Business context and reporting period
This is a quarterly report for the three and nine months ended September 30, 2019, filed November 19, 2019. The filing is by Clinigence Holdings, Inc., formerly iGambit Inc.; it does not identify the registrant as Nutex Health Inc. At the reporting date, the company was a holding company with HealthDatix, a healthcare software and services subsidiary. The results presented predate the October 29, 2019 reverse merger that brought Clinigence Health into the company.
Financial highlights
Amounts below are in dollars unless stated otherwise.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Sales | $7,550 | $22,582 | $19,175 | $30,500 |
| Gross profit (loss) | $(2,492) | $14,748 | $(7,161) | $6,842 |
| Operating expenses | $361,262 | $381,760 | $1,098,414 | $1,274,832 |
| Operating loss | $(363,754) | $(367,012) | $(1,105,575) | $(1,267,990) |
| Net loss | $(373,749) | $(608,519) | $(1,503,511) | $(1,944,799) |
| Loss per share | $(0.48) | $(2.09) | $(2.13) | $(7.39) |
Gross margin was negative in 2019: approximately -33% for Q3 and -37% year to date. The company reported no investing cash flows. For the first nine months, operating cash use was $332,349, financing cash provided was $342,009, and cash increased by $9,660 to $10,029.
At September 30, 2019, total assets were $2,104,777, including $10,029 cash and $2,050,113 net intangible assets. Current liabilities were $1,464,845, against current assets of $52,988, producing a $1,411,857 working-capital deficit. Current debt included $495,593 of notes payable and $72,546 of convertible notes; related-party amounts due were $128,476. Stockholders’ equity was $639,932.
Material changes versus comparable periods
- Sales declined 67% in Q3 and 37% for the nine-month period versus 2018; gross profit turned into a gross loss in both 2019 periods.
- Net loss narrowed year over year, while operating expenses also declined. Lower interest expense and the absence of the prior-year debt-extinguishment loss and derivative fair-value gain affected the quarterly comparison. Year-to-date results included a $98,944 gain from the derivative-liability fair-value change and a $262,566 debt-extinguishment loss.
- Cash rose from $369 at December 31, 2018, but liabilities and the working-capital shortfall remained substantial. Notes payable increased, while convertible debt fell and the derivative liability was reduced to zero.
- During the nine months, $326,189 of note principal and $19,868 of accrued interest were converted into shares. The filing reports 797,108 issued common shares at quarter-end, before the subsequent 1-for-500 reverse split.
Outlook, risks and unusual items
- Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing the accumulated deficit of $13,966,325 and working-capital deficit. Continued operations depend on financing and generating revenue; the company had no bank credit facility. Management expected funding from existing resources, advances and securities issuances to support operations for 12 months, but warned that financing may not be available on acceptable terms and could dilute shareholders.
- Management anticipated higher operating and marketing costs as HealthDatix and Clinigence expand, and expected to seek additional capital. The filing provides no quantified revenue or earnings guidance.
- On October 29, 2019, the reverse merger closed: former Clinigence shareholders received 85% of the combined company on a fully diluted basis, with legacy iGambit holders retaining 15%. The company changed its name to Clinigence Holdings and effected a 1-for-500 reverse stock split.
- Customer concentration is a risk: two customers represented about 29% of HealthDatix nine-month 2019 sales, and one customer accounted for 100% of accounts receivable at quarter-end. No material legal proceedings were reported.
- The MD&A’s nine-month discussion describes revenue as having increased, but the financial statements show a decline from $30,500 to $19,175; the statement figures are used above.
Investor facts to verify
- Confirm the intended issuer: this filing is for Clinigence Holdings, formerly iGambit, rather than Nutex Health.
- Review the going-concern disclosure, very low cash balance, working-capital deficit and dependence on new financing.
- Verify the October 2019 reverse-merger terms, post-merger capitalization, reverse split and subsequent operating results of the combined company.
- Assess customer concentration, revenue trends, and the sustainability of operations given recurring losses and negative gross profit.
- Reconcile the MD&A’s revenue-growth wording with the financial-statement figures showing year-over-year declines.