Filing summary
Important identity mismatch: The supplied filing is iGambit Inc.’s Form 10-K for the fiscal year ended December 31, 2017, filed April 17, 2018. It is not a Nutex Health Inc. filing. The summary below describes the filing provided.
Business context and reporting period
iGambit described itself as a holding company focused on medical technology, principally through HealthDatix, a SaaS business offering Medicare Annual Wellness Visit and chronic-care-management solutions. The filing reports the year ended December 31, 2017, compared with 2016; it does not provide standalone fourth-quarter results.
During 2017, iGambit acquired HealthDatix (formerly HubCentrix) for 15 million shares and acquired assets of EncounterCare Solutions’ CyberCare Health Network division for 60 million shares. It also completed the sale of ArcMail, with operations transferred effective April 1, 2017. The company reported five HealthDatix channel partners and six employees.
Financial results and liquidity
| Metric | 2017 | 2016 |
|---|---|---|
| Sales from continuing operations | $23,166 | $0 |
| Gross profit (loss) | $(7,315) | Not applicable |
| General and administrative expense | $1,813,624 | $448,595 |
| Operating loss | $(5,692,920) | $(448,595) |
| Loss from continuing operations | $(6,007,474) | $(451,060) |
| Income (loss) from discontinued operations | $6,589,536 | $(6,981,181) |
| Net income (loss) | $582,062 | $(7,432,241) |
| Net cash used in operating activities | $(714,623) | $(274,223) |
| Cash at year-end | $9,449 | $10,522 |
The 2017 discontinued-operations result included a $6,657,848 gain on the ArcMail disposal; reported net income therefore contrasts with a substantial continuing-operations loss. The filing reports no meaningful continuing-operations gross margin because sales were only $23,166 and cost of sales was $30,481.
Total assets were $3,328,755, including $3,267,885 of net intangible assets. Current assets were $55,080 and current liabilities were $959,780, producing a $904,700 working-capital deficit. Stockholders’ equity was $2,368,975, versus a $5,869,425 deficiency in 2016. Current liabilities included $333,689 of convertible debentures, $52,500 of notes payable, $21,602 of accrued interest, and a $66,059 derivative liability. Related-party amounts payable were $128,476.
Operating cash use increased year over year. Financing provided $711,500, including $469,000 from convertible debentures and $275,000 from common-stock sales. The filing reports $9,449 of cash at year-end and no bank credit facility.
Material changes and unusual items
- Continuing-operations G&A rose to $1.81 million from $448,595, with increases including payroll, consulting, board compensation, and marketing.
- The acquisitions added substantial intangible assets and goodwill; 2017 included $533,886 of amortization and $3,338,095 of impairment expense.
- The ArcMail sale removed substantial discontinued-operation liabilities from the balance sheet and generated the disposal gain. ArcMail had reported liabilities of $5,973,747 at December 31, 2016.
- Shares issued for the 2017 acquisitions and financing, together with stock-based compensation and debt conversions, materially increased the share count. The company also reported 8,463,000 options and 400,000 warrants outstanding at year-end.
- Convertible notes included market-price-discount conversion terms; the filing recorded derivative liabilities, noncash interest expense, and a loss on extinguishment of debt.
Outlook, risks, and contingencies
Management planned to expand HealthDatix and anticipated higher administrative, development, and marketing costs in 2018. It expected to fund needs through existing funds, securities issuances, and debt, but cautioned that financing might not be available on acceptable terms and that further equity or convertible-debt issuance could dilute shareholders. No quantified revenue or earnings guidance was provided.
The independent auditor stated that the accumulated deficit, working-capital deficit, and disposal of the operating subsidiary raised substantial doubt about the company’s ability to continue as a going concern. Management said funding and HealthDatix revenue were necessary to sustain operations. This warning contrasts with management’s assertion that anticipated resources were expected to fund operations for the next twelve months. The auditor expressed an unmodified opinion on the financial statements, but did not audit internal control effectiveness. Management reported its controls effective as of year-end.
The company disclosed customer concentration at HealthDatix: three customers represented approximately 44%, 27%, and 11% of 2017 sales, and 58%, 26%, and 11% of year-end receivables. It reported no material pending litigation and no off-balance-sheet arrangements. Future lease payments were approximately $30,978. The filing also notes that tax benefits from approximately $4.8 million of federal and $5.0 million of state net operating loss carryforwards are subject to a full valuation allowance and may be limited by ownership changes.
Important facts for investors to verify
- Confirm the issuer: the supplied filing is for iGambit Inc., not Nutex Health Inc.
- Review the going-concern warning, working-capital deficit, low cash balance, and the timing and availability of financing.
- Assess underlying HealthDatix revenue, customer concentration, channel-partner activity, and its ability to generate cash; reported 2017 sales were minimal.
- Reconcile the reported net income to the ArcMail disposal gain and continuing-operations loss.
- Verify the fully diluted share count, acquisition consideration, outstanding options and warrants, and the dilution potential of convertible notes.
- Check the filing’s share-count and disclosure inconsistencies, including differing outstanding-share totals and the statement that iGambit had disposed of its operating subsidiary despite its HealthDatix business description.