Business context and reporting period
Filing identity mismatch: The request identifies Nutex Health Inc., but the supplied Form 10-Q is for iGambit Inc. This summary reflects the supplied filing, not a Nutex Health filing. It covers the unaudited quarter ended March 31, 2017; the filing describes iGambit as shifting its focus to medical technology after acquiring HealthDatix on February 14, 2017.
Financial results and condition
Amounts are in U.S. dollars. HealthDatix contributed results only from its acquisition date through quarter-end.
| Metric | Q1 2017 | Q1 2016 or comparison |
|---|---|---|
| Revenue from continuing operations | $4,350 | $0 |
| Gross profit | $4,170 | $0 |
| Operating expenses | $167,380 | $161,936 |
| Loss from continuing operations | $(175,137) | $(162,537) |
| Loss from discontinued operations | $(66,937) | $(76,333) |
| Net loss | $(242,074) | $(238,870) |
| Cash and cash equivalents at period-end | $73,527 | $10,522 at Dec. 31, 2016 |
| Total assets | $1,722,838 | $510,835 at Dec. 31, 2016 |
| Total liabilities | $6,677,714 | $6,380,260 at Dec. 31, 2016 |
| Stockholders’ deficiency | $(4,954,876) | $(5,869,425) at Dec. 31, 2016 |
Gross margin was approximately 96% on the very small continuing-operations revenue base. Net loss per share was reported as $(0.00), rounded; weighted-average shares were 48,807,434. The balance sheet includes $6.09 million of liabilities from discontinued operations, principally ArcMail obligations. ArcMail notes payable were $3.12 million, with additional related-party debt and other liabilities.
Net cash used in operating activities was $124,715, comprising $115,740 from continuing operations and $8,975 from discontinued operations. Investing activities provided $11,220 overall; financing activities provided $176,500. Cash increased by $63,005 during the quarter. The company raised $100,000 from common stock and $100,000 from convertible debentures.
Material changes versus the prior comparable period
- Revenue from continuing operations rose from zero, primarily because HealthDatix was acquired in February; its limited post-acquisition contribution makes the comparison non-equivalent.
- Net loss widened by $3,204. Continuing-operations loss increased by $12,600, partly offset by a smaller discontinued-operations loss.
- Assets increased mainly from HealthDatix acquisition-related intangible assets and higher cash. The acquisition consideration was 15 million restricted shares valued at $1.05 million; acquired assets included $849,945 of net intangible assets and $277,176 of goodwill.
- Common shares outstanding were 56,718,990 at March 31, versus 39,708,990 at December 31, 2016. The filing reports 117,868,990 shares outstanding on May 22, 2017.
Outlook, risks, and unusual items
- Management expected expenses and capital needs to rise as HealthDatix expanded, particularly for development and marketing. It anticipated financing through additional securities and debt; no specific revenue or earnings guidance was provided.
- The filing states that substantial doubt exists about the company’s ability to continue as a going concern, citing its accumulated losses, stockholders’ deficiency, and need for financing and revenue growth. It had no bank credit facility; financing might not be available on acceptable terms and could dilute shareholders.
- A March 30 convertible note had $75,000 principal, 8% interest, and a conversion price set at 65% of a specified recent trading-price measure after 180 days. The related derivative liability was $83,773 at quarter-end.
- After quarter-end, HealthDatix acquired certain CyberCare Health Network assets for 60 million restricted iGambit shares. Also after quarter-end, iGambit entered a $125,000 convertible note at 12% interest, with a 50% conversion-price discount based on the lowest VWAP over a specified 20-trading-day period.
- HealthDatix reported that two customers accounted for approximately 80% and 11% of its Q1 sales, and one customer represented all its accounts receivable at March 31.
- The filing says disclosure controls were effective at a reasonable-assurance level and reports no material change in internal control over financial reporting. It reports no litigation material to ongoing operations.
Important facts for investors to verify
- Confirm the filing is the intended company: this document names iGambit Inc., not Nutex Health Inc.
- Review the going-concern disclosure, cash runway, financing needs, and terms and potential dilution of convertible securities.
- Verify the post-quarter CyberCare asset purchase, 60 million-share consideration, and the reported May 22 share count.
- Assess the composition, repayment terms, and disposition implications of ArcMail’s $6.09 million discontinued-operations liabilities.
- Reconcile the cash-flow discussion in MD&A with the financial statements: MD&A cites $174,715 of operating cash use, while the statement of cash flows reports $124,715. The filing also contains inconsistent descriptions of certain investing cash flows.