UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
For
the Quarterly period ended
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(Exact name of small business issuer as specified in its charter)
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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.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
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As of November 15, 2021, there were shares of common stock of the registrant, $0.001 par value per share, issued and outstanding.
| 1 |
Clinigence
Holdings, Inc.
Form 10-Q
| Part I — Financial Information | ||
| Item 1. | Financial Statements | |
| Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020 | 4 | |
| Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited) | 5 | |
| Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2021 and 2020 (Unaudited) | 6 | |
| Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2019 (Unaudited) | 7 | |
| Unaudited Condensed Notes to Consolidated Financial Statements | 8 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 27 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 |
| Item 4. | Controls and Procedures | 31 |
| Part II — Other Information | ||
| Item 1. | Legal Proceedings | 32 |
| Item 1A. | Risk Factors | 32 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 32 |
| Item 3. | Defaults upon Senior Securities | 32 |
| Item 4. | Mine Safety Disclosures | 32 |
| Item 5. | Other Information | 32 |
| Item 6. | Exhibits | 32 |
| 2 |
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 Clinigence Holdings, Inc., a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “Clinigence” refers to Clinigence Holdings, Inc.
Trade names and trademarks of the Company and its subsidiaries referred to herein, and their respective logos, are our property. This Quarterly Report on Form 10-Q may contain additional trade names and/or trademarks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names and/or trademarks, if any, to imply an endorsement or sponsorship of us by such companies, or any relationship with any of these companies.
NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, 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, statements about the Company’s guidance for the year ending December 31, 2021, any statements about our business (including the impact of the COVID-19 pandemic on our business), financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, or otherwise, and our future liquidity, including cash flows; any statements of any plans, strategies, and objectives of management for future operations, such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases, or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.
Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations, and certain assumptions of management. Some or all of such beliefs, expectations, and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental, and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K, for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the “SEC”) on April 2, 2021, including the risk factors discussed under the heading “Risk Factors” in Part I, Item IA thereof. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes, and results to differ materially from those indicated by such statements. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
| 3 |
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements
CLINIGENCE
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| SEPTEMBER 30, | ||||||||
| 2021 | DECEMBER 31, | |||||||
| (UNAUDITED) | 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Stock subscriptions receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Long-term assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use asset, net | ||||||||
| Investment in ACMG | ||||||||
| Intangible assets, net | ||||||||
| Goodwill | ||||||||
| Deposits and other assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Customer deposits | ||||||||
| Accrued interest on notes payable | ||||||||
| Due to related parties | ||||||||
| Lease liability - current | ||||||||
| Deferred revenue | ||||||||
| Convertible notes payable, net of debt discount | ||||||||
| Current portion of notes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term liabilities | ||||||||
| Lease liability - long term | ||||||||
| Deferred tax liabilities | ||||||||
| Notes payable | ||||||||
| Total liabilities | ||||||||
| Stockholders' equity (deficiency) | ||||||||
| Preferred stock, $ par value; authorized - shares; issued and outstanding - shares in 2020 and 2019, respectively | ||||||||
| Common stock, $ par value; authorized - shares; and shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Total stockholders' equity (deficiency) | ( | ) | ||||||
| Total liabilities and stockholders' equity (deficiency) | $ | $ | ||||||
| See accompanying notes to the consolidated financial statements. | ||||||||
| 4 |
CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| THREE MONTHS | NINE MONTHS | |||||||||||||||
| ENDED | ENDED | |||||||||||||||
| SEPTEMBER 30, | SEPTEMBER 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales | $ | $ | $ | $ | ||||||||||||
| Cost of sales | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | ||||||||||||||||
| Sales and marketing | ( | ) | ||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Gain on sale of assets | ( | ) | ( | ) | ||||||||||||
| Amortization | ||||||||||||||||
| Total operating expenses | ( | ) | ( | ) | ||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Other income (expenses) | ||||||||||||||||
| Loss on disposal of subsidiary | ( | ) | ||||||||||||||
| Income from forgiveness of debt | ||||||||||||||||
| Loss on sale of assets | ( | ) | ( | ) | ||||||||||||
| Income (loss) from earnings from equity investment | ||||||||||||||||
| Loss on extinguishment of debt | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total other income (expenses) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income (loss) from continuing operations | ( | ) | ( | ) | ||||||||||||
| Income
from discontinued operations (including gain on disposal of $ | ||||||||||||||||
| Net income (loss) | ( | ) | ( | ) | ||||||||||||
| Net income attributable to noncontrolling interest | ||||||||||||||||
| Net income (loss) attributable to Clinigence Holdings, Inc. | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Basic and fully diluted income (loss) per common share: | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | $ | ( | ) | |||||||||
| Discontinued operations | $ | $ | $ | |||||||||||||
| Net income (loss) per common share | $ | ( | ) | $ | $ | ( | ) | |||||||||
| Weighted average common shares outstanding - basic and fully diluted | ||||||||||||||||
| See accompanying notes to the consolidated financial statements. | ||||||||||||||||
| 5 |
CLINIGENCE
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(UNAUDITED)
| Common stock | ||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interest | Treasury Stock | Totals | ||||||||||||||||||||||
| Balances, January 1, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ( | ) | ||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Common stock issued for related party note payable | ||||||||||||||||||||||||||||
| Common stock issued in business acquisitions | ||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances, March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||
| Financing cost for capital raise | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Notes payable converted to common stock | ||||||||||||||||||||||||||||
| Debt discount on notes payable | — | |||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||
| Balances, June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||
| Financing cost for capital raise | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Common stock subscribed | ||||||||||||||||||||||||||||
| Notes payable converted to common stock | ||||||||||||||||||||||||||||
| Warrants converted to common stock | ||||||||||||||||||||||||||||
| Return of common stock held back in AHP acquisition | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Adjustment to common stock issued in AHA acquisition | ||||||||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances, September 30, 2021 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Balances, January 1, 2020 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||
| Purchase of treasury stock | — | ( | ) | ( | ) | |||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balances, March 31, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||
| Options issued for services | — | |||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||
| Treasury stock cancelled | ||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Balance June 30, 2020 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||
| Common stock issued for cash | ||||||||||||||||||||||||||||
| Common stock cancelled | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||
| Common stock issued in connection with separation agreement | ||||||||||||||||||||||||||||
| Net income | ||||||||||||||||||||||||||||
| Balance September 30, 2020 | $ | $ | $ | ( | ) | $ | $ | $ | ||||||||||||||||||||
| See accompanying notes to the consolidated financial statements. | ||||||||||||||||||||||||||||
| 6 |
CLINIGENCE
HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
| 2021 | 2020 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| (Income) loss from discontinued operations | ( | ) | ||||||
| Net income (loss) from continuing operations | ( | ) | ||||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities | ||||||||
| Depreciation | ||||||||
| Amortization | ||||||||
| Interest expense associated with debt discount | ||||||||
| Non cash interest expense | ||||||||
| Gain on sale of assets | ( | ) | ||||||
| Loss on sale of assets | ||||||||
| Loss on extinguishment of debt | ||||||||
| Cancellation of common stock | ( | ) | ||||||
| Purchase price adjustment to investment in AHP | ( | ) | ||||||
| Income from forgiveness of debt | ( | ) | ||||||
| Income from earnings from equity investment | ( | ) | ||||||
| Stock-based compensation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Deposits and other assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Customer deposits | ( | ) | ||||||
| Accrued interest on notes payable | ( | ) | ||||||
| Lease liability | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ( | ) | ||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Decrease in restricted cash | ||||||||
| Sale of property and equipment | ||||||||
| Payment to AHP shareholder for litigation settlement | ( | ) | ||||||
| Preacquisition loans from subsidiary | ||||||||
| Cash acquired from acquisition of subsidiary | ||||||||
| Net cash provided by continuing investing activities | ||||||||
| Net cash used in discontinued investing activities | ( | ) | ||||||
| NET CASH PROVIDED BY (USED) IN INVESTING ACTIVITIES | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from sale of common stock | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from notes payable | ||||||||
| Payments on notes payable | ( | ) | ( | ) | ||||
| Payments of financing costs for capital raise | ( | ) | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH - BEGINNING OF PERIOD | ||||||||
| CASH - END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Non-cash investing and financing activities: | ||||||||
| Investment in AHA in exchange of assets sold and liabilities assumed | $ | $ | ||||||
| Common stock issued for acquisition of subsidiaries | ||||||||
| Common stock issued for subscriptions receivable | ||||||||
| Related party loans converted to common stock | ||||||||
| Notes payable converted to accounts payable | ||||||||
| Notes payable converted to common stock | ||||||||
| Accrued interest converted to convertible notes payable | ||||||||
| Deferred tax liability recorded on intangible assets | ||||||||
| Debt discount on notes payable | ||||||||
| Right of use asset added for operating lease | ||||||||
| See accompanying notes to the consolidated financial statements. | ||||||||
| 7 |
CLINIGENCE HOLDINGS, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
Nine Months Ended September 30, 2021 and 2020
Note 1 - Organization and Basis of Presentation
The consolidated financial statements presented are those of Clinigence Holdings, Inc., formerly known as iGambit Inc., (the “Company”) and its wholly-owned subsidiaries, Accountable Healthcare America, Inc. (“AHA”), AHP Management, Inc. (“AHP”), Clinigence Health, Inc. (“Clinigence”) and HealthDatix, Inc. (“HealthDatix”). The Company’s name was changed to Clinigence Holdings, Inc. on October 29, 2019 in connection with a reverse merger. In October 2018, Clinigence was incorporated as a wholly-owned subsidiary of Clinigence LLC. The Company is a population health analytics company that provides turnkey SaaS solutions that enable connected intelligence across the care continuum by transforming massive amounts of data into actionable insights. The Company’s solutions help healthcare organizations throughout the United States improve the quality and cost-effectiveness of care, enhance population health management and optimize provider networks. The Company enables risk-bearing healthcare organizations achieve their objectives on the path to value-based care. The Company’s platform automatically extracts and delivers targeted data insights from its cloud-based analytics engine directly to the workflows and technologies of its customers. This enhances end-user workflows with actionable analytics, seamlessly delivers data from disparate sources to the point of engagement, automates the delivery of data to ensure on-time access, and reduces dependency on non-essential applications from the end-user’s workflow. All of this allows the healthcare organization to enable population health management, manage cost and utilization, improve quality, identify gaps in care, risk stratify and target patients, increase collaboration among providers and to optimize network provider performance.
AHA was organized to acquire a series of companies providing a broad array of health and managed care services to Medicare members. AHA’s initial focus is on acquiring Accountable Care Organizations (“ACO’s”), Managed Service Organizations (“MSO’s”) and Primary Care Physician Practices (“PCP’s”) with significant numbers of Medicare members.
AHP is a privately held medical management company and provider network that manages its affiliated medical group, AHP Independent Physicians Association.
Interim Financial Statements
The following condensed consolidated balance sheet as of December 31, 2020, which has been derived from audited financial statements, and the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine months ended September 30, 2021 are not necessarily indicative of results that may be expected for the year ending December 31, 2021. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 5, 2021.
Business Acquisitions
Merger With AHP Management Inc.
On February 25, 2021, Clinigence Holdings, Inc., a Delaware corporation (“Parent” or the “Company”), AHP, Inc., a California corporation (“AHP”), AHP Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub”), and Robert Chan (the “Shareholders’ Representative”) entered into an agreement and plan of merger (the “AHP Merger Agreement”). The transactions contemplated by the AHP Merger Agreement were consummated on February 26, 2021 (the “AHP Closing”).
The AHP Merger Agreement provided for the merger of Merger Sub with and into AHP, hereafter referred to as the “AHP Acquisition.” As a result of the Acquisition, Merger Sub ceased to exist, and AHP became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of AHP (the “AHP Stockholders”) have a direct equity ownership in Clinigence. Merger Sub was renamed AHP Management Inc. Merger Sub was originally incorporated in Delaware on January 26, 2021 and had no operating activity prior to the reported transaction.
| 8 |
AHP was a privately held company with controlling interest in its’ affiliate Associated Hispanic Physicians of Southern California IPA, a California Medical corporation, (“AHPIPA”). A key term of the AHP Merger Agreement is that at Closing, AHP Management Inc entered into a Management Services Agreement with AHPIPA (the “Management Services Agreements”) making AHPIPA a Variable Interest Entity (VIE) of Clinigence.
Merger With Accountable Healthcare America, Inc.
On February 25, 2021, Clinigence Holdings, Inc., a Delaware corporation (“Parent” or the “Company”), Accountable Healthcare America, Inc., a Delaware corporation (“AHA”), and AHA Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub”) entered into an agreement and plan of merger (the “AHA Merger Agreement”). The transactions contemplated by the AHA Merger Agreement were consummated on February 26, 2021 (the “AHA Closing”).
The AHA Merger Agreement provided for the merger of Merger Sub with and into AHA, hereafter referred to as the “AHA Acquisition.” As a result of the Acquisition, Merger Sub ceased to exist, and AHA became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of AHA (the “AHA Stockholders”) have a direct equity ownership in Clinigence. Merger Sub was renamed Accountable Healthcare America, Inc. Merger Sub was originally incorporated in Delaware on January 2, 2020 and had no operating activity prior to the reported transaction.
The following table presents the preliminary allocation of the value of the common shares issued for AHA to the acquired identifiable assets, liabilities assumed and goodwill:
| Fair Value | ||||
| Cash | $ | |||
| Other current assets | ||||
| Investment in ACMG | ||||
| PHP technology | ||||
| Loan to Clinigence | ||||
| Accounts payable | ( | ) | ||
| Due to related party | ( | ) | ||
| Notes payable | ( | ) | ||
| Convertible notes payable | ||||
| Goodwill | ||||
| Purchase price | $ | |||
| 9 |
The following table presents the preliminary allocation of the value of the common shares issued for AHP to the acquired identifiable assets, liabilities assumed and goodwill:
| Fair Value | ||||
| Cash | $ | |||
| Accounts receivable | ||||
| Deposits and other assets | ||||
| Member relationships | ||||
| Trademarks | ||||
| Accounts payable | ( | ) | ||
| Goodwill | ||||
| Purchase price | $ | |||
Pursuant to the AHP Merger Agreement, of the of Company Shares issued to AHP valued at $per share were Litigation Holdback shares, related to two shareholders who were engaged in an Arbitration case with AHP at the time of Closing.
AHP lost the Arbitration case and on September 13,
2021, the Arbitration Court granted the Claimants an award in the amount of $
Going Concern
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $
As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact operations. Other financial impact could occur though such potential impact is unknown at this time. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
The Company expects that working capital requirements will continue to be funded through a combination of its existing funds and further issuances of securities. Working capital requirements are expected to increase in line with the growth of the business. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund operations over the next twelve months. The Company has no lines of credit or other bank financing arrangements. The Company has financed operations to date through the proceeds of a private placement of equity and debt instruments. In connection with the Company’s business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. The Company intends to finance these expenses with further issuances of securities, and debt issuances. Thereafter, the Company expects it will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to current stockholders. Further, such securities might have rights, preferences or privileges senior to common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict business operations.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
| 10 |
For
the nine months ended September 30, 2021, our operations lost $
At
September 30, 2021, we had total current assets of $
Note 2 – Discontinued Operations
Sale of Business
On April 21, 2020 (effective March 1, 2020) the Company completed the sale of HealthDatix, Inc., a Florida corporation (“HDX FL”) to Jerry Robinson, Mary-Jo Robinson and Kathleen Shepherd (“HDX Management”) in accordance with a Stock Purchase Agreement (the “Purchase Agreement”) by and between the Company and HDX Management. Pursuant to the Purchase Agreement, the total consideration paid for the outstanding capital stock of HDX FL was the execution of Settlement and Release Agreements by HDX Management, releasing the Company from all obligations pursuant to certain HDX Management Employment Agreements dated April 1, 2017, and remittance of 1,000 shares of HDX common stock previously issued to HDX Management. As per the Purchase Agreement, the Company’s operations of HDX FL ended February 29, 2020 and HDX Management’s operation of the business is effective as of March 1, 2020.
The components of loss from discontinued operations presented in the consolidated statements of operations for the nine months ended September 30, 2021 are presented as follows:
| Sales | $ | |||
| Cost of sales | ( | ) | ||
| General and administrative expenses | ( | ) | ||
| Depreciation and amortization | ( | ) | ||
| Interest expense | ( | ) | ||
| Loss from operations | ( | ) | ||
| Gain on disposal of HealthDatix | ||||
| Income from discontinued operations | $ |
Note 3 – Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Clinigence Health, Inc., Accountable Healthcare America Inc., and AHP Management Inc. All intercompany accounts and transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. The Company’s significant estimates used in these financial statements include, but are not limited to, accounts receivable reserves, the valuation allowance related to the Company’s deferred tax assets, the recoverability and useful lives of long-lived assets, debt conversion features, stock-based compensation, certain assumptions related to the valuation of the reserved shares and the assets acquired and liabilities assumed related to the Company’s acquisitions. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is reasonably possible that these external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.
| 11 |
Variable Interest Entities
On an ongoing basis, as circumstances indicate the need for reconsideration, the Company evaluates each legal entity that is not wholly-owned by the Company in accordance with the consolidation guidance. The evaluation considers all of the Company’s variable interests, including equity ownership, as well as management services agreements. To fall within the scope of the consolidation guidance, an entity must meet both of the following criteria:
| • | The entity has a legal structure that has been established to conduct business activities and to hold assets; such entity can be in the form of a partnership, limited liability company, or corporation, among others; and |
| • | The Company has a variable interest in the legal entity – i.e., variable interests that are contractual, such as equity ownership, or other financial interests that change with changes in the fair value of the entity’s net assets. |
If an entity does not meet both criteria above, the Company applies other accounting guidance, such as the cost or equity method of accounting. If an entity does meet both criteria above, the Company evaluates such entity for consolidation under either the variable interest model if the legal entity meets any of the following characteristics to qualify as a VIE, or under the voting model for all other legal entities that are not VIEs.
A legal entity is determined to be a VIE if it has any of the following three characteristics:
1. The entity does not have sufficient equity to finance its activities without additional subordinated financial support;
2. The entity is established with non-substantive voting rights (i.e., where the entity deprives the majority economic interest holder(s) of voting rights); or
3. The equity holders, as a group, lack the characteristics of a controlling financial interest. Equity holders meet this criterion if they lack any of the following:
a. The power, through voting rights or similar rights, to direct the activities of the entity that most significantly influence the entity’s economic performance, as evidenced by:
i. Substantive participating rights in day-to-day management of the entity’s activities; or
ii. Substantive kick-out rights over the party responsible for significant decisions;
iii. The obligation to absorb the entity’s expected losses; or
iv. The right to receive the entity’s expected residual returns.
If the Company determines that any of the three characteristics of a VIE are met, the Company will conclude that the entity is a VIE and evaluate it for consolidation under the variable interest model.
Variable interest model
If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company – that is, the Company (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary. Refer to Note 17 – “Variable Interest Entities (VIEs)” to the consolidated financial statements for information on the Company’s consolidated VIEs. If there are variable interests in a VIE but the Company is not the primary beneficiary, the Company may account for the investment using the equity method of accounting.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. The Company does not have any cash equivalents as of September 30, 2021 and December 31, 2020. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.
| 12 |
Accounts Receivable
The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of September 30, 2021, no customers represented more than 10% of total accounts receivable
Property and equipment and depreciation
Property and equipment are stated at cost. Maintenance and repairs are charged to expense when incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is credited or charged to income. Depreciation for both financial reporting and income tax purposes is computed using combinations of the straight line and accelerated methods over the estimated lives of the respective assets as follows:
| Office equipment and fixtures | ||||
| Computer hardware | ||||
| Computer software | ||||
| Development equipment |
Amortization
Intangible assets are amortized using the straight line method over the estimated lives of the respective assets as follows:
| Population Health Platform technology | ||||
| Member relationships | ||||
| Trademarks |
Goodwill
Goodwill represents the net identifiable assets acquired and the liabilities assumed of AHA and AHP and the fair market value of the common shares issued by the Company for the acquisition of AHA and AHP. In accordance with ASC Topic No. 350 “Intangibles – Goodwill and Other”), the goodwill is not being amortized, but instead will be subject to an annual assessment of impairment by applying a fair-value based test, and will be reviewed more frequently if current events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the asset’s carrying amount, an impairment loss is charged to expense in the period identified. No impairment was recorded during the nine months ended September 30, 2021.
Long-Lived Assets
The Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, the Company determines whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows.
| 13 |
Deferred Revenue
Deposits
from customers are not recognized as revenues, but as liabilities, until the following conditions are met: revenues are realized when
cash or claims to cash (receivable) are received in exchange for goods or services or when assets received in such exchange are readily
convertible to cash or claim to cash or when such goods/services are transferred. When such income item is earned, the related revenue
item is recognized, and the deferred revenue is reduced. To the extent revenues are generated from the Company’s support and maintenance
services, the Company recognizes such revenues when services are completed and billed. The Company has received deposits from its various
customers that have been recorded as deferred revenue and presented as current liabilities in the amount of $
The Company accounts for its stock-based awards granted under its employee compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest. The Company uses the Black-Scholes option pricing model to estimate the fair value of its stock options and warrants. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock, the risk free interest rate at the date of grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants. Changes in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options and warrants.
Income Taxes
The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.
The Company applies the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements. In accordance with this provision, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position.
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. The Company’s investment in AHA was valued at level 3 input.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – quoted prices in active markets for identical assets or liabilities
Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
| 14 |
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of maturity.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
Revenue Recognition
Revenue is generated by software licenses, training, and consulting. Software licenses are provided as SaaS-based subscriptions that grants access to proprietary online databases and data management solutions. Training and consulting are project based and billable to customers on a monthly-basis or task-basis.
Revenue from training and consulting are generally recognized upon delivery of training or completion of the consulting project. The duration of training and consulting projects are typically a few weeks or months and last no longer than 12 months.
SaaS-based subscriptions are generally marketed under multi-year agreements with annual, semi-annual, quarterly, or month-to-month renewals and revenue is recognized ratably over the renewal period with the unearned amounts received recorded as deferred revenue. For multiple-element arrangements accounted for in accordance with specific software accounting guidance, multiple deliverables are segregated into units of accounting which are delivered items that have value to a customer on a standalone basis.
On January 1, 2019, the Company adopted the new revenue recognition standard Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using the modified retrospective method. The modified retrospective adoption used by the Company did not result in a material cumulative effect adjustment to the opening balance of accumulated deficit. Revenue from substantially all the Company’s contracts with customers continues to be recognized over time as performance obligations are satisfied.
| 15 |
The Company provides its customers with software licensing, training, and consulting through SaaS-based subscriptions. This subscription revenue represents revenue earned under contracts in which the Company bills and collects the charges for licensing and related services. The Company determines the measurement of revenue and the timing of revenue recognition utilizing the following core principles:
| 1. | Identifying the contract with a customer; |
| 2. | Identifying the performance obligations in the contract; |
| 3. | Determining the transaction price; |
| 4. | Allocating the transaction price to the performance obligations in the contract; and |
| 5. | Recognizing revenue when (or as) the Company satisfies its performance obligations. |
Revenues from subscriptions are deferred and recorded as deferred revenue when cash payments are received in advance of the satisfaction of the Company’s performance obligations and recognized over the period in which the performance obligations are satisfied. The Company completes its contractual performance obligations through providing its customers access to specified data through subscriptions for a service period, and training on consulting associated with the subscriptions. The Company primarily invoices its customers on a monthly basis and does not provide any refunds, rights of return, or warranties to its customers.
AHA’s performance obligation is to manage ACO participants who provide healthcare services to CMS’s members for the purpose of generating shared savings. If achieved, the Company receives shared savings payments from CMS, which represents variable consideration. The shared savings payments are recognized using the most likely methodology. However, as the Company does not have sufficient insight from CMS into the financial performance of the shared risk pool because of unknown factors related to shifting patient count, risk adjustment factors and benchmark adjustments, among other factors, an estimate cannot be developed. Therefore, these amounts are considered to be fully constrained and only recorded in the months when such payments are known and/or received. The Company generally receives payment within ten months after the fiscal year-end.
AHP negotiates fixed per-member, per-month (PMPM) rates (Capitation) with third-party insurers for a fixed period of time. The Independent Physicians Association (“IPA”) recognizes capitation payments received in advance from third-party insurers as revenue on a monthly basis without regard to the frequency, extent, or nature of the medical services actually furnished.
Advertising Costs
The
Company expenses advertising costs as incurred. Advertising costs of $
Recent Accounting Pronouncements
We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.
Note 4 – Property and Equipment
Property and equipment are carried at cost and consist of the following at September 30, 2021 and December 31, 2020:
| 2021 | 2020 | |||||||
| Office equipment and fixtures | $ | $ | ||||||
| Computer hardware | ||||||||
| Computer software | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property, Plant and Equipment, Net | $ | $ | ||||||
Depreciation
expense of $
| 16 |
Note 5 – Intangible Assets
The following tables provide detail associated with the Company’s acquired identifiable intangible assets:
| As of September 30, 2021 | ||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Weighted Average Useful Life (in years) | |||||||||||||
| Amortized intangible assets: | ||||||||||||||||
| Member relationships | $ | $ | ( | ) | $ | |||||||||||
| Trademarks | ( | ) | ||||||||||||||
| PHP technology | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||||
Aggregate Amortization Expense:
| For the nine months ended September 30, 2021 | $ |
Note 6 – Investment in ACMG
In
connection with the acquisition of Accountable Care Medical Group of Florida, Inc. (“ACMG”), AHA defaulted on its payment
obligations of $
Note 7 – Operating Lease
The Company determines if a contract is, or contains, a lease at contract inception. Operating leases are included in operating lease right-of-use ("ROU") assets, current portion of operating lease liabilities and operating lease liabilities, net of current portion in the Company's consolidated balance sheets. Finance leases are included in property and equipment, current portion of finance lease obligations and finance lease obligations, net of current portion in the Company's unaudited consolidated balance sheets.
ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. In addition, ROU assets include initial direct costs incurred by the lessee as well as any lease payments made at or before the commencement date and exclude lease incentives. The Company used the implicit rate in the lease in determining the present value of lease payments.
| 17 |
Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of one year or less are generally not included in ROU assets and liabilities.
Operating lease ROU assets and operating lease liabilities are recorded on the consolidated balance sheet as follows:
| September 30, | ||||
| 2021 | ||||
| Operating Lease: | ||||
| Operating lease right-of-use assets, net | $ | |||
| Current portion of operating lease liabilities | ||||
| Operating lease liabilities, net of current portion | ||||
As
of September 30, 2021, the weighted-average remaining lease term of the operating lease was
The following table summarizes maturities of operating lease liabilities based on lease term as of September 30, 2021:
| 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| Total lease payments | |||||
| Less: Imputed interest | |||||
| Present value of lease liabilities | $ |
At September 30, 2021, the Company had the following future minimum payments due under the non-cancelable lease:
| 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| Total minimum lease payments | $ |
Consolidated
rental expense from continuing operations for all operating leases was $
The following table summarizes the cash paid and related right-of-use operating lease recognized for the nine months ended September 30, 2021.
| Nine Months Ended | ||||
| September 30, 2021 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | |||
| Right-of-use lease assets obtained in the exchange for lease liabilities: | ||||
| Operating leases | ||||
| 18 |
The Company calculates net income (loss) per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net earnings (loss) per common share was determined by dividing net earnings (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s potentially dilutive shares, which include outstanding common stock options, common stock warrants, and convertible debt have not been included in the computation of diluted net loss per share for the nine months ended September 30, 2021 and 2020 as the result would be anti-dilutive.
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Stock options | ||||||||
| Stock warrants | ||||||||
| Total shares excluded from calculation | ||||||||
Options
In 2019, the Company adopted the 2019 Omnibus Equity Incentive Plan (the "2019 Plan"). Awards granted under the 2019 Plan have a ten-year term and may be incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units or performance shares. The awards are granted at an exercise price equal to the fair market value on the date of grant and generally vest over a four year period.
Stock option activity during the nine months ended September 30, 2021 and 2020 follows:
| Options Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Options outstanding at December 31, 2019 | $ | |||||||||||
| Options granted | ||||||||||||
| Options expired | ( | ) | ||||||||||
| Options cancelled | ( | ) | ||||||||||
| Options outstanding at September 30, 2020 | $ | |||||||||||
| Options outstanding at December 31, 2020 | $ | |||||||||||
| Options granted | ||||||||||||
| Options assumed in merger | ||||||||||||
| Options outstanding at September 30, 2021 | $ | |||||||||||
| 19 |
Options outstanding at September 30, 2021 consist of:
| Date Issued | Number Outstanding | Number Exercisable | Exercise Price | Expiration Date | ||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| Total | ||||||||||||||
Warrants
In 2018, the Company issued fully vested warrants to investors as part of a private placement offering. Each unit offered in the private placement consisted of one share of common stock, and a warrant convertible into 0.4 shares of common stock at an exercise of $1.50 per whole share. The warrants are exercisable for a period of five years from the date of issuance. The warrants were cancelled on March 1, 2019 and reissued upon the Qualmetrix acquisition and are each convertible into one share of common stock at an exercise price of $6.67 per share until December 31, 2024.
In November 2019, the Company issued fully vested warrants to investors as part of private placement subscription agreements pursuant to which the Company issued convertible promissory notes. Each noteholder received warrants to purchase common stock of 50% of the principal at an exercise price of $5.56 per share with an expiration date of October 31, 2025.
Warrant activity during the nine months ended September 30, 2021 and 2020 follows:
Warrants Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (Years) | ||||||||||
| Warrants outstanding at December 31, 2019 | $ | |||||||||||
| Warrants cancelled | ( | ) | ||||||||||
| Warrants outstanding at September 30, 2020 | ||||||||||||
| Warrants outstanding at December 31, 2020 | ||||||||||||
| Warrants granted | ||||||||||||
| Warrants exercised | ( | ) | ||||||||||
| Warrants assumed in merger | ||||||||||||
| Warrants outstanding at September 30, 2021 | $ | |||||||||||
| 20 |
Warrants outstanding at September 30, 2021 consist of:
| Date | Number | Number | Exercise | Expiration | ||||||||||||||
| Issued | Outstanding | Exercisable | Price | Date | ||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| $ | ||||||||||||||||||
| Total | ||||||||||||||||||
| 21 |
Note 10 – Convertible Notes Payable
Convertible notes payable consisted of the following at September 30, 2021 and December 31, 2020:
| 2021 | 2020 | |||||||
| Notes payable convertible into Clinigence common shares at $1.55 per share; bearing interest at a rate of 10%; net of debt discount of $1,965,155 and $0, respectively; maturing in July 2022 | $ | $ | ||||||
Included
in the liabilities assumed in the AHA merger are convertible promissory notes to various individuals totaling $
The
debt discount of $
At
the time of issuance of these notes based on independent valuation, debt discounts were calculated and allocated based on the relative
values of $
Included
in the liabilities assumed in the AHA merger are convertible promissory notes to an individual investor totaling $
Note 11 – Notes Payable
Notes payable consisted of the following at September 30, 2021 and December 31, 2020:
| 2021 | 2020 | |||||||
| Notes payable with maturities between six months and twelve months from the date of issuance with annual percentage interest rates between 24% and 31% | $ | $ | ||||||
| SBA Paycheck Protection Program notes payable issued in April 2020 and February 2021 with maturity dates through August 2023 and interest rate of 1% | ||||||||
| SBA Economic Injury Disaster Loan notes payable issued in May 2020 with a maturity date of May 2051 and interest rate of 3.75% | ||||||||
| Note payable with a maturity date of January 31, 2023 and interest rate of 12.9% | ||||||||
| Total notes payable | ||||||||
| Current portion | ( | ) | ( | ) | ||||
| Total notes payable, net | $ | $ | ||||||
Beginning
in April 2018, the Company entered into a series of short-term notes with interest rates ranging from
The Company’s long-term debt is comprised of promissory notes pursuant to the Paycheck Protection Program and Economic Injury Disaster Loan (see below), under Coronavirus Aid, Relief and Economic Security Act (“CARES ACT”) enacted on March 27, 2020 and revised under the provisions of the PayCheck Protection Flexibility Act of 2020 on June 5, 2020 and administered by the United States Small Business Administration (“SBA”).
On
May 22, 2020, the Company received loan proceeds of $
On
April 21, 2020, the Company received a loan in the amount of $
Under
the terms of the loan, a portion or all of the loan is forgivable to the extent the loan proceeds are used to fund qualifying payroll,
rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven.
The Company has utilized the proceeds of the PPP loan in a manner which has enabled qualification as a forgivable loan. However, no assurance
can be provided that all or any portion of the PPP loans will be forgiven. AHA’s PPP loan of $
The
Company assumed a note payable in the AHA merger transaction that AHA entered into with an individual investor on October 24, 2019. AHA
issued a note with a principal amount of $
Effective
February 1, 2021, an Amended and Restated Note was entered into in which the principal amount increased to $
| 22 |
Note 12 – Stock Transactions
Common Stock Issued
The
Company sold common shares consisting of 1,000,000 shares valued at $3.00 per share to a strategic investor and 5,228,571 valued
at $ per share to various investors for proceeds totaling $
The
Company sold common shares valued at $ per share to a director for proceeds of $
In
connection with the convertible notes payable (see Note 11 above) various noteholders converted $
In connection with the acquisition of AHA the Company issued common shares valued at $ per share to the shareholders of AHA on February 25, 2021.
In connection with the acquisition of AHP the Company issued common shares valued at $ per share to the shareholders of AHP on February 25, 2021.
In connection with the AHA and AHP acquisitions, the Company issued common shares valued at $ per share for consulting services on February 25, 2021.
On January 28, 2021, the Company issued common shares to officers and employees for deferred salaries and bonuses and reimbursed expenses, including common shares issued to directors and officers, valued at $ per share.
Note 13 - Income Taxes
A
full valuation allowance was recorded against the Company’s net deferred tax assets. A valuation allowance must be established
if it is more likely than not that the deferred tax assets will not be realized. This assessment is based upon consideration of available
positive and negative evidence, which includes, among other things, the Company’s most recent results of operations and expected
future profitability. Based on the Company’s cumulative losses in recent years, a full valuation allowance against the Company’s
deferred tax assets has been established as Management believes that the Company will not realize the benefit of those deferred tax assets.
A deferred tax liability of $
Note 14 – Concentrations and Credit Risk
Sales and Accounts Receivable
The
Company had sales to two customers which accounted for approximately
The
Company had sales to three customers which accounted for approximately
| 23 |
Cash
Cash
is maintained at a major financial institution. Accounts held at U.S. financial institutions are insured by the FDIC up to $
Note 15 - Related Party Transactions
Due to Related Parties
Due
to related parties with a balance of $
Note 16 – Commitments and Contingencies
Employment Arrangements With Executive Officers
The
Company entered into 3-year employment agreements with Elisa Luqman and Dr. Lawrence Schimmel. Pursuant to the employment agreements
with Ms. Luqman and Dr. Schimmel, each is entitled to receive a base annual salary of $
Pursuant to the employment agreements with the named officers, upon termination, each such individual would be entitled to receive payment of all salary and benefits accrued up to the termination date of his or her employment in all employment termination events. Thereafter, Ms. Luqman would be entitled to receive twelve (12) months of base salary as a severance payment, Dr. Schimmel would be entitled to receive twenty-four (24) months of base salary as a severance payment, Dr. Hosseinion would be entitled to receive twenty four (24) months of base salary as a severance payment, Mr. Sternberg would be entitled to receive twenty four (24) months of base salary as a severance payment Mr. Bowen would be entitled to receive twelve (12) months of base salary as a severance payment, and Mr. Barnett would each be entitled to the balance of the remaining months under his employment agreement of base salary as a severance payment, upon termination of his or her employment by the Company without cause or by such individual for good reason.
Effective
April 1, 2017, in connection with the acquisition of HealthDatix Inc., the Company entered into employment agreements with Jerry Robinson,
MaryJo Robinson, and Kathleen Shepherd each under a three-year term at a base salary of $
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Note 17 - Variable Interest Entities (VIEs)
A VIE is defined as a legal entity whose equity owners do not have sufficient equity at risk, or, as a group, the holders of the equity investment at risk lack any of the following three characteristics: decision-making rights, the obligation to absorb losses, or the right to receive the expected residual returns of the entity. The primary beneficiary is identified as the variable interest holder that has both the power to direct the activities of the VIE that most significantly affect the entity’s economic performance and the obligation to absorb expected losses or the right to receive benefits from the entity that could potentially be significant to the VIE.
The Company follows guidance on the consolidation of VIEs that requires companies to utilize a qualitative approach to determine whether it is the primary beneficiary of a VIE. See Note 2 to the accompanying consolidated financial statements for information on how the Company determines VIEs and its treatment.
The following table includes assets that can only be used to settle the liabilities of AHPIPA and the creditors of AHPIPA have no recourse to the Company. These assets and liabilities are included in the accompanying consolidated balance sheets.
| September 30, | ||||
| 2021 | ||||
| ASSETS | ||||
| Current Assets | ||||
| Cash and cash equivalents | $ | |||
| Accounts receivable | ||||
| Prepaid expenses and other assets | ||||
| Total Current Assets | ||||
| Other Assets | ||||
| Goodwill | ||||
| Right of use asset, net | ||||
| Intangible assets, net | ||||
| Total Other Assets | ||||
| Total Assets | $ | |||
| Current Liabilities | ||||
| Accounts payable and accrued expenses | $ | |||
| Lease liability - current | ||||
| Total Current Liabilities | ||||
| Long-term Liabilities | ||||
| Lease liability – long-term | ||||
| Total Liabilities | $ | |||
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Note 18 – Subsequent Events
The Company evaluated its September 30, 2021 condensed consolidated financial statements for subsequent events through the date the condensed consolidated financial statements were issued.
Business Acquisition
On October 15, 2021, the Company entered into an agreement and plan of merger with Procare Health Inc. (“Procare”), a California corporation, providing for the acquisition of 100% of the outstanding equity securities of Procare in exchange for shares of the Company’s common stock. Based in Garden Grove, California and founded in 2011, ProCare is a leading management services organization (“MSO”) that currently provides services for one health maintenance organization (“HMO”) and three independent physician associations (“IPAs”) in Southern and Northern California.
Conversions of Notes Payable
Subsequent
to the end of the period through the date of the report, various noteholders converted $
Stock Subscriptions Receivable
Subsequent
to the end of the period through the date of the report, the Company received the balance of stock subscriptions receivable of $
at September 30, 2021 from the stockholders, and paid $
Common Stock Issued
Subsequent
to the end of the period through the date of the report, the Company sold shares of common stock to various investors valued
at $ per share for proceeds of $
Sale of ACMG
On November 13, 2021 our subsidiary AHA, as 29% shareholder of Sellers, entered into a Stock Purchase Agreement (the “ACMG Agreement”) by and among Genuine Health Group, LLC (“Buyer”), Accountable Care Medical Group of Florida, Inc., a Florida corporation (“Accountable Care Medical”), ACMG Health Group LLC, a Florida limited liability company (“ACMG Group”), and ACMG Health Systems, Inc., a Florida corporation (“ACMG Systems” and collectively with Accountable Care Medical and ACMG Group, the “Companies” and each a “Company”), each of the shareholders of Accountable Care Medical listed on Exhibit A of the ACMG Agreement (each a “Seller” and collectively the “Sellers”), and Manuel Lopez, as Sellers’ Representative. The purchase price (“Purchase Price”) to be paid by Buyer for the Equity Interests at Closing and all other rights and benefits conferred to Buyer herein, including, without limitation, the representations, warranties and covenants set forth in this Agreement, shall be Thirty Million Dollars ($30,000,000.00) less certain adjustments set forth in the Agreement. AHA shall be entitled to its 29% pro-rata portion of the purchase Price.
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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. In addition, reference is made to our audited consolidated financial statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on April 2, 2021.
Overview
The Company, together with our recent acquisitions of AHP Health Management Services, Inc. (“AHP”) and Accountable Healthcare America, Inc. (“AHA”) is a technology-enabled, risk-bearing population health management company that manages provider networks.
Headquartered in Fort Lauderdale, Florida, our subsidiaries include management services organizations (“MSOs”), affiliated independent practice associations (“IPAs”), and Clinigence Health, Inc., a healthcare information technology company providing a cloud-based platform that enables healthcare organizations to provide value-based care and population health management (PHM). AHP Management, Inc. (AHP) is the administrative and managerial services company for its affiliated variable interest entity (VIE), a physician-owned professional corporation that contracts with independent physicians to deliver medical services in-office and virtually under the Associated Hispanic Physicians of Southern California, Inc., a Professional Medical Corporation (“AHPIPA”). Based in Los Angeles, California, AHPIPA currently provides care for 22,065 patients, including approximately 1800 Medicare Advantage patients, through a network of 141 primary care physicians and 660 specialists. AHA currently has an investment in Accountable Care Medical Group of Florida, an accountable care organizations (“ACO”), with approximately 16,000 Medicare members through a network of over 65 providers.
Recent Developments
Merger with AHP Management Inc.
On February 25, 2021, the Company, AHP, Inc., a California corporation (“AHP”), AHP Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub”), and Robert Chan (the “Shareholders’ Representative”) entered into an agreement and plan of merger (the “AHP Merger Agreement”). The transactions contemplated by the AHP Merger Agreement were consummated on February 26, 2021 (the “AHP Closing”).
The AHP Merger Agreement provided for the merger of Merger Sub with and into AHP, hereafter referred to as the “AHP Acquisition.” As a result of the Acquisition, Merger Sub ceased to exist, and AHP became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of AHP (the “AHP Stockholders”) have a direct equity ownership in Clinigence. Merger Sub was renamed AHP Health Management Inc. Merger Sub was originally incorporated in Delaware on January 26, 2021 and had no operating activity prior to the reported transaction.
Merger with Accountable Healthcare America, Inc.
On February 25, 2021, Clinigence Holdings, Inc., a Delaware corporation (“Parent” or the “Company”), Accountable Healthcare America, Inc., a Delaware corporation (“AHA”), and AHA Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub entered into an agreement and plan of merger (the “AHA Merger Agreement”). The transactions contemplated by the AHA Merger Agreement were consummated on February 26, 2021 (the “AHA Closing”).
The AHA Merger Agreement provided for the merger of Merger Sub with and into AHA, hereafter referred to as the “AHA Acquisition.” As a result of the Acquisition, Merger Sub ceased to exist, and AHA became the surviving corporation and a direct wholly owned subsidiary of Clinigence, and the former stockholders of AHA (the “AHA Stockholders”) have a direct equity ownership in Clinigence. Merger Sub was renamed Accountable Healthcare America, Inc. Merger Sub was originally incorporated in Delaware on January 2, 2020 and had no operating activity prior to the reported transaction.
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Key Financial Measures and Indicators
Operating Revenues
Our revenue primarily consists of capitation revenue and SaaS subscription services. The form of billing and related risk of collection for such services may vary by type of revenue and the customer.
Operating Expenses
Our largest expense is the patient care cost paid to contracted physicians, and the cost of providing management and administrative support services to our affiliated physician groups. These services include providing utilization and case management, physician practice billing, revenue cycle services, physician practice management, administrative oversight, coding services, and other consulting services.
Results of operation
CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| THREE MONTHS ENDED SEPTEMBER 30, | ||||||||
| 2021 | 2020 | |||||||
| Sales | $ | 5,568,757 | $ | 350,032 | ||||
| Cost of sales | 4,380,671 | 210,894 | ||||||
| Gross profit | 1,188,086 | 139,138 | ||||||
| Total operating expenses | 2,012,197 | (1,636,889 | ) | |||||
| Loss from operations | (824,111 | ) | 1,776,027 | |||||
| Total other income (expenses) | (977,856 | ) | (19,873 | ) | ||||
| Income (loss) from continuing operations | (1,801,967 | ) | 1,756,154 | |||||
| Income (loss) from discontinued operations | ||||||||
| Net income (loss) | (1,801,967 | ) | 1,756,154 | |||||
| Net loss attributable to noncontrolling interests | 101,853 | — | ||||||
| Net income (loss) attributable to Clinigence Holdings, Inc. | $ | (1,903,820 | ) | $ | 1,756,154 | |||
CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| NINE MONTHS ENDED SEPTEMBER 30, | ||||||||
| 2021 | 2020 | |||||||
| Sales | $ | 12,873,607 | $ | 1,194,250 | ||||
| Cost of sales | 10,156,087 | 674,881 | ||||||
| Gross profit | 2,717,520 | 519,369 | ||||||
| Total operating expenses | 8,628,428 | (962,299 | ) | |||||
| Loss from operations | (5,910,908 | ) | 1,481,668 | |||||
| Total other income (expenses) | (3,163,639 | ) | (660,690 | ) | ||||
| Income (loss) from continuing operations | (9,074,547 | ) | 820,978 | |||||
| Income (loss) from discontinued operations | — | 39,752 | ||||||
| Net income (loss) | (9,074,547 | ) | 860,730 | |||||
| Net loss attributable to noncontrolling interests | 12,343 | — | ||||||
| Net income (loss) attributable to Clinigence Holdings, Inc. | $ | (9,086,890 | ) | $ | 860,730 | |||
Revenue
Our revenue for the three months ended September 30, 2021, was $5,568,757, as compared to $350,032 for the three months ended September 30, 2020. The increase was primarily attributable to the AHP acquisition.
Our revenue for the nine months ended September 30, 2021, was $12,873,607, as compared to $1,194,250 for the nine months ended September 30, 2020. The increase was primarily attributable to the AHP acquisition.
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Cost of Services
Expenses related to cost of services for the three months ended September 30, 2021, were $4.3 million, as compared to $210,894 for the same period in 2020. The overall increase was primarily due to the AHP acquisition.
Expenses related to cost of services for the nine months ended September 30, 2021, were $10.1 million, as compared to $674,881 for the same period in 2020. The overall increase was primarily due to the AHP acquisition
Sales and Marketing
Sales and Marketing expense for the three months ended September 30, 2021, was $4,711, compared to $(5,248) for the three months ended September 30, 2020. The increase was primarily attributable to press releases issue during the quarter.
Sales and Marketing expense for the nine months ended September 30, 2021, was $21,154 compared to $168,601 for the nine months ended September 30, 2020. The decrease was primarily attributable to the reduction of sales and marketing personnel for our Clinigence Health subsidiary.
Research and Development
Research and Development expense for the three months ended September 30, 2021, was $72,266 compared to $73,827 for the three months ended September 30, 2020. The decrease was primarily attributable to the reduction of research and development personnel for our Clinigence Health subsidiary.
Research and Development expense for the nine months ended September 30, 2021, was $208,615 compared to $502,961 for the nine months ended September 30, 2020. The decrease was primarily attributable to the reduction of research and development personnel for our Clinigence Health subsidiary.
General and Administrative Expenses
General and administrative expenses for the three months ended September 30, 2021, were $1.74 million, as compared to $698,598 million for the same period in 2020. The increase was primarily attributable to the AHP and AHA acquisitions.
General and administrative expenses for the nine months ended September 30, 2021, were $7.95 million, as compared to $2.87 million for the same period in 2020. The increase was primarily attributable to stock-based compensation expense of $4 million and the AHP and AHA acquisitions.
Gain on Sale of Assets
During the three months ending September 30, 2020, the Company recorded a gain on the sale of intellectual property of $2,404,066. During the nine months ending September 30, 2020, the Company recorded a gain on the sale of intellectual property of $4,732,244.
Amortization
Amortization expense for the three months ended September 30, 2021, was $192,131 as compared to $0 for the same period in 2020. This amount includes the amortization of intangible assets acquired from AHP and AHA.
Amortization expense for the nine months ended September 30, 2021, was $448,306 as compared to $222,032 for the same period in 2020. This amount includes the amortization of intangible assets acquired from AHP and AHA.
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Interest Expense
Interest expense for the three months ended September 30, 2021, was $1.56 million as compared to $18,252 for the same period in 2020. The Interest expense reflected was primarily for accretion of debt combined with interest incurred on convertible debt related to the acquisition of AHA.
Interest expense for the nine months ended September 30, 2021, was $3.9 million as compared to $332,528, for the same period in 2020. The Interest expense reflected was primarily for accretion of debt combined with interest incurred on convertible debt related to the acquisition of AHA.
Interest Income
Interest income for the three months ended September 30, 2021, was $270 as compared to $0 for the three months ended September 30, 2020. Interest income reflects interest earned on cash held in deposit accounts.
Interest income for the nine months ended September 30, 2021, was $629 as compared to $0 for the three months ended September 30, 2020. Interest income reflects interest earned on cash held in deposit accounts.
Income from Discontinued Operations
Income from discontinued operations was $39,752 for the for the nine months ended September 30, 2020, as a result of the sale of our HDX subsidiary in 2020.
Net Income (Loss) Attributable to Noncontrolling Interests
Net income attributable to noncontrolling interests was $101,853 for the three months ended September 30, 2021. The was primarily due to amortization expense on intangibles in the current period allocated to the noncontrolling interest in the AHP VIE.
Net income attributable to noncontrolling interests was $12,343 for the nine months ended September 30, 2021. The was primarily due to amortization expense on intangibles in the current period allocated to the noncontrolling interest in the AHP VIE.
LIQUIDITY AND CAPITAL RESOURCES
General
We had cash of $6,011,442 for the nine months ended September 30, 2021, compared to $ 26,931 as of December 31, 2020, an increase of $5,984,511.
Historically, we have had a working capital deficiency and we have operated at a net loss since inception. With the acquisition of AHP we generate cash primarily from capitation contracts. In order to execute our business plans, including the expansion of operations, our primary capital requirements in 2021 are likely to rise. It is not possible to quantify those costs at this point in time, in that they depend on AHP, AHAs and Clinigence Health’s business opportunities and the state of the overall economy. We anticipate raising capital in the private markets to cover any such costs, though there can be no guaranty we will be able to do so on terms we deem to be acceptable. We do not have any plans at this point in time to obtain a line of credit or other loan facility from a commercial bank. We believe we have sufficient liquidity to fund our operations through at least the next 12 months.
Cash Flow Activity
Cash used in operating activities for the nine months ended September 30, 2021, was $3,970,719 as compared to cash used in operating activities of $1,557,995 for the nine months ended September 30, 2020. The increase in cash used in operating activities was primarily driven by our operating revenues not being sufficient to cover our on-going obligations. Additional contributing factors include an increase in accounts receivable of $144,751, an increase in account payable and accrued expenses of $1,445,178, an increase in customer deposits of $13,325, an increase in prepaid expenses of $253,818 income from forgiveness of debt of $311,125, amortization and depreciation expense of $472,428, interest expense associated with debt discount of $3,315,950, accrued interest of $224,466, an AHP purchase price adjustment of $300,000, income from earnings from equity investment of $444,171 and stock-based compensation expense of $4,026,884.
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Cash provided by investing activities during the nine months ended September 30, 2021, was $2,793,578, primarily due to cash acquired in the acquisition of AHP, compared to cash used in investing activities of $47,537 from discontinued investing activities, during the nine months ended September 30, 2020.
Cash provided by financing activities for the nine months ending September 30, 2021, was $7,161,652 compared to $472,766 for the nine months ending September 30, 2020 and consisted of proceeds from the sale of common stock of $7,381,563, proceeds from the exercise of warrants of $60,937, proceeds from notes payable of $413,917 offset by payments on notes payable of $16,765 and payments of financing costs for capital raise of $678,000.
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital, further advances and debt instruments, and anticipated cash flow are anticipated to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock that may have a greater dilutive impact to our current shareholders. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
The notes accompanying our financial statements for the nine months ending September 30, 2021 contain an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern. The financial statements have been prepared “assuming that the Company will continue as a going concern.” Our ability to continue as a going concern is dependent on raising additional capital to fund our operations and ultimately on generating future profitable operations. There can be no assurance that we will be able to raise sufficient additional capital or eventually have positive cash flow from operations to address all of our cash flow needs. If we are not able to find alternative sources of cash or generate positive cash flow from operations, our business and shareholders may be materially and adversely affected.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2021, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including Chief Executive Officers and Chief Financial Officer, concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act, were effective as of September 30, 2021, to ensure that information required to be disclosed by us in this Quarterly Report on Form 10-Q or submitted under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officers and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under Exchange Act) during our first fiscal quarter of 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
From time-to-time, the Company is involved in various civil actions as part of its normal course of business. The Company is not a party to any litigation that is material to ongoing operations as defined in Item 103 of Regulation S-K as of the period ended September 30, 2021.
Item 1A. Risk Factors.
Our business, financial condition, and operating results are affected by a number of factors, whether currently known or unknown, including risks specific to us or the healthcare industry, as well as risks that affect businesses in general. In addition to the information and risk factors set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on April 2, 2021. The risks disclosed in such Annual Report and in this Quarterly Report could materially adversely affect our business, financial condition, cash flows, or results of operations and thus our stock price. We believe there have been no material changes in our risk factors from those disclosed in the Annual Report. However, additional risks and uncertainties not currently known or which we currently deem to be immaterial may also materially adversely affect our business, financial condition, or results of operations.
These risk factors may be important to understanding other statements in this Quarterly Report and should be read in conjunction with the consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q. Because of such risk factors, as well as other factors affecting the Company’s financial condition and operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods.
Our operations and financial results are subject to various risks and uncertainties, including but not limited to those described below, which could harm our business, reputation, financial condition, and operating results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information.
None
Item 6. Exhibits
| Exhibit No. | Description |
| 31.1 | Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 31.2 | Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| 32.1 | Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
| 32.2 | Certification of the Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.) |
| 32 |
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 15, 2021.
| Clinigence
Holdings, Inc. |
|
| /s/ Warren Hosseinion | |
| Warren Hosseinion | |
| Chief Executive Officer | |
| /s/ Michael Bowen | |
| Michael Bowen | |
| Chief Financial Officer | |
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