Amended Quarterly Report (10-q/a)

Date : 08/20/2019 @ 4:48PM
Source : Edgar (US Regulatory)
Stock : Igambit, Inc. (QB) (IGMB)
Quote : 0.0021  0.0 (0.00%) @ 12:00AM

Amended Quarterly Report (10-q/a)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

Amendment No. 1 

(Mark One)

 

  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly period ended June 30, 2019

     

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

 

For the transition period from                       to

 

Commission file number 000-53862

 

iGambit Inc.

(Exact name of small business issuer as specified in its charter)

 

Delaware 11-3363609
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)

 

1050 W. Jericho Turnpike, Suite A
Smithtown, New York 11787
(Address of Principal Executive Offices) (Zip Code)

 

(631) 670-6777
(Issuer’s Telephone Number, Including Area Code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒  No ☐

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒  No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐ Accelerated filer ☐
   

Non-accelerated filer ☐

(Do not check if a smaller reporting company)

Smaller reporting company ☒
   
Emerging Growth Company ☒  

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐  No ☒

 

As of August 19, 2019, the Registrant had 388,553,890 (not including 10 million shares held in treasury) shares of the Registrant’s $0.001 par value common stock outstanding.

 

  1  

 

 

iGambit Inc.

 

EXPLANATORY NOTE

 

The purpose of this amendment on Form 10-K to iGambit Inc.’s Annual Report for the period ended June 30, 2019, filed with the Securities and Exchange Commission on August 19, 2019, is solely to furnish Exhibit 101 to the Form 10Q in accordance with Rule 405 of Regulation S-T and to correct two 7typographical errors in Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations. No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, and does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosure made in the original Form 10-Q.

 

  2  

 

 

iGambit Inc.
Form 10-Q

 

      Page No.
Part I — Financial Information  
Item 1.   Financial Statements:   4
    Condensed Consolidated Balance Sheets   4
    Condensed Consolidated Statements of Income         5
    Condensed Consolidated Statements of Changes in Stockholders’ Equity   6
    Condensed Consolidated Statements of Cash Flows   7
    Notes to Condensed Consolidated Financial Statements   8
Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations   24
Item 3.   Quantitative and Qualitative Disclosures About Market Risk   30
Item 4.   Controls and Procedures   30
Part II — Other Information    
Item 1.   Legal Proceedings   31
Item 1A.   Risk Factors   31
Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds   31
Item 3.   Defaults upon Senior Securities   31
Item 4.   Removed and Reserved   31
Item 5.   Other Information   31
Item 6.   Exhibits   31
Signature   32

  3  

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements 

IGAMBIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
         
      JUNE 30,       DECEMBER 31,  
      2019       2018  
ASSETS                
Current assets                
Cash   $ 75,456     $ 369  
Accounts receivable     10,366       14,871  
Inventory     26,988       27,073  
Total current assets     112,810       42,313  
                 
Other assets                
Property and equipment, net     1,623       2,118  
Intangible assets, net     2,224,081       2,572,015  
Deposits     300       2,020  
    $ 2,338,814     $ 2,618,466  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
Accounts payable and accrued expenses   $ 657,563     $ 480,270  
Accrued interest on notes payable     18,630       32,265  
Amounts due to related parties     128,476       145,367  
Deferred revenue     2,617       9,192  
Notes payable     445,593       52,500  
Convertible notes payable, net     72,254       377,611  
Derivative liability     —         288,242  
Total current liabilities     1,325,133       1,385,447  
                 
Stockholders' equity                
Preferred stock, $.001 par value; authorized - 100,000,000 shares;issued and outstanding - 0 shares in 2019 and 2018, respectively     —         —    
Common stock, $.001 par value; authorized - 800,000,000 shares;398,553,890 and 214,859,994 shares issued and 388,553,890 and 204,859,994 shares outstanding (net of treasury shares) as of June 30, 2019 and December 31, 2018, respectively     398,554       214,860  
Additional paid-in capital     15,207,703       14,480,973  
Accumulated deficit     (13,592,576 )     (12,462,814 )
      2,013,681       2,233,019  
Less: Treasury stock; 10,000,000 shares, at cost     (1,000,000 )     (1,000,000 )
Total stockholders' equity     1,013,681       1,233,019  
    $ 2,338,814     $ 2,618,466  

 

See accompanying notes to the condensed consolidated financial statements.

 

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IGAMBIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
                 
    THREE MONTHS   SIX MONTHS
    ENDED   ENDED
    JUNE 30,   JUNE 30,
    2019   2018   2019   2018
Sales   $ 6,300     $ 3,726     $ 11,625     $ 7,918  
Cost of sales     8,087       7,894       16,294       15,824  
Gross profit (loss)     (1,787 )     (4,168 )     (4,669 )     (7,906 )
                                 
Operating expenses                                
General and administrative expenses     198,953       310,873       389,217       545,137  
Amortization     173,968       173,968       347,935       347,935  
Total operating expenses     372,921       484,841       737,152       893,072  
                                 
Loss from operations     (374,708 )     (489,009 )     (741,821 )     (900,978 )
                                 
Other income (expenses)                                
Change in fair value of derivative liability     152,107       (86,090 )     98,944       (204,191 )
Loss on extinguishment of debt     (256,698 )     (74,571 )     (262,566 )     (138,270 )
Interest expense     (91,066 )     (76,577 )     (224,319 )     (92,841 )
Total other income (expenses)     (195,657 )     (237,238 )     (387,941 )     (435,302 )
                                 
Net loss   $ (570,365 )   $ (726,247 )   $ (1,129,762 )   $ (1,336,280 )
                                 
Basic and fully diluted loss per common share:                                
Net loss per common share   $ (.00 )   $ (.01 )   $ (.00 )   $ (.01 )
Weighted average common shares outstanding - basic and fully diluted     380,608,478       127,632,070       333,669,806       124,456,325  

 

 

See accompanying notes to the condensed consolidated financial statements.

 

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IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2019 AND 2018
 
                         
    Common stock          
    Shares   Amount   Additional Paid-inCapital   Accumulated Deficit   Treasury Stock   Totals
Balances, December 31, 2017     126,196,571     $ 126,196     $ 12,891,348     $ (9,648,569 )   $ (1,000,000 )   $ 2,368,975  
Common stock issued for cash     750,000       750       14,250       —         —         15,000  
Notes payable and accrued interest converted to common stock     5,344,180       5,345       342,758       —         —         348,103  
Net loss                             (610,033 )             (610,033 )
Balances, March 31, 2018     132,290,751     $ 132,291     $ 13,248,356     $ (10,258,602 )   $ (1,000,000 )   $ 2,122,045  
Common stock issued for cash     1,500,000       1,500       28,500       —         —         30,000  
Notes payable and accrued interest converted to common stock     15,462,376       15,463       698,455       —         —         713,918  
Common stock issued for services     3,000,000       3,000       85,800       —         —         88,800  
Net loss                             (1,336,280 )             (1,336,280 )
Balances, June 30, 2018     152,253,127     $ 152,254     $ 14,061,111     $ (11,594,882 )   $ (1,000,000 )   $ 1,618,483  
                                                 
Balances, December 31, 2018     214,859,994     $ 214,860     $ 14,480,973     $ (12,462,814 )   $ (1,000,000 )   $ 1,233,019  
Compensation for vested stock options     —         —         1,025       —         —         1,025  
Notes payable and accrued interest converted to common stock     146,727,525       146,727       402,081       —         —         548,808  
Net loss                             (559,397 )             (559,397 )
Balances, March 31, 2019     361,587,519     $ 361,587     $ 14,884,079     $ (13,022,211 )   $ (1,000,000 )   $ 1,223,455  
Notes payable and accrued interest converted to common stock     36,966,371       36,967       323,624       —         —         360,591  
Net loss                             (570,365 )             (570,365 )
Balances, June 30, 2019     398,553,890     $ 398,554     $ 15,207,703     $ (13,592,576 )   $ (1,000,000 )   $ 1,013,681  

 

See accompanying notes to the condensed consolidated financial statements.  

 

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IGAMBIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
 
         
      2019       2018  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (1,129,762 )   $ (1,336,280 )
Adjustments to reconcile net loss to net cash used in operating activities                
Depreciation     494       863  
Amortization     347,935       347,935  
Non cash interest expense     222,736       91,008  
Stock-based compensation expense     1,025       88,800  
Loss on extinguishment of debt     262,566       138,270  
Change in fair value of derivative liability     (98,944 )     204,191  
Changes in operating assets and liabilities:                
Accounts receivable     4,505       5,128  
Inventory     85       —    
Prepaid expenses and other current assets     —         33,716  
Deposits     1,720       —    
Accounts payable and accrued expenses     177,293       (58,213 )
Deferred revenue     (6,575 )     (7,450 )
NET CASH USED IN OPERATING ACTIVITIES     (216,922 )     (492,032 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:     —         —    
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from issuance of convertible debentures     168,500       503,500  
Repayments of convertible debentures     (257,693 )     —    
Proceeds from sale of common stock     —         30,000  
Proceeds from notes payable     393,093       —    
Proceeds from related party loans     11,254       —    
Repayments of related party loans     (23,145 )     —    
NET CASH PROVIDED BY FINANCING ACTIVITIES     292,009       533,500  
                 
NET INCREASE IN CASH     75,087       41,468  
                 
CASH - BEGINNING OF PERIOD     369       9,449  
                 
CASH - END OF PERIOD   $ 75,456     $ 50,917  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                
Cash paid during the period for:                
Interest   $ 1,583     $ 1,834  
                 
Non-cash investing and financing activities:                
Debt discount related to derivative liability   $ 222,500     $ 224,249  
Notes payable converted to common stock     326,189       257,000  
Common stock issued in payment of accrued interest     19,868       15,466  

 

See accompanying notes to the condensed consolidated financial statements.

 

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IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2019 and 2018

(Unaudited)

 

Note 1 - Organization and Basis of Presentation

 

The consolidated financial statements presented are those of iGambit Inc., (the “Company”) and its wholly-owned subsidiary, HealthDatix, Inc. (“HealthDatix. The Company is a holding company which seeks out acquisitions of operating companies in technology markets. HealthDatix, Inc. is engaged in the business of streamlining the process of managing information in the document-intensive medical field for customers throughout the United States.

 

Interim Financial Statements

 

The following (a) condensed consolidated balance sheet as of December 31, 2018, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2019 are not necessarily indicative of results that may be expected for the year ending December 31, 2019. These condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on April 16, 2019.

 

Note 2 – Summary of Significant Accounting Policies

 

Principles of Consolidation

 

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary.  All intercompany accounts and transactions have been eliminated.

 

Use of Estimates in the Preparation of Financial Statements

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

 

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Fair Value Measurements

 

The Company adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short- and long-term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for identical assets or liabilities

Level 2 – quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based on assumptions)

The estimated fair value of the derivative liability was calculated using the Black-Scholes option pricing model. The Company uses Level 3 inputs to value its derivative liabilities. The following table provides a reconciliation of the beginning and ending balances for the major classes of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) and reflects gains and losses for the six months ended June 30, 2019 and year ended December 31, 2018.

 

    2019   2018
Liabilities:                
Balance of derivative liabilities - beginning of period   $ 288,242     $ 66,059  
Issued     292,913       1,122,211  
Converted     (482,211 )     (928,773 )
Change in fair value recognized in operations     (98,944 )     28,745  
Balance of derivative liabilities - end of period   $ —       $ 288,242  

 

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Convertible Instruments

 

The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

 

Revenue Recognition

 

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products by: (1) identify the contract (if any) with a customer; (2) identify the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. The Company has no outstanding contracts with any of is’ customers. There was no impact on the Company’s financial statements as a result of adopting Topic 606 for the six months ended June 30, 2019 and 2018.

 

iGambit is a holding company and has no sources of revenue.

 

  10  

 

 

HealthDatix’s revenues are derived primarily from its Software as a Service (SaaS) offerings that are rendered to healthcare providers.  HealthDatix recognizes revenues when the products or services have been provided or delivered, the fees charged are fixed or determinable, HealthDatix and its customers understand the specific nature and terms of the agreed upon transactions, and collectability is reasonably assured.

 

Advertising Costs

 

The Company expenses advertising costs as incurred. Advertising costs of $329 and $0 were charged to operations for the six months ended June 30, 2019 and 2018, respectively.

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, cash and cash equivalents include checking and money market accounts and any highly liquid debt instruments purchased with a maturity of three months or less.

 

Accounts Receivable

 

The Company analyzes the collectability of accounts receivable from continuing operations each accounting period and adjusts its allowance for doubtful accounts accordingly.  A considerable amount of judgment is required in assessing the realization of accounts receivables, including the creditworthiness of each customer, current and historical collection history and the related aging of past due balances.  The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment.

 

Inventory

 

Inventory consisting of finished products is stated at the lower of cost or net realizable value.

Property and equipment and depreciation

 

Property and equipment are stated at cost. Maintenance and repairs are charged to expense when incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts and any gain or loss is credited or charged to income. Depreciation for both financial reporting and income tax purposes is computed using combinations of the straight line and accelerated methods over the estimated lives of the respective assets as follows:

 

Office equipment and fixtures   5 - 7 years
Computer hardware   5 years
Computer software   3 years
Development equipment   5 years

 

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Amortization

Intangible assets are amortized using the straight line method over the estimated lives of the respective assets as follows:

 

Software   5 years
Technology license   5 years
Purchased in process R&D   Indefinite
Customer contracts   10 years

 

Long-Lived Assets

 

The Company assesses the valuation of components of its property and equipment and other long-lived assets whenever events or circumstances dictate that the carrying value might not be recoverable. The Company bases its evaluation on indicators such as the nature of the assets, the future economic benefit of the assets, any historical or future profitability measurements and other external market conditions or factors that may be present. If such factors indicate that the carrying amount of an asset or asset group may not be recoverable, the Company determines whether an impairment has occurred by analyzing an estimate of undiscounted future cash flows at the lowest level for which identifiable cash flows exist. If the estimate of undiscounted cash flows during the estimated useful life of the asset is less than the carrying value of the asset, the Company recognizes a loss for the difference between the carrying value of the asset and its estimated fair value, generally measured by the present value of the estimated cash flows.

 

Deferred Revenue

 

Deposits from customers are not recognized as revenues, but as liabilities, until the following conditions are met: revenues are realized when cash or claims to cash (receivable) are received in exchange for goods or services or when assets received in such exchange are readily convertible to cash or claim to cash or when such goods/services are transferred. When such income item is earned, the related revenue item is recognized, and the deferred revenue is reduced. To the extent revenues are generated from the Company’s support and maintenance services, the Company recognizes such revenues when services are completed and billed. The Company has received deposits from its various customers that have been recorded as deferred revenue and presented as current liabilities in the amount of $2,617 and $9,192 as of June 30, 2019 and December 31, 2018, respectively.

 

Stock-Based Compensation

 

The Company accounts for its stock-based awards granted under its employee compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest.  The Company uses the Black-Scholes option pricing model to estimate the fair value of its stock options and warrants. The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock, the risk free interest rate at the date of grant, the expected vesting term of the grant, expected dividends, and an assumption related to forfeitures of such grants.  Changes in these subjective input assumptions can materially affect the fair value estimate of the Company’s stock options and warrants.

 

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Income Taxes

 

The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic No. 740, Income Taxes . Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

 

The Company applies the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements . In accordance with this provision, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position.

 

Recent Accounting Pronouncements

 

We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the condensed consolidated financial statements as a result of future adoption.

 

Note 3 – Going Concern

 

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.  The Company has an accumulated deficit of $13,592,576, and a working capital deficit of $1,212,323 at June 30, 2019. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time.  The Company’s continuation as a going concern is dependent upon its ability to obtain necessary equity financing and ultimately from generating revenues from its newly acquired subsidiary to continue operations. The Company expects that working capital requirements will continue to be funded through a combination of its existing funds and further issuances of securities. Working capital requirements are expected to increase in line with the growth of the business. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund operations over the next twelve months. The Company has no lines of credit or other bank financing arrangements. The Company has financed operations to date through the proceeds of a private placement of equity and debt instruments.  In connection with the Company’s business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. The Company intends to finance these expenses with further issuances of securities, and debt issuances. Thereafter, the Company expects it will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to current stockholders. Further, such securities might have rights, preferences or privileges senior to common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict business operations.

 

  13  

 

 

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 – Property and Equipment

 

Property and equipment are carried at cost and consist of the following at June 30, 2019 and December 31, 2018:

 

    2019   2018
Office equipment and fixtures   $ 10,964     $ 10,964  
Less: Accumulated depreciation     9,341       8,846  
    $ 1,623     $ 2,118  

 

Depreciation expense of $494 and $863 was charged to operations for the six months ended June 30, 2019 and 2018, respectively.

 

Note 5 – Intangible Assets

 

Intangible assets from the acquisitions of HealthDatix and ECSL consist of the following at June 30, 2019 and December 31, 2018:

 

    2019   2018   Life
Software   $ 156,925     $ 156,925       5 years  
Customer contracts     644,846       644,846       10 years  
FDA 510K clearance     1,396,000       1,396,000       5 years  
Technology license     1,000,000       1,000,000       5 years  
In process research and development     604,000       604,000       Indefinite  
      3,801,771       3,801,771          
Less: Accumulated amortization     1,577,690       1,229,756          
    $ 2,224,081     $ 2,572,015          

 

Amortization expense of $347,935 was charged to operations for the six months ended June 30, 2019 and 2018, respectively.

 

  14  

 

 

Note 6 - Earnings (Loss) Per Common Share

 

The Company calculates net income (loss) per common share in accordance with ASC 260 “ Earnings Per Share ” (“ASC 260”). Basic and diluted net earnings (loss) per common share was determined by dividing net earnings (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s potentially dilutive shares, which include outstanding common stock options and common stock warrants, have not been included in the computation of diluted net loss per share for the six months ended June 30, 2019 and 2018 as the result would be anti-dilutive.  

 

    Three Months Ended   Six Months Ended
    June 30,   June 30,
    2019   2018   2019   2018
Stock options     20,250,000       8,463,000       20,250,000       8,463,000  
Stock warrants     1,625,000       1,900,000       1,625,000       1,900,000  
 Total shares excluded from calculation     21,875,000       10,363,000       21,875,000       10,363,000  

 

Note 7 – Stock Based Compensation

 

Options

 

In 2006, the Company adopted the 2006 Long-Term Incentive Plan (the "2006 Plan").   Awards granted under the 2006 Plan have a ten-year term and may be incentive stock options, non-qualified stock options or warrants. The awards are granted at an exercise price equal to the fair market value on the date of grant and generally vest over a three or four year period. The Plan expired on December 31, 2009, therefore as of June 30, 2019, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2006 plan.

 

The 2006 Plan provided for the granting of options to purchase up to 10,000,000 shares of common stock.  8,146,900 options have been issued under the plan to date of which 7,157,038 have been exercised and 692,962 have expired to date.  There were 296,900 options outstanding under the 2006 Plan on its expiration date of December 31, 2009. All options issued subsequent to this date were not issued pursuant to any plan.

 

  15  

 

 

Stock option activity during the six months ended June 30, 2019 and 2018 follows:

 

    Options
Outstanding
  Weighted
Average Exercise Price
  Weighted
Average Grant-Date Fair Value
  Weighted
Average Remaining Contractual Life (Years)
Options outstanding at December 31, 2017     8,463,000     $ 0.07     $ 0.07       7.41  
No option activity     —         —         —            
Options outstanding at  June 30, 2018     8,463,000     $ 0.07       0.07       6.91  
Options outstanding at  December 31, 2018     20,500,000       0.03       0.03       7.52  
Options expired     (250,000 )     0.05       —            
Options outstanding at  June 30, 2019     20,250,000     $ 0.03     $ 0.03       7.72  

 

Options outstanding at June 30, 2019 consist of:

 

Date   Number   Number   Exercise   Expiration
Issued   Outstanding   Exercisable   Price   Date
March 24, 2015     200,000       200,000     $ 0.01       March 24, 2020  
April 6, 2017     600,000       600,000     $ 0.03       April 6, 2027  
June 6, 2017     700,000       700,000     $ 0.07       June 6, 2022  
June 6, 2017     6,500,000       6,500,000     $ 0.07       June 6, 2027  
November 1, 2018     12,250,000       12,250,000     $ 0.01       November 1, 2028  
Total     20,250,000       20,250,000                  

 

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Warrants

 

In addition to our 2006 Long Term Incentive Plan, we have issued and outstanding compensatory warrants to two consultants entitling the holders to purchase a total of 275,000 shares of our common stock at an average exercise price of $0.94 per share. Warrants to purchase 25,000 shares of common stock vest upon 6 months after the Company engages in an IPO, have an exercise price of $3.00 per share, and expire 2 years after the Company engages in an IPO. Warrants to purchase 250,000 shares of common stock vest 100,000 shares on issuance (June 1, 2009), and 50,000 shares on each of the following three anniversaries of the date of issuance, have exercise prices ranging from $0.50 per share to $1.15 per share, and expired on June 1, 2019. The issuance of the compensatory warrants was not submitted to our shareholders for their approval.

 

Warrant activity during the six months ended June 30, 2019 and 2018 follows:

 

   

Warrants

Outstanding

  Weighted Average Exercise Price   Weighted Average Grant-Date Fair Value   Weighted
Average Remaining Contractual Life (Years)
Warrants outstanding at December 31, 2017     400,000     $ 0.62     $ 0.10       3.27  
Warrant granted     1,500,000       0.05       —            
Warrants outstanding at June 30, 2018     1,900,000     $ 0.21     $ 0.12       3.75  
Warrants outstanding at December 31, 2018     1,875,000     $ 0.12     $ 0.12       3.24  
Warrants expired     (250,000 )     0.73       —            
Warrants outstanding at June 30, 2019     1,625,000     $ 0.03     $ 0.03       3.15  

 

Warrants outstanding at June 30, 2019 consist of:

 

Date   Number   Number   Exercise   Expiration
Issued   Outstanding   Exercisable   Price   Date
January 1, 2017     50,000       50,000     $ 0.25       October 10, 2021  
January 1, 2017     50,000       50,000     $ 0.50       November 7, 2021  
January 5, 2017     25,000       25,000     $ 0.50       January 5, 2022  
February 5, 2018     750,000       750,000     $ 0.05       February 5, 2023  
April 27, 2018     750,000       750,000     $ 0.05       April 27, 2023  
  Total     1,625,000       1,625,000                  

 

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Note 8 – Convertible Debt

 

Convertible Notes Payable

 

On January 10, 2018, the Company issued an 8% convertible note in the aggregate principal amount of $240,000, convertible into shares of the Company’s common stock, and includes a back-ended note with principal of $120,000 that was funded on July 10, 2018. The back-ended Note, including accrued interest is due July 10, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 15 trading day period ending on the latest complete trading day prior to the conversion date. During the six months ended June 30, 2019, the noteholder converted $71,732 of the principal balance and accrued interest of $5,366 to 48,693,873 shares of common stock. The principal balance of the note of $94,268, accrued interest of $7,417, and prepayment penalty of $5,000 were paid on June 24, 2019 with proceeds from the Clinigence note (See note 10 below).

 

On March 6, 2018, the Company issued an 8% convertible note in the aggregate principal amount of $126,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due March 6, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the lowest trading price during the 20 trading day period ending on the latest complete trading day prior to and including the conversion date. During the six months ended June 30, 2019, the noteholder converted the remaining principal balance of $60,000 and accrued interest of $4,342 to 35,446,300 shares of common stock.

 

On May 3, 2018, the Company entered into a Convertible Promissory Note pursuant to which the Company borrowed in the aggregate principal amount of $83,500. The convertible note is due 12 months after issuance and bears interest at a rate of 8%. The Note is convertible into shares of common stock of the Company 180 days following the date of funding and thereafter. The conversion price shall be subject to a discount of 35% applied to the average of the three lowest closing bid prices of the Common Stock during the prior twenty (20) trading day period. The Investor will be limited to convert no more than 4.99% of the issued and outstanding Common Stock at the time of conversion at any one time. At any time during the period beginning on the date of the Note and ending on the date which is 180 days thereafter, the Company may repay the Note by paying an amount equal to the then outstanding amount multiplied by 130%. During the six months ended June 30, 2019, the noteholder converted the remaining principal balance of $53,957 and accrued interest of $4,600 to 25,674,344 shares of common stock.

 

On June 25, 2018, the Company issued an 8% convertible note in the aggregate principal amount of $53,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due April 15, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. During the six months ended June 30, 2019, the noteholder converted the remaining principal balance of $38,000 and accrued interest of $2,120 to 14,859,260 shares of common stock.

 

  18  

 

 

On August 13, 2018, the Company issued an 8% convertible note in the aggregate principal amount of $53,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due May 30, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. During the six months ended June 30, 2019, the noteholder converted the principal balance of the note and accrued interest of $2,120 to 26,247,619 shares of common stock.

 

On September 17, 2018, the Company issued an 8% convertible note in the aggregate principal amount of $33,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due June 30, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. During the six months ended June 30, 2019, the noteholder converted the principal balance of the note and accrued interest of $1,320 to 31,762,500 shares of common stock.

 

On January 3, 2019, the Company issued an 8% convertible note in the aggregate principal amount of $38,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due October 30, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. The principal balance of the note of $38,000, accrued interest of $1,659, and prepayment penalty of $7,600 were paid on June 24, 2019 with proceeds from the Clinigence note (See note 10 below).

 

On February 15, 2019, the Company issued an 8% convertible note in the aggregate principal amount of $38,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due November 30, 2019 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. The principal balance of the note of $38,000, accrued interest of $1,259, and prepayment penalty of $7,600 were paid on June 24, 2019 with proceeds from the Clinigence note (See note 10 below).

 

On March 29, 2019, the Company issued an 8% convertible note in the aggregate principal amount of $38,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due February 15, 2020 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. The principal balance of the note of $38,000, accrued interest of $810, and prepayment penalty of $7,600 were paid on June 24, 2019 with proceeds from the Clinigence note (See note 10 below).

 

On May 22, 2019, the Company issued an 8% convertible note in the aggregate principal amount of $38,000, convertible into shares of the Company’s common stock. The Note, including accrued interest is due March 15, 2020 and is convertible any time after 180 days at the option of the holder into shares of the Company’s common stock at 65% of the average stock price of the lowest 3 closing bid prices during the 10 trading day period ending on the latest complete trading day prior to the conversion date. The principal balance of the note of $38,000, accrued interest of $280, and prepayment penalty of $7,600 were paid on June 24, 2019 with proceeds from the Clinigence note (See note 10 below).

 

The Company recorded a debt discount related to identified embedded derivatives relating to conversion features and a reset provisions (see Note 9) based fair values as of the inception date of the Notes. The calculated debt discount equaled the face of the 8% note dated January 10, 2018 and was amortized through the date the convertible debt was fully extinguished. The calculated debt discount equaled the face of the 8% note dated March 6, 2018 and was amortized through the date the convertible debt was fully extinguished. The calculated debt discount equaled the face of the 8% note dated May 3, 2018 and was amortized through the date the convertible debt was fully extinguished. The calculated debt discount equaled the face of the 8% note dated June 25, 2018 and was amortized through the date the convertible debt was fully extinguished. The calculated debt discount equaled the face of the 8% note dated August 13, 2018 and was amortized through the date the convertible debt was fully extinguished. The calculated debt discount equaled the face of the 8% note dated September 17, 2018 and was amortized through the date the convertible debt was fully extinguished. Interest expense on the convertible notes of $218,454 and $61,479 was recorded for the six months ended June 30, 2019 and 2018, respectively.

 

  19  

 

 

The Company issued convertible debentures in the amount of $75,000 to three individuals. The debentures are convertible into 75,000 shares of common stock for up to 5 years, at the holders’ option, at an exercise price of $.50 and $.25, respectively. The debentures mature on the earlier of the closing of a subsequent financing event by the Company resulting in gross proceeds of at least $10,000,000 or three years from the date of issuance. The debentures bear interest at a rate of 10%. A beneficial conversion feature was not recorded as the fair market value of the Company’s common stock was less than the exercise prices at the dates of issuance and through the end of the year. Interest expense on the convertible debentures of $3,699 was recorded for the six months ended June 30, 2019 and 2018, respectively.

 

Convertible notes payable at June 30, 2019 and December 31, 2018 are summarized as follows:

 

    2019   2018
Total face value of notes   $ 75,000     $ 478,957  
Less: Discount     2,746       101,346  
Balance   $ 72,254     $ 377,611  

 

Note 9 – Derivative Liability

 

The Company has determined that the conversion feature embedded in the convertible notes described in Note 8 contain a potential variable conversion amount which constitutes a derivative which has been bifurcated from the note and recorded as a derivative liability at fair value, with a corresponding discount recorded to the associated debt. The excess of the derivative value over the face amount of the note is recorded immediately to interest expense at inception. The Company used the Binomial Option Pricing model to value the conversion features.

 

The Company used Level 3 inputs for its valuation methodology for the conversion option liability in determining the fair value using a Black-Scholes option-pricing model with the following assumption inputs:

 

           June 30,       December 31,  
      2019       2018  
Annual dividend yield     —         —    
Expected life (years)      0.78 - 1.0        0.77 - 1.0  
Risk-free interest rate      2.44% - 2.52%        2.07% - 2.57%  
Expected volatility      274% - 294%        257% - 293%  

 

Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible notes. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.

 

  20  

 

 

Note 10 – Notes Payable

 

On June 24, 2019, the Company entered into a secured promissory note with Clinigence Holdings, Inc. (“Clinigence”) for proceeds of $393,093, of which $293,093 was utilized to pay outstanding principal, accrued interest and penalties of certain convertible notes payable, and $100,000 was utilized for working capital. The note bears interest at a rate of 6% and is due upon the earlier of December 24, 2019 or the Merger Agreement (See note 16).

 

Notes payable at June 30, 2019 and December 31, 2018 consists of loans to HealthDatix from 3 individuals totaling $52,500. The loans do not bear interest and there are no specific terms for repayment.

 

Note 11 – Stock Transactions

 

Designation of Preferred Stock

 

On August 2, 2018, the Company filed a Certificate of Designation with the Delaware Division of Corporations whereby the Company designated a Series A Preferred Stock and issued 1,000 shares to the Company’s CEO. The holders of Series A Preferred Stock will have voting rights, when combined with their existing holdings of the Company’s common stock, that entitle them to have an aggregate of 51% of the votes eligible to be cast by all stockholders with respect to all matters brought before a vote of the stockholders of the Company.

 

Common Stock Issued

 

On August 8, 2018, the Board unanimously approved an amendment to the Company’s Articles of Incorporation to increase the number of shares of Common Stock which the Company is authorized to issue from Four hundred million (400,000,000) to Eight Hundred Million (800,000,000) shares of Common Stock, $0.001 par value per share.

 

In connection with the convertible notes payable (see Note 8 above) the noteholders converted $326,189 of principal balance and $19,868 of accrued interest to 182,683,896 shares of common stock during the six months ended June 30, 2019. The stock issued was determined based on the terms of the convertible notes.

 

Note 12 - Income Taxes

 

A full valuation allowance was recorded against the Company’s net deferred tax assets. A valuation allowance must be established if it is more likely than not that the deferred tax assets will not be realized. This assessment is based upon consideration of available positive and negative evidence, which includes, among other things, the Company’s most recent results of operations and expected future profitability. Based on the Company’s cumulative losses in recent years, a full valuation allowance against the Company’s deferred tax assets has been established as Management believes that the Company will not realize the benefit of those deferred tax assets.

 

  21  

 

 

Note 13 – Concentrations and Credit Risk

 

Sales and Accounts Receivable

 

HealthDatix had sales to two customers which accounted for approximately 22% and 16%, respectively of HealthDatix’s total sales for the six months ended June 30, 2019. One customer accounted for approximately 96% of accounts receivable at June 30, 2019.

 

HealthDatix had sales to four customers which accounted for approximately 32%, 23%, 22%, and 10%, respectively of HealthDatix’s total sales for the six months ended June 30, 2018. One customer accounted for 100% of accounts receivable at June 30, 2018.

 

Cash

 

Cash is maintained at a major financial institution. Accounts held at U.S. financial institutions are insured by the FDIC up to $250,000. Cash balances could exceed insured amounts at any given time, however, the Company has not experienced any such losses. The Company did not have any interest-bearing accounts at June 30, 2019 and December 31, 2018, respectively.

 

Note 14 - Related Party Transactions

 

Amounts Due to Related Parties

 

Amounts due to related parties with balances of $128,476 and $145,367 at June 30, 2019 and December 31, 2018, respectively, do not bear interest and are payable on demand. The Company’s former subsidiary, Arcmail owed amounts on a credit card that is guaranteed by the husband of the Company’s Executive Vice President, who was held personally responsible by the credit card company for the unpaid balance.

 

Note 15 – Commitments and Contingencies

 

Lease Commitment

 

The Company was obligated under an operating lease for its premises in Smithtown, New York that expired on May 31, 2019. The lease was not renewed and the officers of the Company are providing office space to the Company at no charge.

 

Rent expense of $15,262 and $14,235 was charged to operations for the six months ended June 30, 2019 and 2018, respectively.

 

  22  

 

 

Employment Arrangements With Executive Officers

 

Effective April 1, 2017, in connection with the acquisition of HealthDatix Inc., the Company entered into employment agreements with Jerry Robinson, MaryJo Robinson, and Kathleen Shepherd each under a three-year term at a base salary of $75,000 per year, bonuses based upon objectives set by the Company, and participation in all benefit programs generally made available to HealthDatix employees. The employment agreements restrict the executive officers from engaging in certain competitive activities for the greater of 60 months from the date of the agreements or two years following the termination of their respective employment.

 

Note 16 – Subsequent Events

 

On August 9, 2019, the Company entered into a definitive merger agreement with Clinigence Holdings, Inc. pursuant to which the companies will combine in a stock-for-stock merger transaction. Pursuant to the merger agreement, iGambit shall issue newly-issued shares of common stock, on a fully-diluted pro rata basis, to the equity holders of Clinigence by means of a reverse triangular merger in which a wholly owned subsidiary of iGambit shall merge with and into Clinigence, with Clinigence continuing as the surviving corporation (the “Merger”). If the closing of the Merger occurs (the “Closing”), the former Clinigence equityholders shall own 85% of iGambit’s issued and outstanding common stock and the former iGambit equityholders shall own 15% of iGambit’s issued and outstanding common stock, in each case on a fully-diluted, as converted basis as of immediately prior to the Closing (including options, warrants and other rights to acquire equity securities of iGambit).

 

  23  

 

  

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

FORWARD LOOKING STATEMENTS

 

This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-Q which address activities, events or developments that the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof), finding suitable merger or acquisition candidates, expansion and growth of the Company’s business and operations, and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments as well as other factors it believes are appropriate in the circumstances.

 

Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements. Factors that could adversely affect actual results and performance include, among others, potential fluctuations in quarterly operating results and expenses, government regulation, technology change and competition. Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.

  

INTRODUCTION

 

Introduction

          

iGambit is a company focused on the medical technology markets. Our primary focus is the expansion of our subsidiary HealthDatix™ Inc.

 

HealthDatix is a medical technology company that provides end to end Software-as-a-Service solutions, services and products via our HealthDatix Platform that manages, reports, and analyzes critical data, enabling healthcare and commercial organizations to deliver positive member outcomes.

 

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HealthDatix Platform Products and Services

 

Health Risk Assessment (HRA)

 

Our Health Risk Assessment (HRA) solution is a standardized method of collecting health risk data from patients or employees that can be used by Wellness Clinics, Insurance Companies, Third Party Administrators (TPA’s) and/or self insured companies to identify the health risks of their employee or patient population. Our HRA solution can be tailored to deliver the HRA and a Preventive Plan for all beneficiaries and their dependents.

 

Target Market : Insurance Companies, TPA’s and/or self-insured companies.

 

Annual Wellness Visit (AWV)

 

Our Annual Wellness Visit (AWV) solution allows for a mass check of patients with CMS to determine if and when they are eligible for an initial or subsequent AWV and identifies eligibility for other preventive screenings. Our proprietary algorithm determines a patients’ qualification for preventive screenings, health and lifestyle risks and if they have 2 or more qualifying chronic conditions that make them eligible for CCM. The program creates a 5-10 year preventive plan for the patient and meets all of CMS audit requirements to bill for the services. The AWV provides a proactive approach to patient care and increases practice revenue by identifying and executing CMS recommended screenings for the patient to catch early disease states before they become chronic conditions

 

Target Market: Medicare Programs including ACO’s, Primary Care Offices, Chronic Care Management and Non-Medicare including Wellness Clinics, Insurance Companies, Medicare Advantage Plans (MAP)

 

BioDatix HealthBand

 

Our BioDatix Health Band requires our Remote Patient Monitoring (RPM) solution that speaks to our FDA cleared Electronic House Call system. The BioDatix Health Band passively collects heart rate, blood pressure, blood oxygen every 15 minutes. It calculates sleep and steps and sends to our BioDatix iOS/Android app and then to our RPM solution.

 

Target Markets: Physician Groups, ACO’s, Healthcare Systems, Cardiovascular & Pulmonary Providers, Insurance Companies, Preventive Care for High Stress Jobs, Wellness Clinics.

 

BioDatix Remote Patient Monitoring

 

In addition to our BioDatix HealthBand, our RPM solution accepts data from multiple FDA approved devices on a patient’s health status, ie. blood pressure, weight, glucose levels, etc. It’s a product that is primarily for home bound patients that need remote monitoring vs. placement in a rehab center after hospital discharge. The information in our RPM solution can then be accessed by the physician/staff to determine the health status of the patient and whether or not a critical situation is at hand for the patient to go to the hospital, come in for a visit, or receive a nursing staff visit. 

 

Target Markets: Physician Groups, ACO’s, Healthcare Systems, Cardiovascular & Pulmonary Providers, Insurance Companies, Preventive Care for High Stress Jobs, Wellness Clinics.

 

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HealthDatix - Chronic Care Management (CCM) Program

 

Centers for Medicaid and Medicare Services (CMS) introduced the Chronic Care Management (CCM) program in 2015 with the goal of filling patient care gaps and providing patient care at home.

 

HealthDatix Chronic Care Management (CCM) service was established to provide better care by engaging patients between visits by providing remote monitoring of patients. eat better, exercise more, take their medications, and live healthier lives.  The CCM program delivers 20 minutes of non-face-to-face care coordination to Medicare eligible beneficiaries with two or more chronic conditions.

 

Target Markets:  Physician Groups, ACO’s, Healthcare Systems

 

  Assets. At June 30, 2019, we had $2,338,814 in total assets compared to $2,618,466 at December 31, 2018. The decrease in total assets was primarily due to amortization of intangible assets from the acquisition of our HealthDatix subsidiary.

 

  Liabilities. At June 30, 2019, our total liabilities were $1,325,133 compared to $1,385,447 at December 31, 2018. Our current liabilities at June 30, 2019 consisted of accounts payable and accrued expenses of $657,563, accrued interest on notes payable of $18,630, amounts due to related parties of $128,476, deferred revenue of $2,617 notes payable of $445,593 and convertible notes payable of $72,254, whereas our current liabilities at December 31, 2018 consisted of accounts payable and accrued expenses of $480,270, accrued interest on notes payable of $32,265, amounts due to related parties of $145,367, deferred revenue of $9,192, notes payable of $52,500, convertible notes payable of $377,611, and derivative liability of $288,242.

 

Stockholders’ Equity. Our Stockholders’ Equity was $1,013,681 at June 30, 2019 compared to Stockholders Equity of $1,233,019 at December 31, 2018. This decrease was primarily due to an increase in accumulated deficit during the six months ended June 30, 2019.

 

threE Months Ended JUNE 30, 2019 as Compared to Three Months Ended JUNE 30, 2018

 

Revenues and Net Loss . We had $6,300 of revenue from our HealthDatix subsidiary and a net loss of $570,365 during the three months ended June 30, 2019, compared to $3,726 of revenue and a net loss of $726,247 during the three months ended June 30, 2018. The increase in revenue was due to revenue generated by our HealthDatix subsidiary.

 

  26  

 

 

General and Administrative Expenses . General and Administrative Expenses decreased to $198,953 from $310,873 for the three months ended June 30, 2019 from the three months ended June 30, 2018. For the three months ended June 30, 2019 our General and Administrative Expenses consisted of corporate administrative expenses of $14,254, depreciation expense of $247, legal and accounting fees of $15,787 employee benefits expenses (health and life insurance) of $2,925, travel and business meals expenses of $3,053, payroll expenses of $96,356, contract labor expenses of $4,500, bank service fees $45,443, rent expense of $7,533, franchise taxes of $3,781 and transfer agent fees of $5,074. For the three months ended June 30, 2018 our General and Administrative Expenses consisted of corporate administrative expenses of $24,175, depreciation expense of $432, legal and accounting fees of $26,500 employee benefits expenses (health and life insurance) of $11,623, marketing expense of $17,941, travel expenses of $3,859, payroll expenses of $103,344, contract labor expenses of $12,000, consulting fees expense of $89,400, exchange filing fees of $4,200, rent expense of $7,188, and transfer agent fees of $10,211. The decreases from the three months ended June 30, 2018 to the three months ended June 30, 2019 relate primarily due to: (i) a decrease in payroll expense and employee benefits, (ii) a decrease in bank service fees, and (iii) a decrease in consulting and fees expenses. Costs associated with the operation of our HealthDatix subsidiary are expected to increase going forward, as we expand the business operations of HealthDatix which would likely increase our corporate administrative expenses.

 

Other Income (Expense) . We reported a gain on change in fair value of derivative liability of $152,107, loss on extinguishment of debt of $256,698 and interest expense of $91,066 for the three months ended June 30, 2019. We reported a loss on change in fair value of derivative liability of $86,090, loss on extinguishment of debt of $74,571 and interest expense of $76,577 for the three months ended June 30, 2018.

 

six Months Ended june 30, 2019 as Compared to six Months Ended june 30, 2019

 

Revenues and Net Loss . We had $11,625 of revenue from our HealthDatix subsidiary and a net loss of $1,129,762 during the six months ended June 30, 2019, compared to revenue of $7,918 and a net loss of $1,336,280 for the six months ended June 30, 2018. The increase in revenue was due to the revenue generated by our HealthDatix subsidiary.

 

  27  

 

 

General and Administrative Expenses . General and Administrative Expenses decreased to $389,217 for the six months ended June 30, 2019 from $545,137 for the six months ended June 30, 2018. For the six months ended June 30, 2019 our General and Administrative Expenses consisted of corporate administrative expenses of $31,904, depreciation expense of $495, legal and accounting fees of $40,242 employee benefits expenses (health and life insurance) of $6,199, travel and business meals expenses of $7,142, payroll expenses of $206,102, contract labor expenses of $14,500, bank service fees $46,048, rent expense of $15,262, franchise taxes of $3,781 and transfer agent fees of $17,542. For the six months ended June 30, 2018 our General and Administrative Expenses consisted of corporate administrative expenses of $46,699, depreciation expense of $863, legal and accounting fees of $44,610, employee benefits expenses (health and life insurance) of $21,891, marketing expense of $34,616, trade show expense of $5,543, travel and business meals expenses of $4,965, payroll expenses of $208,430, contact labor expenses of $24,200, commissions and fees expense of $21,000, consulting fees expense of $89,400, exchange filing fees of $10,810, rent expense of $14,235, and transfer agent fees of $17,875. The decreases from the six months ended June 30, 2018 to the six months ended June 30, 2019 relate primarily due to: (i) a decrease in payroll expense and employee benefits, (ii) a decrease in commissions and fees expenses, (iii) a decrease in consulting fees expenses and (iv) a decrease in exchange filing expense. Costs associated with the operation of our HealthDatix subsidiary are expected to increase going forward, as we expand the business operations of HealthDatix which would likely increase our corporate administrative expenses.

 

Other Income (Expense) . We reported a gain on change in fair value of derivative liability of $98,944, loss on extinguishment of debt of $262,536 and interest expense of $224,319 for the six months ended June 30, 2019. We reported a loss on change in fair value of derivative liability of $204,191, loss on extinguishment of debt of $138,270 and interest expense of $92,841 for the six months ended June 30, 2018.

 

Liquidity and Capital Resources

 

General

 

As reflected in the accompanying consolidated financial statements, at June 30, 2019, we had $75,456 of cash and stockholders’ equity of $1,013,681. At December 31, 2018, we had $369 of cash and stockholders’ equity of $1,233,019.

 

Our primary capital requirements in 2019 are likely to arise from the expansion of our HealthDatix operations. It is not possible to quantify those costs at this point in time, in that they depend on HealthDatix’s business opportunities and the state of the overall economy. We anticipate raising capital in the private markets to cover any such costs, though there can be no guaranty we will be able to do so on terms we deem to be acceptable. We do not have any plans at this point in time to obtain a line of credit or other loan facility from a commercial bank.

 

While we believe in the viability of our strategy to improve HealthDatix’s sales volume, and in our ability to raise additional funds, there can be no assurances that we will be able to fully effectuate our business plan.

 

We believe we will continue to increase our cash position and liquidity for the foreseeable future. We believe we have enough capital to fund our present operations.

 

  28  

 

 

Cash Flow Activity

 

Net cash used in operating activities was $216,922, for the six months ended June 30, 2019, compared to $492,032 for the six months ended June 30, 2018. Our primary use of operating cash flows from operating activities was from net losses of $1,129,762 and $1,336,280 for the six months ended June 30, 2019 and 2018, respectively. Additional contributing factors to the change were from depreciation expense of $494, amortization expense of $347,935, non-cash interest expense of $222,736, stock based compensation of $1,025, loss on the extinguishment of debt of $262,536, a change in fair value of derivative liability of ($98,944) decrease in accounts receivable of $4,505, a decrease in inventory of $85, a decrease in deposits of $1,720, an increase in accounts payable and accrued expenses of $177,293, and a decrease in deferred revenue of $6,575.

 

Net cash flows from investing activities was $0 for the six months ended June 30, 2019 and 2018, respectively.

 

Net Cash provided by financing activities was $292,009 for the six months ended June 30, 2019 compared to $533,500 for the six months ended June 30, 2018. The cash flows provided by financing activities for the six months ended June 30, 2019 was primarily from $168,500 in proceeds from issuance of convertible debentures, repayment of convertible debentures of $257,693, $393,093 in proceeds from notes payable, proceeds from related party loans d $11,254 and repayment of related party loans of $23,145. The cash flows provided by financing activities for the six months ended June 30, 2018 was primarily from $30,000 in proceeds from the sale of common stock and $503,500 in proceeds from issuance of convertible debentures.

 

Plan of Operation and Funding

 

We expect that working capital requirements will continue to be funded through a combination of our existing funds and further issuances of securities. Our working capital requirements are expected to increase in line with the growth of our business. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund our operations over the next twelve months. We have no lines of credit or other bank financing arrangements. Generally, we have financed operations to date through the proceeds of the private placement of equity and debt instruments. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. We intend to finance these expenses with further issuances of securities, and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. Additional issuances of equity or convertible debt securities will result in dilution to our current shareholders. Further, such securities might have rights, preferences or privileges senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict our business operations.

 

  29  

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

 

Not Required.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q.

 

Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of June 30, 2019, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

.

Limitations on Effectiveness of Controls and Procedures

 

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

 

  30  

 

 

PART II — OTHER INFORMATION

 

Item 1.   Legal Proceedings.

 

From time-to-time, the Company is involved in various civil actions as part of its normal course of business. The Company is not a party to any litigation that is material to ongoing operations as defined in Item 103 of Regulation S-K as of the period ended June 30, 2019. 

 

Item 1A.   Risk Factors

 

Not required

 

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds.

 

None

 

Item 3.   Defaults upon Senior Securities.

 

None

 

Item 4.   Removed and Reserved.

 

Item 5.   Other Information.

 

None

 

Item 6.   Exhibits

 

Exhibit No.   Description
31.1   Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of the Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
32.2   Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Linkbase
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
101.DEF   XBRL Taxonomy Extension Definition Linkbase
101.LAB   XBRL Taxonomy Extension Label Linkbase
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

 

 

  31  

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 20, 2019.

 

       
  iGambit Inc.
 
  /s/ John Salerno  
  John Salerno 
  Chief Executive Officer 
 
   
  /s/ Elisa Luqman  
  Elisa Luqman 
  Chief Financial Officer and Principal Accounting Officer

 

  32  

 

 

Exhibit Index

 

Exhibit No.   Description
31.1   Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2   Certification of the Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1   Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
32.2   Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)
101.INS   XBRL Instance Document
101.SCH   XBRL Taxonomy Extension Schema Linkbase
101.CAL   XBRL Taxonomy Extension Calculation Linkbase
101.DEF   XBRL Taxonomy Extension Definition Linkbase
101.LAB   XBRL Taxonomy Extension Label Linkbase
101.PRE   XBRL Taxonomy Extension Presentation Linkbase

  33  

 

 

 

 

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