Nutex Health (NUTX) - 2022 Q3 - Quarterly Report

Part I — Financial Information Financial Statements The financial statements for the period ended September 30, 2022, reflect a significant net loss of $432.4 million, primarily due to a goodwill impairment charge Condensed Consolidated Balance Sheets As of September 30, 2022, total assets increased to $434.5 million, while total equity significantly declined to $132.5 million due to a retained deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Metric | September 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $434,517,727 | $394,650,043 | | Cash and cash equivalents | $36,620,799 | $36,118,284 | | Goodwill, net | $17,010,637 | $1,139,297 | | Total Liabilities | $301,989,725 | $203,069,033 | | Financing lease liabilities, net | $204,591,022 | $65,735,501 | | Total Equity | $132,528,002 | $191,581,010 | | Retained earnings (accumulated deficit) | ($358,967,267) | $102,315,623 | Condensed Consolidated Statements of Operations For Q3 2022, the company reported a net loss of $433.2 million, primarily due to a $408.5 million goodwill impairment charge, with revenue significantly decreasing Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $28,395,058 | $117,971,732 | $165,570,233 | $268,129,646 | | Hospital division Revenue | $21,244,305 | $117,971,732 | $151,976,226 | $268,129,646 | | Population health management division Revenue | $7,150,753 | $— | $13,594,007 | $— | | Impairment of goodwill | $408,466,575 | $— | $408,466,575 | $— | | Operating Income (Loss) | ($439,012,276) | $74,462,783 | ($411,151,780) | $154,727,918 | | Net Income (Loss) | ($433,240,552) | $74,494,252 | ($432,412,571) | $155,051,299 | | Net Income (Loss) Attributable to Nutex Health Inc. | ($422,517,803) | $53,793,277 | ($420,359,806) | $118,614,814 | | Basic EPS | ($0.65) | $0.09 | ($0.67) | $0.20 | Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2022, net cash from operating activities significantly decreased to $46.1 million, despite a goodwill impairment charge Cash Flow Summary (Nine Months Ended September 30) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash from operating activities | $46,101,114 | $127,008,338 | | Net cash from investing activities | ($12,217,448) | ($25,206,117) | | Net cash from financing activities | ($33,381,151) | ($93,078,162) | | Net change in cash and cash equivalents | $502,515 | $8,724,059 | | Cash and cash equivalents - end of the period | $36,620,799 | $34,238,334 | Notes to Condensed Consolidated Financial Statements The notes detail the company's structure, accounting policies, and key financial events, including the Clinigence merger, goodwill impairment, and revenue reduction from the No Surprises Act - The merger with Clinigence on April 1, 2022, was accounted for as a reverse business combination, establishing the company's two-division structure: Hospital and Population Health Management[32][40] - A non-cash impairment charge of $408.5 million was recognized in Q3 2022 to reduce the carrying amount of goodwill for the population health management division, initially recorded as part of the reverse merger[68][98] - The implementation of the No Surprises Act (NSA) on January 1, 2022, led to a decline in average insurance payments, resulting in a revenue reduction of approximately $29.0 million for Q3 2022 and $38.6 million for the nine months ended September 30, 2022[104][108] - In Q2 2022, the company deconsolidated 17 Real Estate Entities (VIEs) after third-party lenders released the company's guarantees on their mortgage loans, removing significant assets and liabilities from the consolidated balance sheet[45][149][150] - Subsequent to the quarter end, on November 14, 2022, the company entered into an agreement with Lincoln Park Capital Fund for the right to sell up to $100 million of its common stock over a 36-month period to support working capital and growth[151] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the significant net loss in Q3 2022 to a $408.5 million goodwill impairment and the No Surprises Act, impacting revenue and patient visits - The No Surprises Act (NSA), effective January 1, 2022, has caused an approximate 30% decline in average insurer payments for emergency services, leading to a revenue reduction of $29.0 million in Q3 2022 and $38.6 million in the first nine months of 2022[181][192][208] - A non-cash goodwill impairment charge of $408.5 million was recorded in Q3 2022 for the population health management division, significantly impacting the net loss for the period[193][201] Adjusted EBITDA Reconciliation (Non-GAAP) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) attributable to Nutex Health Inc. | ($422,517,803) | $53,793,277 | ($420,359,806) | $118,614,814 | | Adjusted EBITDA | ($15,703,878) | $55,720,823 | $18,456,057 | $125,469,515 | Hospital Patient Visits | Period | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Three months ended Sept 30 | 36,500 | 59,990 | (39%) | | Nine months ended Sept 30 | 121,414 | 137,041 | (11%) | - The company is pursuing strategic actions to mitigate the impact of the NSA, including working with legislatures, maximizing claims coding, increasing co-pay collections, dedicating a team to the IDR process, and seeking favorable contracts with insurers[182][184] Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies, thus no information is provided - Disclosure is not required for smaller reporting companies[248] Controls and Procedures Management concluded that disclosure controls and procedures were ineffective as of September 30, 2022, due to material weaknesses, with remediation efforts underway - The company's disclosure controls and procedures were deemed ineffective as of September 30, 2022[249] - A material weakness was identified in internal control over financial reporting concerning the revenue estimation process, lease accounting, and inadequate accounting close processes[251] - Remediation efforts are underway, including hiring a new CFO, engaging specialists, and employing additional experienced accounting personnel to strengthen internal controls[252] Part II — Other Information Legal Proceedings As of September 30, 2022, the company is not a party to any material litigation - The Company is not a party to any material litigation as of the period ended September 30, 2022[256] Risk Factors No material changes to the company's risk factors have occurred since the Form S-3 Registration Statement filing on September 30, 2022 - No material changes in risk factors have occurred since the Form S-3 filing on September 30, 2022[258] Unregistered Sales of Equity Securities and Use of Proceeds In Q3 2022, the company issued 851,611 common shares to convert convertible notes payable, an unregistered sale exempt under Section 4(a)(2) of the Securities Act - During Q3 2022, 851,611 common shares were issued to convert the remaining convertible notes payable[259] - The issuance was an unregistered sale, exempt from registration requirements under Section 4(a)(2) of the Securities Act[259] Other Information No other information is reported for this item - None[261] Exhibits This section lists the exhibits filed, including CEO and CFO certifications required by the Sarbanes-Oxley Act - The exhibits filed include CEO and CFO certifications as required by the Sarbanes-Oxley Act[262]