ITEM
1. BUSINESS
HISTORY
On
March 1, 2019, Clinigence Holdings, Inc., a Delaware corporation (“Clinigence”) entered into a Contribution Agreement
by and among Clinigence, Qualmetrix, Inc., a Delaware corporation and the Members of Clinigence, LLC, a Georgia limited liability
company (“Agreement”) whereby Clinigence acquired all of the assets and operations and assumed all of the liabilities
of Qualmetrix, Inc. Pursuant to the 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. All outstanding shares of
Qualmetrix, Inc. immediately preceding the exchange 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.
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. All outstanding preferred member units,
common member units, and incentive units of Clinigence, LLC immediately preceding the exchange were treated as one class.
On
August 8, 2019, we entered into an Agreement and Plan of Merger (the “Reverse Merger Agreement”) by and among Clinigence,
iGambit, Inc., a Delaware corporation (“iGambit”), HealthDatix, Inc., a Delaware corporation and wholly owned subsidiary
of iGambit (“Merger Sub”), and John Salerno, an individual and holder of shares of iGambit capital stock constituting
a majority of the votes eligible to be cast by all of the stockholders of iGambit. The transactions contemplated by the Reverse
Merger Agreement were consummated on October 29, 2019 (the “Closing”).
The
signing of the Reverse Merger Agreement was disclosed on iGambit’s current report on Form 8-K filed on August 9, 2019.
The
Reverse Merger Agreement provided for the merger of Merger Sub with and into Clinigence, hereafter referred to as the “Acquisition.”
As a result of the Acquisition, Merger Sub ceased to exist, and Clinigence became the surviving corporation and a direct wholly
owned subsidiary of iGambit, and the former stockholders of Clinigence (the “Clinigence Stockholders”) have a direct
equity ownership and controlling interest in iGambit. Merger Sub was renamed Clinigence Health Inc. iGambit was renamed Clinigence
Holdings, Inc. Merger Sub was originally incorporated in Delaware on October 17, 2013 and had no operating activity prior to the
reported transaction. Merger Sub is wholly separate and distinct from our subsidiary HealthDatix, Inc. a Florida corporation (“HDX
FL”).
At
the Closing, all of the outstanding shares of Clinigence common stock (the “Clinigence Shares”) were converted solely
into the right to receive a number of shares of iGambit common stock (the “Company Shares”) such that the holders
of outstanding equity of Clinigence immediately prior to the Closing own 85%, on a fully-diluted basis, of the outstanding equity
of iGambit immediately following the Closing, and holders of outstanding equity of iGambit immediately prior to the Closing own
15%, on a fully-diluted basis, of the outstanding equity of iGambit. For each share of Clinigence Shares, each former Clinigence
Stockholder received 0.22489093 shares of Company Shares after giving effect to the reverse stock split described immediately
below.
In
connection with the Acquisition, the Company amended its certificate of incorporation to (i) effect a reverse stock split of the
Company Shares at a ratio of 1 for 500, and (ii) change its name to Clinigence Holdings, Inc. to better align with the business
of Clinigence.
The
Acquisition was disclosed on the Company’s current report on Form 8-K filed on November 1, 2019.
Discontinued
Operations
eEffective
March 1, 2020 we completed the sale of our subsidiary HealthDatix Inc., a Florida corporation (HDX FL) to Jerry Robinson, Mary-Jo
Robinson and Kathleen Shepherd (“HDX Management”) in accordance with a Stock Purchase Agreement (the “Purchase
Agreement”) by and between the Company and HDX Management. Pursuant to the Purchase Agreement, the total consideration paid
for the outstanding capital stock of HDX FL was the execution of Settlement and Release Agreements by HDX Management, releasing
the Company from all obligations pursuant to certain HDX Management Employment Agreements dated April 1, 2017. As per the Purchase
Agreement, the Company’s operations of HDX FL ended February 29, 2020 and HDX Management’s operation of the business
became effective as of March 1, 2020. HDX FL had nominal revenue and its expenses were insignificant for the period ended December
31, 2019. We recorded a loss of the sale of operations of $158,744.
Asset
Purchase Agreement
On
May 27, 2020, we. entered into an Intellectual Property Asset Purchase Agreement (the “IP APA Agreement”) by and among
Clinigence Health, the Company, AHA Analytics, Inc., a Delaware corporation (“Purchaser”) and Accountable Healthcare
America Inc., a Delaware corporation (“AHA”). The transactions contemplated by the IP APA Agreement were consummated
on May 29, 2020.
The
IP APA Agreement provided for the sale of certain intellectual property and rights, including but not limited to copyrights, patents,
pending patents, and continuation in part, to Purchaser from Clinigence Health, in exchange for AHA Series E Preferred Stock (the
“Asset Sale”).
The
Series E Preferred Stock as more fully described and stated in the Series E Preferred Stock Certificate of Designation (the “Certificate
of Designation”), has an initial stated value of $15,000,000 in the aggregate (the “Stated Value”), unless adjusted
as set forth in the IP APA Agreement. The Stated Value, however, may be reduced by the certain assumed liabilities, as set forth
in the IP APA Agreement which also includes a hold back amount, as set forth in Article 9 of the IP APA Agreement. The Series
E Stock will automatically convert upon either of the following events:
(1)
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Immediately
(A) before AHA’s consummation of a merger with or an acquisition by a Publicly
Traded Company listed on NASDAQ, all of the Series E Preferred Shares will be automatically
converted into shares of Common Stock of Purchaser or (B) upon AHA’s consummation
of any such merger or acquisition into Common Shares of the Publicly Traded Company (“Pubco
Shares”) equal to the Stated Value (as may be adjusted in accordance with the terms
of the Certificate of Designation), which Pubco Shares will be valued at the Fair Market
Value of those shares; or
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(2)
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After
two hundred and forty (240) days from the date of Closing of the Asset Sale, if the event
described in paragraph (1) above has not occurred, the Series E Preferred Stock shall
automatically convert into 3,750,000 of Common Shares of Stock of AHA, based upon a $4
per share valuation on the date of Conversion.
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The
Asset Purchase was disclosed on the Company’s current report on Form 8-K filed on June 3, 2020.
As
discussed, below the AHA Series E Preferred Stock was surrendered a part of the Merger with Accountable Healthcare America, Inc.
License
Agreement
In
connection with the Asset Purchase, the Company’s subsidiary Clinigence Health, Inc. (“Clinigence Health”) entered
into an Intellectual Property License Agreement (the “License Agreement”) with AHA Analytics Inc., a Delaware corporation
(“Licensor”).
Pursuant
to the License Agreement Licensor granted Clinigence Health a worldwide, irrevocable, royalty-free, non-transferable (other than
as set forth herein), non-exclusive license to use, solely for Clinigence Health’s ongoing Analytics Business Customers,
the Licensor Intellectual Property (as defined in the License Agreement) to make, have made, use, offer to sell, sell and import,
copy, reproduce, modify, publish, display, publicly perform and make derivative works on the Licensed Products and to incorporate
the Licensor Intellectual Property and Licensed Products (as defined in the License Agreement), in whole or in part, into the
Analytics Business platform maintained by Licensee, within the Territory (as defined in the License Agreement), and subject to
the License Agreement, to develop improvements based on the Licensor Intellectual Property.
Licensor
also granted Clinigence Health the right to grant limited sub-licenses to customers as a non-exclusive license to use the Licensed
Material, for the Term of the License Agreement. It is understood that the use of the licensed material will be offered to Clinigence
Health ‘s customers as part of its ongoing Analytics Business.
The
following events occurred subsequent to December 31, 2020.
Managed
Services Agreement
In
connection with the Asset Purchase, Clinigence Health entered into a Managed Services Agreement (the “Managed Services Agreement”)
by and between AHA Analytics, Inc. (“AHA Analytics”), a Delaware corporation and Clinigence Health, Inc., a Delaware
corporation.
Pursuant
to the Managed Services Agreement Clinigence Health will provide, supply and render management and operational support services
as are necessary to continue to maintain and keep the AHA Analytics technology up to date, in keeping with the ordinary course
of business as it has customarily been used in the Clinigence Health Analytics Business.
Merger
with AHP Management Inc.
On
February 25, 2021, we entered into an agreement and plan of merger (the “AHP Merger Agreement”) with AHP Management,
Inc., a California corporation (“AHP”), AHP Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of
Clinigence Holdings, Inc. (“Merger Sub”), and Robert Chan (the “Shareholders’ Representative”).
The transactions contemplated by the AHP Merger Agreement were consummated on February 26, 2021 (the “AHP Closing”).
The
AHP Merger Agreement provided for the merger of Merger Sub with and into AHP, hereafter referred to as the “AHP Acquisition.”
As a result of the Acquisition, Merger Sub ceased to exist, and AHP became the surviving corporation and a direct wholly owned
subsidiary of Clinigence, and the former stockholders of AHP (the “AHP Stockholders”) have a direct equity ownership
in Clinigence. Merger Sub was renamed AHP Management Inc. Merger Sub was originally incorporated in Delaware on January 26, 2021
and had no operating activity prior to the reported transaction.
AHP
is a privately held company with controlling interest in its’ affiliate Associated Hispanic Physicians of Southern California
IPA, a California Medical corporation, (“AHPIPA”). A key term of the AHP Merger Agreement is that at Closing, AHP
Management Inc entered into a Management Services Agreement with AHPIPA (the “Management Services Agreement”) making
AHPIPA a Variable Interest Entity (VIE) of Clinigence.
The
AHP Merger Agreement and Management Services Agreement was disclosed on the Company’s current report on Form 8-K filed on
March 2, 2021.
Merger
with Accountable Healthcare America, Inc.
On
February 25, 2021, we entered into an agreement and plan of merger with Accountable Healthcare America, Inc., a Delaware corporation
(“AHA”), and AHA Acquisition Corp., a Delaware corporation, a wholly owned subsidiary of Parent (“Merger Sub
entered into an agreement and plan of merger (the “AHA Merger Agreement”). The transactions contemplated by the AHA
Merger Agreement were consummated on February 26, 2021 (the “AHA Closing”).
The
AHA Merger Agreement provided for the merger of Merger Sub with and into AHA, hereafter referred to as the “AHA Acquisition.”
As a result of the Acquisition, Merger Sub ceased to exist, and AHA became the surviving corporation and a direct wholly owned
subsidiary of Clinigence, and the former stockholders of AHA (the “AHA Stockholders”) have a direct equity ownership
in Clinigence. Merger Sub was renamed Accountable Healthcare America, Inc. Merger Sub was originally incorporated in Delaware
on January 2, 2020 and had no operating activity prior to the reported transaction.
The
AHA Merger Agreement was disclosed on the Company’s current report on Form 8-K filed on March 2, 2021.
At
the AHP Closing and the AHA Closing, hereafter collectively referred to as the “Closing”, all of the outstanding shares
of AHP common stock (the “AHP Shares”) were converted solely into the right to receive a number of shares of Clinigence
common stock (the “Company Shares”) such that the holders of outstanding equity of AHP immediately prior to the Closing
own 45%, on a fully-diluted basis, of the outstanding equity of Clinigence immediately following the Closing, and all of the outstanding
shares of AHA common stock (the “AHA Shares”) were converted solely into the right to receive a number of the Company
Shares such that the holders of outstanding equity of AHA immediately prior to the Closing own 35%, on a fully-diluted basis,
of the outstanding equity of Clinigence immediately following the Closing, and holders of outstanding equity of Clinigence immediately
prior to the Closing own 20%, on a fully-diluted basis, of the outstanding equity of Clinigence. Additionally, the AHA Series
E Preferred Stock was surrendered a part of the Acquisition of 100% of AHA.
The
accounting for our merger with AHP and AHA has not been completed because we have not finalized the December 31, 2020 AHP and
AHA audits and valuation of the acquired AHP and AHA intangible assets.
OUR
COMPANY
Introduction
The
Company is a technology-enabled, risk-bearing population health management company that manages provider networks. Our primary
focus has been on the medical technology markets and the growth of our subsidiary Clinigence Health Inc. (“Clinigence Health”).
With the recent acquisitions of Accountable Healthcare Americas, Inc. (“AHA”) and AHP Management, Inc. (“AHP”)
the Company’s focus is expanding to the seeking additional acquisitions of risk-bearing organizations, including Management
Service Organizations (MSO), Independent Practice Associations (IPA) and Accountable Care Organizations (ACO) that are principally
serving Medicare Advantage Plans or CMS Primary Care initiatives.
Clinigence
Health’s Platform Services
Clinigence
Health is a healthcare information technology company providing a cloud-based platform that enables healthcare organizations to
provide value-based care and population health management (PHM). Our proprietary cloud-based PHM platform extracts claims and
clinical data from multiple claims and EHR systems, which it then uses to report clinical quality measures (GPRO, MIPS, etc.),
gaps in care, risk-stratification of patients, generates a utilization dashboard on every provider, has predictive analytics and
a provider scorecard. The Clinigence Health platform provides turnkey SaaS solutions that enable connected intelligence across
the care continuum by transforming massive amounts of data into actionable insights. Clinigence Health’s solutions help
healthcare organizations improve the quality and cost effectiveness of care, enhance population health management and optimize
provider networks.
Clinigence
Health’s platform provides a clinical business intelligence Software-as-a-Service (“SaaS”). Clinigence Health’s
solution integrates clinical and financial data across all electronic health record (“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. The Clinigence Health 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.
The
Company’s solutions help healthcare organizations improve the quality and cost-effectiveness of care, enhance population
health management and optimize provider networks. The Company enables risk-bearing healthcare organizations to achieve their objectives
on the path to value-based care.
Competitive
Comparison
Clinigence
Health has a pending patent application for its technology (U.S. Patent Application No. 15/882,688). Clinigence Health 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 in real time with no dependence
on EHR vendors, information technology or informatics staff.
Customers
Clinigence
Health’s services have been utilized by more than 1,000 health care practices, including some 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. In 2020, the largest three customers of the Company represented 36.83%
of revenues during that period and in 2021 we expect to derive a significant portion of our revenues from these same three customers.
Expansion
Summary
Expansion
through Acquisition
AHA
Acquisition
Based
in Ft. Lauderdale, Florida and founded in 2017 by industry veterans with a combined 125 years of experience in the Medicare managed
care space, AHA is a medical management platform company that currently has an investment in an accountable care organization
with approximately 16,000 Medicare members through a network of over 65 providers. Through its investment, AHA provides a suite
of services for its providers, including care coordination, high-risk care managers, documentation improvement and medical coding
programs, medical management best practices programs, health management programs such as annual wellness visits and chronic care
management, and performance improvement plans.
AHP
Acquisition
Based
in Los Angeles, California and founded in 2000, AHP Management, Inc.’s affiliated medical group, AHP IPA, currently provides
care for 22,065 patients, including approximately 1800 Medicare Advantage patients, through a network of 141 primary care physicians
and 660 specialists. AHP Management’s affiliated medical group, AHP IPA, has become a variable interest entity (“VIE”)
of Clinigence in order to be compliant with California’s corporate practice of medicine regulations.
Expansion
of Platform
Clinigence
Health’s objective is to be a market leader in providing a world class software application as well as expand our offering
to current and new customers, including healthcare practitioners, ACOs, MSOs.
Summary
The
combination of the three companies fuses a healthcare information technology company with medical management companies to form
a unique, scalable operating platform that we believe is well positioned for the ongoing transition of U.S. healthcare from fee-for-service
payments to value-based reimbursements, including full-risk, global capitation models. The platform also addresses another major
theme in U.S. healthcare: faced with mounting costs, shifting regulations and burdensome billing, reporting and technology requirements,
many physicians and medical groups have been selling their practices to larger hospital systems. The strategy of the combined
company is to be one of the few, technology-enabled national medical groups by acquiring and/or operating medical groups, independent
practice associations (“IPAs”), accountable care organizations (“ACOs”), management services organizations
(“MSOs”) and individual practices, allowing providers to focus on providing the best quality of care to their patients.
Regulatory
Environment
The
healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes
and regulations govern the manner in which we provide and bill for services and collect reimbursement from governmental programs
and private payors, our contractual relationships with our providers, vendors and clients, our marketing activities and other
aspects of our operations. Of particular importance are:
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the
federal physician self-referral law, commonly referred to as the Stark Law;
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the
federal Anti-Kickback Act;
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the
criminal healthcare fraud provisions of HIPAA;
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the
federal False Claims Act;
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reassignment
of payment rules that prohibit certain types of billing and collection;
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similar
state law provisions pertaining to anti-kickback, self-referral and false claims issues;
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state
laws that prohibit general business corporations, such as us, from practicing medicine;
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laws
that regulate debt collection practices as applied to our debt collection practices;
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Our
revenue will be dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare
industry is subject to changing political, regulatory and other influences. The Patient Protection and Affordable Care Act
or PPACA made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to
the uninsured and underinsured population of the United States.
HIPAA
establishes a set of basic national privacy and security standards for the protection of protected health information, or PHI,
by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities, and the business
associates with whom such covered entities contract for services, which includes us.
Because
of the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important.
If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to
obtain access to sensitive client and patient data, including HIPAA-regulated PHI.
Employees
We
presently have 14 total employees all of whom are full-time for operations.
OUR
CORPORATE INFORMATION
Our
principal corporate office is located at 501 1st Avenue, Suite 901 St. Petersburg, FL 33701. Our telephone number is (678) 607-6393.
AHA’s office are located at 2455 East Sunrise Blvd. Suite 1204 Fort Lauderdale FL, 33304. AHP’s offices are located
at 7422 Garvey Ave. Ste 101 Rosemead, CA 91755. We currently operate a corporate websites that can be found at www.clinigencehealth.com.,
www.ahpscipa.com and www.ahahealthcare.net (The information on the foregoing websites do not form a part of this report).
ITEM
1A. RISK FACTORS
Our
operations and financial results are subject to various risks and uncertainties, including but not limited to those described
below, which could harm our business, reputation, financial condition, and operating results.
There
is substantial doubt as to our ability to continue as a going concern.
The
notes accompanying our December 31, 2020 and 2019 audited financial statements, and as noted on the Report of Independent Registered
Public Accounting Firm , contain an explanatory paragraph expressing substantial doubt about our ability to continue as a
going concern. The financial statements have been prepared “assuming that the Company will continue as a going concern.”
Our ability to continue as a going concern is dependent on raising additional capital to fund our operations and ultimately on
generating future profitable operations. There can be no assurance that we will be able to raise sufficient additional capital
or eventually have positive cash flow from operations to address all of our cash flow needs. If we are not able to find alternative
sources of cash or generate positive cash flow from operations, our business and shareholders may be materially and adversely
affected.
We
may not be able to obtain adequate financing to continue our operations.
As
of December 31, 2020 we had a working capital deficiency and we have operated at a net loss since inception. In order to execute
our business plan, including the expansion of operations, our primary capital requirements in 2021 are likely to rise. It is not
possible to quantify those costs at this point in time, in that they depend on Clinigence Health’s business opportunities
and the state of the overall economy. We anticipate raising capital in the private markets to cover any such costs, though there
can be no guaranty we will be able to do so on terms we deem to be acceptable. We do not have any plans at this point in time
to obtain a line of credit or other loan facility from a commercial bank. Additional issuances of equity or convertible debt securities
will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior
to our common stock that may have a greater dilutive impact to our current shareholders. Additional financing may not be available
upon acceptable terms, or at all.
Clinigence
Health has a limited prior operating history and it is impossible to reliably predict future growth and operating results.
The
Company was incorporated in April 2000 and consummated a reverse merger with Clinigence Holdings Inc. on October 29, 2019 and
two additional Mergers in February 2021. Clinigence Health is the Company’s wholly owned subsidiary and was the result of
the combination of Clinigence LLC (founded in 2010) and QualMetrix, Inc. (founded in 2013), on March 1, 2019. Accordingly, the
Company has a limited prior operating history upon which you can evaluate its business prospects, and it is difficult to forecast
the Company’s future operating results. The evolving nature of the PHM industry increases these uncertainties. You must
consider the Company’s business prospects in light of the risks, uncertainties, and problems frequently encountered by companies
with limited operating histories. Clinigence, LLC provided clinical business intelligence software-as-a-service (SaaS) to healthcare
organizations. QualMetrix, Inc. was a population health claims analytics company that provided turnkey SaaS solutions to healthcare
organizations.
The
success of the Company’s growth strategy depends on the successful identification, completion and integration of acquisitions.
The
Company’s future success will depend on the ability to identify, complete, and integrate the acquired businesses with the
Company’s existing operations. The growth strategy will result in additional demands on the Company’s infrastructure,
and will place further strain on limited management, administrative, operational, financial and technical resources. Acquisitions
involve numerous risks, including, but not limited to:
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the
possibility that the Company is not able to identify suitable acquisition
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candidates
or consummate acquisitions on acceptable terms, if at all;
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possible
decreases in capital resources or dilution to existing stockholders;
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difficulties
and expenses incurred in connection with an acquisition;
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the
diversion of management’s attention from other business concerns;
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the
difficulties of managing an acquired business;
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the
potential loss of key employees and customers of an acquired business;
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in
the event that the operations of an acquired business do not meet expectations,
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the
Company may be required to restructure the acquired entity or write-off the
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value
of some or all of the assets of the acquisition.
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The
Company has an unproven business model with no assurance of significant revenues or operating profit.
The
current business model is unproven and the profit potential, if any, is unknown at this time. The Company is subject to all of
the risks inherent in the creation of a new business. The Company’s ability to achieve profitability is dependent, among
other things, on its initial marketing to generate sufficient operating cash flow to fund future expansion. There can be no assurance
that the Company’s results of operations or business strategy will achieve significant revenue or profitability.
The
PHM market is fairly new and unproven, and it may decline or experience limited growth, which would adversely affect our ability
to fully realize the potential of our platform.
The
PHM market is relatively new and evaluating the size and scope of the market is subject to a number of risks and uncertainties.
We believe that our future success will depend in large part on the growth of this market. The utilization of our platform is
still relatively new, and customers may not recognize the need for, or benefits of, our platform, which may prompt them to cease
use of our platform or decide to adopt alternative products and services to satisfy their healthcare requirements. In order to
expand our business and extend our market position, we intend to focus our marketing and sales efforts on educating customers
about the benefits and technological capabilities of our platform and the application of our platform to specific needs of customers
in different market verticals. Our ability to access and expand the market that our platform is designed to address depends upon
a number of factors, including the cost, performance and perceived value of our platform. Assessing the market for our solutions
in each of the vertical markets we are competing in, or planning to compete in, is particularly difficult due to a number of factors,
including limited available information and rapid evolution of the market. The market for our platform, or for PHM applications,
may fail to grow significantly or be unable to meet the level of growth we expect. As a result, we may experience lower-than-expected
demand for our products and services due to lack of customer acceptance, technological challenges, competing products and services,
decreases in spending by current and prospective customers, weakening economic conditions and other causes. If our market does
not experience significant growth, or if demand for our platform does not increase, then our business, results of operations and
financial condition will be adversely affected.
We
conduct business in a heavily regulated industry and if we fail to comply with these laws and government regulations, we could
incur penalties or be required to make significant changes to our operations or experience adverse publicity, which could have
a material adverse effect on our business, financial condition, and results of operations.
The
healthcare industry is heavily regulated and closely scrutinized by federal, state and local governments. Comprehensive statutes
and regulations govern the manner in which we provide and bill for services and collect reimbursement from governmental programs
and private payors, our contractual relationships with our providers, vendors and clients, our marketing activities and other
aspects of our operations. Of particular importance are:
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the
federal physician self-referral law, commonly referred to as the Stark Law;
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•
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the
federal Anti-Kickback Act;
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the
criminal healthcare fraud provisions of HIPAA;
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the
federal False Claims Act;
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reassignment
of payment rules that prohibit certain types of billing and collection;
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similar
state law provisions pertaining to anti-kickback, self-referral and false claims issues;
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state
laws that prohibit general business corporations, such as us, from practicing medicine;
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laws
that regulate debt collection practices as applied to our debt collection practices;
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Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some
of our business activities could be subject to challenge under one or more of such laws. Achieving and sustaining compliance with
these laws may prove costly. Failure to comply with these laws and other laws can result in civil and criminal penalties such
as fines, damages, overpayment recoupment loss of enrollment status and exclusion from the Medicare and Medicaid programs. The
risk of our being found in violation of these laws and regulations is increased by the fact that many of them have not been fully
interpreted by the regulatory authorities or the courts, and their provisions are sometimes open to a variety of interpretations.
Our failure to accurately anticipate the application of these laws and regulations to our business or any other failure to comply
with regulatory requirements could create liability for us and negatively affect our business. Any action against us for violation
of these laws or regulations, even if we successfully defend against it, could cause us to incur significant legal expenses, divert
our management’s attention from the operation of our business and result in adverse publicity.
To
enforce compliance with the federal laws, the U.S. Department of Justice and the OIG, have recently increased their scrutiny of
healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare
industry. Dealing with investigations can be time- and resource-consuming and can divert management’s attention from the
business. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business. In
addition, because of the potential for large monetary exposure under the federal False Claims Act, which provides for treble damages
and mandatory minimum penalties of $5,500 to $11,000 per false claim or statement, healthcare providers often resolve allegations
without admissions of liability for significant and material amounts to avoid the uncertainty of treble damages that may be awarded
in litigation proceedings. Such settlements often contain additional compliance and reporting requirements as part of a consent
decree, settlement agreement or corporate integrity agreement. Given the significant size of actual and potential settlements,
it is expected that the government will continue to devote substantial resources to investigating healthcare providers’
compliance with the healthcare reimbursement rules and fraud and abuse laws.
The
laws, regulations and standards governing the provision of healthcare services may change significantly in the future. We cannot
assure you that any new or changed healthcare laws, regulations or standards will not materially adversely affect our business.
We cannot assure you that a review of our business by judicial, law enforcement, regulatory or accreditation authorities will
not result in a determination that could adversely affect our operations.
The
impact of recent healthcare reform legislation and other changes in the healthcare industry and in healthcare spending in the
US is currently unknown, but may adversely affect our business, financial condition and results of operations.
Our
revenue will be dependent on the healthcare industry and could be affected by changes in healthcare spending and policy. The healthcare
industry is subject to changing political, regulatory and other influences. The Patient Protection and Affordable Care Act
or PPACA made major changes in how healthcare is delivered and reimbursed and increased access to health insurance benefits to
the uninsured and underinsured population of the United States.
The
PPACA, among other things, increased the number of individuals with Medicaid and private insurance coverage, implemented reimbursement
policies that tie payment to quality, facilitated the creation of accountable care organizations that may use capitation and other
alternative payment methodologies, strengthened enforcement of fraud and abuse laws and encouraged the use of information technology.
Several of these changes require implementing regulations which have not yet been drafted or have been released only as proposed
rules.
Such
changes in the regulatory environment may also result in changes to our payor mix that may affect our operations and revenue.
In
addition, certain provisions of the PPACA authorize voluntary demonstration projects, which include the development of bundling
payments for acute, inpatient hospital services, physician services and post-acute services for episodes of hospital care. Further,
the PPACA may adversely affect payors by increasing medical costs generally, which could have an effect on the industry and potentially
impact our business and revenue as payors seek to offset these increases by reducing costs in other areas. The full impact of
these changes on us cannot be determined at this time.
We
expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the
amounts that federal and state governments and other third-party payors will pay for healthcare products and services, which could
adversely affect our business, financial condition and results of operations.
Any
future litigation against us could be costly and time-consuming to defend.
We
may become subject, from time to time, to legal proceedings and claims that arise in the ordinary course of business such as claims
brought by our clients in connection with commercial disputes or employment claims made by our current or former associates. Litigation
may result in substantial costs and may divert management’s attention and resources, which may substantially harm our business,
financial condition and results of operations. Insurance may not cover such claims, may not provide sufficient payments to cover
all of the costs to resolve one or more such claims and may not continue to be available on terms acceptable to us. A claim brought
against us that is uninsured or underinsured could result in unanticipated costs, thereby reducing our revenue and potential profits.
Our
use and disclosure of personally identifiable information, including health information, is subject to federal and state privacy
and security regulations, and our failure to comply with those regulations or to adequately secure the information we hold could
result in significant liability or reputational harm and, in turn, a material adverse effect on our client base, membership base
and revenue.
Numerous
state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security, availability
and integrity of personally identifiable information, or PII, including protected health information. These laws and regulations
include HIPAA. HIPAA establishes a set of basic national privacy and security standards for the protection of protected health
information, or PHI, by health plans, healthcare clearinghouses and certain healthcare providers, referred to as covered entities,
and the business associates with whom such covered entities contract for services, which includes us.
HIPAA
requires healthcare providers like us to develop and maintain policies and procedures with respect to PHI that is used or disclosed,
including the adoption of administrative, physical and technical safeguards to protect such information. HIPAA also implemented
the use of standard transaction code sets and standard identifiers that covered entities must use when submitting or receiving
certain electronic healthcare transactions, including activities associated with the billing and collection of healthcare claims.
HIPAA
imposes mandatory penalties for certain violations. Penalties for violations of HIPAA and its implementing regulations start at
$100 per violation and are not to exceed $50,000 per violation, subject to a cap of $1.5 million for violations of the same
standard in a single calendar year. However, a single breach incident can result in violations of multiple standards. HIPAA also
authorizes state attorneys general to file suit on behalf of their residents. Courts are able to award damages, costs and attorneys’
fees related to violations of HIPAA in such cases. While HIPAA does not create a private right of action allowing individuals
to sue us in civil court for violations of HIPAA, its standards have been used as the basis for duty of care in state civil suits
such as those for negligence or recklessness in the misuse or breach of PHI.
In
addition, HIPAA mandates that the Secretary of Health and Human Services, or HHS conduct periodic compliance audits of HIPAA covered
entities or business associates for compliance with the HIPAA Privacy and Security Standards. It also tasks HHS with establishing
a methodology whereby harmed individuals who were the victims of breaches of unsecured PHI may receive a percentage of the Civil
Monetary Penalty fine paid by the violator.
HIPAA
further requires that patients be notified of any unauthorized acquisition, access, use or disclosure of their unsecured PHI that
compromises the privacy or security of such information, with certain exceptions related to unintentional or inadvertent use or
disclosure by employees or authorized individuals. HIPAA specifies that such notifications must be made “without unreasonable
delay and in no case later than 60 calendar days after discovery of the breach.” If a breach affects 500 patients or more,
it must be reported to HHS without unreasonable delay, and HHS will post the name of the breaching entity on its public web site.
Breaches affecting 500 patients or more in the same state or jurisdiction must also be reported to the local media. If a breach
involves fewer than 500 people, the covered entity must record it in a log and notify HHS at least annually.
Numerous
other federal and state laws protect the confidentiality, privacy, availability, integrity and security of PII, including PHI.
These laws in many cases are more restrictive than, and may not be preempted by, the HIPAA rules and may be subject to varying
interpretations by courts and government agencies, creating complex compliance issues for us and our Clients and potentially
exposing us to additional expense, adverse publicity and liability.
New
health information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could have a significant
effect on the manner in which we must handle healthcare related data, and the cost of complying with standards could be significant.
If we do not comply with existing or new laws and regulations related to PHI, we could be subject to criminal or civil sanctions.
Because
of the extreme sensitivity of the PII we store and transmit, the security features of our technology platform are very important.
If our security measures, some of which are managed by third parties, are breached or fail, unauthorized persons may be able to
obtain access to sensitive client and patient data, including HIPAA-regulated PHI. As a result, our reputation could be severely
damaged, adversely affecting client and patient confidence. Members may curtail their use of or stop using our services or our
client base could decrease, which would cause our business to suffer. In addition, we could face litigation, damages for contract
breach, penalties and regulatory actions for violation of HIPAA and other applicable laws or regulations and significant costs
for remediation, notification to individuals and for measures to prevent future occurrences. Any potential security breach could
also result in increased costs associated with liability for stolen assets or information, repairing system damage that may have
been caused by such breaches, incentives offered to clients or other business partners in an effort to maintain our business relationships
after a breach and implementing measures to prevent future occurrences, including organizational changes, deploying additional
personnel and protection technologies, training employees and engaging third-party experts and consultants. While we maintain
insurance covering certain security and privacy damages and claim expenses in the amount of at least $3.0 million, we may
not carry insurance or maintain coverage sufficient to compensate for all liability and in any event, insurance coverage would
not address the reputational damage that could result from a security incident.
We
outsource important aspects of the storage and transmission of Client and Member information, and thus rely on third parties to
manage functions that have material cyber-security risks. We attempt to address these risks by requiring outsourcing subcontractors
who handle client and patient information to sign business associate agreements contractually requiring those subcontractors to
adequately safeguard personal health data to the same extent that applies to us and in some cases by requiring such outsourcing
subcontractors to undergo third-party security examinations. In addition, we periodically hire third-party security experts to
assess and test our security posture. However, we cannot assure you that these contractual measures and other safeguards will
adequately protect us from the risks associated with the storage and transmission of client and patient’s proprietary and
protected health information.
In
addition, various states have enacted laws governing the privacy of personal information collected and used by businesses online.
For example, California has recently adopted the California Consumer Privacy Act of 2018, which went into effect on January 1,
2020. This law, in part, requires that companies make certain disclosures to consumers via their privacy policies, or otherwise
at the time the personal data is collected. The Company will have to determine what personal data it is collecting from individuals
and for what purposes, and to update its privacy policy every 12 months to make the required disclosures, among other things.
Since this law is newly enacted and has not yet gone into effect, it is unclear whether it will have any material impact on the
Company’s business and operations.
The
success of our business depends on our ability to expand into new vertical markets and attract new customers in a cost-effective
manner.
In
order to grow our business, we plan to drive greater awareness and adoption of our platform from enterprises across new vertical
markets. We intend to increase our investment in sales and marketing, as well as in technological development, to meet evolving
customer needs in these and other markets. There is no guarantee, however, that we will be successful in gaining new customers
from any or all of these markets. We have limited experience in marketing and selling our products and services generally, and
in particular in these new markets, which may present unique and unexpected challenges and difficulties.
If
the costs of the new marketing channels we use increase dramatically, then we may choose to use alternative and less expensive
channels, which may not be as effective as the channels we currently use. As we add to or change the mix of our marketing strategies,
we may need to expand into more expensive channels than those we are currently in, which could adversely affect our business,
results of operations and financial condition. In addition, we have limited experience marketing our products and platform and
we may not be successful in selecting the marketing channels that will provide us with exposure to customers in a cost-effective
manner. As part of our strategy to penetrate the new vertical markets, we will incur marketing expenses before we are able to
recognize any revenue in such markets, and these expenses may not result in increased revenue or brand awareness. We have made
in the past, and may make in the future, significant expenditures and investments in new marketing campaigns, and these investments
may not lead to the cost-effective acquisition of additional customers. If we are unable to maintain effective marketing programs,
then our ability to attract new customers or enter into new vertical markets could be adversely affected.
We
expect to derive a significant portion of our revenues from our largest customers. The loss, termination or renegotiation of any
contract could negatively impact our results.
Historically,
the Company relied on a limited number of customers for a substantial portion of their total revenue and accounts receivable.
In 2020, the largest three customers of the Company represented 36.83% of revenues during that period.
The
sudden loss of any of our customers, or the renegotiation of any of our customer contracts, could adversely affect our operating
results. In 2020, our customer base remained relatively level whereas in 2019 our operating results were adversely affected as
a result of the loss of several customer contracts, principally due to consolidation in the health care industry. Some customer
contracts were lost due to the acquisition of our customer by another organization. Additionally, other smaller customer contracts
were lost because these smaller customers were unable to compete against the larger consolidated companies and they subsequently
had to discontinue their businesses.
Because
we rely on a limited number of customers for a significant portion of our revenues, we depend on the creditworthiness of these
customers. Our customers are subject to a number of risks including reductions in payment rates from governmental payers, higher
than expected health care costs and lack of predictability of financial results when entering new lines of business, particularly
with high-risk populations, such as plans established under the ACA and Aged, Blind and Disabled Medicaid. If the financial condition
of our customers declines, our credit risk could increase. Should one or more of our significant customers declare bankruptcy,
be declared insolvent or otherwise be restricted by state or federal laws or regulation from continuing in some or all of their
operations, this could adversely affect our ongoing revenues, the collectability of our accounts receivable and affect our bad
debt reserves and net income.
Although
we have long-term contracts with many customers, these contracts may be terminated before their term expires for various reasons,
such as changes in the regulatory landscape and poor performance by us, subject to certain conditions. For example, after a specified
period, certain of these contracts are terminable for convenience by our customers after a notice period has passed and the customer
has paid a termination fee. Certain of our contracts are terminable immediately upon the occurrence of certain events. For example,
some of our contracts may be terminated by the customer if we fail to achieve target performance metrics over a specified period.
Certain of the contracts to which the Company or its subsidiaries is a party may be terminated by the customer immediately following
repeated failures by us to provide specified levels of service over periods ranging from six months to more than a year. Certain
of our contracts may be terminated immediately by the customer if we lose applicable licenses, go bankrupt, lose our liability
insurance or receive an exclusion, suspension or debarment from state or federal government authorities. In addition, one of our
contracts may be terminated immediately if we become insolvent or file for bankruptcy. If any of our contracts with our customers
is terminated, we may not be able to recover all fees due under the terminated contract, which may adversely affect our operating
results. We expect that future contracts will contain similar provisions.
Consolidation
in the health care industry could have a material adverse effect on our business, financial condition and results of operations.
Many
health care industry participants and payers are consolidating to create larger and more integrated health care delivery systems
with greater market power. We expect regulatory and economic conditions to result in additional consolidation in the health care
industry in the future. As consolidation accelerates, the economies of scale of our customers’ organizations may grow. If
a customer experiences sizable growth following consolidation, it may determine that it no longer needs to rely on us and may
reduce its demand for our products and services. In addition, as health care providers consolidate to create larger and more integrated
health care delivery systems with greater market power, these providers may try to use their market power to negotiate fee reductions
for our products and services. Finally, consolidation may also result in the acquisition or future development by our customers
of products and services that compete with our products and services. Any of these potential results of consolidation could have
a material adverse effect on our business, financial condition and results of operations.
Our
use of “open source” software could adversely affect our ability to offer our services and subject us to possible
litigation.
We
use open source software in connection with our products and services. Companies that incorporate open source software into their
products have, from time to time, faced claims challenging the use of open source software and/or compliance with open source
license terms. As a result, we could be subject to suits by parties claiming ownership of what we believe to be open source software
or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software
containing open source software to publicly disclose all or part of the source code to such software and/or make available any
derivative works of the open source code, which could include valuable proprietary code of the user, on unfavorable terms or at
no cost. While we monitor the use of open source software and try to ensure that none is used in a manner that would require us
to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently
occur, in part because open source license terms are often ambiguous. Any requirement to disclose our proprietary source code
or pay damages for breach of contract could have a material adverse effect on our business, financial condition and results of
operations and could help our competitors develop products and services that are similar to or better than ours.
Our
business will depend on customers increasing their use of our services and/or platform, and we may experience loss of customers
or decline in their use of our services and/or platform.
Our
ability to grow and generate revenue depends, in part, on our ability to maintain and grow our relationships with existing customers
and convince them to increase their usage of our platform. If our customers do not increase their use of our platform, then our
revenue may not grow and our results of operations may be harmed. It is difficult to accurately predict customers’ usage
levels and the loss of customers or reductions in their usage levels may have a negative impact on our business, results of operations
and financial condition. If a significant number of customers cease using, or reduce their usage of, our platform, then we may
be required to spend significantly more on sales and marketing than we currently plan to spend in order to maintain or increase
revenue from customers. These additional expenditures could adversely affect our business, results of operations and financial
condition. Most of our customers do not have long-term contractual financial commitments to us and, therefore, most of our customers
may reduce or cease their use of our platform at any time without penalty or termination charges.
2020,
our customer base remained relatively level whereas in 2019 our operating results were adversely affected as a result of the loss
of several customer contracts, principally due to consolidation in the health care industry. Some customer contracts were lost
due to the acquisition of our customer by another organization. Additionally, other smaller customer contracts were lost because
these smaller customers were unable to compete against the larger consolidated companies and they subsequently had to discontinue
their businesses.
Interruptions
or performance problems associated with our technology and infrastructure may adversely affect our business and operating results.
Our
continued growth will depend in part on the ability of customers to access our platform at any time and within an acceptable amount
of time. We may experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure
changes, introductions of new applications and functionality, software errors and defects, capacity constraints due to an increasing
number of users accessing our platform simultaneously, or security related incidents. In addition, from time to time we may experience
limited periods of server downtime due to server failure or other technical difficulties (as well as maintenance requirements).
It may become increasingly difficult to maintain and improve our performance, especially during peak usage times and as our platform
becomes more complex and our user traffic increases. If our platform is unavailable or if our users are unable to access our platform
within a reasonable amount of time or at all, our business would be adversely affected, and our brand could be harmed. In the
event of any of the factors described above, or certain other failures of our infrastructure, customer or consumer data may be
permanently lost. To the extent that we do not effectively address capacity constraints, upgrade our systems as needed, and continually
develop our technology and network architecture to accommodate actual and anticipated changes in technology, customers and consumers
may cease to use our platform and our business and operating results may be adversely affected.
The
security of our platform, networks or computer systems may be breached, and any unauthorized access to our customer data will
have an adverse effect on our business and reputation.
The
use of our platform will involve the storage, transmission and processing of our clients’ private data, and this data may
contain confidential and proprietary information of our clients or other personal or identifying information regarding our clients,
their employees or other persons. Individuals or entities may attempt to penetrate our network or platform security, or that of
our third-party hosting and storage providers, and could gain access to our clients’ private data, which could result in
the destruction, disclosure or misappropriation of proprietary or confidential information of our clients’ or their customers,
employees and business partners. If any of our clients’ private data is leaked, obtained by others or destroyed without
authorization, it could harm our reputation, we could be exposed to civil and criminal liability, and we may lose our ability
to access private data, which will adversely affect the quality and performance of our platform.
In
addition, our platform may be subject to computer malware, viruses and computer hacking, fraudulent use attempts and phishing
attacks, all of which have become more prevalent in our industry. Though it is difficult to determine what, if any, harm may directly
result from any specific interruption or attack, they may include the theft or destruction of data owned by us or our customers,
and/or damage to our platform. Any failure to maintain the performance, reliability, security and availability of our products
or services and technical infrastructure to the satisfaction of our customers may harm our reputation and our ability to retain
existing customers and attract new users.
While
we will implement procedures and safeguards that are designed to prevent security breaches and cyber-attacks, they may not be
able to protect against all attempts to breach our systems, and we may not become aware in a timely manner of any such security
breach. Unauthorized access to or security breaches of our platform, network or computer systems, or those of our technology service
providers, could result in the loss of business, reputational damage, regulatory investigations and orders, litigation, indemnity
obligations, damages for contract breach, civil and criminal penalties for violation of applicable laws, regulations or contractual
obligations, and significant costs, fees and other monetary payments for remediation. If customers believe that our platform does
not provide adequate security for the storage of sensitive information or its transmission over the Internet, our business will
be harmed. Customers’ concerns about security or privacy may deter them from using our platform for activities that involve
personal or other sensitive information.
Privacy
and data security laws and regulations could require us to make changes to our business, impose additional costs on us and reduce
the demand for our software solutions.
Our
business model contemplates that we will store, process and transmit both public data and our clients’ private data. Our
customers may store and/or transmit a significant amount of personal or identifying information through our platform. Privacy
and data security have become significant issues in the United States and in other jurisdictions where we may offer our software
solutions. The regulatory framework relating to privacy and data security issues worldwide is evolving rapidly and is likely to
remain uncertain for the foreseeable future. Federal, state and foreign government bodies and agencies have in the past adopted,
or may in the future adopt, laws and regulations regarding the collection, use, processing, storage and disclosure of personal
or identifying information obtained from customers and other individuals. In addition to government regulation, privacy advocates
and industry groups may propose various self-regulatory standards that may legally or contractually apply to our business. Because
the interpretation and application of many privacy and data security laws, regulations and applicable industry standards are uncertain,
it is possible that these laws, regulations and standards may be interpreted and applied in a manner inconsistent with our existing
privacy and data management practices. As we expand into new jurisdictions or verticals, we will need to understand and comply
with various new requirements applicable in those jurisdictions or verticals.
To
the extent applicable to our business or the businesses of our customers, these laws, regulations and industry standards could
have negative effects on our business, including by increasing our costs and operating expenses, and delaying or impeding our
deployment of new core functionality and products. Compliance with these laws, regulations and industry standards requires significant
management time and attention, and failure to comply could result in negative publicity, subject us to fines or penalties or result
in demands that we modify or cease existing business practices. In addition, the costs of compliance with, and other burdens imposed
by, such laws, regulations and industry standards may adversely affect our customers’ ability or desire to collect, use,
process and store personal information using our software solutions, which could reduce overall demand for them. Even the perception
of privacy and data security concerns, whether or not valid, may inhibit market acceptance of our software solutions in certain
verticals. Furthermore, privacy and data security concerns may cause our customers’ clients, vendors, employees and other
industry participants to resist providing the personal information necessary to allow our customers to use our applications effectively.
Any of these outcomes could adversely affect our business and operating results.
Any
failure to offer high-quality customer support may adversely affect our relationships with our customers.
Our
ability to retain existing customers and attract new customers will depend in part on our ability to maintain a consistently high
level of customer service and technical support. Our customers depend on our service support team to assist them in utilizing
our platform effectively and to help them to resolve issues quickly and to provide ongoing support. If we are unable to hire and
train sufficient support resources or are otherwise unsuccessful in assisting our customers effectively, it could adversely
affect our ability to retain existing customers and could prevent prospective customers from adopting our platform. We may be
unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to
modify the nature, scope and delivery of our customer support to compete with changes in the support services provided by our
competitors. Increased demand for customer support, without corresponding revenue, could increase our costs and adversely affect
our business, results of operations and financial condition. Our sales are expected to be highly dependent on our business reputation
and on positive recommendations from customers. Any failure to maintain high-quality customer support, or a market perception
that we do not maintain high-quality customer support, could adversely affect our reputation, business, results of operations
and financial condition.
We
could incur substantial costs in protecting or defending our intellectual property rights, and any failure to protect our intellectual
property could adversely affect our business, results of operations and financial condition.
Our
success depends, in part, on our ability to protect our brand and the proprietary methods and technologies that we develop under
patent and other intellectual property laws of the United States and foreign jurisdictions so that we can prevent others from
using our inventions and proprietary information. Clinigence Health Inc. owns U.S. Patent Application No. 15/882,688, which is
a utility patent application currently pending before the United States Patent and Trademark Office. Any patents that have been
applied for or that may be issued in the future may not provide significant protection for our intellectual property. If we fail
to protect our intellectual property rights adequately, our competitors might gain access to our technology and our business,
results of operations and financial condition may be adversely affected.
The
particular forms of intellectual property protection that we seek, or our business decisions about when to file patent applications
and trademark applications, may not be adequate to protect our business. We could be required to spend significant resources to
monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property
rights, determine the validity and scope of our proprietary rights or those of others, or defend against claims of infringement
or invalidity. Such litigation could be costly, time-consuming and distracting to management, result in a diversion of significant
resources, lead to the narrowing or invalidation of portions of our intellectual property and have an adverse effect on our business,
results of operations and financial condition. Our efforts to enforce our intellectual property rights may be met with defenses,
counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights or alleging that
we infringe the counterclaimant’s own intellectual property. Any of our patents, patent applications, copyrights, trademarks
or other intellectual property rights could be challenged by others or invalidated through administrative process or litigation.
We
expect to also rely, in part, on confidentiality agreements with our business partners, employees, consultants, advisors, customers
and others in our efforts to protect our proprietary technology, processes and methods. These agreements may not effectively prevent
disclosure of our confidential information, and it may be possible for unauthorized parties to copy our software or other proprietary
technology or information, or to develop similar software independently without our having an adequate remedy for unauthorized
use or disclosure of our confidential information. In addition, others may independently discover our trade secrets and proprietary
information, and in these cases we would not be able to assert any trade secret rights against those parties. Costly and time-consuming
litigation could be necessary to enforce and determine the scope of our proprietary rights, and the failure to obtain or maintain
trade secret protection could adversely affect our competitive business position.
In
addition, the laws of some countries do not protect intellectual property and other proprietary rights to the same extent as the
laws of the United States. To the extent we expand our international activities, our exposure to unauthorized copying, transfer
and use of our proprietary technology or information may increase.
Our
means of protecting our intellectual property and proprietary rights may not be adequate or our competitors could independently
develop similar technology. If we fail to meaningfully protect our intellectual property and proprietary rights, our business,
results of operations and financial condition could be adversely affected.
Assertions
by third parties of infringement or other violations by us of their intellectual property rights could result in significant costs
and harm our business and operating results.
Our
success depends upon our ability to refrain from infringing upon the intellectual property rights of others. Some companies, including
some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against
us. As we grow and enter new markets, we will face a growing number of competitors. As the number of competitors in our industry
grows and the functionality of products in different industry segments overlaps, we expect that software and other solutions in
our industry may be subject to such claims by third parties. Third parties may in the future assert claims of infringement, misappropriation
or other violations of intellectual property rights against us. We cannot assure you that infringement claims will not be asserted
against us in the future, or that, if asserted, any infringement claim will be successfully defended. A successful claim against
us could require that we pay substantial damages or ongoing royalty payments, prevent us from offering our services, or require
that we comply with other unfavorable terms. We may also be obligated to indemnify our customers or business partners or pay substantial
settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications
or refund fees, which could be costly. Even if we were to prevail in such a dispute, any litigation regarding our intellectual
property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations.
The
information that we expect to provide to our clients could be inaccurate or incomplete, which could harm our business reputation,
financial condition, and results of operations.
We
expect to aggregate, process, and analyze healthcare-related data and information for use by our clients. Because data in the
healthcare industry is fragmented in origin, inconsistent in format, and often incomplete, the overall quality of data received
or accessed in the healthcare industry is often poor, the degree or amount of data which is knowingly or unknowingly absent or
omitted can be material, and we frequently discover data issues and errors during our data integrity checks. If the analytical
data that we expect to provide to our clients are based on incorrect or incomplete data or if we make mistakes in the capture,
input, or analysis of these data, our reputation may suffer and our ability to attract and retain clients may be materially harmed.
In
addition, we expect to assist our clients with the management and submission of data to governmental entities, including CMS.
These processes and submissions are governed by complex data processing and validation policies and regulations. If we fail to
abide by such policies or submit incorrect or incomplete data, we may be exposed to liability to a client, court, or government
agency that concludes that our storage, handling, submission, delivery, or display of health information or other data was wrongful
or erroneous.
Our
proprietary applications may not operate properly, which could damage our reputation, give rise to a variety of claims against
us, or divert our resources from other purposes, any of which could harm our business and operating results.
Proprietary
software and application development is time-consuming, expensive, and complex, and may involve unforeseen difficulties. We may
encounter technical obstacles, and it is possible that we discover additional problems that prevent our proprietary applications
from operating properly. If our applications and services do not function reliably or fail to achieve client expectations in terms
of performance, clients could assert liability claims against us and attempt to cancel their contracts with us. Moreover, material
performance problems, defects, or errors in our existing or new applications and services may arise in the future and may result
from, among other things, the lack of interoperability of our applications with systems and data that we did not develop and the
function of which is outside of our control or undetected in our testing. Defects or errors in our applications might discourage
existing or potential clients from purchasing services from us. Correction of defects or errors could prove to be time consuming,
costly, impossible, or impracticable. The existence of errors or defects in our applications and the correction of such errors
could divert our resources from other matters relating to our business, damage our reputation, increase our costs, and have a
material adverse effect on our business, financial condition, and results of operations.
As
a result of variable sales and implementation cycles, we might not be able to recognize revenue to offset expenditures, which
could result in fluctuations in our quarterly results of operations or otherwise adversely affect our future operating results.
The
sales cycle for our services is expected to be typically four to six months from initial contact to contract execution, but can
vary depending on the particular client, product under consideration, and time of year, among other factors. Some clients, for
instance, undertake a more prolonged evaluation process, which has in the past resulted in extended sales cycles. Our sales efforts
are expected to involve educating potential clients about the use, technical capabilities, and benefits of our services, and gaining
an understanding of their needs and budgets. During the sales cycle, we expect to expend significant time and resources, and we
do not recognize any revenue to offset such expenditures, which could result in fluctuations in our quarterly results of operations
and adversely affect our future operating results. In addition, we may be unable to enter into definitive contracts at the end
of a sales cycle on terms that are favorable to us or at all, in some cases for reasons outside our control, which may materially
adversely affect our business and prospects.
After
a client contract is signed, we expect to provide an implementation process for the client during which we load, test, and integrate
data into our system and train client personnel. Our implementation cycle generally ranges from 20 to 90 days from contract
execution to completion of implementation but can vary depending on the amount and quality of the client’s data and how
quickly the client facilitates access to data. In addition, for certain clients, our third-party vendors must go through delegation
processes in order to become authorized to provide certain services to those clients, which could delay our ability to provide
such services to those clients. During the implementation cycle, we expect to expend time, effort, and financial resources implementing
our services, but accounting principles do not allow us to recognize the resulting revenue until implementation is complete and
the services are available for use by our clients. If implementation periods are extended, revenue recognition will be delayed,
which could adversely affect our results of operations in certain periods.
In
addition, because most of our revenue in each quarter is expected to be derived from agreements entered into with our clients
during previous quarters, the negative impacts resulting from a decline in new or renewed agreements in any one quarter may not
be fully reflected in our revenue for that quarter. Such declines, however, would negatively affect our revenue in future periods
and the effect of significant downturns in sales of and market demand for our services, and potential changes in our renewal rates
or renewal terms may not be fully reflected in our results of operations until future periods. Our sales and implementation cycles
are expected to also make it difficult for us to rapidly increase our total revenue through additional sales in any period. As
a result, the effect of changes in the industry impacting our business, or changes we experience in our new sales, may not be
reflected in our short-term results of operations.
We
could experience losses or liability not covered by insurance.
Our
business will expose us to risks that are inherent in the provision of analytics and toolsets that assist clinical decision-making.
If clients or individuals assert liability claims against us, any ensuing litigation, regardless of outcome, could result in a
substantial cost to us, divert management’s attention from operations, and decrease market acceptance of our toolsets. We
expect to attempt to limit our liability to clients by contract; however, the limitations of liability set forth in the contracts
may not be enforceable or may not otherwise protect us from liability for damages. Additionally, we may be subject to claims that
are not explicitly covered by contract. We also maintain general liability coverage; however, this coverage may not continue to
be available on acceptable terms, may not be available in sufficient amounts to cover one or more large claims against us, and
may include larger self-insured retentions or exclusions for certain products. In addition, the insurer might disclaim coverage
as to any future claim. A successful claim not fully covered by our insurance could have a material adverse impact on our liquidity,
financial condition, and results of operations.
If
we are unable to hire, retain and motivate qualified personnel, our business will suffer.
Our
future success depends, in part, on our ability to continue to attract and retain highly skilled personnel. We believe that there
is, and will continue to be, intense competition for highly skilled management, engineering, data science, sales and other personnel
with experience in our industry. We must provide competitive compensation packages and a high-quality work environment to hire,
retain and motivate employees. If we are unable to retain and motivate our existing employees and attract qualified personnel
to fill key positions, we may be unable to manage our business effectively, including the development, marketing and sale of our
products, which could adversely affect our business, results of operations and financial condition. To the extent we hire personnel
from competitors, we also may be subject to allegations that they have been improperly solicited or that they have divulged proprietary
or other confidential information. If we are unable to retain our employees, our business, results of operations and financial
condition could be adversely affected.
Our
Board of Directors may change our strategies, policies, and procedures without stockholder approval, and we may become more highly
leveraged, which may increase our risk of default under our debt obligations.
Our
investment, financing, leverage, and dividend policies, and our policies with respect to all other activities, including growth,
capitalization, and operations, are determined exclusively by our board of directors, and may be amended or revised at any time
by our board of directors without notice to or a vote of our stockholders. This could result in us conducting operational matters,
making investments, or pursuing different business or growth strategies than those contemplated in this private placement memorandum.
Further, our charter and bylaws do not limit the amount or percentage of indebtedness, funded or otherwise, that we may incur.
Higher leverage also increases the risk of default on our obligations. In addition, a change in our investment policies, including
the manner in which we allocate our resources across our portfolio or the types of assets in which we seek to invest, may increase
our exposure to interest rate risk and liquidity risk. Changes to our policies with regards to the foregoing could materially
adversely affect our financial condition, results of operations, and cash flow.
The
COVID-19 pandemic has impacted our operations and similar unforeseen and uncontrollable events may impact our operations in the
future.
The
COVID-19 pandemic has resulted in social distancing, travel bans and quarantine, and this has limited access to our facilities,
customers, management, support staff and professional advisors. These factors, in turn, have had an impact on our operations,
financial condition and demand for our goods and services as well as our overall ability to react timely to mitigate the impact
of this event. Also, it has hampered our efforts to comply with our filing obligations with the Securities and Exchange Commission.
While we have learned from the COVID-19 pandemic and its result on our operations and financial condition, because of the nature
of these events, we cannot assure you that we will be well-prepared for similar unforeseen and uncontrollable events that may
occur in the future.
Our
business will be subject to the risks of earthquakes, fire, floods and other natural catastrophic events, health epidemics or
pandemics, and to interruption by man-made problems such as power disruptions, computer viruses, data security
breaches or terrorism.
We
expect to have facilities located in the Southeast United States, including Florida, a region known for hurricane activity. A
significant natural disaster, such as a hurricane or a flood, occurring at our headquarters, at one of our other facilities or
where a business partner is located could adversely affect our business, results of operations and financial condition. Further,
if a natural disaster, health epidemics or pandemic, or man-made problem were to affect our network service providers
or Internet service providers, this could adversely affect the ability of our customers to use our products and platform. In addition,
health epidemics or pandemics, natural disasters and acts of terrorism could cause disruptions in our business, or the businesses
of our customers or service providers. We also expect to rely on our network and third-party infrastructure and enterprise applications
and internal technology systems for our engineering, sales and marketing and operations activities. Although we maintain incident
management and disaster response plans, in the event of a major disruption caused by a health epidemic or pandemic, natural disaster
or man-made problem, we may be unable to continue our operations and may endure system interruptions, reputational harm,
delays in our development activities, lengthy interruptions in service, breaches of data security and loss of critical data, any
of which could adversely affect our business, results of operations and financial condition.
Our
solutions face intense competition in the marketplace. If we are unable to compete effectively, our operating results could be
adversely affected.
The
market for our solutions is increasingly competitive, rapidly evolving and fragmented, and is subject to changing technology and
shifting customer needs. Although we believe that our platform and the solutions that it offers are unique, many vendors develop
and market products and services that compete to varying extents with our offerings, and we expect competition in our market to
continue to intensify. Moreover, industry consolidation may increase competition.
Many
of our existing expected competitors, as well as a number of potential new competitors, have longer operating histories, greater
name recognition, more established customer bases and significantly greater financial, technical, marketing and other resources
than we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities,
technologies, standards or customer requirements. We could lose customers if our competitors introduce new competitive products
and technologies, add new features, acquire competitive products, reduce prices, form strategic alliances with other companies
or are acquired by third parties with greater available resources. We expect to also face competition from a variety of vendors
of cloud-based and on-premise software applications that address only a portion of one of our solutions. We may also face increasing
competition from open source software initiatives, in which competitors may provide software and intellectual property for free.
In addition, if a prospective customer is currently using a competing solution, the customer may be unwilling to switch to our
solutions without access to setup support services. If we are unable to provide those services on terms attractive to the customer,
the prospective customer may be unwilling to utilize our solutions. If our competitors’ products, services or technologies
become more accepted than our solutions, if they are successful in bringing their products or services to market earlier than
ours, or if their products or services are more technologically capable than ours, then our revenue could be adversely affected.
In addition, some of our competitors may offer their products and services at a lower price. If we are unable to achieve our target
pricing levels, our operating results would be negatively affected. Pricing pressures and increased competition could result in
reduced sales, reduced margins, losses or a failure to maintain or improve our competitive market position, any of which would
adversely affect our business.
If
we do not keep pace with technological changes, our solutions may become less competitive and our business may suffer.
Our
market is expected to be characterized by rapid technological change, frequent product and service innovation and evolving industry
standards. If we are unable to provide enhancements and new features for our existing solutions or new solutions that achieve
market acceptance or that keep pace with these technological developments, our business could be adversely affected. The success
of enhancements, new features and solutions depends on several factors, including the timely completion, introduction and market
acceptance of the enhancements or new features or solutions. Failure in this regard may significantly impair our revenue growth.
In addition, because our solutions are designed to operate on a variety of systems, we will need to continuously modify and enhance
our solutions to keep pace with changes in internet-related hardware, software, communication, browser and database technologies.
We may not be successful in either developing these modifications and enhancements or in bringing them to market in a timely fashion.
Furthermore, uncertainties about the timing and nature of new network platforms or technologies, or modifications to existing
platforms or technologies, could increase our research and development expenses. Any failure of our solutions to keep pace with
technological changes or operate effectively with future network platforms and technologies could reduce the demand for our solutions,
result in customer dissatisfaction and adversely affect our business.
We
may record future intangible asset impairment charges related to one or more of our subsidiaries, which could materially adversely
impact our results of operations.
We
test our goodwill balances during the fourth quarter of each year for impairment, or more frequently if indicators are present
or changes in circumstances suggest that impairment may exist. We assess goodwill for impairment at the reporting unit level and,
in evaluating the potential for impairment of goodwill, we make assumptions regarding estimated revenue projections, growth rates,
cash flows and discount rates. On a quarterly basis, we monitor the key drivers of fair value to detect events or other changes
that would warrant an interim impairment test of our goodwill and other intangible assets. Relatively small declines in the future
performance and cash flows of a reporting unit or asset group, changes in our reporting units or in the structure of our business
as a result of future reorganizations, acquisitions or divestitures of assets or businesses, or small changes in other key assumptions,
may result in the recognition of significant asset impairment charges, which could have a material adverse impact on our results
of operations.
Economic
conditions or changing consumer preferences could adversely impact the Company.
A
downturn in economic conditions in one or more of its markets, such as the current global pandemic associated with COVID-19, could
have a material adverse effect on the results of operations, financial condition, business and prospects. Although the Company
attempts to stay informed of customer preferences, any sustained failure to identify and respond to trends could have a material
adverse effect on its results of operations, financial condition, business and prospects.
The
Company’s success depends upon its ability to adapt to a changing market and its continued development of additional services.
Although
the Company believes that it will provide a competitive range of products and services, there can be no assurance of acceptance
by the marketplace. The procurement of new contracts by the Company may be dependent upon the continuing results achieved with
current clients, upon pricing and operational considerations, as well as the potential need for continuing improvement
to existing services. Moreover, the markets for such services may not develop as expected nor can there be any assurance that
the Company will be successful in its marketing of any such services.
Legal
claims could be filed that would have a material adverse effect on our business, operating results and financial condition. We
may in the future face risks of litigation and liability claims on technological liability and other matters, the extent of such
exposure can be difficult or impossible to estimate and which can negatively impact our financial condition and results of operations.
From
time to time, we may be involved in disputes or regulatory inquiries that arise in the ordinary course of business. We expect
that the number and significance of these potential disputes may increase as our business expands and our company grows larger.
While our agreements with customers limit our liability for damages arising from our solutions, we cannot assure you that these
contractual provisions will protect us from liability for damages in the event we are sued. Although we may carry general liability
insurance coverage, our insurance may not cover all potential claims to which we are exposed or may not be adequate to indemnify
us for all liability that may be imposed. Any claims against us, whether meritorious or not, could be time consuming, result in
costly litigation, require significant amounts of management time, and result in the diversion of significant operational resources.
Because litigation is inherently unpredictable, we cannot assure you that the results of any of these actions will not have a
material adverse effect on our business, financial condition, results of operations and prospects.
Although
there is no current pending litigation against the Company or its subsidiaries, in the future, clients or competitors may threaten
lawsuits for what they believe to be infractions against themselves.
Our
operations are subject to numerous US laws and regulations. Liability under these laws involves inherent uncertainties. Violations
of these laws and regulations are subject to civil, and, in some cases, criminal sanctions. Although we are not aware of any compliance
related issues, we may not have been, or may not be, at all times, in complete compliance with all requirements, and we may incur
costs or liabilities in connection with such requirements. We may also incur unexpected interruptions to our operations, administrative
injunctions requiring operation stoppages, fines and other penalties.
There
can also be no assurance that any insurance coverage we take will be adequate or that we will prevail in any future cases. We
can provide no assurance that we will be able to obtain liability insurance that would protect us from any such lawsuits. We are
not currently subject to any claims from our employees or customers; however, we may be subject to such claims in the future.
In the event that are not covered by insurance, our management could expend significant time addressing any such issues.
If
we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce
timely and accurate financial statements or comply with applicable regulations could be impaired.
We
are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and
the rules and regulations of the applicable listing standards of the New York Stock Exchange. We expect that the requirements
of these rules and regulations will continue to increase our legal, accounting, and financial compliance costs; make some activities
more difficult, time-consuming, and costly; and strain our personnel, systems, and resources.
The
Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control
over financial reporting. We are also required to make a formal assessment and provide an annual management report on the effectiveness
of our internal control over financial reporting.. In order to maintain the effectiveness of our disclosure controls and procedures
and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, resources, including
accounting-related costs and management oversight.
Additionally,
current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
Further, additional weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the
future. Any failure to maintain or develop effective controls or any difficulties encountered in their implementation or improvement
could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our
financial statements for prior periods. Any failure to maintain effective internal control over financial reporting also could
adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial
reporting.