UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) May 21, 2021

Clinigence Holdings, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (678) 607-6393

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

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

On March 2, 2021, Clinigence Holdings, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) reporting, among other things, that on February 25, 2021, the Company closed its acquisition of all of the issued and outstanding shares of capital stock AHP, Inc. (AHP) and its acquisition of all of the issued and outstanding shares of capital stock Accountable Healthcare America, Inc. (“AHA”), hereinafter collectively referred to as the Merger. This Form 8-K/A amends the Original Form 8-K to include the historical audited combined financial statements of AHP and AHA and the unaudited pro forma condensed combined financial information required by Items 9.01(a) and 9.01(b) of Form 8-K that were excluded from the Original Form 8-K in reliance on the instructions to such items and to file the Amendment.

Item 9.01 Financial Statements and Exhibits

(a) Financial statements of businesses acquired 

The audited financial statements of AHP’s variable interest entity (“VIE”), Associated Hispanic Physicians of Southern California, Inc. (AHPIPA), which comprise the statements of financial position as of December 31, 2020 and 2019, and the related combined statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and the related notes to the combined financial statements, are filed herewith as Exhibit 99.2.

The audited financial statements of AHA, which comprise the statements of financial position as of December 31, 2020 and 2019, and the related combined statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and the related notes to the combined financial statements, are filed herewith as Exhibit 99.3.

(b) Pro forma financial information 

The unaudited pro forma condensed financial information of the Company, AHP (including its VIE) and AHA is filed as Exhibit 99.4 to this Form 8-K/A.

(d) Exhibits

Reference is made to the Exhibit Index following the signature page of this Current Report on Form 8-K, which is incorporated herein by reference.

SIGNATURES

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

Date: May 21, 2021

Clinigence Holdings, Inc.

By: /s/ Michael Bowen

Michael Bowen

Chief Financial Officer  

EXHIBIT INDEX

Associated Hispanic Physicians of

Southern California, Inc.

Audited Financial Statements

(With Independent Auditor’s Report)

For the Years Ended December 31, 2020 and 2019

TABLE OF CONTENTS

Independent Auditor’s Report

To the Board of Directors

Associated Hispanic Physicians of Southern California, Inc. Monterey Park, California

We have audited the accompanying financial statements of Associated Hispanic Physicians of Southern California, Inc. (an S Corporation), which comprise the balance sheets as of December 31, 2020 and 2019, and the related statements of income, stockholder’s equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principals generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Associated Hispanic Physicians of Southern California, Inc. as of December 31, 2020 and 2019, and the results of their operations and their cash flows for the years then ended in accordance with accounting principals generally accepted in the United States of America.

Riverside, California

April 17, 2021

Associated Hispanic Physicians of Southern California, Inc.

Balance Sheets

As of December 31, 2020 and 2019

(See Independent Auditor's Report)

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

Associated Hispanic Physicians of Southern California, Inc.

Statements of Income

For the Years Ended December 31, 2020 and 2019

(See Independent Auditor's Report)

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

Associated Hispanic Physicians of Southern California, Inc.

Statements of Stockholder's Equity

For the Years Ended December 31, 2020 and 2019

(See Independent Auditor's Report)

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

Associated Hispanic Physicians of Southern California, Inc.

Statements of Cash Flows

For the Years Ended December 31, 2020 and 2019

(See Independent Auditor's Report)

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

Associated Hispanic Physicians of Southern California, Inc.

Notes to the Financial Statements 

Summary of Significant Accounting Policies

Organization and Operations:

The IPA was formed as a California mutual benefit corporation in 1991. On August 22, 1994, the Articles of Incorporation were restated to change the IPA to a professional medical corporation. The IPA operates as an Independent Physicians Association (“IPA”), which enters into contractual arrangements with Health Maintenance Organizations (“HMO”), third party payors and other insurance entities. In turn, the IPA enters into contractual agreements to provide medical services to designated subscribers and beneficiaries of HMOs, third party payors and other insurance entities.

Basis of Accounting:

The accompanying financial statements are prepared on the accrual basis of accounting.

Cash and Cash Equivalents:

For purposes of the statement of cash flows, the organization considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents.

Certificate of Deposit:

Investment consists of a certificate of deposit with an original maturity greater than ninety (90) days when purchased and are recorded at fair value.

Allowance for Uncollectible Accounts:

Receivables are stated at contractual amounts billed. The IPA reserves 20% of all account balances over 120 days past due.

Income Recognition:

The IPA negotiates fixed per-member, per-month (PMPM) rates (Capitation) with third-party insurers for a fixed period of time. The IPA recognizes capitation payments received in advance from third-party insurers as revenue on a monthly basis without regard to the frequency, extent, or nature of the medical services actually furnished.

Income Taxes:

The IPA, with the consent of its stockholders, has elected under the Internal Revenue Code to be taxed as an S Corporation. The stockholders of an S Corporation are taxed on their proportionate share of the IPA’s taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Certain specific deductions and credits flow through the IPA to the stockholders.

Summary of Significant Accounting Policies, continued

Income Taxes:

The election is valid for California income tax purposes; however, California law requires a minimum tax, which is the greater of $800 or 1.5 percent of state taxable income. Therefore, a provision and related tax liability have been included in the financial statements for California income taxes currently due plus deferred tax for operating losses in the amount of $159,143 that are available to offset future taxable income through 2039.

Membership:

The IPA is operated by physician members.

Risk and Incentive Pool Revenue:

The IPA participates in various risk pools maintained by HMO’s and hospitals (who also contract with the HMO’s). The risk pool payments to the IPA by the HMO’s are based on contractual agreements, which contain schedules of payments using the hospital days per 1,000 as a basis for distribution. The HMO’s make periodic payments of a percentage of the calculated amount and distribute the remainder upon completion of their annual reconciliation of pools.

Use of Estimates:

The preparation of financial statements in conformity with Generally Accepted Accounting Principles (GAAP) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Reclassifications:

Certain amounts in the prior year financial statements have been reclassified for comparative purposes to conform to the presentation in the current year financial statements.

Concentration of Credit Risk

As of December 31, 2020, the IPA had cash deposits in excess of federally insured limits with financial institutions in the amount of $3,882,207.

Health Plan Receivables

Health Plan receivables consist of outstanding capitation. See Note of Summary of Significant Accounting Policies: Risk and Incentive Pool Revenue and Income Recognition for greater details regarding accrued shared risk and outstanding capitation, respectively.

Income Tax Provision

The provisions for income taxes were as follows at December 31, 2020 and 2019:

For the years ended December 31, 2020 and 2019, the effective tax rates approximated the state statutory rate of 1.50%, respectively.

The noncurrent components of deferred income taxes recognized in the balance sheet at December 31, 2020 and 2019, were as follows:

Management has determined that no valuation allowance related to deferred tax assets is necessary at December 31, 2020 and 2019.

Physician Claims Payable

Physician claims payable includes a provision for amounts for services incurred but not reported (IBNR) by providers as of December 31, 2020. The IBNR is calculated based on claims lag analysis.

Related Party Transactions

During the year ended December 31, 2020 and 2019, the IPA paid in excess of $2.6 and $2.8 million respectfully to stockholders and their related companies for healthcare services rendered through the provider network.

During 2019 the IPA paid advanced capitation of $256,000 to Associated Hispanic Medical Group, Inc. (AHM), a provider of the IPA. AHM is majority owned by stockholders of the IPA. AHM will make repayments in the amount of $13,000 per month by offset of their monthly provider capitation due from the IPA. AHM receives provider capitation from the IPA of approximately $36,000 per month. The offsets commence February 29, 2020 and are to be repaid by a final offset in the amount of $124,000 by September 29, 2020. The advance is shown as prepaid capitation, related party in the current asset section of the balance sheet in the amount of $256,000. AHM repaid the IPA in November 2020.

Stop Loss Insurance

The IPA has an insurance policy that limits exposure to specific losses that may be in excess of certain amounts with respect to capitated eligible services provided to members. The policy period effective dates are from January 1, 2020 to January 1, 2021 and covers claims incurred within the policy period and nine (9) months thereafter. The policy contains a per-covered member, per policy deductible of $20,000 for commercial members and $25,000 for Medicare and Medicaid members. The maximum amount reimbursable less deductible, per member per policy period is $500,000.

Commitments and Contingencies

Health Care Industry

The health care industry is subject to numerous laws and regulations of federal, state, and local governments. Compliance with these laws and regulations can be subject to government review and interpretation, as well as regulatory action unknown and unasserted at this time. Recently, government activity has increased with respect to investigations and allegations concerning possible violations of regulations by health care providers, which could result in the imposition of significant fines and penalties, as well as significant repayments of previously billed and collected revenues of patient services.

Subsequent Events

The IPA evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued. Management is currently evaluating the impact of the COVID-19 pandemic on the industry and has concluded that while it is reasonably possible that the virus could have a negative effect on the IPA's financial position and results of its operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

On February 22, 2021, the Shareholders of the AHP Management, Inc, a California corporation (“AHP”), Clinigence Holdings, Inc., a Delaware corporation (“Parent”), AHP Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), and Robert Chan (the “Shareholders’ Representative”) entered into an agreement and plan of merger (the “Merger Agreement”). The Merger became effective on February 25, 2021.

The Merger Agreement provided for the merger of Merger Sub with and into AHP (the “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 Parent, and the former stockholders of AHP have a direct equity ownership in Parent. 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.

Prior to the Acquisition, AHP was a privately held company with controlling interest in the IPA. A key term of the Merger Agreement was that AHP enter into a Management Services Agreement with the IPA (the “Management Services Agreements”) making the IPA a Variable Interest Entity (VIE) of AHP and its Parent, together the primary beneficiary (“PB”).

Under the ASC 805, the PB analysis is a qualitative analysis based on power and benefits. The PB consolidates a VIE if the PB has both power and benefits – that is, (i) the PB has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance, and (ii) PB has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE. The PB operates by maintaining a long-term MSA with the IPA. In accordance with relevant accounting guidance, the IPA has been determined to be a VIE of AHP, and ultimately Parent, as the PB has the ability, through majority representation on the IPA’s Board and otherwise, to direct the activities (excluding clinical decisions) that most significantly affect the IPA’s economic performance.

The IPA has evaluated subsequent events for recognition and disclosure through April 17, 2021 which is the date the financial statements were available to be issued.

ACCOUNTABLE HEALTHCARE AMERICA, INC.

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED

DECEMBER 31, 2020 AND 2019

Accountable Healthcare America, Inc. and Subsidiary

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Accountable Healthcare America, Inc.

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Accountable Healthcare America, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Explanatory Paragraph — Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Marcum LLP 

Marcum LLP

We have served as the Company’s auditor since 2020.

New York, NY

May 21, 2020

Accountable Healthcare America, Inc

Consolidated Balance Sheets

The accompanying notes are an integral part of these consolidated financial statements.

Accountable Healthcare America, Inc

Consolidated Statements of Operations

The accompanying notes are an integral part of these consolidated financial statements.

Accountable Healthcare America, Inc

Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit)

The accompanying notes are an integral part of these consolidated financial statements.

Accountable Healthcare America, Inc

Consolidated Statements of Cash Flows

The accompanying notes are an integral part of these consolidated financial statements.

Accountable Healthcare America, Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2020 and 2019

1. Principles of Consolidation and Description of Business

The consolidated financial statements presented are those of Accountable Healthcare America, Inc., (the “Company”) and its wholly owned subsidiaries, AHA Analytics, Inc. (“Analytics”) and Accountable Care Medical Group of Florida, Inc. (“ACMG”). ACMG has been deconsolidated as of November 15, 2020, as more fully described below.

Accountable Healthcare America, Inc. (“AHA” or the “Holding”) was incorporated on October 6, 2014 pursuant to the laws of the State of Delaware and filed amendments to its Articles of Incorporation on March 23, 2018. 

ACMG was incorporated on June 11, 2012, pursuant to the laws of the State of Florida and filed amendments to its Articles of Incorporation on July 19, 2012.

Analytics was formed on February 1, 2020 and incorporated in the State of Delaware on May 8, 2020 for the purpose of acquiring and holding certain assets of Clinigence Holdings, Inc. pursuant to an Agreement dated May 29, 2020.

AHA was organized to acquire a series of companies providing a broad array of health and managed care services to Medicare members. AHA’s initial focus is on acquiring Accountable Care Organizations (“ACO’s”), Managed Service Organizations (“MSO’s”) and Primary Care Physician Practices (“PCP’s”) with significant numbers of Medicare members.

ACMG was organized to create and manage a “Clinically Integrated Health Care Delivery System” under the Medicare Shared Savings Program (“MSSP”). On January 1, 2014, ACMG began its first three-year agreement with The Centers for Medicare and Medicaid Services (“CMS”) as a Track 1 ACO, responsible for coordinating the care of Medicare Fee for Services (“FFS”) beneficiaries. In 2020, ACMG split its business into two ACOs. One remained as a Track 1 ACO and one became a Track 3 ACO. As an Enhanced Track ACO, ACMG will receive 75% of the shared savings generated to CMS after deductions for quality and sequestration and will be responsible to pay for shared losses not to exceed 15% of the updated benchmark.

On August 9, 2017, AHA entered into a Stock Purchase Agreement to acquire the stock of ACMG. Initial terms called for the purchase of 15% of ACMG for an immediate payment of $2,250,000 and a one-year option for the remaining 85% of ACMG. In 2018, the companies entered into a series of Addendums to the Stock Purchase Agreement whereby, among other things, AHA agreed to issue 1,593,750 shares of Series A Redeemable Convertible Cumulative Preferred Stock. The Series A preferred shares had a fair value at the date of issuance of $5,115,938. The Company also made a cash payment totaling $2,100,000 for which together represented a cumulative ownership interest in ACMG of 71.5%. The transactions were accounted for as business acquisition. On March 15, 2019, AHA and ACMG entered into Addendum 6 to the Stock Purchase Agreement whereby AHA agreed to issue 1,068,750 shares of Series A Redeemable Convertible Cumulative Preferred Stock; therefore, owning 100% of ACMG. On November 15, 2020, AHA became in default of its latest payment obligation as contained in its Extension Agreement dated July 31, 2020 and it is required to return 71% of the shares it owns in ACMG but has not paid for. As a result, AHA has deconsolidated ACMG as of November 15, 2020 (see Note 4).

Going Concern and Management’s Plans

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has an accumulated deficit of $ 6,339,890, and a working capital deficit of $ 7,525,589 at December 31, 2020. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for the next twelve months from the date that the financial statements are issued. Management’s plans and assessment of the probability that such plans will mitigate and alleviate any substantial doubt about the Company’s ability to continue as a going concern, is dependent upon the ability to attain funding to secure additional resources to generate sufficient revenues and increased margin, which without these represent the principal conditions that raise substantial doubt about our ability to continue as a going concern.

As a result of the spread of the COVID-19 coronavirus, economic uncertainties have arisen which are likely to negatively impact operations. Other financial impact could occur though such potential impact is unknown at this time. A pandemic typically results in social distancing, travel bans and quarantine, and this may limit access to our facilities, customers, management, support staff and professional advisors. These factors, in turn, may not only impact our operations, financial condition and demand for our goods and services but our overall ability to react timely to mitigate the impact of this event. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.

The Company expects that working capital requirements will continue to be funded through a combination of its existing funds and further issuances of securities. Working capital requirements are expected to increase in line with the growth of the business. Existing working capital, further advances and debt and equity instruments, and anticipated cash flow are expected to be adequate to fund operations over the next twelve months. The Company has no lines of credit or other bank financing arrangements. The Company has financed operations to date through the proceeds of private placements of equity and debt instruments. The Company intends to finance its expenses with further issuances of securities, and debt issuances. Thereafter, the Company expects it 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 current stockholders. Further, such securities might have rights, preferences, or privileges senior to common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict business operations.

The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

2. Summary of Significant Accounting Policies Basis of Presentation

The accompanying consolidated financial statements include the accounts of AHA and its subsidiary ACMG. AHA and its subsidiary are collectively referred to as (“the Company”). All intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared by management in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Non-controlling interest represents the portion of equity that AHA does not own in ACMG that is consolidated. ACMG has been deconsolidated as of November 15, 2020, the date at which AHA became in default of its payment obligations to ACMG under Amendment 8 and the Extension Agreement.

Use of Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include collectability of receivables, accrual of medical liabilities (including historical medical loss ratios (“MLR”), and incurred, but not reported (“IBNR”) claims), determination of full-risk and shared-risk revenue and receivables and adoption of ASC 606, income taxes and valuation of share-based compensation. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ materially from those estimates and assumptions

Cash

The Company considers all highly liquid investments that are both readily convertible into known amounts of cash and mature within ninety days from their date of purchase to be cash equivalents. As of December 31, 2020 and 2019 the Company had no cash equivalents.

The Company maintains its cash in deposit accounts with one bank, which at times may exceed Federal Deposit Insurance Corporation (“FDIC”) insured limits. The Company believes it is not exposed to any significant credit risk on its cash balances. As of December 31, 2020 and 2019, the Company’s deposit accounts with banks exceeded the FDIC’s insured limit by approximately $1,035,000 and $910,000, respectively. The Company mitigates this risk by maintaining its cash balances at a high-quality financial institution and has not experienced any losses to date.

Property and Equipment

Property and equipment is recorded at cost. Expenditures for major improvements and additions are charged to the asset accounts, while replacements, maintenance and repairs which do not improve or extend the lives of the respective assets are charged to expense as incurred. AHA is provided with office furniture and computers and the shared use of an office copier as part of an office space lease. Property and equipment as of December 31, 2020 consists of the acquired software in connection with the transaction with Clinigence. (See note 3)

Fair Value of Financial Instruments

The Company’s carrying amounts of financial instruments as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 825, “Disclosures about Fair Value of Financial Instruments”, including prepaid expenses, accrued expenses and other current liabilities, approximate their fair value due to the relatively short period to maturity for these instruments. The fair value of notes payable are based on current rates at which the Company could borrow funds with similar remaining maturities and the carrying value approximates fair value.

Intangible Assets

Intangible assets with finite lives consist of software acquired from Clinigence Holdings, Inc. in an asset purchase which closed on May 27, 2020. The value of this asset at time of acquisition was $9,036,554. The asset is being amortized over its useful life of 11 years. Amortization since date of acquisition to December 31, 2020 was $488,339 resulting in a net book value for the asset at December 31, 2020 of $8,548,215.

Revenue Recognition and Reserves Against Estimated Revenues

The Company accounts for revenue recognition in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”. Revenue from substantially all of the Company’s contracts with customers continues to be recognized over time as services are rendered.

Revenues are recognized when we satisfy a performance obligation by transferring goods or services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receivein exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers.

We evaluate our revenue contracts with customers based on the five-step model under ASC 606: (1) identifythe contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenues when (or as) each performance obligation is satisfied.

Under Topic 606, the Company applied the practical expedient to not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less and contracts forwhich variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.Additionally, the Company applied the practical expedient to not adjust the transaction price for the effectsof a significant financing component as the period between the time of service and time of payment is typically one year or less.

The Company’s performance obligation is to manage ACO participants who provide healthcare services toCMS’s members for the purpose of generating shared savings. If achieved, the Company receives shared savings payments from CMS, which represents variable consideration. The shared savings payments are recognized using the most likely methodology. However, as the Company does not have sufficient insightfrom CMS into the financial performance of the shared risk pool because of unknown factors related to shifting patient count, risk adjustment factors and benchmark adjustments, among other factors, an estimate cannot be developed. Therefore, these amounts are considered to be fully constrained and only recorded in the months when such payments are known and/or received. The Company generally receives payment within ten months after the fiscal year-end.

Derivative Financial Instruments

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including issued stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), ASC 815-15, Embedded Derivatives, and ASC 815-40, Contracts in an Entity’s Own Equity (“ASC 815-40”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Stock Compensation

The Company accounts for stock-based compensation in accordance with ASC No. 718, Compensation - Stock Compensation (“ASC No. 718”). Under ASC No. 718, compensation expense related to stock-based payments is recorded over the requisite service period based on the grant date fair value of the awards. Compensation previously recorded for unvested stock options that are forfeited is reversed upon forfeiture.The Company uses the Black-Scholes option pricing model for determining the estimated fair value for stock-based awards. The Black-Scholes model requires the use of assumptions which determine the fair value of stock-based awards, including the option's expected term and the price volatility of the underlyingstock.

The Company's accounting policy for equity instruments issued to consultants and vendors in exchange for goods and services follows the provisions of ASC No. 505-50, Equity Based Payments to Non-Employees. Accordingly, the measurement date for the fair value of the equity instruments issued is determined at the earlier of (i) the date at which a commitment for performance by the consultant or vendor is reached or (ii) the date at which the consultant or vendor's performance is complete. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

Income Taxes

The provision for income taxes is computed using the asset and liability method, under which deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carryforwards. Deferred tax assets and liabilities are measured using the currently enacted tax rates that apply to taxable income in effect for the years in which those tax assets and liabilities are expected to be realized or settled. The Company records a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized.

Uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company has no material unrecognized tax benefits and no adjustments to its consolidated financial position, results of operations or cash flows were required as of December 31, 2020 and 2019.

The Company’s tax returns for the year ended December 31, 2017 through December 31, 2020 remain subject to examination by federal and state tax jurisdictions. No income tax returns are currently under examination by taxing authorities. AHA recognizes interest and penalties, if any, related to uncertain tax positions in income tax expense. AHA did not have any accrued interest or penalties associated with uncertain tax positions as of December 31, 2020 and 2019.

Preferred Stock

The Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity.

Convertible Instruments

The Company applies the accounting standards for derivatives and hedging and for distinguishing liabilities from equity when accounting for hybrid contracts that feature conversion options. The accounting standards require 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 includes circumstances in which (i) 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, (ii) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (iii) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. The derivative is subsequently marked to market at each reporting date based on current fair value, with the changes in fair value reported in result sof operations.

Conversion options that contain variable settlement features such as provisions to adjust the conversion price upon subsequent issuances of equity or equity linked securities at exercise prices more favorable than that featured in the hybrid contract generally result in their bifurcation from the host instrument. The Company also records, when necessary, deemed dividends for the intrinsic value of the conversion options embedded in preferred stock based upon the difference between the fair value of the underlying common stock at the commitment date of the transaction and the effective conversion price embedded in the preferred stock.

The Company has also evaluated its convertible preferred stock in accordance with the provisions of ASC 815, Derivatives and Hedging, including consideration of embedded derivatives requiring bifurcation. The issuance of the convertible preferred stock could generate a beneficial conversion feature (“BCF”), which arises when a debt or equity security is issued with an embedded conversion option that is beneficial to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market price of the underlying stock at the commitment date.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. We have adopted the provisions of this ASU effective January 1, 2019. There was no material impact.

In April 2016, the FASB issued ASU 2016–10 Revenue from Contract with Customers (Topic 606): identifying Performance Obligations and Licensing. The amendments in this Update do not change the core principle of the guidance in Topic 606. Rather, the amendments in this Update clarify the following two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas. Topic 606 includes implementation guidance on (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended render more detailed implementation guidance with the expectation to reduce the degree of judgement necessary to comply with Topic 606. We have adopted the provisions of this ASU effective January 1, 2019. There was no material impact.

3. Business Acquisitions

ACMG

AHA entered into a Stock Purchase Agreement to acquire the stockof ACMG in a transaction that has occurred in stages. Initially, AHA acquired a 15% interest in 2017 for cash consideration of $2,250,000. On June 30, 2018, AHA acquired an additional 42.5% interest through issuance of 1,593,750 shares of Series A Redeemable Convertible Preferred Stock (“Series A Preferred Stock”), which had an estimated fair value of $5,115,938. On August 9 and 31, 2018, AHA paid cash of $2,100,000 for 14% of ACMG. On March 15, 2019, AHA issued 1,068,750 shares of Series A Redeemable Convertible Preferred Stock with a fair value of $3,804,750 for the remaining 28.5% non-controlling interest in ACMG which was recorded as a reduction to non-controlling interest. The goodwill recorded as part of this transaction is not deductible for tax purposes.

On April 7, 2020, AHA and ACMG entered into Amendment 8 to the Purchase Contract whereby AHA agreed to pay $15,000,000 by June 30, 2020 in full satisfaction of all AHA’s payment obligations to ACMG including accrued and unpaid dividends, (the “Payment Deadline”).

On July 31, 2020, AHA and ACMG entered into an Extension Agreement whereby the parties agreed extend the Payment Deadline until November 15, 2020. The Company failed to meet its payment deadline and consequently AHA deconsolidated the operations of ACMG. (See Note 4).

ANALYTICS

On May 27, 2020, Clinigence Holdings Inc. entered into an Intellectual Property Asset Purchase Agreement (the “IP APA Agreement”) by and among Clinigence Health, Inc., a Delaware corporation (“Clinigence Health” or “Seller”), Clinigence Holdings, Inc., a Delaware corporation (“CLNH” or “Shareholder”), 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 “Closing”).

The assets purchased from Clinigence by AHA consisted almost entirely of software The Company’s software solutions help healthcare organizations throughout the United States improve the quality and cost- effectiveness of care, enhance population health management, and optimize provider networks. The Company’s platform automatically extracts and delivers targeted data insights from its cloud-based analytics engine directly to the workflows and technologies of its customers.

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, (the “Transferred Assets”) to Purchaser from the Seller, hereafter referred to as the “Asset Sale.”

Subject to the provisions of the IP APA Agreement, the Asset Sale provided for an aggregate purchase price (“Purchase Price”) to Seller and Shareholder equal to the sum of the Series E Preferred Stock, (the “Preferred Stock”), the Assumed Liabilities.

The Preferred Stock shall automatically convert upon either of the following events:

Immediately before (A) the Purchaser’s consummation of a merger with or an acquisition by a Publicly Traded Company listed on NASDAQ all of the Preferred Shares shall be automatically converted into shares of Common Stock of Purchaser or (B) upon Purchaser’s consummation of the Merger 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 shall be valued at the Fair Market Value of those shares;

After two hundred and forty (240) days from the date of Closing, if the merger with or an acquisition by a Publicly Traded Company has not occurred, the Preferred Stock shall automatically convert into 3,750,000 of Common Shares of Stock of the Purchaser, based upon a $4 per share valuation on the date of Conversion.

On May of 2020, the Company had an independent valuation performed to determine the fair value of the Series E Preferred Stock. The Series E Preferred stock was valued at $4.44 per share for an aggregate value of $5,562,840.

The investment in AHA is recorded at the fair value of the Series E Preferred Stock of $5,562,840 plus assumed liabilities as identified below for a total value of 9,036,554.

The Assumed Liabilities consist of the following:

4. Discontinued Operations

In connection with the acquisition of ACMG, AHA failed to meet its payment obligations of $15,000,000 (based on Amendment 8 dated April 7, 2020) by the extended deadline of November 15, 2020. Accordingly, AHA was required to return 71% of its ownership to the shareholders of ACMG in full settlement of the default. AHA, therefore, deconsolidated its reporting of ACMG.

In Accordance with ASC Topic 360 “Property, Plant and Equipment”, The Company had classified the assets and liabilities as available for sale assets and liabilities as of December 31, 2019 in the accompanying consolidated financial statements.

The major categories of assets and liabilities of deconsolidated operations in the consolidated balance sheet as of December 31, 2019:

ACMG Assets/Liabilities:

The assets and liabilities that were divested as part of the deconsolidation on November 15, 2020 were as follows: