Business context and reporting period
Filing identity discrepancy: The request identifies Nutex Health Inc., but the supplied Form 10-K is for iGambit Inc. (ticker IGMB), for the fiscal year ended December 31, 2015, filed April 14, 2016. This is an annual report, not a standalone fourth-quarter report. The filing says the common stock was quoted on the OTC Bulletin Board, but also states there was no current market for the shares.
iGambit described itself as a technology-focused acquisition holding company. It acquired Wala, Inc. (ArcMail), an enterprise email and data archiving business, on November 4, 2015, issuing 11.5 million common shares valued at $1.15 million. The next day, it sold certain Gotham assets to VHT for stated consideration of $600,000. ArcMail contributed results only from its acquisition date; Gotham was presented as discontinued operations.
Financial results and liquidity
| Metric | FY 2015 | FY 2014 |
|---|---|---|
| Revenue | $474,679 | $1,068,617 |
| Gross profit | $466,628 | Not separately reported for 2014 |
| Operating loss | $(498,981) | $(723,432) |
| Loss from continuing operations | $(543,575) | $(639,325) |
| Income (loss) from discontinued operations | $627,384 | $(45,017) |
| Net income (loss) | $83,809 | $(684,342) |
| Cash and cash equivalents at year-end | $131,987 | $126,833 |
| Total assets | $7,637,996 | $280,786 |
| Total liabilities | $6,076,680 | $285,277 |
| Stockholders’ equity (deficiency) | $1,561,316 | $(4,491) |
- Revenue fell about 56%, primarily reflecting the Gotham asset sale and ArcMail’s inclusion for only the final two months of 2015. The periods are not directly comparable.
- FY 2015 reported net income depended on $627,384 of discontinued-operations income; continuing operations remained loss-making. The filing does not clearly disaggregate the components of that discontinued-operations income in the supplied text.
- Gross margin was approximately 98% on reported revenue, with cost of sales of $8,051. This newly acquired, partial-year ArcMail result may not represent a full-year margin.
- Cash from operating activities was $44,907, versus $159,202 in 2014. This comprised $451,023 of cash used by continuing operations and $495,930 provided by discontinued operations. Investing activities provided approximately $11,524 and financing activities used $51,277; cash increased $5,154.
- Current assets of $890,686 were below current liabilities of $2,888,678, implying negative working capital of approximately $2.0 million. Cash was $131,987.
- At year-end, notes payable totaled $3,119,001, including current and long-term portions; related-party notes totaled $626,265. Accrued interest on notes was $302,278. The filing lists annual principal payments of approximately $779,750 through 2018 and $779,751 in 2019 on notes payable, plus related-party installments of approximately $155,566 annually through 2019.
- Deferred revenue was $1,190,279, with $811,227 classified current and $379,052 long-term. The filing expects most of it to be recognized during 2016–2018.
Material changes, outlook and risks
- The ArcMail acquisition substantially increased reported assets and liabilities. The purchase-price allocation recorded $6,705,157 of goodwill; liabilities assumed were $5,833,234, substantially exceeding the $278,077 of identifiable assets listed. Management said it was too early to assess goodwill impairment; no impairment was recorded in 2015.
- The Gotham sale provided for $400,000 at closing and further payments. The detailed terms describe 12 monthly payments of $16,667, including a $10,000 earn-out component contingent on VHT maintaining its relationship with Gotham’s major client. The filing also reports $495,930 of cash received from VHT during 2015.
- Management’s stated priorities were to expand ArcMail sales and pursue additional technology acquisitions. It was not under contract to acquire another company at the filing date. Management anticipated raising private-market capital for potential acquisition and expansion costs, could not assure acceptable financing would be available, and said it had no current plan for a bank credit facility. It believed existing capital was sufficient for present operations, but provided no quantified forecast or earnings guidance.
- Management identified competition for acquisitions, limited financial resources relative to competitors, and uncertainty in executing its growth strategy. Goodwill recoverability depends on ArcMail’s future operating results. Gotham’s deferred sale proceeds include a customer-relationship contingency.
- The company reported no off-balance-sheet arrangements and no material unresolved staff comments. Management concluded disclosure controls and internal control over financial reporting were effective; the external auditor did not audit or express an opinion on internal control.
Most important facts for investors to verify
- Confirm the issuer: the supplied filing is iGambit Inc., not Nutex Health Inc.
- Reconcile the share-count and capitalization disclosures. The filing reports 39,683,990 shares outstanding at December 31, 2015 and April 14, 2016, but its beneficial-ownership table refers to a 25,044,056-share base; the filing also gives differing authorized-common-share figures in separate sections.
- Review the ArcMail purchase accounting, assumed debt and other liabilities, goodwill valuation, and the terms and payment status of ArcMail’s notes.
- Confirm the timing, collection and earn-out conditions for the remaining VHT sale consideration, and the basis for the reported discontinued-operations income.
- Assess near-term debt service and liquidity against cash, negative working capital, deferred-revenue obligations and management’s reliance on possible private financing.
- Compare a full-year ArcMail operating record with the partial-year 2015 results; reported annual revenue and net income are materially affected by the acquisition and Gotham disposal.