iGambit, Inc. — Form 10-Q Summary
Entity clarification: The supplied filing is for iGambit, Inc., not Nutex Health Inc. It covers the quarter and six months ended June 30, 2011; interim results are not necessarily indicative of full-year results.
Business context
iGambit’s operating subsidiary, Gotham Innovation Lab, provided media technology services to the real estate industry. The company also received contingent payments from Digi-Data Corporation (DDC) under a 2006 asset sale agreement. That agreement ended February 28, 2011. The filing describes efforts to grow Gotham and pursue acquisitions or partnerships.
Financial results and liquidity
| Metric | Three months ended June 30, 2011 | Six months ended June 30, 2011 | Comparable 2010 period |
|---|---|---|---|
| Sales | $477,441 | $889,344 | $246,317; $413,659 |
| Gross profit | $255,849 | $537,531 | $149,864; $269,334 |
| Gross margin | 53.6% | 60.4% | 60.9%; 65.1% |
| Operating loss | $(194,813) | $(365,530) | $(279,309); $(589,406) |
| Continuing-operations loss | $(122,235) | $(236,500) | $(170,616); $(359,423) |
| Net income (loss) | $(122,235) | $(76,715) | $204,838; $361,024 |
General and administrative expense was $450,662 for Q2 and $903,061 for the first half, versus $429,173 and $858,740 in 2010. Six-month DDC discontinued-operations income, net of tax, fell to $159,785 from $720,447; Q2 had no discontinued-operations income. Continuing-operations income tax benefits were $65,643 for Q2 and $114,860 for the first half.
At June 30, cash was $468,617; current assets were $2.06 million and current liabilities $283,056, implying working capital of about $1.77 million. Total assets were $2.19 million, stockholders’ equity $1.91 million, and liabilities $283,056, with no long-term liabilities reported. The company reported $439,012 in notes receivable from Allied Airbus, bearing 6% interest and due within a year; it also had $17,000 due from a stockholder. A $25,390 related-party note payable bore 5.5% interest and was due July 1, 2011.
For the first half, operating cash use was $341,169, compared with operating cash provided of $990,436 in 2010. Investing activities provided $344,237, including $330,000 of DDC receipts; financing cash flow was zero. Cash increased by $3,068 to $468,617. The filing reports no separate operating margin.
Changes, outlook, risks, and unusual items
- Sales rose year over year, which management attributed to Gotham. However, the business lost the DDC revenue stream after the agreement ended; DDC payments earned were $242,099 in the first half of 2011 versus $1.21 million in the comparable 2010 period.
- Management expected Gotham’s business and revenue to grow during 2011, believed existing cash was sufficient for current operations, and expected to increase cash and liquidity. Expansion or acquisitions could require additional capital; management anticipated private-market fundraising but gave no assurance it could obtain acceptable terms. No quantified earnings or revenue guidance was provided.
- Management cited possible quarterly fluctuations, regulation, technology change, and competition. Gotham sales were concentrated: four customers represented approximately 70% of first-half sales; the filing lists customer shares of 31%, 28%, and 11%.
- Allied Airbus and iGambit did not reach a definitive agreement after a letter of intent; the company had advanced Allied $439,012 in personally guaranteed notes. The company recorded no bad-debt reserve in the first half of 2011.
- Comparative 2010 financial statements were restated for income taxes, goodwill, warrant compensation, and cash-flow classifications. No goodwill impairment was recorded in the first half of 2011, although no interim impairment study was performed.
- Management said disclosure controls were effective and reported no material litigation or material changes in internal control over financial reporting.
Important facts for investors to verify
- Confirm the filing’s issuer: it is iGambit, Inc., despite the request identifying Nutex Health Inc.
- Verify collection timing and recoverability of the $439,012 Allied notes and the $724,829 of assets from discontinued operations, principally receivables.
- Check whether DDC paid the remaining amounts management expected during 2011 and assess the revenue impact after the agreement’s expiration.
- Confirm repayment of the related-party note due July 1, 2011, and review the terms of any additional capital raised.
- Assess Gotham’s customer concentration and whether its growth can support ongoing operating expenses.