Business context and reporting period
The supplied filing is iGambit Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2018, filed August 14, 2018. This does not match the request metadata naming Nutex Health Inc.; the filing identifies iGambit as the registrant. iGambit describes itself as focused on medical technology, primarily through HealthDatix, a healthcare software and services business. The company also describes a BioDatix health-band pilot planned for September 2018.
Financial performance and condition
Amounts below are reported in dollars, not in thousands.
| Metric | Three months ended June 30, 2018 | Six months ended June 30, 2018 |
|---|---|---|
| Revenue | $3,726 | $7,918 |
| Gross loss | $4,168 | $7,906 |
| Operating loss | $489,009 | $900,978 |
| Net loss | $726,247 | $1,336,280 |
| Net loss per share | $0.01 | $0.01 |
- Gross margins were negative because cost of sales exceeded very small revenue; the filing does not state margin percentages.
- For the six months, operating cash used was $492,032, investing cash flow was zero, and financing provided $533,500. Cash rose by $41,468 from year-end to $50,917.
- At June 30, total assets were $2,982,581, total current liabilities were $1,117,168, and stockholders’ equity was $1,865,413. Working capital was negative $1,059,464.
- Current liabilities included $583,508 of convertible debentures, $52,500 of notes payable, $128,476 due to related parties, and $33,473 of derivative liability. Related-party amounts are payable on demand; the filing states notes payable do not bear interest and have no specific repayment terms.
- Intangible assets, net, were $2,919,950. Six-month amortization expense was $347,935.
Changes versus the prior comparable period
- Second-quarter revenue declined to $3,726 from $4,595; six-month revenue declined to $7,918 from $8,945.
- Net loss narrowed to $726,247 from $1,647,250 for the quarter and to $1,336,280 from $1,889,324 for six months. Lower general and administrative expense was a major factor: $310,873 versus $913,213 for the quarter, and $545,137 versus $1,067,847 for six months.
- The prior-year comparisons include unusual items: a $396,972 loss on sale of a subsidiary in 2017’s second quarter and first half, and $66,937 of discontinued-operations loss in the 2017 first half. In 2018, six-month other expenses included $204,191 from derivative-liability fair-value changes and a $138,270 debt-extinguishment loss.
- Operating cash use increased to $492,032 from $367,692 for the six months. Financing proceeds increased to $533,500 from $391,492, primarily reflecting convertible-debt proceeds.
- Common shares issued increased from 126,196,571 at December 31, 2017 to 146,158,947 at June 30, 2018. The filing reports substantial conversions of discounted convertible notes into shares.
Outlook, risks, and unusual items
- The auditor’s report is not included in the supplied text; management states that accumulated deficit of $10,984,849 and the working-capital deficit raise substantial doubt about the company’s ability to continue as a going concern. Management expects funding from existing cash and further securities issuances to support operations for the next 12 months, but says additional financing may not be available on acceptable terms or at all.
- Management expects spending on HealthDatix development and marketing to increase and anticipates needing further equity or debt financing for longer-term requirements. Additional securities could dilute existing shareholders or have senior rights.
- Convertible notes carry conversion discounts to market prices. Their embedded derivatives produced fair-value and extinguishment charges, and conversions increased the share count.
- HealthDatix reported four customers representing approximately 32%, 23%, 22%, and 10% of six-month sales; one customer represented all accounts receivable at June 30. This indicates customer and receivable concentration.
- Subsequent to quarter-end, noteholders converted $89,000 principal and $6,640 accrued interest into 8,828,901 shares. On August 2, 2018, the company designated Series A preferred stock and issued 1,000 shares to its CEO; combined voting rights with the CEO’s common shares provide 51% of votes on stockholder matters.
- The company reported no material litigation and stated disclosure controls were effective at a reasonable-assurance level. It reported no material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Confirm the issuer and filing identity: the supplied 10-Q is for iGambit Inc., not Nutex Health Inc.
- Assess the going-concern disclosure against the company’s cash balance, working-capital deficit, near-term obligations, and ability to raise capital.
- Review the convertible-note terms, subsequent conversions, potential dilution, and the valuation assumptions behind derivative liabilities.
- Verify HealthDatix revenue generation, customer concentration, receivable collection, and the status and commercial prospects of the planned health-band pilot.
- Evaluate the governance and voting impact of the Series A preferred stock issued to the CEO after quarter-end.