SEC Filing Summary: iGambit Inc. (Form 10-K)
Business Context and Reporting Period
Company: iGambit Inc. (Ticker: IGMB)
Reporting Period: Fiscal Year Ended December 31, 2018
Business Model: iGambit operates as a holding company with no direct revenue sources. Its primary focus is the expansion of its wholly-owned subsidiary, HealthDatix Inc., a medical technology firm providing Software-as-a-Service (SaaS) solutions for healthcare data management, chronic care, and remote patient monitoring. The company previously disposed of its ArcMail and Gotham subsidiaries, which are reported as discontinued operations.
Key Financial Metrics
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue (Sales) | $60,224 | $23,166 |
| Gross Profit | $29,075 | $(7,315) |
| Net Loss (Continuing Ops) | $(2,814,245) | $(6,007,474) |
| Net Income (Loss) (Total) | $(2,814,245) | $582,062 |
| Cash and Equivalents | $369 | $9,449 |
| Total Assets | $2,618,466 | $3,328,755 |
| Total Liabilities | $1,385,447 | $959,780 |
| Stockholders' Equity | $1,233,019 | $2,368,975 |
| Accumulated Deficit | $(12,462,814) | $(9,648,569) |
Debt and Liquidity: The company holds $377,611 in convertible notes payable and $52,500 in non-interest-bearing notes payable. A significant derivative liability of $288,242 exists due to embedded conversion features in debt instruments. Working capital is negative, with current liabilities ($1,385,447) exceeding current assets ($42,313).
Material Changes vs. Prior Period
- Revenue Growth: Revenue increased 160% to $60,224, driven by HealthDatix SaaS offerings, though the absolute volume remains minimal.
- Loss Reduction: Net loss from continuing operations decreased by approximately $3.2 million compared to 2017, primarily due to the absence of a $3.3 million goodwill impairment charge recorded in the prior year.
- Discontinued Operations: 2017 included $6.59 million in income from discontinued operations (gain on disposal of ArcMail), whereas 2018 had no such income.
- Liabilities: Total liabilities increased by 44% due to higher accounts payable, increased amounts due to related parties, and a rise in derivative liabilities.
- Equity Dilution: Significant issuance of common stock occurred in 2018 to settle debt ($588,543 principal converted) and for services, increasing outstanding shares from ~116 million to ~205 million.
Outlook, Risks, and Management Commentary
- Going Concern Warning: The independent auditors have issued a "Going Concern" opinion. The company has an accumulated deficit of $12.46 million and a working capital deficit of $1.34 million. Continuation is dependent on obtaining equity financing and generating revenue from HealthDatix.
- Capital Requirements: Management anticipates increased operating expenses for HealthDatix expansion in 2019. Funding is expected to come from existing funds, further issuances of securities, and debt. There are no bank lines of credit.
- Customer Concentration: HealthDatix relies heavily on a single customer, which accounted for approximately 75% of total sales and 67% of accounts receivable in 2018.
- Derivative Liability Risk: The company faces volatility in its financial statements due to the fair value adjustments of derivative liabilities embedded in its convertible notes.
Investor Verification Checklist
- Cash Runway: Verify the company's ability to fund operations with only $369 in cash on hand and no bank credit facilities.
- Financing Terms: Review the terms of recent convertible notes (often issued with significant discounts and reset provisions) to assess future dilution risk.
- Revenue Sustainability: Investigate the stability of the single customer representing 75% of HealthDatix's revenue.
- Related Party Transactions: Scrutinize the $145,367 in amounts due to related parties (officers/stockholders) and the issuance of stock for services.
- Derivative Valuation: Confirm the methodology used to value the $288,242 derivative liability and its impact on future interest expense.