Filing summary
Entity and period: The supplied filing is iGambit Inc.’s Form 10-K for the fiscal year ended December 31, 2012, filed June 20, 2013. It is not a Nutex Health Inc. filing, and it reports annual results rather than standalone 2012 fourth-quarter results. The filing describes iGambit as a technology-focused holding company; its operating subsidiary, Gotham Innovation Lab, provided media technology services to real estate businesses.
Financial results and liquidity
| Metric | 2012 | 2011 |
|---|---|---|
| Revenue | $1,593,886 | $1,783,904 |
| Gross profit / gross margin | $810,381 / 50.8% | $1,019,155 / 57.1% |
| Operating loss | $(1,573,187) | $(844,577) |
| Net loss | $(1,623,895) | $(383,393) |
| Cash from (used in) operating activities | $(518,687) | $(659,136) |
| Cash at year-end | $104,721 | $224,800 |
| Total assets | $745,919 | $1,891,178 |
| Total current liabilities | $440,221 | $288,585 |
| Stockholders’ equity | $305,698 | $1,602,593 |
Revenue fell about 10.7%. Gotham revenue decreased to $1,528,822 from $1,623,654, while technical consulting revenue declined to $65,064 from $160,250. Gross margin contracted by about 6.3 percentage points. The company reported a current ratio of approximately 1.63 and working capital of $276,608 at year-end, based on the balance-sheet figures.
General and administrative expense rose to $2,383,568 from $1,863,732. The 2012 total included $327,000 in stock issued for advisory and consulting services, $387,000 of fees and expenses associated with the IGX transaction, and a $111,026 goodwill impairment. The filing attributes the larger net loss chiefly to those transaction costs, lower revenue—including Hurricane Sandy’s effect on the New York real estate market—and the end of Digi-Data contingency payments. The 2012 tax presentation included a $768,836 valuation allowance against deferred tax assets; the company said recent cumulative losses made realization unlikely.
Cash used by continuing operating activities was $768,687, partly offset by $250,000 of discontinued-operation cash receipts from Digi-Data. Investing activities provided $417,735, primarily from repayment of Allied Airbus notes; financing activities used $19,127 to repay related-party loans. At year-end, liabilities consisted of $433,958 of accounts payable and a $6,263 related-party note payable; the filing does not report material conventional long-term debt at that date. The note was due December 31, 2013 and bore 5.5% interest.
Changes, outlook, and material matters
- IGX acquisition rescinded: The company agreed in December 2012 to acquire IGX Global and IGX Global UK, but the deal was rescinded in April 2013 and completed by April 25. The original proposal included $500,000 cash, a $1 million note, assumption of up to $2.5 million of liabilities, and potential issuance of 3.75 million shares. Under the rescission, IGX was to arrange payoff of the Keltic financing, assume certain expenses, and pay iGambit $625,000: $275,000 initially and $350,000 in equal monthly installments over 18 months. The filing says the acquisition was not reflected in the 2012 financial statements.
- Digi-Data dispute: iGambit sued for unpaid contingency payments. At December 31, 2012, the related discontinued-operations receivable was $570,590 before a $250,000 allowance, or $320,590 net. Digi-Data counterclaimed over alleged indemnification obligations. The related Verizon patent litigation was dismissed with prejudice in April 2013; iGambit filed a motion for summary judgment against Digi-Data in May 2013. The filing does not establish the outcome or collectability of the receivable.
- Other claims and contingencies: The financial adviser BHC asserted entitlement to a $300,000 minimum transaction fee after the IGX deal; iGambit disputed that the fee was earned because the transaction was rescinded. Management said resolution was not expected to materially harm financial position or results, but the outcome was undetermined.
- Liquidity and strategy: Management said existing capital was sufficient for present operations but anticipated private-market fundraising for expansion or acquisitions, with no assurance of acceptable financing or execution. The filing gives no quantified earnings or revenue guidance. Management was discussing four potential acquisition candidates but was not under contract to acquire any at the time described.
- Concentration and trading: Five customers represented approximately 76% of 2012 sales; Douglas Elliman alone was approximately 42%. Management warned that losing major accounts could materially harm the business. Although the stock was quoted on the OTC Bulletin Board, the filing said there was no established public trading market.
- Reporting and controls: The 2012 financial statements received an unqualified audit opinion. Management concluded disclosure controls and internal control over financial reporting were effective; the independent auditor was not engaged to audit internal controls. The prior auditor was dismissed and a new auditor engaged in January 2013, with no reported disagreements or reportable events.
Investor verification priorities
- Confirm the issuer and filing match the investment being reviewed: this document is for iGambit Inc., not Nutex Health Inc.
- Verify collection status and subsequent receipts for the $320,590 net Digi-Data receivable, the related litigation, and the $250,000 allowance.
- Confirm the IGX rescission payments, Keltic financing payoff, and any remaining transaction or adviser obligations.
- Assess cash runway, accounts payable, financing needs, and the customer concentration—especially reliance on Douglas Elliman.
- Reconcile the filing’s small inconsistency in 2012 stockholders’ equity: the audited balance sheet reports $305,698, while MD&A states $305,695 in one passage.
- Review dilution and liquidity: 1,268,900 options and 275,000 warrants were outstanding at year-end, and the filing reports no established trading market.