Filing summary
Issuer and period: The supplied filing is iGambit Inc.’s unaudited Form 10-Q for the quarter and six months ended June 30, 2015. It does not identify Nutex Health Inc. as the registrant; verify that this is the intended filing. iGambit describes itself as a holding company whose operating subsidiary, Gotham Innovation Lab, provides media technology services to real estate brokers.
Financial performance
| Metric | Three months ended June 30, 2015 | Three months ended June 30, 2014 | Six months ended June 30, 2015 | Six months ended June 30, 2014 |
|---|---|---|---|---|
| Revenue | $347,767 | $310,424 | $648,114 | $550,637 |
| Gross profit | $180,323 | $186,721 | $345,048 | $324,022 |
| Gross margin | 51.9% | 60.2% | 53.2% | 58.8% |
| General and administrative expense | $228,828 | $387,972 | $536,747 | $660,239 |
| Operating loss | $(48,505) | $(201,251) | $(191,699) | $(336,217) |
| Net loss | $(51,646) | $(75,270) | $(196,543) | $(236,848) |
Revenue increased year over year in both periods, while gross margin declined. Lower G&A expense helped narrow operating losses. The six-month 2014 comparison included a $152,076 derivative-liability gain and $17,531 of discontinued-operations income; neither recurred in 2015.
Cash flow: Six-month cash used by continuing operating activities was $119,870, versus $36,789 used in the comparable 2014 period. The 2014 total operating cash inflow of $618,957 was primarily associated with $655,746 received from discontinued operations. Cash used in investing was $5,026; financing provided $32,436, principally from stockholder advances. Cash declined by $92,460, from $133,436 to $40,976.
Financial position and liquidity
At June 30, 2015, cash was $40,976, accounts receivable $107,531, current assets $248,955, and total assets $271,939. Current liabilities were $340,975, comprising $308,539 of accounts payable and $32,436 of stockholder advances. The resulting working-capital deficit was $92,020, compared with $25,060 at December 31, 2014. Stockholders’ deficiency was $69,036, versus $4,491 at year-end. The company reported no long-term liabilities; the filing shows no convertible note payable outstanding at quarter-end.
Stockholder/officer advances are non-interest-bearing and stated to be repayable by December 31, 2015. The company issued 600,000 common shares for services on May 18, 2015, valued at $0.20 per share; shares outstanding were 27,183,990 as of August 18, 2015.
Outlook, risks, and unusual items
- Management says it believes current capital is sufficient for present operations and expects liquidity to increase, but also anticipates raising private-market capital for expansion or acquisitions and provides no assurance it can raise funds on acceptable terms.
- Management’s plans focus on expanding Gotham and pursuing acquisitions. It says operating costs should remain broadly level absent a material business expansion; no quantified revenue or earnings guidance is provided.
- Customer concentration is significant: one customer represented approximately 65% of six-month 2015 sales and 66% of accounts receivable at June 30, 2015.
- Other disclosed risks include quarterly fluctuations, regulation, technology change, competition, customer collectability, and dependence on additional financing. No material litigation or defaults on senior securities were reported.
- The filing reports disclosure controls as effective and no material changes in internal control during the six months. However, the controls discussion contains an apparent date error, referring once to an evaluation as of June 30, 2012.
- The filing’s interim statements are unaudited. Management cautions that six-month results are not necessarily indicative of full-year results.
Key facts for investors to verify
- Confirm issuer identity: the filing is for iGambit Inc., not Nutex Health Inc.
- Assess the working-capital deficit, operating cash use, and ability to repay the $32,436 stockholder advances and meet accounts payable.
- Investigate the concentration of sales and receivables with one customer, and the collectability of accounts receivable.
- Distinguish recurring operating performance from the prior-year derivative gain and discontinued-operation cash receipt.
- Review the 600,000-share service issuance, related stock-based compensation, and potential dilution from outstanding options and warrants.
- Check the filing’s apparent inconsistencies: the MD&A gives a misstated 2014 six-month net-loss figure in one passage, and the controls section includes the 2012 date reference.