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

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 March 31, 2013

  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 þ     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     25,044,056     shares     of     its     common     stock     outstanding     as     of     July 23,     2013.



iGambit Inc.

Form 10-Q

Page

No.

Part I — Financial Information

Item 1.

Financial Statements:

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Income

2

Condensed Consolidated Statements of Cash Flows

3

Notes to Condensed Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

15

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

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3.

Defaults upon Senior Securities

22

Item 4.

Removed and Reserved

22

Item 5.

Other Information

22

Item 6.

Exhibits

22

EX-31.1

EX-31.2

EX-32.1

EX-32.2

i



PART I — FINANCIAL INFORMATION

IGAMBIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31,

2013

DECEMBER 31,

(Unaudited)

2012

ASSETS

Current assets

Cash

$

49,261

$

104,721

Accounts receivable, net

157,045

158,441

Prepaid expenses

118,494

133,077

Assets from discontinued operations, net

320,590

320,590

Total current assets

645,390

716,829

Property and equipment, net

16,332

17,870

Other assets

Deposits

8,370

11,220

$

670,092

$

745,919

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

430,745

$

433,958

Deferred income

130,000

--

Note payable - related party

6,263

6,263

Total current liabilities

567,008

440,221

Stockholders' equity

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

issued and outstanding - 25,044,056 shares, respectively

25,044

25,044

Additional paid-in capital

2,729,000

2,729,000

Accumulated deficit

(2,650,960)

(2,448,346)

Total stockholders' equity

103,084

305,698

$

670,092

$

745,919

1



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

2013

2012

Sales

$

362,821

$

480,348

Cost of sales

115,770

255,038

Gross profit

247,051

225,310

Operating expenses

General and administrative expenses

449,665

496,941

Loss from operations

(202,614)

(271,631)

Other income

Interest income

--

6,840

Loss from operations before income tax

(202,614)

(264,791)

Income tax (benefit)

--

(101,256)

Net loss

$

(202,614)

$

(163,535)

Basic and fully diluted loss per common share

$

(.01)

$

(.01)

Weighted average common shares outstanding

25,044,056

23,954,056

2



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(202,614)

$

(163,535)

Adjustments to reconcile net loss to net

cash used in operating activities

Depreciation

1,538

2,124

Deferred income taxes

--

(101,256)

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

1,396

57,693

Prepaid expenses

14,583

15,014

Accounts payable

(3,213)

35,164

Deferred income

130,000

--

Net cash used in continuing operating activities

(58,310)

(154,796)

Net cash provided by discontinued operating activities

--

150,000

NET CASH USED IN OPERATING ACTIVITIES

(58,310)

(4,796)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

--

(1,147)

Decrease in deposits

2,850

430

NET CASH PROVIDED BY (USED IN) INVESTING

ACTIVITIES

2,850

(717)

NET CASH USED IN FINANCING ACTIVITIES:

Repayment of loans payable to related party

--

(3,125)

NET DECREASE IN CASH

(55,460)

(8,638)

CASH - BEGINNING OF PERIOD

104,721

224,800

CASH - END OF PERIOD

$

49,261

$

216,162

SUPPLEMENTAL DISCLOSURES OF CASH FLOW

INFORMATION:

Cash paid during the period for:

Interest

$

638

$

924

Income taxes

--

4,125

Non-cash investing and financing activities:

Property and equipment purchased through loan from stockholder

$

--

$

5,300

3



IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2013 and 2012

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  21,  2000

before  changing  to  iGambit  Inc.  on  April  5,  2006.   Gotham  was  incorporated  under  the

laws  of  the  state  of  New  York  on  September  23,  2009.    The  Company  is  a  holding

company  which  seeks  out  acquisitions  of  operating  companies  in  technology  markets.

Gotham  is  in  the  business  of  providing  media  technology  services  to  real  estate  agents

and brokers in the New York metropolitan area.

Interim Financial Statements

The  following (a) condensed  consolidated  balance  sheet  as  of December 31, 2012,  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 three  months ended  March  31, 2013 are not

necessarily  indicative  of  results  that  may  be  expected  for  the  year  ending  December  31,

2013.  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,  2012  included  in  the  Company’s  Annual  Report  on  Form  10-K,  filed  with

the Securities and Exchange Commission (“SEC”) on June 20, 2013.

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  received  payments  from  Digi-

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

Company  was  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

4



discontinued  operations  line  of the  statements  of operations  for the  year ended  December

31, 2011, the last year of payments.

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

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

discontinued  operations  consist  of  accounts  receivable of  $320,590  as  of  March 31,  2013

and December 31, 2012, respectively.

Accounts Receivable

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

quarters and are stated net of an allowance for bad debts of $250,000.

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  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.

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.   Additionally,  there  are  no

assets or liabilities for which fair value is remeasured on a recurring basis.

Revenue Recognition

The  Company’s  revenues  are  derived  primarily  from  the  sale  of  products  and  services

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

services.

Advertising Costs

The  Company  expenses  advertising  costs  as  incurred.    Advertising  costs  for  the  three

months ended March 31, 2013 and 2012 were $1,989 and $6,889, respectively.

5



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.   There  was  no  bad  debt  expense  charged  to  operations  for  the  three

months ended March 31, 2013 and 2012, respectively.

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.     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  $1,538  and  $2,124  was  charged  to  operations  for  the  three

months ended March 31, 2013 and 2012, respectively.

Goodwill

Goodwill  represents  the  excess  of  the  aggregate  purchase  price  over  the  fair  value  of  the

net assets acquired in a  business combination, specifically the acquisition of Jekyll  by the

Company’s  subsidiary,  Gotham.   In  accordance  with  ASC  Topic  No.  350  “Intangibles  

Goodwill  and  Other”,  goodwill  is  not  amortized,  but  instead  is  subject  to  an  annual

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

frequently   if   current   events   and   circumstances   indicate   a   possible   impairment.   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,  2012,  the  Company

performed  its annual impairment study and  determined that  present and  future cash flows

6



were  not  expected  to  be  sufficient  to  recover  the  carrying  amount  of  goodwill,  and  the

goodwill was written off.

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.

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

The  Company has  reviewed  recently issued,  but  not  yet  adopted,  accounting standards  in

order  to  determine  their  effects,  if  any,  on  its  results  of  operations,  financial  position  or

cash   flows.   Based   on   that   review,   the   Company   believes   that   none   of   these

pronouncements will have a significant effect on its consolidated financial statements.

Note 4 – Deferred Income

As   of   March   31,   2013,   the   Company  received   $130,000   from   IGX   Global   Inc.   in

connection with a rescission agreement dated April 8, 2013, as described in Note 12.

7



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

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.

Three Months Ended

March 31,

2013

2012

         Stock options

1,268,900      2,768,900

Common stock warrants

275,000

275,000

Basic Total shares excluded from calculation

1,543,900      3,043,900

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

are expected to vest. The  grant date fair value for stock options and warrants is calculated

using  the  Black-Scholes  option  pricing  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  of  the  Company’s

common    stock,    expected    dividends,    and    a    risk-free    interest    rate.    Stock-based

compensation  expense  is   reported   under   general  and  administrative   expenses   in  the

accompanying consolidated statements of operations.

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.    Effective    January 1,    2006,    the    Company    began    recognizing

compensation  expense  ratably  over  the  vesting  period,  net  of  estimated  forfeitures.  The

Plan  expired  on  December  31,  2009,  therefore  as  of  March  31,  2013,  there  was  no

unrecognized   compensation   cost   related   to   non-vested   share-based   compensation

arrangements granted under the 2006 plan.

8



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  to  date.  There  were  no  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.

Stock option activity during the three months ended March 31, 2013 and 2012 follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2011

2,768,900

$

0.04

$

0.10

6.85

No option activity

--

--

--

Options outstanding at

March 31, 2012

2,768,900

$

0.04

$

0.10

6.60

Options outstanding at

December 31, 2012

1,268,900

$

0.08

$

0.10

6.16

No option activity

--

--

--

Options outstanding at

March 31, 2013

1,268,900

$

0.08

$

0.10

5.91

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  expire  on  June 1,  2019.  The  issuance  of  the

compensatory warrants was not submitted to our shareholders for their approval.

9



Warrant activity during the three months ended March 31, 2013 and 2012 follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Warrants

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Warrants outstanding

at December 31, 2011

275,000

$

0.94

$

0.10

1.06

No warrant activity

--

--

--

Warrants outstanding

at March 31, 2012

275,000

$

0.94

$

0.10

1.02

Warrants outstanding

at December 31, 2012

275,000

$

0.94

$

0.10

.92

No warrant activity

--

--

--

Warrants outstanding

at March 31, 2013

275,000

$

0.94

$

0.10

.88

Options outstanding at March 31, 2013 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

50,000

50,000

$0.01

May 1, 2016

May 1, 2006

46.900

46,900

$0.01

May 1, 2016

July 21, 2010

113,000

113,000

$0.10

July 21, 2020

July 21, 2010

59,000

59,000

$0.10

July 21, 2020

July 21, 2010

500,000

500,000

$0.10

July 21, 2020

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

Total

1,268,900

1,268,900

Warrants outstanding at March 31, 2013 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

April 1, 2000

25,000

25,000

$3.00

2 years after IPO

June 1, 2009

100,000

100,000

$0.50

June 1, 2019

June 1, 2009

50,000

50,000

$0.65

June 1, 2019

June 1, 2009

50,000

50,000

$0.85

June 1, 2019

June 1, 2009

50,000

50,000

$1.15

June 1, 2019

Total

275,000

275,000

10



Note 7 - Income Taxes

Quarter Ended March 31,

2013

2012

Effective tax rate

0.0 %

30.3 %

The  decrease  in  the  effective  tax  rate  for  the  quarter  ended  March  31,  2013  is  due  to  the

establishment  of a  full valuation allowance against  the Company’s  net  deferred tax  assets

which was initially recorded in the fourth quarter of 2012. 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.

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 three months ended March 31, 2013 and 2012

were $6,522 and $2,702, respectively.

Note 9 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham  had  sales  to  two  customers  which  accounted  for  approximately  44%  and  17%,

respectively of Gotham’s total sales for the three months ended March 31, 2013.  The two

customers  accounted  for  approximately 41%  and  3%,  respectively of  accounts  receivable

at March 31, 2013.

Gotham  had  sales  to  three  customers  which  accounted  for  approximately  36%,  17%  and

12%,  respectively  of  Gotham’s  total  sales  for  the  three  months  ended  March  31,  2012.

Two  of  the  three  customers  accounted  for  approximately  44%  of  accounts  receivable  at

March 31, 2012.

Cash

Cash  is  maintained  at  a  major  financial  institution  and,  at  times,  balances  may  exceed

federally  insured  limits.  The  Company  has  never  experienced  any  losses  related  to  these

balances.  All  of  the  Company’s  non-interest  bearing  cash  balances  were  fully  insured  at

11



March  31,  2013.  As  of  December  31,  2012,  the  Company  had  no  amounts  of  cash  or  cash

equivalents  in  financial  institutions  in  excess  of  amounts  insured  by  agencies  of  the  U.S.

Government,  the  limit  of  which  is  $250,000.    The  Company  did  not  have  any  interest-

bearing accounts at March 31, 2013 and December 31, 2012, respectively.

Note 10 - Related Party Transactions

Note Payable – Related Party

Gotham  was  provided  a  loan  from  an  entity  that  is  controlled  by  the  officers  of  Gotham,

such  amounts  outstanding  were  $6,263  at  March  31,  2013  and  December  31,  2012,

respectively.  The note bears interest at a rate of 5.5% and is due on December 31, 2013.

Note 11 – Commitments and Contingencies

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  a  month  to  month  license  agreement  for  office  space  that  commenced  on

August  2,  2012  at  a  monthly  license  fee  of  $2,400.    The  license  agreement  may  be

terminated upon 30 days notice.

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

December 31 are as follows:

2013

$ 13,830

2014

18,720

2015

19,080

2016

19,440

2017

3,240

$ 74,310

Rent  expense  of  $20,570  and  $23,400  was  charged  to  operations  for  the  three  months

ended March 31, 2013 and 2012, respectively.

The  Company  provides  accruals  for  costs  associated  with  the  estimated  resolution  of

contingencies  at  the  earliest  date  at  which  it  is  deemed  probable  that  a  liability  has  been

incurred and the amount of such liability can be reasonably estimated.

Litigation

Digi-Data Corporation

In  connection  with  the  asset  purchase  agreement  discussed  in  Note  2,  the  Company  filed

a  complaint  against  Digi-Data  on  October  1,  2012  for  unpaid  contingency  payments

12



owed to the Company totaling $570,590 at March 31, 2013, exclusive of an allowance for

bad  debts  of  $250,000.    On  or  about  December  3,  2012,  Digi-Data  filed  its  Answer,

Affirmative  Defenses  and  Counterclaim  against  the  Company.  The  Counterclaim  seeks

damages  against  the  Company  for  breach  of  the  Agreement  for  the  alleged  failure  to

indemnify   Digi-Data   for   expenses   related   to   pending   litigation   between   Verizon

Communications,   Inc.   (one   of   Digi-Data's   customers)   and   an   unrelated   third   party,

Titanide   Ventures,   LLC,   concerning   alleged   patent   violations   (hereinafter   "Verizon

Patent  Litigation").    Upon  information  and  belief,  the  Verizon  Patent  Litigation  is  a

"patent  troll"  whereby  Titanide  seeks  to  extract  settlement  funds  from  alleged  patent

infringers   without   seeking   actual   adjudication   of   its   purported   patent   rights.   The

Company  has  advised  Digi-Data  of  what  it  believes  is  "prior  act"  related  to  the  subject

intellectual property that  is at-issue in the Verizon Patent  Litigation, a possible defense to

the  claims  by Titanide.   A pre-trial  order  was  issued  by the  Court  with  detailed  deadlines

regarding  among  other  items,  discovery  cut-off  and  status  report  deadline  date  of  April

29,   2013   and   dispositive   motions   deadline   date   of   May   28,   2013.   The   Company

propounded its initial discovery upon Digi-Data, responses to which were due on or about

March  8,  2013.  On  April  4,  2013,  Digi-Data  provided  discovery  to  the  Company.  No

depositions  have  been  scheduled  as  of  the  date  of  this  report,  nor  has  the  Company

received  any  information  from  Digi-data  regarding  any  specific  quantified  “damages”

directly  resulting  from  this  Order  or  the  settlement  agreement  between  Verizon  and  the

Plaintiff.   On  April  4,  2013,  an  Order  of  Dismissal  in  the  Verizon  Patent  Litigation  was

filed.  The  Dismissal  is  with prejudice  with each  party to bear its  own  costs and fees.   On

May 24, 2013, the Company filed a Motion for Summary Judgment with the Court asking

the  Court  to  move  in  its  favor  against  DDC  for  the  entire  outstanding  balance  due  along

with  attorney’s  fees  and  post  and  pre-judgment  interest  as  applicable  under  Maryland

Law.

Allied Airbus, Inc.

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% per annum.

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.

Financial Advisor Contract

Brooks, Houghton & Company, Inc. (BHC)

The  Company  had  entered  into  a  contract  with  BHC  in  which  BHC  would  provide

financial   advisory   services   in   connection   with   the   Company’s   proposed   business

combinations and related fund raising transactions. As part of that agreement BHC would

be  entitled  to  a  “Business  Combination  Fee”  equal  to  three  percent  of  the  amount  of  the

13



company’s  total  proceeds    and  other  consideration  paid  or  to  be  paid  for  the  assets

acquired,  inclusive  of  equity  or  any  debt  issued;  however  the  fee  was  to  be  no  less  than

$300,000.  As  a  result  of  the  IGX  transaction,  as  described  in  Note  12,  BHC  initially  felt

entitled  to  $300,000.  The  Company  has  taken  a  position  that  since  the  transaction  has

been  rescinded,  that  the  fee  is  has  not  been  earned  and  thus  not  to  be  paid.  While  the

ultimate   outcome   of   this   matter   is   not   presently   determinable,   it   is   the   opinion   of

management  that  the resolution of any outstanding claim will not have  a  material adverse

effect on the financial position or results of operations of the Company.

Note 12 – Subsequent Events

Rescission of Purchase Agreement for Acquisition of IGX Global Inc. and IGX Global UK

Limited

On  April  8,  2013,   the  Company  and  its  wholly  owned  subsidiary,  IGXGLOBAL,  CORP.

entered  into,  and  became  obligated  under,  a  transaction  to  rescind  the  Company’s  purchase

agreement   dated   December   28,    2012   (the   “Purchase   Agreement”)   with

IGX   Global

Inc.(“IGXUS”),  IGX  Global  UK  Limited  (“IGXUK”)  and  Tomas  Duffy  (“DUFFY”)  the  sole

shareholder of both IGXUK and IGXUS.

Under  the  Purchase  Agreement,  the  Company  intended  to  purchase,  as  December  31,

2012, substantially all of the assets of IGXUS and all of the issued and outstanding shares

of  IGXUK  and  thereby  the  acquired  business  operated  by  IGXUS  and  IGXUK  (the

“Acquired  Business”).   The  original  agreement  called  for  a  $500,000  payment  at  closing,

a  $1,000,000  Promissory  Note,  assumption  of  certain  liabilities  of  the  IGXUS  up  to

$2,500,000 and 3.75 million shares of iGambit stock to be earned over a three year period

based upon certain revenue and earnings targets. The Company had arranged financing at

the  original  effective  date  of  the  purchase  to  pay  the  $500,000  payment  and  payoff

certain liabilities of IGXUS.

On  April  8,  2013,  under  the  terms  of  a  Rescission  Agreement,  the  Company,  IGXUS,

IGXUK and Duffy (IGX), agreed to unwind the Purchase Agreement in its entirety and to

fully  restore  each  to  the  positions  they  were  respectively  prior  to  entering  into  the

Purchase  Agreement.  This  included  IGX  obtaining  financing  to  payoff  the  entire  balance

of  the  financing  the  Company  had  obtained  to  fund  the  upfront  payment  and  certain

liabilities at the original  closing date;  IGX also assumed and paid certain expenses related

to  the  purchase.  Also  as  consideration  for  iGambit’s  expenses  and  inconvenience,  the

Company  received  $130,000  prior  to  the  effective  date  of  the  rescission  from  IGX  (see

Note 4), and upon the effective date of the rescission, an additional payment of $275,000,

and  will  receive  an  additional  $350,000  payable  in  equal  monthly  installments  over  18

months.   Based  upon  timing  and  terms  of  the  Rescission  Agreement,  the  Company  has

not recognized the  effects of the purchase of IGX on the financial statements presented as

of   and   for   the   three   months   ending   March   31,   2013.    In   addition,   the   settlement

consideration  received  under  the  rescission  agreement  was  recognized  on  its  effective

date of April 8, 2013.

14



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.

15



Revenue Recognition

Our  revenues  from  continuing  operations  consist  of  revenues  derived  primarily

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

recognized upon delivery of the products or services.

Contingency  payment  income  was  recognized  quarterly  from  a  percentage  of

Digi-Data’s vaulting service revenue until February 28, 2011.

Deferred Income

As  of  March  31,  2013,  the  Company  received  $130,000  from  IGX  Global  Inc.  in

connection  with  a  rescission  agreement  dated  April  8,  2013,  as  described  in  Note  12  of

the Notes to Condensed Consolidated Financial Statements.

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  from  continuing  operations

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    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.  There

was  no  bad  debt  expense  charged  to  operations  for  three  months  ended  March  31,  2013

and 2012, respectively.

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.    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.

16



Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair  value

of the  net  assets  acquired  in  a  business  combination,  specifically 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  amortized, but instead is subject

to   an   annual   assessment   of   impairment   by  applying   a  fair-value  based   test,   and   is

reviewed   more   frequently   if   current   events   and   circumstances   indicate   a   possible

impairment.    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,  2012,  the  Company

performed  its annual impairment study and  determined that  present and  future cash flows

were  not  expected  to  be  sufficient  to  recover  the  carrying  amount  of  goodwill,  and  the

goodwill was written off.

Stock-Based Compensation

We    account    for    our    stock-based    awards    granted    under    our    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.

17



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.   We   are   focused   on   expanding   the

operations of Gotham by marketing the company to existing and potential new clients.

Assets.   At   March   31,   2013,   we   had   $670,092   in   total   assets,   compared   to

$745,919  at  December  31,  2012.  The  decrease  in  total  assets  was  primarily  due  to  the

decrease  in  cash  used  to  fund  the  loss,  the  decrease  in  accounts  receivable  and  the

decrease in prepaid expenses.

Liabilities.  At  March  31,  2013,  our  total  liabilities  were  $567,008  compared  to

$440,221 at December 31, 2012. Liabilities consist of accounts payable, a note payable to

a  related  party  and  deferred  income.  We  do  not  have  any  long  term  liabilities.    The

increase  in  liabilities  was  primarily  due  to  deferred  income  of  $130,000  from  the  IGX

Rescission Agreement.

Stockholders’  Equity.  Our  stockholders’  equity  decreased  to  $103,084  at  March

31,  2013  from  $305,698  at  December  31,  2012.   This  decrease  was  primarily  due  to  an

increase  in  accumulated  deficit  from  $(2,448,346)  at  December  31,  2012  to  $(2,650,960)

at  March  31,  2013,  resulting  from  losses  from  operations  of  $(202,614)  for  the  three

months ended March 31, 2013.

THREE   MONTHS   ENDED   MARCH   31,   2013   AS   COMPARED   TO   THREE

MONTHS ENDED MARCH 31, 2012

Revenues  and  Cost  of  Sales.    We  had  $362,821  of  revenue  during  the  three

months ended  March  31,  2013 compared  to revenue of $480,348 during the three  months

ended  March  31,  2012.  The  decrease  in  revenue  was  due  primarily  to  a  decrease  in

revenue  generated  by  our  Gotham  subsidiary  from  $446,504  for  the  three  months  ended

March  31,  2012  compared  to  $362,821  for  the  three  months  ended  March  31,  2013.   We

also  earned  revenue  of  $33,844  in  technical  consulting  fees  for  the  three  months  ended

March  31,  2012  compared  to  $0  for  the  three  months  ended  March  31,  2013.  The

decrease in our cost of goods sold for the three  months ended March 31, 2013 was  due to

a decrease in the cost of the outsourced photography vendors utilized by Gotham.

General  and  Administrative  Expenses.  General  and  Administrative  Expenses

decreased  to  $449,665  for the  three  months  ended  March  31,  2013  from $496,941  for the

three  months  ended  March  31,  2012.     For  the  three  months  ended  March  31,  2013  our

General  and  Administrative  Expenses  consisted  of  corporate  administrative  expenses  of

$95,990,  legal  and  accounting  fees  of  $27,284,  health  insurance  expenses  of  $22,088,

commissions  and  finder’s  fees  of  $25,000  and  payroll  expenses  of  $279,303.    For  the

three  months  ended  March  31,  2012  our  General  and  Administrative  Expenses  consisted

of  corporate  administrative  expenses  of  $125,028,  legal  and  accounting  fees  of  $39,085,

18



health insurance expenses  of $18,294, consulting fees  of $14,756 and payroll  expenses of

$299,778.    The  decreases  from  the  three  months  ended  March  31,  2012  to  the  three

months  ended  March  31,  2013  relate  primarily to:  (i) a  decrease  in  payroll  expenses;  and

(ii) a  decrease  in  general  and  administrative  costs  associated  with  the  operation  of  our

Gotham  subsidiary.  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.

Other   Income   (Expense)   and   Taxes.   There  was   no   interest   income   and   no

income  tax  benefit  for  the  three  months  ended  March  31,  2013  compared  to  interest

income  of  $6,840  and  an  income  tax  benefit  of  $(101,256)  for  the  three  months  ended

March 31, 2012.

LIQUIDITY AND CAPITAL RESOURCES

General

As  reflected  in  the  accompanying  consolidated  financial  statements,  at  March  31,

2013,  we  had  $49,261  of  cash  and  stockholders’  equity  of  $103,084  as  compared  to

$104,721  and  $305,698  at  December  31,  2012.   At  March  31,  2013  we  had  $670,092  in

total assets, compared to $745,919 at December 31, 2012.

Our primary capital requirements in 2013 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.

19



Cash Flow Activity

Net  cash  used  by  operating  activities  was  $58,310  for  the  three  months  ended

March 31, 2013, compared to net  cash used by operating activities of $4,796 for the three

months   ended   March   31,   2012.   Our   primary   source   of   operating   cash   flows   from

continuing  operating  activities  for  the  three  months  ended  March  31,  2013  was  from  our

Gotham  subsidiary’s  revenues  of  $362,821  and  $446,504  for  the  three  months  ended

March  31,  2012.   Additional  contributing  factors  to  the  change  were  from  a  decrease  in

accounts  receivable  of  $1,396,  a  decrease  in  prepaid  expenses  of  $14,583,  a  decrease  in

accounts  payable  of  $(3,213)  and  deferred  income  of  $130,000.   Net  cash  provided  by

discontinued  operating  activities  was  $0  for  the  three  months  ended  March  31,  2013  and

cash  provided  by  discontinued  operating  activities  was  $150,000  for  the  three  months

ended  March  31,  2012.  The  $150,000  cash  provided  by  discontinued  operations  for  the

three months ended March 31, 2012, was $150,000 in cash payments received from DDC

which  was  offset  by  a  decrease  in  accounts  receivable  included  in  the  Assets  from

Discontinued Operations.

Cash  provided  by investing  activities  was  $2,850  for  the  three  months  ended  March

31,  2013  and  Cash  used  by  investing  activities  was  $(717)  for  the  three  months  ended

March  31, 2012.   For the  three  months  ended  March  31,  2013  the  primary source  of  cash

provided  by  investing  activities  was  from  a  decrease  in  deposits.   For  the  three  months

ended  March  31,  2012  the  source  of  cash  used  in  investing  activities  was  $(1,147)  from

the purchase of property and equipment and a decrease in deposits of $430.

Cash used by financing activities was $0 for the three months ended March 31, 2013

compared  to  $(3,125)  for  the  three  months  ended  March  31,  2012.  The  cash  flows  used

by  financing  activities  for  the  three  months  ended  March  31,  2012  was  a  repayment  of

loans payable to related party.

Supplemental Cash Flow Activity

In  the  three  months  ended  March  31,  2013  the  company  paid  income  taxes  of  $0

and interest  of $638 compared to income taxes of $4,125 and interest of $924 in the three

months ended March 31, 2013.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

We  carried  out  an  evaluation,  as  required  by  paragraph  (b) of  Rule 13a-15  and

15d-15  of  the  Exchange  Act  under  the  supervision  and  with  the  participation  of  our

management,  including  our  Chief  Executive  Officer  and  Chief  Financial  Officer,  of  the

effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and

20



15d-15(e) under the Exchange Act as of March 31, 2012. Based upon that evaluation, our

Chief   Executive   Officer   and   Chief   Financial   Officer   concluded   that   our   disclosure

controls and procedures were effective as of March 31, 2013.

Change in Internal Controls

During  the  quarter  ended  March 31,  2013,  there  were  no  changes  in  our  internal

control  over   financial  reporting  that   materially  affected,   or   are  reasonably  likely  to

materially affect, our internal control over financial reporting.

.

PART II — OTHER INFORMATION

Item 1.   Legal Proceedings.

On  October  1,  2012,  we  filed  a  lawsuit  in  the  United  States  District  Court  for  the

District   of   Maryland,   Baltimore   Division,   asserting   claims   against   DigiData   Corp.

("Defendant")  for  monetary  damages  arising  from  the  Defendant's  breach  of  contract

regarding  that  certain  Asset  Purchase  Agreement  dated  February  26,  2006  among  the

parties,   and   to   enforce   payment   of   outstanding   contingency   payments   due   to   the

Company pursuant to said agreement.

On  or about  December  3,  2012, Digi-Data  filed  its  Answer, Affirmative  Defenses

and Counterclaim against  iGambit.  The  Counterclaim  seeks  damages  against  iGambit  for

breach  of  the  Agreement  for  the  alleged  failure  to  indemnify  Digi-Data  for  expenses

related  to  pending  litigation  between  Verizon  Communications,  Inc.  (one  of  Digi-Data's

customers)  an  unrelated  third  party,  Titanide  Ventures,  LLC,  concerning  alleged  patent

violations (hereinafter "Verizon Patent Litigation").

Upon  information  and  belief,  the  Verizon  Patent  Litigation  is  a  "patent  troll"

whereby Titanide  seeks to extract settlement  funds from alleged patent infringers  without

seeking  actual  adjudication  of  its  purported  patent  rights.  iGambit  has  advised  Digi-Data

of  what  iGambit  believes  is  "prior  art"  related  to  the  subject  intellectual  properly  that  is

at-issue in the Verizon Patent Litigation, a possible defense to the claims by Titanide.

A  pre-trial  order  was  issued  by  the  Court  with  detailed  deadlines.  E.g.,  discovery

cut-off    and    status    report    (4/29/13)    and    dispositive    motions    (5/28/13).    iGambit

propounded its initial discovery upon Digi-Data, responses to which were due on or about

March 8, 2013.

On   April   4,   2013,   Digi-Data   provided   discovery   to   iGambit.   To   date,   no

depositions  have  been  scheduled.   To  date,  we  have  not  received  any  information  from

DDC  regarding  any  specific  quantified  “damages”  directly  resulting  from  this  Order  or

the settlement agreement between Verizon and the Plaintiff.

On  April  4,  2013  an  Order  of  Dismissal  in  the  Verizon  Patent  Litigation  was

filed.  The Dismissal is with prejudice with each party to bear its own costs and fees.

21



On  May  24,  2013  we  filed  a  Motion  for  Summary  Judgment  with  the  Court

asking the Court to move in our favor against DDC for the entire outstanding balance due

along   with   attorney’s   fees   and   post   and   pre-judgment   interest   as   applicable   under

Maryland Law.

One  June  11,  2013,  Digi-Data  filed  its  Response  to  the  Motion  for  Summary

Judgment  and,  for the first  time, purported to liquidate certain alleged damages for  which

Digi-Data  seeks  a  set-off  against  the  amounts  admittedly  owed  by  Digi-Data  to  iGambit

and   alludes   the   existence   of   additional   although   not   yet   quantified   damages.     The

Response  relies  entirely  upon  the  Affidavit  of  a  Vice  President  of  Digi-Data  for  its

evidentiary  support.   Notwithstanding,  Digi-Data  failed  to  produce  documentary  support

for  its  alleged  damages  and  to  explain  why  it  failed  to  disclose  such  information  during

the discovery period or thereafter.

On  July  9,  2013,  the  Company  filed  its  Reply  to  Digi-Data’s  Response  and,

thereby,  advised  the  Court  of  Digi-Data’s  apparent  litigation-by-ambush  tactic  such  as

withholding allegations  of damages  until  the  end  of discovery and  attempting to  use  such

previously  withheld  information  to  defeat  summary  judgment,  and  the  legal  inadequacy

of same.  Pursuant the Maryland District Court’s Local Rules, Digi-Data is not authorized

to file a Surreply without Court order.

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 Chief Financial Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

22



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.)

23



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  July

23, 2013.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer and

Principal Accounting Officer