Nutex Health Inc. annual report, FY2014

Business context and reporting period

Entity mismatch: The request identifies Nutex Health Inc., but the supplied Form 10-K is for iGambit Inc. This summary reflects the supplied filing, not Nutex Health. The filing covers the fiscal year ended December 31, 2014; it is an annual report, not a standalone fourth-quarter report.

iGambit describes itself as a technology holding company seeking acquisitions. Its sole operating subsidiary, Gotham Innovation Lab, provided media technology services to real estate businesses. The planned IGX acquisition was rescinded in 2013; the company reported no acquisition contract in progress at the time of this filing.

Financial performance and position

Revenue fell about 27%, which management attributed mainly to closing Gotham’s Team5 division. Cost of sales also declined, but gross margin contracted. General and administrative expense decreased to $1,383,646 from $1,692,556, primarily with lower payroll and employee benefits. The 2014 net loss included a $152,076 gain from extinguishing the convertible-note derivative liability; 2013 results included $755,000 of income from the IGX rescission agreement. These items make reported net results less indicative of recurring operations.

Current assets were $260,217 and current liabilities were $285,277, implying a working-capital deficit of $25,060. The company reported no long-term liabilities. The former $103,500 convertible note was settled in 2014: $49,000 of principal converted into 1,539,934 shares, and the remaining $54,500 principal plus accrued interest was repaid. Financing cash flow was a net use of $54,500.

Net cash provided by operating activities was $165,805, compared with $183,151 used in 2013. However, continuing operations used $489,941 of operating cash; the positive consolidated operating cash flow depended on $655,746 received from Digi-Data relating to discontinued operations. Investing activities used $4,739. The filing gives no conventional operating margin guidance; the reported operating loss was approximately 73% of revenue.

Material changes, outlook, risks and unusual items

• Management said it believed existing capital was sufficient for present operations and expected liquidity to increase, but anticipated possible private-market fundraising for expansion or acquisitions. It gave no quantified forecast and stated that fundraising on acceptable terms was not assured.
• The company’s acquisition strategy depends on identifying and financing suitable targets; it faced competition from better-resourced acquirers. No target was under contract.
• Customer concentration is substantial: Douglas Elliman represented approximately 70% of 2014 sales and 60% of year-end accounts receivable. The filing says losing this customer could materially harm financial condition. The five named customers together represented approximately 75% of sales.
• Digi-Data paid the full judgment balance and accrued interest in May 2014; the related discontinued-operation receivable was collected. The company separately disputed a financial-advisor claim for a $300,000 minimum business-combination fee arising from the rescinded IGX transaction. Management said the outcome was uncertain but did not expect a material adverse effect.
• In 2014, the company approved capitalization amendments providing for 200 million authorized common shares and 100 million preferred shares, with preferred-stock terms available for board designation. The balance sheet reports 200 million authorized common shares; the cover page and amendment description also refer to an increase from 75 million to 300 million total shares.
• Management concluded disclosure controls and internal control over financial reporting were effective as of year-end. The external auditor expressed an unqualified opinion on the financial statements, but was not engaged to audit internal control. The filing states there was no current market for the stock while also describing OTC Bulletin Board quotation; trading status should be checked.

Important facts for investors to verify

• Confirm the issuer: the supplied filing is iGambit Inc., not Nutex Health Inc.
• Verify whether Gotham retained Douglas Elliman and assess the resulting customer and receivables concentration.
• Assess recurring cash generation separately from the one-time Digi-Data collection and other nonrecurring income.
• Confirm current liquidity, accounts payable, financing needs, and whether private fundraising or an acquisition occurred after the filing date.
• Check the status and possible exposure from the BHC fee dispute, and reconcile the authorized-share disclosures and potential dilution from outstanding options and warrants.
• Confirm the stock’s actual quotation and trading liquidity; the filing contains inconsistent statements about market availability.