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Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading Risk Factors included in our Form 10-K for the year ended December 31, 2025 and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Our obligThe Implementation to issue additional shares of the Federal Independent Dispute Resolution process has, and may continue in the future, result in significant volatility in our quarterly financial results and materially adversely affect the trading price of our common stock to former doctor owners .
We recognize revenue at the time of under construservice based on the estimated transaction hospitals may cause signprice we expect to receive from third-party payers. We apply Financial Accounting Standards Board (FASB) Accounting Standards Codificant dilution tion (ASC) 606 Revenue from Contracts with Customers in making estimates of the votiour earned revenue and accounts receivable at each reporting power of our current stockholders.
We maydate. For out-of-network services subject to the No Surprises Act, our methodology incorporates, among other things, historical arbitration outcomes, payor be required to issuehavior, and expected resolution timing in determining the additexpected transactional shares of our comm price for applicable claims. This estimation stock to former doctor ownersprocess is highly subjective. We regularly conduct a comparative analysis of hospitals that were under construction and non-oour actual results to our previously determined transaction results in order to evaluate whether adjustments are required based on newly available information. When the expected transaction price is adjusted, the cumulative effect of that adjustment is reflected in revenue in the perational prior to our April 1, 2022 merger. Such former owners,iod in which the adjustment is identified, including its impact on accounts receivable balances recognized in prior periods, and can result including Dr. Vo, transferre significant fluctuations in recognized revenue from period to period.
Due to the ongoing operational volatility of the IDR framework and their hospi implementation of these portal intmodifications, therests to Nutex Health Holdco LLC in connection is inherent uncertainty regarding the ultimate timing and impact of these updates on our financial results. Revenue associated with the merger. The aggregatse estimates is recognized as information becomes available during the numberormal course of addithe claims adjudicational shares we process, which
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may be required to issue could result in fluctuations in patient revenue between the period services are rendered and the period related adjustments are recorded. As a result, we may experience significantly dilute the vot volatility in our quarterly financial results, which may have a materially adverse effect on the trading powerrice of our existingcommon stockholders. Any such additional shares, including.
Certain former doctor owners dispute the number of shares issuedable to Dr. Vo, will be subject to a 100% lock upthem under the earn out for six months,mula approved in connection with 66 2/3% of the merger.
We are required to issue these additional shares locked upof our common stock to for one year, and, with respect to the remaining 33 1/3%, the lock up expiring 18 months aftmer doctor owners of hospitals that were under construction and non-operational prior to our April 1, 2022 merger. Such former issuance, which may be waived or amended at the discreowners, including Dr. Vo, transferred their hospital interests to Nutex Health Holdco LLC in connection ofwith the Companymerger.
As approved by the stockholders on April 1, 2022, the number of additional shares issuable is equal to (a)(i) the trailing twelve months of earnings before interest, taxes, depreciation and amortization, as determined at the end of each such hospitals initial 24-month operation period multiplied by (ii) 10; minus (iii) the aggregate amount of the former doctor owners capital contribution; minus (iv) such former doctor owners pro rata share of the aggregate debt, with the resulting value divided by (b) the greater of (i) the price of the common stock at the end of the operational period or (ii) $420.00 (representing $2.80 as adjusted for the 2024 reverse stock splits and subject to adjustment for future stock dividends, combinations, splits, recapitalizations and the like).
With respect to eight hospitals, the initial 24-month operational periods expired on or prior to March 31, 2026. Based on the formula described above, and assuming an aggregate 1,374,614 shares issued,Former owners of certain under construction hospitals have disputed the earn out shares represent approximately 19.8% of our issued and outstanding shares as of March 31, 2026 (includingnumber of additional shares subject to issuance pursuant tble to the earn out and accrued as of such date).
With respect to two additional hospitals with an initial 24-month operational period expiring on or prior to December 31, 2026, we estimate, based on current expectations, to issue approximately 47,100 additional shares, or 0.7% of our issued and outstanding shares as of March 31, 2026 (including shares subject to issuance pursuant to the earn out anm in accordance with the formula agreed upon at the time of the merger (as described above) and accrued as of such date). See Part I - Item 1 Notes to Condensed Consolidated Financial Statements (unaudited) Note 11. This estimatedssert, among other things, that the number of shares is n the calculated ion a pro forma basis basshould not be adjusted on September 30, for the 2026 operating results and trading price. Since we cannot predict future operating results and trading prices4 reverse stock splits. For example, the actual number of additional shares issued may diffformer significantly from our estimate.
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Fdoctor ormer owners of certain under construction hosABQ Hospitals have, LLC disputed the number of additional shares issuable to them in accordance with the formulaCompany calculation that an agreed upon at the time gregate of the merger (as described above) and assert, among o216,039 shares are to be issued to ther thm. Includings, that the number of ese shares in the calculation should not be adjusted fo, an aggregate of approximately 256,005 shares computed by the Company under the 2024 reverseformula described above is stock splitsill under dispute. We disagree with these allegations, but cannot predict the outcome of these disputes, including the amounts of cash settlement, if any, and the impact on our financial condition. (Refer to Item 1. -- Legal Proceedings.)).