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EXCEL - IDEA: XBRL DOCUMENT - iGambit, Inc.Financial_Report.xls
EX-31.2 - CERTIFICATION IGAMBIT - iGambit, Inc.exhibit312.htm
EX-32.1 - CERTIFICATION IGAMBIT - iGambit, Inc.exhibit321.htm
EX-31.1 - CERTIFICATION IGAMBIT - iGambit, Inc.exhibit311.htm
EX-32.2 - CERTIFICATION IGAMBIT - iGambit, Inc.exhibit322.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended June 30, 2011

o

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

(I.R.S. Employer

incorporation or organization)

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 þ     No o

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 o     No o

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 o

Smaller reporting company

o

o

þ

(Do not  check if a smaller reporting  company)

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

Act). Yes o     No þ

The Registrant  had 23,954,056 shares of its common stock outstanding as of August  7, 2012.



iGambit Inc.

Form 10-Q

Part I — Financial Information

1

Item 1.

Financial Statements:

1

Consolidated Balance Sheets

1

Consolidated Statements of Income

2

Consolidated Statements of Cash Flows

3

Notes to Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

Part II — Other Information

21

Item 1.

Legal Proceedings

21

Item 1A.

Risk Factors

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

21

Item 3.

Defaults upon Senior Securities

21

Item 4.

Removed and Reserved

21

Item 5.

Other Information

21

Item 6.

Exhibits

21

EX-31.1

EX-31.2

EX-32.1

EX-32.2



PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

IGAMBIT INC.

CONSOLIDATED BALANCE SHEETS

JUNE 30,

DECEMBER 31,

2012

2011

(Unaudited)

ASSETS

Current  assets

Cash

$

653,462

$

224,800

Accounts receivable, net

161,350

269,353

Prepaid expenses

26,955

58,649

Notes receivable

--

434,512

Notes receivable - stockholder

17,000

17,000

Deferred  income taxes

368,658

184,185

Assets from discontinued operations

345,590

570,590

Total current  assets

1,573,015

1,759,089

Property and equipment, net

20,761

18,563

Other assets

Goodwill

111,026

111,026

Deposits

2,070

2,500

Total other assets

113,096

113,526

$

1,706,872

$

1,891,178

LIABILITIES AND STOCKHOLDERS' EQUITY

Current  liabilities

Accounts payable

$

380,350

$

263,195

Note payable - related party

19,765

25,390

Loan payable - stockholder

5,300

--

Total current  liabilities

405,415

288,585

Stockholders' equity

Common stock, $.001 par value; authorized - 75,000,000 shares;

issued and outstanding - 23,954,056 shares, respectively

23,954

23,954

Additional paid-in capital

2,403,090

2,403,090

Accumulated deficit

(1,125,587)

(824,451)

Total stockholders' equity

1,301,457

1,602,593

$

1,706,872

$

1,891,178

1



IGAMBIT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

UNAUDITED

THREE MONTHS

SIX MONTHS

ENDED

ENDED

JUNE 30,

JUNE 30,

2012

2011

2012

2011

Sales

$

429,168

$

477,441

$

909,516

$

889,344

Cost of sales

222,573

221,592

477,611

351,813

Gross profit

206,595

255,849

431,905

537,531

Operating expenses

General and administrative expenses

433,294

450,662

930,235

903,061

Loss from operations

(226,699)

(194,813)

(498,330)

(365,530)

Other income

Interest income

5,881

6,935

12,721

14,170

Loss from continuing operations before

income tax benefit

(220,818)

(187,878)

(485,609)

(351,360)

Income tax benefit

83,217

65,643

184,473

114,860

Loss from continuing operations

(137,601)

(122,235)

(301,136)

(236,500)

Discontinued operations

Income  from discontinued operations

Provision for income taxes

--

--

--

242,099

--

--

--

82,314

Income  from discontinued operations, net

of taxes

--

--

--

159,785

Net  loss

$

(137,601)

$

(122,235)

$

(301,136)

$

(76,715)

Basic and  fully diluted earnings (loss) per

common share:

Continuing operations

Discontinued operations, net of tax

$

(.01)

$

(.01)

$

(.01)

$

(.01)

Net  earnings per common share

$

.00

$

.00

$

.00

$

.01

$

(.01)

$

(.01)

$

(.01)

$

.00

Weighted average common shares

outstanding

23,954,056

23,954,056

23,954,056

23,954,056

2



IGAMBIT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,

(UNAUDITED)

2012

2011

CASH  FLOWS  FROM OPERATING ACTIVITIES:

Net  loss

$     (301,136)

$

(76,715)

Adjustments to reconcile net  loss to  net

cash provided (used) by operating activities

Income  from discontinued operations

--

(159,785)

Depreciation

4,249

2,894

Deferred  income taxes

(184,473)

--

Increase (Decrease)  in cash flows as a result of

changes in asset  and  liability account  balances:

Accounts receivable

108,003

(154,163)

Prepaid expenses

31,694

197,475

Accounts payable

117,155

(68,561)

Net  cash used by continuing operating activities

(224,508)

(258,855)

Net  cash provided (used) by discontinued operating activities

225,000

(82,314)

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

492

(341,169)

CASH  FLOWS  FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(1,147)

(18,751)

Decrease  in deposits

430

--

Proceeds from repayments of notes receivable

434,512

32,988

Net  cash provided by continuing  investing activities

433,795

14,237

Net  cash provided by discontinued  investing activities

--

330,000

NET CASH PROVIDED BY INVESTING ACTIVITIES

433,795

344,237

NET CASH USED BY FINANCING ACTIVITIES:

Repayment of loans from shareholders

(5,625)

--

NET INCREASE IN CASH

428,662

3,068

CASH  - BEGINNING OF PERIOD

224,800

465,549

CASH  - END OF PERIOD

$

653,462

$

468,617

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period  for:

Interest

$

1,368

$

1,372

Income taxes

4,125

13,940

Non-cash investing and  financing activities:

Property and equipment  purchased through loan from stockholder

$

5,300

$

--

3



IGAMBIT INC.

Notes to Consolidated Financial Statements

Note 1 - Organization and Basis of Presentation

The   consolidated   financial   statements   presented   are   those   of   iGambit   Inc.,   (the

“Company”)  and  its  wholly-owned  subsidiary,  Gotham  Innovation  Lab  Inc.  (“Gotham”).

The  Company  was  incorporated  under  the  laws  of  the  State  of  Delaware  on  April  13,

2000.  The  Company was  originally incorporated  as  Compusations  Inc.  under  the  laws  of

the   State   of   New   York   on   October   2,   1996.     The   Company  changed   its   name   to

BigVault.com  Inc.  upon  changing  its  state of  domicile  on  April  13,  2000.   The  Company

changed  its  name  again  to  bigVault  Storage  Technologies  Inc.  on  December  22,  2000

before  changing  to  iGambit  Inc.  on  July  18,  2006.   Gotham  was  incorporated  under  the

laws of the state of New York on September 23, 2009.

In  the  opinion  of  management,  the  accompanying  interim  financial  statements  reflect  all

adjustments  (consisting  of  normal  recurring  accruals)  necessary  to  present  fairly  the

financial  position  and  the  results  of  operations  and  cash  flows  for  the  interim  periods

presented.   The   results   of   operations   for   these   interim   periods   are   not   necessarily

indicative of the results to be expected for the year ending December 31, 2012.

Note 2 – Discontinued Operations

Sale of Business

On  February 28, 2006,  the Company entered into an asset purchase agreement with Digi-

Data  Corporation  (“Digi-Data”),  whereby  Digi-Data  acquired  the  Company’s  assets  and

its  online  digital  vaulting  business  operations  in  exchange  for  $1,500,000,  which  was

deposited  into  an  escrow  account  for  payment  of  the  Company’s  outstanding  liabilities.

In  addition,  as  part  of  the  sales  agreement,  the  Company  receives  payments  from  Digi-

Data  based  on  10%  of  the  net  vaulting  revenue  payable  quarterly  over  five  years.   The

Company is  also  entitled to  an additional 5%  of  the  increase in  net  vaulting revenue  over

the  prior  year’s  revenue.     These  adjustments  to  the  sales  price  are  included  in  the

discontinued operations line of the statements of operations.

The  assets  of  the  discontinued  operations  are  presented  in  the  balance  sheets  under  the

captions  “Assets  of  discontinued  operations”.   The  underlying  assets  of  the  discontinued

operations  consist  of  accounts  receivable  of  $345,590  and  $570,590  as  of  June  30,  2012

and December 31, 2011, respectively.

Accounts Receivable

Accounts  receivable  includes  50%  of  contingency  payments  earned  for  the  previous

quarter.   Reserve  for  bad  debts  of  $250,000  was  charged  to  operations  for  the  year  ended

December  31,  2010.    No  reserve  for  bad  debts  was  charged  to  operations  for  the  six

months ended June 30, 2012.

4



Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The  consolidated  financial  statements  include  the  accounts  of  the  Company  and  its

wholly-owned  subsidiary,  Gotham  Innovation  Lab,  Inc.  All  significant  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

reporting   amounts   of   assets   and   liabilities   and   disclosure   of   contingent   assets   and

liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

For  certain  of  the  Company’s  financial  instruments,  including  cash  and  cash  equivalents,

accounts  receivable,  accounts  payable,  and  amounts  due  to  related  parties,  the  carrying

amounts approximate fair value due to their short maturities.

Revenue Recognition

Contingency payment income was recognized quarterly from a percentage of Digi-Data’s

vaulting service revenue, and is included in discontinued operations.

The Company’s revenues from continuing operations consists of revenues primarily from

sales  of  products  and  services  rendered  to  real  estate  brokers.  Revenues  are  recognized

upon delivery of the products or services.

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  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

current  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.   There  was  no  bad

5



debt  expense  charged  to  operations  for  the  six  months  ended  June  30,  2012  and  2011,

respectively.

Prepaid Expenses

Prepaid expenses consist of the following:

June 30,      December 31,

2012

2011

Prepaid state income taxes

$   22,368

$   31,758

Prepaid insurance

4,587

26,891

$   26,955

$   58,649

Property and equipment and depreciation

Property  and  equipment  are  stated  at  cost.   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.   During  the  six  months  ended

June   30,   2012,   the   Company  purchased   furniture   and   computer   equipment   totaling

$6,447.  Computer  equipment  is  depreciated  over  5  years  and  furniture  and  fixtures  are

depreciated over 7 years.  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 expense  of  $4,249  and  $2,894  was  charged  to  operations  for  the  six months

ended June 30, 2012 and 2011, respectively.

Goodwill

Goodwill  represents  the  fair  market  value  of  the  common  shares  issued  and  common

stock  options  granted  by  the  Company  for  the  acquisition  of  Jekyll  by  the  Company’s

subsidiary,  Gotham.    In  accordance  with  ASC  Topic  No.  350  “Intangibles    Goodwill

and  Other”), the  goodwill  is  not  being  amortized,  but  instead  will  be  subject to  an annual

assessment  of  impairment  by applying a  fair-value  based  test,  and  will  be  reviewed more

frequently   if   current   events   and   circumstances   indicate   a   possible   impairment.   An

impairment loss is charged to expense in the period identified. If indicators of impairment

are  present  and  future  cash  flows  are  not  expected  to  be  sufficient  to  recover  the  asset’s

carrying  amount,  an  impairment  loss  is  charged  to  expense  in  the  period  identified.  A

lack   of   projected   future   operating   results   from   Gotham’s   operations   may   cause

impairment.   At  December  31,  2011,  the  Company  performed  an  impairment  study  and

determined  that  there  is  no  indication  that present  and  future  cash  flows  are  not  expected

to  be  sufficient  to  recover  the  carrying  amount  of  goodwill.    The  Company  has  not

performed an impairment study during the six months ended June 30, 2012.  Based on the

6



Company’s  evaluation  of  goodwill,  no  impairment  was  recorded  during  the  six  months

ended June 30, 2012.

Stock-Based Compensation

The  Company  accounts  for  its  stock-based  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  valuation  model  to  estimate  the  fair  value  of  its

stock  options  and  warrants.  The  Black-Scholes  option  valuation  model  requires  the input

of  highly  subjective  assumptions  including  the  expected  stock  price  volatility  of  the

Company’s common stock.  Changes in these subjective input assumptions can materially

affect the fair value estimate of the Company’s stock options and warrants.

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.

Note 4 – Notes Receivable

In  connection  with  a  letter  of  intent  the  Company  entered  into  with  Allied  Airbus,  Inc.

(“Allied”)  on  July  20,  2010  to  which  both  parties  were  unable  to  reach  a  mutually

acceptable  definitive  agreement,  the  Company  provided  various  loans  to  Allied  totaling

$434,512  at  December  31,  2011,  for  which  promissory  notes  were  issued.    The  notes,

which  became  past  due  during  the  period,  were  repaid  in  full  including  accrued  interest

on June 27, 2012.

Accrued interest on the notes was $12,044 and $20,358 for the six months ended June 30,

2012 and 2011, respectively.

Note 5 - Earnings Per Common Share

The  Company  calculates  net  earnings  (loss)  per  common  share  in  accordance  with  ASC

260   Earnings   Per   Share   (“ASC   260”).   Basic   and   diluted   net   earnings   (loss)   per

7



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 earnings (loss) per share for all periods as the result would be anti-dilutive.

Six Months Ended

June 30,

2012

2011

SStock options

2,768,900      2,468,900

Common stock warrants

275,000      3,085,000

Total shares excluded from calculation

3,043,900      5,553,900

Note 6 – Stock Based Compensation

Stock-based  compensation  expense  for  all  stock-based  award  programs,  including  grants

of  stock  options  and  warrants,  is  recorded  in  accordance  with  "Compensation—Stock

Compensation", Topic 718 of the FASB ASC. Stock-based compensation expense, which

is  calculated  net  of  estimated  forfeitures,  is  computed  using  the  grant  date  fair-value

method  on  a  straight-line  basis  over  the  requisite  service  period  for  all  stock  awards  that

vest  during  the  period.  The  grant  date  fair  value  for  stock  options  is  calculated  using  the

Black-Scholes  option  valuation  model.  Determining  the  fair  value  of  options  at  the  grant

date  requires  judgment,  including estimating the  expected  term  that  stock  options  will  be

outstanding prior  to  exercise,  the  associated  volatility and  the  expected  dividends.  Stock-

based  compensation  expense  is  reported  under  general  and  administrative  expenses  on

the accompanying consolidated statements of operations.

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.   Effective   January 1,   2006,   the  Company  recognized   compensation

expense ratably over the vesting period, net of estimated forfeitures. As of June 30, 2012,

there   was   no   unrecognized   compensation   cost   related   to   non-vested   share-based

compensation arrangements granted under the 2006 plan.

The 2006 Plan provides for the granting of options to purchase up to 10,000,000 shares of

common  stock.  8,822,000  options  have  been  issued  or  exercised  to  date.  There  are

8,617,520 options outstanding under the 2006 Plan.

8



Warrant activity during the six months ended June 30, 2012 follows:

Weighted

Average

Weighted

Remaining

Average

Average

Contractual

Grant-Date

Life

Warrants

Exercise Price

Fair Value

(Years)

Warrants outstanding

at January 1, 2012

275,000

$

0.94

$

0.10

No warrant activity

--

--

--

Warrants outstanding

at June 30, 2012

275,000

$

0.94

$

0.10

0.99

Stock Option Plan activity during the six months ended June 30, 2012 follows:

Weighted

Average

Weighted

Remaining

Average

Average

Contractual

Grant-Date

Life

Options

Exercise Price

Fair Value

(Years)

Options outstanding at

January 1, 2012

2,768,900

$

0.04

$

0.10

No option activity

--

--

--

Options outstanding at

June 30, 2012

2,768,900

$

0.04

$

0.10

4.27

The  fair  value  of  warrants and  options  granted  is  estimated  on  the  date  of  grant  based  on

the  weighted-average  assumptions  in  the  table  below.  The  assumption  for  the  expected

life  is  based  on  evaluations  of  historical  and  expected  exercise  behavior.  The  risk-free

interest  rate  is  based  on  the  U.S.  Treasury  rates  at  the  date  of  grant  with  maturity  dates

approximately  equal  to  the  expected  life  at  the  grant  date.  The  calculated  value  method

using  the  historical  volatility  of  the  Computer  Services  industry  is  used  as  the  basis  for

the volatility assumption.

Six months ended June 30,

__2012__

__2011__

Weighted average risk-free rate

0.64%

1.89%

Average expected life in years

5.0

4.6

Expected dividends

None

None

Volatility

44%

36%

Forfeiture rate

0%

0%

9



Note 7 - Income Taxes

The tax provision at June 30 consists of the following:

2012

2011

From operations:

Continuing operations:

Current tax expense (benefit):

Federal

$(148,524)

$ (114,860)

State and local

(35,949)

--

Total from continuing operations

(184,473)

(114,860)

Discontinued operations:

Current tax expense (benefit)

Federal

--

82,314

State and local

--

--

Total from discontinued operations

--

82,314

Total

$(184,473)

$  (32,546)

A reconciliation of the statutory federal income tax rate and the effective tax rate follows:

Six Months Ended

June 30,

2012

2011

Statutory tax rate

34.0%

34.0%

Effect of:

State income taxes, net of

federal income tax benefit

5.0%

0.0%

Tax effect of expenses that are not

deductible for income tax purposes

(1.0)%

(4.2)%

Effective tax rate

38.0%

29.8%

The  Company  recognizes  deferred  tax  assets  and  liabilities  based  on  the  future  tax

consequences of  events  that have  been included  in the  financial  statements  or  tax  returns.

The  differences  relate  primarily to  net  operating loss  carryovers.   Deferred  tax  assets  and

liabilities  are  calculated  based  on  the  difference  between  the  financial  reporting  and  tax

bases  of  assets  and  liabilities  using  the  currently  enacted  tax  rates  in  effect  during  the

years  in  which  the  differences  are  expected  to  reverse.   Deferred  taxes  are  classified  as

current  or  non-current,  depending  on  the  classification  of  the  assets  and  liabilities  to

which they relate.

The  Company’s  provision  for  income  taxes  differs  from  applying  the  statutory  U.S.

federal  income  tax  rate  to  income  before  income  taxes.   The  primary  differences  result

from  providing  for  state  income  taxes  and  from  deducting  certain  expenses  for  financial

statement purposes but not for federal income tax purposes.

10



In   accordance   with   ASC   Topic   No.   740,   Income   Taxes,   a   valuation   allowance   is

established  based  on  the  future  recoverability  of  deferred  tax  assets.   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.  Management has determined that no valuation allowance related to deferred

tax assets is necessary at June 30, 2012 and December 31, 2011.

Note 8 - Retirement Plan

Gotham  has  adopted  the  Gotham  Innovation  Lab,  Inc.  SIMPLE  IRA  Plan,  which  covers

substantially  all  employees.  Participating  employees  may  elect  to  contribute,  on  a  tax-

deferred  basis,  a  portion  of  their  compensation  in  accordance  with  Section  408  (a)  of  the

Internal Revenue Code. The Company matches up to 3% of employee contributions.  The

Company's  contributions  to  the  plan  for  the  six  months  ended  June  30,  2012  and  2011

were $5,476 and $5,541, respectively.

Note 9 – Significant Customers

Sales  of  Gotham  to  three  customers  amounted  to  approximately  65%  of  Gotham’s  total

sales for the six months ended June 30, 2012 at 38%, 14%, and 13%, respectively.

Note 10 – Risks and Uncertainties

Uninsured Cash Balances

Substantially all amounts of cash accounts held at financial institutions are insured by the

FDIC.

Note 11 - Related Party Transactions

Notes Receivable - Stockholders

The  Company  provided  loans  to  a  stockholder  totaling  $17,000  at  June  30,  2012  and

December 31, 2011.   The loans bear interest at a rate of 6% and are due on December 31,

2012.

Accrued  interest  on  the  note  was  $509  and  $506  for  the  six  months  ended  June  30,  2012

and 2011, respectively.

Note Payable – Related Party

Gotham  was  provided  loans  from  an  entity  that  is  controlled  by  the  officers  of  Gotham

totaling $19,765 and $25,390 at June 30, 2012 and December 31, 2011, respectively.  The

note bears interest at a rate of 5.5% and is due on December 31, 2012.

11



Interest  expense  of  $295  was  charged  to  operations  for  the  six  months  ended  June  30,

2012 and 2011, respectively.

Loan Payable - Stockholder

A  stockholder/officer  of  the  Company  paid  for  property  and  equipment  totaling  $5,300

on  behalf  of  the  Company.   The  loan  does  not  bear  interest  and  has  been  repaid  as  of  the

date of this report.

Note 12 - Lease Commitment

On  February  1,  2012,  iGambit  entered  into  a  5  year  lease  for  new  executive  office  space

in Smithtown, New York commencing on March 1, 2012.

Gotham  has  an  operating  lease  for  office  space  renewable  annually  on  October  16  at  a

monthly rent of $5,500.

Total   future   minimum   annual   lease   payments   under   the   lease   for   the   years   ending

December 31 are as follows:

2012

$   9,000

2013

18,360

2014

18,720

2015

19,080

2016

19,440

$ 84,600

Rent expense of $49,900 and $48,600 was charged to operations for the six months ended

June 30, 2012 and 2011, respectively.

Note 13 - Litigation

On  November  1,  2011,  the  Company  commenced  collection  proceedings  against  Allied

Airbus,  Inc.  (“Allied”)  for  nonpayment  of  various  promissory  notes  totaling  $434,512  at

December  31,  2011  in  connection  with  a  letter  of  intent  the  Company  entered  into  to

acquire  the  assets  and  business  of  Allied,  to  which  a  definitive  agreement  could  not  be

reached.  The claim against Allied included accrued interest at the rate of 6%.

As  a  result  of  a  settlement  reached  on  June  12,  2012,  the  Company  received  payment  of

the total balance, accrued interest and legal fees on June 27, 2012.

Note 14 – Recent Accounting Pronouncements

In  May 2011,  the  FASB  issued  Accounting  Standards  Update  No.  2011-04,  Amendments

to  Achieve  Common  Fair  Value  Measurement  and  Disclosure  Requirements  in  U.S.

GAAP  and  IFRSs  (“ASU  2011-04”),  which  is  intended  to  result  in  convergence  between

12



U.S.    GAAP    and    International    Financial    Reporting    Standards    requirements    for

measurement  of,  and  disclosures  about,  fair  value.  ASU  2011-04  clarifies  or  changes

certain   fair   value   measurement   principles   and   enhances   the   disclosure   requirements

particularly  for  Level  3  fair  value  measurements.  This  pronouncement  is  effective  for

reporting  periods  beginning  after  December  15,  2011,  with  early  adoption  prohibited  for

public  companies.  The  new  guidance  will  require  prospective  application.  The  Company

adopted  this  pronouncement  in  the  first  quarter  of  2012  and  does  not  expect  its  adoption

to have a material effect on its financial position or results of operations.

In  December  2010,  the  FASB  issued  authoritative  guidance  regarding  when  to  perform

step  2  of  the  goodwill  impairment  test  for  reporting  units  with  zero  or  negative  carrying

amounts.  The guidance modifies  Step  1  of  the  goodwill  impairment test  so  that  for those

reporting  units  with  zero  or  negative  carrying  amounts,  an  entity  is  required  to  perform

Step 2 of the goodwill impairment test if it is more likely than not based on an assessment

of  qualitative  indicators  that  a  goodwill  impairment  exists.  In  determining  whether  it  is

more  likely  than  not  that  goodwill  impairment  exists,  an  entity  should  consider  whether

there  are  any  adverse  qualitative  factors  indicating  that  an  impairment  may  exist.  This

guidance  is  effective  for  fiscal  years,  and  interim  periods  within  those  years,  beginning

after  December 15,  2010.  The  Company  adopted  this  standard  beginning  January  1,

2011,  and  the  adoption  did  not  have  a  material  impact  on  the  Company’s  consolidated

financial statements.

In  January 2010,  the  FASB  issued  ASU  No.  2010-6,  Improving  Disclosures  About  Fair

Value    Measurements”,    which    provides    amendments    to    ASC    820    Fair    Value

Measurements  and  Disclosures,  including  requiring  reporting  entities  to  make  more

robust  disclosures  about  (1)  the  different  classes  of  assets  and  liabilities  measured  at  fair

value,  (2)  the  valuation  techniques  and  inputs  used,  (3)  the  activity  in  Level  3  fair  value

measurements  including  information  on  purchases,  sales,  issuances,  and  settlements  on  a

gross  basis  and  (4)  the  transfers  between  Levels  1,  2,  and  3.  The  standard  is  effective  for

annual   reporting   periods   beginning   after   December   15,   2009,   except   for   Level   3

reconciliation   disclosures,   which   are   effective   for   annual   periods   beginning   after

December 15,  2010.  The  Company adopted  this  standard  beginning January 1,  2011,  and

the  adoption  did  not  have  a  material  impact  on  the  Company’s  consolidated  financial

statements.

Note 15 – Subsequent Events

In  accordance  with  FASB  ASC  855,  Subsequent  Events,  the  Company  evaluates  events

and  transactions  that  occur  after  the  balance  sheet  date  for  potential  recognition  in  the

consolidated   financial   statements.   The   effect   of   all   subsequent   events   that   provide

additional  evidence  of  conditions  that  existed  at  the  balance  sheet  date  are  recognized  in

the consolidated financial statements as of June 30, 2012. In preparing these  consolidated

financial  statements,  the  Company  evaluated  the  events  and  transactions  that  occurred

through  the  date  these  consolidated  financial  statements  were  issued.  There  were  no

material  subsequent  events  that  required  recognition  or  additional  disclosure  in  these

consolidated financial statements.

13



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.

CRITICAL ACCOUNTING ESTIMATES

Our management’s discussion and analysis of our financial condition and results of

operations are based on our financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States of America. The

preparation of financial statements may require us to make estimates and assumptions

that may affect the reported amounts of assets and liabilities and the related disclosures at

the date of the financial statements. We do not currently have any estimates or

assumptions where the nature of the estimates or assumptions is material due to the levels

of subjectivity and judgment necessary to account for highly uncertain matters or the

susceptibility of such matters to change or the impact of the estimates and assumptions on

financial condition or operating performance is material, except as described below.

Fair Value of Financial Instruments

For certain of the our financial instruments, including cash and cash equivalents,

accounts receivable, accounts payable, and amounts due to related parties, the carrying

amounts approximate fair value due to their short maturities.

14



Revenue Recognition

Contingency payment income is recognized quarterly from a percentage of Digi-

Data’s vaulting service revenue, and is included in discontinued operations. Our revenues

from continuing operations consist of revenues primarily from sales of products and

services rendered to real estate brokers. Revenues are recognized upon delivery of the

products or services.

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

We analyze the collectability of accounts receivable each accounting period and adjust

our allowance for doubtful accounts accordingly. A considerable amount of judgment is

required in assessing the realization of accounts receivables, including the current

creditworthiness of each customer, current and historical collection history and the

related aging of past due balances. We evaluate specific accounts when we become 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.

As  of  December  31,  2011,  accounts  receivable  included  50%  of  contingency  payments

earned  for  the  previous  quarter.  Reserve  for  bad  debts  of  $250,000  was  charged  to

operations  for  the  year  ended  December  31,  2010. No  reserve  for  bad  debts  was  charged

to operations for the six months ended June 30, 2012.

Property and equipment and depreciation

Property and equipment are stated at cost. 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. During the six

months ended June 30, 2012, the Company purchased computer equipment totaling

$6,447. Computer equipment is depreciated over 5 years and furniture and fixtures are

depreciated over 7 years.  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 expense of $4,249 and $2,894was charged to operations for the six

months ended June 30, 2012 and 2011, respectively.

Goodwill

Goodwill represents the fair market value of the common shares issued and common

stock options granted by the Company for the acquisition of Jekyll by the Company’s

subsidiary, Gotham. In accordance with ASC Topic No. 350 “Intangibles — Goodwill

and Other”, the goodwill is not being amortized, but instead will be subject to an annual

15



assessment of impairment by applying a fair-value based test, and will be reviewed more

frequently if current events and circumstances indicate a possible impairment. An

impairment loss is charged to expense in the period identified. If indicators of impairment

are present and future cash flows are not expected to be sufficient to recover the asset’s

carrying amount, an impairment loss is charged to expense in the period identified. A

lack of projected future operating results from Gotham’s operations may cause

impairment.

At  December  31,  2011,  the  Company  performed  an  impairment  study  and  determined

that  there  is  no  indication  that  present  and  future  cash  flows  are  not  expected  to  be

sufficient  to  recover  the  carrying  amount  of  goodwill.   The  Company  has  not  performed

an   impairment   study   during   the   six   months   ended   June   30,   2012.     Based   on   the

Company’s  evaluation  of  goodwill,  no  impairment  was  recorded  during  the  six  months

ended June 30, 2012.

Stock-Based Compensation

We  account for our stock-based 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.  We  use  the  Black-

Scholes  option  valuation  model  to  estimate  the  fair  value  of  our  stock  options  and

warrants.   The   Black-Scholes   option   valuation   model   requires   the   input   of   highly

subjective  assumptions  including  the  expected  stock  price  volatility  of  the  Company’s

common  stock.  Changes  in  these  subjective  input  assumptions  can  materially  affect  the

fair value estimate of our stock options and warrants.

Income Taxes

We  account  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.

We   apply   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.

16



MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Introduction

iGambit is a company focused on the technology markets. Our sole operating subsidiary,

Gotham Innovation Lab, Inc., is in the business of providing media technology services

to the real estate industry. During the year ended December 31, 2011 and during the six

months ended June 30, 2012 Gotham produced approximately $1,623,654 and $852,272

of revenue, respectively. We are focused on expanding the operations of Gotham by

marketing the company to existing and potential new clients. Currently Gotham has

several proposals outstanding to franchisees of one of its main customers, as well as other

potential new clients.  In addition to Gotham’s operations, during the year ended

December 31, 2011 and during the six months ended June 30, 2012 we earned $160,250

and $ 57,244 in technical consulting fees.   We also received Quarterly Revenue Share

Payments and Annual Increase Payments from Digi-Data Corporation, which were

payable pursuant to the terms of an agreement under which we sold certain assets to DDC

in 2006. We earned $247,860 of Contingency Payments from DDC in the year ended

December 31, 2011.  The agreement with DDC ended on February 28, 2011. We expect

the balance of the amounts due to be paid during 2012.   We are also focused on

acquiring or partnering with additional technology companies.

Assets. At June 30, 2012, we had $1,706,872 in total assets, compared to $1,891,178 at

December 31, 2011. The decrease in total assets was primarily due to the decrease in cash

as a result of the receipt of decreased contingency payments from DDC.

Liabilities. At  June 30, 2012, our total liabilities were $405,415 compared to $288,585

at December 31, 2011. Liabilities consist of accounts payable and a note payable to a

related party. We do not have any long term liabilities.  The increase in liabilities was due

to an increase in accounts payable and a loan payable to stockholder.

Stockholders’  Equity.  Our  stockholders’  equity  decreased  to  $1,301,457  at  June  30,

2012  from  $1,602,593  at  December  31,  2011.    This  decrease  was  primarily  due  to  an

increase in accumulated deficit from $(824,451) at December 31, 2011 to $(1,125,587)  at

June 30, 2012, resulting from the end of the contingency payments from Digi-Data Corp.

Three  Months  Ended  June  30,  2012  as  Compared  to  Three  Months  Ended  June  30,

2011

Revenues  and  Net  Income.  We  had  $429,168  of  revenue  during  the  three  months

ended June 30, 2012, as compared to $477,441 of revenue during the three months ended

June 30,  2011.   The  decrease  was  due  to a decrease in  revenue  generated  by our  acquired

subsidiary  Gotham   resulting  from   a   transition   of   revenue   focus   away  from   custom

development  and  towards  online  real  estate  media  In  addition,  we  had  a  net  loss  of

(137,601) for the three months ended June 30, 2012, compared to a net loss of ($122,235)

for the three months ended June 30, 2011.

17



General   and   Administrative   Expenses.   General   and   Administrative   Expenses

decreased  to  $433,294  for  the  three  months  ended  June  30,  2012  from  $450,662  for  the

three months ended June 30, 2011. For the three months ended June 30, 2012 our General

and Administrative Expenses consisted of corporate administrative expenses of $102,331,

rent  expense  of  $26,500,  employee  benefits,  consisting  primarily  of  health  insurance

expense  of  $19,871,  and  payroll  expenses  of  $284,592.  For  the  three  months  ended  June

30,  2011  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses  of  $122,118,  legal  and  accounting  fees  of  $29,829  and  payroll  expenses  of

$298,715.  The  decreases  from  the  three months  ended  June  30,  2011  to  the  three months

ended  June  30,  2012  relate  primarily  to:  (i) the  recoupment  of  legal  fees  as  part  of  the

Allied   lawsuits   settlement,   (ii)   a   decrease   in   professional   costs   associated   with   the

preparation and  filing of  a registration statement with the SEC; and  (iii)  leveling in costs

associated   with   the   operation   of   our   Gotham   subsidiary.   Costs   associated   with   the

operation  of  our  Gotham  subsidiary  should  remain  level  going  forward,  subject  to  a

material expansion in the business operations of  Gotham which would likely increase our

corporate   administrative   expenses.   Further,   we   anticipated   an   increase   in   legal   and

accounting  fees  in  2012  as  a  result  of  having  become  a  reporting  company  under  the

Securities Exchange Act of 1934.

Six Months Ended June 30, 2012 as Compared to Six Months Ended June 30, 2011

Revenues and Net Income. We had $909,516 of revenue during the six months ended

June 30, 2012, as compared to $889,344 of  revenue during the six  months ended June 30,

2011.   The  increase  in  revenue  was  due  to  revenue  generated  by our  acquired  subsidiary

Gotham.    In  addition,  we  had  no  income  from  discontinued  operations      for  the  six

months  ended  June  30,  2012,  compared  to  $242,099  for  the  six  months  ended  June  30,

2011, and net loss of $(301,136) for the six months ended June 30, 2012, compared to net

loss of $(76,715) for the six months ended June 30, 2011.

General   and   Administrative   Expenses.   General   and   Administrative   Expenses

increased  to  $930,235  for  the  six  months  ended  June  30,  2012  from  $903,061  for  the  six

months  ended  June  30,  2011.  For  the  six  months  ended  June  30,  2012  our  General  and

Administrative  Expenses  consisted  of  corporate  administrative  expenses  of  $198,284,

rent  expense  of  $49,900,  employee  benefits,  consisting  primarily  of  health  insurance

expense of $41,881, legal and accounting fees of $31,902, business insurance expenses of

$23,898,  and  payroll  expenses  of  $584,370.   For  the  six  months  ended  June  30,  2011  our

General  and  Administrative  Expenses  consisted  of  corporate  administrative  expenses  of

$231,439,   legal  and   accounting  fees   of  $92,651,   initial   public  offering  expenses   of

$15,000,  and  payroll  expenses  of  $563,971.

The  increases  from  the  six  months  ended

June  30,  2011  to  the  six  months  ended  June  30,  2012  relate  primarily  to  an  increase  in

insurance  expenses,  in  particular  health  care  premium  increases  and  D&O  insurance.

(Costs  associated  with  our  officers’  salaries  and  the  operation  of  our  Gotham  subsidiary

should  remain  level  going  forward,  subject  to  a  material  expansion  in  the  business

operations of Gotham which would likely increase our corporate administrative expenses.

18



Liquidity and Capital Resources

As  reflected  in  the  accompanying  consolidated  financial  statements,  at  June  30,

2012,  we  had  $653,462  of  cash  and  stockholders’  equity  of  $1,301,457  compared  to

$224,800  of  cash  and  $1,602,593  of  stockholders’  equity at  December  31,  2011.  At  June

30,  2012  we  had  $1,706,872  in  total  assets,  compared  to  $1,891,178  at  December 31,

2011.

Our primary capital requirements in 2012 are likely to arise from the expansion of

our  Gotham  operations,  and,  in  the  event  we  effectuate  an  acquisition,  from:  (i) the

amount  of  the  purchase  price  payable  in  cash  at  closing,  if  any;  (ii) professional  fees

associated  with  the  negotiation,  structuring,  and  closing  of  the  transaction;  and  (iii) post

closing  costs.  It  is  not  possible  to  quantify  those  costs  at  this  point  in  time,  in  that  they

depend on Gotham’s business opportunities, the state of the overall economy, the relative

size  of  any  target  company  we  identify  and  the  complexity  of  the  related  acquisition

transaction(s).  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  Gotham’s  sales

volume  and  to  acquire  companies,  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.

Cash Flow Activity

Net cash provided by operating activities was $492 for the six months ending

June 30, 2012, compared to net cash used by operating activities of $341,169 for the six

months ending June 30, 2011. Our primary source of operating cash flows from

continued operating activities for the six months ending June 30, 2012 was from our

Gotham subsidiary’s revenues of $852,273.  Additional contributing factors to the change

were a decrease in accounts receivable of $108,003, prepaid expenses of $31,694, and an

increase in accounts payable of $117,115.  Net cash provided by discontinued operating

activities was $225,000 for the six months ending June 30, 2012 and cash used by

discontinued operating activities was $82,314 for the six months ending June 30, 2011.

The $225,000 provided from discontinued operating activities for the six months ending

June 30, 2012 was a decrease in the DDC accounts receivable. For the six months ending

June 30, 2011, the primary source of cash flows from operating activities was revenue of

$889,344.  For the six months ending June 30, 2011 we also had income from

discontinued operations of $163,588 (net of taxes of $82,314).  The agreement with DDC

ended on February 28, 2011.    Revenue earned from DDC totaled $242,099 during the

six months ending June 30, 2011   Of the $242,099 revenue earned from DDC in the six

months ending June 30, 2011 we received $330,000 in cash payments from DDC all of

which was for the second and third quarter 2010 Contingency Payments.  Additionally

19



$92,099 was offset by an increase in the accounts receivable included in Assets from

Discontinued Operations.

Cash  provided  by  investing  activities  was  $433,795  and  $344,237  respectively,  for

the  first  six  months  ending  June  30,  2012  and  June  30,  2011.  For  the  six  month  ending

June  30,  2012 the  primary source  of  cash provided  by continuing investing activities  was

from  the  repayment  of  notes  receivable  due  from  Allied  Airbus  Inc.    For  the  six  months

ending  June  30,  2011  the  entire  source  of  cash  provided  by  discontinued  investing

activities   is   the   DDC   contingency   payments   and   the   cash   provided   by   continuing

investing  activities  was  from  the  repayment  of  notes  receivable  due  from  Allied  Airbus

Inc.

Cash  used  by  financing  activities  was  $(5,625)  and  $0  for  the  six  months  ending

June   30,   2012  and  June   30,   2011  respectively.    The   cash   flows   used   by  financing

activities in the first six months of fiscal year 2012 were from repayment of loans payable

to a related party from our subsidiary Gotham.

Supplemental Cash Flow Activity

In the six months ending June 30, 2012 the company paid income taxes of $4,125

compared to $13,940 for the six months ending June 30, 2011. The decrease in taxes was

due to tax overpayments in 2011. The Company also paid interest of $1,368 during the

first six months of fiscal year 2012 compared to $1,372 during the first six months of

fiscal year 2011.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

Item 4. Controls and Procedures.

Evaluation  of  disclosure  controls  and  procedures.  Under  the  supervision  and  with  the

participation   of   the   Company’s   management,   including   the   Company’s   principal

executive officer and principal financial officer, the Company conducted an evaluation of

the  effectiveness  of  its  disclosure  controls  and  procedures,  as  such  term  is  defined  in

Rules 13a-15(e)  and  15d-15(e)  under  the  Securities  Exchange  Act  of  1934,  as  amended

(the  “Exchange  Act”),  as  of  June  30,  2011.  Based  on  their  evaluation,  our  principal

executive  officer  and  principal  financial  officer  concluded  that  our  disclosure  controls

and procedures were effective.

Changes   in   internal   controls.   There  were   no   changes   in   our   internal  controls   over

financial  reporting during  the  second  fiscal  quarter  of  2011  that  have  materially affected,

or are reasonably likely to materially affect, our internal controls over financial reporting.

20



PART II — OTHER INFORMATION

Item 1.   Legal Proceedings.

On November 1, 2011, we filed a lawsuit in the Circuit Court in and for Broward County,

Florida, asserting claims against Allied Airbus, Inc. (as "Borrower") and Michael Polo,

Kishore Taneja and Alberto Gonzalez (collectively, as "Guarantors") for monetary

damages arising from the breach of multiple promissory notes owed by Borrower to us

and to enforce guaranty agreements executed by Guarantors to secure payment of the

promissory notes.    On or about January 20, 2012, we filed an Amended Complaint after

additional promissory notes owed by Borrower became due and following Borrower's

and Guarantors' default on payment of same.  In response to the lawsuit, Borrower and

Guarantors Polo and Taneja, filed a counterclaim that was subsequently amended on or

about February 9, 2012.  The Amended Counterclaim asserts claims against us for

alleged fraud and for alleged violations of Florida's deceptive and unfair trade practices

act for, amongst other things, the alleged failure to loan Allied $1,500,000.00 following

an alleged prior commitment to do so.

On  June  12,  2012,  the  parties  settled  the  lawsuit  and  entered  into  a  settlement  agreement

pursuant  to  which  the  Company  was  paid,  on  June  27,  2012,  all  principal  and  interest

owed under the notes, as well as all legal fees incurred.

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

21



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 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.)

22



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

8, 2012.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer

23



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.)

24