Filing summary: iGambit Inc. Form 10-Q, quarter ended September 30, 2012
Entity identification: The supplied filing is for iGambit Inc., not Nutex Health Inc. Investors should verify that this is the intended issuer and filing.
Business context and reporting period
iGambit’s operating subsidiary, Gotham Innovation Lab, provided media technology services to the real estate industry. The filing reports the three and nine months ended September 30, 2012, compared with the corresponding 2011 periods. The company also pursued expansion of Gotham and potential technology acquisitions or partnerships. Revenue from the former Digi-Data asset-sale agreement is reported in discontinued operations; the agreement had ended in February 2011.
Financial results and position
| Metric | Q3 2012 | Q3 2011 | Nine months 2012 | Nine months 2011 |
|---|---|---|---|---|
| Sales | $416,429 | $410,258 | $1,325,945 | $1,299,602 |
| Gross profit / margin | $253,121 / 60.8% | $219,202 / 53.4% | $685,026 / 51.7% | $756,733 / 58.2% |
| Operating loss | $(184,937) | $(239,372) | $(683,267) | $(604,902) |
| Net loss | $(114,462) | $(153,473) | $(415,598) | $(230,188) |
For the nine months, Gotham generated $1,260,881 of revenue. The 2011 comparison included $159,785 of after-tax income from discontinued operations; there was none in 2012. Income-tax benefits were $254,691 for the 2012 nine-month period, compared with $192,649 in 2011.
At September 30, 2012, cash was $363,591; current assets were $1,357,124 and current liabilities were $309,212, implying a current ratio of about 4.4. Total assets were $1,496,207, total liabilities $309,212, and stockholders’ equity $1,186,995. The company reported no long-term liabilities. Current liabilities included $302,949 of accounts payable and a $6,263 related-party note payable.
Nine-month operating cash flow was $(263,227), including $(513,227) from continuing operations and $250,000 provided by discontinued operations. Investing cash flow was $421,145, principally reflecting collection of Allied Airbus notes receivable; financing cash flow was $(19,127). Cash increased by $138,791. The filing reports no dividends or share issuance during the period; 23,954,056 shares were outstanding as of November 14, 2012.
Changes versus prior comparable periods
- Q3 sales increased about 1.5% year over year, while gross margin improved to 60.8% from 53.4%; the operating loss narrowed, alongside lower general and administrative expense.
- Nine-month sales increased about 2.0%, but gross profit fell about 9.5% and the operating loss widened. General and administrative expense was slightly higher.
- The nine-month net loss widened mainly because the 2011 period included income from discontinued operations associated with Digi-Data.
- Cash increased from $224,800 at December 31, 2011 to $363,591, while total assets and equity declined. The company attributed the asset decrease partly to Allied Airbus note repayment and use of funds for operating losses.
Outlook, risks, and unusual items
- Management said it expected to increase liquidity and believed existing capital was sufficient for current operations, but provided no quantified financial guidance. It anticipated that expansion or acquisitions could require additional capital, potentially from private markets, with no assurance of acceptable financing.
- Three customers represented approximately 64% of Gotham’s nine-month sales, indicating customer concentration.
- On October 1, 2012, the company sued Digi-Data over unpaid contingency payments. The claim was $570,590 at September 30, exclusive of a $250,000 bad-debt reserve; the balance sheet reported $320,590 of discontinued-operation assets. Collection and litigation outcomes are uncertain.
- The company had settled its Allied Airbus collection action and received the notes’ principal, accrued interest, and legal fees in June 2012. A separate $17,000 stockholder receivable was due December 31, 2012.
- iGambit entered a five-year office lease in 2012, with disclosed minimum payments totaling $80,100 through 2016. Management reported no goodwill impairment, but said no impairment study was performed during the first nine months of 2012.
- The filing’s controls discussion refers to an evaluation as of September 30, 2010 and changes during the third quarter of 2011, despite this being a 2012 report. Those dates appear inconsistent and should be checked against the original filing.
Key facts investors should verify
- Confirm issuer identity: the filing is for iGambit Inc., not Nutex Health Inc.
- Confirm the recoverability, reserve treatment, and legal status of the Digi-Data contingency-payment claim.
- Assess Gotham’s customer concentration, operating losses, and ability to convert sales into positive continuing-operations cash flow.
- Verify funding needs and financing availability for planned expansion or acquisitions, and the timing of related-party obligations.
- Check the original filing for the apparently inconsistent dates in the controls-and-procedures disclosure and for any later updates to litigation or liquidity.