UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2023March 31, 2024
or
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☐ | 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
NUTEX HEALTH INC.
(Exact name of registrant as specified in its charter)
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Delaware | 11-3363609 |
(State or other jurisdiction | (I.R.S. Employer |
of incorporation or organization) | Identification No.) |
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6030 S. Rice Ave, Suite C, | |
Houston, Texas | 77081 |
(Address of principal executive offices) | (Zip code) |
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(713) 660-0557 | |
(Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: |
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Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
Common Stock, $0.001 par value | | NUTX | | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ 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 |
| Accelerated 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of NovemberMay 6, 2023,2024, the registrant had 670,781,59549,719,375 shares of common stock outstanding.
NUTEX HEALTH INC.
FORM 10-Q
TABLE OF CONTENTS
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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INTRODUCTORY NOTE
Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Nutex Health Inc. (formerly known as Clinigence Holdings, Inc.), a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “Nutex” refers to Nutex Health Inc.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, changes in laws or regulations applicable to our operations, any statements about our business, financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, or otherwise, and our future liquidity, including cash flows; any statements of any plans, strategies, and objectives of management for future operations, such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases, or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.
Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations, and certain assumptions of management. Some or all of such beliefs, expectations, and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental, and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under, but not limited to, the heading “Item 1A. Risk Factors” included in this Quarterly Report the Quarterly Report on the Form 10-Q for the quarter ended June 30, 2023, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, and in the Annual Report of Nutex Health Inc. on Form 10-K for the year ended December 31, 20222023 and other filings of the Company with the United States Securities and Exchange Commission. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes, and results to differ materially from those indicated by such statements. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
NUTEX HEALTH INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
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| | September 30, 2023 | | December 31, 2022 | ||
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 26,826,733 | | $ | 34,255,264 |
Accounts receivable | |
| 53,209,834 | |
| 57,777,386 |
Accounts receivable - related parties | |
| 1,487,591 | |
| 538,183 |
Inventories | |
| 2,682,716 | |
| 3,533,285 |
Prepaid expenses and other current assets | | | 5,645,296 | | | 1,869,806 |
Total current assets | | | 89,852,170 | | | 97,973,924 |
Property and equipment, net | | | 85,496,612 | | | 82,094,352 |
Operating right-of-use assets | | | 16,712,230 | | | 20,466,632 |
Finance right-of-use assets | |
| 247,593,480 | |
| 192,591,624 |
Intangible assets, net | | | 21,624,132 | | | 21,191,390 |
Goodwill, net | |
| 17,935,036 | |
| 17,010,637 |
Other assets | | | 419,882 | | | 423,426 |
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Total assets | | $ | 479,633,542 | | $ | 431,751,985 |
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Liabilities and Equity | |
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Current liabilities: | |
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Accounts payable | | $ | 17,599,047 | | $ | 23,614,387 |
Accounts payable - related parties | |
| 6,144,188 | |
| 3,915,661 |
Lines of credit | |
| 3,371,676 | |
| 2,623,479 |
Current portion of long-term debt | |
| 19,644,656 | |
| 12,546,097 |
Operating lease liabilities, current portion | | | 1,562,385 | | | 1,703,014 |
Finance lease liabilities, current portion | | | 4,171,489 | | | 4,219,518 |
Accrued expenses and other current liabilities | | | 14,773,273 | |
| 6,240,813 |
Total current liabilities | |
| 67,266,714 | |
| 54,862,969 |
Long-term debt, net | | | 19,303,829 | | | 23,051,152 |
Operating lease liabilities, net | | | 15,874,261 | | | 19,438,497 |
Finance lease liabilities, net | | | 263,791,711 | | | 203,619,756 |
Deferred tax liabilities | | | 8,492,294 | | | 10,452,211 |
Total liabilities | |
| 374,728,809 | |
| 311,424,585 |
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Commitments and contingencies | | | | | | |
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Equity: | | | | | | |
Common stock, $0.001 par value; 950,000,000 shares authorized; 670,711,741 and 650,223,840 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively | | | 670,712 | | | 650,224 |
Additional paid-in capital | | | 466,711,720 | | | 458,498,402 |
Accumulated deficit | | | (377,454,642) | | | (363,285,925) |
Nutex Health Inc. equity | | | 89,927,790 | | | 95,862,701 |
Noncontrolling interests | |
| 14,976,943 | | | 24,464,699 |
Total equity | | | 104,904,733 | | | 120,327,400 |
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Total liabilities and equity | | $ | 479,633,542 | | $ | 431,751,985 |
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| | March 31, 2024 | | December 31, 2023 | ||
Assets | | | | | | |
Current assets: | | | | | | |
Cash and cash equivalents | | $ | 30,006,419 | | $ | 22,002,056 |
Accounts receivable | |
| 61,533,245 | |
| 58,624,301 |
Accounts receivable - related parties | |
| 4,213,847 | |
| 4,152,068 |
Inventories | |
| 2,975,486 | |
| 3,390,584 |
Prepaid expenses and other current assets | | | 1,629,346 | | | 2,679,394 |
Total current assets | | | 100,358,343 | | | 90,848,403 |
Property and equipment, net | | | 80,570,705 | | | 81,387,649 |
Operating right-of-use assets | | | 11,580,253 | | | 11,853,082 |
Finance right-of-use assets | |
| 173,920,659 | |
| 176,146,329 |
Intangible assets, net | | | 20,102,371 | | | 20,512,636 |
Goodwill, net | |
| 17,066,263 | |
| 17,066,263 |
Other assets | | | 685,260 | | | 431,135 |
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Total assets | | $ | 404,283,854 | | $ | 398,245,497 |
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Liabilities and Equity | |
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Current liabilities: | |
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Accounts payable | | $ | 17,217,905 | | $ | 18,899,196 |
Accounts payable - related parties | |
| 6,856,962 | |
| 6,382,197 |
Lines of credit | |
| 2,777,128 | |
| 3,371,676 |
Current portion of long-term debt | |
| 9,388,455 | |
| 10,808,721 |
Operating lease liabilities, current portion | | | 1,586,904 | | | 1,579,987 |
Finance lease liabilities, current portion | | | 4,366,696 | | | 4,315,979 |
Accrued expenses and other current liabilities | | | 17,694,134 | |
| 12,955,296 |
Total current liabilities | |
| 59,888,184 | |
| 58,313,052 |
Long-term debt, net | | | 26,308,017 | | | 26,314,733 |
Warrant liability | | | 5,060,810 | | | - |
Operating lease liabilities, net | | | 15,097,284 | | | 15,479,639 |
Finance lease liabilities, net | | | 212,867,062 | | | 213,886,213 |
Deferred tax liabilities | | | 5,050,347 | | | 5,145,754 |
Total liabilities | |
| 324,271,704 | |
| 319,139,391 |
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Commitments and contingencies | | | | | | |
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Equity: | | | | | | |
Common stock, $0.001 par value; 950,000,000 shares authorized; 49,719,375 and 45,111,994 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively | | | 49,719 | | | 45,112 |
Additional paid-in capital | | | 472,405,834 | | | 470,480,617 |
Accumulated deficit | | | (409,436,614) | | | (409,072,539) |
Nutex Health Inc. equity | | | 63,018,939 | | | 61,453,190 |
Noncontrolling interests | |
| 16,993,211 | | | 17,652,916 |
Total equity | | | 80,012,150 | | | 79,106,106 |
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Total liabilities and equity | | $ | 404,283,854 | | $ | 398,245,497 |
See accompanying notes to the unaudited condensed consolidated financial statements.
4
NUTEX HEALTH INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
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| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
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| 2023 |
| 2022 |
| 2023 |
| 2022 |
| 2024 |
| 2023 | ||||||
Revenue: | | | | | | | | | | | | | | | | | | |
Hospital division | | $ | 54,585,263 | | $ | 21,244,305 | | $ | 155,485,230 | | $ | 151,976,226 | | $ | 60,029,369 | | $ | 49,288,164 |
Population health management division | | | 8,137,709 | | | 7,150,753 | | | 22,491,613 | | | 13,594,007 | | | 7,424,418 | | | 7,041,253 |
Total revenue | | | 62,722,972 | | | 28,395,058 | | | 177,976,843 | | | 165,570,233 | | | 67,453,787 | | | 56,329,417 |
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Operating costs and expenses: |
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Payroll and benefits | | | 28,873,144 | | | 29,048,207 | | | 79,570,519 | | | 79,014,608 | | | 27,003,144 | | | 25,836,673 |
Contract services | | | 9,035,650 | | | 8,557,373 | | | 27,972,854 | | | 26,536,452 | | | 11,319,454 | | | 9,189,331 |
Medical supplies | | | 3,460,130 | | | 2,486,083 | | | 10,748,214 | | | 9,327,114 | | | 5,321,842 | | | 4,023,882 |
Depreciation and amortization |
| | 4,745,941 |
| | 4,330,167 |
| | 12,908,848 |
| | 9,859,513 |
| | 4,186,202 |
| | 3,993,747 |
Other | | | 9,541,894 | | | 7,686,132 | | | 25,215,549 | | | 22,092,033 | | | 9,465,967 | | | 8,438,061 |
Total operating costs and expenses | | | 55,656,759 | | | 52,107,962 | | | 156,415,984 | | | 146,829,720 | | | 57,296,609 | | | 51,481,694 |
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Gross profit (loss) | | | 7,066,213 | | | (23,712,904) | | | 21,560,859 | | | 18,740,513 | ||||||
Gross profit | | | 10,157,178 | | | 4,847,723 | ||||||||||||
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Corporate and other costs: | | | | | | | | | | | | | | | | | | |
Facilities closing costs | | | - | | | - | | | 217,266 | | | - | | | - | | | 217,266 |
Acquisition costs | | | 43,464 | | | - | | | 43,464 | | | 3,885,666 | ||||||
Stock-based compensation expense | | | 49,167 | | | 81,249 | | | 2,198,812 | | | 135,415 | | | 49,167 | | | 1,900,000 |
Impairment of goodwill | | | - | | | 398,135,038 | | | - | | | 398,135,038 | ||||||
General and administrative expenses | | | 7,794,808 | | | 6,751,548 | | | 24,730,168 | | | 17,404,637 | | | 8,658,410 | | | 7,175,544 |
Total corporate and other costs | | | 7,887,439 | | | 404,967,835 | | | 27,189,710 | | | 419,560,756 | | | 8,707,577 | | | 9,292,810 |
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Operating loss |
| | (821,226) | | | (428,680,739) |
| | (5,628,851) | | | (400,820,243) | ||||||
Operating income (loss) |
| | 1,449,601 | | | (4,445,087) | ||||||||||||
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Interest expense, net | | | 4,098,179 | | | 3,402,606 | | | 12,081,316 | | | 9,628,189 | | | 4,444,362 | | | 3,140,089 |
Other expense (income) |
| | (53,206) |
| | (630,450) |
| | 70,721 |
| | 346,873 | ||||||
Gain on warrant liability | | | (2,600,747) | | | - | ||||||||||||
Other (income) expense |
| | (241,192) |
| | 247,455 | ||||||||||||
Loss before taxes | | | (4,866,199) | | | (431,452,895) | | | (17,780,888) | | | (410,795,305) | | | (152,822) | | | (7,832,631) |
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Income tax expense (benefit) | | | (342,259) | | | (8,543,880) | | | (2,068,530) | | | 11,285,729 | | | 389,665 | | | (910,659) |
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Net loss | | | (4,523,940) | | | (422,909,015) | | | (15,712,358) | | | (422,081,034) | | | (542,487) | | | (6,921,972) |
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Less: net income (loss) attributable to noncontrolling interests | | | 1,018,451 | | | (10,722,749) | | | (1,543,641) | | | (12,052,765) | ||||||
Less: net loss attributable to noncontrolling interests | | | (178,412) | | | (1,774,693) | ||||||||||||
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Net loss attributable to Nutex Health Inc. | | $ | (5,542,391) | | $ | (412,186,266) | | $ | (14,168,717) | | $ | (410,028,269) | | $ | (364,075) | | $ | (5,147,279) |
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Loss per common share: | | | | | | | | | | | | | | | | | | |
Basic | | $ | (0.01) | | $ | (0.62) | | $ | (0.02) | | $ | (0.65) | | $ | (0.01) | | $ | (0.12) |
Diluted | | $ | (0.01) | | $ | (0.62) | | $ | (0.02) | | $ | (0.65) | | $ | (0.01) | | $ | (0.12) |
See accompanying notes to the unaudited condensed consolidated financial statements.
5
NUTEX HEALTH INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
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| | Common Stock | | Additional Paid-in | | Retained Earnings | | Noncontrolling | | Total | |||||||
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| Shares |
| Amount |
| Capital |
| (Accumulated Deficit) |
| Interests |
| Equity | |||||
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Balance at January 1, 2022 | | 592,791,712 | | $ | 592,792 | | $ | 11,742,891 | | $ | 102,315,623 | | $ | 76,929,704 | | $ | 191,581,010 |
Contributions | | — | | | — | | | — | | | — | | | 3,869,201 | | | 3,869,201 |
Distributions | | — | | | — | | | — | | | (27,114,936) | | | (5,738,045) | | | (32,852,981) |
Net income | | — | | | — | | | — | | | 21,442,843 | | | 3,383,288 | | | 24,826,131 |
Balance at March 31, 2022 | | 592,791,712 | | | 592,792 | | | 11,742,891 | | | 96,643,530 | | | 78,444,148 | | | 187,423,361 |
Reverse acquisition with Clinigence | | 50,961,109 | | | 50,961 | | | 436,449,305 | | | — | | | 194,747 | | | 436,695,013 |
Notes payable converted to common stock | | 2,622,819 | | | 2,623 | | | 4,062,749 | | | — | | | — | | | 4,065,372 |
Common stock issued for exercise of warrants | | 2,147,252 | | | 2,147 | | | 4,116,994 | | | — | | | — | | | 4,119,141 |
Common stock issued for exercise of options | | 312,019 | | | 312 | | | 644,662 | | | — | | | — | | | 644,974 |
Stock-based compensation | | 83,547 | | | 83 | | | 54,083 | | | — | | | — | | | 54,166 |
Deconsolidation of Real Estate Entities | | — | | | — | | | — | | | (6,466,946) | | | (32,336,946) | | | (38,803,892) |
Contributions | | — | | | — | | | — | | | — | | | 861,916 | | | 861,916 |
Distributions | | — | | | — | | | — | | | (7,341,202) | | | (7,637,993) | | | (14,979,195) |
Net loss | | — | | | — | | | — | | | (19,284,846) | | | (4,713,304) | | | (23,998,150) |
Balance at June 30, 2022 | | 648,918,458 | | | 648,918 | | | 457,070,684 | | | 63,550,536 | | | 34,812,568 | | | 556,082,706 |
Notes payable converted to common stock | | 851,611 | | | 852 | | | 1,319,148 | | | — | | | — | | | 1,320,000 |
Stock-based compensation | | — | | | — | | | 81,249 | | | — | | | — | | | 81,249 |
Contributions | | — | | | — | | | — | | | — | | | 94,260 | | | 94,260 |
Distributions | | — | | | — | | | — | | | — | | | (2,141,198) | | | (2,141,198) |
Net loss | | — | | | — | | | — | | | (412,186,266) | | | (10,722,749) | | | (422,909,015) |
Balance at September 30, 2022 | | 649,770,069 | | $ | 649,770 | | $ | 458,471,081 | | $ | (348,635,730) | | $ | 22,042,881 | | $ | 132,528,002 |
(Continued)
See accompanying notes to the unaudited condensed consolidated financial statements.
6
NUTEX HEALTH INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
(UNAUDITED)
| | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-in | | Accumulated | | Noncontrolling | | Total | |||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Interests |
| Equity | |||||
| | | | | | | | | | | | | | | | | |
Balance as of December 31, 2022 | | 43,348,256 | | $ | 43,348 | | $ | 459,105,278 | | $ | (363,285,925) | | $ | 24,464,699 | | $ | 120,327,400 |
Deconsolidation of Real Estate Entity | | — | | | — | | | — | | | — | | | (4,258,133) | | | (4,258,133) |
Common stock issued for exercise of warrants | | 46,819 | | | 47 | | | (47) | | | — | | | — | | | — |
Common stock issued to Apollo Medical Holdings, Inc. | | 66,667 | | | 67 | | | 1,899,933 | | | — | | | — | | | 1,900,000 |
Contributions | | — | | | — | | | — | | | — | | | 28,000 | | | 28,000 |
Distributions | | — | | | — | | | — | | | — | | | (1,537,141) | | | (1,537,141) |
Net loss | | — | | | — | | | — | | | (5,147,279) | | | (1,774,693) | | | (6,921,972) |
Balance at March 31, 2023 | | 43,461,742 | | $ | 43,462 | | $ | 461,005,164 | | $ | (368,433,204) | | $ | 16,922,732 | | $ | 109,538,154 |
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| | Common Stock | | Additional Paid-in | | Retained Earnings | | Noncontrolling | | Total | ||||||||||||||||||||||||
| | Shares |
| Amount |
| Capital |
| (Accumulated Deficit) |
| Interests |
| Equity | ||||||||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||||||||||
Balance at January 1, 2023 | | 650,223,840 | | $ | 650,224 | | $ | 458,498,402 | | $ | (363,285,925) | | $ | 24,464,699 | | $ | 120,327,400 | |||||||||||||||||
Deconsolidation of Real Estate Entity | | — | | — | | — | | | — | | (4,258,133) | | (4,258,133) | |||||||||||||||||||||
Common stock issued for exercise of warrants | | 702,285 | | 702 | | (702) | | | — | | — | | — | |||||||||||||||||||||
Common stock issued to Apollo Medical Holdings, Inc. | | 1,000,000 | | 1,000 | | 1,899,000 | | | — | | — | | 1,900,000 | |||||||||||||||||||||
Contributions | | — | | — | | — | | | — | | 28,000 | | 28,000 | |||||||||||||||||||||
Balance at December 31, 2023 | | 45,111,994 | | $ | 45,112 | | $ | 470,480,617 | | $ | (409,072,539) | | $ | 17,652,916 | | $ | 79,106,106 | |||||||||||||||||
Common stock issued for Employee Stock Purchase Plan | | 7,462 | | 8 | | 19,018 | | — | | — | | 19,026 | ||||||||||||||||||||||
Common stock issuance | | 4,444,444 | | 4,444 | | 1,536,499 | | — | | — | | 1,540,943 | ||||||||||||||||||||||
Debt conversion to common stock | | 118,243 | | 118 | | 320,570 | | — | | — | | 320,688 | ||||||||||||||||||||||
Stock-based compensation | | — | | — | | 49,167 | | — | | — | | 49,167 | ||||||||||||||||||||||
Vesting of Restricted Stock Units | | 12,981 | | 13 | | (13) | | — | | — | | — | ||||||||||||||||||||||
Reverse stock split adjustment | | 24,251 | | 24 | | (24) | | — | | — | | — | ||||||||||||||||||||||
Distributions | | — | | — | | — | | | — | | (1,537,141) | | (1,537,141) | | — | | — | | — | | — | | (481,293) | | (481,293) | |||||||||
Net loss | | — | | | — | | | — | | | (5,147,279) | | | (1,774,693) | | | (6,921,972) | | — | | | — | | | — | | | (364,075) | | | (178,412) | | | (542,487) |
Balance at March 31, 2023 | | 651,926,125 | | 651,926 | | 460,396,700 | | | (368,433,204) | | 16,922,732 | | 109,538,154 | |||||||||||||||||||||
Common stock issued for exercise of warrants | | 566,042 | | 566 | | (566) | | | — | | — | | — | |||||||||||||||||||||
Debt conversion to common stock | | 8,035,737 | | 8,035 | | 3,224,404 | | | — | | — | | 3,232,439 | |||||||||||||||||||||
Stock-based compensation | | 214,720 | | 215 | | 249,430 | | | — | | — | | 249,645 | |||||||||||||||||||||
Contributions | | — | | — | | — | | | — | | 621,550 | | 621,550 | |||||||||||||||||||||
Distributions | | — | | — | | — | | | — | | (1,149,163) | | (1,149,163) | |||||||||||||||||||||
Net loss | | — | | | — | | | — | | | (3,479,047) | | | (787,399) | | | (4,266,446) | |||||||||||||||||
Balance at June 30, 2023 | | 660,742,624 | | 660,742 | | 463,869,968 | | | (371,912,251) | | 15,607,720 | | 108,226,179 | |||||||||||||||||||||
Debt conversion to common stock | | 7,427,606 | | 7,428 | | 1,911,643 | | | — | | — | | 1,919,071 | |||||||||||||||||||||
Stock-based compensation | | — | | — | | 49,167 | | | — | | — | | 49,167 | |||||||||||||||||||||
Common stock issued for acquisition | | 2,541,511 | | 2,542 | | 747,458 | | | — | | — | | 750,000 | |||||||||||||||||||||
Warrants issued with convertible debt | | — | | — | | 133,484 | | | — | | — | | 133,484 | |||||||||||||||||||||
Distributions | | — | | — | | — | | | — | | (1,649,228) | | (1,649,228) | |||||||||||||||||||||
Net loss | | — | | | — | | | — | | | (5,542,391) | | | 1,018,451 | | | (4,523,940) | |||||||||||||||||
Balance at September 30, 2023 | | 670,711,741 | | $ | 670,712 | | $ | 466,711,720 | | $ | (377,454,642) | | $ | 14,976,943 | | $ | 104,904,733 | |||||||||||||||||
Balance at March 31, 2024 | | 49,719,375 | | $ | 49,719 | | $ | 472,405,834 | | $ | (409,436,614) | | $ | 16,993,211 | | $ | 80,012,150 |
See accompanying notes to the unaudited condensed consolidated financial statements.
76
NUTEX HEALTH INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| | | | | | | | | | | | |
| | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||
|
| 2023 |
| 2022 |
| 2024 |
| 2023 | ||||
Cash flows from operating activities: | | | | | | | | | | | | |
Net loss | | $ | (15,712,358) | | $ | (422,081,034) | | $ | (542,487) | | $ | (6,921,972) |
Adjustments to reconcile net loss to net cash from operating activities: |
| | | | | |
| | | | | |
Depreciation and amortization |
| | 12,908,848 | | | 9,859,513 |
| | 4,186,202 | | | 3,993,747 |
Impairment of goodwill | | | - | | | 398,135,038 | ||||||
Gain on warrant liability | | | (2,600,747) | | | - | ||||||
Amortization of debt issuance costs | | | - | | | 6,738 | ||||||
Stock-based compensation expense | | | 2,198,812 | | | 135,415 | | | 49,167 | | | 1,900,000 |
Deferred tax expense (benefit) |
| | (2,068,530) | | | 3,375,106 | ||||||
Deferred tax benefit |
| | (95,407) | | | (910,659) | ||||||
Debt accretion expense |
| | 1,251,867 | | | 1,719,572 |
| | 365,104 | | | - |
Loss on lease termination | | | 58,210 | | | - | | | - | | | 58,211 |
Non-cash lease expense | | | 89,338 | | | 18,775 | ||||||
Non-cash lease expense (income) | | | (102,609) | | | 40,545 | ||||||
Changes in operating assets and liabilities, net of the effects of acquisitions: | | | | | | | | | | | | |
Accounts receivable | | | 4,444,706 | | | 52,921,095 | | | (2,908,944) | | | 6,620,249 |
Accounts receivable - related party |
| | (949,408) | | | 1,846,887 |
| | (61,779) | | | (100) |
Inventories | | | 850,569 | | | (399,198) | | | 415,098 | | | 47,840 |
Prepaid expenses and other current assets |
| | (3,771,946) | | | (5,658,746) |
| | 795,923 | | | 1,040,753 |
Accounts payable |
| | (6,015,250) | | | 4,147,170 |
| | (1,681,291) | | | (8,565,577) |
Accounts payable - related party | | | 2,228,527 | | | (630,490) | | | 474,765 | | | 9,636 |
Accrued expenses and other current liabilities | | | 7,519,285 | | | 2,712,011 | | | 4,757,864 | | | 3,732,602 |
Net cash from operating activities | | | 3,032,670 | | | 46,101,114 | | | 3,050,859 | | | 1,052,013 |
|
| | | | | |
| | | | | |
Cash flows from investing activities: |
| | | | | |
| | | | | |
Acquisitions of property and equipment |
| | (10,322,487) | | | (22,512,464) |
| | (733,323) | | | (4,376,983) |
Payments for acquisitions of businesses, net of cash acquired | | | (743,837) | | | - | ||||||
Acquired cash in reverse acquisition with Clinigence | | | - | | | 12,716,228 | ||||||
Cash related to deconsolidation of Real Estate Entities | | | (1,039,157) | | | (2,421,212) | | | - | | | (1,039,157) |
Net cash from investing activities | | | (12,105,481) | | | (12,217,448) | | | (733,323) | | | (5,416,140) |
| | | | | | | | | | | | |
Cash flows from financing activities: | | | | | | | | | | | | |
Proceeds from lines of credit | | | 2,340,911 | | | 2,592,714 | | | - | | | 49,414 |
Proceeds from notes payable | | | 16,952,905 | | | 10,126,130 | | | 2,915,000 | | | 7,551,506 |
Proceeds from convertible debt | | | 891,000 | | | - | ||||||
Repayments of lines of credit | | | (1,592,714) | | | (72,055) | | | (594,548) | | | - |
Repayments of notes payable | | | (10,557,758) | | | (4,720,737) | | | (4,386,398) | | | (2,209,678) |
Repayments of finance leases |
| | (2,704,082) | | | (923,321) |
| | (968,434) | | | (936,703) |
Common stock issued for exercise of warrants |
| | - | | | 4,119,141 | ||||||
Common stock issued for exercise of options | | | - | | | 644,974 | ||||||
Proceeds from common stock issuance, net issuance costs | | | 9,202,500 | | | - | ||||||
Members' contributions | | | 649,550 | | | 4,825,377 | | | - | | | 28,000 |
Members' distributions | | | (4,335,532) | | | (49,973,374) | | | (481,293) | | | (1,537,141) |
Net cash from financing activities | | | 1,644,280 | | | (33,381,151) | | | 5,686,827 | | | 2,945,398 |
Net change in cash and cash equivalents | | | (7,428,531) | | | 502,515 | | | 8,004,363 | | | (1,418,729) |
Cash and cash equivalents - beginning of the period | | | 34,255,264 | | | 36,118,284 | | | 22,002,056 | | | 34,255,264 |
Cash and cash equivalents - end of the period | | $ | 26,826,733 | | $ | 36,620,799 | | $ | 30,006,419 | | $ | 32,836,535 |
See accompanying notes to the unaudited condensed consolidated financial statements.
87
NUTEX HEALTH INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 – Organization and Operations
Nutex Health Inc. (“Nutex Health” or the “Company”), is a physician-led, healthcare services and operations company with 2221 hospital facilities in eightnine states (hospital division), and a primary care-centric, risk-bearing population health management division. Our hospital division implements and operates different innovative health care models, including micro-hospitals, specialty hospitals and hospital outpatient departments (“HOPDs”). The population health management division owns and operates provider networks such as independent physician associations (“IPAs”) and offers a cloud-based proprietary technology platform to IPAs which aggregates clinical and claims data across multiple settings, information systems and sources to create a holistic view of patients and providers.
We employ approximately 800 full time employees, contract 230 doctors at our facilities and partner with over 900 physicians.1,700 physicians within our networks. Our corporate headquarters is based in Houston, Texas. We were incorporated on April 13, 2000 in the state of Delaware.
Merger of Nutex Health Holdco LLC and Clinigence Holdings, Inc. On April 1, 2022, the merger (the “Merger”) of Nutex Health Holdco LLC and Clinigence Holdings, Inc. (“Clinigence”) was completed pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) entered on November 23, 2021 between Clinigence, Nutex Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of Clinigence, Nutex, Micro Hospital Holding LLC (solely for the purposes of certain sections of the Merger Agreement), Nutex Health Holdco LLC and Thomas Vo, M.D., solely in his capacity as the representative of the equity holders of Nutex Health Holdco LLC.
In connection with the Merger Agreement, Nutex Health Holdco LLC entered into certain Contribution Agreements with holders of equity interests (“Nutex Owners”) of subsidiaries and affiliates (the “Nutex Subsidiaries”) pursuant to which such Nutex Owners agreed to contribute certain equity interests in the Nutex Subsidiaries to Nutex Health Holdco LLC in exchange for specified equity interests in Nutex Health Holdco LLC (collectively, the “Contribution Transaction”). Nutex owners having ownership interests representing approximately 84% of the agreed upon aggregate equity value of the Nutex Subsidiaries, agreed to contribute all or a portion of their equity interests, as applicable.
Pursuant to the Merger Agreement, each unit representing an equity interest in Nutex Health Holdco LLC issued and outstanding immediately prior to the effective time of the Merger but after the Contribution Transaction (collectively, the “Nutex Membership Interests”) was converted into the right to receive 3.571428575 shares of common stock of Clinigence, or an aggregate of 592,791,712 shares of common stock of Clinigence.
After completing the merger, Clinigence was renamed Nutex Health Inc.
Reverse Stock Split.
The Company held its annual meeting of stockholders on June 29, 2023, where the Company’s stockholders approved a reverse stock split at a ratio within a range of 1-for-2 and 1-for-15 and granted the Company’s Board of Directors the discretion to determine the timing and ratio of the split within such range. This approval is valid through June 29, 2024.
On April 1, 2024, the Company’s Board of Directors determined to effect the reverse stock split of the common stock at a 1-for-15 ratio (the “Reverse Stock Split”) and approved the filing of a Certificate of Amendment (the “Certificate of Amendment”) to the Second Amended and Restated Certificate of Incorporation of the Company to effect the Reverse Stock Split.
On April 9, 2024, the Company filed the Certificate of Amendment with the Delaware Secretary of State to effect the Reverse Split, effective at 11:59 p.m. Eastern Time on April 9, 2024 (the “Effective Time”). The Company’s common stock began trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market at the open of the markets on
8
April 10, 2024. The Reverse Stock Split was implemented for the purpose of regaining compliance with the minimum bid price requirement for continued listing of the Company’s common stock on the Nasdaq Capital Market.
As a result of the Reverse Stock Split, the number of shares of common stock outstanding was reduced from 745,426,858 shares to 49,719,375 shares, inclusive of whole shares issued for fractional shares, and the number of authorized shares of common stock remains 950 million shares.
Unless otherwise indicated, all authorized, issued, and outstanding stock and per share amounts contained in the accompanying condensed consolidated financial statements have been adjusted to reflect the 1-for-15 Reverse Stock Split for all prior periods presented. Proportionate adjustments for the Reverse Stock Split were made to the exercise prices and number of shares issuable under the Company’s equity incentive plans, and the number of shares underlying outstanding equity awards, as applicable. See Note 18 for information and disclosures relating to adjustments related to the Reverse Stock Split.
Note 2 - Summary of Significant Accounting Policies
Basis of presentation. These financial statements present the Company’s consolidated financial condition and results of operations including those of majority-owned subsidiaries and variable interest entities (“VIEs”) for which we are the primary beneficiary.
The hospital division includes our healthcare billing and collections organization and hospital entities. In addition, we have financial and operating relationships with multiple professional entities (the “Physician LLCs”) and real estate entities (the “Real Estate Entities”). The Physician LLCs employ the doctors who work in our hospitals. These entities are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to the Physician LLCs in the event of cash shortages and received the benefit of their cash surpluses.
The Real Estate Entities own the land and hospital buildings which are leased to our hospital entities. The Real Estate Entities have mortgage loans payable to third parties which are collateralized by the land and buildings. We consolidate the Real Estate Entities as VIEs in instances where our hospital entities are guarantors or co-borrowers under their
9
outstanding mortgage loans. Since the second quarter of 2022, we have deconsolidated 18 Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.
The Company has no direct or indirect ownership interest in the consolidated Physician LLCs or Real Estate Entities, so 100% of the equity for these entities is shown as noncontrolling interests in the consolidated balance sheets and statements of operations. Many of the Physician LLCs and Real Estate Entities are owned in part and in some cases controlled by related parties including members of our executive management team.
The population health management division includes our management services organizations and a healthcare information technology company providing a cloud-based platform for healthcare organizations. In addition, Associated Hispanic Physicians of So. California (“AHISP”), an IPA entity that is not owned by us, but is consolidated as a VIE of our wholly-owned subsidiary AHP Health Management Services Inc. (“AHP”) sincebecause AHP is the primary beneficiary of its operations and has 100% control of AHISP’s operations through its management services agreement with AHISP.
All significant intercompany balances and transactions have been eliminated in consolidation.
Interim financial statements. These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements include all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods presented. These interim financial statements should be read together with the consolidated financial statements and notes thereto included in our audited financial statements for the years ended December 31, 20222023 and 2021.2022.
9
Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include (i) estimates of net revenue and accounts receivable, (ii) fair value of acquired assets and liabilities in business combinations and (iii) impairment of long-lived assets and goodwill. Actual results could differ from those estimates.
Cash and cash equivalents. The Company considers all highly liquid investments with an original maturity of three months or less to be cash and cash equivalents. The Company has cash amounts, that were at times material, held in covered banking institutions in excess of the insured amounts, but does not deem the risk of loss to be likely. The Company has $4.1 million in restricted cash as of March 31, 2024. The amounts included in restricted cash represent those required to be set aside either by note payable agreement or compensating balance requirements.
Fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We classify fair value balances based on the classification of the inputs used to calculate the fair value of a transaction. The three levels related to fair value measurements are as follows:
Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities.
Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The estimated fair value of accounts receivable, accounts payable, accrued expenses and notes payable approximate the carrying amount due to the relatively short maturity or time to maturity of these instruments. Accounts receivable and payable with related parties may not be arms-length transactions and therefore, may not reflect fair value.
10
Except for the initial valuation of intangible assets in connection with the reverse business combination with Clinigence discussed in Note 3 and the impairment of goodwill discussed above, thereThere were no assets or liabilities that were re-measured at fair value on a non-recurring basis during the periods presented.
Convertible debt. The Company accounts for convertible debt that does not meet the criteria for equity treatment as a liability reported at its amortized cost. The Company classifies convertible debt based on the repayment terms and conditions. Any original issue discounts and costs incurred upon issuance of the convertible debt are amortized to interest expense over the debt term. Convertible debt is also analyzed for the existence of embedded derivatives, which may require bifurcation from the convertible debt and separate accounting treatment.
Segment reporting. A public company is required to report descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of similar operating segments into a single reportable operating segment is permitted if the businesses have similar economic characteristics and meet established criteria. The Company operates three reportable segments – the hospital division, the population health management division and the real estate division. The real estate division is comprised of the Real Estate Entities.
Revision of Prior Period Financial Statements. As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2022, we corrected the reported amount of goodwill related to our Merger with Clinigence. We evaluated these matters in accordance with SAB No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and determined that their related impact was not material to our financial statements for any prior annual or interim period. We will correct previously reported financial information for these immaterial matters in our future filings, as applicable. A summary of the revisions to our prior period financial statements is presented below:
| | | | | | | | | |
| | Nine months ended September 30, 2022 | |||||||
| | | As | | | | | | As |
| | | Reported | | | Revisions | | | Revised |
Revised statements of operations | | | | | | | | | |
Net income (loss) | | $ | (432,412,571) | | $ | 10,331,537 | | $ | (422,081,034) |
Less: net income (loss) attributable to noncontrolling interests | | | (12,052,765) | | | - | | | (12,052,765) |
Net income (loss) attributable to Nutex Health Inc. | | $ | (420,359,806) | | $ | 10,331,537 | | $ | (410,028,269) |
11
| | | | | | | | | |
| | Three months ended September 30, 2022 | |||||||
| | | As | | | | | | As |
| | | Reported | | | Revisions | | | Revised |
Revised statements of operations | | | | | | | | | |
Net income (loss) | | $ | (433,240,552) | | $ | 10,331,537 | | $ | (422,909,015) |
Less: net income (loss) attributable to noncontrolling interests | | | (10,722,749) | | | - | | | (10,722,749) |
Net income (loss) attributable to Nutex Health Inc. | | $ | (422,517,803) | | $ | 10,331,537 | | $ | (412,186,266) |
| | | | | | | | | |
Revised statements of changes in equity | | | | | | | | | |
Balance at June 30, 2022 | | | | | | | | | |
Common stock | | $ | 649,770 | | $ | - | | $ | 649,770 |
Additional paid-in capital | | | 468,802,618 | | | 10,331,537 | | | 458,471,081 |
Retained earnings | | | (358,967,267) | | | (10,331,537) | | | (348,635,730) |
Noncontrolling interest | | | 22,042,881 | | | - | | | 22,042,881 |
Total at September 30, 2022 | | $ | 132,528,002 | | $ | - | | $ | 132,528,002 |
Reclassifications. Financial statements presented for prior periods include reclassifications that were made to conform to the current year presentation.
Recent accounting pronouncements. There are no new accounting pronouncements that are expected to have a material impact on the condensed consolidated financial statements.
Note 3 – Business Combinations
Merger of Nutex Health Holdco LLC and Clinigence Holdings, Inc.
The merger of Nutex Health Holdco LLC and Clinigence was completed pursuant to the Merger Agreement on April 1, 2022. As discussed above, the merger was accounted for as a reverse business combination with Nutex Health Holdco LLC as the accounting acquirer and Clinigence as the accounting acquiree.
The fair value of purchase consideration transferred on the closing date includes the value of the shares of the combined company owned by Clinigence shareholders at closing of the merger and the fair value of Clinigence’s outstanding and exercisable common stock options and warrants as determined using a Black-Scholes valuation model. The fair value per share of Clinigence’s common stock was $6.40; its traded closing price on April 1, 2022.
Total consideration in the merger is shown below:
| | | |
Fair value of Clinigence common shares at $6.40 per share (50,961,109 shares) | | $ | 326,151,098 |
Fair value of Clinigence outstanding common stock options and warrants | | | 110,543,915 |
Total consideration | | $ | 436,695,013 |
1210
The following is the allocation of the total purchase consideration to acquired assets and assumed liabilities including the fair value of identified intangible assets as determined by independent valuation (a level 3 measurement):
| | | |
Cash and cash equivalents | | $ | 12,716,228 |
Accounts receivable, net | | | 2,127,076 |
Prepaid expenses and other current assets | | | 127,384 |
Property and equipment, net | | | 14,793 |
Right of use asset, net | | | 86,989 |
Intangible assets, net | | | 21,668,000 |
Goodwill | | | 414,006,378 |
Accounts payable and accrued expenses | | | (3,966,100) |
Deferred revenue | | | (92,111) |
Convertible notes payable, net | | | (3,771,858) |
Term note payable | | | (674,526) |
Lease liability | | | (91,238) |
Deferred tax liability | | | (5,456,002) |
Assets acquired | | $ | 436,695,013 |
We made a retrospective change in the valuation of options and warrants assumed by us as part of the total consideration in the merger. This change reduced the fair value of consideration paid and goodwill by $10.3 million.
The intangible assets denoted above each have definite lives. These intangible assets are being amortized over their estimated useful lives of 5 to 16 years. Goodwill arising from the reverse business combination is not tax-deductible. We recognized a non-cash impairment charge of $398.1 million in 2022 to reduce the carrying amount of goodwill arising in the reverse business combination.
The results of operations of Clinigence have been included in the Company’s consolidated financial statements since the April 1, 2022 merger date. We expensed $3.9 million of acquisition-related costs for the merger in 2022. These costs consisted principally of legal, accounting and other professional fees for the transaction.
Supplemental Pro Forma Information – The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the merger with Clinigence had been completed on the date indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that management believes are reasonable under the circumstances.
The supplemental pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisition had occurred on January 1, 2022, to give effect to certain events that management believes to be directly attributable to the acquisition. These pro forma adjustments primarily include an increase to depreciation and amortization expense that would have been recognized due to acquired tangible and intangible assets.
13
The supplemental pro forma financial information is as follows:
| | | |
| | Nine Months Ended September 30, | |
|
| 2022 | |
| | | |
Revenue | | $ | 171,779,408 |
Net loss attributable to Nutex Health Inc. | | | (434,709,956) |
Basic earnings per share | | | (0.69) |
Diluted earnings per share | | | (0.69) |
The pro forma income above includes $14.2 million of one-time stock-based compensation expense related to the merger transaction. Pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the period presented and is not intended to be a projection of future results.
2023 Acquisitions
On August 1, 2023, the Company acquired two Florida based IPAs for $0.8 million in cash, $0.8 million in Company shares and contingent consideration of up to $0.4 million in cash and $0.5 million in Company shares if the acquired IPAs meet Medicare Lives thresholds in 2024 and 2025. Additionally, we will pay earn-out consideration if certain financial targets are achieved by year end December 31, 2023. Substantially all of the total purchase consideration was allocated to goodwill and identified intangible assets. The acquired IPAs are reported within our Population Health Management division. Management considers this acquisition to be immaterial.
Note 43 – Revenue
We disaggregate revenue from contracts with customers into types of services or products, consistent with our reportable segments, as follows:
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 |
| 2024 |
| 2023 | ||||||
Hospital Division: | | | | | | | | | | | | | | | | | | |
Net patient service revenue | | $ | 54,759,158 | | $ | 20,840,305 | | $ | 154,593,033 | | $ | 150,866,044 | | $ | 59,823,298 | | $ | 48,839,332 |
Management fees | | | (173,895) | | | 404,000 | | | 892,197 | | | 1,110,182 | | | 206,071 | | | 448,832 |
Total Hospital Division revenue | | | 54,585,263 | | | 21,244,305 | | | 155,485,230 | | | 151,976,226 | | | 60,029,369 | | 49,288,164 | |
| | | | | | | | | | | | | | | | | | |
Population Health Management Division: | | | | | | | | | | | | | | | | | | |
Capitation revenue, net | | | 7,234,927 | | | 4,888,094 | | | 19,503,063 | | | 10,038,436 | | | 6,699,623 | | 6,051,574 | |
Management fees | | | 670,107 | | | 1,701,719 | | | 2,143,260 | | | 2,704,519 | | | 379,828 | | 719,626 | |
SaaS revenue | | | 232,675 | | | 560,940 | | | 845,290 | | | 851,052 | | | 344,967 | | | 270,053 |
Total Population Health Management Division revenue | | | 8,137,709 | | | 7,150,753 | | | 22,491,613 | | | 13,594,007 | | | 7,424,418 | | | 7,041,253 |
Total revenue | | $ | 62,722,972 | | $ | 28,395,058 | | $ | 177,976,843 | | $ | 165,570,233 | | $ | 67,453,787 | | $ | 56,329,417 |
Net patient service revenue. We receive payment for facility services rendered by us from federal agencies, private insurance carriers, and patients. The Physician LLCs receive payment for doctor services from these same sources. On average, greater than 90% of our net patient service revenue is paid by insurers, federal agencies, and other non-patient third parties. The remaining revenues arerevenue is paid by our patients in the form of copays, deductibles, and self-payment. We generally operate as an out-of-network provider and, as such, do not have negotiated reimbursement rates with insurance companies.
14
TableThe Company recorded approximately $0.7 million of Contentsnet revenue for cash collections during the three months ended March 31, 2024 for services that were previously provided. The Company had previously reserved for this amount as uncollectible.
The following tables present the allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage:
| | | | | | | | | | | | | | | ||||
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | | 2024 |
| 2023 | ||||||
| | | | | | | | | | | | | | | | | | |
Insurance | | | 92% | | | 91% | | | 93% | | | 94% | | | 91% | | 93% | |
Self pay | | | 5% | | | 7% | | | 4% | | | 5% | | | 6% | | 4% | |
Workers compensation | |
| 2% | | | 1% | |
| 2% | | | 1% | |
| 2% | | 1% | |
Medicare/Medicaid | | | 1% | | | 1% | | | 1% | | | 0% | | | 1% | | | 2% |
Total | | | 100% | | | 100% | | | 100% | | | 100% | | | 100% | | | 100% |
Contract balances. Cash payments for SaaS-based subscriptions received in advance of the satisfaction of our performance obligations are reported as deferred revenue and subsequently recognized as revenue 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. We primarily invoice our customers on a monthly basis and do not provide any refunds, rights of return, or warranties. Deferred revenue is presented as current liabilities and totaled $0.1 million as of September 30, 2023March 31, 2024 and December 31, 2022.2023. We expect to recognize revenue for these amounts within the next twelve months.
11
Note 54 - Property and Equipment
The principal categories of property and equipment, net are summarized as follows:
| | | | | | | | | | | | | | | | |
| Useful | | September 30, | | December 31, | Useful | | March 31, | | December 31, | ||||||
| Life (years) | | 2023 |
| 2022 | Life (years) | | 2024 |
| 2023 | ||||||
| | | | | | | | | | | | | | | | |
Buildings and improvements | | 39 | | $ | 8,968,439 | | $ | 8,521,996 | | 39 | | $ | 18,926,097 | | $ | 18,947,818 |
Land | | - |
| | 4,401,888 |
| | 3,721,576 | | - |
| | 4,401,888 |
| | 4,401,888 |
Leasehold improvements | | 10-39 |
| | 28,855,241 |
| | 28,855,239 | | 10-39 |
| | 27,778,203 |
| | 27,606,383 |
Construction in progress | | - |
| | 16,356,304 |
| | 19,389,329 | | - |
| | 2,733,511 |
| | 3,776,138 |
Medical equipment | | 10 |
| | 34,163,757 |
| | 28,744,664 | | 10 |
| | 33,946,901 |
| | 33,519,026 |
Office furniture and equipment | | 7 |
| | 3,333,445 |
| | 2,860,680 | | 7 |
| | 3,886,505 |
| | 3,698,874 |
Computer hardware and software | | 5 | | | 4,204,638 | | | 1,713,434 | | 5 | | | 6,999,058 | | | 6,066,520 |
Vehicles | | 5 |
| | 135,590 |
| | 135,590 | | 5 |
| | 145,090 |
| | 135,590 |
Signage | | 10 |
| | 1,429,628 |
| | 1,163,722 | | 10 |
| | 1,690,501 |
| | 1,576,475 |
Total cost | | |
| | 101,848,930 |
| | 95,106,230 | | |
| | 100,507,754 |
| | 99,728,712 |
Less: accumulated depreciation | | |
| | (16,352,318) | | | (13,011,878) | | |
| | (19,937,049) | | | (18,341,063) |
Total property and equipment, net | | | | $ | 85,496,612 | | $ | 82,094,352 | | | | $ | 80,570,705 | | $ | 81,387,649 |
We deconsolidated 17consolidate two Real Estate Entities in the second quarter of 2022 and one Real Estate Entity in the first quarter of 2023.Company. Refer to Note 18.
Assets placed into service from construction in progress was $3.2 million at September 30, 2023.17.
Depreciation and amortization of property and equipment for the three months ended September 30,March 31, 2024 and 2023 and 2022 totaled $1.6 million and $1.4 million, respectively, and for the nine months ended September 30, 2023 and 2022 totaled $4.0 million and $2.1$1.1 million, respectively.
15
Note 65 – Intangible Assets and Goodwill
Intangible Assets. The following tables provide detail of the Company’s intangible assets:
| | | | | | | | | | | | | | | | | | | ||||||
| | Gross | | Accumulated | | Net Carrying | | Weighted Average | | Gross | | Accumulated | | Net Carrying | | Weighted Average | ||||||||
September 30, 2023 | | Carrying Amount | | Amortization | | Amount | | Useful Life (in years) | ||||||||||||||||
March 31, 2024 | | Carrying Amount | | Amortization | | Amount | | Useful Life (in years) | ||||||||||||||||
Amortizing intangible assets: | | | | | | | | | | | | | | | | | | | ||||||
Member relationships | | $ | 18,491,000 | | $ | 1,689,899 | | $ | 16,801,101 | | | 15 | | $ | 18,491,000 | | $ | 2,321,267 | | $ | 16,169,733 | | | 15 |
Management contracts | | | 2,021,000 | | 189,469 | | 1,831,531 | | | 16 | | | 2,021,000 | | 252,625 | | 1,768,375 | | | 16 | ||||
Customer contracts | | | 914,000 | | 91,400 | | 822,600 | | | 15 | | | 914,000 | | 121,867 | | 792,133 | | | 15 | ||||
Trademarks | | | 1,425,000 | | 225,049 | | 1,199,951 | | | 7-12 | | | 1,426,795 | | 300,065 | | 1,126,730 | | | 7-12 | ||||
PHP technology | | | 409,000 | | 122,700 | | 286,300 | | | 5 | | | 409,000 | | | 163,600 | | | 245,400 | | | 5 | ||
Indefinite life intangible - license | | | 682,649 | | | - | | | 682,649 | | | - | ||||||||||||
Total | | $ | 23,942,649 | | $ | 2,318,517 | | $ | 21,624,132 | | | | | $ | 23,261,795 | | $ | 3,159,424 | | $ | 20,102,371 | | | |
| | | | | | | | | | | | | | | | | | | | | ||||
December 31, 2022 | | | | | | | | | | | ||||||||||||||
December 31, 2023 | | | | | | | | | | | ||||||||||||||
Amortizing intangible assets: | | | | | | | | | | | | | | | | | | | ||||||
Member relationships | | $ | 16,899,000 | | $ | 844,950 | | $ | 16,054,050 | | | 15 | | $ | 18,491,000 | | $ | 2,015,772 | | $ | 16,475,228 | | | 15 |
Management contracts | | | 2,021,000 | | 94,734 | | 1,926,266 | | | 16 | | | 2,021,000 | | 221,047 | | 1,799,953 | | | 16 | ||||
Customer contracts | | | 914,000 | | 45,700 | | 868,300 | | | 15 | | | 914,000 | | 106,633 | | 807,367 | | | 15 | ||||
Trademarks | | | 1,425,000 | | 112,525 | | 1,312,475 | | | 7-12 | | | 1,426,795 | | 262,557 | | 1,164,238 | | | 7-12 | ||||
PHP technology | | | 409,000 | | 61,350 | | 347,650 | | | 5 | | | 409,000 | | | 143,150 | | | 265,850 | | | 5 | ||
Indefinite life intangible - license | | | 682,649 | | | - | | | 682,649 | | | - | ||||||||||||
Total | | $ | 22,350,649 | | $ | 1,159,259 | | $ | 21,191,390 | | | | | $ | 23,261,795 | | $ | 2,749,159 | | $ | 20,512,636 | | | |
Amortization of intangible assets for the three months ended September 30,March 31, 2024 and 2023 and 2022 totaled $0.4 million each, and for the nine months ended September 30, 2023 and 2022 totaled $1.2 million and $0.4 million, respectively.each.
Goodwill. At September 30, 2023Goodwill totaled $17.1 million at March 31, 2024 and December 31, 2022, Goodwill totaled $17.9 million and $17.0 million, respectively.2023.
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Note 76 – Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| | | | | | | | | | | | |
|
| September 30, | | December 31, |
| March 31, | | December 31, | ||||
| | 2023 |
| 2022 | | 2024 |
| 2023 | ||||
| | | | | | | | | | | | |
Accrued wages and benefits | | $ | 7,754,090 | | $ | 4,235,167 | | $ | 6,567,759 | | $ | 6,590,710 |
Accrued medical insurance claims | | | 1,902,615 | | | 1,865,280 | ||||||
Accrued taxes | | | 1,510,191 | | | 405,352 | ||||||
Accrued other |
| | 7,019,183 | | | 2,005,646 |
| | 7,713,569 | | | 4,093,954 |
Total accrued expenses and other current liabilities | | $ | 14,773,273 | | $ | 6,240,813 | | $ | 17,694,134 | | $ | 12,955,296 |
16
Note 87 – Debt
The Company’s outstanding debt is shown in the following table:
| | | | | | | | | | | | | | | | | ||
| Maturity | | Interest | | September 30, | | December 31, | Maturity | | Interest | | March 31, | | December 31, | ||||
| Dates | | Rates | | 2023 | | 2022 | Dates | | Rates | | 2024 | | 2023 | ||||
| | | | | | | | | | | | | | | | | ||
Term loans secured by all assets | 01/2024 - 12/2028 | | 4.15 - 7.71% | | $ | 8,555,677 | | $ | 11,341,934 | 04/2024 - 10/2027 | | 4.15 - 7.71% | | $ | 6,610,077 | | $ | 7,030,613 |
Term loans secured by property and equipment | 01/2024 - 10/2028 | | 3.59 - 9.75% | | | 11,216,145 | | | 9,299,197 | 04/2024 - 10/2028 | | 3.59 - 10.00% | | | 9,686,907 | | | 10,562,207 |
Term loan secured by deposits | 04/2024 | | 7.36% | | | 2,915,000 | | | - | |||||||||
Line of credit secured by all assets | 01/2024 - 11/2025 | | 4.00 - 8.00% | | | 3,371,676 | | | 2,623,479 | 04/2024 - 09/2024 | | 4.00 - 9.50% | | | 2,777,128 | | | 3,371,675 |
Term loans of consolidated Real Estate Entities | 10/2023 - 03/2037 | | 2.84 - 5.75% | | | 13,371,325 | | | 15,068,920 | 05/2028 - 03/2037 | | 2.84 - 5.75% | | | 12,715,842 | | | 13,005,019 |
Unsecured convertible term notes | 10/2025 | | 8.00 - 10.00% | | | 990,000 | | | — | 10/2025 | | 8.00 - 10.00% | | | 5,384,990 | | | 5,384,990 |
Pre-paid advance (convertible debt) | 03/2024 | | 0.00% | | | 5,661,124 | | | — | 03/2024 | | 0.00% | | | - | | | 3,078,302 |
Total | | | | | | 43,165,947 | | | 38,333,530 | | | | | | 40,089,944 | | | 42,432,806 |
Less: unamortized issuance costs and discount | | | | | | 845,786 | | | 112,802 | | | | | | 1,616,344 | | | 1,937,676 |
Less: short-term lines of credit | | | | | | 3,371,676 | | | 2,623,479 | | | | | | 2,777,128 | | | 3,371,676 |
Less: current portion of long-term debt | | | | | | 19,644,656 | | | 12,546,097 | | | | | | 9,388,455 | | | 10,808,721 |
Total long-term debt | | | | | $ | 19,303,829 | | $ | 23,051,152 | | | | | $ | 26,308,017 | | $ | 26,314,733 |
Term loans and lines of credit. We have entered into private debt arrangements with banking institutions for the purchase of equipment and to provide working capital and liquidity through cash and lines of credit. Unless otherwise delineated above, these debt arrangements are obligations of Nutex and/or its majority-owned subsidiaries. Consolidated Real Estate Entities have entered into private debt arrangements with banking institutions for purposes of purchasing land, constructing new emergency room facilities and building out leasehold improvements which are leased to our hospital entities. Nutex is a guarantor or, in limited cases, a co-borrower on the debt arrangements of the Real Estate Entities for the periods shown. Since the second quarter of 2022, we have deconsolidated 18 Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.
Certain outstanding debt arrangements require minimum debt service coverage ratios and other financial covenants. At September 30, 2023,March 31, 2024, we were not in compliance with the debt service coverage ratio for one term loan with an outstanding balance of $1.0$0.2 million. This balance has been included in current liabilities. At September 30, 2023,March 31, 2024, we had remaining availability of $1.4$1.2 million under outstanding lines of credit.
13
Pre-Paid Advance Agreement (convertible debt).
On April 11, 2023, the Company entered into a Pre-Paid Advance Agreement (the “PPA”) with YA II PN, Ltd. (“Yorkville”) pursuant to which the Company may request advancesrequested an advance of up to $25.0$15.0 million each from Yorkville (or such greater amount that parties may mutually agree) (each, a “Pre-Paid Advance”) for a total of up to $100 million, which will be purchased by Yorkville at 90% of the face amount. The initial Pre-Paid Advance requested was $25 million, $15 million of which was paid on April 11, 2023, with the remaining $10 million to be paid upon mutual agreement of the parties. During the period ending June 30, 2023, the parties mutually agreed not to fund the remaining $10 million of the initial request. Future Pre-Paid Advances, if any, will range from $5 million to $25 million depending on stock price and volume conditions being met, with an aggregate limitation on Pre-Paid Advances of $100.0 million over an 18-months period. At the request and sole discretion of Yorkville, such Pre-Paid Advances will be correspondingly reduced upon the issuance of our Common Stock to Yorkville at a Purchase Price equal to (a) $1.00 in respect of the initial Pre-Paid Advance, and (b) with respect to each subsequent Pre-Paid Advance the lower of (i) 100% of the volume weighted average prices (“VWAP”) of the Company’s common stock on the trading day immediately preceding the closing of such Pre-Paid Advance or (ii) 92.0% of the average of the two lowest daily VWAP of the shares during the seven trading days immediately prior to each Pre-Paid Advance, subject to a floor price of $0.1851 per share (“Floor Price”). The issuance of the shares of Common Stock under the PPA is subject
17
to certain limitations, including that the aggregate number of shares of Common Stock issued pursuant to the PPA cannot exceed 19.9% of the Company's outstanding shares of Common Stock as of April 11, 2023 (“Exchange Cap”). Additionally, Yorkville may not request issuances of Common Stock with respect to the initial Pre-Paid Advance in excess of $7.5 million in any consecutive 30-day period. Further Yorkville may not request the issuance of Common Stock if such issuance would result in Yorkville (and its affiliates) beneficially owning more than 4.99% of the outstanding shares of the Company. Interest accruesaccrued on the outstanding balance of anythe Pre-Paid Advance at an annual rate equal to 0% subject to an increase to 15% upon events of default described in the PPA. EachThe Pre-Paid Advance has a maturity date of 12 months from the Pre-Paid Advance Date.
The PPA provides that in respect of any Pre-Paid Advance, if the VWAP of shares of Common Stock is less than the Floor Price for at least five trading days during a period of seven consecutive trading days or the Company has issued substantially all of the shares of Common Stock available under the Exchange Cap, then the Company is required to make monthly cash payments of amounts outstanding under any Pre-Paid Advance beginning on the third trading day after the triggering date and continuing on the same day of each successive calendar month until the entire amount of such Pre-Paid Advance balance has been paid or until the payment obligation ceases. Pursuant to the PPA, the monthly payment obligation ceases if the Exchange Cap no longer applies or the VWAP is greater than 120% of the Floor Price for a period of five consecutive trading days, unless a subsequent triggering date occurs.
The Company, at its option, has the right, but not the obligation, to repay early in cash a portion or all amounts outstanding under any Pre-Paid Advance, provided that the VWAP of the Common Stock is less than the Fixed Price during a period of ten consecutive trading days immediately prior to the date on which the Company delivers a notice to Yorkville of its intent and such notice is delivered at least 10 trading days prior to the date on which the Company will make such payment (“Optional Prepayment”). If elected, the Optional Prepayment includes a 6% payment premium (“Payment Premium”). If any Pre-Paid Advances are outstanding and any event of default has occurred, the full amount outstanding under the Pre-Paid Advances plus the Payment Premium, together with interest and other amounts owed in respect thereof, will become, at Yorkville’s election, immediately due and payable in cash.
On April 11, 2023, the Company requested a $15.0 million initial Pre-Paid Advance in accordance with the PPA. The net proceeds of $13.5 million received by the Company from Yorkville reflect a 10% discount of $1.5 million in accordance with the PPA. Additionally, in connection with the PPA, the Company incurred $0.9 million in placement and legal fees, which the Company classifies as debt issuance costs. The discount and the debt issuance costs are reported as a direct deduction from the face amount of the PPA and are amortized monthly based on the effective interest rate method. The amortization of the discount and debt issuance costs are reported as interest expense in the condensed consolidated statements of operations.
Since the receiptAs a result of the initial Pre-Paid Advance, 15.5the Company (i) issued 1.5 million shares of Commoncommon stock to Yorkville (23.1 million prior to Reverse Stock have been issued to Yorkville,Split), reducing the principal of initial Pre-Paid Advance by $5.9 million. Additionally, on June 22, 2023, the Companyto $7.3 million, (ii) made an Optional PrepaymentPrepayments of $3.7$8.2 million in accordance with the PPA, consisting of $3.5$7.7 million of principal and $0.2$1.0 million attributed to the Payment Premium. As of September 30, 2023,Premium and (iii) paid off in full the net carrying amountremaining outstanding balance of the PPA is $5.1 millionon January 30, 2024 and is presented in current portion of long-term debt within the condensed consolidated balance sheet as of September 30, 2023. The net carrying amount of $5.1 million is composed of $5.6 million in principal and $(0.5) million in discount and debt issuance costs.
Interest expense incurred underparties terminated the Yorkville PPA for the three and nine months ended September 30, 2023 was $0.5 million and $2.2 million, respectively, which was the result of the amortization and reductions due to conversions and repayments. The effective interest rate for the PPA for the three and nine months ended September 30, 2023 was 19.4%.
As of September 30, 2023, there were 114.3 million of additional shares of Common Stock issuable under the Exchange Cap.on February 15, 2024.
September 2023 Convertible Debt Issuance. On
From September 2023 to December 2023, the Company commencedconducted a private offering (the “September 2023 Private Offering”of convertible notes (“Unsecured Convertible Term Notes”) of up to $15.0 million pursuant to which the Company will issue investment units (the “Units”and six-year warrants (“Warrants”) at $50,000 per Unit to accredited investors (the “Unit Holder”“Holders”) as defined in Rule 501 under the 1933 Act. Each Unit consists of (a) an interest-bearing unsecured convertible promissory note (the “UnsecuredAct and issued Unsecured Convertible Term
18
Notes”) in the principal amount of $50,000 Notes convertible into an aggregate of 897,500 shares (13,462,500 prior to Reverse Stock Split) of common stock at a conversion price of $0.40$6.00 per share ($0.40 prior to Reverse Stock Split) and (b) a six-year warrant (the “Warrants”)Warrants to purchase up to 62,500an aggregate of 448,750 shares of common stock (6,731,250 prior to Reverse Stock Split) at an exercise price of $0.40$6.00 per share.share ($0.40 prior to Reverse Stock Split). We also issued Warrants for the purchase of 269,250 shares (4,038,750 prior to Reverse Stock Split) to the placement agent. The Unsecured Convertible Term Notes mature on October 31, 2025 and the Warrants expire on December 31, 2029.
On March 26, 2024, the Company and the Holders agreed to amend the conversion price of the Unsecured Convertible Term Notes and exercise price of the Warrants to $3.00 each ($0.20 prior to Reverse Stock Split), resulting in the Unsecured Convertible Term Notes being convertible into 1,795,000 shares of common stock (26,925,000 prior to Reverse Stock Split), the Warrants exercisable for 897,500 shares of common stock (13,462,500 prior to Reverse Stock Split) and the placement agent Warrants exercisable for 538,500 shares of common stock (8,077,500 prior to Reverse Stock Split).
The Unsecured Convertible Term Notes bear an annual interest rate of 8% if paid in cash or an annual interest rate of 10% if paid in the form of common stock. The payment of interest in the form of common stock is at the discretion of the Company. When paid in common stock, the number of shares is equal to the quotient of the total accrued interest due divided by the last reported sale price of the Company’s common stock on the last complete trading day of such quarter. The Unit Holders have the option, at any time, to convert all or any portion of the unpaid principal and interest outstanding in common stock at the conversion price of $0.40$3.00 per share. If the Company fails to pay the outstanding principal amount and all accrued interest within 30 days of the maturity date, the interest rate payable is adjusted to 12%.
14
The Company appointed Emerson Equity LLC (“Emerson”) as placement agent for the September 2023 Private Offering. Per the Placement Agent Agreement, the Company agrees to pay (i) a cash commission equal to 10% of the gross proceeds from the sale of Units and (ii) warrants to purchase a number of Common Stock equal to 20% of the total number of Units.shares issuable upon conversion or exercise of the Unsecured Convertible Term Notes and Warrants, as applicable.
During the three months ended September 30, 2023, the Company received net cash proceeds of $0.9 million. The net cash proceeds after the placement agent fees were allocated between the convertible debt and warrants based on their relative fair values. The fair valuecarrying amount of the warrantsUnsecured Convertible Term Notes was determined using a Black-Scholes Option Pricing model. Key assumptions included a risk-free interest rate$3.8 million as of 4.60%, historical volatility of 123.8%March 31, 2024 and expected term of the warrants of six years. A total of $0.1 million was recorded to equity for the warrants. The discount on the convertible debt totaled $0.3 million and will be amortized to interest expense over the period until maturity. Theweighted average effective interest rate on the convertible debt is 25.08%21.5%.
Clinigence convertible notes payable. We assumed $5.4 The Unsecured Convertible Term Notes interest expense was $0.3 million principalfor the three months ending March 31, 2024, comprising of convertible notes payable of Clinigence outstanding at the merger date. The convertible notes payable were fully converted into 3,474,430 shares of common stock at a conversion price of $1.55 per share before their maturity on July 31, 2022. Debt discount totaling $1.7$0.2 million was accreted over four months to the maturity date of the convertible notes payable.in amortization expense and $0.1 million in accrued interest expense.
| | | |
Note 98 – Leases
We have entered into hospital property, office and equipment rental agreements with various lessors including related parties. The following tables disclose information about our leases of property and equipment:
| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | ||||
| | | | | | | | | | | | |
Operating lease cost | | $ | 789,877 | | $ | 862,642 | | $ | 2,676,894 | | $ | 1,555,311 |
| | | | | | | | | | | | |
Finance lease cost: | | | | | | | | | | | | |
Amortization of right-of-use assets | | $ | 2,858,223 | | $ | 3,539,969 | | $ | 7,889,533 | | $ | 4,467,633 |
Interest on lease liabilities | | | 3,203,802 | | | 3,770,058 | | | 8,718,643 | | | 4,750,677 |
Total finance lease cost | | $ | 6,062,025 | | $ | 7,310,027 | | $ | 16,608,176 | | $ | 9,218,310 |
19
| | | | | | |
| | Three Months Ended March 31, | ||||
| | 2024 |
| 2023 | ||
| | | | | | |
Operating lease cost | | $ | 644,698 | | $ | 948,515 |
| | | | | | |
Finance lease cost: | | | | | | |
Amortization of right-of-use assets | | $ | 2,225,670 | | $ | 2,484,275 |
Interest on lease liabilities | | | 3,400,227 | | | 2,688,520 |
Total finance lease cost | | $ | 5,625,897 | | $ | 5,172,795 |
Note 109 – Commitments and Contingencies
Litigation. From time to time, the Company, its consolidated subsidiaries or VIEs may be named in various claims and legal actions in the normal course of business. Based upon counsel and management’s opinion, the outcome of such matters is not expected to have a material adverse effect on the consolidated financial statements.
Note 1110 – Stock-based Compensation
In 2022, the Company adopted the Amended and Restated Nutex Health Inc. 2022 Equity Incentive Plan (the “2022 Plan”). The maximum aggregate number of shares that may be issued under the 2022 Plan is 5,000,000333,333 shares subject(5,000,000 prior to increases on January 1st of each calendar year through January 1, 2027 of up to 5% annually at the discretion of the compensation committee of our Board of Directors. A total of 1,248,072 shares of common stock, par value $0.001 per share (“Common Stock”) of the Company were available for issuance under the 2022 Plan at September 30, 2023. Reverse Stock Split). On June 29, 2023, the stockholders of the Company approved the Amended and Restated Nutex Health Inc. 2023 Equity Incentive Plan (the “2023 Plan”), which replaced the 2022 Plan, and an additional 8,751,928583,462 new shares of Common Stock (8,751,928 prior to Reverse Stock Split) were made available for issuance under the 2023 Plan, which replacessubject to annual increases on January 1st of each calendar year through January 1, 2033 of up to 1% of the 2022 Plan.issued and outstanding shares of the Company’s Common Stock on the final day of the preceding calendar year, at the discretion of the compensation committee of our Board of Directors. On September 30, 2023,March 31, 2024, a total of 10,000,000734,263 shares of Common Stock (11,013,943 prior to Reverse Stock Split) were available for issuance under the 2023 Plan.
Awards granted under the 2023 Plan 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.
Obligations for under-construction and ramping hospitals. Under the terms of the Contribution Agreements, contributing owners of the under-construction hospitals and ramping hospitals are eligible to receive a one-time additional issuance of Company common stock.
15
● | With respect to ramping hospitals that were acquired before the Merger, 24 months after the opening date (the “Determination Date”) of the applicable ramping hospital, such owner is eligible to receive such owner’s pro rata share of a number of shares of Company Common Stock equal to (i) the trailing twelve months earnings before interest, taxes, depreciation and amortization on the respective Determination Date, multiplied by (ii) 10, (iii) minus the initial equity value received at the Closing of the Merger, and (iv) minus such owner’s pro rata share of the aggregate debt of the applicable ramping hospital outstanding as of the closing of the Merger. The number of additional shares to be issued will be determined based on the greater of (a) the price of the Company’s common stock at the time of determination or (b) $2.80. |
● | With respect to under construction hospitals that were acquired before the Merger, contributing owners of under construction hospitals will be eligible to receive, on the Determination Date, such owner’s pro rata share of a number of shares of Company common stock equal to (a)(i) the trailing twelve months earnings before interest, taxes, depreciation and amortization as of the Determination Date multiplied by (ii) 10, minus (iii) the aggregate amount of such owner’s capital contribution to the under construction hospital, minus (iv) such owner’s pro rata share of the aggregate debt of the applicable under construction hospital outstanding as of the Closing of the Merger, divided by (b) the greater of (i) the price of the Company common stock at the time of determination or (ii) $2.80. |
We have not recognized any expense for this stock-based compensation for three months ended March 31, 2024 based on our current estimates of future obligations to the contributing owners.
Options. The following table summarizes stock-based awards activity:
| | | | | | | | | |
| | | | | | | | Weighted Average | |
| | Options | | Weighted Average | | Remaining Contractual | |||
| | Outstanding | | Exercise Price | | Life (Years) | |||
| | | | | | | | | |
Options outstanding at December 31, 2022 | | | 343,185 | | $ | 34.50 | | | 7.60 |
Options exercised | | | — | | | — | | | |
Options cancelled | | | — | | | — | | | |
Options outstanding at March 31, 2023 | | | 343,185 | | $ | 34.82 | | | 7.35 |
| | | | | | | | | |
Options outstanding at December 31, 2023 | | | 275,810 | | $ | 33.58 | | | 6.94 |
Options exercised | | | — | | | — | | | |
Options cancelled | | | — | | | — | | | |
Options outstanding at March 31, 2024 | | | 275,810 | | $ | 33.58 | | | 6.69 |
2016
Options. Clinigence had 6,500,010 options for the purchase of our common stock outstanding as of the merger date, all of which were fully vested and exercisable. The following table summarizes stock-based awards activity:
| | | | | | | | | |
| | | | | | | | Weighted Average | |
| | Options | | Weighted Average | | Remaining Contractual | |||
| | Outstanding | | Exercise Price | | Life (Years) | |||
| | | | | | | | | |
Options outstanding at April 1, 2022 merger date | | | 6,500,010 | | $ | 2.30 | | | 6.62 |
Options exercised | | | (312,019) | | | 2.08 | | | |
Options cancelled | | | — | | | — | | | |
Options outstanding at September 30, 2022 | | | 6,187,991 | | $ | 2.30 | | | 6.17 |
| | | | | | | | | |
Options outstanding at December 31, 2022 | | | 5,147,770 | | $ | 2.30 | | | 7.60 |
Options exercised | | | — | | | — | | | |
Options cancelled | | | — | | | — | | | |
Options outstanding at September 30, 2023 | | | 5,147,770 | | $ | 2.30 | | | 6.85 |
Options outstanding as of September 30, 2023March 31, 2024 consisted of:
| | | | | | | | | | | | | | | | | | |
Expiration | | Number | | Number | | Exercise | | Number | | Number | | Exercise | ||||||
Date | | Outstanding | | Exercisable | | Price | | Outstanding | | Exercisable | | Price | ||||||
| | | | | | | | | | | | | | | | | | |
March 15, 2025 | | | 157,196 | | | 157,196 | | $ | 4.47 | |||||||||
January 27, 2027 | | | 180,000 | | | 180,000 | | | 1.50 | | | 6,000 | | | 6,000 | | $ | 22.50 |
May 11, 2027 | | | 350,000 | | | 350,000 | | | 1.50 | | | 17,333 | | | 17,333 | | | 22.50 |
June 6, 2027 | | | 3,600 | | | 3,600 | | | 36.25 | |||||||||
August 16, 2027 | | | 25,000 | | | 25,000 | | | 2.51 | |||||||||
June 9, 2027 | | | 1,667 | | | 1,667 | | | 38.25 | |||||||||
January 28, 2028 | | | 180,000 | | | 180,000 | | | 1.61 | | | 6,000 | | | 6,000 | | | 24.15 |
January 27, 2030 | | | 296,865 | | | 296,865 | | | 1.50 | | | 12,080 | | | 12,080 | | | 22.50 |
February 28, 2030 | | | 95,794 | | | 95,794 | | | 1.25 | |||||||||
June 30, 2030 | | | 117,056 | | | 117,056 | | | 1.45 | | | 7,137 | | | 7,137 | | | 21.75 |
August 4, 2029 | | | 40,480 | | | 40,480 | | | 5.56 | | | 675 | | | 675 | | | 83.40 |
January 28, 2031 | | | 1,000,000 | | | 1,000,000 | | | 1.61 | | | 66,667 | | | 66,667 | | | 24.15 |
February 28, 2031 | | | 200,000 | | | 200,000 | | | 2.00 | | | 13,333 | | | 13,333 | | | 30.00 |
September 9, 2031 | | | 1,934,779 | | | 1,934,779 | | | 2.75 | | | 128,985 | | | 128,985 | | | 41.25 |
September 9, 2031 | | | 410,000 | | | 410,000 | | | 2.75 | | | 10,933 | | | 10,933 | | | 41.25 |
December 17, 2031 | | | 157,000 | | | 157,000 | | | 3.50 | | | 5,000 | | | 5,000 | | | 52.50 |
Total | | | 5,147,770 | | | 5,147,770 | | | | | | 275,810 | | | 275,810 | | | |
Restricted Stock Units. On April 1, 2023, the Company issued 604,15840,277 Restricted Stock Units (“RSUs”) (604,158 prior to Reverse Stock Split), valued at $0.6 million to certain employees. Total of 214,71914,314 RSU Common Shares (214,720 prior to Reverse Stock Split) vested on April 1, 2023 and another 194,71912,980 common shares will vest(194,720 prior to Reverse Stock Split) vested on March 1, 2024 and another 194,7192024. Another 12,980 common shares (194,720 prior to Reverse Stock Split) will vest on March 1, 2025.
For grants of restricted stock units, we recognize compensation expense over the applicable vesting period equal to the fair value of our common stock at grant date. Grants of restricted stock units generally vest one third per year on each of the first three anniversaries of the grant date. The following table summarizes the changes in restricted stock units during the ninethree months ended September 30,March 31, 2024 and 2023.
|
|
|
|
|
|
|
21
| | Shares |
| Weighted Average Grant-Date Fair Value Per Share | | | | | | | ||
| | | | | | | | Shares |
| Weighted Average Grant-Date Fair Value Per Share | ||
Non-vested awards, January 1, 2023 | | | — | | | — | ||||||
| | | | | | | ||||||
Non-vested awards, December 31, 2022 | | | — | | | — | ||||||
Granted | | | 604 | | | $1.01 | | | — | | | — |
Vested | |
| (215) | | | 1.01 | |
| — | | | — |
Non-vested awards, September 30, 2023 | | | 389 | | | $1.01 | ||||||
Non-vested awards, March 31, 2023 | | | — | | | — | ||||||
| | | | | | | ||||||
Non-vested awards, December 31, 2023 | | | 26 | | $ | 15.15 | ||||||
Granted | | | — | | | — | ||||||
Vested | | | (13) | | | 15.15 | ||||||
Non-vested awards, March 31, 2024 | | | 13 | | $ | 15.15 |
As of September 30, 2023,March 31, 2024, we estimate $0.3$0.2 million of unrecognized compensation cost related to restricted stock units issued to our employees to be recognized over the weighted-average vesting period of 1.10.9 years.
Employee Stock Purchase Plan. In May 2023, the Board of Directors adopted the 2023 Employee Stock Purchase Plan (“2023 ESPP”), which was subsequently approved by the Company’s stockholders and became effective in June 2023. The 2023 ESPP authorizes the initial issuance of up to 5,000,000333,333 shares (5,000,000 prior to Reverse Stock Split) of the Company’s common stock to eligible employees, who are entitled to purchase shares of common stock equal to 85% of the closing price on the purchase date with accumulated payroll deductions. During the three and nine months ended September 30, 2023,March 31, 2024, the Company did not issue anyissued 7,462 shares (111,917 prior to Reverse Stock Split) under the ESPP.
17
Note 1211 – Equity
We are authorized to issue up to a total of 950,000,000 shares of common stock having a par value of $0.001 per share. Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders and to receive ratably in proportion to the shares of common stock held by them any dividends declared from time to time by the board of directors. Our common stock has no preferences or rights of conversion, exchange, pre-exemption or other subscription rights.
Common Stock Issued. Following is a discussion of common stock issuances during the periods presented. See presented:
Note 8 – DebtSecurities Purchase Agreement.
On January 22, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a single healthcare focused institutional investor for issuances that were registered onthe sale by the Company of 4,444,444 shares (66,666,666 prior to Reverse Stock Split) of the Company’s registration statement on Form S-3 undercommon stock, par value $0.001 per share, and warrants to purchase 4,444,444 shares (66,666,666 prior to the Securities Act of 1933. All issuances referenced below were unregistered and were exempt from the registration requirementsReverse Stock Split) of the Securities ActCompany’s common stock. The shares and the warrants were issued separately and issued on a one-to-one ratio at a public offering price of 1933, as amended, under Section 4(a)(2)$2.25 per share and accompanying warrant ($0.15 prior to Reverse Stock Split).
The Warrants have an exercise price of $2.25 per share ($0.15 prior to Reverse Stock Split), are exercisable immediately upon issuance and expire five years from the Closing Date. The Warrants may only be exercised on a cashless basis if there is no registration statement registering, or the prospectus contained therein is not available for, the issuance or resale of shares of common stock underlying the Warrants to or by the holder. The holder of a Warrant is prohibited from exercising any such warrants to the extent that such exercise would result in the number of shares of common stock beneficially owned by such holder and its affiliates exceeding 4.99% (or, upon election by the holder prior to the issuance of any Warrants, 9.99%) of the total number of shares of common stock outstanding immediately after giving effect to the exercise. In the event of certain fundamental transactions, the holder of the Warrants will have the right to receive the Black Scholes Value of its Warrants calculated pursuant to a formula set forth in the Form of Warrant, payable either in cash or in the same type or form of consideration that is being offered and being paid to the holders of common stock.
The gross proceeds to the Company from the offering were $9.2 million after deducting the placement agent’s fees and other offering expenses of $0.8 million. The allocation of the proceeds was $7.7 million to warrant liability and $1.5 million to additional paid-in capital.
The Company used the Black-Scholes option model to compute the fair value (level 3) of the Warrants, with inputs including volatility (approximately 120%) and risk-free rate based on US Treasury yield curve rates. The Company classified the Warrants as liabilities due to certain contractual provisions and recorded $7.7 million in warrant liability on January 25, 2024. On March 31, 2024, the Company remeasured the Warrants and recorded a $2.6 million gain on warrant liability as the fair value of the Warrants was $5.1 million at March 31, 2024.
Under the Purchase Agreement, if the Company, at any time while the Warrants are outstanding, combines (including by way of reverse share split) outstanding shares of common stock into a smaller number, then, on the tenth trading day following, the exercise price will be reduced, and only reduced, to the lesser of (i) the then exercise price and (ii) 100% of the average of the volume weighted average prices for the ten trading day period immediately following. Accordingly, on April 26, 2024, as required under the terms of the Purchase Agreement and as a result of the Reverse Stock Split, the exercise price was reduced from $2.25 to $0.68 per share.
2218
Warrants. Clinigence had 12,401,240 common stock warrants outstanding as ofDuring the merger date. On September 30, 2023,three months ended March 31, 2024, as part of the September 2023 Private Offering,Securities Purchase Agreement, the Company issued warrants to Unit Holderspurchase 4,444,444 shares (66,666,666 prior to purchase 1,237,500 sharesReverse Stock Split) of Common Stock at a strike price of $0.40$2.25 ($0.15 prior to Reverse Stock Split) for a period of sixfive years. These warrants were outstanding but not yet exercised as of September 30, 2023.March 31, 2024. Additionally, on March 26, 2024, the Company agreed to amend the conversion price of the Unsecured Convertible Term Notes and exercise price of the related warrants to $3.00 each, resulting in an increase in warrants of 718,000 shares (10,770,000 prior to Reverse Stock Split). Warrant activity follows:
| | | | | | | | | | | | | | | | | | |
| | | | | | | Weighted Average | | | | | | | Weighted Average | ||||
| | Warrants | | Weighted Average | | Remaining Contractual | | Warrants | | Weighted Average | | Remaining Contractual | ||||||
| | Outstanding | | Exercise Price | | Life (years) | | Outstanding | | Exercise Price | | 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 outstanding at September 30, 2022 | | | 10,214,015 | | $ | 2.04 | | | 4.60 | |||||||||
| | | | | | | | | | |||||||||
Warrants outstanding at December 31, 2022 | | | 11,033,015 | | $ | 1.96 | | | 3.80 | | | 735,534 | | $ | 29.42 | | | 3.80 |
Warrants issued | | | 1,237,500 | | | 0.40 | | | | |||||||||
Warrants exercised | | | (1,456,453) | | | 1.55 | | | | | | (53,764) | | | 23.25 | | | |
Warrants expired | | | (3,000) | | | 25.00 | | | | | | (100) | | | 23.25 | | | |
Warrants outstanding at September 30, 2023 | | | 10,811,062 | | $ | 1.83 | | | 3.35 | |||||||||
Warrants outstanding at March 31, 2023 | | | 681,670 | | $ | 29.85 | | | 3.53 | |||||||||
| | | | | | | | | | |||||||||
Warrants outstanding at December 31, 2023 | | | 1,356,237 | | $ | 17.41 | | | 4.42 | |||||||||
Warrants issued | | | 4,444,444 | | | 2.25 | | | | |||||||||
Warrants amended | | | 718,000 | | | 3.00 | | | | |||||||||
Warrants exercised | | | - | | | | | | | |||||||||
Warrants expired | | | - | | | | | | | |||||||||
Warrants outstanding at March 31, 2024 | | | 6,518,681 | | $ | 5.16 | | | 4.78 |
Warrants outstanding as of March 31, 2024 consisted of:
| | | | | | | | | |
Expiration | | Number | | Number | | Exercise | |||
Date | | Outstanding | | Exercisable | | Price | |||
| | | | | | | | | |
December 31, 2024 | | | 36,992 | | | 36,992 | | $ | 100.05 |
October 31, 2025 | | | 1,082 | | | 1,082 | | | 18.75 |
October 31, 2025 | | | 104,430 | | | 104,430 | | | 23.25 |
February 26, 2026 | | | 19,216 | | | 19,216 | | | 60.00 |
July 31, 2026 | | | 168,860 | | | 168,860 | | | 23.25 |
May 31, 2027 | | | 307,657 | | | 307,657 | | | 26.25 |
September 30, 2029 | | | 165,000 | | | 165,000 | | | 3.00 |
October 31, 2029 | | | 572,500 | | | 572,500 | | | 3.00 |
November 30, 2029 | | | 51,667 | | | 51,667 | | | 3.00 |
December 31, 2029 | | | 646,833 | | | 646,833 | | | 3.00 |
January 25, 2029 | | | 4,444,444 | | | 4,444,444 | | | 2.25 |
Total | | | 6,518,681 | | | 6,518,681 | | | |
In the first quarter of 2023, 702,285 shares of common stock were issued in satisfaction of cashless exercises of warrants to purchase of 806,453 shares of common stock. In the second quarter of 2023, 566,042 shares of common stock were issued in satisfaction of cashless exercises of warrants to purchase 650,000 shares of common stock. Warrants outstanding as of September 30, 2023 consisted of:
| | | | | | | | | |
Expiration | | Number | | Number | | Exercise | |||
Date | | Outstanding | | Exercisable | | Price | |||
| | | | | | | | | |
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 |
May 31, 2027 | | | 4,614,853 | | | 4,614,853 | | | 1.75 |
September 30, 2029 | | | 1,237,500 | | | 1,237,500 | | | 0.40 |
Total | | | 10,811,062 | | | 10,811,062 | | | |
23
Note 1312 – Income Taxes
Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items is recognized in the period these occur.
In periods before the merger with Clinigence, Nutex Health Holdco LLC and the Nutex Subsidiaries were pass-through entities treated as partnerships for U.S. federal income tax purposes. No provision for federal income taxes was provided for these periods as federal taxes were obligations of these companies’ members. After the merger, Nutex Health Holdco LLC became a wholly-owned subsidiary of Clinigence and is included in its consolidated corporate tax filings. We recognized a non-cash charge of $20.8 million to income tax expense during the three months ended June 30, 2022 for the change in tax status of Nutex Health Holdco LLC. This charge provides for the accumulated net deferred tax liabilities representing the differences between the book and tax bases of Nutex Health Holdco LLC’s assets and liabilities as of the April 1, 2022 change in tax status.
At the time of our merger with Clinigence, Clinigence had a full valuation allowance against its deferred tax assets. During the three months ended June 30, 2022, we recorded a non-cash benefit of $2.4 million to income tax expense to remove the acquired valuation allowance after we concluded that the associated deferred tax assets would be realizable.
Excluding the discrete items above and excluding the non-deductible goodwill impairment, our effective tax rate for the three and nine months ended September 30, 2022 was 25.3% and 26.2%, respectively. Our effective tax rate for the three and nine months ended September 30, 2023March 31, 2024 was 7.0% and 11.6%, respectively.14.2%. The primary difference from the federal statutory rate of 21% is related to state taxes, income of noncontrolling interests in flow-through entities and permanent differences for non-deductible expenses.
19
Note 1413 – Earnings per Share
The following is the computation of earnings (loss)loss per basic and diluted share:
| | | | | | | | | | | | | | | | | ||
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | | 2024 |
| 2023 | ||||||
Amounts attributable to Nutex Health Inc.: | | | | | | | | | | | | | | | | | ||
Numerator: | | | | | | | | | | | | | | | | | ||
Net income (loss) attributable to common stockholders | | $ | (5,542,391) | | $ | (412,186,266) | | $ | (14,168,717) | | $ | (410,028,269) | ||||||
Net loss attributable to common stockholders | | $ | (364,075) | | $ | (5,147,279) | ||||||||||||
| | | | | | | | | | | | | | | | | | |
Denominator: | | | | | | | | | | | | | | | | | | |
Weighted average shares used to compute basic EPS | | | 665,055,603 | | | 649,577,082 | | | 657,590,265 | | | 629,787,661 | | | 48,492,347 | | 43,394,380 | |
| | | | | | | | | | | | | | | | | | |
Earnings (loss) per share: | | | | | | | | | | | | | ||||||
Loss per share: | | | | | | |||||||||||||
Basic | | $ | (0.01) | | $ | (0.62) | | $ | (0.02) | | $ | (0.65) | | $ | (0.01) | | $ | (0.12) |
Diluted | | $ | (0.01) | | $ | (0.62) | | $ | (0.02) | | $ | (0.65) | | $ | (0.01) | | $ | (0.12) |
The computation of diluted earnings per common share excludes the 5,147,770275,810 common stock options 10,811,062(4,137,149 prior to Reverse Stock Split), 6,518,681 warrants 389,439(97,780,228 prior to Reverse Stock Split), 12,980 restricted stock units (194,720 prior to Reverse Stock Split) and 1,795,000 common stock (26,925,000 prior to Reverse Stock Split) issuable upon conversion of outstanding convertible debt for the three and nine months ended September 30, 2023.March 31, 2024. The March 31, 2023 computation excludes the 343,185 common stock options (5,147,770 prior to Reverse Stock Split) and 681,670 warrants (10,225,062 prior to Reverse Stock Split). The dilutive effect of convertible debt was calculated using the if-converted method, whereas the dilutive effect of the assumed exercise of outstanding options and warrants was calculated using the treasury stock method.
24
Note 1514 - Supplemental Cash Flows Information
| | | | | | | | | | | ||
| | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||
| | 2023 |
| 2022 | | 2024 |
| 2023 | ||||
Cash paid for interest | | $ | 858,773 | | $ | 3,402,606 | | $ | 548,418 | | $ | 430,643 |
Cash paid for income taxes | | | 737,000 | | | 7,595,105 | ||||||
Non-cash investing and financing activities: | | | | | | | | | | | | |
Financed capital expenditures | | | 5,521,759 | | | - | | | - | | | 2,709,019 |
Acquisition of finance leases | | | 18,798,667 | | | 23,603,817 | | | - | | | 18,798,667 |
Termination of operating and finance leases | | | - | | | 2,818,498 | ||||||
Exercise of warrants on cashless basis | | | 1,268 | | | - | | | - | | | 702 |
Issuance of restricted stock units | | | 298,812 | | | - | ||||||
Issuance of common stock to Apollo Medical Holdings, Inc. | | | 1,900,000 | | | - | | | - | | | 1,900,000 |
Deconsolidation of Real Estate Entity | | | 4,258,133 | | | - | | | - | | | 4,258,133 |
Warrant liability related to common stock issuance | | | 7,661,557 | | | - | ||||||
Reverse stock split adjustment | | | 24 | | | | ||||||
Common stock issued for Employee Stock Purchase Plan | | | 19,026 | | | - | ||||||
Convertible debt converted to common stock | | | 5,151,509 | | | - | | | 320,688 | | | - |
Warrants issued with convertible debt | | | 175,710 | | | - | ||||||
Payment for acquisition in common stock | | | 750,000 | | | - |
20
Note 1615 – Segment Information
We report the results of our operations as three segments in our consolidated financial statements: (i) the hospital division, (ii) the population health management division and (ii) the real estate division. The determination of our reporting segments was made on the basis of our strategic priorities, which corresponds to the manner in which our Chief Executive Officer, as our chief operating decision maker, reviews and evaluates operating performance to make decisions about resources to be allocated. We evaluate the performance of our reportable segments based on, among other measures, operating income, which is defined as income before interest expense, other income (expense), and taxes. Corporate costs primarily include expenses for support functions and salaries and benefits for corporate employees and are excluded from segment operating results.
Reportable segment information, including intercompany transactions, is presented below:
| | | | | | | | | | | ||
| | September 30, | | December 31, | | March 31, | | December 31, | ||||
| | 2023 | | 2022 | | 2024 | | 2023 | ||||
Assets: | | | | | | | | | | | ||
Hospital division | | $ | 343,902,711 | | $ | 314,085,287 | | $ | 283,487,838 | | $ | 278,635,841 |
Population health management division | | | 86,311,678 | | 77,825,753 | | | 83,889,168 | | 83,647,378 | ||
Real estate division | | | 49,419,153 | | | 39,840,945 | | | 36,906,848 | | | 35,962,278 |
Total Assets | | $ | 479,633,542 | | $ | 431,751,985 | | $ | 404,283,854 | | $ | 398,245,497 |
| | | | | | |
| | Three Months Ended March 31, | ||||
| | 2024 |
| 2023 | ||
Revenue from external customers: | | | | | | |
Hospital division | | $ | 60,029,369 | | $ | 49,288,164 |
Population health management division | | | 7,424,418 | | | 7,041,253 |
Total revenue | | $ | 67,453,787 | | $ | 56,329,417 |
| | | | | | |
Segment operating income (loss): | | | | | | |
Hospital division | | | 10,471,050 | | | 4,778,637 |
Population health management division | | | (313,872) | | | 69,086 |
Total segment operating income | | $ | 10,157,178 | | $ | 4,847,723 |
| | | | | | |
Capital expenditures: | | | | | | |
Hospital division | | | 733,323 | | | 4,376,983 |
Real estate division | | | - | | | - |
Total capital expenditures | | $ | 733,323 | | $ | 4,376,983 |
| | | | | | |
Revenue from inter-segment activities: | | | | | | |
Real estate division | | $ | 799,850 | | $ | 258,015 |
| | | | | | |
Depreciation and amortization: | | | | | | |
Hospital division | | | 3,764,347 | | | 3,564,022 |
Population health management division | | | 420,995 | | | 388,047 |
Real estate division | | | 860 | | | 41,678 |
Total depreciation and amortization | | $ | 4,186,202 | | $ | 3,993,747 |
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| | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | ||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | ||||
Revenue from external customers: | | | | | | | | | | | | |
Hospital division | | $ | 54,585,263 | | $ | 21,244,305 | | $ | 155,485,230 | | $ | 151,976,226 |
Population health management division | | | 8,137,709 | | | 7,150,753 | | | 22,491,613 | | | 13,594,007 |
Total revenue | | $ | 62,722,972 | | $ | 28,395,058 | | $ | 177,976,843 | | $ | 165,570,233 |
| | | | | | | | | | | | |
Segment operating income: | | | | | | | | | | | | |
Hospital division | | | 7,238,738 | | | (23,742,606) | | | 21,122,489 | | | 18,997,515 |
Population health management division | | | (172,525) | | | 29,702 | | | 438,370 | | | (257,002) |
Total segment operating income | | $ | 7,066,213 | | $ | (23,712,904) | | $ | 21,560,859 | | $ | 18,740,513 |
| | | | | | | | | | | | |
Capital expenditures: | | | | | | | | | | | | |
Hospital division | | | 2,875,585 | | | - | | | 10,322,487 | | | 3,730,053 |
Real estate division | | | - | | | 5,890,738 | | | - | | | 18,782,411 |
Total capital expenditures | | $ | 2,875,585 | | $ | 5,890,738 | | $ | 10,322,487 | | $ | 22,512,464 |
| | | | | | | | | | | | |
Revenue from inter-segment activities: | | | | | | | | | | | | |
Real estate division | | $ | 13,192,549 | | $ | - | | $ | 13,708,579 | | $ | 11,989,212 |
| | | | | | | | | | | | |
Depreciation and amortization: | | | | | | | | | | | | |
Hospital division | | | 4,238,498 | | | 3,748,431 | | | 11,518,388 | | | 8,844,757 |
Population health management division | | | 401,566 | | | 431,986 | | | 1,201,227 | | | 819,970 |
Real estate division | | | 105,877 | | | 149,750 | | | 189,233 | | | 194,786 |
Total depreciation and amortization | | $ | 4,745,941 | | $ | 4,330,167 | | $ | 12,908,848 | | $ | 9,859,513 |
Note 1716 – Related Party Transactions
Related party transactions included the following:
● | The Physician LLCs employ the doctors who work in our hospitals. We have no direct ownership interest in these entities, but they are owned and, in some instances, controlled by related parties including our CEO, Dr. Thomas Vo. The Physician LLCs are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to them in the event of cash shortages and received the benefit of their cash surpluses. |
In connection with the merger with Clinigence, we forgave certain amounts due from Physician LLCs for past advances made by us in support of their operations. We recognized net expense of $1.5 million in the three months ended March 31, 2022 as other expense in the consolidated statements of operations. No such expense was recognized subsequently.
The Physician LLCs had outstanding obligations to their member owners, who are also Company stockholders,stockholders. These outstanding obligations primarily represent contributions for facilities currently under construction totaling $4.0$3.3 million at September 30, 2023March 31, 2024 and $2.1$2.9 million at December 31, 20222023 reported within accounts payable – related party in our consolidated balance sheets.
● | Most of our hospital division facilities are leased from real estate entities which are owned by related parties. 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. Our obligations under these leases are presented in Note |
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● | 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 third parties which are collateralized by the land and buildings. We have no direct ownership interest in these entities, but they are owned and, in some instances, controlled by related parties including our CEO. We deconsolidated 17 Real Estate Entities in the second quarter of 2022 and one Real Estate Entity in the first quarter of 2023. |
In connection with the merger with Clinigence, we forgave certain amounts due from Real Estate Entities for past advances made by us. We recognized net expense totaling $0.6 million in the three months ended March 31, 2022 as other expense in the consolidated statements of operations. No such expense was recognized subsequently.
● | Accounts receivable – related party included |
● | Micro Hospital Holding LLC, an affiliate controlled by our CEO, and 2GT PLLC, an affiliate controlled by a physician partner, made advances to one of our hospital facilities, SE Texas ER. These advances totaled $1.4 million and $1.2 million at |
● | Accounts payable – related party in our consolidated balance sheets included |
● | We |
● | Two of our ER Entities |
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Note 1817 – Variable Interest Entities
The following tables provide the balance sheet amounts for consolidated VIEs:
| | | | | | | | | | | | | ||||
| September 30, 2023 | March 31, 2024 | ||||||||||||||
| Real Estate | | Physician | | AHISP | Real Estate | | Physician | | AHISP | ||||||
| Entities | | LLCs | | IPA | Entities | | LLCs | | IPA | ||||||
| | | | | | | | | | | | | ||||
Current assets | $ | 438,235 | | $ | 6,111,810 | | $ | 10,326,963 | $ | 131,103 | | $ | 7,372,220 | | $ | 8,398,253 |
Property and equipment, net | | - | | 3,668 | | 91,546 | | - | | 3,668 | | 11,325 | ||||
Other long-term assets | | 46,730,762 | | | - | | | 29,653 | | 33,134,000 | | | - | | | 91,694 |
| | | | | | | | | | | | | ||||
Total assets | $ | 47,168,997 | | $ | 6,115,478 | | $ | 10,448,162 | $ | 33,265,103 | | $ | 7,375,888 | | $ | 8,501,272 |
| | | | | | | | | | | | | ||||
Current liabilities | | 876,464 | | 5,854,614 | | 10,448,162 | | 38,510 | | 5,672,833 | | 8,501,272 | ||||
Long-term liabilities | | 13,324,617 | | | - | | | - | | 12,670,853 | | | - | | | - |
| | | | | | | | | | | | | ||||
Total liabilities | | 14,201,081 | | 5,854,614 | | 10,448,162 | | 12,709,363 | | 5,672,833 | | 8,501,272 | ||||
| | | | | | | | | | | | | ||||
Equity | | 32,967,916 | | | 260,864 | | | - | | 20,555,740 | | | 1,703,055 | | | - |
| | | | | | | | | | | | | ||||
Total liabilities and equity | $ | 47,168,997 | | $ | 6,115,478 | | $ | 10,448,162 | $ | 33,265,103 | | $ | 7,375,888 | | $ | 8,501,272 |
| | | | | | | | | | | | | ||||
| December 31, 2022 | December 31, 2023 | ||||||||||||||
| Real Estate | | Physician | | AHISP | Real Estate | | Physician | | AHISP | ||||||
| Entities | | LLCs | | IPA | Entities | | LLCs | | IPA | ||||||
| | | | | | | | | | | | | ||||
Current assets | $ | 3,466,811 | | $ | 6,915,710 | | $ | 6,641,448 | $ | 138,342 | | $ | 8,074,928 | | $ | 8,473,486 |
Property and equipment, net | | 16,726,986 | | 3,668 | | - | | - | | 3,668 | | 65,277 | ||||
Long-term assets | | 19,647,148 | | | - | | | 498,990 | | 33,089,636 | | | - | | | 36,452 |
| | | | | | | | | | | | | ||||
Total assets | $ | 39,840,945 | | $ | 6,919,378 | | $ | 7,140,438 | $ | 33,227,978 | | $ | 8,078,596 | | $ | 8,575,215 |
| | | | | | | | | | | | | ||||
Current liabilities | | 2,326,335 | | 4,831,617 | | 7,109,758 | | 38,510 | | 5,648,516 | | 8,575,215 | ||||
Long-term liabilities | | 15,019,633 | | | - | | | 30,680 | | 12,959,171 | | | - | | | - |
| | | | | | | | | | | | | ||||
Total liabilities | | 17,345,968 | | 4,831,617 | | 7,140,438 | | 12,997,681 | | 5,648,516 | | 8,575,215 | ||||
| | | | | | | | | | | | | ||||
Equity | | 22,494,977 | | | 2,087,761 | | | - | | 20,230,297 | | | 2,430,080 | | | - |
| | | | | | | | | | | | | ||||
Total liabilities and equity | $ | 39,840,945 | | $ | 6,919,378 | | $ | 7,140,438 | $ | 33,227,978 | | $ | 8,078,596 | | $ | 8,575,215 |
The assets of each of the ER Entities may only be used to settle the liabilities of that entity or its consolidated VIEs and may not be required to be used to settle the liabilities of any of the other ER Entities, other VIEs, or corporate entity. Additionally, the assets of corporate entities cannot be used to settle the liabilities of VIEs. The Company has aggregated all of the Physician LLCs and Real Estate Entities into two categories above, because they have similar risk characteristics, and presenting distinct financial information for each VIE would not add more useful information.
Real Estate Entities are consolidated by the Company as VIEs because they do not have sufficient equity at risk and our hospital entities are guarantors of their outstanding mortgage loans. We have been working with the third-party lenders to remove our guarantees of their outstanding mortgage loans. As these guarantees are released, the associated Real
23
Estate Entity no longer qualifies as a VIE and is deconsolidated. We deconsolidated 17 Real Estate Entities in the second
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quarter of 2022 and one Real Estate Entity in the first quarter of 2023. There was no gain or loss on the deconsolidation of these entities. As of September 30, 2023,March 31, 2024, two Real Estate Entities continue to be consolidated in our financial statements.
At the date we deconsolidated these Real Estate Entities in the second quarter of 2022, they had $2.4 million of cash, $9.8 million of fixed assets (principally land and building), $0.5 million of other assets, $69.6 million of liabilities (principally mortgage indebtedness) and $31.4 million of equity reported as noncontrolling interests.
The Real Estate Entity we deconsolidated in the first quarter of 2023 had $1.0 million of cash, $8.4 million of fixed assets (principally land and building), $0.2 million of other assets, $5.4 million of liabilities (principally mortgage indebtedness) and $4.3 million of equity reported as noncontrolling interests as of the date of deconsolidation.
Note 1918 - Subsequent Events
The Company has evaluated subsequent events through the filing of this report and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements, except the following:
SubsequentReverse Stock Split
On July 5, 2023, the Company held its annual meeting of stockholders on June 29, 2023. At such meeting, the Company’s stockholders approved a reverse stock split at a ratio within a range of 1-2 and 1-15 and granted the Company’s Board of Directors the discretion to determine the timing and ratio of the split within such range. This approval is valid through June 29, 2024.
On April 1, 2024, the Company’s Board of Directors determined to effect the reverse stock split of the common stock at a 1-for-15 ratio (the “Reverse Stock Split”) and approved the filing of a Certificate of Amendment (the “Certificate of Amendment”) to the endSecond Amended and Restated Certificate of Incorporation of the period throughCompany to effect the dateReverse Stock Split.
On April 9, 2024, the Company filed the Certificate of Amendment with the Delaware Secretary of State to effect the Reverse Split, effective at 11:59 p.m. Eastern Time on April 9, 2024 (the “Effective Time”). The Reverse Split did not modify any voting rights or other terms of the report, in connection withcommon stock, and the September 2023 Convertible Debt Issuance,number of authorized shares of the Company received additional net cash proceedswill remain at 950,000,000.
Unless otherwise noted, share numbers and per share amounts in these financial statements reflect the Reverse Stock Split.
The impacts of $3.1 million.the Reverse Stock Split were applied retroactively for all periods presented in accordance with applicable guidance, less the number of rounded whole shares issued for fractional shares on April 10, 2024. Therefore, prior period amounts are different than those previously reported. Certain amounts within the following tables may not foot due to rounding.
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The following table illustrates changes in equity, as previously reported prior to, and as adjusted subsequent to, the impact of the Reverse Stock Split retroactively adjusted for the periods presented:
| | | | | | | | | |
| | March 31, 2023 | |||||||
| | | As Previously | | | Impact of Reverse | | | As |
| | | Reported | | | Stock Split | | | Revised |
Common Stock - Shares | | | 651,926,125 | | | (608,464,383) | | | 43,461,742 |
Common Stock - Amount | | $ | 651,926 | | $ | (608,464) | | $ | 43,462 |
Additional Paid-in Capital | | $ | 460,396,700 | | $ | 608,464 | | $ | 461,005,164 |
| | | | | | | | | |
| | December 31, 2023 | |||||||
| | | As Previously | | | Impact of Reverse | | | As |
| | | Reported | | | Stock Split | | | Revised |
Common Stock - Shares | | | 676,679,911 | | | (631,567,917) | | | 45,111,994 |
Common Stock - Amount | | $ | 676,680 | | $ | (631,568) | | $ | 45,112 |
Additional Paid-in Capital | | $ | 469,849,049 | | $ | 631,568 | | $ | 470,480,617 |
| | | | | | | | | |
| | December 31, 2022 | |||||||
| | | As Previously | | | Impact of Reverse | | | As |
| | | Reported | | | Stock Split | | | Revised |
Common Stock - Shares | | | 650,223,840 | | | (606,875,584) | | | 43,348,256 |
Common Stock - Amount | | $ | 650,224 | | $ | (606,876) | | $ | 43,348 |
Additional Paid-in Capital | | $ | 458,498,402 | | $ | 606,876 | | $ | 459,105,278 |
The following table illustrates changes in loss per share and weighted average shares outstanding, as previously reported prior to, and as adjusted subsequent to, the impact of the Reverse Stock Split retroactively adjusted for the periods presented:
| | | | | | | | | |
| | Three months ended March 31, 2023 | |||||||
| | | As Previously | | | Impact of Reverse | | | As |
| | | Reported | | | Stock Split | | | Revised |
Loss attributable to common stockholders | | $ | (5,147,279) | | $ | - | | $ | (5,147,279) |
Weighted average shares used to compute basic and diluted EPS | | | 650,915,693 | | | (607,521,313) | | | 43,394,380 |
Loss per share - basic and diluted | | $ | (0.01) | | $ | (0.11) | | $ | (0.12) |
The following outstanding stock options and warrants exercisable or issuable into shares of common stock were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:
| | | | | | | | | |
| | Three months ended March 31, 2023 | |||||||
| | | As Previously | | | Impact of Reverse | | | As |
| | | Reported | | | Stock Split | | | Revised |
Common stock options | | | 5,147,770 | | | (4,804,585) | | | 343,185 |
Common stock warrants | | | 10,225,062 | | | (9,543,392) | | | 681,670 |
Stock options were adjusted retroactively to give effect to the Reverse Stock Split for the three months ended March 31, 2023:
| | | | | | | | | | | | | | | | | | |
| | As Previously Reported | | Impact of Reverse Stock Split | | Revised | ||||||||||||
| | Options | | Weighted Average | | Options | | Weighted Average | | Options | | Weighted Average | ||||||
| | Outstanding | | Exercise Price | | Outstanding | | Exercise Price | | Outstanding | | Exercise Price | ||||||
Options outstanding at December 31, 2022 | | | 5,147,770 | | $ | 2.30 | | | (4,804,585) | | $ | 32.20 | | | 343,185 | | $ | 34.50 |
Options exercised | | | — | | | — | | | — | | | — | | | — | | | — |
Options cancelled | | | — | | | — | | | — | | | — | | | — | | | — |
Options outstanding at March 31, 2023 | | | 5,147,770 | | $ | 2.32 | | | (4,804,585) | | $ | 32.49 | | | 343,185 | | $ | 34.82 |
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Warrants were adjusted retroactively to give effect to the Reverse Stock Split for the three months ended March 31, 2023:
| | | | | | | | | | | | | | | | | | |
| | As Previously Reported | | Impact of Reverse Stock Split | | Revised | ||||||||||||
| | Warrants | | Weighted Average | | Warrants | | Weighted Average | | Warrants | | Weighted Average | ||||||
| | Outstanding | | Exercise Price | | Outstanding | | Exercise Price | | Outstanding | | Exercise Price | ||||||
Warrants outstanding at December 31, 2022 | | | 11,033,015 | | $ | 1.96 | | | (10,297,481) | | $ | 27.46 | | | 735,534 | | $ | 29.42 |
Warrants exercised | | | (806,453) | | | 1.55 | | | 752,689 | | | 21.70 | | | (53,764) | | | 23.25 |
Warrants expired | | | (1,500) | | | 1.55 | | | 1,400 | | | 21.70 | | | (100) | | | 23.25 |
Warrants outstanding at March 31, 2023 | | | 10,225,062 | | $ | 1.99 | | | (9,543,392) | | $ | 27.86 | | | 681,670 | | $ | 29.85 |
* * * * *
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.
Explanatory Note
On April 1, 2022 (the “Merger Date”), Nutex Health Holdco LLC and Clinigence Holdings, Inc. (“Clinigence”) completed the merger (the “Merger”) contemplated by the Agreement and Plan of Merger (the “Merger Agreement”) dated as of November 23, 2021 between Clinigence, Nutex Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of Clinigence, Nutex, Micro Hospital Holding LLC (solely for the purposes of certain sections of the Merger Agreement), Nutex Health Holdco LLC and Thomas Vo, M.D., solely in his capacity as the representative of the equity holders of Nutex. Immediately following the completion of the Merger, Clinigence amended its certificate of incorporation and bylaws to change its name to “Nutex Health Inc.” In connection with the Merger, each outstanding equity interest of Nutex Health Holdco LLC was exchanged for 3.571428575 shares of Clinigence common stock. The Merger was accounted for as a reverse business combination under U.S. GAAP. Therefore, Nutex Health Holdco LLC was treated as the accounting acquirer in the Merger. Our financial statements presented for periods prior to the Merger Date are those of Nutex Health Holdco, LLC, as the Company’s predecessor entity. Beginning with the second quarter of 2022, our financial statements are presented on a consolidated basis and include Clinigence.
Except where the context indicates otherwise, (i) references to “we,” “us,” “our,” or the “Company” refer, for periods prior to the completion of the Merger, to Nutex Health Holdco LLC and its subsidiaries, (ii) references the “Nutex Health” for periods following the completion of the Merger, refer to Nutex Health Inc. and its subsidiaries and (iii) references to “Clinigence” refer to Clinigence Holdings, Inc. and its subsidiaries prior to the completion of the Merger.
Overview
Nutex Health Inc. is a physician-led, healthcare services and operations company with 2221 hospital facilities in eightnine states (hospital division), and a primary care-centric, risk-bearing population health management division. Our hospital division implements and operates different innovative health care models, including micro-hospitals, specialty hospitals and hospital outpatient departments (“HOPDs”). The population health management division owns and operates provider networks such as independent physician associations (“IPAs”) and offers a cloud-based proprietary technology platform to IPAs which aggregates clinical and claims data across multiple settings, information systems and sources to create a holistic view of patients and providers.
We employ approximately 800 full time employees, contract 230 doctors at our facilities and partner with over 900 physicians.1,700 physicians within our networks. Our corporate headquarters is based in Houston, Texas. We were incorporated on April 13, 2000 in the state of Delaware.
Our financial statements present the Company’s consolidated financial condition and results of operations including those of majority-owned subsidiaries and variable interest entities (“VIEs”) for which we are the primary beneficiary.
The hospital division includes our healthcare billing and collections organization and hospital entities. In addition, we have financial and operating relationships with multiple professional entities (the “Physician LLCs”) and real estate entities (the “Real Estate Entities”). The Physician LLCs employ the doctors who work in our hospitals. These entities are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to the Physician LLCs in the event of cash shortages and received the benefit of their cash surpluses.
The Real Estate Entities own the land and hospital buildings which are leased to our hospital entities. The Real Estate Entities have mortgage loans payable to third parties which are collateralized by the land and buildings. We consolidate the Real Estate Entities as VIEs in instances where our hospital entities are guarantors or co-borrowers under their
27
outstanding mortgage loans. Since the second quarter of 2022, we deconsolidated 18 Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.
30
The Company has no direct or indirect ownership interest in the Physician LLCs or Real Estate Entities, so 100% of the equity for these entities is shown as noncontrolling interest in the consolidated balance sheets and statements of operations.
The population health management division includes our management services organizations and a healthcare information technology company providing a cloud-based platform for healthcare organizations. In addition, AHISP, IPA, a physician-affiliated entity that is not owned by us—is consolidated as a VIE of our wholly-owned subsidiary AHP sincebecause we are the primary beneficiary of their operations under AHP’s management services contracts with them.
On August 1, 2023, the Company acquired two Florida based IPAs for $0.8 million in cash, $0.8 million in Company shares and contingent consideration of up to $0.4 million in cash and $0.5 million in Company shares if the acquired IPAs meet Medicare Lives thresholds in 2024 and 2025. Additionally, we will pay earn-out consideration if certain financial targets are achieved by year end December 31, 2023. Substantially all of the purchase consideration was allocated to goodwill and identified intangible assets. The acquired IPAs are reported within our Population Health Management division. Management considers this acquisition to be immaterial.
Sources of revenue. Our hospital division recognizes net patient service revenue for contracts with patients and in most cases a third-party payor (commercial insurance, workers compensation insurance or, in limited cases, Medicare/Medicaid).
We receive payment for facility services rendered by us from federal agencies, private insurance carriers, and patients. The Physician LLCs receive payment for doctor services from these same sources. On average, greater than 90% of our net patient service revenue areis paid by insurers, federal agencies, and other non-patient third parties. The remaining revenues arerevenue is paid by our patients in the form of copays, deductibles, and self-payment. The following tables present the allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage:
| | | | | | | | | | | | | | | ||||
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | | 2024 |
| 2023 | ||||||
| | | | | | | | | | | | | | | | | | |
Insurance | | | 92% | | | 91% | | | 93% | | | 94% | | | 91% | | 93% | |
Self pay | | | 5% | | | 7% | | | 4% | | | 5% | | | 6% | | 4% | |
Workers compensation | |
| 2% | | | 1% | |
| 2% | | | 1% | |
| 2% | | 1% | |
Medicare/Medicaid | | | 1% | | | 1% | | | 1% | | | 0% | | | 1% | | | 2% |
Total | | | 100% | | | 100% | | | 100% | | | 100% | | | 100% | | | 100% |
The population health management division recognizes revenue for capitation and management fees for services to IPAs and physician groups and for the licensing, training, and consulting related to our cloud-based proprietary technology. Capitation revenue consists primarily of capitated fees for medical services provided by physician-owned entities we consolidate as VIEs. 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. We receive management fees that are received based on gross capitation revenues of the IPAs or physician groups we manage.
Our growth plans. We plan to expand our operations by entering new market areas either through development of new hospitals, formation of new IPAs or by making acquisitions. In 2023, we have opened healthcare facilities in Fort Smith (Arkansas), Alhambra (California), Royce City (Texas), Albuquerque (New Mexico) and Mandeville (Louisiana).
We identify new market areas for hospitals based on the area’s need for access to emergency health services and growth expectations. We identify and partner with local physicians who will operate and manage the new location. When developing new hospitals, we have a turn-key process for location selection, real estate acquisition, design, and development of the facility including staffing, training and operations. We extend our existing comprehensive suite of
31
centralized centralized services to operating hospitals, including executive management, billing, collections, recruiting and marketing.
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Overview of Legislative Developments
The U.S. Congress and many state legislatures have introduced and passed a large number of proposals and legislation designed to make major changes in the healthcare system, including changes that have impacted access to health insurance. The most prominent of these efforts, the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed. The Affordable Care Act increased health insurance coverage through a combination of public program expansion and private sector health insurance reforms. There is uncertainty regarding the ongoing net effect of the Affordable Care Act due to the potential for continued changes to the law’s implementation and its interpretation by government agencies and courts. There is also uncertainty regarding the potential impact of other health reform efforts at the federal and state levels.
In response to the COVID-19 pandemic, federal and state governments passed legislation, promulgated regulations, and have taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency and to provide financial relief. Among these, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) had the most impact on our business.
The CARES Act included a waiver of insurance copayments, coinsurance, and annual deductibles for laboratory tests to diagnose COVID-19 and visits to diagnose COVID-19 at an emergency department of a hospital. These provisions of the CARES Act expired on June 30, 2021. While these provisions were effective, we experienced higher levels of revenue due to a shift of payor mix. The larger number and acuity of patient claims for COVID-19 also resulted in higher revenue.
No Surprises Act
The No Surprises Act (“NSA”) is a federal law that took effect January 1, 2022, to protect consumers from most instances of “surprise” balance billing. With respect to the Company, the NSA limits the amount an insured patient will pay for emergency services furnished by an out-of-network provider. The NSA addresses the payment of these out-of-network providers by group health plans or health insurance issuers (collectively, “insurers”). In particular, the NSA requires insurers to reimburse out-of-network providers at a statutorily calculated “out-of-network rate.” In states without an all-payor model agreement or specified state law, the out-of-network rate is either the amount agreed to by the insurer and the out-of-network provider or an amount determined through an independent dispute resolution (“IDR”) process.
Under the NSA, insurers must issue an initial payment or notice of denial of payment to a provider within thirty days after the provider submits a bill for an out-of-network service. If the provider disagrees with the insurer’s determination, the provider may initiate a thirty-day period of open negotiation with the insurer over the claim. If the parties cannot resolve the dispute through negotiation, the parties may then proceed to IDR arbitration.
Independent Dispute Resolution. The provider and insurer each submits a proposed payment amount and explanation to the arbitrator. The arbitrator must select one of the two proposed payment amounts taking into account the “qualifying payment amount” and additional circumstances including among other things the level of training, outcomes measurements of the facility, the acuity of the individual treated, and the case mix and scope of services of the facility providing the service. The NSA prohibits the arbitrator from considering the provider’s usual and customary charges for an item or service, or the amount the provider would have billed for the item or service in the absence of the NSA.
Qualifying Payment Amount. The “qualifying payment amount” or “QPA” is generally “the median of the contracted rates recognized by the plan or issuer under such plans or coverage, respectively, on January 31, 2019, for the same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the geographic region in which the items or service is furnished,” with annual increases based on the consumer price index. In other words, the qualifying payment amount is typically the median rate the insurer would have paid for the service if provided by an in-network provider or facility.
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HHS Final Rule. As required by the NSA, the United States Department of Health and Human Services (“HHS”) has established an IDR process under which a certified IDR entity determines the ultimate amount of payment. The HHS’
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final rule became effective October 25, 2022. The final rule eliminated the rebuttable presumption that the qualified payment amount is the correct price and also abandoned the requirement that the certified IDR entity must select the offer closest to the qualifying payment amount. These key provisions were initially part of the interim rule issued in 2021 and were challenged by several court cases. Under the final rule, the certified IDR entity must instead select the offer that best reflects the value of the item or service provided, by first considering the QPA and then considering “additional information” that is relevant to the dispute.
The Texas Medical Association on November 30, 2022 filed an additional lawsuit (“TMA III”) challenging how insurers are establishing the QPA under the final rules, alleging that the final rules allow insurers to include what is referred to in the healthcare industry as “ghost rates,” which are rates included in contracts with providers who do not actually provide the specified service and as a result are lower than rates a provider would have incentive to meaningfully negotiate, thus artificially lowering the QPA. According to the Texas Medical Association, this practice stands in violation of the congressional definition of the QPA as the median of the contracted rates recognized by the plan or insurer for the same or similar item or service that is provided by a provider in the same or similar specialty in the same geographic region.
On August 24, 2023, the U.S. District Court in the Eastern District of Texas in TMA III ruled to vacate several aspects of the regulations mandating the methodology for the QPA calculation. In particular, the court prohibited the inclusion of “ghost rates” as part of the QPA calculation and QPA calculations that are not based on the same or similar specialty. This is the 4th time the federal court has ruled in favor of the Texas Medical Association effective nationwide. In its FAQs dated October 6, 2023, the Department of Labor states that the Department of Justice intends to appeal the court’s ruling.
SinceAfter the NSA became effective January 1, 2022, our average payment by insurers of patient claims for emergency services hashad declined by approximately 26%.30%, including 37% reduction for physician services, at the end of 2022. In 2023, we experienced a 5% improvement from 2022 in emergency services but a 10% reduction for physician services, for an overall impact of 3% increase combined in 2023. In our experience, insurers often initially pay amounts lower than the QPA without regard for other information relevant to the claim. This requires us to make more appeals using the IDR process. We submitted 90,000 cases for IDR open negotiation in 2023 and 28,000 cases for IDR open negotiation in 2022, most in the fourth quarter. The IDR process, subsequent appeals and insurance payor delays require extensive administrative time and delays in collections. While we are working within the established processes for IDR, we have had varying successes at achieving collections at or higher than the established QPA.
On March 17,Our experience is similar to that of other healthcare providers. In February 2023, the Centers for Medicare & Medicaid Services (“CMS”) issued new guidance (“Guidance”) applicable toEmergency Department Physician Management Association reported survey results of its membership. The survey found that in more than 90% of claims surveyed, insurance companies followed the independent dispute resolution (“IDR”) process infinal rules implemented under the NSA effective for QPA disclosure and that the average claim payment determinations made on or after February 6, 2023 for items and services furnished on or after October 25, 2022 for plan years (in the individual market, policy years) beginning on or after January 1, 2022. The revisions were put in place to help balance the arbitration process by including the recent Texas Medical Association Court Order and removing “double counting” provisions. From now on, independent arbiters must consider all evidence given to them by the disputing parties, and not just the Qualified Payment Amount (QPA).declined 32% per ER Visit post-NSA.
UnderWhile we are working within the Guidance, Certifiedestablished processes for IDR, Entities now must consider:
we have had varying successes at achieving collections at or higher than the established QPA. We have undertaken several strategic actions designed to improve our collections results. These include:
o | increasing efforts to collect co-pays and co-insurance, |
o | adding additional administrative staff to handle the increased administrative IDR burden, |
o | having a dedicated IDR team to accelerate resubmission of claims under the IDR process, |
o | making appeals for additional payment of claims for periods before and after the |
o | making efforts to sign favorable contracts with new insurers, |
o | working to sign more favorable contracted rates with existing contracted providers, |
o | working with both local and national legislatures to enforce the NSA rules and guidelines for |
Generally, parties may submit additional information regarding any of the circumstances of the services provided. Under the Guidance, the certified IDR entity now must consider all information submitted to determine the appropriate payment rate. Previously, there was a rebuttable presumption that the QPAThe final rule was the appropriate payment amount, andsubject of legal challenges. The Texas Medical Association (TMA) in September of 2022 filed motions for summary judgment in the IDR entity was not required to consider any additional factors. This news comes as a major win for Nutex Health and other providers’ quest to make the arbitration process more equitable and straightforward.
After being suspended for services rendered after October 25, 2022, IDR entities on March 17, 2023 were instructed to resume payments. However, on August 4, 2023, the HHS and CMS again temporarily suspended the federal IDR process, including the ability to initiate new disputes, until the HHS and CMS can provide new instructions in response to the summary judgement granted by the U.S. District Court for the Eastern District of Texas, on August 3, 2023 inTyler Division, seeking to invalidate the IDR related provisions of the final rule, arguing that the QPA does not represent the fair value of the services rendered by the
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favorphysicians and providers and that the final rule illegally favors the QPA over the fair value of the Texas Medical Association vacating the HHS’ December 2022 decision to increase, without notice, the administrative fee required to initiate IDR arbitration from $50 to $350. The IDR process resumed on September 5, 2023. We anticipate that this additional favorable court ruling will further enhance the fairnessprovider services in contravention of the reimbursement process understatutory language of the NSA.
On October 19, 2022, and in addition to amicus briefs by several other national medical associations, the American Society of Anesthesiologists, the American College of Emergency Physicians, and the American College of Radiology, professional associations representing an aggregate of approximately 136,000 physicians, filed an Amicus brief supporting the TMA Motion.
On February 6, 2023, CMS announced new guidancethe U.S. District Court ruled in responsefavor of the TMA by granting its motion for summary judgment against the HHS and stating that the revised IDR process in the final rule "continues to place a thumb on the August 2023 rulingscale" in TMA III vacating severalfavor of insurers and conflicts with the statutory provisions of the existing NSA, regulations. Inis unlawful and must be set aside. The Courts decision vacated all of the announcement,revised regulations challenged by the Departments stateTMA, including HHS’ rule that while they disagree with the court’s ruling,arbiters must primarily consider the QPA calculations must now be made in good faith in accordance with the NSAIDR process. The court stated that the final rules wrongly require arbitrators to presume the correctness of the QPA and applicable rules currently in effect, with no additional guidance provided bythen impose a heightened burden on the Departments and a suspension of any enforcement until at least May 1, 2024,remaining statutory factors to give the insurers adequate time to comply withovercome that presumption. In addition, the TMA III court ruling. Our management team is actively working with legislatures,on January 1, 2023, also in the Administration,U.S. Eastern District, filed a lawsuit seeking declaratory and injunctive relief to invalidate a recent 600% percent increase in the Center for Consumer Information and Insurance Oversight (CCIIO) to request CMS to promptly issue specific guidance on health plan obligations to calculate QPAsadministrative fees payable in line with the federal district court ruling and issue additional instructions to certified IDR entities on how to evaluate QPAs that are based on an invalidated methodology.process.
On October 27, 2023,Effective January 1, 2024, in consultation with the Departments of HHS, Labor and Health and Human Services, the Treasury, along withInternal Revenue Service (IRS) announced the Office of Personnel Management, released a proposed rule on the NSA’s Federal IDR process. The proposed rules would allow: better communication betweenannual increase that health plans and providers, open negotiations through a centralized Federal IDR portal, improved IDR eligibility determinations and batching abilitymust apply to the calculation of claims. We do not know when andthe QPA for insurance reimbursements to account for inflation from 2023 to 2024 (Notice 2024-1). Under the No Surprises Act, QPAs are calculated based on median contracted rates for the same or similar service as they existed in what form these proposed rules will be implemented, however, we feel that this is a favorable step2019. Treasury Regulations direct the IRS to anchor the annual inflationary update in the right directionConsumer Price Index for All Urban Consumers (CPI-U). In Notice 2024-1, the IRS directs health plans to repairupdate QPAs in 2024 by an increase of 5.4% over 2023 QPAs. Alternatively, to update 2023 rates, health plans may return to the faulty implementation oforiginal 2019 calculation and apply a cumulative update factor to account for the NSA.IRS inflationary updates from 2019 to 2024. Under that approach, the cumulative update that must be applied to 2019 base year rates is 20.9%.
We are supportive of industry efforts seeking to amend the NSA final rule.challenging NSA. Our experience, like that of many other healthcare providers, is that the final rule as currently in effect, continues to unfairly favor insurers in the determination of the QPA we receive for our healthcare services. It is difficult to predict the ultimate outcome of efforts to challenge or amend the final rule. As well, there can be no assurance that third-party payors will not attempt to further reduce the rates they pay for our services or that additional rules issued under the NSA will not have adverse consequences to our business.
Recent Developments
NASDAQ LetterReverse Stock Split..
The Company held its annual meeting of stockholders on June 29, 2023, where the Company’s stockholders approved a reverse stock split at a ratio within a range of 1-for-2 and 1-for-15 and granted the Company’s Board of Directors the discretion to determine the timing and ratio of the split within such range. This approval is valid through June 29, 2024.
On May 22, 2023,April 1, 2024, the Company’s Board of Directors determined to effect the reverse stock split of the common stock at a 1-for-15 ratio (the “Reverse Stock Split”) and approved the filing of a Certificate of Amendment (the “Certificate of Amendment”) to the Second Amended and Restated Certificate of Incorporation of the Company to effect the Reverse Stock Split.
On April 9, 2024, the Company filed the Certificate of Amendment with the Delaware Secretary of State to effect the Reverse Split, effective at 11:59 p.m. Eastern Time on April 9, 2024 (the “Effective Time”). At the Effective Time, every 15 shares of issued and outstanding common stock automatically combined into one issued share of common stock, with no change in par value. No fractional shares were issued as a result of the Amendment. All stockholders entitled to receive fractional shares as a result of the Reverse Split received a letter (the “Nasdaq Staff Deficiency Letter”) fromone whole share for their fractional share interest. The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, forReverse Split did not modify any voting rights or other terms of the prior thirty (30) consecutive business days, the bid price for thecommon stock. The Company’s common stock had closed below the minimum $1.00 per share requirement for continued listingbegan trading on a Reverse Stock Split-adjusted basis on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).
In accordance with Nasdaq Listing Rule 5810(c)(3)(A),at the Company has been provided an initial periodopen of 180 calendar days, or until November 20, 2023, to regain compliance. The letter states that the Nasdaq staff will provide written notification that the Company has achieved compliance with Rule 5550(a)(2) if at any time before November 20, 2023 (the “Compliance Period”), the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of ten (10) consecutive business days. The Nasdaq Staff Deficiency Letter has no immediate effect on the listing or trading of the Company’s common stock.
The Company intends to continue actively monitoring the bid price for its shares of common stock between now and the expiration of the Compliance Period and will consider all available options to resolve the deficiency with every intention to regain compliance with the Minimum Bid Price Requirement.
If the Company does not regain compliance with Rule 5550(a)(2) by November 20, 2023, the Company may be eligible for an additional 180 calendar day compliance period. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, for example, by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq would notify the Company that its securities would be subject to delisting. In the event of such a notification, the Company may appeal the Nasdaq staff’s determination to delist its securities. There can be no
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assurance that the Company will be eligiblemarkets on April 10, 2024. The Reverse Stock Split was implemented for the additional 180 calendar daypurpose of regaining compliance period, if applicable, or thatwith the Nasdaq staff would grant the Company’s requestminimum bid price requirement for continued listing subsequentof the Company’s common stock on the Nasdaq Capital Market.
As a result of the Reverse Stock Split, the number of shares of common stock outstanding was reduced from 745,426,858 shares to any delisting notification.49,719,375 shares inclusive of whole shares issued for fractional shares, and the number of authorized shares of common stock remains 950 million shares.
Results of Operations
We report the results of our operations as three segments in our consolidated financial statements: (i) the hospital division, (ii) the population health management division and (ii) the real estate division. Activity within our business segments is significantly impacted by demand for healthcare services we provide, competition for these services in each of the market areas we serve, and the legislative changes discussed above.
| | | | | | | | | | | | | | |||||
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | | 2024 |
| 2023 | ||||||
Revenue: | | | | | | | | | | | | | | | | | | |
Hospital division | | $ | 54,585,263 | | $ | 21,244,305 | | $ | 155,485,230 | | $ | 151,976,226 | | $ | 60,029,369 | | $ | 49,288,164 |
Population health management division | | | 8,137,709 | | | 7,150,753 | | | 22,491,613 | | | 13,594,007 | | | 7,424,418 | | | 7,041,253 |
Total revenue | | | 62,722,972 | | 28,395,058 | | | 177,976,843 | | 165,570,233 | | | 67,453,787 | | 56,329,417 | |||
Segment operating income: | | | | | | | | | | | | | | | | |||
Hospital division | | | 7,238,738 | | (23,742,606) | | | 21,122,489 | | 18,997,515 | | | 10,471,050 | | 4,778,637 | |||
Population health management division | | | (172,525) | | | 29,702 | | | 438,370 | | | (257,002) | | | (313,872) | | | 69,086 |
Total segment operating income | | | 7,066,213 | | (23,712,904) | | | 21,560,859 | | 18,740,513 | | | 10,157,178 | | 4,847,723 | |||
Corporate and other costs: | | | | | | | | | | | | | | | | |||
Facilities closing costs | | | - | | - | | | 217,266 | | - | | | - | | 217,266 | |||
Acquisition costs | | | 43,464 | | - | | | 43,464 | | 3,885,666 | ||||||||
Stock-based compensation expense | | | 49,167 | | 81,249 | | | 2,198,812 | | 135,415 | | | 49,167 | | 1,900,000 | |||
Impairment of goodwill | | | - | | 398,135,038 | | | - | | 398,135,038 | ||||||||
General and administrative expenses | | | 7,794,808 | | | 6,751,548 | | | 24,730,168 | | | 17,404,637 | | | 8,658,410 | | | 7,175,544 |
Total corporate and other costs | | | 7,887,439 | | 404,967,835 | | | 27,189,710 | | 419,560,756 | | | 8,707,577 | | 9,292,810 | |||
Interest expense | | | 4,098,179 | | 3,402,606 | | | 12,081,316 | | 9,628,189 | | | 4,444,362 | | 3,140,089 | |||
Gain on warrant liability | | | (2,600,747) | | - | |||||||||||||
Other expense | | | (53,206) | | | (630,450) | | | 70,721 | | | 346,873 | | | (241,192) | | | 247,455 |
Loss before taxes | | | (4,866,199) | | (431,452,895) | | | (17,780,888) | | (410,795,305) | | | (152,822) | | (7,832,631) | |||
Income tax expense (benefit) | | | (342,259) | | | (8,543,880) | | | (2,068,530) | | | 11,285,729 | | | 389,665 | | | (910,659) |
| | | | | | | | | | | | | | | | |||
Net loss | | | (4,523,940) | | (422,909,015) | | | (15,712,358) | | (422,081,034) | | | (542,487) | | (6,921,972) | |||
Less: net income (loss) attributable to noncontrolling interests | | | 1,018,451 | | | (10,722,749) | | | (1,543,641) | | | (12,052,765) | ||||||
Less: net loss attributable to noncontrolling interests | | | (178,412) | | | (1,774,693) | ||||||||||||
Net loss attributable to Nutex Health Inc. | | $ | (5,542,391) | | $ | (412,186,266) | | $ | (14,168,717) | | $ | (410,028,269) | | $ | (364,075) | | $ | (5,147,279) |
| | | | | | | | | | �� | | | | | | |||
Adjusted EBITDA | | $ | 1,279,193 | | $ | (15,703,848) | | $ | 7,711,586 | | $ | 18,456,057 | | $ | 4,560,401 | | $ | 2,437,854 |
Three Months Ended September 30, 2023March 31, 2024 Compared to Three Months Ended September 30, 2022March 31, 2023
We reported a netNet loss attributable to Nutex Health Inc. of $5.5decreased to $0.4 million, or a loss of $0.01 per share, for the three months ended September 30, 2023 as compared withMarch 31, 2024 from a net loss attributable to Nutex Health Inc. of $412.2$5.1 million, or a loss of $0.62$0.12 per share, for the same period of 2022. The net loss for the third quarter of 2022 includes a $398.1 million goodwill impairment.2023. Our 20232024 results were principally affected by:by higher revenue due to:
● | Higher patient visits, increasing by |
● |
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Adjusted EBITDA for the three months ended September 30, 2023 was $1.3March 31, 2024 increased to $4.6 million as compared to a loss of $15.7from $2.4 million for the comparable period of 2022.2023. Refer to Non-GAAP Financial Measures discussed below for a definition and reconciliation of Adjusted EBITDA. The items affecting revenue contributed significantly to the increase in Adjusted EBITDA in the 20232024 period.
A discussion of our segment results is included below.
Hospital Division. Our revenue for the three months ended September 30, 2023March 31, 2024 totaled $54.6$60.0 million as compared to $21.2$49.3 million for the same period of 2022. The2023, an increase of $10.7 million or 21.7%. This increase was attributed to an increase in visits, an increase in revenue was attributedper visit and an increase in collections. Of this revenue increase, 6.7% related to a decrease in revenue in the three months ended September 30, 2022 causedmature hospitals, which are hospitals that were opened by legislative changes reducing the amounts we are able to collect for patient services to median in-network rates, totaling approximately $29.0 million, as well as the closing of underperforming facilities and opening of new facilities impacting the third quarter of 2023.December 31, 2021.
The following table shows the number of patient visits during the periods:
| | | | | | | | | | |||
| | Three Months Ended September 30, | | Three Months Ended March 31, | ||||||||
| | 2023 | | 2022 | | 2024 | | 2023 | ||||
Patient visits: | | | | | | | | | | | | |
Hospital | | | 37,443 | | 36,500 | | | 40,068 | | 33,085 |
Total patient visits increased 2.6%21.1% during the three months ended September 30, 2023March 31, 2024 as compared with the same period of 20222023 due mostly to the opening of threefour facilities in the quarterthroughout 2023 which are fully operating in the ramp-up stage.2024. Of this visit increase, 5.3% related to mature hospitals, which are hospitals opened by December 31, 2021.
The Company recorded approximately $0.7 million of net revenue for cash collections during the three months ended March 31, 2024 for services that were previously provided. The Company had previously reserved for this amount as uncollectible.
The hospital division’s operating income was $7.2$10.5 million during the three months ended September 30, 2023,March 31, 2024, compared with an operating lossincome of $23.7$4.8 million in the same period of 2022,2023, an increase of 130%119%. Our revenue and operating income for the thirdfirst quarter of 2022 was adversely affected by the reduction in net revenue discussed above. Our operating income for the third quarter of 20232024 was positively affected by a reductionthe increase in operating costs. We renegotiated contract personnel agreements to better align with our operations. We have made significant progress with the IDR process for both the NSA (Federal) as well as the Texas Department of Insurance. We have made a significant investment in the revenue cycle team to address this IDR process. In the three months ending September 30, 2023,visits and revenue per patient for the period is trending favorably compared to the same period in 2022.visit discussed above.
Population Health Management Division. Our total revenue for the three months ended September 30, 2023March 31, 2024 was $8.1$7.4 million as compared with $7.2$7.0 million for the same period of 2022.2023. The increase was due to higher capitation revenue earned.
The population health management division had $0.2$0.3 million of operating loss for the three months ended
September 30, 2023 March 31, 2024 as compared with $0.1 million of operating income for the same period of 2022.2023. Strategically, we are focused on the growth of this division principally through the addition of new independent physician associations and have staffed our organization to manage larger numbers of such organizations. In August 2023, we completed the acquisition of two IPAs in Florida.
Real Estate Division. This division reports the operations of consolidated Real Estate Entities where we provide guarantees of their indebtedness or are co-borrowers.
Revenue and operating expenses of consolidated Real Estate Entities are not significant since the extent of these entities’ operations is to own facilities leased to our hospital division entities which are financed by a combination of contributed equity by related parties and third-party mortgage indebtedness. Such leases are typically on a triple net basis where our hospital division is responsible for all operating costs, repairs and taxes on the facilities. Finance lease income is recognized outside of segment operating income as other income by the Real Estate Entities. However, these amounts are largely eliminated in the consolidation of these entities into our financial statements.
At September 30, 2023,As of March 31, 2024, two Real Estate Entities continue to be consolidated in our financial statements. We expect that hospitals we open in the future may be leased from new Real Estate Entities which may be owned in whole or part by
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related parties. Third-party lenders to these entities may require that we provide a guarantee or become co-borrowers
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under mortgage indebtedness and financings for such facilities. In such instances, we may be required to consolidate these new Real Estate Entities in our financial statements as VIEs.
Corporate and other costs. Corporate and other costs in the three months ended September 30, 2023March 31, 2024 totaled $7.98.7 million as compared to $405.0$9.3 million for the same period of 2022. We recorded an impairment expense of $398.1 million to goodwill during the third quarter of 2022.2023. General and administrative costs include our executive management, accounting, human resources, corporate technology, insurance and professional fees. We have incurred higher levels of professional fees as a public company. We recognized $0.1 million of stock-based compensation expense related to the issuance of RSUs.
Nonoperating items
Interest expense. Interest expense totaled $4.1was $4.4 million in the three months ended September 30, 2023March 31, 2024 as compared with $3.4$3.1 million for the same period of 2022.2023. The increase in interest expense for the 20232024 period is principally due to discount amortization expense and interest expense associated with the Pre-paid Advance Agreement.Unsecured Convertible Term Debt.
Gain on warrant liability. Gain on warrant liability was $2.6 million in the three months ended March 31, 2024 is the remeasurement of the warrant liability required at each reporting period and is influenced by changes in our common stock market price.
Income tax expense. Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items is recognized in the period these occur.
Our effective tax rate for the three months ended September 30, 2023March 31, 2024 was approximately 7.0%. Excluding discrete items, our effective tax rate for the three months ended September 30, 2022 was 25.3%. The primary difference from the federal statutory rate of 21% is related to state taxes, income of noncontrolling interests in flow-through entities and permanent differences for non-deductible expenses.
Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022
We reported a net loss attributable to Nutex Health Inc. of $14.2 million, or a loss of $0.02 per share, for the nine months ended September 30, 2023 as compared with net loss attributable to Nutex Health Inc. of $410.0 million, or a loss of $0.65 per diluted share, for same period of 2022. The net loss for the third quarter of 2022 includes a $398.1 million goodwill impairment. Our 2023 results were principally affected by:
Adjusted EBITDA for the nine months ended September 30, 2023 was $7.7 million as compared to $18.5 million for the comparable period of 2022. Refer to Non-GAAP Financial Measures discussed below for a definition and reconciliation of Adjusted EBITDA. The items affecting revenue contributed significantly to the decline in Adjusted EBITDA in the 2023 period.
A discussion of our segment results is included below.
Hospital Division. Our revenue for the nine months ended September 30, 2023 ended totaled $155.5 million as compared to $152.0 million for the same period of 2022, an increase of 2% caused by an improvement collection amounts per patient.
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The following table shows the number of patient visits during the periods:
| | | | | | |
| | Nine Months Ended September 30, | ||||
| | 2023 | | 2022 | ||
Patient visits: | | | | | | |
Hospital | | | 102,798 | | | 121,414 |
Total patient visits decreased 15.3% during the nine months ended September 30, 2023 as compared with the same period of 2022. Patient visits in the 2022 period included significant volumes of COVID-19 related cases. Despite the decrease in patient visits, revenue increased due to our continued improvement in collection efforts throughout 2023 along with a shift acuity of our patient visits, generating high gross charges.
The hospital division’s operating income was $21.1 million during the nine months ended September 30, 2023, as compared with income of $19.0 million in the same period of 2022, an increase of 11%. Our operating income for the first nine months of 2023 was positively affected by an increase in net revenue. We have made significant progress with the IDR process for both the NSA (Federal) as well as the Texas Department of Insurance. Our operating income was adversely impacted by additional incurred cost of $1.4 million in 2023 for four new locations opened in 2023. Start-up and operating costs at new facilities often exceed our revenue at these facilities until they achieve sustaining volumes of patient visits.
Population Health Management Division. We completed our reverse business combination with Clinigence in April 2022. Clinigence’s operations are reported as the population health management division. Our total revenue for the nine months ended September 30, 2023 was $22.5 million consisting of capitation revenue of $19.5 million, management fees of $2.1 million and SaaS revenue of $0.8 million. Capitation revenue is recognized by our consolidated VIE, AHISP. We do not have an equity interest in this VIE but consolidate it since we are the primary beneficiary of its operations under our management services contract with them. We also earn management fees under our management services contracts with other IPAs and MSOs which are reported as revenue.
The population health management division had $0.4 million of operating income for the nine months ended September 30, 2023. Strategically, we are focused on the growth of this division principally through the addition of new independent physician associations and have staffed our organization to manage larger numbers of such organizations. In August 2023, we completed the acquisition two IPAs in Florida.
Real Estate Division. This division reports the operations of consolidated Real Estate Entities where we provide guarantees of their indebtedness or are co-borrowers. During the first nine months of 2023, we deconsolidated one Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.
Revenue and operating expenses of consolidated Real Estate Entities are not significant since the extent of these entities’ operations is to own facilities leased to our hospital division entities which are financed by a combination of contributed equity by related parties and third-party mortgage indebtedness. Such leases are typically on a triple net basis where our hospital division is responsible for all operating costs, repairs and taxes on the facilities. Finance lease income is recognized outside of segment operating income as other income by the Real Estate Entities. However, these amounts are largely eliminated in the consolidation of these entities into our financial statements.
At September 30, 2023, two Real Estate Entities continue to be consolidated in our financial statements. We expect that hospitals we open in the future may be leased from new Real Estate Entities which may be owned in whole or part by related parties. Third-party lenders to these entities may require that we provide a guarantee or become co-borrowers under mortgage indebtedness financings for such facilities. In such instances, we may be required to consolidate these new Real Estate Entities in our financial statements as VIEs.
Corporate and other costs. Corporate and other costs in the nine months ended September 30, 2023 included general and administrative expenses totaling $27.2 million. General and administrative costs include our executive management, accounting, human resources, corporate technology, insurance and professional fees. We have incurred higher levels of professional fees as a public company. During the nine months ended September 30, 2023, we incurred closing costs of
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$0.2 million due to the closure of three facilities in January 2023. In addition, we have made staffing and management additions commensurate with our operational growth. We recognized $1.9 million of stock-based compensation expense for the issuance in March 2023 of 1,000,000 common shares to Apollo Medical Holdings, Inc. for IPA managerial services, and $0.3 million for the April 2023 issuance of RSUs.
Nonoperating items
Interest expense. Interest expense totaled $12.1 million in the nine months ended September 30, 2023 as compared with $9.6 million for the same period of 2022. The increase in interest expense for the 2023 period is principally due to discount amortization expense associated with the Yorkville Pre-paid Advance Agreement and the opening of four new facilities.
Income tax expense. Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items is recognized in the period these occur.
Our effective tax rate for the nine months ended September 30, 2023 was approximately 11.6%. Excluding discrete items, our effective tax rate for the nine months ended September 30, 2022 was 26.2%14.2%. The primary difference from the federal statutory rate of 21% is related to state taxes, income of noncontrolling interests in flow-through entities and permanent differences for non-deductible expenses.
Liquidity and Capital Resources
As of September 30, 2023,March 31, 2024, we had $26.8$30.0 million of cash and equivalents, compared to $34.3$22.0 million of cash and equivalents at December 31, 2022.2023.
Significant sources and uses of cash during the first ninethree months of 2023.2024.
Sources of cash:
● | Cash from operating activities was $3.0 million, which included |
● |
Uses of cash:
● | Net payments of lines of credit and notes payable of $2.1 million |
● | Capital expenditures were |
● | Distributions, net of contributions, to noncontrolling interests totaled |
● | Repayments of finance leases |
Future sources and uses of cash. Our operating activities are financed with cash on hand which is generated from revenues, which may vary significantly based on regulatory changes affecting the timing and amounts of insurance reimbursements for our services. Most of our hospital facilities are leased from various lessors including related parties. These leases are presented in our consolidated balance sheets unless the lease is from a consolidated Real Estate Entity. Our growth plans include the development of new hospital locations. We expect that in many of these locations we will lease facilities from newly established entities partially owned by related parties.
We routinely enter into equipment lease agreements to procure new or replacement equipment and may also finance these purchases with term debt. We have smaller lines of credits available for working capital purposes and are presently
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working to supplement or replace these with larger financing commitments. These larger financing commitments are subject to market conditions and we may not be able to obtain such larger financing commitments atwith favorable economic terms or at all. We also believe that our existing cash, cash equivalents, and marketable securities, and available borrowing capacity, will be sufficient to meet our anticipated cash needs requirements for operations and growth
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objectives for at least the next twelve months. If the assumptions underlying our business plan regarding future revenue and expenses change or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or debt securities.
Indebtedness. The Company’s indebtedness at September 30, 2023March 31, 2024 is presented in Item I, “Financial Statements – Note 87 – Debt” and our lease obligations are presented in Item I, “Financial Statements—Note 98 – Leases.”
Off-Balance Sheet Arrangements
As of September 30, 2023,March 31, 2024, we had no material off-balance sheet arrangements.
Non-GAAP Financial Measures
Adjusted EBITDA. Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.
We define Adjusted EBITDA as net income (loss) attributable to Nutex Health Inc. plus net interest expense, income taxes, depreciation and amortization, further adjusted for stock-based compensation, any facilities closing costs, acquisition related costs and impairments. A reconciliation of net income to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | Three Months Ended March 31, | ||||||||||||
| | 2023 |
| 2022 | | 2023 |
| 2022 | | 2024 |
| 2023 | ||||||
Reconciliation of net income (loss) attributable to Nutex Health Inc. to Adjusted EBITDA: | | | | | | | | | | | | | ||||||
Reconciliation of net loss attributable to Nutex Health Inc. to Adjusted EBITDA: | | | | | | | ||||||||||||
Net loss attributable to Nutex Health Inc. | | $ | (5,542,391) | | $ | (412,186,266) | | $ | (14,168,717) | | $ | (410,028,269) | | $ | (364,075) | | $ | (5,147,279) |
Depreciation and amortization | | | 4,745,941 | | | 4,330,167 | | | 12,908,848 | | | 9,859,513 | | | 4,186,202 | | | 3,993,747 |
Interest expense, net | | | 4,098,179 | | | 3,402,606 | | | 12,081,316 | | | 9,628,189 | | | 4,444,362 | | | 3,140,089 |
Income tax expense (benefit) | | | (342,259) | | | (8,543,880) | | | (2,068,530) | | | 11,285,729 | | | 389,665 | | | (910,659) |
Allocation to noncontrolling interests | | | (1,772,908) | | | (922,762) | | | (3,500,873) | | | (4,445,224) | | | (1,544,173) | | | (755,310) |
EBITDA | | | 1,186,562 | | | (413,920,135) | | | 5,252,044 | | | (383,700,062) | | | 7,111,981 | | | 320,588 |
Facilities closing costs | | | - | | | - | | | 217,266 | | | - | | | - | | | 217,266 |
Impairment of goodwill | | | - | | | 398,135,038 | | | - | | | 398,135,038 | ||||||
Acquisition costs | | | 43,464 | | | - | | | 43,464 | | | 3,885,666 | ||||||
Gain on warrant liability | | | (2,600,747) | | | - | ||||||||||||
Stock-based compensation expense | | | 49,167 | | | 81,249 | | | 2,198,812 | | | 135,415 | | | 49,167 | | | 1,900,000 |
Adjusted EBITDA | | $ | 1,279,193 | | $ | (15,703,848) | | $ | 7,711,586 | | $ | 18,456,057 | | $ | 4,560,401 | | $ | 2,437,854 |
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Significant Accounting Policies
The preparation of financial statements and related disclosures in accordance with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements included in the Form 10-K for the year ended December 31, 20222023 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. The Company’s critical accounting policies that are impacted by judgments, assumptions and estimates are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022.2023. Since December 31, 2022,2023, there
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have been no material changes in the Company’s accounting policies that are impacted by judgments, assumptions and estimates, except for the following:
Convertible debt. The Company accounts for convertible debt that does not meet the criteria for equity treatment in accordance with the guidance contained in Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Accordingly, the Company elected to classify the convertible debt as a liability at amortized cost using the effective interest method. The Company classifies convertible debt based on the re-payment terms and conditions. Any discounts on the convertible debt and costs incurred upon issuance of the convertible debt are amortized to interest expense over the terms of the related convertible debt. Convertible debt is also analyzed for the existence of embedded derivatives, which may require bifurcation from the convertible debt and separate accounting treatment. Refer to Note 8 for information regarding convertible debt.estimates.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
With respect to the three months and six months ended September 30, 2023,March 31, 2024, there have been no material changes in our primary market risk exposures or how those exposures are managed since the information disclosed in our 20222023 Form 10-K.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In accordance with Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of disclosure controls and procedures as of September 30, 2023.March 31, 2024. Based on this evaluation, the Company concluded that our disclosure controls and procedures were not effective as of September 30, 2023March 31, 2024 due to the material weakness previously identified as described below.
Previously Reported Material Weaknesses. We previously identified material weaknesses in our internal control over financial reporting in our Form 10-K for the year ended December 31, 2022,2023, based on criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Based on our assessment, the following material weaknesses were identified:
● | The Company |
1) | appropriate restrictions that would adequately prevent users from gaining inappropriate access to the financially relevant systems. |
2) | IT program and data changes affecting the Company’s financial IT applications and underlying accounting records, are identified, tested, authorized and implemented appropriately to validate that data produced by its relevant IT systems were complete and accurate. Automated process-level and manual controls that are dependent upon the information derived from |
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3) | key third party service provider SOC reports were obtained and reviewed. |
● | Business process controls across |
● | Ineffective design and implementation of controls over the completeness and accuracy of information included in key spreadsheets supporting the financial statements. |
Management has concluded that, based on applying the COSO criteria, as of December 31, 2022,2023, the Company’s internal control over financial reporting was not effective to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.
Remediation Plans. These material weaknesses did not result in a material misstatement of the Company’s consolidated financial statements for the periods presented. TheIn 2023, the Company has started the process of designing and implementing effective internal control measures to remediate the reported material weakness.weaknesses. The Company’s efforts include the implementation ofincluded implementing a new enterprise-wide system in the first quarter of 2023 that willto reduce reliance on manual processes and spreadsheets supporting the
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financial statements. Additionally, the Company has engaged aan accounting firm in 2023 to assist in the proper design, implementation and testing of internal controls over financial reporting. We have added key senior management positions including a Chief Operating Officer. We have alsoOfficer and made some additions to our accounting and financial reporting teams inthroughout 2023.
While we believe that these efforts will improve our internal control over financial reporting, our remediation efforts are ongoing and will require validation and testing of the design and operating effectiveness of internal controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the remaining material weakness in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting.
Changes in Internal Control Over Financial Reporting. We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are making changes to our internal control over financial reporting in connection with the implementation of our new enterprise-wide system in the first quarter of 2023.
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures. Our senior members of management do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, the Company, its consolidated subsidiaries or VIEs may be named in various claims and legal actions in the normal course of business. The Company is not involved in any legal proceedings that it believes would have a material effect on its business or financial condition.
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Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Form 10-K for the year ended December 31, 2022, our Form 10-Q for the three months ended March 31, 2023 and our Form 10-Q for the three months ended June 30, 2023 and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. In addition, you should carefully consider the risks described below.
We may experience additional ownership dilution as a resultnot be able to maintain compliance with the continued listing requirements of the September 2023 Private Offering
In September 2023, the Company commenced a private offering (the “September 2023 Private Offering”) of up to $15.0 million pursuant to which the Company will issue investment units (the “Units”) at $50,000 per Unit to accredited investors (the “Unit Holder”) as defined in Rule 501 under the 1933 Act. Each Unit consists of (a) an interest-bearing unsecured convertible promissory note (the “Unsecured Convertible Term Notes”) in the principal amount of $50,000 convertible into shares of Common Stock at a conversion price of $0.40 per share and (b) a six-year warrant (the “Warrants”) to purchase up to 62,500 shares at an exercise price of $0.40 per share. We also agreed to issue warrants for the purchase of up to 11,250,000 shares to the placement agent. The Notes mature on October 31, 2025 and the Warrants expire on December 31, 2029.
Nasdaq Global Market.
If a significant number of the Unit Holders choose to exercise their conversion rights, it could result in the issuance of additional common shares, diluting the ownership interests of existing shareholders. Assuming a $15 million private offering, the note and warrant holders, upon exercise or conversion, would receive up to 67,500,000 shares of Common Stock. This dilution could adversely affect the market price of our common stock.
We may experience increased volatility in the trading price of our stock as a result of the September 2023 Private Offering
The presence of convertible debt with attached warrants in our capital structure may contribute to increased volatility in the trading price of our common stock. The potential for conversion and warrant exercise can lead to fluctuations in our stock price, making it more difficult for investors to predict and assess the value of our common shares.
We may experience a cash flow and liquidity impact as a result of the September 2023 Private Offering
The Unsecured Convertible Term Notes bear an annual interest rate of 8% if paid in cash or an annual interest rate of 10% if paid in in the form of common stock. The payment of interest in the form of common stock is at the discretion of the Company. When paid in common stock, the number of shares is equal to the quotient of the total accrued interest due divided by the last reported sale price of the Company’s common stock on the last complete trading day of such quarter. The Unit Holders have the option to convert all or any portion of the unpaid principal and interest outstanding in Common Stock at the conversion price of $0.40 per share. If the Company fails to pay the outstanding principal amount and all accrued interest within 30 days of the maturity date, the interest rate payable is adjusted to 12%.
Our convertible debt instruments require periodic interest paymentscommon stock is listed on the Nasdaq Capital Market. In order to maintain that listing, we must satisfy minimum financial and other requirements including, without limitation, a requirement that our closing bid price be at least $1.00 per share. On May 22, 2023, the repaymentCompany received a letter from Nasdaq indicating that, for the last thirty consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued listing on Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2). As reported on the Company’s current report on Form 8-K dated May 22, 2023, the Company had an initial period of principal upon maturity. The need180 calendar days, or until November 20, 2023, to make interest and principal payments can place financial pressure on our company, especially if our financial performanceregain compliance. On November 21, 2023, Nasdaq notified the Company that it has determined that the Company is not sufficienteligible for an additional 180 calendar day period, or until May 20, 2024, to cover these obligations.
regain
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compliance (the "Second Compliance Period”). Nasdaq’s determination is based on the Company’s meeting the continued listing requirement for market value of publicly held shares and all other applicable requirements for initial listing on The Nasdaq Capital Market with the exception of the Minimum Bid Price Requirement, and the Company’s written notice of its intention to cure the deficiency during the Second Compliance Period by effecting a reverse stock split, if necessary. On April 10, 2024, the Company effected a 1-to-15 reverse stock split.
As of the date hereof and taking into account the effects of the Company’s April 2024 reverse stock split, the Common Stock has not regained compliance with the Minimum Bid Price Requirement. If the Company fails to regain compliance prior to the expiration of the second grace period on May 20, 2024, Nasdaq will issue a Delisting Notice. Nutex intends to appeal such notice, but can give no assurance that such appeal will be successful. Nasdaq will maintain the common stock’s listing during the appeals process. Pending stockholder approval at its 2024 Annual Meeting on June 17, 2024, the Company’s board will have the option to effect an additional reverse stock split if necessary to regain compliance with the Minimum Bid Price Requirement.
If we fail to regain compliance or fail to continue to meet all applicable continued listing requirements for Nasdaq in the future and Nasdaq determines to delist our common stock, we could face significant material adverse consequences including:
• | a limited availability of market quotations for our securities; |
• | reduced liquidity for our securities; |
• | a determination that our Common Stock is a "penny stock,” which will require brokers trading in our Common Stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; |
• | inability to obtain financing to repay debt and fund our operations; |
• | a decreased ability to issue additional securities or obtain additional financing in the future; and |
• | a limited amount of news and analyst coverage. |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Securities; use of proceeds from registered securities.
Common Stock Issued. In the third quarter of 2023,On March 26, 2024, the Company issued 2,541,511and the Holders agreed to amend the conversion price of the Unsecured Convertible Term Notes and exercise price of the Warrants to $3.00 each ($0.20 prior to Reverse Stock Split), resulting in the Unsecured Convertible Term Notes being convertible into 1,795,000 shares of common stock (26,925,000 prior to Reverse Stock Split), the Warrants exercisable for 897,500 shares in connection withof common stock (13,462,500 prior to Reverse Stock Split) and the acquisitionplacement agent Warrants exercisable for 538,500 shares of two IPAs in Florida.common stock (8,077,500 prior to Reverse Stock Split). These shareswarrants were issued in a private placement in reliance on section 4(a)(2) of the Securities Act.
During the third quarter of 2023, the Company issued 7,427,606 shares of common stock to Yorkville, reducing the principal amount outstanding under the initial Pre-Paid Advance. These shares were issued pursuant to a prospectus supplement to the Company’s existing registration statement on Form S-3.
Item 3. Defaults upon Senior Securities.
Not Applicable
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information.
Trading Arrangements
During the fiscal quarter ended September 30, 2023,March 31, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K) for the purchase or sale of the Company’s securities.
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Item 6. Exhibits
Exhibit No. | Description |
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31.1* | |
31.2* | |
32.1* | |
32.2* | |
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
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SIGNATURES
Pursuant to the requirements 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, on November 9, 2023.May 8, 2024.
| Nutex Health Inc. | |||
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By: | /s/ Thomas T. Vo | |||
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| Thomas T. Vo | ||
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| Chief Executive Officer and Chairman of the Board (principal executive officer) | ||
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By: | /s/ Jon C. Bates | |||
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| Jon C. Bates | ||
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| Chief Financial Officer (principal financial officer and principal accounting officer) |
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