Business context and reporting period
Filing identity: The supplied filing is iGambit Inc.’s Form 10-K, not a Nutex Health Inc. filing. It covers the fiscal year ended December 31, 2013; it is an annual report, not a standalone Q4 report.
iGambit describes itself as a technology-focused holding company seeking acquisitions. Its sole operating subsidiary, Gotham Innovation Lab, provides media technology services to real estate businesses, primarily in the New York metropolitan area. The company reported 9 full-time employees and was not under contract to acquire another company at the filing date.
Financial performance and position
| Metric | FY 2013 | FY 2012 |
|---|---|---|
| Sales | $1,461,183 | $1,593,886 |
| Gross profit | $965,175 | $810,381 |
| Gross margin | 66.1% | 50.8% |
| General and administrative expenses | $1,692,556 | $2,383,568 |
| Loss from operations | $(727,381) | $(1,573,187) |
| Loss from continuing operations | $(67,136) | $(1,623,895) |
| Net income (loss) | $250,489 | $(1,623,895) |
| Net cash used by operating activities | $(183,151) | $(518,687) |
Revenue declined about 8.3%, while gross profit rose as cost of sales fell. The company attributed the sales decline mainly to exiting Gotham’s customer technical-services division and concentrating more on real estate photography. FY 2013 net income included $755,000 of income from the IGX rescission and $317,625 of income from discontinued operations related to the Digi-Data judgment; continuing operations remained loss-making.
At December 31, 2013, cash was $26,870, current assets were $1,050,746, total assets were $1,071,342, current liabilities and total liabilities were $515,155, and stockholders’ equity was $556,187. Current assets included $638,215 from discontinued operations and $239,779 due under the IGX rescission agreement. The company reported no long-term liabilities. Cash fell from $104,721 a year earlier. Operating cash use improved year over year, but remained negative.
Debt included a $103,500, 8% convertible note due June 18, 2014, with a holder conversion price based on 55% of specified recent low bid prices. The balance sheet reported a $40,250 net note payable and a $152,076 derivative liability. Interest expense was $54,505 and debt-discount amortization was $40,250. The filing reported no dividends and no off-balance-sheet arrangements.
Material changes, outlook, and risks
- G&A declined approximately 29%, principally reflecting lower payroll and corporate administrative costs and fewer IGX-related advisory expenses. Cost of sales declined to $496,008 from $783,505.
- The planned acquisition of IGX Global and IGX Global UK was rescinded in April 2013. Under the rescission, iGambit reported $755,000 of income; $239,779 remained due at year-end. The original acquisition financing was to be repaid or arranged by IGX.
- In December 2013, iGambit obtained summary judgment against Digi-Data for $570,590 plus interest, and Digi-Data’s counterclaim was dismissed. A February 2014 forbearance agreement set a $646,668.67 settlement amount, including interest, with an initial payment and subsequent installments. Collection remained subject to the agreement’s payment terms.
- Management said it believed available capital could fund present operations, but expected possible private-market fundraising to support expansion or acquisitions and gave no assurance funds would be available on acceptable terms. It anticipated additional professional fees if an acquisition occurred in 2014.
- Customer concentration is significant: the filing reports two Gotham customers represented approximately 45% and 24% of 2013 sales, and one customer represented approximately 53% of year-end receivables. The business section also says five customers accounted for approximately 81% of sales.
- A financial-advisor fee claim related to the rescinded IGX transaction was unresolved; management believed resolution would not materially affect the company. The filing marks Item 1A “Risk Factors” as not required, but discusses acquisition competition, limited resources, customer concentration, and financing risks elsewhere.
- Management concluded disclosure controls and internal control over financial reporting were effective at year-end. The independent auditor issued an unqualified opinion on the financial statements, but was not engaged to audit internal control effectiveness.
Important facts for investors to verify
- Confirm the issuer: this document identifies iGambit Inc., not Nutex Health Inc., and reports FY 2013 rather than a standalone Q4 period.
- Verify subsequent Digi-Data settlement receipts, installment compliance, accrued interest, and collectability of the year-end discontinued-operations receivable.
- Check collection of the remaining IGX rescission amount and whether the financial-advisor fee dispute was resolved.
- Assess liquidity beyond reported current assets: cash was only $26,870, operating cash flow was negative, and a convertible note was due in June 2014.
- Review potential dilution and conversion mechanics of the discounted convertible note, along with the reported derivative valuation and related expense.
- Confirm customer concentration and reconcile the filing’s stated approximately 81% five-customer sales concentration with the separately listed customer percentages.
- Resolve the filing’s inconsistent market statements: the cover says there was no current market for common stock, while Item 5 says the stock was quoted on the OTC Bulletin Board under “IGMB.”