NUTEX HEALTH INC. SIGNIFICANT ACCOUNTING POLICIES
Our management's discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared in
accordance with accounting principles generally accepted in
Principles of Consolidation
Our consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries,
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Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
Fair Value Measurements
We adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk. The Company's investment in AHA was valued at level 3 input.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 - quoted prices in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 - inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
Convertible Instruments
We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
We account for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
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We account for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
Revenue Recognition
Revenue is generated primarily by software licenses, training, and consulting. Software licenses are provided as SaaS-based subscriptions that grants access to proprietary online databases and data management solutions. Training and consulting are project based and billable to customers on a monthly-basis or task-basis.
Revenue from training and consulting are generally recognized upon delivery of training or completion of the consulting project. The duration of training and consulting projects are typically a few weeks or months and last no longer than 12 months.
SaaS-based subscriptions are generally marketed under multi-year agreements with annual, semi-annual, quarterly, or month-to-month renewals and revenue is recognized ratably over the renewal period with the unearned amounts received recorded as deferred revenue.
On
We provide our customers with software licensing, training, and consulting through SaaS-based subscriptions. This subscription revenue represents revenue earned under contracts in which we bill and collect the charges for licensing and related services. We determine the measurement of revenue and the timing of revenue recognition utilizing the following core principles:
1. Identifying the contract with a customer;
2. Identifying the performance obligations in the contract;
3. Determining the transaction price;
4. Allocating the transaction price to the performance obligations in the
contract; and
5. Recognizing revenue when (or as) the Company satisfies its performance
obligations.
Revenues from subscriptions are deferred when cash payments are received in advance of the satisfaction of the Company's performance obligations and recognized over the period in which the performance obligations are satisfied. We complete our contractual performance obligations through providing our customers access to specified data through subscriptions for a service period, and training on consulting associated with the subscriptions. We primarily invoice our customers on a monthly basis and does not provide any refunds, rights of return, or warranties to its customers.
36 Cost of Sales
Our costs of sales primarily consist of cloud computing and storage costs, datasets, and contracted and internal labor costs.
Advertising Costs
We expense advertising costs as incurred. Advertising costs of
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash and highly liquid investments
with original maturities of 90 days or less at the date of purchase. We do not
have any cash equivalents as of
Accounts Receivable
We analyze the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances. We evaluate specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment.
Inventory
Inventory consisting of finished products is stated at the lower of cost or net realizable value.
Property and equipment and depreciation
Property and equipment are stated at cost. Maintenance and repairs are charged to expense when incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is credited or charged to income. Depreciation for both financial reporting and income tax purposes is computed using combinations of the straight line and accelerated methods over the estimated lives of the respective assets as follows:
Office equipment and fixtures 5 - 7 years Computer hardware 5 years Computer software 3 years Development equipment 5 years 37 Amortization
Intangible assets are amortized using the straight-line method over the estimated lives of the respective assets as follows:
Developed technology 13 years Customer relationships 10 yearsGoodwill
Long-Lived Assets
We assess the valuation of components of our property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. We base our evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, we determine whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, we recognize a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows.
Deferred Revenue
Deposits from customers are not recognized as revenues, but as liabilities,
until the following conditions are met: revenues are realized when cash or
claims to cash (receivable) are received in exchange for goods or services or
when assets received in such exchange are readily convertible to cash or claim
to cash or when such goods/services are transferred. When such income item is
earned, the related revenue item is recognized, and the deferred revenue is
reduced. To the extent revenues are generated from our support and maintenance
services, we recognize such revenues when services are completed and billed. We
received deposits from our various customers that have been recorded as deferred
revenue and presented as current liabilities the amount of
38 Stock-Based Compensation
We accounts for our stock-based awards granted under our employee compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest. We use the Black-Scholes option pricing model to estimate the fair value of its stock options and warrants. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility of the Company's common stock, the risk free interest rate at the date of grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants. Changes in these subjective input assumptions can materially affect the fair value estimate of the Company's stock options and warrants.
Income Taxes
We account for income taxes using the asset and liability method in accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.
We apply the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in our financial statements. In accordance with this provision, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position.
Going Concern
The notes accompanying our
Recent Accounting Pronouncements
We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
Year Ended
Assets. At
Liabilities. At
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Stockholders' Equity (Deficiency). Our stockholders' deficiency was
Revenue. We had revenue of
Costs and Expenses
Cost of Sales. We had cost of sales of
Operating Expenses. General and Administrative expense was
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
Sales and Marketing expense was
Research and Development expense was
Impairment of
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Gain on Sale of Assets. We recorded a gain on the sale of assets of
Other Operating Expenses. For the year ended
Other Income (Expense). For the year ended
LIQUIDITY AND CAPITAL RESOURCES
General
As reflected in the accompanying consolidated financial statements, we had cash
of
Cash Flow Activity
Cash used in operating activities was
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Cash used in investing activities was
Cash provided by financing activities was
Plan of Operation and Funding
We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital, further advances and debt instruments, and anticipated cash flow are anticipated to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current 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. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.
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OFF BALANCE SHEET ARRANGEMENTS
We have no off balance-sheet arrangements.
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