Business context and reporting period
This is iGambit Inc.’s unaudited Form 10-Q for the quarter and nine months ended September 30, 2017, filed November 20, 2017. The filing is for iGambit Inc., not Nutex Health Inc. The company describes itself as a medical-technology-focused holding company following its acquisition of HealthDatix in February 2017 and certain CyberCare Health Network assets from EncounterCare Solutions in April 2017. HealthDatix offers healthcare software, including tools for Medicare Annual Wellness Visits and chronic-care management.
Key financial metrics
Amounts below are in dollars unless stated otherwise.
| Metric | Three months ended Sept. 30, 2017 | Nine months ended Sept. 30, 2017 |
|---|---|---|
| Revenue | $19,012 | $27,957 |
| Cost of sales / gross profit | $7,952 / $11,060 | $22,564 / $5,393 |
| General and administrative expenses | $723,000 | $2,129,083 |
| Loss from continuing operations | $(728,608) | $(2,154,023) |
| Income from discontinued operations | $7,053,622 | $6,589,713 |
| Net income | $6,325,014 | $4,435,690 |
| Net cash used in operating activities | Not presented separately | $(523,545) |
The reported net income was driven by discontinued operations, including a $6,657,848 gain on the ArcMail disposal reported for the nine-month period; continuing operations remained loss-making. The filing does not present a clear operating margin measure.
At September 30, 2017, cash was $15,489, total current assets were $87,713, total assets were $6,569,951, and total liabilities were $734,038. Current liabilities included accounts payable and accrued expenses of $318,521, notes payable of $52,500, convertible debentures of $146,620, and a derivative liability of $195,370. Stockholders’ equity was $5,835,913, versus a deficiency of $5,869,425 at year-end 2016. The filing reports $275,000 in common-stock proceeds and $288,000 in convertible-debenture proceeds during the nine months.
Material changes versus prior periods
- Revenue was $19,012 for the quarter and $27,957 for the nine months, compared with no revenue in the respective 2016 periods, primarily reflecting HealthDatix, acquired in February 2017.
- G&A expense rose from $75,699 to $723,000 for the quarter and from $302,146 to $2,129,083 for the nine months. Management attributed the increases mainly to payroll and benefits, marketing, HealthDatix operations, and acquisition and disposal costs; amortization also contributed materially.
- ArcMail was sold on June 30, 2017, in exchange for the return of 10 million previously issued company shares. The balance sheet no longer includes ArcMail’s reported $5,973,747 of discontinued-operation liabilities at December 31, 2016.
- Assets increased substantially, principally from acquired intangible assets. The company issued 60 million shares valued at $6 million for the CyberCare assets and 15 million shares valued at $1.05 million for HealthDatix. Common shares outstanding were 122,868,990 at September 30 and 124,393,746 at November 20, 2017.
Outlook, risks, and unusual items
- Management expects working-capital needs and operating expenses to rise as HealthDatix expands, including development and marketing costs. It expects to rely on existing funds and further equity or debt issuances; it has no bank credit line.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern, citing its accumulated deficit and dependence on financing and revenue growth. Management nevertheless says existing working capital, advances, debt instruments, and anticipated cash flow are expected to fund operations for the next twelve months. Financing may be unavailable or dilutive, and the filing cautions that the business plan may not be fully achieved.
- Convertible notes include conversion discounts tied to recent market prices, creating potential dilution. A $78,000 convertible note was issued after quarter-end; subsequent to quarter-end, holders converted $120,000 of principal into 1,524,756 shares.
- HealthDatix had concentrated customer exposure: five customers represented approximately 29%, 18%, 16%, 13%, and 12% of its nine-month sales; four customers represented approximately 33%, 32%, 15%, and 11% of receivables at September 30.
- The filing reports no litigation material to ongoing operations and says disclosure controls were effective at a reasonable-assurance level. It provides no quantified revenue or earnings guidance.
Important facts for investors to verify
- Confirm issuer identity: the supplied filing identifies iGambit Inc., not Nutex Health Inc.
- Reconcile the reported discontinued-operations income of $7,053,622 for the third quarter with $6,589,713 for the nine-month period, and confirm the period in which the ArcMail disposal gain was recognized.
- Assess HealthDatix’s revenue generation, customer concentration, and ability to cover the continuing business’s substantial expenses.
- Review liquidity and financing needs in light of $15,489 cash, negative working capital, going-concern language, and management’s twelve-month funding expectation.
- Evaluate potential dilution from acquisition shares, discounted convertible notes, outstanding options and warrants, and post-quarter conversions.