Filing and business context
Important identity mismatch: The supplied filing is iGambit Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2016—not a filing identified as Nutex Health Inc. The filing describes iGambit as a technology-focused holding company; its operating subsidiary ArcMail sells email-archiving products and support services. Gotham’s business was sold in November 2015 and is reported as discontinued operations.
Financial results and position
| Metric | Three months ended June 30, 2016 | Six months ended June 30, 2016 |
|---|---|---|
| Sales | $589,951 | $993,701 |
| Gross profit / margin | $564,688 / 95.7% | $965,247 / 97.1% |
| Operating expenses | $581,122 | $1,139,775 |
| Loss from continuing operations | $(95,812) | $(338,240) |
| Net loss | $(96,052) | $(334,922) |
- Revenue was primarily generated by ArcMail, acquired in November 2015. The comparable 2015 periods reported no continuing-operations sales, so the year-over-year revenue increase is not a like-for-like comparison.
- Six-month continuing operating cash use was $263,663; total operating cash use, including discontinued operations, was $220,980. Investing cash use was $1,269 and financing provided $123,632. Cash fell $98,617 to $33,370.
- At June 30, cash was $33,370; current assets were $743,115 and current liabilities $2,989,905. Total assets were $7,479,072, total liabilities $6,252,678, and stockholders’ equity $1,226,394.
- Reported notes payable and related-party notes, including current and long-term portions, totaled approximately $3.86 million; accrued interest on notes was approximately $430,000. Deferred revenue was $1,188,457, including $734,634 current.
- Goodwill was $6,705,157, with no impairment recorded in the six-month period. The company reported a full valuation allowance against deferred tax assets and a 0% effective tax rate.
Changes, outlook, and risks
- Six-month G&A increased to $1,139,775 from $227,007 in 2015, reflecting ArcMail operations and higher payroll, marketing, and other costs. Six-month interest expense rose to $163,712 from $1,501.
- Management said officer salary and ArcMail operating costs should remain level, except that expansion could increase corporate costs. It anticipated raising private-market capital for ArcMail growth or acquisitions, but gave no quantified forecast and cautioned that financing may not be available on acceptable terms.
- Management identified uncertainty around executing its business plan and raising capital. The filing also cites risks including expense and quarterly-result fluctuations, regulation, technology change, and competition. ArcMail goodwill could be impaired if future operating results or cash flows are insufficient.
- ArcMail entered merchant-financing agreements for $210,000 of proceeds, repayable from a percentage of receivable collections for total payments of $287,400, with maturity in January 2017. Gotham sale earn-out payments depend in part on the buyer maintaining its relationship with Gotham’s major client.
- The filing reports no litigation material to ongoing operations and no changes in internal control that materially affected, or were reasonably likely to materially affect, financial reporting controls.
Most important facts to verify
- Confirm the intended issuer: the provided 10-Q is for iGambit Inc., not Nutex Health Inc.
- Reconcile debt disclosures: balance-sheet debt components and the notes’ stated principal maturities do not clearly align; verify balances, maturities, interest, and merchant-financing repayment terms.
- Assess near-term liquidity given $33,370 cash, substantial current liabilities, operating cash use, and management’s stated need to raise capital.
- Review ArcMail’s standalone operating performance and the recoverability of $6.71 million of goodwill; reported revenue growth compares against periods before the acquisition.
- Confirm the collection and contingent-payment status of the Gotham sale receivables and earn-out installments, and note the filing’s apparent date typo in its controls discussion (it refers once to June 30, 2012, then concludes controls were effective as of June 30, 2016).