iGambit, Inc. — Form 10-Q Summary
Issuer discrepancy: The supplied filing is for iGambit, Inc., not Nutex Health Inc. It covers the quarter and nine months ended September 30, 2011; 2010 comparative results are identified as restated.
Business context and reporting period
iGambit’s operating subsidiary, Gotham Innovation Lab, provides media technology services to the real estate industry. The company also received contingent payments from Digi-Data Corporation (DDC) related to a 2006 business sale; that agreement ended February 28, 2011. The filing describes plans to grow Gotham and pursue acquisitions or partnerships.
Financial performance and position
- Revenue: Third-quarter sales were $410,258, up from $232,343. Nine-month sales were $1,299,602, up from $646,002. Management attributes the increase to Gotham.
- Profitability: Third-quarter net loss was $153,473 versus net income of $12,644. Nine-month net loss was $230,188 versus net income of $373,668. Nine-month gross profit was $756,733, approximately 58% of sales, compared with $402,290, approximately 62%, in 2010. Nine-month operating expenses were $1,361,635, resulting in an operating loss of $604,902.
- Discontinued operations: Nine-month after-tax income was $159,785, down from $930,179, reflecting the wind-down of DDC payments. No discontinued-operations income was reported in Q3 2011.
- Cash flow: Operating activities used $543,138 in the first nine months, versus $1,253,273 used in 2010. Investing activities provided $381,096, largely from DDC receipts; financing cash flow was zero. Cash declined $162,042 to $303,507.
- Liquidity and debt: Current assets were $1,878,616 and current liabilities $256,386 (working capital of $1,622,230). Total liabilities were $256,386, including $25,390 owed to a related party; the company reported no long-term liabilities.
- Other balance-sheet items: Total assets were $2,012,184 and stockholders’ equity $1,755,798. Notes receivable from Allied Airbus were $436,512, of which $93,516 was past due at quarter-end. Accounts receivable included $689,828 classified as assets of discontinued operations.
Material changes, outlook, and risks
- Gotham reported nine-month revenue of $1,234,412 and net income of $78,182, compared with revenue of $639,642 and a net loss of $250,503 in the comparable 2010 period.
- DDC payments materially declined after the agreement ended. Management expected the remaining amounts due to be paid during 2011; the filing reports $365,000 of DDC cash receipts in the first nine months.
- Management said it expected Gotham’s business and revenue to grow, believed existing resources were sufficient for current operations, and expected cash and liquidity to increase. It also anticipated potentially raising private-market capital for expansion or acquisitions, while cautioning that financing and execution were not assured.
- Two Gotham customers represented approximately 58% of its nine-month sales (32% and 26%). Allied’s past-due notes and collectability are significant items to monitor; the company sent demand notices on October 26, 2011.
- Management cited risks including quarterly fluctuations, regulation, technology change, competition, and the possibility that Gotham’s future results may not support goodwill. No goodwill impairment was recorded, but no impairment study was performed during the nine-month period.
- The filing says there was no material litigation, no defaults on senior securities, and no material third-quarter changes in internal controls. The controls discussion, however, dates its effectiveness evaluation to September 30, 2010, although this is the 2011 filing.
Important facts for investors to verify
- Confirm issuer identity: this filing is for iGambit, Inc., not Nutex Health Inc.
- Verify collection of Allied’s $93,516 past-due balance and the status of the full $436,512 notes receivable.
- Check whether remaining DDC receivables were collected after the agreement ended and how much revenue, if any, was recognized thereafter.
- Assess Gotham’s customer concentration, profitability, and ability to sustain growth as DDC income disappears.
- Clarify the controls-evaluation date and reconcile the filing’s liquidity-growth expectation with operating cash use.
- Review the restated 2010 comparative figures and the filing’s inconsistent MD&A period wording before relying on trend comparisons.