1,065,251  $6.04   5.17 
Warrants cancelled  (507,378)  —       
Warrants outstanding at December 31, 2020  557,873   6.77   3.79 
Warrants granted  5,522,748   1.90     
Warrants issued in merger  6,415,965   1.74     
Warrants exercised  (113,036)  1.45     
Warrants outstanding at December 31, 2021  12,383,550  $2.04   4.64 

Warrants outstanding at December 31, 2021 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
February 25, 2021  1,666,573   1,666,573  $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  128,143   128,143  $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
  Total  12,383,550   12,383,550       

Note 10 – Convertible Notes Payable

Convertible notes payable consisted of the following at December 31, 2021 and 2020:

Schedule of Convertible notes payable   
  2021 2020
Notes payable convertible into Clinigence common shares at $1.55 per share; bearing interest at a rate of 10%; net of debt discount of $3,904,221 and $0, respectively; maturing in July 2022 $3,904,221  $0   

Included in the liabilities assumed in the AHA merger are convertible promissory notes to various individuals totaling

Included in the liabilities assumed in the AHA merger are convertible promissory notes to various individuals totaling $3,904,221 at December 31, 2021. 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 December 31, 2021 is $3,904,221. During the year ended December 31, 2021, various noteholders converted principal balances of $1,820,000 into 1,173,834 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 December 31, 2021 is $1,086,095.

Included in the liabilities assumed in the AHA merger are convertible promissory notes to an individual investor totaling $575,000. The note was entered into on August 25, 2020 and was convertible into AHA’s common stock contingent upon a merger transaction with a SPAC, which did not close. Under an Agreement with the investor signed on April 20, 2021, the Note was deemed to mature as of December 31, 2020 and accrued penalty interest was assessed through April 15, 2021 when the Note (including accrued interest) was to be converted into 625,313 shares of Clinigence common stock consisting of principal of $575,000 and penalty interest of $50,313, valued at $1.00 per share. On September 30, 2021, the Company entered into a promissory note settlement agreement whereby the noteholder converted the principal balance of $575,000 into 191,667 common shares valued at $3.00 per share, and the Company paid $51,750 of accrued interest to the noteholder.

Note 11 – Notes Payable

Notes payable consisted of the following at December 31, 2021 and 2020:

Notes payable        
  2021 2020
Notes payable with maturities between six months and twelve months from the date of issuance with annual percentage interest rates between 24% and 31% $0    $1,765 
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   311,125 
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   150,000 
Note payable with a maturity date of January 31, 2023 and interest rate of 12.9%  467,095   0   
Total notes payable  877,182   462,890 
Current portion  (727,182)  (312,890)
Total notes payable, net $150,000  $150,000 

Beginning in April 2018, the Company entered into a series of short-term notes with interest rates ranging from 24% to 31% per annum. Throughout the year ended December 31, 2020 the Company made average monthly principal and interest payments approximating $8,200 per month. The outstanding balance on the short-term notes at December 31, 2021 and 2020 was $0 and $1,765, respectively.

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.

On April 21, 2020, the Company received a loan in the amount of $311,125 under the Payroll Protection Program (“PPP Loan”). On February 25, 2021, the Company received a second PPP loan of $260,087. The loans 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. However, no assurance can be provided that all or any portion of the PPP loans will be forgiven. AHA’s PPP loans of $172,000 and $150,000 were assumed in the merger transaction under the same terms. On June 21, 2021, the first PPP loan in the amount of $311,125 and AHA’s PPP loans of $172,000 and $150,000 on June 28, 2021 and August 28, 2021, respectively were forgiven by the SBA and reported as other income in the consolidated statements of operations. The balance on the PPP loans was $260,087 and $311,125 as of December 31, 2021 and 2020, respectively and has been classified as a long-term liability in notes payable, less current portion on the accompanying consolidated balance sheets.

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 $467,095.

Note 12 – Stock Transactions

Common Stock Issued

The Company sold 6,526,786 common shares valued at $1.75 per share to various investors for proceeds totaling $11,421,875 during the year ended December 31, 2021. The Company received $100,000 of the proceeds in the first quarter of 2022 for which a receivable was recorded at December 31, 2021. The Company paid the placement agent $1,013,500 in cash and issued 1,759,785 warrants.

The Company sold 1,000,000 common shares valued at $3.00 per share to an investor for proceeds of $3,000,000 on September 30, 2021. 

The Company sold 1,250 common shares valued at $1.25 per share to a director for proceeds of $1,562 on September 28, 2021.

In connection with the convertible notes payable (see Note 10 above) various noteholders converted $2,395,000 of principal balance to 1,365,501 shares of common stock during the year ended December 31, 2021. The stock issued was determined based on the terms of the convertible notes.

During the year ended December 31, 2021, various shareholders exercised warrants in exchange for 106,578 common shares for proceeds of $153,424.

On December 14, 2021, a shareholder exercised options in exchange for 89,421 common shares valued at $2.00 per share for proceeds of $178,842.

In connection with the acquisition of Procare the Company issued 607,229 common shares valued at $4.00 per share and 151,807 common shares valued at $446,018 to the shareholders of Procare on October 1, 2021.

In connection with the acquisition of AHA the Company issued 14,218,241 common shares valued at $2.06 per share to the shareholders of AHA on February 25, 2021.

In connection with the acquisition of AHP the Company issued 19,000,000 common shares valued at $2.06 per share to the shareholders of AHP on February 25, 2021.

In connection with the AHA and AHP acquisitions, the Company issued 750,000 common shares valued at $2.06 per share for consulting services on February 25, 2021.

On January 28, 2021, the Company issued 182,567 common shares to officers and employees for deferred salaries and bonuses and reimbursed expenses, including 153,606 common shares issued to directors and officers, valued at $.65 per share.

On January 28, 2021, the Company issued 46,154 common shares valued at $.65 per share to a former officer for payment of a note balance of $30,000.

The Company issued 225,820 restricted common shares to employees for salaries on June 30, 2020, valued at $361,312. On September 28, 2020, 23,276 of these shares issued to an employee, valued at $33,750 were cancelled in connection with a separation agreement.

The Company issued 228,346 common shares to an employee in connection with a separation agreement on July 12, 2020, valued at $290,000.

On August 12, 2020, the Company sold 190,476 restricted shares of common stock valued at $0.63 per share to 5 directors and an investor for proceeds of $120,000.

The Company issued 12,000 common shares to an employee in connection with a separation agreement on September 11, 2020, valued at $15,000.

Note 13 - Income Taxes

Prior to March 1, 2019, the Company operated as a Limited Liability Company (“LLC”). Taxable income and losses of an LLC are passed through to its members and there is no entity level tax.

Components of income tax expense (benefit) for the years ended December 31 consists of the following:

Components of income tax expense        
  2021 2020
From Continuing Operations:    
Current:    
U.S. federal $0    $0   
U.S. state and local  0     0   
Non-U.S.  0     0   
Total current income tax expense $0    $0   
     
Deferred:        
U.S. federal $(984,810) $0   
U.S. state and local  0     0   
Non-U.S.  0     0   
Total deferred income tax expense (benefit)  (984,810)  0   
Change in valuation allowance  0     0   
Total deferred income tax expense (benefit)  (984,810)  0   
Income tax expense from discontinued operations  0     0   
Total income tax expense (benefit) $(984,810) $0   

The reconciliation between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense (benefit) is as follows:

Schedule of Effective Income Tax Rate Reconciliation        
  Years Ended
  December 31,
  2021 2020
Statutory U.S. federal income tax rate  21.0%  21.0%
State income taxes, net offederal income tax benefit  (0.4)%  (0.3)%
Tax effect of expenses that are not deductible for income tax purposes:        
Accretion of debt  (8.6)%  0.0%
Impairment of goodwill  (0.0)%  (12.8)%
Gain on sale of assets  0.0%  7.4%
Other  0.9%  (1.3)%
Change in Valuation Allowance  (19.6)%  (14.0)%
Effective tax rate  (6.7)%  0.0%

At December 31, the significant components of the deferred tax assets (liabilities) are summarized below:

Schedule of deferred tax assets (liabilities)        
  2021 2020
Deferred Tax Assets:        
Net Operating Losses $3,162,746  $1,376,426 
Charitable contributions  110   0   
Stock-based compensation  741,219   577,595 
Total deferred tax assets  3,904,075   1,954,021 
         
Deferred Tax Liabilities:        
Intangibles  (1,747,250)  0   
Total deferred tax liabilities  (1,747,250)  0   
Valuation Allowance  (2,156,825)  (1,954,021)
Net deferred tax assets $0    $0   

As of December 31, 2021, the Company had federal net operating loss carryforwards of approximately $13.3 million which may be carried forward indefinitely. These net operating loss carryforwards may be used to offset future taxable income and thereby reduce the Company’s U.S. federal income taxes. The net operating losses may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% change in ownership as determined under the regulations.

AHP was incorporated in 2021 to facilitate the merger and will file separate federal and state tax returns on a standalone basis for the 2021 tax year.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets for every period because it is more likely than not that all of the deferred tax assets will not be realized.

In accordance with ASC 740, a valuation allowance must be established if it is more likely than not that the deferred tax assets will not be realized. This assessment is based upon consideration of available positive and negative evidence, which includes, among other things, the Company’s most recent results of operations and expected future profitability. Based on the Company’s cumulative losses in recent years, a full valuation allowance against the Company’s deferred tax assets as of December 31, 2021 and 2020 has been established as Management believes that the Company will not more likely than not realize the benefit of those deferred tax assets. Therefore, no tax provision has been recorded for the years ended December 31, 2021 and 2020.

The Company complies with the provisions of ASC 740-10 in accounting for its uncertain tax positions. ASC 740-10 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely that not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. Management has determined that the Company has no significant uncertain tax positions requiring recognition under ASC 740-10.

The Company is subject to income tax in the U.S., and certain state jurisdictions. The Company has not been audited by the U.S. Internal Revenue Service, or any states in connection with income taxes. The Company’s tax years generally remain open to examination for all federal and state income tax matters until its net operating loss carryforwards are utilized and the applicable statutes of limitation have expired. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations.

The Company recognizes interest and penalties related to unrecognized tax benefits, if incurred, as a component of income tax expense. No interest or penalties have been recorded for the years ended December 31, 2021 and 2020, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOL’s incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The Company is currently evaluating the impact of the CARES Act, but at present does not expect that the NOL carryback provision of the CARES Act would result in a material cash benefit to us.

Note 14 – Concentrations and Credit Risk

Sales and Accounts Receivable

The Company had sales to two customers which accounted for approximately 13% and 10%, respectively of total sales for the year ended December 31, 2021. The two customers accounted for less than 10%, respectively of accounts receivable at December 31, 2021.

The Company had sales to two customers which accounted for approximately 14% and 10%, respectively of total sales for the year ended December 31, 2020. The two customers accounted for less than 10%, respectively of accounts receivable at December 31, 2020.

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 December 31, 2021 and 2020, respectively.

Note 15 - Related Party Transactions

Due to Related Parties

Due to related parties with a balance of $128,176 and $30,000 at December 31, 2021 and 2020, 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. A shareholder and former officer made a $30,000 non-interest bearing loan to the Company on December 31, 2020, which was repaid with common stock on January 28, 2021.

Note 16 – 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.

Effective April 1, 2017, in connection with the acquisition of HealthDatix Inc., the Company entered into employment agreements with Jerry Robinson, MaryJo Robinson, and Kathleen Shepherd each under a three-year term at a base salary of $75,000 per year, bonuses based upon objectives set by the Company, and participation in all benefit programs generally made available to HealthDatix employees. The employment agreements restrict the executive officers from engaging in certain competitive activities for the greater of 60 months from the date of the agreements or two years following the termination of their respective employment. The employment agreements were terminated in connection with the sale of HealthDatix effective March 1, 2020.

Note 17 - 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 3 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    
  December 31,
  2021
ASSETS    
Current Assets    
Cash and cash equivalents $3,215,844 
Accounts receivable  369,539 
Prepaid expenses and other assets  44,350 
Total Current Assets  3,629,723 
     
Other Assets    
Goodwill  31,733,526 
Right of use asset, net  98,088 
Intangible assets, net  6,555,306 
Total Other Assets  38,386,920 
Total Assets $42,016,643 
     
Current Liabilities    
Accounts payable and accrued expenses $2,696,726 
Lease liability - current  46,593 
Total Current Liabilities  2,743,319 
     
Long-term Liabilities    
Lease liability – long-term  55,906 
Total Liabilities $2,799,225 

Note 18 – Subsequent Events

The Company evaluated its December 31, 2021 consolidated financial statements for subsequent events through the date the consolidated financial statements were issued.

Notes Payable Transactions

On March 17, 2022, a noteholder converted $330,000 of principal to 212,903 shares of the Company’s common stock, valued at $1.55 per share.

On February 22, 2022, Clinigence Health Inc.’s second PPP loan of $260,087 was forgiven by the SBA.

Planned Business Acquisition

On March 16, 2022, the Company held a special meeting of stockholders in lieu of its annual meeting (the “Special Meeting”) to consider eight proposals related to the Company’s contemplated merger (the “Merger”) with Nutex Health Holdco LLC (“Nutex”) pursuant to the Agreement and Plan of Merger dated as of November 23, 2021 (the “Merger Agreement”) among the Company, Nutex, Nutex Acquisition LLC, Micro Hospital Holding LLC, Nutex Health LLC, and Tom Vo, as the Nutex Representative. Each of the Company’s proposals was approved by the requisite vote of the Company’s stockholders.

At the close of business on January 27, 2022, the record date for the Special Meeting, there were 47,200,627 shares of common stock of the Company outstanding. The holders of a total of 36,424,794 shares of the Company’s common stock were represented at the Special Meeting in person or by proxy, representing approximately 77% of the Company’s shares of common stock entitled to vote at the Special Meeting, which total constituted a quorum for the Special Meeting in accordance with the Company’s bylaws.

The proposal to approve the Merger and the other transactions contemplated by the Merger Agreement , including the issuance of shares of common stock of the Company to Nutex members as consideration in the Merger (Proposal No. 1), the proposal to approve the Amended and Restated Certificate of Incorporation of the Company (the “Charter”) to change the Company’s name, to increase the number of authorized shares of Common Stock of the Company and to remove authorized shares of preferred stock (Proposal No.2), the proposal to approve the Amended and Restated Bylaws (“Bylaws”) of the Company to change the Company’s name, change the voting threshold required to amend the Bylaws, and provide that the Court of Chancery in Delaware or state or federal courts located within Delaware be the exclusive forum over certain actions and claims (Proposal No. 3), the proposal to approve the Amended and Restated Nutex 2022 Equity Incentive Plan (Proposal No. 4), the proposal to elect seven directors to the Company’s board of directors (Proposal No. 5), the proposal to approve, on a non-binding advisory basis, the compensation paid to the Company’s named executive officers pursuant to the golden parachute proposal (the “Golden Parachute Proposal”) (Proposal No. 6), the proposal to approve the auditor ratification (the “Auditor Ratification Proposal”) (Proposal No. 7) and the proposal to approve the adjournment of the Special Meeting to a later date or dates, if necessary (Proposal No. 8) each exceeded the requisite percentages for approval of such proposal. The stockholder approvals are subject to the completion of the Merger.

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