Business context and reporting period
This is iGambit Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2018, filed May 15, 2018. The supplied filing identifies the registrant as iGambit Inc., not Nutex Health Inc.; investors should verify the company and filing identity. iGambit describes itself as focused on medical technology through HealthDatix, whose products support Medicare wellness visits and chronic-care management. ArcMail was sold in June 2017.
Financial performance and condition
| Metric | Q1 2018 | Q1 2017 or comparison |
|---|---|---|
| Revenue | $4,192 | $4,350 |
| Gross profit (loss) | $(3,738) | $4,170 |
| Operating expenses | $408,231 | $167,380 |
| Operating loss | $(411,969) | $(163,210) |
| Net loss | $(610,033) | $(242,074) |
| Net loss per share | $(0.01) | $(0.00) |
| Operating cash flow | $(273,204) | $(124,715) |
| Cash at quarter-end | $60,245 | $9,449 at Dec. 31, 2017 |
Revenue was negligible relative to expenses, and the quarter produced a gross loss; a meaningful gross margin is not indicated. The 2017 net loss included $66,937 from discontinued operations, while 2018 had no discontinued-operations loss. Q1 2018 other expenses included a $118,101 derivative fair-value charge, a $63,699 debt-extinguishment loss, and $16,264 of interest expense.
At March 31, 2018, total assets were $3,183,563, including $3,093,918 of net intangible assets. Current liabilities were $1,061,518, compared with current assets of $84,287, producing a reported working-capital deficit of $977,231. The balance sheet lists $560,799 of net convertible debentures, $52,500 of notes payable, and $128,476 due to related parties; the related-party amounts are non-interest-bearing and payable on demand. Total stockholders’ equity was $2,122,045.
Cash increased by $50,796 during the quarter, mainly because $324,000 of financing proceeds exceeded $273,204 of operating cash use; there was no investing cash flow. Financing included $309,000 from convertible debt and $15,000 from common-stock sales. Convertible-note conversions also resulted in 5,344,180 shares issued for $102,000 of principal and $12,346 of accrued interest.
Material changes versus the prior comparable period
- Net loss increased to $610,033 from $242,074; excluding discontinued operations, the reported loss rose from $175,137 to $610,033.
- Operating expenses increased, including general and administrative costs of $234,264 versus $167,380 and amortization of $173,967 versus none reported in the income statement for Q1 2017.
- Revenue declined slightly, from $4,350 to $4,192, while cost of sales rose from $180 to $7,930.
- Operating cash use more than doubled, from $124,715 to $273,204. Cash at quarter-end was above year-end 2017, supported by debt and equity financing.
- Common shares outstanding increased: the filing reports 122,290,751 outstanding at March 31, 2018, excluding 10 million treasury shares, and 125,089,324 outstanding as of May 15, 2018.
Outlook, risks, contingencies, and unusual items
The filing states that substantial doubt exists about the company’s ability to continue as a going concern, citing its accumulated deficit of $10,258,602 and working-capital deficit. Management expects to fund operations through existing funds, further advances, and securities issuances, and says these sources and anticipated cash flow are expected to fund operations over the next 12 months. It also acknowledges that additional financing may not be available on acceptable terms or at all, and that equity or convertible-debt financing may dilute shareholders or have senior rights. The company reports no bank credit line.
Management anticipates higher development, marketing, payroll, and operating costs as HealthDatix expands, but provides no quantified revenue or earnings guidance. It cautions that forward-looking results may differ because of operating fluctuations, regulation, technology change, and competition. Four customers represented approximately 30%, 21%, 21%, and 19% of HealthDatix sales in Q1 2018; one customer represented all accounts receivable at quarter-end.
Subsequent events disclosed include a May 3, 2018 convertible note for $83,500 at 8% interest, convertible after 180 days at a discount to market, and $64,000 of additional note conversions into 2,798,573 shares after quarter-end. The filing reports no material litigation, defaults on senior securities, or unregistered sales requiring disclosure in the relevant Part II items. Management concluded disclosure controls were effective at a reasonable-assurance level and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Confirm that this iGambit Inc. filing is the intended filing for the Nutex Health Inc. request.
- Assess the company’s ability to fund operations given minimal revenue, cash of $60,245, and a $977,231 working-capital deficit, notwithstanding management’s 12-month funding statement.
- Review the terms, maturities, conversion discounts, derivative accounting, and potential dilution associated with convertible notes and debentures.
- Verify HealthDatix customer concentration, receivable collection, and the commercial progress of its products; the filing gives no quantified forward sales guidance.
- Check share-count changes and subsequent conversions against later filings and the company’s capitalization disclosures.