Information Statement - All Other (definitive) (def 14c)

Date : 10/07/2019 @ 3:49PM
Source : Edgar (US Regulatory)
Stock : Igambit, Inc. (QB) (IGMB)
Quote : 0.0021  0.0 (0.00%) @ 12:00AM

Information Statement - All Other (definitive) (def 14c)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

SCHEDULE 14C

 

INFORMATION REQUIRED IN INFORMATION STATEMENT

SCHEDULE 14C INFORMATION

 

Information Statement Pursuant to Section 14(c) of the

Securities Exchange Act of 1934

Check the appropriate box:

 

  Preliminary information statement Confidential, for use of the Commission only (as permitted by Rule 14c-5(d)(2))
  Definitive information statement    

 

IGAMBIT, INC.

(Name of Registrant as Specified in Charter)

 

Payment of Filing Fee (Check the appropriate box):

 

     
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IGAMBIT, INC.

1050 W. Jericho Turnpike, Suite A

Smithtown, NY 11787

(631) 670-6777

 

Dear Stockholders:

 

This Information Statement is being made available to the holders of record (the “Stockholders”) of the outstanding shares of common stock, $0.001 per value per share (the “Common Stock”) of iGambit, Inc., a Delaware corporation (the “Company”), as of the close of business on September 24, 2019 (the “Record Date”), pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Board of Directors (the “Board”) is not soliciting your proxy and you are requested not to send us a proxy. The purpose of this Information Statement is to notify you that on September 24, 2019 the stockholders holding a majority of our outstanding voting capital stock of the Company have approved the following:

 

(1) To adopt an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) by and among Clinigence Holdings, Inc., a Delaware corporation (“Clinigence”), the Company, the Company’s wholly owned subsidiary, HealthDatix, Inc., a Delaware Corporation (“Merger Sub”), and John Salerno, the transaction contemplated by the Merger Agreement is known as the “Merger”;

 

(2) to adopt an amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect a reverse stock split at a ratio ranging from 1 to 100 to up to 1 for 500, such ratio to be determined by the Board (the “Reverse Stock Split”);

 

(3) to adopt an amendment to the Certificate of Incorporation, as amended, to change the name of the Company to “Clinigence Holdings, Inc.” (the “Name Change”); and

 

(4) to adopt the iGambit, Inc. 2019 Omnibus Equity Incentive Plan (the “Incentive Plan”);

 

(5) to adopt Amended and Restated Bylaws of the Company (the “Bylaws”); and

 

(6) upon the close of the Merger, Dr. Warren Hosseinion, Jacob Margolin, Dr. Lawrence Schimmel, Martin Breslin, Mitchell Creem, Mark Fawcett, David Meiri, John Waters and Elisa Luqman be appointed as members of the Board of Directors. John Salerno will resign as an officer and director of the Company and the new directors will be appointed effective upon the close of the Merger (the “Ratification of Appointment of Directors”).

  

The Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws, and the Ratification of Appointment of Directors (collectively, the “Actions”) are more fully described in the accompanying Information Statement. The Actions were approved on August 7, 2019 by our Board of Directors and by Written Consent on September 24, 2019 by a majority of holders of our voting capital stock, in accordance with Delaware General Corporation Law. Our directors and majority of the stockholders of our outstanding capital stock, as voted through a unanimous vote of our Series A Preferred Stock, have approved the Actions after carefully considering them and concluding that approving the Actions was in the best interests of our Company and our stockholders. The Series A Preferred Stock is held by John Salerno, the Company’s Chief Executive Officer and Chairman. The accompanying Information Statement is being furnished to all of our stockholders in accordance with Section 14C of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated by the U.S. Securities and Exchange Commission (the “SEC”) thereunder, solely for the purpose of informing our Stockholders of the action taken by the Written Consent before it becomes effective.

 

THE MERGER, THE REVERSE STOCK SPLIT, THE NAME CHANGE, THE INCENTIVE PLAN, THE BYLAWS AND THE RATIFICATION OF APPOINTMENT OF DIRECTORS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE U.S. SECURITIES AND EXCHANGE COMMISSION, NOR HAS THE U.S. SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE FAIRNESS OR MERIT OF THE MERGER, THE REVERSE STOCK SPLIT, NAME CHANGE, THE INCENTIVE PLAN, THE BYLAWS OR THE RATIFICATION OF APPOINTMENT OF DIRECTORS NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN THIS INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

 

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No additional action will be undertaken by us with respect to the receipt of written consents, and no dissenters’ rights with respect to the receipt of the written consents are afforded to Stockholders as a result of the approval of the Actions.

 

Pursuant to Rule 14c-2 promulgated under the Exchange Act, the earliest date that the Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and the Ratification of Appointment of Directors can become effective is twenty (20) calendar days after this Information Statement is first sent or given to the Stockholders. Notwithstanding the foregoing, we must notify the Financial Industry Regulatory Authority (“FINRA”) of the Reverse Stock Split and Name Change by filing the Issuer Company Related Action Notification Form no later than ten (10) days prior to the anticipated effective date of the Reverse Stock Split and Name Change. FINRA needs to approve the Actions before they will be reflected in the trading of the shares of the Common Stock. In addition, the Reverse Stock Split and the Name Change will not become effective until we file an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware after the twenty (20) calendar day period has elapsed. A form of the Merger Agreement is attached to this Information Statement as Annex A. A form of the Amendment with regard to the Reverse Stock Split and Name Change is attached to this Information Statement as Annex B. A form of the Incentive Plan is attached to this Information Statement as Annex C. A form of the Amended and Restated Bylaws is attached to this Information Statement as Annex D.

 

This is not a notice of a special meeting of stockholders and no stockholder meeting will be held to consider any matter which is described herein.

 

THE ACCOMPANYING INFORMATION STATEMENT IS BEING MAILED TO STOCKHOLDERS ON OR ABOUT OCTOBER 7, 2019.

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.

 

 

For the Board of Directors of IGAMBIT, INC.

     
October 7, 2019 By: /s/ John Salerno
Name:

John Salerno

  Title: Chairman and Chief Executive Officer

 

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Table of Contents

 

TABLE OF CONTENTS 4
GENERAL OVERVIEW OF ACTION 5
VOTE REQUIRED FOR APPROVAL 6
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF 7
BOARD OF DIRECTORS’ RECOMMENDATION AND STOCKHOLDER APPROVAL 7
FORWARD-LOOKING STATEMENTS 8
QUESTIONS AND ANSWERS REGARDING THE ACTIONS 8
ACTION 1 THE MERGER 12
THE MERGER AGREEMENT 18
THE VOTING AGREEMENT 23
INFORMATION WITH RESPECT TO CLINIGENCE 24
PRINCIPAL STOCKHOLDERS OF CLINIGENCE 46
MANAGEMENT FOLLOWING THE MERGER 47
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS AND FINANCIAL DATA 50
ACTION 2 THE REVERSE STOCK SPLIT 54
ACTION 3 THE NAME CHANGE 58
ACTION 4 THE INCENTIVE PLAN 58
ACTION 5 THE BYLAWS 60
ACTION 6 THE Ratification of Appointment of Directors 62
EFFECTIVENESS OF CORPORATE ACTION 65
MARKET PRICES AND DIVIDEND DATA 65
SECURITY OWNERSHIP OF EXECUTIVE OFFICERS, DIRECTORS AND FIVE PERCENT STOCKHOLDERS 66
WHERE YOU CAN FIND MORE INFORMATION 67
ANNEX A AGREEMENT AND PLAN OF MERGER A-1
ANNEX A – 1 Clinigence LLC 2017 and 2018 Audited Financials A-1-1
ANNEX A – 2 QualMetrix Inc. 2017 and 2018 Audited Financials A-2-1
ANNEX B CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION B-1
ANNEX C IGAMBIT INC. 2019 OMNIBUS EQUITY INCENTIVE PLAN C-1
ANNEX D AMENDED AND RESTATED BY LAWS D-1

 

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IGAMBIT, INC.

1050 W. Jericho Turnpike, Suite A

Smithtown, NY 11787

(631) 670-6777

 

INFORMATION STATEMENT REGARDING

ACTIONS TAKEN BY WRITTEN CONSENT OF

MAJORITY STOCKHOLDERS

IN LIEU OF A SPECIAL MEETING

PURSUANT TO SECTION 14(C) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

WE ARE NOT ASKING YOU FOR A PROXY,

AND YOU ARE REQUESTED NOT TO SEND US A PROXY

 

PURPOSE OF INFORMATION STATEMENT

 

This Information Statement is being furnished to all holders of the common stock of iGambit, Inc. (“iGambit” or the “Company”) as of September 24, 2019, in connection with the action taken by written consent of holders of a majority of the outstanding voting power of the Company.

 

GENERAL OVERVIEW OF ACTION

Action by Written Consent:

 

The following actions were approved by written consent, in lieu of a special meeting, of the holders of a majority of our outstanding voting power authorizing the Board of Directors of the Company:

 

(1) To adopt an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) by and among Clinigence Holdings, Inc., a Delaware corporation (“Clinigence”), iGambit, iGambit’s wholly owned subsidiary, HealthDatix, Inc., a Delaware corporation (“Merger Sub”), and John Salerno, the transaction contemplated by the Merger Agreement is known as the “Merger”;

 

(2) to adopt an amendment to the Company’s Certificate of Incorporation, as amended (the “Certificate of Incorporation”), to effect a reverse stock split at a ratio ranging from 1 to 100 to up to 1 for 500, such ratio to be determined by the Board (the “Reverse Stock Split”);

 

(3) to adopt an amendment to the Certificate of Incorporation, as amended, to change the name of the Company to “Clinigence Holdings, Inc.” (the “Name Change”); and

 

(4) to adopt the iGambit, Inc. 2019 Omnibus Equity Incentive Plan (the “Incentive Plan”);

 

(5) to adopt Amended and Restated Bylaws of the Company (the “Bylaws”); and

 

(6) upon the close of the Merger, Dr. Warren Hosseinion, Jacob Margolin, Dr. Lawrence Schimmel, Martin Breslin, Mitchell Creem, Mark Fawcett, David Meiri, John Waters and Elisa Luqman be appointed as members of the Board of Directors. John Salerno will resign as an officer and director of the Company and the new directors will be appointed effective upon the close of the Merger (the “Ratification of Appointment of Directors”).

 

“We,” “us,” “our,” the “Registrant” and the “Company” refers to iGambit, Inc., a Delaware corporation.

 

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The Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and Ratification of Appointment of Directors and Officers (collectively, the “Actions”) are more fully described in the accompanying Information Statement. The Actions were approved by Written Consent on August 7, 2019, by our Board of Directors and a majority of holders of our voting capital stock, in accordance with Delaware General Corporation Law. Our directors and majority of the stockholders of our outstanding capital stock, as voted through a unanimous vote of our Series A Preferred Stock, have approved the Actions after carefully considering them and concluding that approving the Actions was in the best interests of our Company and our stockholders. The Series A Preferred Stock is held by John Salerno, the Company’s Chief Executive Officer and Chairman. The accompanying Information Statement is being furnished to all of our stockholders in accordance with Section 14C of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules promulgated by the U.S. Securities and Exchange Commission (the “SEC”) thereunder, solely for the purpose of informing our Stockholders of the action taken by the Written Consent before it becomes effective.

 

The Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and the Ratification of Appointment of Directors cannot be effectuated until twenty (20) days after the mailing of this Information Statement and after the filing of the amended Certificate of Incorporation with Secretary of State of the State of Delaware with respect to the Reverse Stock Split and the Name Change. The amendment to the Certificate of Incorporation is to effectuate the Reverse Stock Split and the Name Change.

 

The date on which this Information Statement will be sent to stockholders will be on or about, October 7, 2019 and is being furnished to all holders of the common stock of the Company on record as of September 24, 2019.

 

The Annual Report on Form 10-K for fiscal year ended December 31, 2018, and the Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, and the Current Reports on Form 8-K filed by the Company during the past year with the Securities and Exchange Commission may be viewed on the Securities and Exchange Commission’s web site at www.sec.gov in the Edgar Archives. The Company is presently current in the filing of all reports required to be filed by it.

 

Only one information statement is being delivered to multiple stockholders sharing an address, unless we have received contrary instructions from one or more of the stockholders. We will undertake to deliver promptly upon written or oral request a separate copy of the information statement to a stockholder at a shared address to which a single copy of the information statement was delivered. You may make a written or oral request by sending a written notification to our principal executive offices stating your name, your shared address, and the address to which we should direct the additional copy of the information statement or by emailing our office or by calling our principal executive offices at (631) 670-6777. If multiple stockholders sharing an address have received one copy of this information statement and would prefer us to mail each stockholder a separate copy of future mailings, you may send notification to or call our principal executive offices. Additionally, if current stockholders with a shared address received multiple copies of this information statement and would prefer us to mail one copy of future mailings to stockholders at the shared address, notification of that request may also be made by mail, email or telephone call to our principal executive offices.

 

VOTE REQUIRED FOR APPROVAL 

In accordance with the Delaware Corporation General Law, the following actions were taken based upon the unanimous recommendation and approval by the Company’s Board of Directors and the written consent of the majority voting control of the stockholders.

 

The Board of Directors of the Company has adopted, ratified and approved the Actions. The securities that are entitled to vote to adopt the Actions consist of all issued and outstanding shares of the Company’s $0.001 par value Series A Preferred Stock outstanding on September 24, 2019, the record date for determining stockholders who are entitled to notice of and to vote on the proposed amendment to the Company’s Certificate of Incorporation.

 

The Board of Directors, and persons owning a majority of the outstanding voting securities of the Company have unanimously adopted, ratified and approved the proposed Actions by the Company’s Board of Directors. No other votes are required or necessary.

 

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Pursuant to the Company’s Bylaws and the Delaware Corporation General Law, a vote by the holders of at least a majority of the Company’s outstanding votes is required to effect the Actions. The Company’s Certificate of Incorporation does not authorize cumulative voting. As of the record date, the Company had 388,553,890 (not including 10 million shares held in treasury) voting shares of common stock issued and outstanding and 1,000 shares of Series A Preferred Stock issued and outstanding. The consenting stockholders of the Series A Preferred Stock are entitled to 51% of the total votes. Mr. Salerno is the sole holder of Series A Preferred Shares and thus holds the majority of our outstanding voting power. The consenting stockholders of Series A Preferred Stock, Mr. Salerno, voted in favor of the Actions described herein in a unanimous written consent, dated August 7, 2019.

 

On August 2, 2018, the Board of Directors of the Company issued 1,000 shares of Series A Preferred Stock to its Chief Executive Officer, John Salerno, in consideration for his services to the Company for the past two years without salary. The Series A Preferred Stock, when combined with the existing holdings of the Company’s common stock, gives him an aggregate of 51% of the votes eligible to be cast by all stockholders with respect to all matters brought before a vote of the stock holders of the Company, which gives him effective voting control over the Registrant’s affairs.

 

VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF

The Board of Directors fixed the close of business on September 24, 2019 as the record date for the determination of the common and preferred stockholders entitled to notice of the action by written consent.

 

At the record date, the Company had 800,000,000 shares of common stock authorized with a stated par value of $0.001, of which approximately 388,553,890 (not including 10 million shares held in treasury) million shares of common stock were issued and outstanding, excluding warrants, options and shares estimated for the conversion of notes and 100 million shares of authorized preferred stock, no par value, of which 1,000 shares of Series A Preferred Stock is issued and outstanding. The holders of shares of common stock are entitled to one vote per share on matters to be voted upon by stockholders.  The holder of the Series A Preferred Stock is entitled to a vote equal to 51% of all matters brought before the common stockholders, and therefore, have majority voting control.

 

All of the holders of the Series A Preferred Stock of the Company, as of the record date, have consented to the proposed Actions. These stockholders have consented to the Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, and the Bylaws. This consent was sufficient, without any further action, to provide the necessary stockholder approval of the action.

 

BOARD OF DIRECTORS’ RECOMMENDATION

AND STOCKHOLDER APPROVAL

 

In accordance with Delaware General Corporation Law (“DGCL”), on August 7, 2019, our Board of Directors voted to authorize and seek approval of our stockholders of the Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and the Ratification of Appointment of Directors. In the absence of a meeting, the affirmative consent of holders of a majority of the vote represented by our outstanding shares of Series A Stock was required to approve the Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and the Ratification of Appointment of Directors.  Because holders of all shares of Series A Stock signed a written consent in favor of the Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and the Ratification of Appointment of Directors, adopt the Merger, amend the Certificate of Incorporation to effect the Reverse Stock Split and Name Change, to adopt the Incentive Plan and to adopt the Amended and Restated Bylaws. The Merger, the Reverse Stock Split, the Name Change, the Incentive Plan, the Bylaws and the Ratification of Appointment of Directors cannot be effectuated until twenty (20) days after the mailing of this Information Statement. The Reverse Stock Split and the Name Change Amendment will be effective upon the filing of an amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware, which is expected to occur as soon as reasonably practicable on or after the 20th day following the mailing of this Information Statement to stockholders.

 

The information contained in this Information Statement constitutes the only notice we will be providing stockholders.

 

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FORWARD-LOOKING STATEMENTS

This Information Statement, including information incorporated by reference into this Information Statement, includes forward-looking statements regarding, among other things, iGambit’s and Clinigence’s plans, strategies and prospects, both business and financial. Although iGambit and Clinigence believe that their plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither iGambit nor Clinigence can assure you that either will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions including, without limitation, the factors described under “Risk Factors” from time to time in iGambit’s filings with the SEC. All statements other than statements of historical fact are statements that could be deemed forward-looking statements. Many of the forward-looking statements contained in this presentation may be identified by the use of forward-looking words such as “believe”, “expect”, “anticipate”, “should”, “planned”, “will”, “may”, “intend”, “estimated”, “aim”, “on track”, “target”, “opportunity”, “tentative”, “positioning”, “designed”, “create”, “predict”, “project”, “seek”, “would”, “could”, “continue”, “ongoing”, “upside”, “increases” and “potential”, among others. Important factors that could cause actual results to differ materially from the forward-looking statements we make in this presentation are set forth in other reports or documents that we file from time to time with the SEC.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Information Statement. All forward-looking statements included herein attributable to any of iGambit, Clinigence or any person acting on either party’s behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

All forward-looking statements in this Information Statement are current only as of the date on which the statements were made. iGambit and Clinigence do not undertake any obligation to publicly update any forward-looking statement to reflect events or circumstances after the date on which any statement is made or to reflect the occurrence of unanticipated events.

 

QUESTIONS AND ANSWERS REGARDING THE ACTIONS

The following questions and answers are intended to briefly address commonly asked questions as they pertain to the Actions. These questions and answers may not address all questions that may be important to you as a Company stockholder. Please refer to the “Summary” beginning on page 1 and the more detailed information contained elsewhere in this Information Statement, the annexes to this Information Statement and the documents referred to or incorporated by reference in this Information Statement, each of which you should read carefully.

Q.       What is the proposed transaction and what effects will it have on the Company?

A. On August 8, 2019, iGambit, Inc., a Delaware corporation (“iGambit”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) by and among Clinigence Holdings, Inc., a Delaware corporation (“Clinigence”), iGambit, iGambit’s wholly owned subsidiary, HealthDatix, Inc., a Delaware corporation (“Merger Sub”), and John Salerno, an individual and holder of iGambit shares constituting a majority of the votes eligible to be cast by all of the stockholders of iGambit (the “Signing Stockholder”).

The proposed transaction is the Merger of the Merger Sub with Clinigence pursuant to the Merger Agreement. Once the closing conditions under the Merger Agreement have been satisfied or waived and subject to the other terms and conditions in the Merger Agreement, Merger Sub, a wholly owned subsidiary of iGambit, will merge with and into Clinigence. Clinigence will be the surviving corporation of the Merger and a wholly owned subsidiary of iGambit and the separate corporate existence of Merger Sub will cease. iGambit shall change its name to Clinigence Holdings, Inc.

Q.       What will iGambit Stockholders retain in the Merger?

A. Subject to the terms of the Merger Agreement, at the Effective Time of the Merger, Clinigence stockholders will receive a number of newly issued shares of iGambit common stock determined using the exchange ratio described below in exchange for their shares of Clinigence stock.

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 Following the Merger, stockholders of Clinigence will become the majority owners of iGambit.

At the Effective Time, all outstanding shares of Clinigence common stock will be converted solely into the right to receive a number of shares of iGambit common stock such that the holders of outstanding equity of Clinigence immediately prior to the Effective Time will own approximately 85%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time, and holders of outstanding equity of iGambit immediately prior to the Effective Time will own approximately 15%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time, which ratio we refer to herein as the “Exchange Ratio.”

Q. When do you expect the Merger to be completed?

A: Pursuant to the terms of the Merger Agreement and a subsequent amendment, the Merger must be consummated by the outside date of November 30, 2019 which may be further extended by the parties, and the Merger will become effective at such time as a certificate of merger is duly filed with the Secretary of State of Delaware, unless a later date is specified therein.

 

Q: What happens if the Merger is not completed?

 

A: If the Merger is not completed for any reason, iGambit will remain an independent public company, its common stock will continue to be listed and traded on OTC Pink Marketplace and registered under the Exchange Act and iGambit will continue to file periodic reports with the SEC. 

 

Q: Is the Merger subject to the fulfillment of certain conditions?

A: Yes. Before the Merger can be completed iGambit and Clinigence must fulfill or, if permissible, waive several closing conditions. If these conditions are not satisfied or waived, the Merger will not be completed. See “The Merger Agreement — Closing Conditions of the Merger” beginning on page 20.

 

Q: What happens to Options and Warrants if the Merger is completed?

A: At the Effective Time, each Option and Warrant, whether vested or unvested, that is outstanding immediately before the Effective Time will remain outstanding immediately following the Effective Time.

 

Q: Why is iGambit effecting the Reverse Stock Split?

A. The Reverse Stock Split of iGambit’s issued and outstanding common stock will be effected by a ratio of not less than one-for-one hundred and not more than one-for-five hundred, with the exact ratio to be set at a whole number within this range as determined by iGambit’s Board of Directors in its sole discretion.

 

iGambit’s Board of Directors believes that the Reverse Stock Split is in the best interest of iGambit. A Reverse Stock Split typically will initially result in an increase in the price per share of iGambit’s common stock. The Board believes that an increased stock price may encourage investor interest and improve the marketability and liquidity of iGambit’s common stock. In addition, iGambit may in the future seek a listing on a national exchange, for which a higher stock price than the current price will be required. Because of the trading volatility often associated with low-priced stocks, many brokerage firms and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers and investors. iGambit’s Board of Directors believes that the anticipated higher market price resulting from a Reverse Stock Split may reduce, to some extent, the negative effects on the liquidity and marketability of the common stock inherent in some of the policies and practices of institutional investors and brokerage firms described above. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of iGambit’s common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.

 

Prior to the Effective Time, iGambit will effect the Reverse Stock Split.

 

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Q: What happens to Options and Warrants if the Reverse Stock Split is completed?

 

 A: At the Effective Time, proportionate adjustments will be made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding options and warrants entitling the holders thereof to purchase shares of the Common Stock, which will result in approximately the same aggregate price being required to be paid for such options and warrants upon exercise of such options warrants immediately preceding the reverse stock split. 

 

Q: Why is iGambit changing the name of iGambit after the effective date of the Merger to “Clinigence Holdings, Inc.”?

 

A: Further to the Merger Agreement, the name of iGambit will become “Clinigence Holdings, Inc.” after the Effective Date of the Merger. An amendment to the Company’s Certificate of Incorporation is required to effect the Name Change. The board of directors believes that changing the name of the combined company to Clinigence Holdings, Inc. better reflects the future direction and focus of the combined company.

 

Q: Did the Board approve and recommend the Merger?

 

A: Yes. In its review the Board consulted with its management, legal and financial advisors, and reviewed a significant amount of information and considered a number of factors, including, among others, the following factors: (i) the information Clinigence provided regarding its technology, products and services, management experience and potential competitive position; (ii) the financial, operational, businesses and strategic objectives of Clinigence; (iii) the willingness of Clinigence to lend funds to iGambit prior to the Merger to pay off iGambit’s short term convertible debt and to be used for working capital; (iv) the current target markets proposed by Clinigence; (v) the consideration to be received by iGambit’s stockholders for the Merger; (vi) the terms, conditions and obligations of the Merger Agreement; (vii) possible alternative strategies and prospects for iGambit as an independent company and (viii) the financial condition and future prospects for iGambit.

 

Specifically, the iGambit Board considered that iGambit has not been able to adequately fund its HealthDatix subsidiary and achieve sustaining revenue. This merger with Clinigence presented the opportunity to achieve revenue through synergistic products and common target market customers. The iGambit Board also considered that Clinigence's management has extensive experience in the health technology and related industry.

 

The iGambit Board further considered that Clinigence’s management has extensive experience in the successful growth and expansion of healthcare related companies in the public arena, most significantly, Clinigence’s Chairman, Dr. Warren Hosseinion’s success with Apollo Medical Holdings (NASDAQ: AMEH). 

 

Q: What happens if a third party makes an offer to acquire the Company before the Merger is completed?

 

A: If a third party makes an unsolicited, written bona fide Acquisition Proposal to the Company prior to Closing, the Company may, negotiate and discuss such proposal with the third party under certain circumstances specified in the Merger Agreement. If the Board determines in good faith, after consultation with the Company’s outside legal counsel and financial advisors, that such Acquisition Proposal constitutes, or would reasonably be expected to lead to or result in, a Superior Proposal and the Company notifies Clinigence, and complies with certain additional requirements in the Merger Agreement, including, if requested by Clinigence, negotiating with Clinigence during a period of ten (10) business days, so that Clinigence has the opportunity to submit a matching or topping proposal, and Clinigence does not submit a matching or topping proposal during such ten (10) business day period, then the Company may terminate the Merger Agreement. In which case the Company must (i) pay Clinigence $400,000, (ii) reimburse Clinigence all out of pocket expenses incurred by Clinigence in connection with the transactions contemplated herein, and (iii) repay the balance and accrued interest outstanding on the promissory note in favor of Clinigence, the total sum amount of which shall be due and payable immediately upon such termination.

 

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Q: Should I send in my Company Common Stock certificates now?

 

A: No. Please do NOT return your Company Common Stock certificate(s) to the Company.  As of the effective date of the Reverse Stock Split, each certificate representing shares of iGambit common stock before the Reverse Stock Split would be deemed, for all corporate purposes, to evidence ownership of the reduced number of shares of iGambit’s common stock resulting from the Reverse Stock Split.

 

iGambit’s transfer agent will be available to effect the exchange of stock certificates. After the Effective Date, stockholders and holders of securities exercisable for iGambit’s common stock will be notified of the effectiveness of the Reverse Stock Split. Persons who hold their shares in brokerage accounts or “street name” will not be required to take any further actions to effect the exchange of their shares. No new certificates will be issued to a stockholder until such stockholder has surrendered any outstanding certificates to the transfer agent. Until surrendered, each certificate representing shares before the Reverse Stock Split will continue to be valid and will represent the adjusted number of shares based on the ratio of the Reverse Stock Split. Stockholders should not destroy any stock certificate and should not submit any certificates until after the Reverse Stock Split has become effective.

 

Q: Will I owe taxes as a result of the Reverse Stock Split?

 

A: No gain or loss should be recognized by a stockholder upon his or her exchange of pre-Reverse Stock Split shares for post-Reverse Stock Split shares. The aggregate tax basis of the post-Reverse Stock Split shares received (including any fraction of a new share deemed to have been received) will be the same as the stockholder’s aggregate tax basis in the pre-Reverse Stock Split shares exchanged therefor. The stockholder’s holding period for the post- Reverse Stock Split shares will include the period during which the stockholder held the pre-Reverse Stock Split shares surrendered in the Reverse Stock Split.

 

Q: Why is iGambit adopting the Incentive Plan?

 

A: The purpose of the Incentive Plan is to increase our ability to attract and retain talented employees, consultants and directors and thereby enhance our growth and profitability. Under the 2019 Stock Incentive Plan, options to purchase common stock, including incentive stock options, restricted stock awards and other equity-based compensation, may be awarded to directors, officers, employees, consultants or other agents. Stockholder approval of the Incentive Plan is required for purposes of compliance with certain exclusions from the Internal Revenue Code of 1986, as amended (the “Code

 

Prior to the execution of the Effective Time, iGambit will adopt the Incentive Plan.

 

Q: Why is iGambit adopting the Bylaws?

 

A: The Bylaws were drafted to address a number of DGCL and general corporate governance related developments since the original Bylaws were adopted over nineteen years ago. The adoption of the Bylaws will result in greater flexibility in permitting management to complete and carry out certain corporate actions with Board approval and without the need to seek stockholder approval, where such approval is not required by the DGCL, the Company’s Certificate of Incorporation or other applicable state and Federal securities laws. An advantage to the adoption of the Bylaws is that time and expense associated with seeking stockholder approval by a public reporting company that results from the need to prepare and file a proxy statement prior to carrying out certain corporate actions can be avoided.

 

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Q: Why am I not being asked to vote on the Actions?

 

A: In accordance with Delaware General Corporation Law on August 7, 2019, our Board of Directors, believing it to be in the best interests of the Company and its stockholder approved the Actions, subject to shareholder approval. On September 24, 2019 Mr. John Salerno, the sole holder of Series A Preferred Shares and thus holder of the majority of our outstanding voting power, believing it to be in the best interests of the Company and its stockholders, approved the Actions.

 

Q: Why did I receive this Information Statement?

 

A: Applicable laws and securities regulations require us to provide you with notice of the Written Consent that was delivered by the Majority Stockholders, as well as other information regarding the Actions, even though your vote or consent is neither required nor requested to adopt or authorize the Actions.

 

Q: Do I have appraisal rights?

 

A: Neither the Delaware General Corporate Law nor our Certificate of Incorporation or Bylaws provide our Stockholders with appraisal rights in connection with the Actions discussed in this Information Statement.

 

Q: Who is paying for the Information Statement?

 

A: The Company will pay for the delivery of this Information Statement.

 

Q: What is householding and how does it affect me?

 

A: The SEC permits companies to send a single set of certain disclosure documents to stockholders who share the same address and have the same last name, unless contrary instructions have been received, but only if the applicable company provides advance notice and follows certain procedures. In such cases, each stockholder continues to receive a separate set of disclosure documents. This practice, known as “householding,” is designed to reduce duplicate mailings and save significant printing and postage costs as well as natural resources.

 

If you received a householded mailing and you would like to have additional copies of this Information Statement mailed to you, or you would like to opt out of this practice for future mailings, please submit your request to the Company by phone at (631) 670-6777 or by email to info@igambit.com or by mail to iGambit, Inc., 1050 W. Jericho Tpke. Ste.A, Smithtown, NY 117877. We will promptly send additional copies of this Information Statement upon receipt of such request.

 

Q: Where can I find more information about the Company?

 

A: We file periodic reports and other information with the SEC. You may read and copy this information at the SEC’s public reference facilities. Please call the SEC at (800) SEC-0330 for information about these facilities. This information is also available on the website maintained by the SEC at www.sec.gov.

 

Q: Who can help answer my other questions?

 

A: If you have more questions about the Merger, please contact us at (631) 670-6777 or info@igambit.com. If your broker holds your shares, you should call your broker for additional information.

 

 

ACTION 1 THE MERGER

In accordance with Delaware General Corporation Law on August 7, 2019, our Board of Directors believing it to be in the best interests of the Company and its stockholders, approved the Merger, and on September 24, 2019 Mr. John Salerno, the sole holder of Series A Preferred Shares and thus holder of the majority of our outstanding voting power, believing it to be in the best interests of the Company and its stockholders, approved the Merger. A copy of the form of the Merger Agreement is attached as Annex A to this Information Statement.

 

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Parties Involved in the Merger

 

iGambit, Inc.

 

iGambit, through its wholly owned subsidiary HealthDatix™ Inc., a Florida corporation, (“HealthDatix FL”) is a medical technology company that provides end to end Software-as-a-Service (“SaaS”) solutions, services and products via our HealthDatix Platform that manages, reports, and analyzes critical data, enabling healthcare and commercial organizations to deliver positive member outcomes.

 

Clinigence Holdings, Inc.

 

Clinigence is a leading healthcare information technology company providing an advanced, cloud-based platform that enables healthcare organizations to provide value-based care and population health management. The Clinigence platform aggregates clinical and claims data across multiple settings, information systems and sources to create a holistic view of each patient and provider and virtually unlimited insights into patient populations.

 

Clinigence is the culmination of the combination of Clinigence, LLC and QualMetrix, Inc., two pioneering healthcare information technology companies.

 

Clinigence, LLC, founded in 2010 and based in Atlanta, Georgia, is a pioneer in clinical quality reporting. Its solution integrates clinical and claims data across multiple electronic health record (“EHR”) systems to allow its customers to improve the quality of care of its patients, improve care coordination and to reduce cost.

 

QualMetrix, Inc., founded in 2013 and based in Miramar, Florida, is a population health analytics company that provides turnkey solutions that enable connected intelligence across the care continuum by transforming massive amounts of clinical and claims data into actionable insights.

 

Clinigence’s platform is currently in use by 14 Accountable Care Organizations (“ACOs”), 7 Managed Services Organizations (“MSOs”), 5 health plans, 35 hospitals, and over 8,000 individual providers, and hosting more than 9 million patient records.

 

Merger Sub

 

Merger Sub is a wholly owned subsidiary of iGambit, Inc. formed solely for the purpose of effecting a merger or acquisition. Merger Sub was incorporated under the laws of Delaware in October 17, 2013 original under the name Securecare Corp. and renamed HealthDatix, Inc. in 2017. Merger Sub is separate and distinct from our wholly owned subsidiary HealthDatix, Inc., a Florida corporation (“HealthDatix FL”).

 

Effect of the Merger

 

Under the terms of the Merger Agreement, upon completion of the Merger, Merger Sub will merge with and into Clinigence. Clinigence will be the surviving corporation in the Merger and will become a wholly owned subsidiary of iGambit. Subject to the terms of the Merger Agreement, at the effective time of the Merger, Clinigence stockholders will receive a number of newly issued shares of iGambit’s common stock determined using the Exchange Ratio described below in exchange for their shares of Clinigence stock. Following the Merger, stockholders of Clinigence will become the majority owners of iGambit, and will own approximately 85%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time and holders of outstanding equity of iGambit immediately prior to the Effective Time will own approximately 15%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time, which ratio we refer to herein as the “Exchange Ratio.”

 

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Effective Time

The time at which the Merger will become effective, which we refer to as the “Effective Time” of the Merger, will occur upon the filing of a certificate of merger with the Secretary of State of Delaware.

Merger Consideration

At the Effective Time, all outstanding shares of Clinigence common stock will be converted solely into the right to receive a number of shares of iGambit’s common stock such that the holders of outstanding equity of Clinigence immediately prior to the Effective Time will own approximately 85%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time and holders of outstanding equity of iGambit immediately prior to the Effective Time will own approximately 15%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time.

Effect on iGambit if the Merger is Not Completed

If the Merger is not completed for any other reason, iGambit will remain an independent public company, its common stock will continue to be listed and traded on OTC Pink Marketplace and registered under the Exchange Act and iGambit will continue to file periodic reports with the SEC.

If the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of iGambit’s common stock. If the Merger is not completed, iGambit’s board of directors will continue to evaluate and review iGambit’s business operations, properties, dividend policy and capitalization, among other things, make such changes as are deemed appropriate and continue to seek to identify strategic alternatives to enhance stockholder value. If the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to iGambit will be offered or that iGambit’s business, prospects or results of operation will not be adversely impacted.

Background of the Merger

After the acquisition of our HealthDatix FL subsidiary, we encountered several setbacks in customer contracts not ramping up quick enough, and difficulty with getting our BioDatix health band technology completed in a timely manner with our Asian manufacturing partners. Although we made substantial strides with our backend platform and wearable medical technology, as well as built a good distribution pipeline, the Board of iGambit recognized that revenue will still take considerable time to gain significant traction and funding on-going operations was going to be increasingly more difficult.

The Board of iGambit undertook a strategic review of alternatives to improve revenues and to enhance shareholder value which contemplated a number of alternatives.

The Board determined that one alternative was to merge with a healthcare technology company with revenue and the potential to expand the product offerings and shareholder value.

In connection with these activities, in May 2018, one of iGambit’s advisors introduced iGambit to their Chronic Care Management (CCM) partner company interested in merging with a public entity. During an initial conference call with the CCM company, the CCM’s financial consultant (the “Consultant”) participated in the call. Certain synergies were identified, and it was determined that discussions should continue. On May 16, 2018, iGambit signed a consulting agreement with a twelve (12) month term with Consultant to assist the Company in advising of potential merger partners and developing corporate partnering relationships, provide introductions to professional analysts and money managers and assist the Company in financing arrangement, among other services.

On May 29, 2018, the Consultant, the principal of the CCM company, and a financial analyst came to iGambit’s office to meet with iGambit’s Chief Executive Officer (“CEO”), Executive Vice President and General Counsel, and an advisor to the Board. Preliminary discussions began regarding the structure of a potential merger with the CCM company. Between May 29, 2018 and June 14, 2018, several additional meetings and conference calls were held outlining a potential deal. On June 14, 2018, iGambit and the CCM entered a Letter of Intent (LOI) to merge. One of the terms of the LOI, was that the CCM would secure a minimum of $2,000,000 in equity financing for the merged companies. Upon signing of the LOI mutual due diligence commenced and the Consultant began the financing efforts. Several funding resources were identified. Funding was delayed because the funding resources were waiting for a certain potential customer contract to be signed. The contract was signed in September 2018, and on September 7, 2018, an Amended LOI was executed in anticipation of funding being secured. Unfortunately, the funding was further delayed, as the contract did not guarantee sufficient enough sustaining recurring revenue in the near term, and pursuant to the contract revenue would not start ramping up until close to 2020. Acknowledging that the CCM financing and merger was taking too long, and appeared unlikely to close in a timely manner, iGambit began aggressively seeking out other options.

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In September 2018, iGambit began discussions with a small group of independent investors. After several meetings in Florida with our HealthDatix subsidiary management team, this group became interested in investing in iGambit. In November 2018 they were in the process of another financial transaction that was expected to close in the ensuing sixty (60) to ninety (90) days. In December 2018, this group informed us that they want to invest some of the proceeds of this transaction into iGambit. On December 3, 2018, they signed a term sheet to invest a minimum $1,000,000 to a maximum of $3,000,000 into iGambit. Unfortunately, the closing of their other financing transaction has been continually delayed.

Simultaneously, in December 2018, one of iGambit’s stockholders, introduced iGambit to a third-party administrator (TPA) of healthcare services who was looking to possibly merge with a public company. On December 28, 2018, a member of our HealthDatix management, along with the stockholder, and a potential investor met with the TPA’s CEO. Discussions began regarding how the two companies could work together and type of transaction that could take place. Between December, through April 23, 2019, several meetings, conference calls and discussions of potential terms of a transaction occurred. Although discussions continued, the TPA was never able to come up with a definitive offer.

On April 26, 2019, Dr. Warren Hosseinion, Chairman of Clinigence Holdings, Inc. reached out to Elisa Luqman, Chief Financial Officer (“CFO”) and General Counsel of iGambit, via email, asking if iGambit would be interested in a potential merger. After looking up Dr. Hosseinion’s background, particularly his position at Apollo Medical Holdings (NASDAQ: AMEH) as well as Clinigence’s service offerings, and informing the CEO John Salerno and Board Advisor John Waters, Ms. Luqman responded to Dr. Hosseinion that iGambit was indeed interested.

On April 26, 2019, Dr. Hosseinion contacted Elisa Luqman via phone to introduce himself formally and his plans regarding Clinigence. This preliminary discussion included high-level potential synergies and future strategies. Between April 26, 2019 and May 14, 2019, Dr. Hosseinion and Elisa Luqman continued email and telephone correspondence outlining the general terms of a potential merger.

At that time, Clinigence Holdings, Inc. had been incorporated and combined Clinigence, LLC and QualMetrix, Inc. (“QMX”), with Clinigence, LLC being a wholly owned subsidiary of Clinigence Holdings, Inc. By mid-May, Clinigence had raised approximately $4,000,000 in funding for the QMX combination, and was actively seeking a merger partner in the public arena. Clinigence was attracted to our HealthDatix subsidiary.

On May 15, 2019, Dr. Warren Hosseinion and Mitchell Creem from Clinigence, and Elisa Luqman, John Salerno, and John Waters from iGambit, held a conference call to discuss the synergies between the companies, Clinigence’s future plans, the general terms of a potential merger and next steps.

Accordingly, the iGambit Board determined to pursue continued discussions with Clinigence.

From May 15, 2019 through May 31, 2019, iGambit and Clinigence had frequent conference calls and email exchanges discussing the possibility of pursuing a strategic transaction whereby the two companies would merge. One of the key topics of discussion was iGambit’s need to pay its short-term convertible debt and need of short-term working capital until a merger could be completed. It was agreed that Clinigence would advance funds to iGambit, but first needed to perform due diligence.

Additionally, the Exchange Ratios ranging from 60:40 to 90:10 in favor of Clinigence were discussed and evaluated. Ultimately, these negotiations resulted in agreement of an exchange ratio which would provide the stockholders of Clinigence with 85%, on a fully-diluted basis, of the outstanding shares of iGambit common stock following the Merger. This number also took into consideration certain factors; including, but not limited to, (1) Clinigence paying iGambit’s short term convertible debt; (2) Clinigence assuming iGambit’s remaining liabilities; (3) iGambit having nominal revenue; (4) Clinigence having revenue and the necessary working capital to support the consolidated company post-merger; and (5) Clinigence’s management’s team ability to raise additional funding post-merger.

On June 1, 2019, Clinigence and iGambit entered into a Non-Binding Indication of Interest (IOI), pursuant to which the parties would engage in two (2) weeks of aggressive mutual due diligence. Upon the successful completion and mutual satisfaction of due diligence, the parties would enter in a Letter of Intent (LOI) to merge and Clinigence would advance iGambit $393,092.28, in the form of a Promissory Note, $293,092.28 of which would be used solely to pay off iGambit’s short-term convertible debt, $100,000 to be used by iGambit as working capital.

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On June 12, 2019, Elisa Luqman from iGambit, Jerry Robinson, Mary-Jo Robinson and Kathleen Shepherd (the “HealthDatix Management Team”) met with Clinigence’s management team, consisting of Dr. Warren Hosseinion (Chairman), Mihir Shah (CFO), Dr. Larry Schimmel (CMO and the co-founder of QualMetrix), Chuck Kandzierski (COO/CIO) at HealthDatix’s headquarters in St. Petersburg, FL for the review of each company’s technology and capabilities.

After successful completion of the mutual due diligence, on June 24, 2019 iGambit, Inc. entered into a Letter of Intent (the “LOI”) with Clinigence Holdings, Inc. pursuant to which Clinigence loaned iGambit $393,092.28. On June 25, 2019 all of iGambit’s outstanding short-term convertible notes totaling $293,092.28 were retired and iGambit received $100,000 from Clinigence to be used as working capital. On June 26, 2019 a Form 8-K was filed by iGambit with the Securities and Exchange Commission to announce that the LOI had been executed.

On June 27, 2019, Elisa Luqman, John Salerno, and John Waters held conference calls with an investment banking firm for recommendations on determining the reverse stock split range for iGambit.

On July 10, 2019, Elisa Luqman and the HealthDatix Management Team met with Kobi Margolin (CEO and founder of Clinigence) and the Clinigence senior management team at Clinigence’s headquarters in Atlanta, GA, to continue the review of each company’s technology and capabilities.

On July 15, 2019, legal counsel to Clinigence presented a draft of the Merger Agreement to iGambit. On July 16, 2019, iGambit’s outside counsel provided initial markup and notes on the draft and it was circulated to the Board and advisor for review.

On July 17, 2019 Elisa Luqman, John Salerno, John Waters and Dr. Warren Hosseinion held conference calls with two additional investment banking firms for recommendations on determining the reverse stock split range for iGambit.

On July 25, 2019, the Board and advisor met to review and discuss the draft. On August 1, 2019, a revised marked version was sent to iGambit’s outside legal counsel for review. On August 2, 2019, a marked-up version was submitted back to Clinigence’s legal counsel. Simultaneously, during the Merger Agreement draft review process Clinigence’s auditors worked aggressively to complete the Clinigence two-year audits and 2019 first quarter review, and to provide the necessary Clinigence financial pro formas to be included in this Information Statement.

On August 5, 2019, the parties respective legal counsel had a conference call to discuss the revisions to the draft of the Merger Agreement. On the same day Mr. Hosseinion and Ms. Luqman also had a conference call to discuss the revisions to the draft of the Merger Agreement. Key issues addressed included (1) the fiduciary out language and particularly the related termination fee, (2) the sufficiency of the Reverse Stock Split range, (3) the review of the iGambit disclosure schedules, and in particular the schedule of liabilities, and (4) the willingness of iGambit and HealthDatix management to accept stock as partial payment against deferred compensation.

From August 6 through August 7, 2019, respective legal counsel to the parties provided each other comments and revised versions of the draft of the Merger Agreement. On August 7, 2019, a draft of the Merger Agreement in substantially final form was circulated to the Board and advisor for review.

On August 7, 2019, the Board met to discuss the acceptance of the Merger Agreement. The Board reviewed the substantially final version of the proposed Merger Agreement including the material terms, conditions and provisions of the draft Merger Agreement and the structure of the proposed transaction. Following the discussion, the Board approved the Merger Agreement and adopted the resolution to approve the Merger as it was in the best interest of iGambit and its stockholders.

On August 8, 2019 iGambit entered into the Merger Agreement with Clinigence and Merger Sub. Also, on August 8, 2019, a Form 8-K was filed by iGambit with the Securities and Exchange Commission to announce that the Merger Agreement had been executed.

On September 24, 2019, Mr. John Salerno, the sole holder of Series A Preferred Shares and thus holder of the majority of our outstanding voting power, believing it to be in the best interests of the Company and its stockholders, approved the Merger.

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Reasons for the Merger; Recommendation of iGambit’s Board of Directors

In its review the Board consulted with its management, legal and financial advisors, and reviewed a significant amount of information and considered a number of factors, including, among others, the following factors: (i) the information Clinigence provided regarding its technology, products and services, management experience and potential competitive position; (ii) the financial, operational, businesses and strategic objectives of Clinigence; (iii) the willingness of Clinigence to lend funds to iGambit prior to the Merger to pay off iGambit’s short term convertible debt and working capital; (iv) the current target markets proposed by Clinigence; (v) the consideration to be received by iGambit’s stockholders for the Merger; (vi) the terms, conditions and obligations of the Merger Agreement; (vii) possible alternative strategies and prospects for iGambit as an independent company and (viii) the financial condition and future prospects for iGambit.

Specifically, the iGambit Board considered that iGambit has not been able to adequately fund its HealthDatix subsidiary and achieve sustaining revenue, and this merger with Clinigence presented that opportunity through synergistic products and the same target market customers. The iGambit Board also considered that Clinigence's management has extensive experience in the health technology and related industry.

 

Clinigence’s founders have established relationships with leading healthcare companies, including, but not limited to Accountable Care Organizations (ACOs), Managed Services Organizations (MSOs), health plans, health systems, and physician practices. They have commercialized products in the space which the iGambit Board thought could be leveraged from a partnering perspective.

 

The iGambit Board further considered that Clinigence’s management has extensive experience in the successful growth and expansion of healthcare related companies in the public arena, most significantly, Clinigence’s Chairman, Dr. Warren Hosseinion’s success with Apollo Medical Holdings (NASDAQ: AMEH).

 

In addition, the Board considered the following challenges faced by iGambit as an independent company:

iGambit has not been successful in generating significant revenues from its current subsidiary operations both in its attempt to license its Annual Wellness Visit/Health Risk Assessment subscription service and launch its medical wearable, for which it accumulated significant debt;
the lack of revenues and debt has impacted iGambit and caused iGambit to seek additional financing options which resulted in further dilution of iGambit stock and greatly impacted its ability to continue operations;
the lack of funds necessary for further iGambit research and development in its medical wearable has impacted iGambit;
iGambit also has difficulties in raising capital in the public markets due to its financial position;
alternative acquisition and merger opportunities pursued during the past twelve (12) to eighteen (18) months have not come to fruition or been financially viable; and
the Company has nominal cash and the only opportunity to raise additional cash is through unattractive convertible notes that convert at a significant discount to the stock price and cause further dilution of the stockholders and induces a decrease in the trading share price.

Having no other viable alternative, and having exhausted all opportunities presented over the previous eighteen months, the Board unanimously (i) determined that the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement are acceptable and in the best interest of iGambit’s stockholders, (ii) approved the Merger Agreement, the Merger and the transactions contemplated by the Merger Agreement, and (iii) recommended that iGambit’s stockholders vote to adopt and approve the Merger Agreement and the Merger.

Factors Relating to the Specific Terms of iGambit’s Merger Agreement with Clinigence:

The Merger will result in iGambit stockholders being diluted based on the Exchange Ratio, to approximately 15%, on a fully-diluted basis, of the outstanding equity of iGambit immediately following the Effective Time. The Board agreed that based on the current financial status of iGambit and the potential for future increased value in the shares resulting from Clinigence’s projected performance, that the Merger was a viable solution at the agreed upon Exchange Ratio.

The Merger provides for the $418,092.28 bridge loan to iGambit. Clinigence loaned iGambit $393,092.28 upon signing of the Letter of Intent for the Merger in the form of a promissory note until the Effective Date, on August 6, 2019, Clinigence loaned iGambit an additional $25,000 in the form of a promissory note until the Effective Date, and on September 12, 2019, Clinigence loaned iGambit an additional $25,000 in the form of a promissory note until the Effective Date.

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iGambit engaged in extensive negotiation regarding the Exchange Ratio with Clinigence.

In the course of reaching the determinations and decisions and making the recommendation described above, iGambit’s Board of Directors, in consultation with iGambit’s senior management and outside advisors and outside legal counsel considered the risks and potentially negative factors relating to the Merger Agreement, the Merger and the other transactions contemplated thereby, including the following material factors:

the fact that the Merger would result in a change in control of iGambit with Clinigence stockholders holding 85%, on a fully-diluted basis, of the outstanding shares of iGambit common stock following the Merger and the right to appoint the new Board of Directors;
the risk that the potential benefits of the Merger and Clinigence’s business plans will not be realized or will not be realized within the expected time period;
the risk that the Merger may result in iGambit assuming unknown liabilities;
the risks associated with Clinigence’s projected revenue not being realized or not within the expected time period and therefore not having the ability to successfully implementing its business plan;
the risks and contingencies relating to the announcement and pendency of the Merger and the risks and costs to iGambit if the closing of the Merger is not timely or if it does not close at all, may have an effect on the trading price of iGambit common shares; and
the risk that the requirement as a provision of the Merger Agreement that iGambit conducts its business only in the ordinary course prior to the completion of the Merger, may delay or prevent iGambit from undertaking certain business opportunities that might arise pending completion of the Merger.

The Board believes that, overall, the potential benefits to the iGambit Stockholders of the Merger Agreement and the Transactions contemplated thereby outweigh the risks and uncertainties.

 

THE MERGER AGREEMENT

The following is a brief summary of the material provisions of the Merger Agreement, a copy of which is attached as Annex A to this Information Statement and is incorporated by reference into this summary. This summary may not contain all of the information about the Merger Agreement that is important to iGambit stockholders, and iGambit stockholders are encouraged to read the Merger Agreement carefully in its entirety. The legal rights and obligations of the parties are governed by the specific language of the Merger Agreement and not this summary.

The Merger

On August 8, 2019, iGambit, Inc. entered into an Agreement and Plan of Merger by and among iGambit, Clinigence, Merger Sub, and the Signing Stockholder.

The Merger Agreement provides for the Merger of Merger Sub with and into Clinigence. As a result of the Merger, Merger Sub will cease to exist, and Clinigence will continue as the surviving corporation in the Merger. After the Merger, the surviving corporation will be a direct wholly owned subsidiary of iGambit, and the former Clinigence stockholders will have a direct equity ownership and controlling interest in iGambit.

When the Merger Becomes Effective

Pursuant to the terms of the Merger Agreement, the Merger must be consummated by the outside date of November 30, 2019, which may be further extended by the parties, and the Merger will become effective at such time as a certificate of merger is duly filed with the Secretary of State of Delaware, unless a later date is specified therein.

Consideration to be Received Pursuant to the Merger

Each share of Clinigence Common Stock shall be converted solely into the right to receive a number of shares of iGambit Common Stock equal to the exchange ratio (the “Merger Consideration”).

At the Effective Time, all outstanding shares of Clinigence common stock will be converted solely into the right to receive a number of shares of iGambit common stock such that the holders of outstanding equity of Clinigence immediately prior to the Effective Time, will own approximately 85%, on a fully-diluted basis, of the outstanding equity, on a fully-diluted basis, of iGambit immediately following the Effective Time and holders of outstanding equity of iGambit immediately prior to the Effective Time, will own approximately 15%, on a fully-diluted basis, of the outstanding equity, on a fully-diluted basis, of iGambit immediately following the Effective Time.

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Fractional Shares

No fractional shares of iGambit common stock will be issued by virtue of the Merger and any Clinigence stockholder entitled under the Merger Agreement to receive a fractional share of iGambit common stock will be rounded up to the next whole share.

Representations and Warranties

The Merger Agreement contains customary representations and warranties of iGambit and Merger Sub, including representations and warranties relating to, among other things:

Organization
Authority
Capitalization
Conflict; Consents
Financial Statements
Absence of Undisclosed Liabilities
Absence of Changes
Material Contracts
Title to Assets
Properties
Intellectual Property
Service Providers
Benefit Programs
Compliance with Laws; Government Approval
Litigation
Taxes and Tax Returns
Brokers
Transactions with Affiliates
Insurance
Bank Accounts
Power of Attorney
Certain Securities Laws
Disclosure

The Merger Agreement also contains customary representations and warranties of Clinigence, including representations and warranties relating to, among other things:

Organization
Authority
Capitalization
Conflict; Consents
Financial Statements
Absence of Undisclosed Liabilities
Absence of Changes
Material Contracts
Title to Assets
Properties
Intellectual Property
Service Providers
Benefit Programs
Compliance with Laws; Government Approval
Litigation
Taxes and Tax Returns
Brokers
Transactions with Affiliates
Insurance
Bank Accounts
Power of Attorney
Certain Securities Laws
Disclosure

 

  19  

 

Additional Agreements

The Merger Agreement contains certain other agreements of the parties including, among other things, that:

Until the Effective Time or the earlier termination of the Merger Agreement in accordance with its terms, John Salerno (the “Signing Stockholder”) shall vote the shares of iGambit stock owned by him (or provide his written consent) in favor of the approval of the Merger Agreement and the Merger and against the approval of any proposal made in opposition to, or in competition with, the Merger Agreement or the Merger, including any Acquisition Transaction;
Promptly following the Closing, iGambit shall enter into an agreement with the Signing Stockholder granting him customary observer rights with respect to the iGambit Board;
iGambit and Clinigence will promptly notify one another of the occurrence or non-occurrence of any event that, individually or in the aggregate, would make the timely satisfaction of certain conditions of the Merger Agreement (set forth below in “Merger Agreement — Conditions of the Merger”) impossible or unlikely;
iGambit will enter into a three (3) year employment agreement with Elisa Luqman; and
The management team of the Company’s subsidiary HealthDatix, Inc., consisting of Jerry Robinson, Mary-Jo Robinson, Kathleen Shepherd and Marios Arnaoutoglou-Andreou will each have a minimum of a two (2) year employment term with HealthDatix, Inc., which employment term will become effective upon the closing of the Merger.

Certain Fees and Expenses

At or prior to closing of the Merger, each of iGambit and Clinigence shall pay their respective fees and expenses incurred in connection with the Merger.

Closing Conditions of the Merger

iGambit and Clinigence’s respective obligations to complete the Merger are subject to the satisfaction or waiver of various conditions, including the following:

No Restraints. The absence of any federal, state, local or foreign statute, law, ordinance, rule, regulation, order, judgment, decree or legal requirement, or any injunction by any United States or state court or United States governmental body prohibiting, restraining or enjoining the completion of the Merger;
Stockholder Approval. iGambit stockholders having approved the merger proposal; and
Charter Amendment. iGambit stockholders having approved the amendments to iGambit’s Certificate of Incorporation to effect the Reverse Stock Split and the Name Change.

  20  

 

Conditions to Clinigence’s Obligations

Clinigence’s obligations to complete the Merger are also subject to various conditions, including the following:

iGambit’s representations and warranties in the Merger Agreement being true and correct to the extent set forth in the Merger Agreement;
material compliance by iGambit with the covenants and obligations as to the extent set forth in the Merger Agreement, including, but not limited to:
o Redeem at par value or cancel for no consideration all issued and outstanding shares of iGambit Series A Preferred Stock; provided, however, that iGambit shall not redeem or cancel the iGambit Series A Preferred Stock more than two (2) Business Days prior to the Closing Date without the prior consent of Clinigence;
o Repay or convert in full any outstanding promissory notes issued by iGambit, other than the promissory note in favor of Clinigence;
o Complete a reverse stock split, including providing an Information Statement to its securityholders with respect thereto at least 20 days prior to such stock split becoming effective;
o Adopt, and submit to its stockholders for approval, an equity incentive plan in form and substance satisfactory to Clinigence;
o Amend its Certificate of Incorporation to change its name to Clinigence Holdings, Inc., eliminate its Series A Preferred Stock as authorized shares and, if necessary to complete the Merger, increase the number of authorized shares of iGambit Common Stock; and
o iGambit shall have provided required notice to FINRA of the transactions set forth in Section 4.1 of the Merger Agreement, the Reverse Stock Split and Name Change, and obtained all required FINRA approvals related to the Merger.
the absence of any material adverse effect on iGambit;
receipt of all required government approvals;
the absence of any federal, state, local or foreign statute, law, ordinance, rule, regulation, order, judgment, decree or legal requirement, or any injunction by any United States or state court or United States governmental body prohibiting, restraining or enjoining the completion of the Merger;
iGambit has obtained all required third party consents;
iGambit has delivered all closing documents as set forth in the Merger Agreement;
iGambit shall be OTCQB qualified and its securities shall be DTC eligible; and
iGambit and Clinigence shall have prepared a draft current report on Form 8-K with respect to the Merger in a form reasonably satisfactory to Clinigence, which will be filed with the SEC immediately following the Effective Time.

  21  

 

Conditions to iGambit’s Obligations

iGambit’s obligations to complete the Merger are also subject to various conditions, including the following:

Clinigence’s representations and warranties in the Merger Agreement being true and correct to the extent set forth in the Merger Agreement;
material compliance by Clinigence with the covenants and obligations as to the extent set forth in the Merger Agreement;
the absence of any material adverse effect on Clinigence;
receipt of all required government approvals;
the absence of any federal, state, local or foreign statute, law, ordinance, rule, regulation, order, judgment, decree or legal requirement, or any injunction by any United States or state court or United States governmental body prohibiting, restraining or enjoining the completion of the Merger;
Clinigence has obtained all required third party consents;
Clinigence has delivered all closing documents as set forth in the Merger Agreement;
iGambit and Clinigence shall have prepared a draft current report on Form 8-K with respect to the Merger in a form reasonably satisfactory to Clinigence, which will be filed with the SEC immediately following the Effective Time; and
Clinigence shall have completed two years of audited financial statements., and one quarter of reviewed financial statements.

 

Termination

 

The Merger Agreement may be terminated at any time, but not later than the closing, as follows:

by mutual written consent of iGambit and Clinigence;
by either iGambit or Clinigence if the transactions contemplated by the Merger Agreement are not consummated on or before November 30, 2019, provided that the right to terminate will not be available to any party whose failure to fulfill any material obligation was the cause of or resulted in the failure of the transactions contemplated by the Merger Agreement to be consummated by such date;
by either iGambit or Clinigence if the other party has breached any of its covenants, agreements or representations and warranties (and has not cured its breach within 30 days of the giving of notice of such breach);
by either iGambit or Clinigence if the other party discloses any facts, circumstances or matters not disclosed in any Schedules delivered on or prior to the Signing Date that, individually or in the aggregate, could reasonably be expected to result in a Clinigence Material Adverse Effect; or
by iGambit, if iGambit receives an unsolicited Acquisition Transaction proposal that its Board of Directors (the “Board”) concludes in good faith, after consultation with outside counsel and its financial advisors, constitutes (or could be reasonably expected to constitute) a Superior Proposal (as defined in the Merger Agreement) after giving effect to all of terms of the Merger Agreement, after iGambit has provide Clinigence for a period of (10) days the opportunity to submit an amended written proposal or to make a new written proposal to the Board (the “Fiduciary Out”).

In the event that the Merger Agreement is terminated by iGambit, pursuant to the Fiduciary Out, iGambit shall (i) pay Clinigence $400,000, (ii) reimburse Clinigence all out of pocket expenses incurred by Clinigence in connection with the transactions contemplated herein, and (iii) repay the balance and accrued interest outstanding on promissory note in favor of Clinigence, the total sum amount of which shall be due and payable immediately upon such termination.

 

  22  

 

 

Expenses

 

Whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger including all legal, accounting, financial, advisory, consulting and all other fees and expenses of third parties incurred by a party in connection with the Merger, shall be the obligation of the respective party incurring such fees and expenses.

 

Effect of Termination

 

In the event of termination of the Merger Agreement prior to the Effective Time in accordance with the terms of the Merger Agreement, the Merger Agreement will become void, and there shall be no liability or further obligation on the part of iGambit and Clinigence other than:

 

the parties’ mutual obligations which survive termination, under the terms of the Merger Agreement; and
any liability that has already accrued as of the effective date of such termination.

 

Interest of iGambit’s Directors and Officers in the Merger

Our executive officers and members of our Board have interests in the merger action that are different from, or in addition to, the interests of our stockholders generally. The members of our Board were aware of these differing interests and considered them, among other matters, in evaluating and negotiating the transaction agreements and in recommending to the majority voting shareholder that he vote in favor of the Actions. These interests include, among other things:

 

Elisa Luqman will enter a three (3) year employment agreement with iGambit, which employment agreement will become effective upon the closing of the Merger;
Elisa Luqman and certain other related parties may agree to cancel certain Deferred Compensation and Related Party Indebtedness, in exchange for Company shares;
the management team of the Company’s subsidiary HealthDatix, Inc., consisting of Jerry Robinson, Mary-Jo Robinson, Kathleen Shepherd and Marios Arnaoutoglou-Andreou will each have a minimum of a two (2) year employment term with HealthDatix, Inc., which employment term will become effective upon the closing of the Merger;
John Waters, advisor to the iGambit Board, may take on the position as a member of the Board of Directors after the Effective Time; and
John Salerno will enteran agreement for customary observer rights with respect to the iGambit Board.

 

No Appraisal Rights.

Under Delaware General Corporation Law, the Stockholders are not entitled to appraisal rights with respect to the Merger, and the Company will not independently provide Stockholders with any such right.

 

No Dissenters’ Rights

Under Delaware General Corporation Law, the Stockholders are not entitled to dissenters’ rights with respect to the Merger, and the Company will not independently provide Stockholders with any such right.

THE VOTING AGREEMENT

The voting agreement generally requires John Salerno to vote the shares of iGambit stock owned by him (or provide his written consent) in favor of the approval of the Merger Agreement and the Merger and against the approval of any proposal made in opposition to, or in competition with, the Merger Agreement or the Merger, including any Acquisition Transaction; unless the Merger Agreement is terminated pursuant to the Fiduciary Out. Also, during the period commencing on the Signing Date and ending at the Effective Time or the earlier termination of the Merger Agreement, Mr. Salerno is not to transfer, sell, exchange, pledge or otherwise dispose of or encumber any of the shares of iGambit owned by him. Mr. Salerno is the sole holder of Series A Preferred Shares and thus holds the majority of iGambit’s outstanding voting power.

  23  

 

INFORMATION WITH RESPECT TO CLINIGENCE

Overview

Clinigence is a leading healthcare information technology company providing an advanced, cloud-based platform that enables healthcare organizations to provide value-based care and population health management. The Clinigence platform aggregates clinical and claims data across multiple settings, information systems and sources to create a holistic view of each patient and provider and virtually unlimited insights into patient populations.

 

Clinigence is the culmination of the combination of Clinigence, LLC and QualMetrix, Inc. (“QualMetrix”), two advanced healthcare information technology companies, with Clinigence, LLC being a wholly owned subsidiary of Clinigence Holdings, Inc.

 

Clinigence, LLC, founded in 2010 and based in Atlanta, Georgia, is a pioneer in clinical quality reporting. Its solution integrates clinical and claims data across multiple electronic health record (EHR) systems to allow its customers to improve the quality of care of its patients, improve care coordination and to reduce cost. Started by a core team that had worked together in previous start-ups. The team has a long track record of health IT innovation and entrepreneurial success, collectively generating more than $1billion in stockholder value.

 

Clinigence, LLC believes it provides unique clinical business intelligence software-as-a-service (SaaS), and has a patent application pending. Clinigence, LLC empowers new value-based care delivery and payment models by liberating patient data and translating them into value metrics.

 

The Clinigence, LLC solution cost-effectively integrates clinical and financial data across all EHR systems and care settings and delivers comprehensive patient views and real-time, dynamic and predictive population reports critical to success in value-based payment.

 

While EHR adoption has skyrocketed over the past few years, clinical data remain locked in silos, highly variable and fragmented by transaction. Current information technology (IT) is designed to maximize transaction-based billing and is inadequate for population based reporting. Payers have access to cost and utilization data through claims and providers have access to EHR data, but neither stakeholder has been successful in putting the two together – the key to maximizing the value of care.

 

Clinigence, LLC has developed technology that efficiently integrates data from any source, normalizes and aggregates it by patient and classifies patients into any population defined by clinicians. To date, Clinigence, LLC has applied this technology to EHR and claims data. Clinigence, LLC has helped more than 1,000 practices, including some 15 accountable care organizations (ACOs) report and improve quality to maximize quality based payment. Clinigence, LLC is also helping its ACO customers reduce cost and improve care coordination.

 

Clinigence, LLC enables clinicians to identify patients in need of services, such as annual wellness visits and chronic care management, and proactively manage them to improve quality and maximize billings. Clinigence, LLC enables healthcare organizations to measure and improve quality and reduce the cost of care. The technology works seamlessly across networks of practices with disparate and diverse systems.

 

Clinigence, LLC has a pending patent application for its technology (U.S. Patent Application No. 15/882,688). Clinigence, LLC believes its technology is unique in two critical ways: (1) it efficiently integrates data from any EHR and claims sources; and (2) it enables clinicians to target any patient population and measure any clinical key performance indicator (KPI) in real time with no dependence on EHR vendors, IT or informatics staff.

 

Clinigence’s platform is currently in use by 14 Accountable Care Organizations (ACOs), 7 Managed Services Organizations (MSOs), 5 health plans, 35 hospitals, and over 8,000 individual providers, and hosting more than 9 million patient records.

 

  24  

 

 

QualMetrix, founded in 2013 and based in Miramar, Florida, is a population health analytics company that provides turnkey SaaS solutions that enable connected intelligence across the care continuum by transforming massive amounts of data into actionable insights.

 

The company’s solutions help healthcare organizations improve the quality and cost effectiveness of care, enhance population health management and optimize provider networks. QualMetrix enables risk-bearing healthcare organizations achieve their objectives on the path to value-based care.

 

QualMetrix’s platform automatically extracts and delivers targeted data insights from its cloud-based analytics engine directly to the workflows and technologies of its customers. This enhances end-user workflows with actionable analytics, seamlessly delivers data from disparate sources to the point of engagement, automates the delivery of data to ensure on-time access, and reduces dependency on non-essential applications from the end-user’s workflow. All of this allows the healthcare organization to enable population health management, manage cost and utilization, improve quality, identify gaps in care, risk stratify and target patients, increase collaboration among providers and to optimize network provider performance.

 

Clinigence, LLC and QualMetrix, Inc. have each developed what they consider leading technology in the provider and payer analytics markets respectively. As the healthcare industry continues to shift risk from payers to providers, the integration of these respective capabilities into a single platform has the potential to surpass the competition and create a leading solution for the value-based healthcare analytics market.

 

Population Health starts with a comprehensive view of each individual patient. Under the fee-for-service (FFS) model, payers bore all the risk. Payers’ attempts to control the cost of care over the past few decades have been stymied by their limited view of their members and their limited control over medical decisions. Under the same model providers had little knowledge of the cost of care and minimal (if not inverse) interest in reducing the total cost of care. Value-based Healthcare aims to transform this perverse paradigm.

 

Under Value-based Healthcare models, providers and payers share the risk for the total cost of care. The sharing of risk is creating an emerging market opportunity that is forecasted to accelerate in the coming years. Under Value-based Healthcare, providers must quickly develop the capacity to manage the total cost of care. At the same time, payers can no longer afford to be left out of the complete clinical picture of their members. On both sides, this trend creates nothing less than a struggle for survival. On the one hand, providers are engaging in “middle-man cutting” arrangements, such as provider-sponsored health plans and direct-to-employer contracts. On the other hand, payers are attempting to shift risk by forging shared- and full-risk contracts with providers.

 

Over the past eight years, Clinigence, LLC has developed technology and expertise that it believes uniquely helps providers manage the quality and clinical outcomes of care. Clinigence, LLC believes that a key differentiator of its technology is the ability to aggregate data from multiple diverse sources into comprehensive patient-centric records. At the same time, QualMetrix, Inc. has developed market-leading technology and expertise in the analysis of the total cost of care based on administrative (claims) data.

 

Clinigence’s platform is currently in use by 14 ACOs, 7 MSOs, 5 health plans, 35 hospitals, and over 8,000 individual providers, and hosting more than 9 million patient records.

 

  25  

 

 

Principal Stockholders of Clinigence

Name and Address of Beneficial Owner   Shares
Beneficially
Owned
  Percent of
Outstanding
Principal Stockholders:                
Avenue 4 Special Situations FU (Series 3)     2,140,000 (1)     12.58 %
  Michal International Investment     1,317,991       7.75 %
                 
Directors and Named Executive Officers:                
Martin Breslin, Director     3,080,381       18.11 %
Jacob Margolin, Chief Executive Officer and Director     1,403,426       8.35 %
David Meiri, Director     1,044,423       6.14 %
Dr. Warren Hosseinion, Chairman, Director     915,000 (2)     5.38 %
Dr. Lawrence Schimmel, Chief Medical Officer     337,627       1.98 %
Charles Kandzierski, Chief Technology Officer     165,394       .97 %
Mihir Shah, Chief Financial Officer     302,000 (3)     1.78 %
Mark R. Fawcett, Director     40,000 (4)     .24 %
All directors and executive officers as a group     10,746,242       93.17 %

(1) Avenue 4 Special Situations FU (Series 3) also owns warrants to purchase 856,000 shares of Clinigence Common Stock.

(2) 675,000 shares are restricted shares subject to vesting on the closing of the Merger on or before December 31, 2019. Dr. Warren Hosseinion also owns warrants to purchase 96,000 shares of Clinigence Common Stock.

(3) 270,000 shares are restricted shares subject to vesting on the closing of the Merger on or before December 31, 2019. Mihir Shah also owns warrants to purchase 12,800 shares of Clinigence Common Stock.

(4) Mark R. Fawcett also owns warrants to purchase 16,000 shares of Clinigence Common Stock.

Assets and Liabilities of Clinigence

As indicated below in Clinigence’s financial statements, as of June 30, 2019 Clinigence had total assets of $6,566,581 of which $1,612,588 is current assets which consist primarily of $827,692 in cash and cash equivalents, $282,953 in accounts receivable, $393,093 note to related party, $108,850 in other current assets, and, $4,953,993 of non-current assets which consist primarily of property, plant and equipment assets of $91,283, intangible assets of $1,606,789, $3,185,473 in goodwill and other non-current assets of $70,448. Clinigence had $1,734,911 in total liabilities consisting of $1,175,641 in accounts payable and accrued expenses, $195,882 in deferred revenue, $16,200 in a note payable to related party, $58,599 in notes payable and $288,589 in convertible notes payable.

  26  

 

 

CLINIGENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED

PRO-FORMA STATEMENT OF OPERATIONS FOR THE

YEARS ENDED DECEMBER 31, 2018 AND 2017

(UNAUDITED)

 

On March 1, 2019, the Company entered into a Contribution Agreement by and among Clinigence Holdings, Inc. (“Clinigence”), QualMetrix, Inc. (“QMX”), and the Members of Clinigence, LLC ( the “Contribution Agreement”) whereby Clinigence Holdings, Inc. (the “Company”) acquired all of the assets and operations and assumed all of the liabilities of QualMetrix, Inc. The Company acquired substantially all of the assets of QMX to further its SAAS-based offerings to its customers and expand into new markets. The goodwill is derived largely from the expected growth of the Company, as well as synergies and economies of scale expected from combining the operations of QMX with the Company. Pursuant to the Contribution Agreement, all of the outstanding Series A and Series B Preferred Stock and Common Stock of QualMetrix, Inc. totaling 34,726,659 shares were exchanged for 5,021,951 common shares of Clinigence Holdings, Inc. All outstanding shares of QualMetrix, Inc. immediately preceding its dissolution were treated as one class. On the date of the transaction, the shares of common stock issued to QualMetrix, Inc. had an estimated fair value of $0.83 per share.

 

The following table represents the fair value of the consideration paid allocated to the assets and liabilities acquired in applying the acquisition method for the completion of the QualMetrix, Inc. business combination:

 

 

Consideration:   Amount
Issuance of 5,021,950 shares of common stock   $ 4,168,219  
Net liabilities assumed     790,703  
Total consideration   $ 4,958,922  
         
Assets Acquired:        
Current assets   $ 112,992  
Property, equipment, and other non-current assets     6,457  
Identifiable intangible assets     1,654,000  
Goodwill     3,183,473  
Total assets acquired   $ 4,958,922  

 

The Company did not incur material acquisition costs associated with the Contribution Agreement.

 

In addition to the acquisition of QualMetrix, Inc., as part of the Contribution Agreement, 15,978,062 issued and outstanding member units of Clinigence, LLC were exchanged for 7,533,000 shares of common stock of Clinigence Holdings, Inc. All outstanding preferred member units, common member units, and incentive units of Clinigence, LLC immediately preceding the exchange were treated as one class.

 

Upon closing the Contribution Agreement, the convertible debt of Clinigence, LLC that is not repaid in full at Closing and holders of such Debt elect to convert such debt and any holders of warrants issued by Clinigence, LLC elect to exercise such warrants, Clinigence shall, to the extent permissible under applicable federal and state securities laws as reasonably determined by Clinigence, issue Clinigence Shares to the holders of such warrants and such debt in satisfaction thereof. As of June 30, 2019, previously outstanding convertible notes with an aggregate principal balance of approximately $600,000 were settled for cash payments of $200,000 and the conversion of aggregate principal of $400,000 into 638,718 shares of common stock.

 

The following unaudited pro forma condensed combined financial statements are presented to illustrate the effects of the acquisition of QualMetrix, Inc. on Clinigence Holdings, Inc. historical results of operations:

Unaudited condensed statements of operations for the year ended December 31, 2018

 

  27  

 

Clinigence Holdings, Inc.

Condensed Consolidated

Pro-Forma Statement of Operations

For the Year Ended December 31, 2018

(Unaudited)  

    Clinigence   QualMetrix   Pro Forma Adjustments   Notes   Pro Forma Combined
 REVENUES   $ 1,366,996     $ 859,411     $ (91,205 )     (1)   $ 2,135,202  
                                         
 COST OF SALES                                        
 Service Hosting Costs     185,521       145,701       (91,205 )     (1)     240,017  
 Direct Labor Costs     189,003       —                         189,003  
 Third Party License Fees     133,116       111,074                       244,190  
TOTAL COST OF SALES     507,640       256,775                       673,210  
                                         
 GROSS PROFIT     859,356       602,636       —                 1,461,992  
                                         
 OPERATING EXPENSES:                                        
Research and development     545,223       327,481                       872,704  
Sales and Marketing     208,924       153,872                       362,796  
General and administrative     945,607       349,324                       1,294,931  
Depreciation & Amortization     —         9,700       141,631       (2)     151,331  
TOTAL OPERATING EXPENSES     1,699,754       840,377       141,631               2,681,762  
LOSS FROM OPERATIONS     (840,398 )     (237,741 )     (141,631 )             (1,219,770 )
                                         
OTHER INCOME AND (EXPENSE)                                        
 Interest expense     (109,799 )     (10,785 )                     (120,584 )
 Interest income     68       —                         68  
 Other income     —         —                         —    
 TOTAL OTHER EXPENSE, NET     (109,731 )     (10,785 )                     (120,516 )
                                         
LOSS BEFORE PROVISION FOR INCOME TAXES     (950,129 )     (248,526 )     (141,631 )             (1,340,286 )
                                         
 PROVISION FOR INCOME TAXES     —         —                            
                                         
 NET LOSS     (950,129 )     (248,526 )     (141,631 )             (1,340,286 )
                                         
Reflects the elimination of intercompany licensing revenue and cost of goods sold exchanged between QualMetrix, Inc. and Clinigence, LLC prior to the acquisition.
Reflects the amortization of identifiable intangible assets acquired from QualMetrix, Inc. consisting of customer relationships and developed technology.

  28  

 

The historical condensed consolidated financial information of Clinigence Holdings, Inc. has been adjusted in the Unaudited Pro Forma Financial Information to give effect to pro forma events that are (1) directly attributable to the Acquisition, (2) factually supportable and (3) with respect to the consolidated statement of operations, expected to have a continuing impact on the combined results of Clinigence Holdings, Inc. and the Acquisition. The following unaudited pro forma condensed combined consolidated statements of operations (Unaudited Pro Forma Statements of Operations) have been prepared assuming the Acquisition had been completed on January 1, 2018, the first day of Clinigence Holdings, Inc.’s fiscal year. The Unaudited Pro Forma Financial Information has been adjusted with respect to certain aspects of the Acquisitions to reflect the consummation of the Acquisition.

The Unaudited Pro Forma Financial Information was prepared in accordance with the regulations of the United States Securities and Exchange Commission (SEC), and is not necessarily indicative of the financial position or results of operations that would have occurred if the Acquisition had been completed on the dates indicated, nor is it indicative of the consolidated future operating results or financial position of the Consolidated Company. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in connection with the Unaudited Pro Forma Financial Information. In accordance with Article 11 of Regulation S-X, a pro forma balance sheet is not required as the Acquisition has already been reflected in Clinigence Holdings, Inc.’s unaudited condensed consolidated balance sheet for the six months ended June 30, 2019.

The Unaudited Pro Forma Financial Information does not reflect events that may occur after the Acquisition, including, but not limited to, the anticipated realization of any ongoing savings from operating synergies. It also does not give effect to the costs necessary to achieve these savings and synergies.

A copy of the Clinigence LLC and QualMetrix Audited Financials for the Fiscal Years Ended December 31, 2017 and December 31, 2018 are attached as Annex A-1 and Annex A-2 to this Information Statement.

  29  

 

CLINIGENCE HOLDINGS, INC.

CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDING JUNE 30, 2019

(UNAUDITED)

 

CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
As of,
   

June 30,

 2019

 

December 31,

2018

    (Unaudited)    
ASSETS        
CURRENT ASSETS:                
Cash and cash equivalents   $ 827,692     $ 119,267  
Accounts receivable     282,953       186,150  
Note receivable - related party     393,093       —    
Other current assets     108,850       —    
Total current assets     1,612,588       305,417  
Property, plant and equipment, net     91,283       7,612  
Identifiable intangible assets, net     1,606,789       —    
Goodwill     3,185,473       —    
Other non-current assets     70,448       136,399  
Total non-current assets     4,953,993       144,011  
TOTAL ASSETS   $ 6,566,581     $ 449,428  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)                
CURRENT LIABILITIES:                
Accounts payable and accrued expenses   $ 1,175,641     $ 567,006  
Deferred revenue     195,882       —    
Convertible notes payable - related party     —         300,000  
Notes payable - related party     16,200       —    
Notes payable     58,599       177,055  
Total current liabilities     1,446,322       1,044,061  
Convertible notes payable - related party, net of current portion     —         299,996  
Notes payable, net of current portion     288,589       602,724  
Total non-current liabilities     288,589       902,720  
TOTAL LIABILITIES     1,734,911       1,946,781  
                 
STOCKHOLDERS’ EQUITY (DEFICIT):                
Preferred member unit capital contributions   $ —       $ 2,876,000  
Members' capital contributions     —         1,078,922  
Common stock, $.00001 par value 100,000,000 authorized: 16,725,668 shares issued and outstanding as of June 30, 2019     167       —    
Additional paid-in capital     12,882,495       —    
Accumulated deficit     (8,050,992 )     (5,452,275 )
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)     4,831,670       (1,497,353 )
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   $ 6,566,581     $ 449,428  

The accompanying notes are an integral part of these unaudited financial statements

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CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
     
      For the Six Months Ended June 30,  
      2019  
      (Unaudited)  
Net revenue   $ 657,414  
         
Cost of revenues     495,509  
         
Gross Profit     161,905  
         
Operating expenses:        
Research and development     463,710  
Sales and marketing     161,552  
Amortization     47,211  
General and administrative     1,900,985  
Total operating expenses     2,573,458  
Operating loss     (2,411,553 )
         
Other income expense:        
Loss on related party convertible debt conversion     (130,140 )
Interest expense, net     (57,024 )
Loss before income tax     (2,598,717 )
Provision for income tax     —    
         
Net loss   $ (2,598,717 )
         
Net loss per common share, basic and diluted   $ (0.19 )
         
Weighted average shares outstanding - basic and diluted     13,377,701  

The accompanying notes are an integral part of these unaudited financial statements

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CLINIGENCE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
    For the Six Months Ended June 30,
    2019
CASH FLOWS FROM OPERATING ACTIVITIES:   (Unaudited)
Net loss   $ (2,598,717 )
Adjustments to reconcile net loss to net cash used in operating activities:        
Stock compensation     541,934  
Amortization     47,211  
Depreciation     5,356  
Loss on related party convertible debt conversion     130,140  
Amortization of debt issuance costs     11,104  
Changes in operating assets and liabilities:        
Accounts payable     49,620  
Deferred revenue     172,682  
Accounts receivable     (96,803 )
Other current assets     (18,725 )
Other non-current assets     67,601  
Net Cash Used in Operating Activities     (1,688,597 )
         
CASH FLOWS FROM INVESTING ACTIVITIES:        
Cash acquired in QualMetrix, Inc.     22,918  
Note receivable - related party     (393,093 )
Purchase of property and equipment     (84,220 )
Net Cash Used in Investing Activities     (454,395 )
         
CASH FLOWS FROM FINANCING ACTIVITIES:        
Proceeds from sale of common stock     3,687,450  
Proceeds from convertible notes     —    
Principal payments on notes payable     (636,033 )
Principal payments on convertible notes payable     (200,000 )
Net Cash Provided by Financing Activities     2,851,417  
         
Net change in cash and cash equivalents     708,425  
Cash and cash equivalents, beginning of period     119,267  
Cash and cash equivalents, end of period   $ 827,692  
         
INTEREST PAID:   $ 45,920  
TAXES PAID:   $ —    
         
NON-CASH INVESTING AND FINANCING ACTIVITIES:        
Common stock issued for acquisition of QualMetrix, Inc.   $ 4,168,219  
Common stock issued for convertible debt conversion   $ 399,997  

The accompanying notes are an integral part of these unaudited financial statements 

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CLINIGENCE HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDING JUNE 30, 2019

(UNAUDITED)

 

1. Nature of Operations

In October 2018, Clinigence Holdings, Inc. was formed as a wholly-owned subsidiary of Clinigence, LLC. On March 1, 2019, Clinigence Holdings, Inc. entered into a Contribution Agreement (“Agreement”) by and among Clinigence Holdings, Inc. (“Clinigence”), QualMetrix, Inc. (“QMX”), Clinigence, LLC (“CLI”) (collectively, the “Company”), and the Members of Clinigence, LLC. Upon closing the transactions as called for in the Contribution Agreement, Clinigence Holdings, Inc. exchanged shares of its common stock for all the outstanding member units of Clinigence, LLC and acquired substantially all of the assets of QualMetrix, Inc.

The Company is a population health analytics company that provides turnkey SaaS solutions that enable connected intelligence across the care continuum by transforming massive amounts of data into actionable insights. The Company’s solutions help healthcare organizations throughout the United States improve the quality and cost-effectiveness of care, enhance population health management and optimize provider networks. The Company enables risk-bearing healthcare organizations achieve their objectives on the path to value-based care. The Company’s platform automatically extracts and delivers targeted data insights from its cloud-based analytics engine directly to the workflows and technologies of its customers. This enhances end-user workflows with actionable analytics, seamlessly delivers data from disparate sources to the point of engagement, automates the delivery of data to ensure on-time access, and reduces dependency on non-essential applications from the end-user’s workflow. All of this allows the healthcare organization to enable population health management, manage cost and utilization, improve quality, identify gaps in care, risk stratify and target patients, increase collaboration among providers and to optimize network provider performance.

2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “financial statements”) have been prepared on a condensed interim basis and may not include all information and footnotes which are normally included in the Company’s annual consolidated financial statements. These financial statements reflect all adjustments (consisting of normal recurring items or items discussed herein) that management believes are necessary to fairly state results for the interim period presented. Results of operations for interim periods are not necessarily indicative of annual results of operations.

Principles of Consolidation

The Company consolidates the assets, liabilities, and operating results of its wholly-owned subsidiaries, Clinigence India and Clinigence, LLC. Subsequent to the acquisition transaction, the Company legally dissolved QualMetrix, Inc. as of June 30, 2019. All intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. The Company does not have any cash equivalents as of June 30, 2019 and December 31, 2018. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured.

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Revenue Recognition

Revenue is generated primarily by software licenses, training, and consulting. Software licenses are provided as SaaS-based subscriptions that grants access to proprietary online databases and data management solutions. Training and consulting are project based and billable to customers on a monthly-basis or task-basis.

Revenue from training and consulting are generally recognized upon delivery of training or completion of the consulting project. The duration of training and consulting projects are typically a few weeks or months and last no longer than 12 months.

SaaS-based subscriptions are generally marketed under multi-year agreements with annual, semi-annual, quarterly, or month-to-month renewals and revenue is recognized ratably over the renewal period with the unearned amounts received recorded as deferred revenue. Deferred revenue is recorded as accrued expenses in the accompanying consolidated balance sheet and was not significant at June 30, 2019 and December 31, 2018. For multiple-element arrangements accounted for in accordance with specific software accounting guidance, multiple deliverables are segregated into units of accounting which are delivered items that have value to a customer on a standalone basis.

On January 1, 2019, the Company adopted the new revenue recognition standard Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using the modified retrospective method. The modified retrospective adoption used by the Company did not result in a material cumulative effect adjustment to the opening balance of accumulated deficit. Revenue from substantially all the Company’s contracts with customers continues to be recognized over time as performance obligations are satisfied.

The Company provides its customers with software licensing, training, and consulting through SaaS-based subscriptions. This subscription revenue represents revenue earned under contracts in which the Company bills and collects the charges for licensing and related services. The Company determines the measurement of revenue and the timing of revenue recognition utilizing the following core principles: 

1. Identifying the contract with a customer;

2. Identifying the performance obligations in the contract;

3. Determining the transaction price;

4. Allocating the transaction price to the performance obligations in the contract; and

5. Recognizing revenue when (or as) the Company satisfies its performance obligations. 

Revenues from subscriptions are deferred when cash payments are received in advance of the satisfaction of the Company’s performance obligations and recognized over the period in which the performance obligations are satisfied. The Company completes its contractual performance obligations through providing its customers access to specified data through subscriptions for a service period, and training on consulting associated with the subscriptions. The Company primarily invoices its customers on a monthly basis and does not provide any refunds, rights of return, or warranties to its customers.

Cost of Sales

The Company’s costs of sales primarily consist of cloud computing and storage costs, datasets, and contracted and internal labor costs.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates made by management include, among others, provisions for doubtful accounts, purchase price allocations, recoverability of long-lived assets including identifiable intangible assets and goodwill, and valuation of stock-based compensation. Actual results could materially differ from those estimates.

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Concentration of Credit Risk

The Company grants credit to its customers during the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral.

Accounts Receivable

The Company grants credit to its customers during the normal course of business. The Company performs ongoing credit evaluations of its customers’ financial condition and generally requires no collateral. The Company did not have an allowance for doubtful accounts at June 30, 2019 and December 31, 2018.

Property and Equipment

Property and equipment, consisting of computers and other office equipment, is recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets ranging from three to five years. Maintenance and repairs are charged to expense as incurred. Renewals and improvements of a major nature are capitalized.

At the time of retirement or other disposition of property and equipment, the cost and accumulated depreciation or amortization are removed from the accounts and any resulting gains or losses are reflected in the accompanying statements of operations.

Long-Lived Assets

Long-lived assets are recorded at cost and depreciated or amortized over their estimated useful lives. For purposes of determining whether there are any impairment losses, management evaluates the carrying value of the Company’s identifiable long-lived assets, including their useful lives, when indicators of impairment are present, considering whether the undiscounted lowest identifiable cash flows are sufficient to recover the carrying amount of the applicable asset or asset group. If an impairment is indicated, the Company computes the impairment based on the fair value of the asset, as compared to the carrying value of the asset, such a loss would be charged to expense in the period the impairment is identified. Furthermore, if the review of the carrying values of the long-lived assets indicates impairment of such assets, the Company may determine that shorter estimated useful lives are more appropriate. 

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary in order to reduce deferred tax assets to the amounts expected to be recovered.

The Company has established a valuation allowance for its deferred tax assets that are not recoverable from taxable temporary differences because the Company is unable to conclude that future utilization of a portion of its net operating loss carryforwards and other deferred tax assets is more likely than not.

The calculation of the Company’s tax positions involves dealing with uncertainties in the application of complex tax regulations in several different state tax jurisdictions. The Company is periodically reviewed by tax authorities regarding the amount of taxes due. These reviews include inquiries regarding the timing and amount of deductions and the allocation of income among various tax jurisdictions. The Company records estimated reserves for exposures associated with positions that it takes on its income tax returns that do not meet the more likely than not standards.

The Company recognizes interest and penalties associated with uncertain tax positions as a component of income tax expense. The Company does not have any unrecognized tax benefits or a liability for uncertain tax positions at June 30, 2019. The Company does not expect to have any unrecognized tax benefits within the next twelve months. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of income tax expense. There were no tax related interest and penalties recorded as of, and for the period ended June 30, 2019. Since the Company incurred net operating losses in every tax year since inception, all of its income tax returns are subject to examination and adjustments by the IRS for at least three years following the year in which the tax attributes are utilized.

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Fair Value Measurement

The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Level 1 Inputs: Quoted prices in active markets for identical assets or liabilities.

Level 2 Inputs: Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 Inputs: Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The fair value of certain of the Company’s financial instruments carried at cost, including cash, accounts receivable, accounts payable, and notes payable approximate the carrying amounts presented in the balance sheet due to the short-term nature of these instruments.

Stock-based Compensation

Stock-based compensation costs for eligible employees and directors are measured at fair value on the date of grant and are expensed over the requisite service period using a straight-line attribution method for the entire award that are subject to only service vesting conditions.

Debt Issuance Costs

Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the terms of the related debt agreements using the effective interest method.

Identifiable Intangible Assets and Goodwill

The Company reviews its long-lived assets, inclusive of goodwill and indefinable intangible assets, at least annually for impairment.

At least annually, at the Company’s fiscal year end, or sooner if events or changes in circumstances indicate that an impairment has occurred, the Company performs a qualitative assessment to determine whether it is more likely than not that the fair value of each reporting unit is less than its carrying amount as a basis for determining whether it is necessary to complete quantitative impairment assessments. The Company is required to perform a quantitative goodwill impairment test only if the conclusion from the qualitative assessment is that it is more likely than not that a reporting unit’s fair value is less than the carrying value of its assets. Should this be the case, a quantitative analysis is performed to identify whether a potential impairment exists by comparing the estimated fair values of the reporting units with their respective carrying values, including goodwill.

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An impairment loss is recognized if the implied fair value of the asset being tested is less than its carrying value. In this event, the asset is written down accordingly. The fair values of goodwill are determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

At least annually, indefinite-lived intangible assets are tested for impairment. Impairment for intangible assets with indefinite lives exists if the carrying value of the intangible asset exceeds its fair value. The fair values of indefinite-lived intangible assets are determined using valuation techniques based on estimates, judgments and assumptions management believes are appropriate in the circumstances.

The Company amortizes its identifiable intangible assets over their estimated useful lives using a straight-line attribution method.  The Company currently amortizes its identifiable intangible assets over a period of ten to thirteen years.  The Company’s identifiable intangible assets relate to customer relationships and developed technology acquired in March 2019.

Going Concern

The accompanying interim condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Since inception, the Company has not generated sufficient cash flows from its operations to fund the Company’s on-going obligations as they arise. In the future, the Company may require sources of capital in addition to cash on hand to continue operations and to implement its strategy.

The Company may be forced to seek credit line facilities from financial institutions, equity investments or debt arrangements. No assurances can be given that the Company will be successful in obtaining such additional financing on reasonable terms, or at all. If adequate funds are not available on acceptable terms, or at all, the Company may be unable to adequately fund its business plan. This raises substantial doubt about the Company’s ability to continue as a going concern. These financials do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

3. Acquisition and Share Exchange 

On March 1, 2019, the Company entered into a Contribution Agreement by and among Clinigence Holdings, Inc. (“Clinigence”), QualMetrix, Inc. (“QMX”), and the Members of Clinigence, LLC (“Agreement”) whereby Clinigence Holdings, Inc. acquired all of the assets and operations and assumed all of the liabilities of QMX. The Company acquired substantially all of the assets of QMX to further its SAAS-based offerings to its customers and expand into new markets. The goodwill is derived largely from the expected growth of the Company, as well as synergies and economies of scale expected from combining the operations of QMX with the Company. Pursuant to the Contribution Agreement, Clinigence shares were issued to QMX in exchange for substantially all of the assets of QMX. QMX shares subsequently distributed Clinigence shares to QMX stockholders in connection with QMX’s dissolution. All outstanding shares of QMX immediately preceding the dissolution were treated as one class. On the date of the combination, the shares of common stock issued to QMX had an estimated fair value of $0.83 per share based on an independent valuation.

The following table represents the fair value of the consideration paid allocated to the assets and liabilities acquired in applying the acquisition method for the completion of the QualMetrix, Inc. business combination:

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Consideration   Amount
Issuance of 5,021,950 shares of common stock   $ 4,168,219  
Net liabilities assumed     790,703  
Total consideration   $ 4,958,922  
         
Assets Acquired:        
Current assets   $ 112,992  
Property, equipment, and other non-current assets     6,457  
Identifiable intangible assets     1,654,000  
Goodwill     3,185,473  
Total assets acquired   $ 4,958,922  

The following tables provide detail associated with the Company’s acquired identifiable intangible assets:

    As of June 30, 2019
     

Gross Carrying

Amount

     

Accumulated

Amortization

     

Net Carrying

Amount

     

Weighted

Average

Useful Life

(in years)

 
Amortized intangible assets:                                
Customer relationships   $ 624,000     $ (20,800 )   $ 603,200       10  
Developed technology     1,030,000       (26,411 )     1,003,589       13  
Total   $ 1,654,000     $ (47,211 )   $ 1,606,789          

 

Aggregate Amortization Expense:   2019
For the six months ended June 30,   $ 47,211  

 

The following table illustrates the estimated amortization expense by year end: 

Estimated Amortization Expense:    
For the year ended December 31, 2019   $ 70,815  
For the year ended December 31, 2020     141,631  
For the year ended December 31, 2021     141,631  
For the year ended December 31, 2022     141,631  
For the year ended December 31, 2023     141,631  

The Company did not incur material acquisition costs associated with the Contribution Agreement.

In addition to the acquisition of substantially all of the assets of QualMetrix, Inc., as part of the Contribution Agreement, 15,978,062 issued and outstanding member units (including incentive units) of Clinigence, LLC were exchanged for 7,533,000 shares of common stock of Clinigence Holdings, Inc. All outstanding preferred member and common units of Clinigence, LLC immediately preceding the exchange were treated as one class. Prior to the acquisition and share exchange there were 360,000 shares of common stock of Clinigence Holdings, Inc. outstanding.

iGambit Definitive Merger Agreement

On June 24, 2019, the Company entered into letter of intent with Letter of Intent (“LOI”) with iGambit to effectuate a reverse triangular merger whereby the Company will be the wholly owned subsidiary of iGambit after closing the transaction. In conjunction with the LOI, subsequent definitive merger agreement entered into on August 8, 2019, the Company issued a six month, six percent interest promissory note to iGambit for $393,093 included in Note receivable-related party in the accompanying condensed consolidated balance sheets, and more fully described in Note 7. Subsequent Events.

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4. Notes and Convertible Notes Payable

Notes payable consisted of the following:

Note Description  

June 30,

2019

  December 31, 2018
Notes Payable:                
Notes Payable with maturities between six months and twelve months from the date of issuance with annual percentage interest rates between 24% and 29%   $ 8,762     $ 63,448  
Demand notes payable issued to former officers of Qualmetrix, Inc. with an annual percentage interest rate of 8% and matured in October 2018     16,200       —    
Note payable issued in May 2013 with a maturity date of May 2023 and interest rate of Prime +2% (7.5% and 6.5% at December 31, 2018 and 2018, respectively)     —         267,137  
Note payable issued in June 2017 with a maturity date of June 2022 and effective interest rate of 10.66%     338,426       449,194  
Total Notes payable   $ 363,388     $ 779,779  
Current portion -related party     (16,200 )     —    
Current portion     (58,599 )     (177,055 )
Total Notes payable, net   $ 288,589     $ 602,724  

Beginning in April 2018, the Company entered into a series of short-term notes with interest rates ranging from 24% to 29% per annum. Throughout the six months ended June 30, 2019 the Company made average monthly principal and interest payments approximating $12,000 per month.

In October 2017, the Company entered into demand notes with its former Chief Executive Officer totaling $100,000. In January through April 2018, the Company issued additional notes to its former Chief Executive Officer totaling $92,000 maturing one year from the date of issuance. In April 2019, one of the notes was settled via a cash payment of interest and principal totaling $195,789.

In June 2017, the Company entered into a Revenue Loan Investment for net working capital proceeds of $500,000. The Company is required to make monthly principal and interest payment on the Revenue Loan based on its net cash receipts from operations in the following 3 tiers:

• Tier 1 – Payments at a rate of 6.0% of the net cash receipts from the immediate month prior until cumulative loan payments are based on $2,500,000 of net cash receipts.

• Tier 2 – After achieving loan payments based on $2,500,000 of net cash receipts in a loan year, additional payments are based on 3.0% of amounts in excess of the Tier 1 Cap.

• Tier 3 – Payments at a rate of 0.5% of net cash receipts in excess of $3,200,000 in a loan year.

From the inception of the Revenue Loan in June 2017 through June 30, 2019 the Company has paid its monthly principal and interest payments based on the Tier 1 net cash receipts.

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In May 2013, the Company entered into a note agreement with a financial institution whereby it received net working capital proceeds of $500,000. The Company made monthly principal and interest payments approximating $6,000 per month including a variable interest rate of Prime plus 2% (6.5% as of December 31, 2018). The outstanding balance at June 30, 2019 and December 31, 2018 was $0 and $267,167, respectively.

Convertible notes payable consisted of the following:

Note Description   June 30, 2019   December 31, 2018
Convertible Notes Payable:                
Notes payable convertible into CLI common units at $0.44 per unit; nominal interest rate of 5%; and matured in January 2019     —         200,000  
Notes payable convertible into CLI common units at $0.59 per unit; nominal interest rate of 12%; and mature at various dates from August 2019 to August 2021; converted in May 2029     —         399,996  
Total Convertible notes payable - related party   $ —       $ 599,996  
Current portion     —         (300,000 )
Total Convertible related part notes payable, net   $ —       $ 299,996  

During the three months ended June 30, 2019, the Company issued 638,718 shares of common stock for the full conversion of previously outstanding related party convertible notes totaling $399,997. The Company recognized a loss on conversion of the debt of $130,140 based on the difference between the estimated fair value of the stock issued ($0.83 per share) and the net carrying amount of the debt totaling $399,997 on the date of conversion.

In January 2019, the Company made a cash payment totaling $200,000 to settle a previously outstanding convertible note payable. In conjunction with the payment, approximately 400,000 underlying warrants to purchase units of CLI expired unexercised.

During the six months ended June 30, 2019 the Company recognized total interest expense of $57,024.

5. Stockholders’ Equity 

Common Stock and Recapitalization

The Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.00001. The following provides a description of the common stock issuances for the six months ended June 30, 2019:

During the three months ended June 30, 2019, the Company issued 1,040,000 shares of common stock for cash proceeds totaling $1,209,000 net of offering costs of $91,000. For each common share purchased, the holders also received 0.4 warrants convertible in shares of common stock at an exercise price of $1.50 with an expiration date of December 31, 2024.

During the three months ended June 30, 2019, the Company issued 638,718 shares of common stock for the full conversion of previously outstanding related party convertible notes totaling $530,137, including the recognition of a loss on conversion of $130,140.

During the three months ended March 31, 2019, the Company issued 2,132,000 shares of common stock for cash proceeds totaling $2,478,450, net of offering costs of $186,550. For each common share purchased, the holders also received 0.4 warrants convertible in shares of common stock at an exercise price of $1.50 with an expiration date of December 31, 2024.

As further discussed in Note 3, the Company issued 5,021,950 shares of common stock for the acquisition of substantially all of the assets of QualMetrix, Inc. with an estimated fair value of $4,168,219.

As further discussed in Note 3, the Company exchanged 15,978,062 outstanding member units of Clinigence, LLC for 7,533,000 shares of common stock. Included in the conversion, the Company converted 3,671,015 inventive units to 1,537,018 shares of Clinigence Holdings, Inc. common stock, net of forfeitures. As part of the conversion, the Company accelerated the vesting of 1,204,121 units (converted to 504,154 shares of Clinigence Holdings, Inc. common stock) and recognized additional compensation cost associated with the accelerated vesting of approximately $542,000. Clinigence had 360,000 shares of common stock outstanding prior to the combination with QualMetrix.

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Warrants

The Company issued full vested warrants to investors as part of a private placement offering. Each unit offered in the private placement consisted of one share of common stock, and a warrant convertible into 0.4 shares of common stock at an exercise of $1.50 per whole share. The warrants are exercisable for a period of five years from the date of issuance.

A summary of the warrant activity is as follows (converted to whole number of shares at a rate of 0.4 to 1): 

    Warrants   Weighted Average Exercise Price
 Outstanding at January 1, 2018     618,062     $ 0.81  
Granted     1,903,200       1.50  
Forfeited and cancelled     (402,062 )     0.44  
Outstanding at June 30, 2019     2,119,200     $ 1.50  
Vested at June 30, 2019     2,119,200     $ 1.50  

During the six months ended June 30, 2019 the Company issued its placement agent 634,400 warrants with an exercise price of $1.50 per share exercisable for a period of five years.

6. Commitments and Contingencies

The Company leases its office space under a 64-month non-cancellable lease arrangement that began on January 1, 2019 and expires in April 2024. The lease payments escalate at a rate of three percent per annum and begin with base monthly lease payments of $5,477.

The following table provides the lease payments due by year under the Company’s non-cancellable lease agreement:

Year   Amount
2019   $ 32,864  
2020     67,700  
2021     69,731  
2022     71,823  
2023     73,978  
Thereafter     25,399  
Total   $ 341,495  

From time to time, the Company is involved in lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. The Company is not a named party in any other pending or threatened litigation that we expect to have a material adverse impact on our business, results of operations, financial condition or cash flows.

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7. Subsequent Events

The Company evaluated its financial statements for subsequent events through September 18, 2019, the date these financial statements were available to be issued.

In August 2019, the Company issued 945,000 shares of fully vested common stock for compensation to two individuals totaling $784,351.

In August 2019, the Company agreed to issue options to purchase an aggregate of approximately 200,000 shares of common stock. As of September 18, 2019, the Company has not granted the underlying options or determined the vesting, exercise price or maturity date.

On August 8, 2019, the Company entered into a definitive merger agreement with iGambit, Inc (“iGambit”). Pursuant to the Merger Agreement, iGambit, subject to certain conditions therein, shall issue shares of its common stock, on a fully-diluted pro rata basis, to the equity holders of the Company in exchange for 100% of the outstanding equity securities of the Company by means of a reverse triangular merger in which a wholly owned subsidiary of iGambit shall merge with and into the Company, with the Company continuing as the surviving corporation and a wholly owned subsidiary of iGambit (the “Merger”). If the closing of the Merger occurs (the “Closing”), the former Company equity holders shall own 85%, on a fully-diluted basis, of iGambit’s issued and outstanding common stock and the former iGambit equity holders shall own 15%, on a fully-diluted basis, of iGambit’s issued and outstanding common stock, in each case on a fully-diluted, as converted basis as of immediately prior to the Closing (including options, warrants and other rights to acquire equity securities of iGambit). To the extent necessary, iGambit shall increase the authorized number of shares to complete the issuance of shares. Any repurchase rights applicable to shares of the Company common stock prior to the Merger shall remain in effect after the Closing, and shall become rights to repurchase the shares of iGambit common stock issued in exchange for such shares of the Company common stock.

Immediately prior to the consummation of the Merger, (i) all issued and outstanding Series A Preferred Stock of iGambit shall be redeemed at $0.001 per share so that the only issued and outstanding equity securities of iGambit shall be common stock, (ii) any promissory notes shall be repaid or converted , and (iii) iGambit shall complete a to-be-mutually-determined reverse stock split such that the only issued and outstanding equity securities, including outstanding options and warrants, of iGambit shall be shares of common stock. 

The Merger Agreement has certain binding obligations and the transaction is subject to various conditions to closing, approval of the Company’s Board of Directors, approval of the Company’s stockholders, if required, and definitive documentation.

As of September 18, 2019, the Company advanced iGambit an additional $50,000 under the same terms as the outstanding note receivable as described in Note 3. 

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CLINIGENCE MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2019

 

You should read the following discussion and analysis of Clinigence Holdings, Inc. (“Clinigence”) financial condition and results of operations together with the Clinigence Holdings, Inc. Condensed Consolidated Financial Statements for the Six Months ended June 30, 2019, Clinigence Holdings, Inc. Condensed Consolidated Pro-Forma Statement of Operations for the Years Ended December 31, 2018 and 2017 (Unaudited) and Clinigence’s consolidated financial statements and related notes included elsewhere in this Information Statement, including financials attached as an Annex to this Information Statement. This discussion and other parts of this Information Statement contain forward-looking statements that involve risks and uncertainties, such as its plans, objectives, expectations, intentions and beliefs. Clinigence’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those included elsewhere in this Information Statement.

INTRODUCTION

Company Overview

Clinigence (the “Company”, “we”, “us”, “our”, “it”) is a population health analytics company that provides turnkey SaaS solutions that enable connected intelligence across the care continuum by transforming massive amounts of data into actionable insights. Clinigence’s solutions help healthcare organizations throughout the United States improve the quality and cost-effectiveness of care, enhance population health management and optimize provider networks. Clinigence enables risk-bearing healthcare organizations achieve their objectives on the path to value-based care. Clinigence’s platform automatically extracts and delivers targeted data insights from its cloud-based analytics engine directly to the workflows and technologies of its customers. This enhances end-user workflows with actionable analytics, seamlessly delivers data from disparate sources to the point of engagement, automates the delivery of data to ensure on-time access, and reduces dependency on non-essential applications from the end-user’s workflow. All of this allows the healthcare organization to enable population health management, manage cost and utilization, improve quality, identify gaps in care, risk stratify and target patients, increase collaboration among providers and to optimize network provider performance.

In October 2018, Clinigence Holdings, Inc. was formed as a wholly-owned subsidiary of Clinigence, LLC. On March 1, 2019, Clinigence entered into a Contribution Agreement by and among Clinigence Holdings, Inc. (“Clinigence”), QualMetrix, Inc. (“QMX”), and the Members of Clinigence, LLC (the “Contribution Agreement”) whereby Clinigence Holdings, Inc. acquired all of the assets and operations and assumed all of the liabilities of QMX. Clinigence acquired substantially all of the assets of QMX to further its SAAS-based offerings to its customers and expand into new markets. The goodwill is derived largely from the expected growth of Clinigence, as well as synergies and economies of scale expected from combining the operations of QMX with Clinigence. Pursuant to the Contribution Agreement, Clinigence shares were issued to QMX in exchange for substantially all of the assets of QMX. QMX subsequently distributed Clinigence shares to QMX stockholders in connection with QMX’s dissolution. All outstanding shares of QMX immediately preceding its dissolution were treated as one class. On the date of the combination, the shares of common stock issued to QMX had an estimated fair value of $0.83 per share based on an independent valuation.

In addition to the acquisition of substantially all of the assets of QMX, as part of the Contribution Agreement, 15,978,062 issued and outstanding member units (including incentive units) of Clinigence, LLC were exchanged for 7,533,000 shares of common stock of Clinigence. All outstanding preferred member and common units of Clinigence, LLC immediately preceding the exchange were treated as one class. Prior to the acquisition and share exchange there were 360,000 shares of common stock of Clinigence Holdings, Inc. outstanding.

On June 24, 2019, Clinigence entered into letter of intent with Letter of Intent (“LOI”) with iGambit, Inc. to effectuate a reverse triangular merger whereby Clinigence will be the surviving entity and a wholly owned subsidiary of iGambit after closing the transaction. In conjunction with the LOI, and subsequent definitive merger agreement entered into on August 8, 2019, Clinigence issued a six-month, six percent interest on promissory note to iGambit for $393,093 included in Note receivable-related party in the accompanying condensed consolidated balance sheets.

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Results of Operations

Revenue. We recognized approximately $657,000 of revenue for the six months ended June 30, 2019. As we continue to integrate the operations of QualMetrix and expand our marketing efforts we expect our revenues to increase on a quarter over quarter basis, however, there can be no assurance we will be successful in these efforts.

 

Operating Expenses. General and Administrative Expenses was approximately $1,901,000 for the six months ended June 30, 2019. Our General and Administrative Expenses consists of general corporate overheard including professional fee of approximately $1,082,000; payroll and related costs of approximately $583,000; rent and other facility costs of approximately $54,000; and general overhead including travel and insurance of approximately $182,000. Significant portions of professional fees and payroll are related to merger activity including a one-time charge for accelerated vesting of previously outstanding incentive awards of approximately $542,000. We expect that upon completion of the merger including the transaction with iGambit we expect our overall corporate overhead to remain flat and we do not expect to incur professional fees at these levels within the normal course of business unless we pursue additional merger and acquisitions activity

 

Sales and marketing expense of $162,000 primarily consists of trade shows including travel costs, payroll for marketing personnel and other advertising and media campaigns.

 

Research and development expense of approximately $464,000 consists of internal payroll and external consultants continuing to develop and improve our platform.

Other Income (Expense). We reported a non-recurring loss on related party convertible debt conversions of approximately $130,000 based on the difference between the estimated fair value of the stock issued ($0.83 per share) to convert the debt and the net carrying amount of the debt totaling $399,997 on the date of conversion. As of June 30, 2019, all of the previously outstanding convertible notes payable were fully settled. During the six months ended June 30, 2019, the Company recognized interest expense of approximately $57,000 on its outstanding notes and convertible notes payable. The Company expects its interest expense to decline for the remainder of 2019 due to the settlement of previously outstanding notes and convertible notes payable of approximately $1,236,000 of which approximately $836,000 was paid in cash with the remaining $400,000 converted to 638,718 shares of common stock.

 

Liquidity and Capital Resources

 

As reflected in the accompanying consolidated financial statements, at June 30, 2019, we had working capital of approximately $166,000 and unrestricted cash of approximately $828,000. While as of June 30, 2019 we have a working capital surplus we have operated at a net loss since inception. In order to execute our business plans, including the expansion of operations, we will need to raise additional capital. We currently do not having any firm funding commitments.

 

Cash Used in Operations

 

Net cash used in operating activities of approximately $1,689,000 for the six months ended June 30, 2019 primarily consisted of our operating revenues not being sufficient to cover our on-going obligations partially off-set by a non-recurring, non-cash charge of $542,000 for stock based compensation and loss on debt conversion of approximately $130,000, and a net increase in assets of approximately $48,000.

 

Cash Used for Investing Activities

 

Net cash used for investing activities primarily consisted of funding a loan to iGambit of approximately $393,000 to pay down debt prior to our expected merger transaction as well as the acquisition of property and equipment used for operations of approximately $84,000.

 

Cash Provided by Financing Activities

 

During the six months ended June 30, 2019, we issued approximately 3,200,000 shares of common stock for net cash proceeds of approximately $3,200,000, and made principal payments on previously outstanding notes and convertible notes payable totaling approximately $836,000.

 

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Plan of Operation and Funding

 

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current stockholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

 

Our primary capital requirements in 2019 are likely to arise from the expansion of our Clinigence operations. We anticipate raising capital in the private markets to cover any such costs, though there can be no guaranty we will be able to do so on terms we deem to be acceptable. We do not have any plans at this point in time to obtain a line of credit or other loan facility from a commercial bank.

 

While we believe in the viability of our strategy to improve Clinigence’s sales volume, and in our ability to raise additional funds, there can be no assurances that we will be able to fully effectuate our business plan.

 

We believe we will continue to increase our cash position and liquidity for the foreseeable future. We believe we have enough capital to fund our present operations.

 

Contractual Obligations and Commitments

Clinigence leases its office space under a 64-month non-cancellable lease arrangement that began on January 1, 2019 and expires in April 2024. The lease payments escalate at a rate of three percent per annum and begin with base monthly lease payments of $5,477.

The following table provides the lease payments due by year under Clinigence’s non-cancellable lease agreement:

Year   Amount
2019   $ 32,864  
2020     67,700  
2021     69,731  
2022     71,823  
2023     73,978  
Thereafter     25,399  
Total   $ 341,495  

Additionally, our currently outstanding debt obligation totaling approximately $338,000 fully mature in 2022.

Off-Balance Sheet Arrangements

As of June 30, 2019, Clinigence had no off-balance sheet arrangements as defined in Item 303(a)(4) of Regulation S-K as promulgated by the SEC.

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PRINCIPAL STOCKHOLDERS OF CLINIGENCE

The following table and the related notes present information on the beneficial ownership of shares of Clinigence’s capital stock as of June 30, 2019 held by:

each director of Clinigence;
each executive officer of Clinigence;
all of Clinigence’s current directors and executive officers as a group; and
each stockholder known by Clinigence to beneficially own more than five percent of its common stock on an as converted basis.
Name and Address of Beneficial Owner   Shares
Beneficially
Owned
  Percent of
Outstanding
Principal Stockholders:                
Avenue 4 Special Situations FU (Series 3)     2,140,000       12.58 %
Michal International Investment     1,317,991       7.75 %
                 
Directors and Named Executive Officers:                
Martin Breslin, Director     3,080,381       18.11 %
Jacob Margolin, Chief Executive Officer and Director     1,403,426       8.35 %
David Meiri, Director     1,044,423       6.14 %
Dr. Warren Hosseinion, Chairman, Director     915,000       5.38 %
Dr. Lawrence Schimmel, Chief Medical Officer     337,627       1.98 %
Charles Kandzierski, Chief Technology Officer     165,394       .97 %
Mihir Shah, Chief Financial Officer     302,000       1.78 %
Mark R. Fawcett, Director     40,000       .24 %
All directors and executive officers as a group)     10,746,242       63.17 %

(1) Avenue 4 Special Situations FU (Series 3) also owns warrants to purchase 856,000 shares of Clinigence Common Stock.

(2) 675,000 shares are restricted shares subject to vesting on the closing of the Merger on or before December 31, 2019. Dr. Warren Hosseinion also owns warrants to purchase 96,000 shares of Clinigence Common Stock.

(3) 270,000 shares are restricted shares subject to vesting on the closing of the Merger on or before December 31, 2019. Mihir Shah also owns warrants to purchase 12,800 shares of Clinigence Common Stock.

(4) Mark R. Fawcett also owns warrants to purchase 16,000 shares of Clinigence Common Stock.           

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Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of June 30, 2019, pursuant to the exercise of options or warrants, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.

Except as indicated in footnotes to this table, Clinigence believes that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to Clinigence by such stockholders. Unless otherwise indicated, the address for each stockholder listed is: c/o Clinigence Holdings, Inc., 55 Ivan Allen Jr Blvd NW, Ste. 875, Atlanta, GA 30308.

MANAGEMENT FOLLOWING THE MERGER

Executive Officers and Directors of the Combined Company Following the Merger

The board of directors of iGambit (the “iGambit Board”) is currently composed of two directors. As of the Effective Time of the Merger, the board of directors is expected to consist of nine members, including Elisa Luqman, who is currently a director and officer of iGambit, Dr. Warren Hosseinion (who shall be Chairman), Jacob Margolin, Dr. Lawrence Schimmel, Martin Breslin, Mitchell Creem, Mark Fawcett and David Meiri, who are currently directors of Clinigence.

The following table lists the names, ages as of September 24, 2019 and positions of the individuals who are expected to serve as executive officers and directors of iGambit upon completion of the Merger:

Name Age Position
Jacob Margolin 52 Chief Executive Officer and Director
Dr. Lawrence Schimmel      70 Chief Medical Officer and Director
Elisa Luqman 55 Chief Financial Officer, General Counsel, Secretary and Director
Dr. Warren Hosseinion      49  Chairman of the Board
Mark R. Fawcett 52 Director
Martin Breslin      48 Director
Mitchell Creem 60 Director
David Meiri      52 Director
John Waters      74      Director

 

For descriptions of the background and experience of the directors and officers, including their principal occupations during the past five years and the name and principal business in which such occupations were carried out, please see the section entitled ACTION 6 — THE Ratification of Appointment of Directors in this Information Statement.

Indemnification of Officers and Directors

Effective upon the consummation of the Merger, Clinigence will have entered into agreements to indemnify its directors, executive officers and other employees as determined by the board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys’ fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. Clinigence believes that the provisions in its Bylaws and indemnification agreements are necessary to attract and retain talented and experienced officers and directors.

Compensation of Directors and Executive Officers

The following table lists the names, positions and compensation of the individuals who are expected to serve as executive officers and directors of the Company upon completion of the Merger:

Name Position Salary
Jacob Margolin Chief Executive Officer $180,000
Dr. Lawrence Schimmel Chief Medical Officer $180,000
Elisa Luqman Chief Financial Officer and General Counsel, Secretary $150,000

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Base Salary

Clinigence has entered into employment agreements with Jacob Margolin and Dr. Lawrence Schimmel. Pursuant to the employment agreement with Mr. Margolin and Dr. Schimmel each are entitled to receive a base annual salary of $180,000 during the term, which will become obligations of the Combined Company after the closing. Elisa Luqman will enter a three (3) year employment agreement with iGambit, which employment agreement will become effective upon the closing of the Merger and pursuant to which Ms. Luqman is entitled to receive a base salary of $150,000 during the term.

Bonus

The iGambit Board may, in its discretion, award bonuses to its executive officers on a case-by-case basis.

Health, Welfare and Additional Benefits

Each of iGambit’s named executive officers is eligible to participate in iGambit employee benefit plans and programs, including medical, dental and vision benefits, and iGambit’s 2019 Omnibus Incentive Plan, to the same extent as its other full-time employees, subject to the terms and eligibility requirements of those plans.

Executive management of Merger-Sub and HealthDatix FL shall remain in place as existing prior to Closing.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table presents the outstanding equity awards held by Clinigence’s named executive officers as of

June 30, 2019 

    Option Awards
Name   Number of
Securities
Underlying
Unexercised
Options
Exercisable
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
      Option
Exercise
price
      Option
Expiration
date
 
Dr. Lawrence Schimmel   6,288     6,288     $   $0.85     2029  

 

The following table presents the outstanding equity awards held by iGambit’s named executive officers as of December 31, 2018.

      Option Awards
Name     Number of
Securities
Underlying
Unexercised
Options
Exercisable
      Number of
Securities
Underlying
Unexercised
Options
Unexercisable
      Option
Exercise
price
    Option
Expiration
date
(1)    Elisa Luqman     1,000,000       1,000,000     $ 0.01     6/6/2017
(1)    Elisa Luqman     1,700,000       1,700,000     $ 0.005     11/1/2018

(1) All Ms. Luqman’s options were voluntarily cancelled on August 2, 2019. On August 2, 2019, iGambit and HealthDatix management and key advisors and consultants voluntarily cancelled all their outstanding options.

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DIRECTOR COMPENSATION

The following table sets forth the compensation received by iGambit’s directors, for their service as directors, during the year ended December 31, 2018.

Name   Fees earned or paid in cash ($)   Stock awards ($)   Option awards ($)   Non-equity incentive plan compensation ($)   Nonqualified deferred compensation earnings
($)
  All other compensation ($)   Total
($)
John Salerno (1)     0       0       40,000       0       0       0       0  
Elisa Luqman (1)     0       0       8,000       0       0       0       0  
(1) All Ms. Luqman’s and Mr. Salerno’s options were voluntarily cancelled on August 2, 2019.

There was no compensation received by iGambit or Clinigence’s directors, for their service as directors, during the six months ended June 30, 2019.

Unless otherwise provided in the Certificate, by resolution of the Board of Directors, each director may be paid his/her expenses, if any, of attendance at each meeting of the Board of Directors or any committee thereof, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors or any committee thereof, or both. No such payment shall preclude any director from serving the corporation in any capacity and receiving compensation therefor.

RELATED PARTY TRANSACTIONS

There are no transactions occurring since June 30, 2019, and any currently proposed transactions to which Clinigence was a party and in which:

The amounts involved exceeded or will exceed $120,000; and
A director, executive officer, holder of more than 5% of the outstanding capital stock of Clinigence, or any member of such person’s immediate family had or will have a direct or indirect material interest, other than compensation, termination and change of control arrangements that are described under the section titled “Executive Compensation” in this Information Statement.

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS AND FINANCIAL DATA

IGAMBIT, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2018

 

    IGAMBIT, INC.   CLINIGENCE HOLDINGS, INC.   PRO FORMA ADJUSTMENTS   PRO FORMA COMBINED
Sales   $ 60,224     $ 2,135,202     $ —       $ 2,195,426  
Cost of sales     31,149       673,210       —         704,359  
Gross profit     29,075       1,461,992       —         1,491,067  
                                 
Operating expenses                                
    General and administrative expenses     1,163,766       2,681,762               3,845,528  
    Amortization     695,870       —         —         695,870  
Total operating expenses     1,859,636       2,681,762               4,541,398  
                                 
Loss from operations     (1,830,561 )     (1,219,770 )     —         (3,050,331 )
                                 
Other income (expenses)                                
    Change in fair value of derivative liability     (28,745 )     —         —         (28,745 )
    Loss on extinguishment of debt     (312,869 )     —         —         (312,869 )
    Interest income     —         68       —         68  
    Interest expense     (642,070 )     (120,584 )     —         (762,654 )
                                 
Total other income (expenses)     (983,684 )     (120,516 )     —         (1,104,200 )
                                 
Net income (loss)   $ (2,814,245 )   $ (1,340,286 )   $ —       $ (4,154,531 )
                                 
Basic and fully diluted loss per common share:                                
Net income (loss) per common share   $ (.02 )                   $ (.03 )
                                 
Weighted average common shares outstanding - basic and fully diluted     143,684,057                       143,684,057  
                                 
 See accompanying notes to the unaudited pro forma condensed consolidated financial information.

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IGAMBIT INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF JUNE 30, 2019

    IGAMBIT INC.   CLINIGENCE HOLDINGS, INC.   PRO FORMA ADJUSTMENTS   NOTES   PRO FORMA COMBINED
    Cash   $ 75,456     $ 827,692                     $ 903,148  
    Accounts receivable     10,366       282,953                       293,319  
    Note Receivable - related party     —         393,093       (393,093 )     (a)        —    
    Inventory and other current assets     26,988       108,850                       135,838  
Total current assets     112,810       1,612,588                       1,725,398  
Other assets                                
    Property and equipment, net     1,623       91,283                       92,906  
    Intangible assets, net     2,224,081       1,606,789                       3,830,870  
    Goodwill     —         3,185,473                  
    Deposits     300       —                         300  
    Other non-current asstes     —         70,448                       70,448  
Total assets   $ 2,338,814     $ 6,566,581                     $ 8,905,395  
                                 
    Accounts payable and accrued expenses   $ 657,563       1,175,641       (180,167 )     (b)        1,653,037  
    Accrued interest on notes payable     18,630       —                         18,630  
    Amounts due to related parties     128,476       16,200                       144,676  
    Deferred revenue