Business Context and Reporting Period
Company: Clinigence Holdings, Inc. (formerly iGambit Inc.)
Filing Type: Form 10-Q (Unaudited)
Period Ended: June 30, 2020
Business Overview: A population health analytics company providing SaaS solutions for healthcare organizations to improve care quality and cost-effectiveness. The company operates primarily through its subsidiary, Clinigence Health, Inc.
Key Financial Metrics
| Metric | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 |
|---|---|---|
| Revenue | $844,218 | $657,414 |
| Gross Profit | $380,231 | $161,905 |
| Net Income (Loss) | $1,640,517 | $(2,598,717) |
| Operating Loss | $(2,622,536) | $(2,411,553) |
| Cash and Cash Equivalents | $63,622 | $827,692 |
| Total Assets | $7,175,222 | $6,692,504 |
| Total Liabilities | $1,410,753 | $4,834,071 |
| Stockholders' Equity | $5,764,469 | $5,017,595 |
Working Capital: The company reported a working capital deficit of $699,499 as of June 30, 2020.
Material Changes and Unusual Items
- Asset Sale and Gain on Sale: The primary driver of the net income for the period was a non-operating gain of approximately $4.86 million resulting from the sale of intellectual property assets to Accountable Healthcare America, Inc. (AHA) on May 29, 2020. In exchange, the company received Series E Preferred Stock in AHA valued at $6.4 million.
- Debt Extinguishment: The asset sale included the assumption of approximately $3.4 million in liabilities by AHA, including convertible notes and related party loans. This resulted in a loss on extinguishment of debt of $167,797.
- Discontinued Operations: The company sold its subsidiary, HealthDatix, Inc., effective March 1, 2020. This resulted in a gain on disposal of $142,027 and income from discontinued operations of $39,752 for the six-month period.
- Revenue Growth: Revenue increased 28% year-over-year to $844,218, attributed to the acquisition of Qualmetrix in 2019, despite a noted decrease in revenue for the three months ended June 30, 2020 due to the COVID-19 pandemic.
- Stock-Based Compensation: Significant non-cash expense of $2.27 million was recorded for stock-based compensation, primarily related to board and employee options.
Guidance, Outlook, and Risks
- Going Concern: The filing includes an explanatory paragraph expressing substantial doubt about the company's ability to continue as a going concern. The company has an accumulated deficit of $10.9 million and a working capital deficit. Continuation depends on obtaining necessary equity financing and generating future revenues.
- Liquidity: Cash decreased significantly from $1.07 million at year-end 2019 to $63,622 at June 30, 2020. The company expects to fund operations through existing funds, further issuances of securities, and debt instruments. No lines of credit are currently available.
- Management Changes: Subsequent to the period end, CEO Jacob Margolin resigned (July 11, 2020) and entered into a separation agreement. Lawrence Schimmel was appointed Interim CEO.
- Risk Factors: Key risks include the unproven business model, heavy reliance on a limited number of customers (one customer accounted for 12% of sales in the first half of 2020), regulatory compliance in the healthcare industry (HIPAA, Stark Law), and the impact of the COVID-19 pandemic on operations and demand.
Investor Verification Checklist
- Valuation of AHA Investment: Verify the fair value and convertibility terms of the $6.4 million Series E Preferred Stock received from AHA, as this asset constitutes the majority of the company's total assets.
- Cash Burn Rate: Assess the sustainability of operations given the cash balance of $63,622 and the working capital deficit of nearly $700,000.
- Revenue Quality: Analyze the concentration risk regarding the top customer (12% of sales) and the impact of the pandemic on recurring SaaS revenue.
- Debt Obligations: Review the terms of the remaining notes payable, including the SBA PPP loan ($333k) and EIDL loan ($150k), and the potential for forgiveness or repayment schedules.
- Stock Dilution: Monitor subsequent equity issuances, as the company explicitly states it intends to finance future operations through further issuances of securities, which will dilute existing shareholders.