株探米国株
英語
エドガーで原本を確認する
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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2023

or

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

For the transition period from                 to

Commission File Number: 001-41346

NUTEX HEALTH INC.

(Exact name of registrant as specified in its charter)

Delaware

11-3363609

(State or other jurisdiction

(I.R.S. Employer

of incorporation or organization)

Identification No.)

6030 S. Rice Ave, Suite C,

Houston, Texas

77081

(Address of principal executive offices)

(Zip code)

(713) 660-0557

(Registrant’s telephone number, including area code)

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

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, $0.001 par value

NUTX

NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  ⌧    No  ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ⌧    No  ◻

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ☐    No  ☒

As of November 6, 2023, the registrant had 670,781,595 shares of common stock outstanding.

Table of Contents

NUTEX HEALTH INC.

FORM 10-Q

TABLE OF CONTENTS

Introductory Note

Note About Forward-Looking Statements

Part I — Financial Information

Item 1.

Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 41

Item 4.

Controls and Procedures

 41

Part II — Other Information

 

Item 1.

Legal Proceedings

 42

Item 1A.

Risk Factors

 43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

44

Item 3.

Defaults upon Senior Securities

 44

Item 4.

Mine Safety Disclosures

 44

Item 5.

Other Information

 44

Item 6.

Exhibits

 45

Table of Contents

INTRODUCTORY NOTE

Unless the context dictates otherwise, references in this Quarterly Report on Form 10-Q to the “Company,” “we,” “us,” “our,” and similar words are references to Nutex Health Inc. (formerly known as Clinigence Holdings, Inc.), a Delaware corporation, and its consolidated subsidiaries and affiliated entities, as appropriate, including its consolidated variable interest entities (“VIEs”) and “Nutex” refers to Nutex Health Inc.

NOTE ABOUT FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, changes in laws or regulations applicable to our operations, any statements about our business, financial condition, operating results, plans, objectives, expectations and intentions, any guidance on, or projections of, earnings, revenue or other financial items, or otherwise, and our future liquidity, including cash flows; any statements of any plans, strategies, and objectives of management for future operations, such as the material opportunities that we believe exist for our Company; any statements concerning proposed services, developments, mergers or acquisitions; or strategic transactions; any statements regarding management’s view of future expectations and prospects for us; any statements about prospective adoption of new accounting standards or effects of changes in accounting standards; any statements regarding future economic conditions or performance; any statements of belief; any statements of assumptions underlying any of the foregoing; and other statements that are not historical facts. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipate,” “could,” “can,” “may,” “might,” “potential,” “predict,” “should,” “estimate,” “expect,” “project,” “believe,” “think,” “plan,” “envision,” “intend,” “continue,” “target,” “seek,” “contemplate,” “budgeted,” “will,” “would,” and the negative of such terms, other variations on such terms or other similar or comparable words, phrases, or terminology. These forward-looking statements present our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q and are subject to change.

Forward-looking statements involve risks and uncertainties and are based on the current beliefs, expectations, and certain assumptions of management. Some or all of such beliefs, expectations, and assumptions may not materialize or may vary significantly from actual results. Such statements are qualified by important economic, competitive, governmental, and technological factors that could cause our business, strategy, or actual results or events to differ materially from those in our forward-looking statements. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under, but not limited to, the heading “Item 1A. Risk Factors” included in this Quarterly Report, the Quarterly Report on the Form 10-Q for the quarter ended June 30, 2023, the Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, and in the Annual Report of Nutex Health Inc. on Form 10-K for the year ended December 31, 2022 and other filings of the Company with the United States Securities and Exchange Commission. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change, and significant risks and uncertainties that could cause actual conditions, outcomes, and results to differ materially from those indicated by such statements. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

NUTEX HEALTH INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

September 30, 2023

December 31, 2022

Assets

Current assets:

Cash and cash equivalents

$

26,826,733

$

34,255,264

Accounts receivable

 

53,209,834

 

57,777,386

Accounts receivable - related parties

 

1,487,591

 

538,183

Inventories

 

2,682,716

 

3,533,285

Prepaid expenses and other current assets

5,645,296

1,869,806

Total current assets

89,852,170

97,973,924

Property and equipment, net

85,496,612

82,094,352

Operating right-of-use assets

16,712,230

20,466,632

Finance right-of-use assets

 

247,593,480

 

192,591,624

Intangible assets, net

21,624,132

21,191,390

Goodwill, net

 

17,935,036

 

17,010,637

Other assets

419,882

423,426

Total assets

$

479,633,542

$

431,751,985

Liabilities and Equity

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

17,599,047

$

23,614,387

Accounts payable - related parties

 

6,144,188

 

3,915,661

Lines of credit

 

3,371,676

 

2,623,479

Current portion of long-term debt

 

19,644,656

 

12,546,097

Operating lease liabilities, current portion

1,562,385

1,703,014

Finance lease liabilities, current portion

4,171,489

4,219,518

Accrued expenses and other current liabilities

14,773,273

 

6,240,813

Total current liabilities

 

67,266,714

 

54,862,969

Long-term debt, net

19,303,829

23,051,152

Operating lease liabilities, net

15,874,261

19,438,497

Finance lease liabilities, net

263,791,711

203,619,756

Deferred tax liabilities

8,492,294

10,452,211

Total liabilities

 

374,728,809

 

311,424,585

Commitments and contingencies

Equity:

Common stock, $0.001 par value; 950,000,000 shares authorized; 670,711,741 and 650,223,840 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively

670,712

650,224

Additional paid-in capital

466,711,720

458,498,402

Accumulated deficit

(377,454,642)

(363,285,925)

Nutex Health Inc. equity

89,927,790

95,862,701

Noncontrolling interests

 

14,976,943

24,464,699

Total equity

104,904,733

120,327,400

Total liabilities and equity

$

479,633,542

$

431,751,985

See accompanying notes to the unaudited condensed consolidated financial statements.

4

Table of Contents

NUTEX HEALTH INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

    

2022

    

2023

    

2022

Revenue:

Hospital division

$

54,585,263

$

21,244,305

$

155,485,230

$

151,976,226

Population health management division

8,137,709

7,150,753

22,491,613

13,594,007

Total revenue

62,722,972

28,395,058

177,976,843

165,570,233

Operating costs and expenses:

 

 

Payroll and benefits

28,873,144

29,048,207

79,570,519

79,014,608

Contract services

9,035,650

8,557,373

27,972,854

26,536,452

Medical supplies

3,460,130

2,486,083

10,748,214

9,327,114

Depreciation and amortization

 

4,745,941

 

4,330,167

 

12,908,848

 

9,859,513

Other

9,541,894

7,686,132

25,215,549

22,092,033

Total operating costs and expenses

55,656,759

52,107,962

156,415,984

146,829,720

Gross profit (loss)

7,066,213

(23,712,904)

21,560,859

18,740,513

Corporate and other costs:

Facilities closing costs

-

-

217,266

-

Acquisition costs

43,464

-

43,464

3,885,666

Stock-based compensation expense

49,167

81,249

2,198,812

135,415

Impairment of goodwill

-

398,135,038

-

398,135,038

General and administrative expenses

7,794,808

6,751,548

24,730,168

17,404,637

Total corporate and other costs

7,887,439

404,967,835

27,189,710

419,560,756

Operating loss

 

(821,226)

(428,680,739)

 

(5,628,851)

(400,820,243)

Interest expense, net

4,098,179

3,402,606

12,081,316

9,628,189

Other expense (income)

 

(53,206)

 

(630,450)

 

70,721

 

346,873

Loss before taxes

(4,866,199)

(431,452,895)

(17,780,888)

(410,795,305)

Income tax expense (benefit)

(342,259)

(8,543,880)

(2,068,530)

11,285,729

Net loss

(4,523,940)

(422,909,015)

(15,712,358)

(422,081,034)

Less: net income (loss) attributable to noncontrolling interests

1,018,451

(10,722,749)

(1,543,641)

(12,052,765)

Net loss attributable to Nutex Health Inc.

$

(5,542,391)

$

(412,186,266)

$

(14,168,717)

$

(410,028,269)

Loss per common share:

Basic

$

(0.01)

$

(0.62)

$

(0.02)

$

(0.65)

Diluted

$

(0.01)

$

(0.62)

$

(0.02)

$

(0.65)

See accompanying notes to the unaudited condensed consolidated financial statements.

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NUTEX HEALTH INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

(UNAUDITED)

Common Stock

Additional Paid-in

Retained Earnings

Noncontrolling

Total

    

Shares

    

Amount

    

Capital

    

(Accumulated Deficit)

    

Interests

    

Equity

Balance at January 1, 2022

592,791,712

$

592,792

$

11,742,891

$

102,315,623

$

76,929,704

$

191,581,010

Contributions

3,869,201

3,869,201

Distributions

(27,114,936)

(5,738,045)

(32,852,981)

Net income

21,442,843

3,383,288

24,826,131

Balance at March 31, 2022

592,791,712

592,792

11,742,891

96,643,530

78,444,148

187,423,361

Reverse acquisition with Clinigence

50,961,109

50,961

436,449,305

194,747

436,695,013

Notes payable converted to common stock

2,622,819

2,623

4,062,749

4,065,372

Common stock issued for exercise of warrants

2,147,252

2,147

4,116,994

4,119,141

Common stock issued for exercise of options

312,019

312

644,662

644,974

Stock-based compensation

83,547

83

54,083

54,166

Deconsolidation of Real Estate Entities

(6,466,946)

(32,336,946)

(38,803,892)

Contributions

861,916

861,916

Distributions

(7,341,202)

(7,637,993)

(14,979,195)

Net loss

(19,284,846)

(4,713,304)

(23,998,150)

Balance at June 30, 2022

648,918,458

648,918

457,070,684

63,550,536

34,812,568

556,082,706

Notes payable converted to common stock

851,611

852

1,319,148

1,320,000

Stock-based compensation

81,249

81,249

Contributions

94,260

94,260

Distributions

(2,141,198)

(2,141,198)

Net loss

(412,186,266)

(10,722,749)

(422,909,015)

Balance at September 30, 2022

649,770,069

$

649,770

$

458,471,081

$

(348,635,730)

$

22,042,881

$

132,528,002

(Continued)

See accompanying notes to the unaudited condensed consolidated financial statements.

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NUTEX HEALTH INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY 

(UNAUDITED)

Common Stock

Additional Paid-in

Retained Earnings

Noncontrolling

Total

Shares

    

Amount

    

Capital

    

(Accumulated Deficit)

    

Interests

    

Equity

Balance at January 1, 2023

650,223,840

$

650,224

$

458,498,402

$

(363,285,925)

$

24,464,699

$

120,327,400

Deconsolidation of Real Estate Entity

(4,258,133)

(4,258,133)

Common stock issued for exercise of warrants

702,285

702

(702)

Common stock issued to Apollo Medical Holdings, Inc.

1,000,000

1,000

1,899,000

1,900,000

Contributions

28,000

28,000

Distributions

(1,537,141)

(1,537,141)

Net loss

(5,147,279)

(1,774,693)

(6,921,972)

Balance at March 31, 2023

651,926,125

651,926

460,396,700

(368,433,204)

16,922,732

109,538,154

Common stock issued for exercise of warrants

566,042

566

(566)

Debt conversion to common stock

8,035,737

8,035

3,224,404

3,232,439

Stock-based compensation

214,720

215

249,430

249,645

Contributions

621,550

621,550

Distributions

(1,149,163)

(1,149,163)

Net loss

(3,479,047)

(787,399)

(4,266,446)

Balance at June 30, 2023

660,742,624

660,742

463,869,968

(371,912,251)

15,607,720

108,226,179

Debt conversion to common stock

7,427,606

7,428

1,911,643

1,919,071

Stock-based compensation

49,167

49,167

Common stock issued for acquisition

2,541,511

2,542

747,458

750,000

Warrants issued with convertible debt

133,484

133,484

Distributions

(1,649,228)

(1,649,228)

Net loss

(5,542,391)

1,018,451

(4,523,940)

Balance at September 30, 2023

670,711,741

$

670,712

$

466,711,720

$

(377,454,642)

$

14,976,943

$

104,904,733

See accompanying notes to the unaudited condensed consolidated financial statements.

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NUTEX HEALTH INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

Nine Months Ended September 30, 

    

2023

    

2022

Cash flows from operating activities:

Net loss

$

(15,712,358)

$

(422,081,034)

Adjustments to reconcile net loss to net cash from operating activities:

 

Depreciation and amortization

 

12,908,848

9,859,513

Impairment of goodwill

-

398,135,038

Stock-based compensation expense

2,198,812

135,415

Deferred tax expense (benefit)

 

(2,068,530)

3,375,106

Debt accretion expense

 

1,251,867

1,719,572

Loss on lease termination

58,210

-

Non-cash lease expense

89,338

18,775

Changes in operating assets and liabilities, net of the effects of acquisitions:

Accounts receivable

4,444,706

52,921,095

Accounts receivable - related party

 

(949,408)

1,846,887

Inventories

850,569

(399,198)

Prepaid expenses and other current assets

 

(3,771,946)

(5,658,746)

Accounts payable

 

(6,015,250)

4,147,170

Accounts payable - related party

2,228,527

(630,490)

Accrued expenses and other current liabilities

7,519,285

2,712,011

Net cash from operating activities

3,032,670

46,101,114

 

Cash flows from investing activities:

 

Acquisitions of property and equipment

 

(10,322,487)

(22,512,464)

Payments for acquisitions of businesses, net of cash acquired

(743,837)

-

Acquired cash in reverse acquisition with Clinigence

-

12,716,228

Cash related to deconsolidation of Real Estate Entities

(1,039,157)

(2,421,212)

Net cash from investing activities

(12,105,481)

(12,217,448)

Cash flows from financing activities:

Proceeds from lines of credit

2,340,911

2,592,714

Proceeds from notes payable

16,952,905

10,126,130

Proceeds from convertible debt

891,000

-

Repayments of lines of credit

(1,592,714)

(72,055)

Repayments of notes payable

(10,557,758)

(4,720,737)

Repayments of finance leases

 

(2,704,082)

(923,321)

Common stock issued for exercise of warrants

 

-

4,119,141

Common stock issued for exercise of options

-

644,974

Members' contributions

649,550

4,825,377

Members' distributions

(4,335,532)

(49,973,374)

Net cash from financing activities

1,644,280

(33,381,151)

Net change in cash and cash equivalents

(7,428,531)

502,515

Cash and cash equivalents - beginning of the period

34,255,264

36,118,284

Cash and cash equivalents - end of the period

$

26,826,733

$

36,620,799

See accompanying notes to the unaudited condensed consolidated financial statements.

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NUTEX HEALTH INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 – Organization and Operations

Nutex Health Inc. (“Nutex Health” or the “Company”), is a physician-led, healthcare services and operations company with 22 hospital facilities in eight states (hospital division), and a primary care-centric, risk-bearing population health management division. Our hospital division implements and operates different innovative health care models, including micro-hospitals, specialty hospitals and hospital outpatient departments (“HOPDs”). The population health management division owns and operates provider networks such as independent physician associations (“IPAs”) and offers a cloud-based proprietary technology platform to IPAs which aggregates clinical and claims data across multiple settings, information systems and sources to create a holistic view of patients and providers.

We employ approximately 800 full time employees and partner with over 900 physicians. Our corporate headquarters is based in Houston, Texas. We were incorporated on April 13, 2000 in the state of Delaware.

Merger of Nutex Health Holdco LLC and Clinigence Holdings, Inc. On April 1, 2022, the merger (the “Merger”) of Nutex Health Holdco LLC and Clinigence Holdings, Inc. (“Clinigence”) was completed pursuant to the Agreement and Plan of Merger (the “Merger Agreement”) entered on November 23, 2021 between Clinigence, Nutex Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of Clinigence, Nutex, Micro Hospital Holding LLC (solely for the purposes of certain sections of the Merger Agreement), Nutex Health Holdco LLC and Thomas Vo, M.D., solely in his capacity as the representative of the equity holders of Nutex Health Holdco LLC.

In connection with the Merger Agreement, Nutex Health Holdco LLC entered into certain Contribution Agreements with holders of equity interests (“Nutex Owners”) of subsidiaries and affiliates (the “Nutex Subsidiaries”) pursuant to which such Nutex Owners agreed to contribute certain equity interests in the Nutex Subsidiaries to Nutex Health Holdco LLC in exchange for specified equity interests in Nutex Health Holdco LLC (collectively, the “Contribution Transaction”). Nutex owners having ownership interests representing approximately 84% of the agreed upon aggregate equity value of the Nutex Subsidiaries, agreed to contribute all or a portion of their equity interests, as applicable.

Pursuant to the Merger Agreement, each unit representing an equity interest in Nutex Health Holdco LLC issued and outstanding immediately prior to the effective time of the Merger but after the Contribution Transaction (collectively, the “Nutex Membership Interests”) was converted into the right to receive 3.571428575 shares of common stock of Clinigence, or an aggregate of 592,791,712 shares of common stock of Clinigence.

After completing the merger, Clinigence was renamed Nutex Health Inc.

Note 2 - Summary of Significant Accounting Policies

Basis of presentation. These financial statements present the Company’s consolidated financial condition and results of operations including those of majority-owned subsidiaries and variable interest entities (“VIEs”) for which we are the primary beneficiary.

The hospital division includes our healthcare billing and collections organization and hospital entities. In addition, we have financial and operating relationships with multiple professional entities (the “Physician LLCs”) and real estate entities (the “Real Estate Entities”). The Physician LLCs employ the doctors who work in our hospitals. These entities are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to the Physician LLCs in the event of cash shortages and received the benefit of their cash surpluses.

The Real Estate Entities own the land and hospital buildings which are leased to our hospital entities. The Real Estate Entities have mortgage loans payable to third parties which are collateralized by the land and buildings. We consolidate the Real Estate Entities as VIEs in instances where our hospital entities are guarantors or co-borrowers under their outstanding mortgage loans.

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Since the second quarter of 2022, we have deconsolidated 18 Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.

The Company has no direct or indirect ownership interest in the consolidated Physician LLCs or Real Estate Entities, so 100% of the equity for these entities is shown as noncontrolling interests in the consolidated balance sheets and statements of operations. Many of the Physician LLCs and Real Estate Entities are owned in part and in some cases controlled by related parties including members of our executive management team.

The population health management division includes our management services organizations and a healthcare information technology company providing a cloud-based platform for healthcare organizations. In addition, Associated Hispanic Physicians of So. California (“AHISP”), an IPA entity that is not owned by us, but is consolidated as a VIE of our wholly-owned subsidiary AHP Health Management Services Inc. (“AHP”) since AHP is the primary beneficiary of its operations and has 100% control of AHISP’s operations through its management services agreement with AHISP.

All significant intercompany balances and transactions have been eliminated in consolidation.

Interim financial statements. These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The unaudited condensed consolidated financial statements include all material adjustments of a normal recurring nature that, in the opinion of management, are necessary for a fair presentation of the results of operations for the interim periods presented. These interim financial statements should be read together with the consolidated financial statements and notes thereto included in our audited financial statements for the years ended December 31, 2022 and 2021.

Use of estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include (i) estimates of net revenue and accounts receivable, (ii) fair value of acquired assets and liabilities in business combinations and (iii) impairment of long-lived assets and goodwill. Actual results could differ from those estimates.

Fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We classify fair value balances based on the classification of the inputs used to calculate the fair value of a transaction. The three levels related to fair value measurements are as follows:

Level 1 — Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. 

The estimated fair value of accounts receivable, accounts payable, accrued expenses and notes payable approximate the carrying amount due to the relatively short maturity or time to maturity of these instruments.  Accounts receivable and payable with related parties may not be arms-length transactions and therefore, may not reflect fair value.

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Except for the initial valuation of intangible assets in connection with the reverse business combination with Clinigence discussed in Note 3 and the impairment of goodwill discussed above, there were no assets or liabilities that were re-measured at fair value on a non-recurring basis during the periods presented.

Convertible debt. The Company accounts for convertible debt that does not meet the criteria for equity treatment as a liability reported at its amortized cost. The Company classifies convertible debt based on the repayment terms and conditions. Any original issue discounts and costs incurred upon issuance of the convertible debt are amortized to interest expense over the debt term. Convertible debt is also analyzed for the existence of embedded derivatives, which may require bifurcation from the convertible debt and separate accounting treatment.

Segment reporting. A public company is required to report descriptive information about its reportable operating segments. Operating segments, as defined, are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Aggregation of similar operating segments into a single reportable operating segment is permitted if the businesses have similar economic characteristics and meet established criteria. The Company operates three reportable segments – the hospital division, the population health management division and the real estate division. The real estate division is comprised of the Real Estate Entities.

Revision of Prior Period Financial Statements. As previously reported in our Annual Report on Form 10-K for the year ended December 31, 2022, we corrected the reported amount of goodwill related to our Merger with Clinigence. We evaluated these matters in accordance with SAB No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, and determined that their related impact was not material to our financial statements for any prior annual or interim period. We will correct previously reported financial information for these immaterial matters in our future filings, as applicable. A summary of the revisions to our prior period financial statements is presented below:

Nine months ended September 30, 2022

As

As

Reported

Revisions

Revised

Revised statements of operations

Net income (loss)

$

(432,412,571)

$

10,331,537

$

(422,081,034)

Less: net income (loss) attributable to noncontrolling interests

(12,052,765)

-

(12,052,765)

Net income (loss) attributable to Nutex Health Inc.

$

(420,359,806)

$

10,331,537

$

(410,028,269)

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Three months ended September 30, 2022

As

As

Reported

Revisions

Revised

Revised statements of operations

Net income (loss)

$

(433,240,552)

$

10,331,537

$

(422,909,015)

Less: net income (loss) attributable to noncontrolling interests

(10,722,749)

-

(10,722,749)

Net income (loss) attributable to Nutex Health Inc.

$

(422,517,803)

$

10,331,537

$

(412,186,266)

Revised statements of changes in equity

Balance at June 30, 2022

Common stock

$

649,770

$

-

$

649,770

Additional paid-in capital

468,802,618

10,331,537

458,471,081

Retained earnings

(358,967,267)

(10,331,537)

(348,635,730)

Noncontrolling interest

22,042,881

-

22,042,881

Total at September 30, 2022

$

132,528,002

$

-

$

132,528,002

Reclassifications. Financial statements presented for prior periods include reclassifications that were made to conform to the current year presentation.

Recent accounting pronouncements. There are no new accounting pronouncements that are expected to have a material impact on the condensed consolidated financial statements.

Note 3 – Business Combinations

Merger of Nutex Health Holdco LLC and Clinigence Holdings, Inc.

The merger of Nutex Health Holdco LLC and Clinigence was completed pursuant to the Merger Agreement on April 1, 2022. As discussed above, the merger was accounted for as a reverse business combination with Nutex Health Holdco LLC as the accounting acquirer and Clinigence as the accounting acquiree.

The fair value of purchase consideration transferred on the closing date includes the value of the shares of the combined company owned by Clinigence shareholders at closing of the merger and the fair value of Clinigence’s outstanding and exercisable common stock options and warrants as determined using a Black-Scholes valuation model. The fair value per share of Clinigence’s common stock was $6.40; its traded closing price on April 1, 2022.

Total consideration in the merger is shown below:

Fair value of Clinigence common shares at $6.40 per share (50,961,109 shares)

$

326,151,098

Fair value of Clinigence outstanding common stock options and warrants

110,543,915

Total consideration

$

436,695,013

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The following is the allocation of the total purchase consideration to acquired assets and assumed liabilities including the fair value of identified intangible assets as determined by independent valuation (a level 3 measurement):

Cash and cash equivalents

$

12,716,228

Accounts receivable, net

2,127,076

Prepaid expenses and other current assets

127,384

Property and equipment, net

14,793

Right of use asset, net

86,989

Intangible assets, net

21,668,000

Goodwill

414,006,378

Accounts payable and accrued expenses

(3,966,100)

Deferred revenue

(92,111)

Convertible notes payable, net

(3,771,858)

Term note payable

(674,526)

Lease liability

(91,238)

Deferred tax liability

(5,456,002)

Assets acquired

$

436,695,013

We made a retrospective change in the valuation of options and warrants assumed by us as part of the total consideration in the merger. This change reduced the fair value of consideration paid and goodwill by $10.3 million.

The intangible assets denoted above each have definite lives. These intangible assets are being amortized over their estimated useful lives of 5 to 16 years. Goodwill arising from the reverse business combination is not tax-deductible. We recognized a non-cash impairment charge of $398.1 million in 2022 to reduce the carrying amount of goodwill arising in the reverse business combination.

The results of operations of Clinigence have been included in the Company’s consolidated financial statements since the April 1, 2022 merger date. We expensed $3.9 million of acquisition-related costs for the merger in 2022. These costs consisted principally of legal, accounting and other professional fees for the transaction.

 

Supplemental Pro Forma Information – The supplemental pro forma financial information presented below is for illustrative purposes only and is not necessarily indicative of the financial position or results of operations that would have been realized if the merger with Clinigence had been completed on the date indicated, nor is it indicative of future operating results or financial position. The pro forma adjustments are based upon currently available information and certain assumptions that management believes are reasonable under the circumstances.

 

The supplemental pro forma financial information reflects pro forma adjustments to present the combined pro forma results of operations as if the acquisition had occurred on January 1, 2022, to give effect to certain events that management believes to be directly attributable to the acquisition. These pro forma adjustments primarily include an increase to depreciation and amortization expense that would have been recognized due to acquired tangible and intangible assets.

 

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The supplemental pro forma financial information is as follows:

Nine Months Ended September 30, 

    

2022

Revenue

$

171,779,408

Net loss attributable to Nutex Health Inc.

(434,709,956)

Basic earnings per share

(0.69)

Diluted earnings per share

(0.69)

The pro forma income above includes $14.2 million of one-time stock-based compensation expense related to the merger transaction. Pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the period presented and is not intended to be a projection of future results.

2023 Acquisitions

On August 1, 2023, the Company acquired two Florida based IPAs for $0.8 million in cash, $0.8 million in Company shares and contingent consideration of up to $0.4 million in cash and $0.5 million in Company shares if the acquired IPAs meet Medicare Lives thresholds in 2024 and 2025. Additionally, we will pay earn-out consideration if certain financial targets are achieved by year end December 31, 2023. Substantially all of the total purchase consideration was allocated to goodwill and identified intangible assets. The acquired IPAs are reported within our Population Health Management division. Management considers this acquisition to be immaterial.

Note 4 – Revenue

We disaggregate revenue from contracts with customers into types of services or products, consistent with our reportable segments, as follows:

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2023

    

2022

    

2023

    

2022

Hospital Division:

Net patient service revenue

$

54,759,158

$

20,840,305

$

154,593,033

$

150,866,044

Management fees

(173,895)

404,000

892,197

1,110,182

Total Hospital Division revenue

54,585,263

21,244,305

155,485,230

151,976,226

Population Health Management Division:

Capitation revenue, net

7,234,927

4,888,094

19,503,063

10,038,436

Management fees

670,107

1,701,719

2,143,260

2,704,519

SaaS revenue

232,675

560,940

845,290

851,052

Total Population Health Management Division revenue

8,137,709

7,150,753

22,491,613

13,594,007

Total revenue

$

62,722,972

$

28,395,058

$

177,976,843

$

165,570,233

Net patient service revenue. We receive payment for facility services rendered by us from federal agencies, private insurance carriers, and patients. The Physician LLCs receive payment for doctor services from these same sources. On average, greater than 90% of our net patient service revenue is paid by insurers, federal agencies, and other non-patient third parties. The remaining revenues are paid by our patients in the form of copays, deductibles, and self-payment. We generally operate as an out-of-‎network provider and, as such, do not have negotiated reimbursement rates with insurance ‎companies.

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The following tables present the allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage:

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Insurance

92%

91%

93%

94%

Self pay

5%

7%

4%

5%

Workers compensation

 

2%

1%

 

2%

1%

Medicare/Medicaid

1%

1%

1%

0%

Total

100%

100%

100%

100%

Contract balances. Cash payments for SaaS-based subscriptions received in advance of the satisfaction of our performance obligations are reported as deferred revenue and subsequently recognized as revenue over the period in which the performance obligations are satisfied. The Company completes its contractual performance obligations through providing its customers access to specified data through subscriptions for a service period, and training on consulting associated with the subscriptions. We primarily invoice our customers on a monthly basis and do not provide any refunds, rights of return, or warranties. Deferred revenue is presented as current liabilities and totaled $0.1 million as of September 30, 2023 and December 31, 2022. We expect to recognize revenue for these amounts within the next twelve months.

Note 5 - Property and Equipment

The principal categories of property and equipment, net are summarized as follows:

Useful

September 30, 

December 31, 

Life (years)

2023

    

2022

Buildings and improvements

39

$

8,968,439

$

8,521,996

Land

-

 

4,401,888

 

3,721,576

Leasehold improvements

10-39

 

28,855,241

 

28,855,239

Construction in progress

-

 

16,356,304

 

19,389,329

Medical equipment

10

 

34,163,757

 

28,744,664

Office furniture and equipment

7

 

3,333,445

 

2,860,680

Computer hardware and software

5

4,204,638

1,713,434

Vehicles

5

 

135,590

 

135,590

Signage

10

 

1,429,628

 

1,163,722

Total cost

 

101,848,930

 

95,106,230

Less: accumulated depreciation

 

(16,352,318)

(13,011,878)

Total property and equipment, net

$

85,496,612

$

82,094,352

We deconsolidated 17 Real Estate Entities in the second quarter of 2022 and one Real Estate Entity in the first quarter of 2023. Refer to Note 18.

Assets placed into service from construction in progress was $3.2 million at September 30, 2023.

Depreciation and amortization of property and equipment for the three months ended September 30, 2023 and 2022 totaled $1.6 million and $1.4 million, respectively, and for the nine months ended September 30, 2023 and 2022 totaled $4.0 million and $2.1 million, respectively.

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Note 6 – Intangible Assets and Goodwill

Intangible Assets. The following tables provide detail of the Company’s intangible assets:

Gross

Accumulated 

Net Carrying

Weighted Average

September 30, 2023

Carrying Amount

Amortization

 Amount

Useful Life (in years)

Amortizing intangible assets:

Member relationships

$

18,491,000

$

1,689,899

$

16,801,101

15

Management contracts

2,021,000

189,469

1,831,531

16

Customer contracts

914,000

91,400

822,600

15

Trademarks

1,425,000

225,049

1,199,951

7-12

PHP technology

409,000

122,700

286,300

5

Indefinite life intangible - license

682,649

-

682,649

-

Total

$

23,942,649

$

2,318,517

$

21,624,132

December 31, 2022

Amortizing intangible assets:

Member relationships

$

16,899,000

$

844,950

$

16,054,050

15

Management contracts

2,021,000

94,734

1,926,266

16

Customer contracts

914,000

45,700

868,300

15

Trademarks

1,425,000

112,525

1,312,475

7-12

PHP technology

409,000

61,350

347,650

5

Indefinite life intangible - license

682,649

-

682,649

-

Total

$

22,350,649

$

1,159,259

$

21,191,390

Amortization of intangible assets for the three months ended September 30, 2023 and 2022 totaled $0.4 million each, and for the nine months ended September 30, 2023 and 2022 totaled $1.2 million and $0.4 million, respectively.

Goodwill. At September 30, 2023 and December 31, 2022, Goodwill totaled $17.9 million and $17.0 million, respectively.

Note 7 – Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

    

September 30, 

December 31, 

2023

    

2022

Accrued wages and benefits

$

7,754,090

$

4,235,167

Accrued other

 

7,019,183

2,005,646

Total accrued expenses and other current liabilities

$

14,773,273

$

6,240,813

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Note 8 – Debt

The Company’s outstanding debt is shown in the following table:

Maturity

Interest

September 30, 

December 31, 

Dates

Rates

2023

2022

Term loans secured by all assets

01/2024 - 12/2028

4.15 - 7.71%

$

8,555,677

$

11,341,934

Term loans secured by property and equipment

01/2024 - 10/2028

3.59 - 9.75%

11,216,145

9,299,197

Line of credit secured by all assets

01/2024 - 11/2025

4.00 - 8.00%

3,371,676

2,623,479

Term loans of consolidated Real Estate Entities

10/2023 - 03/2037

2.84 - 5.75%

13,371,325

15,068,920

Unsecured convertible term notes

10/2025

8.00 - 10.00%

990,000

Pre-paid advance (convertible debt)

03/2024

0.00%

5,661,124

Total

43,165,947

38,333,530

Less: unamortized issuance costs and discount

845,786

112,802

Less: short-term lines of credit

3,371,676

2,623,479

Less: current portion of long-term debt

19,644,656

12,546,097

Total long-term debt

$

19,303,829

$

23,051,152

Term loans and lines of credit. We have entered into private debt arrangements with banking institutions for the purchase of equipment and to provide working capital and liquidity through cash and lines of credit. Unless otherwise delineated above, these debt arrangements are obligations of Nutex and/or its majority-owned subsidiaries. Consolidated Real Estate Entities have entered into private debt arrangements with banking institutions for purposes of purchasing land, constructing new emergency room facilities and building out leasehold improvements which are leased to our hospital entities. Nutex is a guarantor or, in limited cases, a co-borrower on the debt arrangements of the Real Estate Entities for the periods shown. Since the second quarter of 2022, we have deconsolidated 18 Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.

Certain outstanding debt arrangements require minimum debt service coverage ratios and other financial covenants. At September 30, 2023, we were not in compliance with the debt service coverage ratio for one term loan with an outstanding balance of $1.0 million. This balance has been included in current liabilities. At September 30, 2023, we had remaining availability of $1.4 million under outstanding lines of credit.

Pre-Paid Advance Agreement (convertible debt). On April 11, 2023, the Company entered into a Pre-Paid Advance Agreement (the “PPA”) with YA II PN, Ltd. (“Yorkville”) pursuant to which the Company may request advances of up to $25.0 million each from Yorkville (or such greater amount that parties may mutually agree) (each, a “Pre-Paid Advance”) for a total of up to $100 million, which will be purchased by Yorkville at 90% of the face amount. The initial Pre-Paid Advance requested was $25 million, $15 million of which was paid on April 11, 2023, with the remaining $10 million to be paid upon mutual agreement of the parties. During the period ending June 30, 2023, the parties mutually agreed not to fund the remaining $10 million of the initial request. Future Pre-Paid Advances, if any, will range from $5 million to $25 million depending on stock price and volume conditions being met, with an aggregate limitation on Pre-Paid Advances of $100.0 million over an 18-months period. At the request and sole discretion of Yorkville, such Pre-Paid Advances will be correspondingly reduced upon the issuance of our Common Stock to Yorkville at a Purchase Price equal to (a) $1.00 in respect of the initial Pre-Paid Advance, and (b) with respect to each subsequent Pre-Paid Advance the lower of (i) 100% of the volume weighted average prices (“VWAP”) of the Company’s common stock on the trading day immediately preceding the closing of such Pre-Paid Advance or (ii) 92.0% of the average of the two lowest daily VWAP of the shares during the seven trading days immediately prior to each Pre-Paid Advance, subject to a floor price of $0.1851 per share (“Floor Price”). The issuance of the shares of Common Stock under the PPA is subject to certain limitations, including that the aggregate number of shares of Common Stock issued pursuant to the PPA cannot exceed 19.9% of the Company's outstanding shares of Common Stock as of April 11, 2023 (“Exchange Cap”).

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Additionally, Yorkville may not request issuances of Common Stock with respect to the initial Pre-Paid Advance in excess of $7.5 million in any consecutive 30-day period. Further Yorkville may not request the issuance of Common Stock if such issuance would result in Yorkville (and its affiliates) beneficially owning more than 4.99% of the outstanding shares of the Company. Interest accrues on the outstanding balance of any Pre-Paid Advance at an annual rate equal to 0% subject to an increase to 15% upon events of default described in the PPA. Each Pre-Paid Advance has a maturity date of 12 months from the Pre-Paid Advance Date.

The PPA provides that in respect of any Pre-Paid Advance, if the VWAP of shares of Common Stock is less than the Floor Price for at least five trading days during a period of seven consecutive trading days or the Company has issued substantially all of the shares of Common Stock available under the Exchange Cap, then the Company is required to make monthly cash payments of amounts outstanding under any Pre-Paid Advance beginning on the third trading day after the triggering date and continuing on the same day of each successive calendar month until the entire amount of such Pre-Paid Advance balance has been paid or until the payment obligation ceases. Pursuant to the PPA, the monthly payment obligation ceases if the Exchange Cap no longer applies or the VWAP is greater than 120% of the Floor Price for a period of five consecutive trading days, unless a subsequent triggering date occurs.

The Company, at its option, has the right, but not the obligation, to repay early in cash a portion or all amounts outstanding under any Pre-Paid Advance, provided that the VWAP of the Common Stock is less than the Fixed Price during a period of ten consecutive trading days immediately prior to the date on which the Company delivers a notice to Yorkville of its intent and such notice is delivered at least 10 trading days prior to the date on which the Company will make such payment (“Optional Prepayment”). If elected, the Optional Prepayment includes a 6% payment premium (“Payment Premium”). If any Pre-Paid Advances are outstanding and any event of default has occurred, the full amount outstanding under the Pre-Paid Advances plus the Payment Premium, together with interest and other amounts owed in respect thereof, will become, at Yorkville’s election, immediately due and payable in cash.

On April 11, 2023, the Company requested a $15.0 million initial Pre-Paid Advance in accordance with the PPA. The net proceeds of $13.5 million received by the Company from Yorkville reflect a 10% discount of $1.5 million in accordance with the PPA. Additionally, in connection with the PPA, the Company incurred $0.9 million in placement and legal fees, which the Company classifies as debt issuance costs. The discount and the debt issuance costs are reported as a direct deduction from the face amount of the PPA and are amortized monthly based on the effective interest rate method. The amortization of the discount and debt issuance costs are reported as interest expense in the condensed consolidated statements of operations.

Since the receipt of the initial Pre-Paid Advance, 15.5 million shares of Common Stock have been issued to Yorkville, reducing the principal of initial Pre-Paid Advance by $5.9 million. Additionally, on June 22, 2023, the Company made an Optional Prepayment of $3.7 million in accordance with the PPA, consisting of $3.5 million of principal and $0.2 million attributed to the Payment Premium. As of September 30, 2023, the net carrying amount of the PPA is $5.1 million and is presented in current portion of long-term debt within the condensed consolidated balance sheet as of September 30, 2023. The net carrying amount of $5.1 million is composed of $5.6 million in principal and $(0.5) million in discount and debt issuance costs.

Interest expense incurred under the PPA for the three and nine months ended September 30, 2023 was $0.5 million and $2.2 million, respectively, which was the result of the amortization and reductions due to conversions and repayments. The effective interest rate for the PPA for the three and nine months ended September 30, 2023 was 19.4%.

As of September 30, 2023, there were 114.3 million of additional shares of Common Stock issuable under the Exchange Cap.

September 2023 Convertible Debt Issuance. On September 2023, the Company commenced a private offering (the “September 2023 Private Offering”) of up to $15.0 million pursuant to which the Company will issue investment units (the “Units”) at $50,000 per Unit to accredited investors (the “Unit Holder”) as defined in Rule 501 under the 1933 Act. Each Unit consists of (a) an interest-bearing unsecured convertible promissory note (the “Unsecured Convertible Term Notes”) in the principal amount of $50,000 convertible into shares of common stock at a conversion price of $0.40 per share and (b) a six-year warrant (the “Warrants”) to purchase up to 62,500 shares of common stock at an exercise price of $0.40 per share.

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The Notes mature on October 31, 2025 and the Warrants expire on December 31, 2029.

The Unsecured Convertible Term Notes bear an annual interest rate of 8% if paid in cash or an annual interest rate of 10% if paid in the form of common stock. The payment of interest in the form of common stock is at the discretion of the Company. When paid in common stock, the number of shares is equal to the quotient of the total accrued interest due divided by the last reported sale price of the Company’s common stock on the last complete trading day of such quarter. The Unit Holders have the option, at any time, to convert all or any portion of the unpaid principal and interest outstanding in common stock at the conversion price of $0.40 per share. If the Company fails to pay the outstanding principal amount and all accrued interest within 30 days of the maturity date, the interest rate payable is adjusted to 12%.

The Company appointed Emerson Equity LLC (“Emerson”) as placement agent for the September 2023 Private Offering. Per the Placement Agent Agreement, the Company agrees to pay (i) a cash commission equal to 10% of the gross proceeds from the sale of Units and (ii) warrants to purchase a number of Common Stock equal to 20% of the total number of Units.

During the three months ended September 30, 2023, the Company received net cash proceeds of $0.9 million. The net cash proceeds after the placement agent fees were allocated between the convertible debt and warrants based on their relative fair values. The fair value of the warrants was determined using a Black-Scholes Option Pricing model. Key assumptions included a risk-free interest rate of 4.60%, historical volatility of 123.8% and expected term of the warrants of six years. A total of $0.1 million was recorded to equity for the warrants. The discount on the convertible debt totaled $0.3 million and will be amortized to interest expense over the period until maturity. The effective interest rate on the convertible debt is 25.08%.

Clinigence convertible notes payable. We assumed $5.4 million principal of convertible notes payable of Clinigence outstanding at the merger date. The convertible notes payable were fully converted into 3,474,430 shares of common stock at a conversion price of $1.55 per share before their maturity on July 31, 2022. Debt discount totaling $1.7 million was accreted over four months to the maturity date of the convertible notes payable.

Note 9 – Leases

We have entered into hospital property, office and equipment rental agreements with various lessors including related parties. The following tables disclose information about our leases of property and equipment:

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Operating lease cost

$

789,877

$

862,642

$

2,676,894

$

1,555,311

Finance lease cost:

Amortization of right-of-use assets

$

2,858,223

$

3,539,969

$

7,889,533

$

4,467,633

Interest on lease liabilities

3,203,802

3,770,058

8,718,643

4,750,677

Total finance lease cost

$

6,062,025

$

7,310,027

$

16,608,176

$

9,218,310

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Note 10 – Commitments and Contingencies

Litigation. From time to time, the Company, its consolidated subsidiaries or VIEs may be named in various claims and legal actions in the normal course of business. Based upon counsel and management’s opinion, the outcome of such matters is not expected to have a material adverse effect on the consolidated financial statements.

Note 11 – Stock-based Compensation

In 2022, the Company adopted the Amended and Restated Nutex Health Inc. 2022 Equity Incentive Plan (the “2022 Plan”). The maximum aggregate number of shares that may be issued under the 2022 Plan is 5,000,000 shares, subject to increases on January 1st of each calendar year through January 1, 2027 of up to 5% annually at the discretion of the compensation committee of our Board of Directors. A total of 1,248,072 shares of common stock, par value $0.001 per share (“Common Stock”) of the Company were available for issuance under the 2022 Plan at September 30, 2023. On June 29, 2023, the stockholders of the Company approved the Amended and Restated Nutex Health Inc. 2023 Equity Incentive Plan (the “2023 Plan”) and an additional 8,751,928 new shares of Common Stock were made available for issuance under the 2023 Plan, which replaces the 2022 Plan. On September 30, 2023, a total of 10,000,000 shares of Common Stock were available for issuance under the 2023 Plan.

Awards granted under the 2023 Plan may be incentive stock options, non-statutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units or performance shares. The awards are granted at an exercise price equal to the fair market value on the date of grant.

Obligations for under-construction and ramping hospitals. Under the terms of the Contribution Agreements, contributing owners of the under-construction hospitals and ramping hospitals are eligible to receive a one-time additional issuance of Company common stock.

With respect to ramping hospitals, 24 months after the opening date (the “Determination Date”) of the applicable ramping hospital, such owner is eligible to receive such owner’s pro rata share of a number of shares of Company Common Stock equal to (i) the trailing twelve months earnings before interest, taxes, depreciation and amortization on the respective Determination Date, multiplied by (ii) 10, (iii) minus the initial equity value received at the Closing of the Merger, and (iv) minus such owner’s pro rata share of the aggregate debt of the applicable ramping hospital outstanding as of the closing of the Merger. The number of additional shares to be issued will be determined based on the greater of (a) the price of the Company’s common stock at the time of determination or (b) $2.80.

With respect to under construction hospitals, contributing owners of under construction hospitals will be eligible to receive, on the Determination Date, such owner’s pro rata share of a number of shares of Company common stock equal to (a)(i) the trailing twelve months earnings before interest, taxes, depreciation and amortization as of the Determination Date multiplied by (ii) 10, minus (iii) the aggregate amount of such owner’s capital contribution to the under construction hospital, minus (iv) such owner’s pro rata share of the aggregate debt of the applicable under construction hospital outstanding as of the Closing of the Merger, divided by (b) the greater of (i) the price of the Company common stock at the time of determination or (ii) $2.80.

We have not recognized any expense for this stock-based compensation based on our current estimates of future obligations to the contributing owners.

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Options. Clinigence had 6,500,010 options for the purchase of our common stock outstanding as of the merger date, all of which were fully vested and exercisable. The following table summarizes stock-based awards activity:

Weighted Average

Options

Weighted Average

Remaining Contractual

Outstanding

Exercise Price

Life (Years)

Options outstanding at April 1, 2022 merger date

6,500,010

$

2.30

6.62

Options exercised

(312,019)

2.08

Options cancelled

Options outstanding at September 30, 2022

6,187,991

$

2.30

6.17

Options outstanding at December 31, 2022

5,147,770

$

2.30

7.60

Options exercised

Options cancelled

Options outstanding at September 30, 2023

5,147,770

$

2.30

6.85

Options outstanding as of September 30, 2023 consisted of:

Expiration

Number

Number

Exercise

Date

Outstanding

Exercisable

Price

March 15, 2025

157,196

157,196

$

4.47

January 27, 2027

180,000

180,000

1.50

May 11, 2027

350,000

350,000

1.50

June 6, 2027

3,600

3,600

36.25

August 16, 2027

25,000

25,000

2.51

January 28, 2028

180,000

180,000

1.61

January 27, 2030

296,865

296,865

1.50

February 28, 2030

95,794

95,794

1.25

June 30, 2030

117,056

117,056

1.45

August 4, 2029

40,480

40,480

5.56

January 28, 2031

1,000,000

1,000,000

1.61

February 28, 2031

200,000

200,000

2.00

September 9, 2031

1,934,779

1,934,779

2.75

September 9, 2031

410,000

410,000

2.75

December 17, 2031

157,000

157,000

3.50

Total

5,147,770

5,147,770

Restricted Stock Units. On April 1, 2023, the Company issued 604,158 Restricted Stock Units (“RSUs”), valued at $0.6 million to certain employees. Total of 214,719 RSU Common Shares vested on April 1, 2023, another 194,719 common shares will vest on March 1, 2024 and another 194,719 common shares will vest on March 1, 2025.

For grants of restricted stock units, we recognize compensation expense over the applicable vesting period equal to the fair value of our common stock at grant date. Grants of restricted stock units generally vest one third per year on each of the first three anniversaries of the grant date. The following table summarizes the changes in restricted stock units during the nine months ended September 30, 2023.

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Table of Contents

Shares
(in thousands)

    

Weighted Average Grant-Date Fair Value Per Share

Non-vested awards, January 1, 2023

Granted

604

$1.01

Vested

 

(215)

1.01

Non-vested awards, September 30, 2023

389

$1.01

As of September 30, 2023, we estimate $0.3 million of unrecognized compensation cost related to restricted stock units issued to our employees to be recognized over the weighted-average vesting period of 1.1 years.

Employee Stock Purchase Plan. In May 2023, the Board of Directors adopted the 2023 Employee Stock Purchase Plan (“2023 ESPP”), which was subsequently approved by the Company’s stockholders and became effective in June 2023. The 2023 ESPP authorizes the initial issuance of up to 5,000,000 shares of the Company’s common stock to eligible employees, who are entitled to purchase shares of common stock equal to 85% of the closing price on the purchase date with accumulated payroll deductions. During the three and nine months ended September 30, 2023, the Company did not issue any shares under the ESPP.

Note 12 – Equity

We are authorized to issue up to a total of 950,000,000 shares of common stock having a par value of $0.001 per share. Holders of our common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders and to receive ratably in proportion to the shares of common stock held by them any dividends declared from time to time by the board of directors. Our common stock has no preferences or rights of conversion, exchange, pre-exemption or other subscription rights.

Common Stock Issued. Following is a discussion of common stock issuances during the periods presented. See Note 8 – Debt for issuances that were registered on the Company’s registration statement on Form S-3 under the Securities Act of 1933. All issuances referenced below were unregistered and were exempt from the registration requirements of the Securities Act of 1933, as amended, under Section 4(a)(2).

At the time of the Merger, Clinigence had 50,961,109 common shares outstanding. These amounts are shown as issued by us in the presentation of consolidated financial statements as the accounting acquiror.
In March 2023, we issued 1,000,000 common shares to Apollo Medical Holdings, Inc. for IPA managerial services. We recognized $1.9 million of stock-based compensation expense for this issuance. This expense should have been recognized on December 31, 2022. However, we consider this expense not material for revision and thus, it is presented as an out-of-period adjustment in the 2023 financial statements.
On August 1, 2023, we issued 2,541,511 shares of common stock in connection with the acquisition of two Florida IPAs. See Note 3 for discussion of 2023 Acquisitions.

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Table of Contents

Warrants. Clinigence had 12,401,240 common stock warrants outstanding as of the merger date. On September 30, 2023, as part of the September 2023 Private Offering, the Company issued warrants to Unit Holders to purchase 1,237,500 shares of Common Stock at a strike price of $0.40 for a period of six years. These warrants were outstanding but not yet exercised as of September 30, 2023. Warrant activity follows:

Weighted Average

Warrants

Weighted Average

Remaining Contractual

Outstanding

Exercise Price

Life (years)

Warrants outstanding at April 1, 2022 merger date

12,401,240

$

2.04

4.65

Warrants exercised

(2,187,225)

2.27

Warrants outstanding at September 30, 2022

10,214,015

$

2.04

4.60

Warrants outstanding at December 31, 2022

11,033,015

$

1.96

3.80

Warrants issued

1,237,500

0.40

Warrants exercised

(1,456,453)

1.55

Warrants expired

(3,000)

25.00

Warrants outstanding at September 30, 2023

10,811,062

$

1.83

3.35

In the first quarter of 2023, 702,285 shares of common stock were issued in satisfaction of cashless exercises of warrants to purchase of 806,453 shares of common stock. In the second quarter of 2023, 566,042 shares of common stock were issued in satisfaction of cashless exercises of warrants to purchase 650,000 shares of common stock. Warrants outstanding as of September 30, 2023 consisted of:

Expiration

Number

Number

Exercise

Date

Outstanding

Exercisable

Price

December 31, 2024

554,873

554,873

$

6.67

October 31, 2025

16,250

16,250

1.25

October 31, 2025

1,566,451

1,566,451

1.55

February 26, 2026

288,235

288,235

4.00

July 31, 2026

2,532,900

2,532,900

1.55

May 31, 2027

4,614,853

4,614,853

1.75

September 30, 2029

1,237,500

1,237,500

0.40

Total

10,811,062

10,811,062

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Note 13 – Income Taxes

Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items is recognized in the period these occur.

In periods before the merger with Clinigence, Nutex Health Holdco LLC and the Nutex Subsidiaries were pass-through entities treated as partnerships for U.S. federal income tax purposes. No provision for federal income taxes was provided for these periods as federal taxes were obligations of these companies’ members. After the merger, Nutex Health Holdco LLC became a wholly-owned subsidiary of Clinigence and is included in its consolidated corporate tax filings. We recognized a non-cash charge of $20.8 million to income tax expense during the three months ended June 30, 2022 for the change in tax status of Nutex Health Holdco LLC. This charge provides for the accumulated net deferred tax liabilities representing the differences between the book and tax bases of Nutex Health Holdco LLC’s assets and liabilities as of the April 1, 2022 change in tax status.

At the time of our merger with Clinigence, Clinigence had a full valuation allowance against its deferred tax assets. During the three months ended June 30, 2022, we recorded a non-cash benefit of $2.4 million to income tax expense to remove the acquired valuation allowance after we concluded that the associated deferred tax assets would be realizable.

Excluding the discrete items above and excluding the non-deductible goodwill impairment, our effective tax rate for the three and nine months ended September 30, 2022 was 25.3% and 26.2%, respectively. Our effective tax rate for the three and nine months ended September 30, 2023 was 7.0% and 11.6%, respectively. The primary difference from the federal statutory rate of 21% is related to state taxes, income of noncontrolling interests in flow-through entities and permanent differences for non-deductible expenses.

Note 14 – Earnings per Share

The following is the computation of earnings (loss) per basic and diluted share:

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Amounts attributable to Nutex Health Inc.:

Numerator:

Net income (loss) attributable to common stockholders

$

(5,542,391)

$

(412,186,266)

$

(14,168,717)

$

(410,028,269)

Denominator:

Weighted average shares used to compute basic EPS

665,055,603

649,577,082

657,590,265

629,787,661

Earnings (loss) per share:

Basic

$

(0.01)

$

(0.62)

$

(0.02)

$

(0.65)

Diluted

$

(0.01)

$

(0.62)

$

(0.02)

$

(0.65)

The computation of diluted earnings per common share excludes the 5,147,770 common stock options, 10,811,062 warrants, 389,439 restricted stock units and common stock issuable upon conversion of outstanding convertible debt for the three and nine months ended September 30, 2023. The dilutive effect of convertible debt was calculated using the if-converted method, whereas the dilutive effect of the assumed exercise of outstanding options and warrants was calculated using the treasury stock method.

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Note 15 - Supplemental Cash Flows Information

Nine Months Ended September 30, 

2023

    

2022

Cash paid for interest

$

858,773

$

3,402,606

Cash paid for income taxes

737,000

7,595,105

Non-cash investing and financing activities:

Financed capital expenditures

5,521,759

-

Acquisition of finance leases

18,798,667

23,603,817

Exercise of warrants on cashless basis

1,268

-

Issuance of restricted stock units

298,812

-

Issuance of common stock to Apollo Medical Holdings, Inc.

1,900,000

-

Deconsolidation of Real Estate Entity

4,258,133

-

Convertible debt converted to common stock

5,151,509

-

Warrants issued with convertible debt

175,710

-

Payment for acquisition in common stock

750,000

-

Note 16 – Segment Information

We report the results of our operations as three segments in our consolidated financial statements: (i) the hospital division, (ii) the population health management division and (ii) the real estate division. The determination of our reporting segments was made on the basis of our strategic priorities, which corresponds to the manner in which our Chief Executive Officer, as our chief operating decision maker, reviews and evaluates operating performance to make decisions about resources to be allocated. We evaluate the performance of our reportable segments based on, among other measures, operating income, which is defined as income before interest expense, other income (expense), and taxes. Corporate costs primarily include expenses for support functions and salaries and benefits for corporate employees and are excluded from segment operating results.

Reportable segment information, including intercompany transactions, is presented below:

September 30, 

December 31, 

2023

2022

Assets:

Hospital division

$

343,902,711

$

314,085,287

Population health management division

86,311,678

77,825,753

Real estate division

49,419,153

39,840,945

Total Assets

$

479,633,542

$

431,751,985

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Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Revenue from external customers:

Hospital division

$

54,585,263

$

21,244,305

$

155,485,230

$

151,976,226

Population health management division

8,137,709

7,150,753

22,491,613

13,594,007

Total revenue

$

62,722,972

$

28,395,058

$

177,976,843

$

165,570,233

Segment operating income:

Hospital division

7,238,738

(23,742,606)

21,122,489

18,997,515

Population health management division

(172,525)

29,702

438,370

(257,002)

Total segment operating income

$

7,066,213

$

(23,712,904)

$

21,560,859

$

18,740,513

Capital expenditures:

Hospital division

2,875,585

-

10,322,487

3,730,053

Real estate division

-

5,890,738

-

18,782,411

Total capital expenditures

$

2,875,585

$

5,890,738

$

10,322,487

$

22,512,464

Revenue from inter-segment activities:

Real estate division

$

13,192,549

$

-

$

13,708,579

$

11,989,212

Depreciation and amortization:

Hospital division

4,238,498

3,748,431

11,518,388

8,844,757

Population health management division

401,566

431,986

1,201,227

819,970

Real estate division

105,877

149,750

189,233

194,786

Total depreciation and amortization

$

4,745,941

$

4,330,167

$

12,908,848

$

9,859,513

Note 17 – Related Party Transactions

Related party transactions included the following:

The Physician LLCs employ the doctors who work in our hospitals. We have no direct ownership interest in these entities but they are owned and, in some instances, controlled by related parties including our CEO, Dr. Thomas Vo. The Physician LLCs are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to them in the event of cash shortages and received the benefit of their cash surpluses.


In connection with the merger with Clinigence, we forgave certain amounts due from Physician LLCs for past advances made by us in support of their operations. We recognized net expense of $1.5 million in the three months ended March 31, 2022 as other expense in the consolidated statements of operations. No such expense was recognized subsequently.

The Physician LLCs had outstanding obligations to their member owners, who are also Company stockholders, totaling $4.0 million at September 30, 2023 and $2.1 million at December 31, 2022 reported within accounts payable – related party in our consolidated balance sheets.

Most of our hospital division facilities are leased from real estate entities which are owned by related parties. These leases are typically on a triple net basis where our hospital division is responsible for all operating costs, repairs and taxes on the facilities. Our obligations under these leases are presented in Note 9. During the three and nine months ended September 30, 2023, we made cash payments for these lease obligations totaling $3.9 million and $11.1 million, respectively. Cash payments for these lease obligations made in the three and nine months ended September 30, 2022 totaled $3.7 million and $9.9 million, respectively.

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We consolidate Real Estate Entities as VIEs when they do not have sufficient equity at risk and our hospital entities are guarantors or co-borrowers under their outstanding mortgage loans. The consolidated Real Estate Entities have mortgage loans payable to third parties which are collateralized by the land and buildings. We have no direct ownership interest in these entities but they are owned and, in some instances, controlled by related parties including our CEO. We deconsolidated 17 Real Estate Entities in the second quarter of 2022 and one Real Estate Entity in the first quarter of 2023. At September 30, 2023, two Real Estate Entities continue to be consolidated in our financial statements.

In connection with the merger with Clinigence, we forgave certain amounts due from Real Estate Entities for past advances made by us. We recognized net expense totaling $0.6 million in the three months ended March 31, 2022 as other expense in the consolidated statements of operations. No such expense was recognized subsequently.

Accounts receivable – related party included $1.5 million at September 30, 2023 and $0.5 million at December 31, 2022 due from noncontrolling interest owners of consolidated ER Entities.

Micro Hospital Holding LLC, an affiliate controlled by our CEO, made advances to one of our hospital facilities, SE Texas ER. These advances totaled $1.4 million at September 30, 2023 and at December 31, 2022 and are reported as accounts payable – related party in our consolidated balance sheets. The advances have no stated maturity and bear no interest.

Accounts payable – related party in our consolidated balance sheets included $0.7 million at September 30, 2023 and $0.1 million at December 31, 2022 for reimbursement of expenses incurred on our behalf.

We provide managerial services to emergency centers owned and, in some instances, controlled by related parties including an entity controlled by our CEO. We recognized $0.1 million and $0.5 million of managerial fees within the hospital division in the three and nine months ended September 30, 2023 for these services. In the three and nine months ended September 30, 2022, we recognized $0.4 million and $1.0 million, respectively, of revenue for these services.

Two of our ER Entities are obligated under managerial services agreements with related parties commencing in 2022. Payments under these agreements totaled $0.1 million and $0.5 million for the three and nine months ended September 30, 2023 and $0.1 million and $1.7 million for the three and nine months ended September 30, 2022.

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Note 18 – Variable Interest Entities

The following tables provide the balance sheet amounts for consolidated VIEs:

September 30, 2023

Real Estate

Physician

AHISP

Entities

LLCs

IPA

Current assets

$

438,235

$

6,111,810

$

10,326,963

Property and equipment, net

-

3,668

91,546

Other long-term assets

46,730,762

-

29,653

Total assets

$

47,168,997

$

6,115,478

$

10,448,162

Current liabilities

876,464

5,854,614

10,448,162

Long-term liabilities

13,324,617

-

-

Total liabilities

14,201,081

5,854,614

10,448,162

Equity

32,967,916

260,864

-

Total liabilities and equity

$

47,168,997

$

6,115,478

$

10,448,162

December 31, 2022

Real Estate

Physician

AHISP

Entities

LLCs

IPA

Current assets

$

3,466,811

$

6,915,710

$

6,641,448

Property and equipment, net

16,726,986

3,668

-

Long-term assets

19,647,148

-

498,990

Total assets

$

39,840,945

$

6,919,378

$

7,140,438

Current liabilities

2,326,335

4,831,617

7,109,758

Long-term liabilities

15,019,633

-

30,680

Total liabilities

17,345,968

4,831,617

7,140,438

Equity

22,494,977

2,087,761

-

Total liabilities and equity

$

39,840,945

$

6,919,378

$

7,140,438

The assets of each of the ER Entities may only be used to settle the liabilities of that entity or its consolidated VIEs and may not be required to be used to settle the liabilities of any of the other ER Entities, other VIEs, or corporate entity. Additionally, the assets of corporate entities cannot be used to settle the liabilities of VIEs. The Company has aggregated all of the Physician LLCs and Real Estate Entities into two categories above, because they have similar risk characteristics, and presenting distinct financial information for each VIE would not add more useful information.

Real Estate Entities are consolidated by the Company as VIEs because they do not have sufficient equity at risk and our hospital entities are guarantors of their outstanding mortgage loans. We have been working with the third-party lenders to remove our guarantees of their outstanding mortgage loans. As these guarantees are released, the associated Real Estate Entity no longer qualifies as a VIE and is deconsolidated. We deconsolidated 17 Real Estate Entities in the second quarter of 2022 and one Real Estate Entity in the first quarter of 2023.

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There was no gain or loss on the deconsolidation of these entities. As of September 30, 2023, two Real Estate Entities continue to be consolidated in our financial statements.

At the date we deconsolidated these Real Estate Entities in the second quarter of 2022, they had $2.4 million of cash, $9.8 million of fixed assets (principally land and building), $0.5 million of other assets, $69.6 million of liabilities (principally mortgage indebtedness) and $31.4 million of equity reported as noncontrolling interests.

The Real Estate Entity we deconsolidated in the first quarter of 2023 had $1.0 million of cash, $8.4 million of fixed assets (principally land and building), $0.2 million of other assets, $5.4 million of liabilities (principally mortgage indebtedness) and $4.3 million of equity reported as noncontrolling interests as of the date of deconsolidation.

Note 19 - Subsequent Events

The Company has evaluated subsequent events through the filing of this report and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except the following:

Subsequent to the end of the period through the date of the report, in connection with the September 2023 Convertible Debt Issuance, the Company received additional net cash proceeds of $3.1 million.

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Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the unaudited consolidated financial statements and the notes thereto included in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q.

Explanatory Note

* * * * * On April 1, 2022 (the “Merger Date”), Nutex Health Holdco LLC and Clinigence Holdings, Inc. (“Clinigence”) completed the merger (the “Merger”) contemplated by the Agreement and Plan of Merger (the “Merger Agreement”) dated as of November 23, 2021 between Clinigence, Nutex Acquisition LLC, a Delaware limited liability company and wholly-owned subsidiary of Clinigence, Nutex, Micro Hospital Holding LLC (solely for the purposes of certain sections of the Merger Agreement), Nutex Health Holdco LLC and Thomas Vo, M.D., solely in his capacity as the representative of the equity holders of Nutex. Immediately following the completion of the Merger, Clinigence amended its certificate of incorporation and bylaws to change its name to “Nutex Health Inc.” In connection with the Merger, each outstanding equity interest of Nutex Health Holdco LLC was exchanged for 3.571428575 shares of Clinigence common stock. The Merger was accounted for as a reverse business combination under U.S. GAAP. Therefore, Nutex Health Holdco LLC was treated as the accounting acquirer in the Merger. Our financial statements presented for periods prior to the Merger Date are those of Nutex Health Holdco, LLC, as the Company’s predecessor entity. Beginning with the second quarter of 2022, our financial statements are presented on a consolidated basis and include Clinigence.

Except where the context indicates otherwise, (i) references to “we,” “us,” “our,” or the “Company” refer, for periods prior to the completion of the Merger, to Nutex Health Holdco LLC and its subsidiaries, (ii) references the “Nutex Health” for periods following the completion of the Merger, refer to Nutex Health Inc. and its subsidiaries and (iii) references to “Clinigence” refer to Clinigence Holdings, Inc. and its subsidiaries prior to the completion of the Merger.

Overview

Nutex Health Inc. is a physician-led, healthcare services and operations company with 22 hospital facilities in eight states (hospital division), and a primary care-centric, risk-bearing population health management division. Our hospital division implements and operates different innovative health care models, including micro-hospitals, specialty hospitals and hospital outpatient departments (“HOPDs”). The population health management division owns and operates provider networks such as independent physician associations (“IPAs”) and offers a cloud-based proprietary technology platform to IPAs which aggregates clinical and claims data across multiple settings, information systems and sources to create a holistic view of patients and providers.

We employ approximately 800 full time employees and partner with over 900 physicians. Our corporate headquarters is based in Houston, Texas. We were incorporated on April 13, 2000 in the state of Delaware.

Our financial statements present the Company’s consolidated financial condition and results of operations including those of majority-owned subsidiaries and variable interest entities (“VIEs”) for which we are the primary beneficiary.

The hospital division includes our healthcare billing and collections organization and hospital entities. In addition, we have financial and operating relationships with multiple professional entities (the “Physician LLCs”) and real estate entities (the “Real Estate Entities”). The Physician LLCs employ the doctors who work in our hospitals. These entities are consolidated by the Company as VIEs because they do not have significant equity at risk, and we have historically provided support to the Physician LLCs in the event of cash shortages and received the benefit of their cash surpluses.

The Real Estate Entities own the land and hospital buildings which are leased to our hospital entities. The Real Estate Entities have mortgage loans payable to third parties which are collateralized by the land and buildings. We consolidate the Real Estate Entities as VIEs in instances where our hospital entities are guarantors or co-borrowers under their outstanding mortgage loans. Since the second quarter of 2022, we deconsolidated 18 Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.

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The Company has no direct or indirect ownership interest in the Physician LLCs or Real Estate Entities, so 100% of the equity for these entities is shown as noncontrolling interest in the consolidated balance sheets and statements of operations.

The population health management division includes our management services organizations and a healthcare information technology company providing a cloud-based platform for healthcare organizations. In addition, AHISP, IPA, a physician-affiliated entity that is not owned by us—is consolidated as a VIE of our wholly-owned subsidiary AHP since we are the primary beneficiary of their operations under AHP’s management services contracts with them.

On August 1, 2023, the Company acquired two Florida based IPAs for $0.8 million in cash, $0.8 million in Company shares and contingent consideration of up to $0.4 million in cash and $0.5 million in Company shares if the acquired IPAs meet Medicare Lives thresholds in 2024 and 2025. Additionally, we will pay earn-out consideration if certain financial targets are achieved by year end December 31, 2023. Substantially all of the purchase consideration was allocated to goodwill and identified intangible assets. The acquired IPAs are reported within our Population Health Management division. Management considers this acquisition to be immaterial.

Sources of revenue. Our hospital division recognizes net patient service revenue for contracts with patients and in most cases a third-party payor (commercial insurance, workers compensation insurance or, in limited cases, Medicare/Medicaid).

We receive payment for facility services rendered by us from federal agencies, private insurance carriers, and patients. The Physician LLCs receive payment for doctor services from these same sources. On average, greater than 90% of our net patient service revenue are paid by insurers, federal agencies, and other non-patient third parties. The remaining revenues are paid by our patients in the form of copays, deductibles, and self-payment. The following tables present the allocation of the estimated transaction price with the patient between the primary patient classification of insurance coverage:

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Insurance

92%

91%

93%

94%

Self pay

5%

7%

4%

5%

Workers compensation

 

2%

1%

 

2%

1%

Medicare/Medicaid

1%

1%

1%

0%

Total

100%

100%

100%

100%

The population health management division recognizes revenue for capitation and management fees for services to IPAs and physician groups and for the licensing, training, and consulting related to our cloud-based proprietary technology. Capitation revenue consists primarily of capitated fees for medical services provided by physician-owned entities we consolidate as VIEs. Capitated arrangements made directly with various managed care providers including HMOs. Capitation revenues are typically prepaid monthly to us based on the number of enrollees selecting us as their healthcare provider. Capitation is a fixed payment amount per patient per unit of time paid in advance for the delivery of health care services, whereby the service providers are generally liable for excess medical costs. We receive management fees that are received based on gross capitation revenues of the IPAs or physician groups we manage.

Our growth plans. We plan to expand our operations by entering new market areas either through development of new hospitals, formation of new IPAs or by making acquisitions. In 2023, we have opened healthcare facilities in Fort Smith (Arkansas), Alhambra (California), Royce City (Texas), Albuquerque (New Mexico) and Mandeville (Louisiana).

We identify new market areas for hospitals based on the area’s need for access to emergency health services and growth expectations. We identify and partner with local physicians who will operate and manage the new location. When developing new hospitals, we have a turn-key process for location selection, real estate acquisition, design, ‎and development of the facility including staffing, training and operations. We extend our existing comprehensive suite of ‎centralized services to operating hospitals, including executive management, billing, collections, recruiting ‎and marketing.

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Overview of Legislative Developments

The U.S. Congress and many state legislatures have introduced and passed a large number of proposals and legislation designed to make major changes in the healthcare system, including changes that have impacted access to health insurance. The most prominent of these efforts, the Affordable Care Act, affects how healthcare services are covered, delivered and reimbursed. The Affordable Care Act increased health insurance coverage through a combination of public program expansion and private sector health insurance reforms. There is uncertainty regarding the ongoing net effect of the Affordable Care Act due to the potential for continued changes to the law’s implementation and its interpretation by government agencies and courts. There is also uncertainty regarding the potential impact of other health reform efforts at the federal and state levels.

In response to the COVID-19 pandemic, federal and state governments passed legislation, promulgated regulations, and have taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 and other patients during the public health emergency and to provide financial relief. Among these, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) had the most impact on our business.

The CARES Act included a waiver of insurance copayments, coinsurance, and annual deductibles for laboratory tests to diagnose COVID-19 and visits to diagnose COVID-19 at an emergency department of a hospital. These provisions of the CARES Act expired on June 30, 2021. While these provisions were effective, we experienced higher levels of revenue due to a shift of payor mix. The larger number and acuity of patient claims for COVID-19 also resulted in higher revenue.

No Surprises Act

The No Surprises Act (“NSA”) is a federal law that took effect January 1, 2022, to protect consumers from most instances of “surprise” balance billing. With respect to the Company, ‎the NSA limits the amount an insured patient will pay for emergency services furnished by an out-of-network ‎provider. The NSA addresses the payment of these out-of-network providers by group health plans or health ‎insurance issuers (collectively, “insurers”). In particular, the NSA requires insurers to reimburse out-of-network ‎providers at a statutorily calculated “out-of-network rate.” In states without an all-payor model agreement or ‎specified state law, the out-of-network rate is either the amount agreed to by the insurer and the out-of-network ‎provider or an amount determined through an independent dispute resolution (“IDR”) process. ‎

Under the NSA, insurers must issue an initial payment or notice of denial of payment to a provider within ‎thirty days after the provider submits a bill for an out-of-network service. If the provider disagrees with the ‎insurer’s determination, the provider may initiate a thirty-day period of open negotiation with the insurer over the ‎claim. If the parties cannot resolve the dispute through negotiation, the parties may then proceed to IDR ‎arbitration. ‎

Independent Dispute Resolution. The provider and insurer each submits a proposed payment amount and ‎explanation to the arbitrator. The arbitrator must select one of the two proposed payment amounts taking into ‎account the “qualifying payment amount” and additional circumstances including among other things the level of training, outcomes ‎measurements of the facility, the acuity of the individual treated, and the case mix and scope of services of the ‎facility providing the service. The NSA prohibits the arbitrator from considering the provider’s usual and ‎customary charges for an item or service, or the amount the provider would have billed for the item or service in ‎the absence of the NSA. ‎

Qualifying Payment Amount. The “qualifying payment amount” or “QPA” is generally “the median of the contracted ‎rates recognized by the plan or issuer under such plans or coverage, respectively, on January 31, 2019, for the ‎same or a similar item or service that is provided by a provider in the same or similar specialty and provided in the ‎geographic region in which the items or service is furnished,” with annual increases based on the consumer price ‎index. In other words, the qualifying payment amount is typically the median rate the insurer would have paid for ‎the service if provided by an in-network provider or facility.‎ HHS Final Rule.

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As required by the NSA, the United States Department of Health and Human ‎Services (“HHS”) has established an IDR process under which a certified IDR ‎entity determines the ultimate amount of payment. The HHS’ final rule became effective October 25, 2022. The final rule eliminated the rebuttable presumption that the qualified payment amount is the correct price and also abandoned the requirement that the certified IDR entity must select the offer closest to the qualifying payment amount. These key provisions were initially part of the interim rule issued in 2021 and were challenged by several court cases. Under the final rule, the certified IDR entity must instead select the offer that best reflects the value of the item or service provided, by first considering the QPA and then considering “additional information” that is relevant to the dispute.

The Texas Medical Association on November 30, 2022 filed an additional lawsuit (“TMA III”) challenging how insurers are establishing the QPA under the final rules, alleging that the final rules allow insurers to include what is referred to in the healthcare industry as “ghost rates,” which are rates included in contracts with providers who do not actually provide the specified service and as a result are lower than rates a provider would have incentive to meaningfully negotiate, thus artificially lowering the QPA. According to the Texas Medical Association, this practice stands in violation of the congressional definition of the QPA as the median of the contracted rates recognized by the plan or insurer for the same or similar item or service that is provided by a provider in the same or similar specialty in the same geographic region.

On August 24, 2023, the U.S. District Court in the Eastern District of Texas in TMA III ruled to vacate several aspects of the regulations mandating the methodology for the QPA calculation. In particular, the court prohibited the inclusion of “ghost rates” as part of the QPA calculation and QPA calculations that are not based on the same or similar specialty. This is the 4th time the federal court has ruled in favor of the Texas Medical Association effective nationwide. In its FAQs dated October 6, 2023, the Department of Labor states that the Department of Justice intends to appeal the court’s ruling.

Since the NSA became effective January 1, 2022, our average payment by insurers of patient claims for emergency services has declined by approximately 26%. In our experience, insurers often initially pay amounts lower than the QPA without regard for other information relevant to the claim. This requires us to make more appeals using the IDR process. While we are working within the established processes for IDR, we have had varying successes at achieving collections higher than the established QPA.

On March 17, 2023, the Centers for Medicare & Medicaid Services (“CMS”) issued new guidance (“Guidance”) applicable to the independent dispute resolution (“IDR”) process in the NSA effective for payment determinations made on or after February 6, 2023 for items and services furnished on or after October 25, 2022 for plan years (in the individual market, policy years) beginning on or after January 1, 2022. The revisions were put in place to help balance the arbitration process by including the recent Texas Medical Association Court Order and removing “double counting” provisions. From now on, independent arbiters must consider all evidence given to them by the disputing parties, and not just the Qualified Payment Amount (QPA).

Under the Guidance, Certified IDR Entities now must consider:

QPA(s) for the applicable year for the qualified IDR item or service; and
other information submitted by a party as long as it does not contain prohibited factors.

Generally, parties may submit additional information regarding any of the circumstances of the services provided. Under the Guidance, the certified IDR entity now must consider all information submitted to determine the appropriate payment rate. Previously, there was a rebuttable presumption that the QPA was the appropriate payment amount, and the IDR entity was not required to consider any additional factors. This news comes as a major win for Nutex Health and other providers’ quest to make the arbitration process more equitable and straightforward.

After being suspended for services rendered after October 25, 2022, IDR entities on March 17, 2023 were instructed to resume payments. However, on August 4, 2023, the HHS and CMS again temporarily suspended the federal IDR process, including the ability to initiate new disputes, until the HHS and CMS can provide new instructions in response to the summary judgement granted by the U.S. District Court for the Eastern District of Texas on August 3, 2023 in favor of the Texas Medical Association vacating the HHS’ December 2022 decision to increase, without notice, the administrative fee required to initiate IDR arbitration from $50 to $350.

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The IDR process resumed on September 5, 2023. We anticipate that this additional favorable court ruling will further enhance the fairness of the reimbursement process under the NSA.

On October 6, 2023, CMS announced new guidance in response to the August 2023 ruling in TMA III vacating several provisions of the existing NSA regulations. In the announcement, the Departments state that while they disagree with the court’s ruling, the QPA calculations must now be made in good faith in accordance with the NSA and applicable rules currently in effect, with no additional guidance provided by the Departments and a suspension of any enforcement until at least May 1, 2024, to give the insurers adequate time to comply with the TMA III court ruling. Our management team is actively working with legislatures, the Administration, and the Center for Consumer Information and Insurance Oversight (CCIIO) to request CMS to promptly issue specific guidance on health plan obligations to calculate QPAs in line with the federal district court ruling and issue additional instructions to certified IDR entities on how to evaluate QPAs that are based on an invalidated methodology.

On October 27, 2023, the Departments of HHS, Labor, and the Treasury, along with the Office of Personnel Management, released a proposed rule on the NSA’s Federal IDR process. The proposed rules would allow: better communication between health plans and providers, open negotiations through a centralized Federal IDR portal, improved IDR eligibility determinations and batching ability of claims. We do not know when and in what form these proposed rules will be implemented, however, we feel that this is a favorable step in the right direction to repair the faulty implementation of the NSA.

We are supportive of industry efforts seeking to amend the NSA final rule. Our experience, like that of many other healthcare providers, is that the final rule, as currently in effect, continues to unfairly favor insurers in the determination of the QPA we receive for our healthcare services. It is difficult to predict the outcome of efforts to challenge or amend the final rule. As well, there can be no assurance that third-party payors will not attempt to further reduce the rates they pay for our services or that additional rules issued under the NSA will not have adverse consequences to our business.

Recent Developments

NASDAQ Letter. On May 22, 2023, the Company received a letter (the “Nasdaq Staff Deficiency Letter”) from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, for the prior thirty (30) consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”).

In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has been provided an initial period of 180 calendar days, or until November 20, 2023, to regain compliance. The letter states that the Nasdaq staff will provide written notification that the Company has achieved compliance with Rule 5550(a)(2) if at any time before November 20, 2023 (the “Compliance Period”), the bid price of the Company’s common stock closes at $1.00 per share or more for a minimum of ten (10) consecutive business days. The Nasdaq Staff Deficiency Letter has no immediate effect on the listing or trading of the Company’s common stock.

The Company intends to continue actively monitoring the bid price for its shares of common stock between now and the expiration of the Compliance Period and will consider all available options to resolve the deficiency with every intention to regain compliance with the Minimum Bid Price Requirement.

If the Company does not regain compliance with Rule 5550(a)(2) by November 20, 2023, the Company may be eligible for an additional 180 calendar day compliance period. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the deficiency during the second compliance period, for example, by effecting a reverse stock split, if necessary. However, if it appears to the Nasdaq staff that the Company will not be able to cure the deficiency, or if the Company is otherwise not eligible, Nasdaq would notify the Company that its securities would be subject to delisting. In the event of such a notification, the Company may appeal the Nasdaq staff’s determination to delist its securities.

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There can be no assurance that the Company will be eligible for the additional 180 calendar day compliance period, if applicable, or that the Nasdaq staff would grant the Company’s request for continued listing subsequent to any delisting notification.

Results of Operations

We report the results of our operations as three segments in our consolidated financial statements: (i) the hospital division, (ii) the population health management division and (ii) the real estate division. Activity within our business segments is significantly impacted by demand for healthcare services we provide, competition for these services in each of the market areas we serve, and the legislative changes discussed above.

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Revenue:

Hospital division

$

54,585,263

$

21,244,305

$

155,485,230

$

151,976,226

Population health management division

8,137,709

7,150,753

22,491,613

13,594,007

Total revenue

62,722,972

28,395,058

177,976,843

165,570,233

Segment operating income:

Hospital division

7,238,738

(23,742,606)

21,122,489

18,997,515

Population health management division

(172,525)

29,702

438,370

(257,002)

Total segment operating income

7,066,213

(23,712,904)

21,560,859

18,740,513

Corporate and other costs:

Facilities closing costs

-

-

217,266

-

Acquisition costs

43,464

-

43,464

3,885,666

Stock-based compensation expense

49,167

81,249

2,198,812

135,415

Impairment of goodwill

-

398,135,038

-

398,135,038

General and administrative expenses

7,794,808

6,751,548

24,730,168

17,404,637

Total corporate and other costs

7,887,439

404,967,835

27,189,710

419,560,756

Interest expense

4,098,179

3,402,606

12,081,316

9,628,189

Other expense

(53,206)

(630,450)

70,721

346,873

Loss before taxes

(4,866,199)

(431,452,895)

(17,780,888)

(410,795,305)

Income tax expense (benefit)

(342,259)

(8,543,880)

(2,068,530)

11,285,729

Net loss

(4,523,940)

(422,909,015)

(15,712,358)

(422,081,034)

Less: net income (loss) attributable to noncontrolling interests

1,018,451

(10,722,749)

(1,543,641)

(12,052,765)

Net loss attributable to Nutex Health Inc.

$

(5,542,391)

$

(412,186,266)

$

(14,168,717)

$

(410,028,269)

Adjusted EBITDA

$

1,279,193

$

(15,703,848)

$

7,711,586

$

18,456,057

Three Months Ended September 30, 2023 Compared to Three Months Ended September 30, 2022

We reported a net loss attributable to Nutex Health Inc. of $5.5 million, or a loss of $0.01 per share, for the three months ended September 30, 2023 as compared with net loss attributable to Nutex Health Inc. of $412.2 million, or a loss of $0.62 per share, for same period of 2022. The net loss for the third quarter of 2022 includes a $398.1 million goodwill impairment. Our 2023 results were principally affected by:

Higher patient visits, increasing by 2.6% during the three months ended September 30, 2023 as compared with the same period of 2022 due mostly to the opening of three facilities in the quarter;
Decrease in revenue in the three months ended September 30, 2022 caused by legislative changes reducing the amounts we are able to collect for patient services to median in-network rates, totaling approximately $29.0 million; and
Goodwill impairment expense recorded in the three months ended September 30, 2022 of $398.1 million.

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Adjusted EBITDA for the three months ended September 30, 2023 was $1.3 million as compared to a loss of $15.7 million for the comparable period of 2022. Refer to Non-GAAP Financial Measures discussed below for a definition and reconciliation of Adjusted EBITDA. The items affecting revenue contributed significantly to the increase in Adjusted EBITDA in the 2023 period.

A discussion of our segment results is included below.

Hospital Division. Our revenue for the three months ended September 30, 2023 totaled $54.6 million as compared to $21.2 million for the same period of 2022. The increase in revenue was attributed to a decrease in revenue in the three months ended September 30, 2022 caused by legislative changes reducing the amounts we are able to collect for patient services to median in-network rates, totaling approximately $29.0 million, as well as the closing of underperforming facilities and opening of new facilities impacting the third quarter of 2023.

The following table shows the number of patient visits during the periods:

Three Months Ended September 30, 

2023

2022

Patient visits:

Hospital

37,443

36,500

Total patient visits increased 2.6% during the three months ended September 30, 2023 as compared with the same period of 2022 due mostly to the opening of three facilities in the quarter which are in the ramp-up stage.

The hospital division’s operating income was $7.2 million during the three months ended September 30, 2023, compared with an operating loss of $23.7 million in the same period of 2022, an increase of 130%. Our revenue and operating income for the third quarter of 2022 was adversely affected by the reduction in net revenue discussed above. Our operating income for the third quarter of 2023 was positively affected by a reduction in operating costs. We renegotiated contract personnel agreements to better align with our operations. We have made significant progress with the IDR process for both the NSA (Federal) as well as the Texas Department of Insurance. We have made a significant investment in the revenue cycle team to address this IDR process. In the three months ending September 30, 2023, revenue per patient for the period is trending favorably compared to the same period in 2022.

Population Health Management Division. Our total revenue for the three months ended September 30, 2023 was $8.1 million as compared with $7.2 million for the same period of 2022. The increase was due to higher capitation revenue earned.

The population health management division had $0.2 million of operating loss for the three months ended

September 30, 2023 as compared with $0.1 million of operating income for the same period of 2022. Strategically, we are focused on the growth of this division principally through the addition of new independent physician associations and have staffed our organization to manage larger numbers of such organizations. In August 2023, we completed the acquisition of two IPAs in Florida.

Real Estate Division. This division reports the operations of consolidated Real Estate Entities where we provide guarantees of their indebtedness or are co-borrowers.

Revenue and operating expenses of consolidated Real Estate Entities are not significant since the extent of these entities’ operations is to own facilities leased to our hospital division entities which are financed by a combination of contributed equity by related parties and third-party mortgage indebtedness. Such leases are typically on a triple net basis where our hospital division is responsible for all operating costs, repairs and taxes on the facilities. Finance lease income is recognized outside of segment operating income as other income by the Real Estate Entities. However, these amounts are largely eliminated in the consolidation of these entities into our financial statements.

At September 30, 2023, two Real Estate Entities continue to be consolidated in our financial statements. We expect that hospitals we open in the future may be leased from new Real Estate Entities which may be owned in whole or part by related parties.

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Third-party lenders to these entities may require that we provide a guarantee or become co-borrowers under mortgage indebtedness financings for such facilities. In such instances, we may be required to consolidate these new Real Estate Entities in our financial statements as VIEs.

Corporate and other costs. Corporate and other costs in the three months ended September 30, 2023 totaled $7.9 million as compared to $405.0 million for the same period of 2022. We recorded an impairment expense of $398.1 million to goodwill during the third quarter of 2022. General and administrative costs include our executive management, accounting, human resources, corporate technology, insurance and professional fees. We have incurred higher levels of professional fees as a public company. We recognized $0.1 million of stock-based compensation expense related to the issuance of RSUs.

Nonoperating items

Interest expense. Interest expense totaled $4.1 million in the three months ended September 30, 2023 as compared with $3.4 million for the same period of 2022. The increase in interest expense for the 2023 period is principally due to discount amortization expense associated with the Pre-paid Advance Agreement.

Income tax expense. Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items is recognized in the period these occur.

Our effective tax rate for the three months ended September 30, 2023 was approximately 7.0%. Excluding discrete items, our effective tax rate for the three months ended September 30, 2022 was 25.3%. The primary difference from the federal statutory rate of 21% is related to state taxes, income of noncontrolling interests in flow-through entities and permanent differences for non-deductible expenses.

Nine Months Ended September 30, 2023 Compared to Nine Months Ended September 30, 2022

We reported a net loss attributable to Nutex Health Inc. of $14.2 million, or a loss of $0.02 per share, for the nine months ended September 30, 2023 as compared with net loss attributable to Nutex Health Inc. of $410.0 million, or a loss of $0.65 per diluted share, for same period of 2022. The net loss for the third quarter of 2022 includes a $398.1 million goodwill impairment. Our 2023 results were principally affected by:

A reduction in net revenue from lower patient visits, which decreased by 15.3% during the nine months ended September 30, 2023 as compared with the same period of 2022, due mostly to decreased COVID-19 visits;
Issuance in March 2023 of 1,000,000 common shares for total expense of $1.9 million to Apollo Medical Holdings, Inc. for IPA managerial services;
Higher interest expense in the 2023 period principally as a result of the Yorkville Pre-paid Advance issuance;
A non-cash impairment charge in the 2022 period of $398.1 million to reduce the carrying amount of goodwill for the population health management division reporting unit acquired in the reverse business combination; and
Decrease in revenue in the 2022 period caused by legislative changes reducing the amounts we are able to collect for patient services to median in-network rates, totaling approximately $38.6 million.

Adjusted EBITDA for the nine months ended September 30, 2023 was $7.7 million as compared to $18.5 million for the comparable period of 2022. Refer to Non-GAAP Financial Measures discussed below for a definition and reconciliation of Adjusted EBITDA. The items affecting revenue contributed significantly to the decline in Adjusted EBITDA in the 2023 period.

A discussion of our segment results is included below.

Hospital Division. Our revenue for the nine months ended September 30, 2023 ended totaled $155.5 million as compared to $152.0 million for the same period of 2022, an increase of 2% caused by an improvement collection amounts per patient.

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The following table shows the number of patient visits during the periods:

Nine Months Ended September 30, 

2023

2022

Patient visits:

Hospital

102,798

121,414

Total patient visits decreased 15.3% during the nine months ended September 30, 2023 as compared with the same period of 2022. Patient visits in the 2022 period included significant volumes of COVID-19 related cases. Despite the decrease in patient visits, revenue increased due to our continued improvement in collection efforts throughout 2023 along with a shift acuity of our patient visits, generating high gross charges.

The hospital division’s operating income was $21.1 million during the nine months ended September 30, 2023, as compared with income of $19.0 million in the same period of 2022, an increase of 11%. Our operating income for the first nine months of 2023 was positively affected by an increase in net revenue. We have made significant progress with the IDR process for both the NSA (Federal) as well as the Texas Department of Insurance. Our operating income was adversely impacted by additional incurred cost of $1.4 million in 2023 for four new locations opened in 2023. Start-up and operating costs at new facilities often exceed our revenue at these facilities until they achieve sustaining volumes of patient visits.

Population Health Management Division. We completed our reverse business combination with Clinigence in April 2022. Clinigence’s operations are reported as the population health management division. Our total revenue for the nine months ended September 30, 2023 was $22.5 million consisting of capitation revenue of $19.5 million, management fees of $2.1 million and SaaS revenue of $0.8 million. Capitation revenue is recognized by our consolidated VIE, AHISP. We do not have an equity interest in this VIE but consolidate it since we are the primary beneficiary of its operations under our management services contract with them. We also earn management fees under our management services contracts with other IPAs and MSOs which are reported as revenue.

The population health management division had $0.4 million of operating income for the nine months ended September 30, 2023. Strategically, we are focused on the growth of this division principally through the addition of new independent physician associations and have staffed our organization to manage larger numbers of such organizations. In August 2023, we completed the acquisition two IPAs in Florida.

Real Estate Division. This division reports the operations of consolidated Real Estate Entities where we provide guarantees of their indebtedness or are co-borrowers. During the first nine months of 2023, we deconsolidated one Real Estate Entities after the third-party lenders released our guarantees of associated mortgage loans.

Revenue and operating expenses of consolidated Real Estate Entities are not significant since the extent of these entities’ operations is to own facilities leased to our hospital division entities which are financed by a combination of contributed equity by related parties and third-party mortgage indebtedness. Such leases are typically on a triple net basis where our hospital division is responsible for all operating costs, repairs and taxes on the facilities. Finance lease income is recognized outside of segment operating income as other income by the Real Estate Entities. However, these amounts are largely eliminated in the consolidation of these entities into our financial statements.

At September 30, 2023, two Real Estate Entities continue to be consolidated in our financial statements. We expect that hospitals we open in the future may be leased from new Real Estate Entities which may be owned in whole or part by related parties. Third-party lenders to these entities may require that we provide a guarantee or become co-borrowers under mortgage indebtedness financings for such facilities. In such instances, we may be required to consolidate these new Real Estate Entities in our financial statements as VIEs.

Corporate and other costs. Corporate and other costs in the nine months ended September 30, 2023 included general and administrative expenses totaling $27.2 million. General and administrative costs include our executive management, accounting, human resources, corporate technology, insurance and professional fees. We have incurred higher levels of professional fees as a public company. During the nine months ended September 30, 2023, we incurred closing costs of $0.2 million due to the closure of three facilities in January 2023.

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In addition, we have made staffing and management additions commensurate with our operational growth. We recognized $1.9 million of stock-based compensation expense for the issuance in March 2023 of 1,000,000 common shares to Apollo Medical Holdings, Inc. for IPA managerial services, and $0.3 million for the April 2023 issuance of RSUs.

Nonoperating items

Interest expense. Interest expense totaled $12.1 million in the nine months ended September 30, 2023 as compared with $9.6 million for the same period of 2022. The increase in interest expense for the 2023 period is principally due to discount amortization expense associated with the Yorkville Pre-paid Advance Agreement and the opening of four new facilities.

Income tax expense. Income tax provisions for interim quarterly periods are generally based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items related specifically to interim periods. The income tax impact of discrete items is recognized in the period these occur.

Our effective tax rate for the nine months ended September 30, 2023 was approximately 11.6%. Excluding discrete items, our effective tax rate for the nine months ended September 30, 2022 was 26.2%. The primary difference from the federal statutory rate of 21% is related to state taxes, income of noncontrolling interests in flow-through entities and permanent differences for non-deductible expenses.

Liquidity and Capital Resources

As of September 30, 2023, we had $26.8 million of cash and equivalents, compared to $34.3 million of cash and equivalents at December 31, 2022.

Significant sources and uses of cash during the first nine months of 2023.

Sources of cash:

Cash from operating activities was $3.0 million, which included $4.3 million from the primary components of our working capital (receivables, inventories, accounts payable and expenses); and
We received net proceeds of $8.0 million from borrowings under notes payable and lines of credit.

Uses of cash:

Capital expenditures were $10.3 million;
Distributions, net of contributions, to noncontrolling interests totaled $3.7 million;
Payments for acquisitions of businesses, net of cash acquired totaled $0.7 million;
Repayments of finance leases totaled $2.7 million; and
Cash associated with the deconsolidated Real Estate Entity totaled $1.0 million.

Future sources and uses of cash. Our operating activities are financed with cash on hand which is generated from revenues, which may vary significantly based on regulatory changes affecting the timing and amounts of insurance reimbursements for our services. Most of our hospital facilities are leased from various lessors including related parties. These leases are presented in our consolidated balance sheets unless the lease is from a consolidated Real Estate Entity. Our growth plans include the development of new hospital locations. We expect that in many of these locations we will lease facilities from newly established entities partially owned by related parties.

We routinely enter into equipment lease agreements to procure new or replacement equipment and may also finance these purchases with term debt‎. We have smaller lines of credits available for working capital purposes and are presently working to supplement or replace these with larger financing commitments. These larger financing commitments are subject to market conditions and we may not be able to obtain such larger financing commitments at favorable economic terms or at all. We also believe that our existing cash, cash equivalents, and marketable securities, and available borrowing capacity, will be sufficient to meet our anticipated cash needs requirements for operations and growth objectives ‎for at least the next twelve months.

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If the assumptions underlying our business plan regarding future revenue and expenses change or if unexpected opportunities or needs arise, we may seek to raise additional cash by selling equity or debt securities.

Indebtedness. The Company’s indebtedness at September 30, 2023 is presented in Item I, “Financial Statements – Note 8 – Debt” and our lease obligations are presented in Item I, “Financial Statements—Note 9 – Leases.”

 

Off-Balance Sheet Arrangements

 

As of September 30, 2023, we had no material off-balance sheet arrangements.

Non-GAAP Financial Measures

Adjusted EBITDA. Adjusted EBITDA is used as a supplemental non-GAAP financial measure by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We believe Adjusted EBITDA is useful because it allows us to more effectively evaluate our operating performance.

We define Adjusted EBITDA as net income (loss) attributable to Nutex Health Inc. plus net interest expense, income taxes, depreciation and amortization, further adjusted for stock-based compensation, any facilities closing costs, acquisition related costs and impairments. A reconciliation of net income to Adjusted EBITDA is included below. Adjusted EBITDA is not intended to serve as an alternative to U.S. GAAP measures of performance and may not be comparable to similarly-titled measures presented by other companies.

Three Months Ended September 30, 

Nine Months Ended September 30, 

2023

    

2022

2023

    

2022

Reconciliation of net income (loss) attributable to Nutex Health Inc. to Adjusted EBITDA:

Net loss attributable to Nutex Health Inc.

$

(5,542,391)

$

(412,186,266)

$

(14,168,717)

$

(410,028,269)

Depreciation and amortization

4,745,941

4,330,167

12,908,848

9,859,513

Interest expense, net

4,098,179

3,402,606

12,081,316

9,628,189

Income tax expense (benefit)

(342,259)

(8,543,880)

(2,068,530)

11,285,729

Allocation to noncontrolling interests

(1,772,908)

(922,762)

(3,500,873)

(4,445,224)

EBITDA

1,186,562

(413,920,135)

5,252,044

(383,700,062)

Facilities closing costs

-

-

217,266

-

Impairment of goodwill

-

398,135,038

-

398,135,038

Acquisition costs

43,464

-

43,464

3,885,666

Stock-based compensation expense

49,167

81,249

2,198,812

135,415

Adjusted EBITDA

$

1,279,193

$

(15,703,848)

$

7,711,586

$

18,456,057

 

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Significant Accounting Policies

The preparation of financial statements and related disclosures in accordance with GAAP requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial statements and accompanying notes. Note 1 to the Consolidated Financial Statements included in the Form 10-K for the year ended December 31, 2022 describes the significant accounting policies and methods used in the preparation of the consolidated financial statements. The Company’s critical accounting policies that are impacted by judgments, assumptions and estimates are described in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022. Since December 31, 2022, there have been no material changes in the Company’s accounting policies that are impacted by judgments, assumptions and estimates, except for the following:

Convertible debt. The Company accounts for convertible debt that does not meet the criteria for equity treatment in accordance with the guidance contained in Accounting Standards Update (“ASU”) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Accordingly, the Company elected to classify the convertible debt as a liability at amortized cost using the effective interest method. The Company classifies convertible debt based on the re-payment terms and conditions. Any discounts on the convertible debt and costs incurred upon issuance of the convertible debt are amortized to interest expense over the terms of the related convertible debt. Convertible debt is also analyzed for the existence of embedded derivatives, which may require bifurcation from the convertible debt and separate accounting treatment. Refer to Note 8 for information regarding convertible debt.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

With respect to the three months and six months ended September 30, 2023, there have been no material changes in our primary market risk exposures or how those exposures are managed since the information disclosed in our 2022 Form 10-K.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. We maintain disclosure controls and procedures as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act that are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In accordance with Rule 13a-15(b) of the Exchange Act, we have evaluated, under the supervision of our CEO and our CFO, the effectiveness of disclosure controls and procedures as of September 30, 2023. Based on this evaluation, the Company concluded that our disclosure controls and procedures were not effective as of September 30, 2023 due to the material weakness previously identified as described below.

Previously Reported Material Weaknesses. We previously identified material weaknesses in our internal control over financial reporting in our Form 10-K for the year ended December 31, 2022, based on criteria established in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). Based on our assessment, the following material weaknesses were identified:

The Company did not design and implement logical access controls for certain financially relevant systems. Business process controls, both automated and manual, that are dependent upon the information derived from those financially relevant systems were also determined to be ineffective as a result of such deficiency;

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Business process controls across the entity’s financial reporting processes were not effectively designed and implemented to properly address the risk of material misstatement, including controls without proper segregation of duties between preparer and reviewer and key management review controls; and
Ineffective design and implementation of controls over the completeness and accuracy of information included in key spreadsheets supporting the financial statements.

Management has concluded that, based on applying the COSO criteria, as of December 31, 2022, the Company’s internal control over financial reporting was not effective to provide reasonable assurance of the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

Remediation Plans. These material weaknesses did not result in material misstatement of the Company’s consolidated financial statements for the periods presented. The Company has started the process of designing and implementing effective internal control measures to remediate the material weakness. The Company’s efforts include the implementation of a new enterprise-wide system in the first quarter of 2023 that will reduce reliance on manual processes and spreadsheets supporting the financial statements. Additionally, the Company has engaged a firm to assist in the proper design, implementation and testing of internal controls over financial reporting. We have added key senior management positions including a Chief Operating Officer. We have also made some additions to our accounting and financial reporting teams in 2023.

While we believe that these efforts will improve our internal control over financial reporting, our remediation efforts are ongoing and will require validation and testing of the design and operating effectiveness of internal controls. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the remaining material weakness in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness. We may also conclude that additional measures may be required to remediate the material weakness in our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting. We are taking actions to remediate the material weakness relating to our internal control over financial reporting, as described above. Except as otherwise described herein, there were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We are making changes to our internal control over financial reporting in connection with the implementation of our new enterprise-wide system in the first quarter of 2023.

Inherent Limitations on Effectiveness of Disclosure Controls and Procedures. Our senior members of management do not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PART II — OTHER INFORMATION

Item 1.   Legal Proceedings.

 

From time to time, the Company, its consolidated subsidiaries or VIEs may be named in various claims and legal actions in the normal course of business. The Company is not involved in any legal proceedings that it believes would have a material effect on its business or financial condition.

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Item 1A. Risk Factors.

 

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Risk Factors” included in our Form 10-K for the year ended December 31, 2022, our Form 10-Q for the three months ended March 31, 2023 and our Form 10-Q for the three months ended June 30, 2023, and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. In addition, you should carefully consider the risks described below.

We may experience additional ownership dilution as a result of the September 2023 Private Offering

In September 2023, the Company commenced a private offering (the “September 2023 Private Offering”) of up to $15.0 million pursuant to which the Company will issue investment units (the “Units”) at $50,000 per Unit to accredited investors (the “Unit Holder”) as defined in Rule 501 under the 1933 Act. Each Unit consists of (a) an interest-bearing unsecured convertible promissory note (the “Unsecured Convertible Term Notes”) in the principal amount of $50,000 convertible into shares of Common Stock at a conversion price of $0.40 per share and (b) a six-year warrant (the “Warrants”) to purchase up to 62,500 shares at an exercise price of $0.40 per share. We also agreed to issue warrants for the purchase of up to 11,250,000 shares to the placement agent. The Notes mature on October 31, 2025 and the Warrants expire on December 31, 2029.

If a significant number of the Unit Holders choose to exercise their conversion rights, it could result in the issuance of additional common shares, diluting the ownership interests of existing shareholders. Assuming a $15 million private offering, the note and warrant holders, upon exercise or conversion, would receive up to 67,500,000 shares of Common Stock. This dilution could adversely affect the market price of our common stock.

We may experience increased volatility in the trading price of our stock as a result of the September 2023 Private Offering

The presence of convertible debt with attached warrants in our capital structure may contribute to increased volatility in the trading price of our common stock. The potential for conversion and warrant exercise can lead to fluctuations in our stock price, making it more difficult for investors to predict and assess the value of our common shares.

We may experience a cash flow and liquidity impact as a result of the September 2023 Private Offering

The Unsecured Convertible Term Notes bear an annual interest rate of 8% if paid in cash or an annual interest rate of 10% if paid in in the form of common stock. The payment of interest in the form of common stock is at the discretion of the Company. When paid in common stock, the number of shares is equal to the quotient of the total accrued interest due divided by the last reported sale price of the Company’s common stock on the last complete trading day of such quarter. The Unit Holders have the option to convert all or any portion of the unpaid principal and interest outstanding in Common Stock at the conversion price of $0.40 per share. If the Company fails to pay the outstanding principal amount and all accrued interest within 30 days of the maturity date, the interest rate payable is adjusted to 12%.

Our convertible debt instruments require periodic interest payments and the repayment of principal upon maturity. The need to make interest and principal payments can place financial pressure on our company, especially if our financial performance is not sufficient to cover these obligations.

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Table of Contents

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Recent Sales of Unregistered Securities; use of proceeds from registered securities.

Common Stock Issued. In the third quarter of 2023, the Company issued 2,541,511 common shares in connection with the acquisition of two IPAs in Florida. These shares were issued in a private placement in reliance on section 4(a)(2) of the Securities Act.

During the third quarter of 2023, the Company issued 7,427,606 shares of common stock to Yorkville, reducing the principal amount outstanding under the initial Pre-Paid Advance. These shares were issued pursuant to a prospectus supplement to the Company’s existing registration statement on Form S-3.

Item 3. Defaults upon Senior Securities.

 

Not Applicable

Item 4.   Mine Safety Disclosures

 

Not Applicable

 

Item 5.   Other Information.

Trading Arrangements

During the fiscal quarter ended September 30, 2023, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934, as amended) adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (in each case, as defined in Item 408(a) of Regulation S-K) for the purchase or sale of the Company’s securities.

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Table of Contents

Item 6.   Exhibits

 

Exhibit No.

Description

10.01*

Employment Agreement, dated as of August 28, 2023, between the Company and Joshua DeTillio.

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.)

101.INS*

XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*

XBRL Taxonomy Extension Schema Document.

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document.

104

Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

* Filed herewith

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 9, 2023.

 

Nutex Health Inc.

 

 

 

By:

/s/ Thomas T. Vo

 

 

Thomas T. Vo

 

 

Chief Executive Officer and Chairman of the Board

(principal executive officer)

 

 

 

 

By:

/s/ Jon C. Bates

 

 

Jon C. Bates

 

 

Chief Financial Officer

(principal financial officer and principal accounting officer)

46

EX-10.1 2 nutx-20230930xex10d1.htm EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the 28th day of August, 2023, by and between Nutex Health, Inc., a Delaware corporation (the “Company”), and Joshua DeTillio, (the “Employee”), each individually a “Party” and collectively the “Parties”. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

1.Positions and Duties.
(a)Position. The Employee shall initially serve as Chief Operating Officer (COO) of the Company. The Company may change the Employee’s position and/or title to that of another senior executive officer as the Company’s needs change.
(b)Duties. The Employee shall perform for the Company the duties that are customarily associated with being a senior executive officer that are consistent with his experience and skills and such other duties as may be assigned to the Employee from time to time by the Company’s Board of Directors (the “Board”) and/or the Company’s Chief Executive Officer (the “CEO”) that are consistent with the duties normally performed by those performing the role of the most senior executives of similar entities.  
(c)Reporting. The Employee shall report directly to the CEO for the hospital division and President for the population health management division.
(d)Devotion of Time. The Employee shall devote such working time, attention, knowledge, skills, and efforts as may be required to fulfill the Employee’s duties hereunder and not less than a full-time (40 hours per week) commitment.
(e)Location. The Employee shall be based in Houston, Texas.
(f)Company Policies. The Employee agrees to comply with the policies and procedures of the Company as may be adopted and changed from time to time. If this Agreement conflicts with such policies or procedures, this Agreement shall control.
(g)Fiduciary Duties. The Employee owes a duty of loyalty to the Company, as well as a duty to perform his duties in a manner that is consistent with the best interests of the Company.
2.Term. Employee will commence his employment as COO of the Company under the terms of this Agreement starting on or about October 2, 2023 (the “Commencement Date”) or such other date as may be agreed to by the Parties. The term of this Agreement shall be for a two (2) year period commencing on the Commencement Date (the “Initial Term”). The term of this Agreement shall automatically renew for an additional year (each, a “Renewal Term”) following the Initial Term and any Renewal Term unless either Party provides written notice to the other Party at least sixty (60) days before the end of the Initial Term or any Renewal Term, as applicable, that it does not desire to renew this Agreement, in which case this Agreement shall expire at the end of the Initial Term or any Renewal Term, as applicable. The Initial Term and any Renewal Term are referred to herein collectively as the “Term”.


3.Compensation and Related Matters.  The Company shall provide the Employee with the compensation and benefits set forth in this Section 3 during the Term.  Authority to take action under this Section 3 with respect to the Employee’s compensation and benefits may be delegated by the Board to its compensation committee and/or the CEO.
(a)Base Salary. The Company shall pay the Employee for all services rendered a base salary of Four Hundred Twenty-Five Thousand and No/100s Dollars ($425,000.00) per year (the “Base Salary”), payable in accordance with the Company’s payroll procedures, subject to customary withholdings and employment taxes.  The Base Salary shall be evaluated annually by the CEO and Board of Directors for potential merit-based raises.
(b)Annual Bonus.  The Employee will be eligible to receive an annual discretionary cash bonus (the “Annual Bonus”) calculated up to seventy percent (70%) of the Employee’s Base Salary.  The amount of the Annual Bonus will be recommended by the CEO at his discretion and approved by the Company Board of Directors. The Annual Bonus shall be based on a combination of Company-wide and Employee-specific goals, both qualitative and quantitative, to be developed and approved by the CEO and Board of Directors each year.  The initial Employee goals will be developed for 2024 by [DATE] and be addended to this agreement.
(c)Additional Compensation.   As required for employment with the Company for the position of COO, and in consideration of such move, the Company shall reimburse the Employee up to Fifty Thousand and No/100 Dollars ($50,000.00) for expenses related to moving and relocation expenses, including house hunting (“Relocation Reimbursement”).  Employee shall provide invoices for all Relocation Reimbursement.  Additionally, the Company shall provide up to Two Thousand and No/100 ($2,000.00) per month for temporary post-move housing for a maximum of six (6) months.  Employee shall provide invoices for all temporary housing expenses.
(d)Long Term Incentive Awards.  The Employee shall be eligible to participate in any long-term incentive plan that may be available to similarly positioned executives. The Board may also determine to grant discretionary additional long-term incentive awards in cash or in equity awards settled in shares of the Company’s stock, including but not limited to stock options, RSUs, and performance shares.  In the event RSUs are awarded, such award will be capped at a value of seventy percent (70%) of Employee’s Base Salary. Any award of RSU Stock for 2023 shall be prorated for the actual months worked. In the event the Company has terminated the Employee’s employment without Cause (as defined in Section 4(d) below or the Employee terminates employment on account of Death or Disability (as defined in Section 4(b) below),  the Employee shall be deemed to be fully vested with respect to any RSUs, stock options, or other equity rights with vesting conditions based solely on continued employment, and to be entitled to payment with respect to any long-term incentive award subject to corporate or business goals to the extent that such goals are met during the performance period on the same basis as if the Employee had remained continuously employed with the Company.
(e)Paid Time Off. During the term, the Employee shall be entitled to twenty (20) business days of paid time off (“PTO”) per calendar year, which begins accruing on Employee’s start date and continues to be accrued ratably during the calendar year. Accrued PTO may be taken at such times and intervals as shall be agreed to by Company and the Employee in their reasonable discretion after ninety (90) days of employment. The Employee may at his/her option elect to carry over a maximum of five (5) days at the end of the year into the next year. Otherwise, any accrued and unused PTO shall be paid in cash at the end of a fiscal year.

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(f)Health Benefits.  Health benefits will be available to the Employee, consisting of medical, dental and vision plans, at zero premium cost to the Employee.  Coverage for family members will incur a cost to the Employee.
(g)Benefit Plans. The Employee shall be entitled to continue to participate in or receive benefits under any employee benefit plan or arrangement which is or may, in the future, be made available by the Company to its employees, subject to and on a basis consistent with the terms, conditions and overall administration of such plan or arrangement.
(h)Business Expenses. The Employee shall be entitled to prompt reimbursement of reasonable and usual business expenses incurred on behalf of Company in accordance with the Company’s expense reimbursement policy.
4.Termination.  The Employee’s employment hereunder may be terminated during the Term without any breach of this Agreement under the following circumstances:
(a)Death. The Employee’s employment hereunder shall terminate upon the Employee’s death.
(b)Disability. The Company may terminate the Employee’s employment if the Employee is disabled and, because of the disability, is unable to perform the essential functions of the Employee’s then existing position or positions under this Agreement with or without reasonable accommodation.  This provision is not intended to reduce any rights the Employee may have pursuant to any law.
(c)Termination by the Company for Cause. At any time during the Term, the Company may terminate the Employee’s employment hereunder for Cause. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Employee constituting a material act of willful misconduct in connection with the performance of the Employee’s duties that results in loss, damage or injury that is material to the Company; (ii) the commission by the Employee of (A) any felony or (B) a misdemeanor in which dishonesty or fraud is a material element, (iii) continued, willful and deliberate non-performance by the Employee of the Employee’s duties hereunder (other than by reason of the Employee’s physical or mental illness, incapacity or disability); (iv) a material breach by the Employee of Section 6 of this Agreement that results in loss, damage or injury that is material to the Company; (v) willful failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the willful inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigations; or (vi) fraud, embezzlement or theft against the Company or any of its Affiliates (as defined in Section 6(a) below). With respect to the events in (i), (iii) and (iv) herein, the Company shall have delivered written notice to the Employee of its intention to terminate the Employee’s employment for Cause, which notice specifies in reasonable detail the circumstances claimed to give rise to the Company’s right to terminate the Employee’s employment for Cause and the Employee shall not have cured such circumstances to the extent such circumstances are reasonably susceptible to cure as determined by the Board in good faith within thirty (30) days following the Company’s delivery of such notice. For avoidance of doubt, “Cause” shall not include (w) below par or below average operational performance, in and of itself; (x) expense reimbursement disputes in which the Employee acts in reasonably good faith; (y) occasional, customary and de minimis use of the Company’s property for personal purposes; and (z) acting in good faith upon advice of Company’s legal counsel.

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(d)Termination without Cause. At any time during the Term, the Company may terminate the Employee’s employment hereunder without Cause by providing the Employee with thirty (30) days advance written notice.  Any termination by the Company of the Employee’s employment under this Agreement that does not constitute a termination for Cause under Section 4(c) and does not result from the death or Disability of the Employee under Sections 4(a) or 4(b) shall be deemed a termination without Cause under this Section 4(d).  Any suspension of the Employee’s employment with pay or benefits pending an investigation of alleged improper activities by the Employee that, if determined to be accurate, would-be grounds for a Cause termination, shall not be considered a termination of the Employee’s employment without Cause.
(e)Notice of Termination. Except for termination as specified in Section 4(a), any termination of the Employee’s employment shall be communicated by written Notice of Termination by the terminating Party to the other Party hereto.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.
(f)Date of Termination. “Date of Termination” shall mean the earliest of the following: (i) if the Employee’s employment is terminated by the Employee’s death, the date of the Employee’s death; (ii) if the Employee’s employment is terminated on account of Disability under Section 4(b) or by the Company for Cause under Section 4(c), the date on which Notice of Termination is given that follows any applicable required cure period; (iii) if the Employee’s employment is terminated by the Company under Section 4(d), thirty (30) days after the date on which a Notice of Termination is given; or (iv) if the Employee’s employment is terminated by the Employee, thirty (30) days after the date of which a Notice of Termination is given or such shorter period agreed to by the Company.  Notwithstanding the foregoing, in the event that the Employee gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination, but such acceleration shall nevertheless be deemed a termination by the Employee on the accelerated date for purposes of this Agreement.  For purposes of determining the time when the lump sum portion of the Severance Amount, if any, is to be paid under Section 5(b)(i) of this Agreement, “Date of Termination” means the Employee’s separation from service as defined under Section 409A.
5.Compensation upon Termination.

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(a)Accrued Benefits. If the Employee’s employment with the Company is terminated for any reason during the Term, or if the Term is not renewed, the Company shall pay or provide the Employee (or the Employee’s authorized representative or estate) any earned but unpaid Base Salary or Annual Bonus for services rendered through the Date of Termination, unpaid expense reimbursements, and accrued but unused paid time off (the “Accrued Benefits”) within thirty (30) days. The unpaid Annual Bonus pursuant to this Paragraph 5(a) will be any bonus earned from the prior calendar year, but not yet paid, plus a pro rata amount of the Annual Bonus in Paragraph 3(b) for the year in which Employee is terminated. With respect to vested compensation or benefits the Employee may have under any employee benefit or compensation plan, program or arrangement of the Company, payment will be made to the Employee under the terms of the applicable plan, program, or arrangement.

(b)Termination by the Company without Cause. If the Employee’s employment is terminated by the Company without Cause as provided in Section 4(d), or the Employee terminates his employment during the Term, or the Employee terminates employment at the end of the Term after the Company provides notice of intent not to renew pursuant to Section 1 for reasons other than would provide grounds for a Cause termination, then the Company shall, through the Date of Termination, pay the Employee his or her Accrued Benefits.  If the Employee signs a general release of claims substantially in the form which is attached as Exhibit A to this Agreement) (the “Release”) within twenty-one (21) days of the receipt of the form of the Release (extended to forty-five (45) days in the event of a group termination or exit incentive program) and does not revoke such Release during the seven (7) day revocation period:
(i)the Company shall pay the Employee an amount equal to one time the sum of the Employee’s most recent Base Salary and any earned but unpaid Annual Bonus (the “Severance Amount”), with such amount to be paid out over twelve (12) months, commencing the first full month following termination and in accordance with the Company’s normal payment schedule and policies and
(ii)any unvested Employee RSUs/options/stocks shall be deemed vested at the time of termination; and
(iii)the Company shall pay the Employee an amount in cash equal to the Company’s premium amounts paid for coverage of Employee at the time of the Employee’s termination of coverage under the Company’s group medical, dental and vision programs for a period of twelve (12) months, to be paid directly to the Employee at the same times such payments would be paid on behalf of a current employee for such coverage; provided, however:
(A)No payments shall be made under this paragraph (ii) unless and until the Employee timely elects continued coverage under such plan(s) pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 as amended (“COBRA”);
(B)This paragraph (ii) shall not be read or construed as placing any restrictions upon amounts paid under this paragraph (ii) as to their use;
(C)Payments under this paragraph (ii) shall cease as of the earliest to occur of the following:
(1)the Employee is no longer eligible for and continuing to receive the COBRA coverage elected in subparagraph (A);

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(2)the time period set forth in the first sentence of this paragraph (ii);
(3)the date on which the Employee first becomes eligible to enroll in a group health plan in which eligibility is based on employment with an employer, and
(4)if the Company in good faith determines that payments under this paragraph (ii) would result in a discriminatory health plan pursuant to the Patient Protection and Affordable Care Act of 2010, as amended.
(iv)If the Employee has opted out of the Company’s group medical, dental and vision programs during the coverage year in which termination occurs, the Company shall add to the Severance Amount an amount equal to twelve (12) months of the Company’s monthly amount paid to employees who opt out from such coverage.
(v)Each individual payment of Severance Amount under Section 5(b)(i), Section 5(b)(ii), and Section 5(b)(iii) of this Agreement, shall be deemed to be a separate “payment” for purposes and within the meaning of Treasury Regulation Section 1.409A-2(b)(2)(iii).
(vi)Each individual payment of the Severance Amount under Section 5(b)(i), Section 5(b)(ii), and Section 5(b)(iii) of this Agreement, which are considered “non-qualified deferred compensation” (“NQDC”) under Section 409A shall be made on the date(s) provided herein and no request to accelerate or defer any such payment under this Agreement shall be considered or approved for any reason whatsoever, except as permitted under Section 409A and as the Company allows in its sole discretion.  The Company may in its sole discretion accelerate or defer (but not beyond the time limit set forth below) any severance payments which do not constitute NQDC in order to allow for the payment of taxes due, but not beyond the time limit specified for such payment such that the payment would be treated as NQDC.  Subject to the requirements of Section 409A, if any severance payment or reimbursement under Section 5(b) of this Agreement is determined in good faith by the Company to constitute NQDC payable to a “specified employee” as defined under Section 409A, then the Company shall make any such payment not earlier than the earlier of: (x) the first payroll date which is six (6) months following the Employee’s separation from service (as defined under Section 409A) with the Company, or (y) the date of Employee’s death.
(vii)for purposes of this Section 5, “Section 409A” means Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder.

6. Confidential Information, Non-solicitation, and Cooperation.

(a)Definitions.

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(i)As used in this Agreement, “Affiliate” means, as to any Person, (i) any other Person which directly, or indirectly through one or more intermediaries, controls such Person or is consolidated with such Person in accordance with GAAP, (ii) any other Person which directly, or indirectly through one or more intermediaries, is controlled by or is under common control with such Person, or (iii) any other Person of which such Person owns, directly or indirectly, fifty percent (50%) or more of the common stock or equivalent equity interests. As used herein, the term “control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or otherwise.

(ii)As used in this Agreement, “Person” means an individual, a corporation, a partnership, a limited liability company, an association, a trust or any other entity or organization.

(b)Confidential Information. As used in this Agreement, “Confidential Information” means information belonging to the Company or its Affiliates which is of value to the Company or any of its Affiliates in the course of conducting its business (whether having existed, now existing, or to be developed or created during Employee’s employment by Company) and the disclosure of which could result in a competitive or other disadvantage to the Company or its Affiliates. Confidential Information includes, without limitation, contract terms and rates; negotiating and contracting strategies; financial information, reports, and forecasts; inventions, improvements and other intellectual property; product plans or proposed product plans; trade secrets; designs, processes or formulae; software; market or sales information, plans or strategies; employee, customer, patient, provider and supplier information; information from patient medical records; financial data; insurance reimbursement methodologies, strategies and practices; product and service pricing methodologies, strategies and practices; contracts with physicians, providers, provider networks, payors, physician databases and contracts with hospitals; regulatory and clinical manuals; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) that have been discussed or considered by the Company or its Affiliates, including, without limitation, the management of the Company or its Affiliates. Confidential Information includes information developed by the Employee in the course of the Employee’s employment by the Company, as well as other information to which the Employee may have access in connection with the Employee’s employment. Confidential Information also includes the confidential information of others with which the Company or its Affiliates has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Employee’s duties under Section 6(b), unless otherwise due to Employee’s breach of the obligations in this Agreement, or unless due to violation of another Person’s obligations to the Company or its Affiliates that Employee should have taken reasonable measures to prevent but that Employee did not take.

(c)Confidentiality. The Employee understands and agrees that the Employee’s employment creates a relationship of confidence and trust between the Company and the Employee with respect to all Confidential Information. At all times, both during the Employee’s employment with the Company and after the Employee’s termination from employment for any reason, the Employee shall keep in confidence and trust all such Confidential Information, and shall not use, disclose, or transfer any such Confidential Information without the written consent of the Company, except as may be necessary within the scope of Employee’s duties with Company and in the ordinary course of performing the Employee’s duties to the Company or as otherwise provided in Section 6(d) below. Employee understands and agrees not to sell, license, or otherwise exploit any products or services which embody or otherwise exploit in whole or in part any Confidential Information or materials.

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Employee acknowledges and agrees that the sale, misappropriation, or unauthorized use or disclosure in writing, orally or by electronic means, at any time of Confidential Information obtained by Employee during or in connection with the course of Employee’s employment constitutes unfair competition. Employee agrees and promises not to engage in unfair competition with Company or its Affiliates, either during employment, or at any time thereafter.

(d) Business Associate Agreement.  Pursuant to this Employment Agreement, Employee and the Company agree to enter into the attached Exhibit C, “Business Associate Addendum,” related to the functions and activities Employer performs on behalf of the Company.

(e)Non-Compete.  Due to the Company’s legitimate business interest in protecting its confidential information and the good and valuable consideration offered to the Employee, Employee covenants and agrees that at all times during employment with the company and for the period expiring two (2) years after the date of termination, Employee shall not enter into or attempt to enter into employment or other financial arrangement under the same capacity as with the Employer with any company, venture or other direct competitor of the Company business model.

(f)Protected Rights.  Notwithstanding anything to the contrary in this Section 6, this Agreement is not intended to, and shall not, in any way prohibit, limit or otherwise interfere with the Employee’s protected rights under federal, state or local law to, without notice to the Company, (i) communicate or file a charge with a government regulator; (ii) participate in an investigation or proceeding conducted by a government regulator; or (iii) receive an award paid by a government regulator for providing information.
(g)Documents, Records, etc. All documents, records, data, apparatus, equipment, and other physical property, whether or not pertaining to Confidential Information, that are furnished to the Employee by the Company or its Affiliates or are produced by the Employee in connection with the Employee’s employment will be and remain the sole property of the Company and its Affiliates. The Employee shall return to the Company all such materials and property as and when requested by the Company. In any event, the Employee shall return all such materials and property immediately upon termination of the Employee’s employment for any reason. The Employee shall not retain any such material or property or any copies thereof after such termination. It is specifically agreed that any documents, card files, notebooks, programs, or similar items containing customer or patient information are the property of the Company and its Affiliates regardless of by whom they were compiled.
(h)Disclosure Prevention. The Employee will take all reasonable precautions to prevent the inadvertent or accidental exposure of Confidential Information.
(i)Removal of Material. The Employee will not remove any Confidential Information from the Company’s or its Affiliate’s premises except for use in the Company’s business, and only consistent with the Employee’s duties with the Company.
(j)Copying. The Employee agrees that copying or transferring Confidential Information (by any means) shall be done only as needed in furtherance of and for use in the Company’s and its Affiliate’s business, and consistent with the Employee’s duties with the Company. The Employee further agrees that copies of Confidential Information shall be treated with the same degree of confidentiality as the original information and shall be subject to all restrictions herein.

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(k)Computer Security. During the Employee’s employment with the Company, the Employee agrees only to use Company’s and its Affiliate’s computer resources (both on and off the Company’s premises) for which the Employee has been authorized and granted access. The Employee agrees to comply with the Company’s policies and procedures concerning computer security.
(l)E-Mail. The Employee acknowledges that the Company retains the right to review any and all electronic mail communications made with employer provided email accounts, hardware, software, or networks, with or without notice, at any time.
(m)Assignment. The Employee acknowledges that any and all inventions, discoveries, designs, developments, methods, modifications, improvements, trade secrets, processes, software, formulae, data, “know-how,” databases, algorithms, techniques and works of authorship whether or not patentable or protectable by copyright or trade secret, made or conceived, first reduced to practice, or learned by the Employee, either alone or jointly with others, during the Term that (i) relate to or are useful in the business of the Company or its Affiliates, or (ii) are conceived, made or worked on at the expense of or during the Employee’s work time for the Company, or using any resources or materials of the Company or its Affiliates, or (iii) arise out of tasks assigned to the Employee by the Company (together “Proprietary Inventions”) will be the sole property of the Company or its Affiliates. The Employee acknowledges that all work performed by the Employee is on a “work for hire” basis and the Employee hereby assigns or agrees to assign to the Company the Employee’s entire right, title and interest in and to any and all Proprietary Inventions and related intellectual property rights. The Employee agrees to assist the Company to obtain, maintain and enforce intellectual property rights for Proprietary Inventions in any and all countries during the Term, and thereafter for as long as such intellectual property rights exist.
(n)Non-solicitation. Employee agrees and covenants that, at any time during Employee’s employment with the Company and for a period of twelve (12) months immediately following the termination of Employee’s relationship with the Company for any reason, whether with or without cause, Employee shall not, either on Employee’s own behalf or on behalf of any other Person: (i) solicit the services of or entice away, directly or indirectly, any Person employed or engaged by or otherwise providing services to the Company or its Affiliates (this provision does not prohibit the Employee’s post-termination acceptance of unsolicited applications for employment); or (ii) take any illegal action or engage in any unfair business practice, including, without limitation, any misappropriation of confidential, proprietary or trade secret information of the Company or its Affiliates, as a result of which relations between the Company or its Affiliates, and any of their customers, clients, suppliers, distributors or others, may be impaired or which might otherwise be detrimental to the business interests or reputation of the Company or its Affiliates.

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(o)Third-Party Agreements and Rights. The Employee hereby confirms that the Employee is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Employee’s use or disclosure of information or the Employee’s engagement in any business except as Employee has previously provided written notice to Company and has attached to this Agreement. The Employee represents to the Company that the Employee’s execution of this Agreement, the Employee’s employment with the Company and the performance of the Employee’s proposed duties for the Company will not violate any obligations the Employee may have to any previous employer or other party. In the Employee’s work for the Company, the Employee will not disclose or use any information in violation of any agreements with or rights of any such previous employer or other party, and the Employee will not bring to (by any means) the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.
(p)Litigation and Regulatory Cooperation. During and after the Employee’s employment, the Employee shall cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or that may be brought in the future against or on behalf of the Company that relate to events or occurrences that transpired while the Employee was employed by the Company. The Employee’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Employee’s employment, the Employee also shall cooperate fully with the Company in connection with any investigation or review of any federal, state, or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Employee was employed by the Company. The Company shall reimburse the Employee for any reasonable out of pocket expenses incurred in connection with the Employee’s performance of obligations pursuant to this Section. “Full cooperation” shall not be construed to in any way require any violation of law or any testimony that is false or misleading.
(q)Enforcement; Injunction. The Employee acknowledges and agrees that the restrictions contained in this Agreement are reasonable and necessary to protect the business and interests of the Company and its Affiliates, do not create any undue hardship for the Employee, and that any violation of the restrictions in this Agreement would cause the Company and its Affiliates substantial irreparable injury. Accordingly, the Employee agrees that a remedy at law for any breach or threatened breach of the covenants or other obligations in Section 6 of this Agreement would be inadequate and that the Company, in addition to any other remedies available, shall be entitled to obtain preliminary and permanent injunctive relief to secure specific performance of such covenants and to prevent a breach or contemplated or threatened breach of this Agreement without the necessity of proving actual damage and without the necessity of posting bond or security, which the Employee expressly waives. Moreover, the Employee will provide the Company a full accounting of all proceeds and profits received by the Employee as a result of or in connection with a breach of Section 6 of this Agreement. Unless prohibited by law, the Company shall have the right to retain any amounts otherwise payable by the Company to the Employee to satisfy any of the Employee’s obligations as a result of any breach of Section 6 of this Agreement. The Employee hereby agrees to indemnify and hold harmless the Company and its Affiliates from and against any damages incurred by the Company or its Affiliates as assessed by a court of competent jurisdiction as a result of any breach of Section 6 of this Agreement by the Employee. The prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs if it prevails in any action to enforce Section 6 of this Agreement. It is the express intention of the parties that the obligations of Section 6 of this Agreement shall survive the termination of the Employee’s employment. The Employee agrees that each obligation specified in Section 6 of this Agreement is a separate and independent covenant that shall survive any termination of this Agreement and that the unenforceability of any of them shall not preclude the enforcement of any other covenants in Section 6 of this Agreement. No change in the Employee’s duties or compensation shall be construed to affect, alter or otherwise release the Employee from the covenants herein.

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7.Successors and Assigns. This Agreement shall be assignable to and shall be binding upon and inure to the benefit of, the Company’s successors and assigns, including, without limitation, successors through merger, name change, consolidation, or sale of a majority of the Company’s stock or assets, and shall be binding upon the Employee.  The Employee shall not have the right to assign his rights or obligations under this Agreement.
8.Severability. The provisions of this Agreement are severable.  If any provision of this Agreement is determined to be unenforceable, in whole or in part, then such provision shall be modified so as to be enforceable to the maximum extent permitted by law.  If such provision cannot be modified to be enforceable, the provision shall be severed from this Agreement to the extent unenforceable.  The remaining provisions and any partially enforceable provisions shall remain in full force and effect.
9.Waiver. No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
10.Notices. Whenever any notice is required hereunder, such notice shall be deemed to have been effectively delivered or given and received on the date personally delivered or on the date sent via email to the respective party to whom it is directed and confirmed by return email within three (3) business days, provided that if confirmation by email is not received within such time, a copy of such notice is also delivered to the person via overnight delivery at the known address of such person or, if not known, then to the corporate headquarters and to the attention of such person.
11.Publicity. The Employee hereby grants to the Company the right to use the Employee’s name and likeness, without additional consideration, on, in and in connection with technical, marketing and/or disclosure materials published by or for the Company for the duration of Employee’s employment with Company.
12.Conflicting Obligations and Rights. The Employee agrees to inform the Company of any apparent conflicts between the Employee’s work for the Company and (a) any obligations the Employee may have to preserve the confidentiality of another’s proprietary information or materials or (b) any rights the Employee claims to any inventions or ideas before using the same on the Company’s behalf. Otherwise, the Company may conclude that no such conflict exists, and the Employee agrees thereafter to make no such claim against the Company. The Company shall receive such disclosures in confidence and consistent with the objectives of avoiding any conflict of obligations and rights or the appearance of any conflict of interest.

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13.Notification of New Employer. In the event that the Employee leaves the employ of the Company, voluntarily or involuntarily, the Employee agrees to inform any subsequent employer of the Employee’s obligations under Section 6 of this Agreement. The Employee further hereby authorizes the Company to notify the Employee’s new employer about the Employee’s obligations under Section 6 of this Agreement.
14.Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes any previous oral or written communications, negotiations, representations, understandings, or agreements between them. Any modification of this Agreement shall be effective only if set forth in a written document signed by the Employee and a duly authorized officer of the Company.
15.Amendment. This Agreement may be amended or modified only by a written instrument signed by the Employee and by a duly authorized representative of the Company.
16.Non-Interference. Notwithstanding anything to the contrary set forth in this Agreement or in any other agreement between the Employee and the Company, nothing in this Agreement or in any other agreement shall limit the Employee’s ability, or otherwise interfere with the Employee’s rights, to (a) file a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission, or any other federal, state, or local governmental agency or commission (each a “Government Agency”), (b) communicate with any Government Agency or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company, (c) receive an award for information provided to any Government Agency, or (d) engage in activity specifically protected by Section 7 of the National Labor Relations Act, or any other federal or state statute or regulation.
17.Governing Law/Consent to Jurisdiction and Venue. The laws of the State of Texas shall govern this Agreement. Any and all claims arising out of or relating to this Agreement shall be brought in a state or federal court of competent jurisdiction in Harris County, Texas. The Parties waive (i) any objection to jurisdiction or venue, or (ii) any defense claiming lack of jurisdiction or improper venue, in any action brought in such courts.
18.Obligations of Successors. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
19.Limitation on Payments in Certain Events.  

(a)Limitation on Payments.

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Notwithstanding anything to the contrary in Section 3 and Section 5 of this Agreement, if any payment or distribution that the Employee would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Payment are paid to the Employee, which of the following alternative forms of payment would maximize the Employee’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that the Employee receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in the Employee’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.

(b)The independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the date the first Payment is due shall make all determinations required to be made under this Section 19.  If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, group or entity effecting the transaction, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

(c)The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and the Employee at such time as requested by the Company or the Employee.  If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Payment, it shall furnish the Company and the Employee with an opinion reasonably acceptable to the Employee that no Excise Tax will be imposed with respect to such Payment.  Any good faith determinations of the accounting firm made hereunder shall be final, binding, and conclusive upon the Parties.

20.Counterparts. This Agreement may be executed in any number of counterparts, including, but not limited to, electronically signed or scanned images, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

[Signature Page Follows]

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Company by its duly authorized officer, and by the Employee, as of the date first above written.

COMPANY:

NUTEX HEALTH, INC.:

By:

/s/ Thomas T. Vo

Printed Name:

Thomas T. Vo

Its:

CEO

Date:

8/28/2023

EMPLOYEE:

JOSHUA DETILLIO

By:

/s/ Joshua DeTillio

Printed Name:

Joshua DeTillio

Date:

8/28/2023

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EXHIBIT A

Release of Claims

I, Joshua DeTillio, in consideration of and subject to the performance by NUTEX HEALTH, INC., a Delaware corporation (the “Company”) of its obligations under the Employment Agreement, dated as of ___________ _, 20__ (as amended from time to time, the “Agreement”), do hereby release and forever discharge as of the date of my execution of this release (this “Release”) the Company, its affiliated and related entities, its and their respective predecessors, successors and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former officers, directors, shareholders, employees, attorneys, accountants and agents of each of the foregoing in their official and personal capacities (collectively, the “Released Parties”) to the extent provided below.

1. I understand that any payments or benefits paid or granted to me under Section 5(b) of the Agreement represent, in part, consideration for signing this Release and are not salary, wages or benefits to which I was already entitled. Such payments and benefits will not be considered compensation for purposes of any employee benefit plan, program, policy, or arrangement maintained or hereafter established by the Company or its affiliates.
2. Releases.

I knowingly and voluntarily (on behalf of myself, my spouse, my heirs, executors, administrators, agents and assigns, past and present) fully and forever release and discharge the Company and the other Released Parties from any and all claims, suits, controversies, actions, causes of action, cross claims, counterclaims, demands, debts, liens, contracts, covenants, suits, rights, obligations, expenses, judgments, compensatory damages, liquid damages, punitive or exemplary damages, other damages, claims for costs and attorneys’ fees, orders and liabilities of whatever kind of nature, in law and in equity, in contract of in tort, both past and present (through the date this General Release becomes effective and enforceable) and whether known or unknown, vested or contingent, suspected, or claimed, against the Company or any of the Released Parties which I, my spouse, or any of my heirs, executors, administrators or assigns, may have, which arise out of or relate to my employment with, or my separation or termination from, the Company up to the date of my execution of this Release (including, but not limited to, any allegation, claim of violation arising under: Title VII of the Civil Rights Act of 1964, as amended; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended (including the Older Workers Benefit Protection Act), the Equal Pay Act of 1963, as amended; the Americans with Disabilities Act of 1990; the Family and Medical Leave Act of 1993; the Worker Adjustment Retraining and Notification Act; the Employee Retirement Income Security Act of 1974; the Fair Labor Standards Act; or their state or local counterparts; or under any other federal, state or local civil or human rights law, or under any other local state or federal law, regulation or ordinance; or under any public policy, contract of tort, or under common law; or arising under any policies, practices or procedures of the Company; or any claim for wrongful discharge, breach of the Agreement, infliction of emotional distress or defamation; or any claim for costs, fees, or other expenses, including attorneys’ fees incurred in these matters) (collectively, the “Claims”).

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Employee agrees that this Agreement is intended to include all claims, if any, that Employee may have against the Company, and that this Agreement extinguishes those claims.

3. I represent that I have made no assignment of transfer of any right, claim, demand, cause of action, or other matter covered by Section 2 above.
4. In signing this Release, I acknowledge and intend that it shall be effective as a bar to each and every one of the claims, demands and causes of action herein above mentioned or implied. I expressly consent that this Release shall be given full force and effect according to each and all of its express terms and provisions, including those relating to unknown and unsuspected claims up to the date of my execution of this Release, if any, as well as those relating to any other claims hereinabove mentioned. I acknowledge and agree that this waiver is an essential and material term of this Release and that without such waiver the Company would not have agreed to the terms of the Agreement. I further agree that in the event I should bring a claim seeking damages against the Company, this Release shall serve as a complete defense to such claims as to my rights and entitlements. I further agree that I am not aware of any pending charge or complaint of the type described in Section 2 above as of the date of my execution of this Release.
5. I agree that neither this Release, nor the furnishing of the consideration for this Release, shall be deemed or constructed at any time to be an admission or acknowledgement by the Company, any Released Party or myself of any improper or unlawful conduct.
6. I agree and acknowledge that the provisions, conditions, and negotiations of this Release are confidential and agree not to disclose any information regarding the terms, conditions and negotiations of this Release, nor transfer any copy of this Release to any person or entity, other than my immediate family and any tax, legal or other counsel or advisor I have consulted regarding the meaning or effect hereof or as required by applicable law, and I will instruct each of the foregoing not to disclose the same to anyone.
7. Notwithstanding anything in the Release to the contrary, nothing in this Release shall be deemed to affect, impair, relinquish, diminish, or in any way affect any rights or claims in any respect to (i) any vested rights or other entitlements that I may have as of the date of my execution of this Release under the Company’s 401(k) plan; (ii) any other vested rights or other entitlements that I may have as of the date of my execution of this Release under any employee benefit plan or program, in which I participated in my capacity as an employee of the Company; (iii) my rights under the Agreement; or (iv) my rights under the Release.
8. I understand that I continue to be bound by Section 6 of the Agreement.
9. Whenever possible, each provision of this Release shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provisions of this Release are held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Release shall be reformed, construed and

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enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.

10. This Release shall be governed by and construed in accordance with the laws of the State of Texas, without giving effect to the conflict of laws principles of the State of Texas.

BY SIGNING THIS RELEASE, I REPRESENT AND AGREE THAT:

(i) I HAVE READ IT CAREFULLY;
(ii) I UNDERSTAND ALL OF ITS TERMS AND KNOW THAT I AM GIVING UP IMPORTANT RIGHTS, INCLUDING BUT NOT LIMITED TO, RIGHTS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED;
(iii) I VOLUNTARILY CONSENT TO EVERYTHING IN IT;
(iv) THE COMPANY IS HEREBY ADVISING ME TO CONSULT WITH AN ATTORNEY BEFORE EXECUTING IT, I HAVE HAD THE OPPORTUNITY TO SO CONSULT, AND HAVE AVAILED MYSELF OF SUCH ADVICE TO THE EXTENT I HAVE DEEMED NECESSARY TO MAKE A VOLUNTARY AND INFORMED CHOICE TO EXECUTE THIS RELEASE;
(v) I HAVE HAD AT LEAST TWENTY-ONE (21) DAYS [45 DAYS IN CONNECTION WITH A GROUP TERMINATION OR EXIT INCENTIVE PLAN] FOLLOWING THE DATE OF TERMINATION OF MY EMPLOYMENT TO CONSIDER THIS RELEASE;
(vi) CHANGES TO THIS RELEASE, WHETHER MATERIAL OR IMMATERIAL, DO NOT RESTART THE RUNNING OF THE TWENTY-ONE (21) DAY [OR 45 DAY] CONSIDERATION PERIOD;
(vii) I UNDERSTAND THAT I HAVE SEVEN (7) DAYS AFTER THE EXECUTION OF THIS RELEASE TO REVOKE IT, SUCH REVOCATION TO BE RECEIVED IN WRITING BY THE COMPANY BY THE END OF THE SEVENTH DAY AFTER THE DATE HEREOF, AND THAT THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE REVOCATION PERIOD HAS EXPIRED;
(viii) I HAVE SIGNED THIS RELEASE KNOWINGLY AND VOLUNTARILY AND WITH THE ADVICE OF ANY COUNSEL RETAINED TO ADVISE ME WITH RESPECT TO IT; AND
(ix) I AGREE THAT THE PROVISIONS OF THIS RELEASE MAY NOT BE AMENDED, WAIVED OR MODIFIED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED BY AN AUTHORIZED REPRESENTATIVE OF THE COMPANY AND BY ME.

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DATED AS OF ________, 20__

[Name]

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EXHIBIT B

Employment Agreement Addendum

It is the philosophy of Nutex Health, Inc. that an experienced operational leader as Chief Operating Officer (“COO”) is critical to the Company’s ability to continue to deliver on its proposition while simultaneously achieving maximum growth potential.  Reporting directly to the Chief Executive Officer (“CEO”) and President, he is charged with strengthening the overarching operational structure and enhancing the cross-functional, end-to-end processes to ensure a highly efficient, effective, and scalable operating infrastructure to support the company’s continuous growth and mounting complexity.  The COO will partner with the CEO, the President, the Board of Directors, other Company Officers, physician partners, the care delivery teams, and the rest of the executive team to successfully grow and manage the explosive growth of business.  The COO will ensure strong controls, sound implementation of operational priorities and greater discipline while at the same time, supporting an effective culture rooted in accountability and patient care.

KEY RESPONSIBILITIES:

●Serve as a business partner to the CEO and President, as well as the Board of directors.  He will be an integral member of the senior leadership team and will be involved in shaping and executing all operational decisions.
●Assume day-to-day responsibility for overseeing all operational management issues for the Company, with the initial direct management responsibilities for Hospital Operations, Corporate Human Resources, Corporate Marketing, Corporate IT, Corporate Planning, and Facilities Construction and Licensing.  This includes development and achievement of the business plan, budget, and key performance indicators for all field operations in both existing and new facilities, development of standard operating policies and procedures, and integration of all business units.  Review analyses of activities, costs, operations and forecast data to determine progress toward stated goals and objectives.
●Additional responsibilities may include oversight and responsibility for other key corporate services including revenue cycle management, finance, population health management division, and other shared services.
●Work effectively with the clinical partners to ensure a positive working relationship and to maximize efficiency, satisfaction, and quality care.  Must exhibit and embrace a “Servant Leader” culture and possess exceptional Emotional Intelligence (EQ) (that being possessing a leadership style comprised of empathy, social skills, self-awareness, self-regulation, and motivation).
●Lead a culture of growth, supported by the continued development of appropriate infrastructure, processes and operational efficiencies to ramp up recent de-novo openings, maximize current financial performance, maintain the highest standard of quality and corporate integrity/compliance, and support the overall growth strategy.
●Partner with the CEO, the President, the Board, the other Company Officers, clinical partners and the rest of the executive team to further develop and implement a comprehensive strategic plan for operating in a dynamic growth environment including long- and short-term operating objectives and clear accountability metrics.

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●Responsible for building and maintaining a “best-in-class” operations team at the corporate and business unit operating levels of the Company by adding world class talent while leveraging existing teams and infrastructure.  Motivate teams with a focus on culture, drivers, and metrics.
●Position himself as a visible and accessible key leader of the Company and the clinical partners by taking a “hands on” approach that bridges corporate services and the field organization and drives a culture of patient care, quality, integrity, accountability, and performance.
●Develop and maintain ongoing working relationships with current physician practices and facilities, and partner with the business development team to support new business opportunities.
●Recruit, develop and retain key talent through coaching, rounding, training and leadership development.  Manage the staffing through the appropriate hiring, firing, and disciplinary actions in collaboration with Human Resources.
●Utilize a metrics-driven culture rooted in accountability, creating a highly scalable infrastructure, implementing “best-in-class” operational structures, driving cross-functional integration and efficiencies, and ensuring the highest quality clinical care programs.  
●Work toward EBITDA growth and margin improvement.
●Maintain excellent financial competency, operational excellence, and exceptional communication skills.
●Develop innovative approaches and ideas, meet challenges with resourcefulness, and generate suggestions for improving work and course correction when necessary.
●Develop and maintain excellent people management and motivational skills to lead and build motivated and high performing teams.
●Demonstrate and maintain a “team player”/”hands on” direct approach to problem solving coupled with the ability to listen to and involve managers as needed to assure resolution.
●Assist with budgeting and financial matters as required.
●Build strong relationships with physicians and care teams in the development of strong patient care orientation models.
●Exhibit a servant leadership style, capable of responsible stewardship.
●At all times maintain high ethical standards, integrity, and excellent leadership skills.

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EXHIBIT C

Business Associate Agreement

THIS HIPAA BUSINESS ASSOCIATE ADDENDUM (the “Addendum”) is entered into as of the ____  day of ____________ 2023, by and between­ Nutex Health, Inc., a Delaware company (the “Covered Entity”), and Joshua DeTillio (the “Business Associate”), and adds the same to the Employment Agreement between the Business Associate and Covered Entity dated _______________, 2023 (the “Agreement”), and shall become effective  on the Commencement Date, as defined in the Agreement.

Pursuant to the Agreement, Business Associate may perform functions or activities on behalf of Covered Entity involving the use and/or disclosure of protected health information received from, or created or received by, Business Associate on behalf of Covered Entity (“PHI”) and/or in the furtherance of his /her responsibilities under the Agreement. Therefore, Business Associate and Covered Entity will comply with the terms of this Addendum for the duration of the Agreement and for such other continuing periods as provided in this Addendum.

1. Definitions

“HIPAA Rules” shall mean the Privacy, Security, Breach Notification, and Enforcement Rules at 45 CFR Part 160 and Part 164 of the Health Insurance Portability and Accountability Act of 1996 and any amendments or implementing regulations (“HIPAA”), or the Health Information for Economic and Clinical Health Act (Title XIII of the American Recovery and Reinvestment Act of 2009) and any amendments or implementing regulations (“HITECH”). Unless otherwise provided, all capitalized terms in this Addendum will have the same meaning as provided under HIPAA Rules.

2. Obligations and Activities of Business Associate

Business Associate agrees to:

(a) Comply with, at all times, applicable HIPAA Rules;

(b) Not use or disclose PHI other than as permitted or required by the Addendum or as required by law;

(c) Use appropriate safeguards, and comply with Subpart C of 45 CFR Part 164 with respect to electronic PHI, to prevent use or disclosure of PHI other than as provided for by the Addendum;

(d) Mitigate, to the extent practicable, any harmful effect that is known to Business Associate of a use or disclosure of PHI by Business Associate in violation of this Addendum;

(e) Report to Covered Entity any use or disclosure of PHI not provided for by the Addendum of which it becomes aware, including breaches of unsecured PHI as required at 45 CFR 164.410, and any security incident of which it becomes aware;

(f) In accordance with 45 CFR 164.502(e)(1)(ii) and 164.308(b)(2), if applicable, ensure that any subcontractors that create, receive, maintain, or transmit PHI on behalf of the Business Associate agree to the same restrictions, conditions, and requirements that apply to the Business Associate with respect to such information;

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(g) Make available PHI in a designated record set to the Covered Entity as necessary to satisfy Covered Entity’s obligations under 45 CFR 164.524;

(h) Make any amendment(s) to PHI in a designated record set as directed or agreed to by the Covered Entity pursuant to 45 CFR 164.526, or take other measures as necessary to satisfy Covered Entity’s obligations under 45 CFR 164.526;

(i) Maintain and make available the information required to provide an accounting of disclosures to the Covered Entity as necessary to satisfy Covered Entity’s obligations under 45 CFR 164.528;

(j) To the extent the Business Associate is to carry out one or more of Covered Entity’s obligation(s) under Subpart E of 45 CFR Part 164, comply with the requirements of Subpart E that apply to the Covered Entity in the performance of such obligation(s); and

(k) Make its internal practices, books, and records available to the Secretary for purposes of determining compliance with the HIPAA Rules.

3. Permitted Uses and Disclosures by Business Associate

(a) Business Associate may only use or disclose PHI as necessary to perform the services set forth in the Agreement.

(b) Business Associate may use or disclose PHI as required by law.

(c) Business Associate agrees to make uses and disclosures and requests for PHI consistent with Covered Entity’s minimum necessary policies and procedures.

(d) Business Associate may not use or disclose PHI in a manner that would violate Subpart E of 45 CFR Part 164 if done by Covered Entity except for the specific uses and disclosures set forth below.

(e) Business Associate may use PHI for the proper management and administration of the Business Associate or to carry out the legal responsibilities of the Business Associate.

(f) Business Associate may disclose PHI for the proper management and administration of Business Associate or to carry out the legal responsibilities of the Business Associate, provided the disclosures are required by law, or Business Associate obtains reasonable assurances from the person to whom the information is disclosed that the information will remain confidential and used or further disclosed only as required by law or for the purposes for which it was disclosed to the person, and the person notifies Business Associate of any instances of which it is aware in which the confidentiality of the information has been breached.

(g) Business Associate may provide data aggregation services relating to the health care operations of the Covered Entity.

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4. Provisions for Covered Entity to Inform Business Associate of Privacy Practices and Restrictions

(a) Covered Entity shall notify Business Associate of any limitation(s) in the notice of privacy practices of Covered Entity under 45 CFR 164.520, to the extent that such limitation may affect Business Associate’s use or disclosure of PHI.

(b) Covered Entity shall notify Business Associate of any changes in, or revocation of, the permission by an individual to use or disclose his or her PHI, to the extent that such changes may affect Business Associate’s use or disclosure of PHI.

(c) Covered Entity shall notify Business Associate of any restriction on the use or disclosure of PHI that Covered Entity has agreed to or is required to abide by under 45 CFR 164.522, to the extent that such restriction may affect Business Associate’s use or disclosure of PHI.

5. Termination

(a) Termination for Cause.  Covered Entity shall provide Business Associate with written notice of Business Associate’s breach of any term or condition of this Addendum, and afford Business Associate the opportunity to cure the breach to the satisfaction of Covered Entity within forty-five (45) days of such notice.  If Business Associate fails to cure the breach, as determined by Covered Entity, the Agreement will terminate as provided in Covered Entity’s notice.

(b) Obligations of Business Associate Upon Termination.  Upon termination of this Addendum for any reason, Business Associate shall destroy all PHI received from Covered Entity, or created, maintained, or received by Business Associate on behalf of Covered Entity, that the Business Associate still maintains in any form.  Business Associate shall retain no copies of the PHI.

(c) Survival.  The obligations of Business Associate under this Section shall survive the termination of this Addendum.

[Signatures to follow]

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IN WITNESS WHEREOF, the parties have caused this Business Associate Addendum to be executed by their duly authorized representatives, on the date and year first above written.

“Covered Entity”

“Business Associate”

Nutex Health, Inc.

Joshua DeTillio

By:

By:

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EX-31.1 3 nutx-20230930xex31d1.htm EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Thomas T. Vo, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Nutex Health. Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023

By:

/s/ Thomas T. Vo

 

Thomas T. Vo 

Chief Executive Officer and Chairman of the Board

(principal executive officer)


EX-31.2 4 nutx-20230930xex31d2.htm EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

I, Jon C. Bates, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of Nutex Health. Inc.;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

          (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

          (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

          (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

          (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

          (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

          (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 9, 2023

By:

/s/ Jon C. Bates

 

Jon C. Bates

Chief Financial Officer

(principal financial officer and principal accounting officer)


EX-32.1 5 nutx-20230930xex32d1.htm EX-32.1

Exhibit 32.1

 

CERTIFICATION OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES OXLEY ACT OF 2002

Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Executive Officer of Nutex Health Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2023, (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023

By:

/s/ Thomas T. Vo

 

Thomas T. Vo

Chief Executive Officer and Chairman of the Board

(principal executive officer)


EX-32.2 6 nutx-20230930xex32d2.htm EX-32.2

Exhibit 32.2

 

CERTIFICATION OF

CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE

SARBANES OXLEY ACT OF 2002

Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Financial Officer of Nutex Health Inc. (the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2023, (the “Report”) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 9, 2023

By:

/s/ Jon C. Bates

 

Jon C. Bates

Chief Financial Officer

(principal financial officer)