Nutex Health (NUTX) - 2020 Q1 - Quarterly Report

Part I — Financial Information Financial Statements The company reported increased sales but a wider net loss, decreased assets, and a working capital deficit, with subsequent asset sales and SBA loans Condensed Consolidated Balance Sheets (Unaudited) Consolidated Balance Sheet Summary | Balance Sheet Item | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $245,700 | $1,243,352 | | Total Assets | $5,641,618 | $6,692,504 | | Total Current Liabilities | $3,848,084 | $4,610,453 | | Total Liabilities | $4,058,307 | $4,834,071 | | Total Stockholders' Equity | $1,583,311 | $1,858,433 | - Cash decreased significantly from $1,065,434 at the end of 2019 to $167,739 as of March 31, 2020[9] - The company had a working capital deficit (Total Current Assets - Total Current Liabilities) of $3,602,384 as of March 31, 2020[9] Condensed Consolidated Statements of Operations (Unaudited) Statement of Operations Summary (Three Months Ended March 31) | Metric | 2020 | 2019 | | :--- | :--- | :--- | | Sales | $465,630 | $212,135 | | Gross Profit | $266,502 | $43,682 | | Loss from Operations | ($939,915) | ($925,911) | | Net Loss | ($1,122,730) | ($968,161) | | Net Loss Per Share | ($0.24) | ($0.38) | - Sales more than doubled year-over-year, increasing by 119.5%[11] - Operating expenses increased to $1.21 million from $0.97 million year-over-year, driven by higher sales & marketing and general & administrative costs, including a new amortization expense of $134,306[11] - The company reported income from discontinued operations of $39,752 in Q1 2020, related to the sale of a subsidiary[11] Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - Total stockholders' equity decreased from $1,858,433 at December 31, 2019, to $1,583,311 at March 31, 2020[12] - The decrease in equity was primarily driven by a net loss of $1,122,730, partially offset by $848,778 from options issued for services[12] Condensed Consolidated Statements of Cash Flows (Unaudited) Cash Flow Summary (Three Months Ended March 31) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($872,992) | ($864,814) | | Net Cash (Used in) Investing Activities | ($2,656) | ($41,743) | | Net Cash Provided by (Used in) Financing Activities | ($22,047) | $2,227,172 | | Net Increase (Decrease) in Cash | ($897,695) | $1,320,615 | - The significant difference in financing activities between Q1 2020 and Q1 2019 was due to proceeds from the sale of common stock of $2.75 million in 2019, which did not recur in 2020[15] Notes to Condensed Consolidated Financial Statements The notes detail significant corporate events and accounting policies. Key events include a reverse merger in October 2019 and the acquisition of QualMetrix in March 2019. The company sold its HealthDatix subsidiary effective March 1, 2020, which is now reported as a discontinued operation. There is substantial doubt about the company's ability to continue as a going concern due to significant accumulated and working capital deficits. Subsequent to the quarter's end, the company sold certain intellectual property assets and received COVID-19 relief loans from the SBA - The company completed a reverse merger with iGambit, Inc. on October 29, 2019, with Clinigence being the accounting acquirer[19][23] - On March 1, 2019, the company acquired Qualmetrix, Inc. (QMX) to expand its SAAS-based offerings, resulting in the recognition of $3.47 million in goodwill and $1.65 million in identifiable intangible assets[26][27] - The company sold its subsidiary HealthDatix, Inc. effective March 1, 2020. The results of this subsidiary are presented as discontinued operations, which included a gain on disposal of $142,027 for the quarter[28][30] - The financial statements have been prepared on a going concern basis, but the company's accumulated deficit of $13.7 million and working capital deficit of $3.6 million raise substantial doubt about its ability to continue as a going concern[61] - Subsequent to quarter-end, the company received SBA loans totaling $483,125 under the EIDL and PPP programs and entered into an agreement to sell certain intellectual property assets for an initial stated value of $15 million in Series E Preferred Stock, less assumed liabilities[108][109][110][112] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) MD&A highlights revenue growth from acquisition, wider net loss due to expenses, and liquidity challenges addressed by subsequent financing - Revenue for Q1 2020 was $465,630, up from $212,135 in Q1 2019. The increase is attributed to the acquisition of Qualmetrix in March 2019[128] - Net loss increased to $1.12 million in Q1 2020 from $0.97 million in Q1 2019. The loss from continuing operations was $1.16 million, partially offset by $39,752 income from discontinued operations[128] - General and Administrative expenses rose to $836,052 from $721,482, primarily due to a significant increase in stock-based compensation expense ($502,826 in Q1 2020)[130] - The company had a working capital deficiency of $3.6 million as of March 31, 2020, and has operated at a net loss since inception, indicating a need to raise additional capital[138] - Subsequent to the quarter, the company sold its HealthDatix subsidiary and entered into an Intellectual Property Asset Purchase Agreement with AHA Analytics, Inc[116][117] Quantitative and Qualitative Disclosures About Market Risk This section is not required for the company as a smaller reporting company - The company is a smaller reporting company and is not required to provide the information requested under this item[145] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2020, with no material changes to internal control - The CEO and CFO concluded that as of March 31, 2020, the company's disclosure controls and procedures were effective at a reasonable assurance level[148] - No changes occurred in the company's internal control over financial reporting during the first quarter of 2020 that have materially affected, or are reasonably likely to materially affect, internal controls[149] Part II — Other Information Legal Proceedings The company reports no material litigation as of March 31, 2020 - As of the period ended March 31, 2020, the Company is not a party to any litigation that is considered material to its ongoing operations[154] Risk Factors The company faces significant financial, business, regulatory, data security, competition, and external event risks, including going concern doubt - Financial Risk: The company has a working capital deficiency and a history of net losses, requiring it to raise additional capital to continue operations. The notes to the financial statements express substantial doubt about its ability to continue as a going concern[156][246] - Business Risk: The company has a limited operating history, an unproven business model, and relies on a limited number of customers for a substantial portion of revenue. The Population Health Management (PHM) market is new and may not grow as expected[157][158][160][189] - Regulatory Risk: The healthcare industry is heavily regulated (e.g., Stark Law, Anti-Kickback Act, HIPAA). Failure to comply can result in significant civil and criminal penalties and exclusion from Medicare/Medicaid programs[161][162][163] - Data Security & Privacy Risk: The company's use of personally identifiable and protected health information (PHI) is subject to numerous federal and state laws. A security breach could result in significant liability, reputational harm, and litigation[173][174][182] - Competition & Technology Risk: The market is intensely competitive with many rivals having greater resources. The company must keep pace with rapid technological changes, and failure to do so could make its solutions less competitive[230][231][232] - External Events Risk: The COVID-19 pandemic has impacted operations by limiting access to facilities and customers, and similar unforeseen events could disrupt business in the future[227] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported during the period - None reported for the period[247] Defaults upon Senior Securities No defaults upon senior securities were reported during the period - None reported for the period[247][248] Other Information No other information is reported for the period - None reported for the period[249][250] Exhibits The exhibits include CEO and CFO certifications required under Sarbanes-Oxley Act Sections 302 and 906 List of Exhibits | Exhibit No. | Description | | :--- | :--- | | 31.1 | Certification of the CEO (Sarbanes-Oxley Act Section 302) | | 31.2 | Certification of the CFO (Sarbanes-Oxley Act Section 302) | | 32.1 | Certification of the CEO (Sarbanes-Oxley Act Section 906) | | 32.2 | Certification of the Interim CFO (Sarbanes-Oxley Act Section 906) |