Business context and reporting period
This is an unaudited Form 10-Q for the three months ended March 31, 2019, filed May 20, 2019. The filing is for iGambit Inc., not Nutex Health Inc.; the company and filing metadata do not match. iGambit describes itself as a medical-technology holding company focused on HealthDatix, a healthcare software and services subsidiary.
Financial results and position
- Revenue: $5,325, versus $4,192 in Q1 2018. Management attributes the increase primarily to HealthDatix. iGambit says it has no revenue sources of its own.
- Gross loss: $2,882, compared with $3,738. Cost of sales exceeded sales in both periods.
- Operating loss: $367,113, compared with $411,969. General and administrative expense declined to $190,264 from $234,264; amortization remained $173,967.
- Net loss: $559,367, versus $610,033. Basic and diluted loss per share was reported as $(0.00), versus $(0.01); weighted average shares rose to 286.2 million from 121.2 million.
- Cash flow: Operating cash use was $101,719, down from $273,204. Financing provided $108,386, compared with $324,000. Investing cash flow was zero in both periods. Cash ended the quarter at $7,036, up from $369.
- Liquidity: Current assets were $44,390 and current liabilities $1,222,874 at March 31, 2019; management disclosed a $1,178,484 working-capital deficit. Total assets were $2,446,329 and stockholders’ equity $1,223,455.
- Debt and liabilities: Convertible notes, net of discount, were $214,368; non-convertible notes payable were $52,500. The balance sheet also reported $219,516 of derivative liability, $570,331 in accounts payable and accrued expenses, and $139,753 due to related parties. Interest expense was $133,253, versus $16,264.
- Margins: Gross margin was negative in both periods; the filing does not present a separate operating or net margin.
Material changes versus Q1 2018
Revenue increased modestly, while net loss narrowed by about $50,666. Lower general and administrative costs and lower derivative revaluation and debt-extinguishment losses were partly offset by sharply higher interest expense. Financing cash inflow decreased, although operating cash use also declined. During Q1, $270,957 of note principal and $18,177 of accrued interest were converted into 146,717,525 common shares, substantially increasing the share count. Convertible debt proceeds were $114,000.
Outlook, risks and unusual items
- Going concern: The company reported an accumulated deficit of $13,022,181 and substantial doubt about its ability to continue as a going concern. It depends on equity financing and growth in subsidiary revenue; financing may not be available on acceptable terms. Management said existing working capital, advances, debt instruments and anticipated cash flow were expected to fund operations for the next 12 months, while also acknowledging the need for further capital for long-term requirements.
- Business outlook: Management expects operating and marketing costs to rise as HealthDatix expands and anticipates financing through additional securities and debt. It provided no quantified revenue or earnings guidance.
- Dilution and debt features: Several 8% convertible notes have conversion prices set at a discount to recent market prices. Conversions and further securities issuance may dilute existing holders. The company recorded a $53,163 derivative-liability fair-value expense and a $5,838 loss on debt extinguishment during the quarter.
- Customer concentration: Three customers represented approximately 24%, 17% and 17% of Q1 2019 sales; one customer accounted for approximately 96% of accounts receivable at quarter end.
- Other items: The Smithtown office lease expires May 31, 2019 and was not renewed; officers were to provide office space at no charge. A subsequent note conversion after quarter end exchanged $55,232 of principal and $1,691 of accrued interest for 35,966,371 shares.
- Management reported disclosure controls effective at a reasonable-assurance level and no material change in internal control during the quarter. The filing reported no material litigation or defaults upon senior securities.
Important facts for investors to verify
- Confirm whether this iGambit filing is intended to correspond to the requested Nutex Health Inc. filing.
- Reconcile the cover-page share count of 387,553,890 outstanding shares with the March 31 balance sheet’s 351,577,519 outstanding shares and subsequent conversions.
- Review the terms, maturities, conversion discounts and dilution implications of outstanding convertible notes, and the subsequent conversion activity.
- Assess funding needs and progress toward addressing the disclosed going-concern uncertainty, given the very low cash balance and working-capital deficit.
- Evaluate HealthDatix’s revenue base, customer concentration and ability to generate operating cash flow.