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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

 þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2013

OR

 o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-53862

IGAMBIT INC.

(Exact name of registrant 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)

(631) 670-6777

(Registrant’s telephone number)

(Registrant’s former telephone number)

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class: NONE

Name of Each Exchange on Which

Registered:

Securities registered pursuant to Section 12(g) of the Act: Common Stock

Indicate  by  check  mark  if  the  registrant  is  a  well-known  seasoned  issuer,  as  defined  in

Rule 405 of the Securities Act. Yes o     No þ



Indicate  by  check   mark   if  the   registrant   is   not   required   to   file   reports   pursuant   to

Section 13 or Section 15(d) of the Exchange Act. Yes o     No þ

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  website,  if  any,  every  Interactive  Date  File  required  to  be  submitted  and

posted  pursuant  to  Rule 405  of  Regulation S-T  (Section 232.405  of  the  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   if   disclosure   of   delinquent   filers   pursuant   to   Item 405   of

Regulation S-K   is   not   contained   herein,   and   will   not   be   contained,   to   the   best   of

registrant’s  knowledge,  in  definitive  proxy  or  information  statements  incorporated  by

reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

Non-accelerated filer o

Smaller

accelerated

filer o

reporting

filer o

company þ

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-

2 of the act): Yes o     No þ

There is not currently a market for the Registrant’s common stock.

As  of  March  31,  2014  there  were  25,044,056  shares  of  the  Registrant’s  $0.001  par  value

common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None



iGambit Inc.

FORM 10-K — FOR THE YEAR ENDED DECEMBER 31, 2013

TABLE OF CONTENTS

Page No.

PART I

Item 1

Business

1

Item 1A

Risk Factors

9

Item 1B

Unresolved Staff Comments

9

Item 2

Properties

9

Item 3

Legal Proceedings

10

Item 4

(Removed and Reserved)

12

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters

and Issuer Purchases of Equity Securities

13

Item 6

Selected Financial Data

14

Item 7

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

15

Item 7A

Quantitative and Qualitative Disclosure About Market Risk

21

Item 8

Financial Statements and Supplementary Data

21

Item 9

Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

21

Item 9A

Controls and Procedures

22

Item 9B

Other Information

23

PART III

Item 10

Directors, Executive Officers and Corporate Governance

23

Item 11

Executive Compensation

28

Item 12

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

30

Item 13

Certain Relationships, Related Transactions and Director

Independence

30

Item 14

Principal Accountant  Fees and Services

31

PART IV

Item 15

Exhibits and Financial Statement Schedules

32

EX-31.1

EX-31.2

EX-32.1

EX-32.2

i



This  annual  report  on  Form  10-K  is  for  the  year  ended  December 31,  2013.  The

Securities  and  Exchange  Commission  (“SEC”)  allows  us  to  “incorporate  by  reference”

information  that  we  file  with  the  SEC,  which  means  that  we  can  disclose  important

information   to   you   by   referring    you   directly   to   those   documents.    Information

incorporated  by  reference  is  considered  to  be  part  of  this  annual  report.  In  addition,

information   that   we  file  with   the   SEC   in   the   future   will  automatically  update   and

supersede  information  contained  in  this  annual  report.  In  this  annual  report,  “Company,”

“we,” “us” and “our” refer to iGambit Inc. and its subsidiaries.

ii



PART I

This Annual Report on Form 10-K 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.  The  Company  has  based  these  forward-

looking  statements  on  the  Company’s  current  expectations  and  projections  about  future

events.   These   forward-looking   statements   are   subject   to   known   and   unknown   risks,

uncertainties  and  assumptions  about  us  and  the  Company’s  subsidiaries  that  may  cause

the  Company’s  actual  results,  levels  of  activity,  performance  or  achievements  to  be

materially   different   from   any   future   results,   levels   of   activity,   performance   or

achievements  expressed  or  implied  by  such  forward-looking  statements.  In  many  cases,

you   can   identify   forward-looking   statements   by   terminology   such   as   “anticipate,”

“estimate,”   “believe,”   “continue,”   “could,”   “intend,”   “may,”   “plan,”   “potential,”

“predict,”  “should,”  “will,”  “expect,”  “objective,”  “projection,”  “forecast,”  “goal,”

“guidance,”   “outlook,”   “effort,”   “target”   and   other   similar   words.   However,   the

absence  of  these  words  does  not  mean  that  the  statements  are  not  forward-looking.

Factors  that  might  cause  or  contribute  to  a  material  difference  include,  but  are  not

limited  to, those  discussed  elsewhere  in  this  Annual  Report, including  the section  entitled

“Risk  Factors”  and  the  risks  discussed  in  the  Company’s  other  Securities  and  Exchange

Commission  filings.  The  following  discussion  should  be  read  in  conjunction  with  the

Company’s   audited   Consolidated   Financial   Statements   and   related   Notes   thereto

included elsewhere in this report.

ITEM 1.  BUSINESS

HISTORY

We were incorporated in the State of Delaware under the name BigVault.com Inc.

on  April 13,  2000.  On  April 18,  2000,  we  merged  with  BigVault.com,  Inc.,  a  New  York

corporation with which we were affiliated. We survived the merger, and on December 19,

2000  changed  our  name  to  bigVAULT  Storage  Technologies,  Inc.  At  that  time  we  were

in  the  business  of  providing  remote,  internet-based  storage  vaulting  services  and  related

ancillary services to end users and resellers (the “Vault Business”).

On   February 28,   2006   we   sold   all   of   our   assets   to   Digi-Data   Corporation

(“DDC”), an unrelated third party, pursuant to the  terms of an Asset  Purchase Agreement

dated  December 21,  2005  (the  “APA”),  a  copy  of  which  is  filed  herewith  as  an  exhibit.

As  consideration  for  our  transfer  of  assets  under  the  APA,  DDC  paid  certain  of  our

liabilities  and  agreed  to  make  certain  quarterly  and  annual  revenue  sharing  payments  to

us,  as  is  further  described  below.  Mr. Salerno  and  Ms.  Luqman  accepted  employment

with  DDC  in  senior  management  positions  post  closing,  and  continued  to  work  for  DDC

until  February 2009.  As  of  March 1,  2009  Mr. Salerno  and  Ms. Luqman  returned  to  their

full time management roles with the Company.

On April 5, 2006, we changed our name to iGambit Inc.

1



On October 1, 2009, we  acquired the  assets  of Jekyll  Island Ventures, Inc., a New

York  corporation  doing  business  as  Gotham  Photo  Company  (“Jekyll”)  through  our

wholly   owned   subsidiary   Gotham   Innovation   Lab,   Inc.,   a   New   York   corporation

(“Gotham”).   Pursuant   to   the   terms   of   the   Asset   Purchase   Agreement   and   Plan   of

Reorganization  (“APAPR”),  we  (i) issued  500,000  shares  of  our  common  stock  to  Jekyll

at  closing;  (ii) assumed  $10,410.59  of  Jekyll  accounts  payable  relating  to  office  rent  and

health  insurance  premiums;  and  (iii) issued  Jekyll  warrants  to  purchase  1,500,000  shares

of  our  common  stock,  at  $0.01  per  share,  subject  to  a  3 year  vesting  schedule  and  the

attainment  by  Gotham  of  certain  revenue  targets  during  said  3 year  period.   The  3  year

period has ended and Gotham did not attain the revenue targets.

On December 28, 2012,  we entered  into an  Asset  and Stock   Purchase  Agreement

(the “Purchase Agreement”) to acquire substantially all of the assets of IGX Global  Inc. a

Connecticut  corporation  (“IGXUS”),  and  all  of  the  issued  and  outstanding  shares  of  IGX

Global  UK  Limited  a  UK  Private  Limited  company  (“IGXUK”)  through  our  wholly

owned  subsidiary  IGXGLOBAL  CORP.,  a  Delaware  corporation  (“IGXGLOBAL”),  and

thereby acquired the business operated by IGSUS and IGSUK (the “Acquired Business”).

Thomas  Duffy  is  the  sole  shareholder  of  both  IGXUK  and  IGXUS  (the  “Shareholder”).

The  Purchase  Agreement  was  disclosed  on  the  Company’s  current  report  on  Form  8-K

filed on January 7, 2013.

Pursuant  to the terms  of the Purchase Agreement  Thomas Duffy was  to receive

(i)  $1,500,000  payable  $  500,000  in  cash  and  a  Promissory  Note  in  the  principal  sum  of

$1,000,000  and  (ii)  Thomas  Duffy  was  to  receive  3.75  million  iGambit  Inc.  Common

voting  shares  over  a  three-year  period  starting  on  the  first  through  third  anniversary  of

signing  of  this  agreement,  based  upon  certain  criteria.  In  addition,  iGambit  was  to  pay

approximately   $2,500,000   of    the    Acquired    Business’s    liabilities    (the    “Assumed

Liabilities”).

The  cash  portion  and  certain  debt  assumed  of  the  Purchase  Price  was  financed

through  asset  based  funding  issued  by  Keltic  Financial  Partners  II  LLP  for  a  $6  million

revolving credit line.

On  April  8,  2013,  iGambit  Inc.  (“iGambit”)  and  its  wholly  owned  subsidiary,

IGXGLOBAL,  CORP.    (“IGXGLOBAL”,  and  collectively,  the  "Company"),  entered

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

Agreement  dated  December  28,  2012   with   IGX  Global  Inc.  (“IGXUS”),  IGX  Global

UK Limited (“IGXUK”, and collectively,  “IGXNJ”) and Tomas  Duffy (“Duffy”) the sole

shareholder of both IGXUK and IGXUS (the “Shareholder”).   The Rescission Agreement

was disclosed on the Company’s current report on Form 8-K filed on April 12, 2013.

Under   the   terms   of   the   Rescission   Agreement,   the   Company,   IGXNJ   and

Shareholder   (collectively   “IGX”),   agreed   to   unwind   the   Purchase   Agreement   in   its

entirety  and  to  fully  restore  each  to  the  positions  they  were  respectively  in  prior  to

entering  the  Purchase  Agreement,  in  every  respect  other  than  as  otherwise  expressly

contemplated by the Rescission Agreement; and key terms as follows:

2



(i)  IGX to payback or arrange acceptable payoff of the Keltic Financing;

(ii) Cancellation of any future consideration to IGX;

(iii)  IGX  to  pay  to  iGambit  $625,000  in  consideration  for  its  expenses  and

inconvenience; and

(v)   IGX  to   assume  and   pay  certain   expenses   related   to   the  contemplated

Purchase Agreement.

On  April  25,  2013  the  conditions  to  closing  the  Rescission  Agreement  were

completed.

OUR COMPANY

Introduction

We  are  a  company  focused  on  the  technology  markets.  Presently  we  have  one

operating subsidiary, Gotham  Innovation  Lab Inc.  (“Gotham”). Gotham is in the business

of  providing  media  technology  services  to  the  real  estate  industry.    Revenues  consist

mostly of revenues from the operation of our Gotham  subsidiary ($1,461,183 during  year

ended December 31, 2013). . In addition to Gotham’s operations, we earned other income

of $755,000 and income from discontinued operations of $317,625.

Our  primary  focus  is  the  acquisition  of  additional  technology  companies.  We

believe  that  the  background  of  our  management  and  of  our  Board  of  Directors  in  the

technology  markets  is  a  valuable  resource  that  makes  us  a  desirable  business  partner  to

the  companies  that  we  are  seeking  to  acquire.  When  we  acquire  a  company,  we  work  to

assume  an  active  role  in  the  development  and  growth  of  the  company,  providing  both

strategic  guidance  and  operational  support.  We  provide  strategic  guidance  to  our  partner

companies   relating  to,   among  other   things,   market   positioning,  business   model   and

product  development,  strategic  capital  expenditures,  mergers  and  acquisitions  and  exit

opportunities. Additionally, we provide operational support to help our partner companies

manage  day-to-day  business  and  operational  issues  and  implement  best  practices  in  the

areas  of  finance,  sales  and  marketing,  business  development,  human  resources  and  legal

services.  Once  a  company  joins  our  partner  company  network,  our  collective  expertise  is

leveraged   to   help   position   that   company   to   produce   high-margin,   recurring   and

predictable earnings and generate long-term value for our stockholders.

Our  current  intention  is  to  fund  the  purchase  price  of  acquisitions  through  a

combination of the issuance of our common stock at  closing and the issuance of common

stock  purchase  or  common-stock  warrants  that  would  become  exercisable  only  in  the

event  certain  earn-out  conditions  are  satisfied  by  the  acquired  company.  In  addition  to

acquiring  entire  companies,  we  would  also  consider  entering  into  joint  ventures  and

acquiring less than 100 percent of a target company.

3



Our Strategy to Grow the Company

General

We  have  an overall  corporate business  plan  as  a  holding company to seek out  and

acquire  operating companies.   Phase  one  of our strategy is  complete.  We  established new

corporate   headquarters   and   a   website,   expanded   our   board   to   include   3   outside

independent   directors,   set   up   periodic   board   meetings,   engaged   a   sophisticated   full

service law firm, engaged a new PCAOB registered auditing firm, engaged an investment

banking  firm  as  advisors  to  assist  in  the  analysis  of  target  acquisitions,  and  become  an

SEC  reporting  company.    In  addition,  we  have  identified  and  acquired  our  first  target

company, Jekyll  Island  Ventures  Inc.  We  are working on  a daily basis towards phase two

of  our  strategy,  identifying  further  acquisitions  that  will  expand  and  or  complement  our

existing subsidiary.

Sources of Target Businesses

We  anticipate that target business candidates will  be brought to our attention from

various  sources,  including  our  management  team,  investment  bankers,  venture  capital

funds,   private   equity   funds,   leveraged   buyout   funds,   management   buyout   funds,

consulting  firms  and  other  members  of  the  financial  community  who  will  become  aware

that  we  are  seeking  business  partners  via  public  relations  and  marketing  efforts,  direct

contact  by  management  or  other  similar  efforts,  who  may present  solicited  or  unsolicited

proposals.  Any  finder  or  broker  would  only  be  paid  a  fee  upon  the  completion  of  a

business  combination.  While  we  do  not  presently  anticipate  engaging  the  services  of

professional  firms  that  specialize  in  acquisitions  on  any  formal  basis,  we  may  decide  to

engage  such  firms  in  the  future  or  we  may  be  approached  on  an  unsolicited  basis.  Our

officers  and  directors,  as  well  as  their  affiliates,  may  also  bring  to  our  attention  target

business candidates that  they become aware of through their business contacts.  While  our

officers  and  directors  make  no  commitment  as  to  the  amount  of  time  they  will  spend

trying  to  identify  or  investigate  potential  target  businesses,  they  believe  that  the  various

relationships  they  have  developed  over  their  careers  together  with  their  direct  inquiry,

will   generate   a   number   of   potential   target   businesses   that   will   warrant   further

investigation.  In  no  event  will  we  pay  any  of  our  existing  officers,  directors,  special

advisors  or  stockholders  or  any  entity  with  which  they  are  affiliated  any  finder’s  fee  or

other   compensation   for   services   rendered   to   us   prior   to   or   in   connection   with   the

completion of a  business  combination.  In  addition, none of our  officers, directors, special

advisors  or  existing  stockholders  will  receive  any  finder’s  fee,  consulting  fees  or  any

similar  fees  from  any  person  or  entity  in  connection  with  any  business  combination

involving  us  other  than  any  compensation  or  fees  that  may  be  received  for  any  services

provided following such business combination.

Selecting Acquisition Targets

Our  management  has  virtually  unrestricted  flexibility  in  identifying  prospective

target business and diligently reviews all of the proposals we receive.

4



The  criteria  we  look  for  in  a  potential  acquisition  include,  but  are  not  limited  to,

the following:

Company Characteristics

§     Established Company with proven track record

o    Company with history of strong operating and financial performance, or

o    Company  undergoing  a  turnaround  that  demonstrates  strong  prospects  for

future growth

§     Strong Cash Flow Characteristics.

o    Cash flow neutral or positive,

o    Predictable recurring revenue stream,

o    High gross margins and

o    Low working capital and capital expenditure needs

§     Strong Competitive Industry Position

o    Leading or niche market position, and/or

o    Strong channel relationships that promote barriers to entry

§     Strong Management Team

o    Experienced,  proven  track  record  in  delivering    revenue  and  ability  to

execute, or

o    A  management  team  that  can  be  complemented    with  our  contacts  and

team

§     Diversified Customer and Supplier base

§     Proprietary products or marketing position

Industry Characteristics

§     Non-cyclical

§     Services Consumer or niche market

§     Fragmented with potential for consolidation or growth

§     Emerging markets

Industries of Interest

§     Real Estate Services

§     Managed Security Services Providers (MSSP)

§     IT   Solutions   Providers   specializing   in   security   and   network   technology

products, services, and support

§     Internet

o    Cloud Computing

o     Security focused applications

Investment Criteria

5



§     Sales Volumes: $500 thousand to $30 million

§     Cash Flow: Neutral or positive

§     Structure: Controlled ownership. Closely held private company

§     Geography: North America  Investment size: $1 million to $5 Million

§     Involvement: Board oversight

§     Controlling Interest: Acquire 100% of controlling interest in target

§     Marketing:

o    Target captures a particular segment of the market

o    Target has a focused strategic marketing plan.

These  criteria  are  not  intended  to  be  exhaustive.  Any  evaluation  relating  to  the

merits  of  a  particular  business  combination  will  be  based,  to  the  extent  relevant,  on  the

above  factors  as  well  as  other  considerations  deemed  relevant  by  our  management  in

effecting a business combination consistent with our business objective.

Diligence Process

Upon  receipt  of  a  business  plan,  the  procedure  is  for  management  to  review  the

business plan and determine if it satisfies the Company’s acquisition criteria, and whether

the   business   plan   should   be   rejected   or   pursued   further.   If   the   plan   satisfies   the

requirements, then Management meets with the target’s management to determine if there

is  a  synergy  that  can  work  and  to  explore  the  business  plan  in  greater  detail.  Generally

this occurs over several meetings and can take some time. Depending on the nature of the

business,  management  may  enlist  certain  technical  or  industry  consultants  to  meet  with

the  target  and  provide  feedback  and  analysis.  Management  will  also  review  the  target’s

financials.  If the analysis suggests the target should be explored further Management will

present the opportunity to the BOD for approval to pursue the opportunity further. One or

two outside directors  may meet  with the target to  make an independent  assessment.  If the

opportunity   is   approved   for   further   exploration   management   will   discuss   potential

purchase structure with target’s  management to be sure that a  meeting of the minds exists

for  a  potential  deal.    At  this  point  management  will  request  that  our  investment  banking

advisors  give  their  opinion  of  the  industry,  the  market  and  potential  financing  options  of

the   deal.   Often,   the   investment   bankers   will   meet   with   target’s   management.     The

investment   banker’s   feedback  is   presented   to   the  board   and,   if   positive,   the   Board

analyzes   the   proposed   financing  structure,   discusses   effects   of   a   transaction   on   the

Company  as  they  relate  to  taxes,  capitalization,  stock  value  etc.,  engaging  the  necessary

outside  consultants.  If  all  appears  positive  a  letter  of  intent  is  negotiated  and  executed,

additional  diligence  is  conducted,  and  definitive  transaction  documents  are  negotiated

and executed.

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Evaluation of the Target’s Management

We  would  condition  any  acquisition  on  the  commitment  of  management  of  the

target  business  to  remain  in  place  post  closing.  Following  a  business  combination,  we

may seek to recruit  additional managers to supplement  the incumbent  management of the

target  business.  We  cannot  assure  you  that  we  will  have  the  ability  to  recruit  additional

managers,  or  that  any  such  additional  managers  will  have  the  requisite  skills,  knowledge

or  experience  necessary  to  enhance  the  incumbent  management.  Although  we  intend  to

closely  scrutinize  the  management  of  a  prospective  target  business  when  evaluating  the

desirability   of   effecting   a   business   combination,   we   cannot   assure   you   that   our

assessment of the target business’s management will prove to be correct.

Competition

In  identifying,  evaluating  and  selecting  a  target  business,  we  may  encounter

intense  competition  from  other  entities  having a  business  objective  similar  to  ours.  Many

of  these  entities  are  well  established  and  have  extensive  experience  identifying  and

effecting  business  combinations  directly  or  through  affiliates.  Many  of  these  competitors

possess  greater  technical,  human  and  other  resources  than  us  and  our  financial  resources

will be relatively limited when contrasted with those of many of these competitors, which

may  limit  our  ability  to  compete  in  acquiring  certain  target  businesses.  This  inherent

competitive  limitation  gives  others  an  advantage  in  pursuing  the  acquisition  of  a  target

business.

Companies Currently Under Review

We   are   constantly   in   the   process   of   reviewing   potential   target   companies.

Currently, we are not under contract to acquire any companies.

Our Partner Company

Gotham Innovation Lab Inc.

Products and Services

Gotham’s  business  is  directed  at  providing  media  technology  services  to  the  real

estate  community.  The   range  of   media  services   includes   Real  Estate  Sales   location

Photography,

the   exclusive   Gotham   EXPO   Full   Screen   Experience;   Floorplan

Measurements,   and   Redraws   and   E-Brochures,   Virtual   Staging,   Headshots,   and   HD

Video.

In  2012, Gotham  launched  its  new offering  ScreenPLAY.  Gotham's  ScreenPLAY

is  a  low  cost  tool  that  gets  real  estate  agents  listings  on  YouTube,  Wellcomemat,  and

other  popular  video  platforms  with  enhanced  visibility  on  Google  quickly.   Gotham  has

also  seen  success  in  its  Headshot  events  for  real  estate  agents,  Headshot  events  offer

professional  headshots  photo  sessions  on  an  individual  or  company wide  basis.    Gotham

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also  provides  website  development  services,  sales  office  technology and  data interchange

services for many of the real estate firms in New York City.

When  it  comes  to  selling  real  estate  every  broker  or  seller  listing  has  to  have

pictures.  Utilizing  the  latest  technology  Gotham’s  service  offerings  provide  a  full  listing

experience  for  real  estate  agents’  clients.  Gotham  service  offerings  allow  brokers  and

sellers to present their listings in the best possible light while giving the viewer control of

the  show.  Gotham’s  services  integrate  images,  photos,  floor  plans,  video,  virtual  staging,

agent and key listing details in an engaging format that immerses the viewer.

All  systems  are  built  on  accessible  web  platforms  that  integrate  quickly  and

seamlessly into the agent’s workflow.

In  addition  to  natural  expansion  into  the  areas  surrounding  NYC,  Gotham  is

actively  working  to  expand  other  geographic  locations  on  the  East  Coast.  Gotham  has

already established a presence in Florida, covering the Miami to West Palm Beach area.

Competitive Comparison

Gotham  competes  with  others  in  the  industry  by  focusing  on  user  interaction,

technology  and  delivery.  Gotham  maintains  strict  standards  of  photography  and  a  roster

of  accomplished  photographers  who  we  engage  in  between  their  premium  assignments

such as fashion shoots, architectural projects, etc.

In   addition   to   superior   media,   in   the   opinion   of   management,   Gotham’s

technology  tools  set  us  apart  from  our  competition.  For  example,  our  expo  product

offering  utilizes  the  pre-generation  of  a  multitude  of  media  sets  to  deliver  images  sized

perfectly  for  the  users  screen,  wasting  no  bandwidth  or  file  size,  thereby  enabling  us  to

maintain  the  speed  and  efficiency  of  the  product  at  an  optimal  level.  In  the  opinion  of

management, a  majority of our competitors either don’t  seem to employ similar measures

in their full screen product offerings or do so, on a more limited basis.

Future Products and Services

Future   offerings   will   include   enhanced   products   that   focus   on   social   media

interaction,  mobile  applications  and  tools  for  realtors,  as  well  as  multi  touch  augmented

reality  technologies  for  presentations,  etc.  Gotham  will  continue  to  expand  its  media

offerings, integrating with and adopting technologies as they become available.

Customers

Gotham   currently  has   approximately  400   client   accounts,   including   accounts

ranging  from  single  agent  accounts  to  large  “master  accounts”  with  large  firms  such  as

Douglas    Elliman    and    Halstead.    Taking    these    and    other    master    accounts    into

consideration,  Gotham  does  business  with  over  3,000  New  York  City  real  estate  agents.

The  following  five  customers  constituted  approximately  81%  of  the  Company’s  sales  in

2013:   EGR  International,  Inc.    approximately  24%  of  sales;  Cambridge  Who’s  Who  

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approximately  6%  of  sales;   Douglas  Elliman  Real  Estate,  LLC    approximately  45%  of

sales;  Halstead  Property  Development  Marketing  LLC    approximately  3%  of  sales;  and

Richard  Caplan  Photography  –  approximately  2%  of  sales.     The  loss  of  any  of  the

foregoing   client   accounts   could   have   a   material   adverse   affect   on   the   Company’s

financial condition.

Expansion Summary

Gotham’s  objective  is  to  be  a  market  leader in  offering EXPO,  Virtual  Tours,  and

Video, type  services  to  the  real  estate  industry.  Gotham  is  currently providing services  to

a  number  of  realtors  and  brokers  in  the  New  York  Metropolitan  area  including,  but  not

limited  to,  Douglas  Elliman  (“DE”),  Corcoran,  Trump  among  others.   In  addition  to

natural  expansion  into  the  areas  surrounding  NYC  such  as  Long  Island,    Gotham  has

recently  expanded  into  Florida,  and  is  actively  working  to  expand  by  further  providing

services  to  large  accounts  that  exist  in  both  Manhattan  and  targeted  secondary  markets,

and  through  the  selective  hiring  of  one-off  service  providers  who  are  currently  operating

in other markets

Employees

We presently have 9 total employees all of which are full-time.

OUR CORPORATE INFORMATION

Our   principal   offices   are   located   at   1050   W.   Jericho   Turnpike,   Suite   A,

Smithtown,  New  York,  11787.  Our  telephone  number  is  (631) 670-6777  and  our  fax

number  is  (631) 670-6780.  We  currently  operate  two  corporate  websites  that  can  be

found  at  www.igambit.com,  and  www.gothamphotocompany.com    (the  information  on

the foregoing websites does not form a part of this report).

ITEM 1A.  RISK FACTORS

Not Required.

ITEM 1B.   UNRESOLVED STAFF COMMENTS

None.

ITEM 2.   PROPERTIES

Our  corporate  executive  office  is  located  in  Smithtown,  New  York,  where  we

lease   approximately  1000   square   feet   of   office   space.   Monthly   lease   payments   are

approximately $1,560.  The  lease  is  for  a  term  of  five  (5)  years  commencing on  March  1,

2012  and  ending  on  February  28,  2017.   The  lease  contains  annual  escalations  of  2%  of

the annual rent.

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Our  Gotham  operations  are  located  in  New  York,  New  York,  where  we  license

office  suites  with  furniture  and  equipment  in  a  shared  global  office  building.  Monthly

license  payments  are  approximately  $4,025  and  the  fees  are  paid  on  a  month  to  month

basis.

Our leased and licensed properties are  suitable for their respective uses and are, in

general,  adequate  for  our  present  needs.  Our  properties  are  subject  to  various  federal,

state,  and  local  statutes  and  ordinances  regulating their operations.  Management  does  not

believe  that  compliance  with  such  statutes  and  ordinances  will  materially  affect  our

business, financial condition, or results of operations.

ITEM 3.  LEGAL PROCEEDINGS

Digi-Data Corporation

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.

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  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

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

Maryland Law.

On December 13, 2013 the  Court Granted Summary Judgment in iGambit’s favor

against  Digi-Data  in  the  amount  of  $570,590,  plus  interest  at  the  Maryland  legal  rate  of

6% per annum from August 31, 2012, and post judgment interest at the Federal statutory

Rate.   Furthermore, Digi-Data’s Counterclaim was dismissed.

On  February  24,  2014  we  entered  into  a  Forbearance  Agreement  with  Digi-Data

pursuant  to  which  Digi-Data  shall  pay  to  iGambit  Six  Hundred  Forty-Six  Thousand,  Six

Hundred   Sixty-Eight   Dollars   and   Sixty-Seven   Cents   ($646,668.67)   (the   “Settlement

Amount”) in full satisfaction of the Judgment based upon the following terms:

Initial   Payment:   Digi-Data   shall   pay   the   Settlement   Amount   by   delivering

Twenty-Five   Thousand   Dollars   and   No   Cents   ($25,000.00)   to   iGambit   upon   the

execution   of   this   Agreement   (“Initial   Payment”),   and   delivering   the   remaining   Six

Hundred Twenty-One Thousand, Six Hundred Sixty-Eight Dollars and Sixty-Seven Cents

($621,668.67),  plus  interest  at  a  rate  of  6%  per  annum  (calculated  at  Actual/360)  (the

“Remaining Balance”) to iGambit.

Monthly  Payments:    Commencing  thirty  (30)  calendar  days  after  the  Effective

Date,  and  continuing  for  the  three  following  months,  Digi-Data  shall  make  monthly

payments  of  Twelve  Thousand,  Five  Hundred  Dollars  and  No  Cents  ($12,500.00)  to

iGambit  (each, an  “Initial  Monthly Payment”).   Thirty (30)  calendar days  after  the  fourth

Initial  Monthly Payment  is  made,  Digi-Data  shall  commence  making  a  monthly payment

of   Twenty-Five   Thousand   Dollars   and   No   Cents   ($25,000.00)   to   iGambit   until   the

Remaining Balance  is paid in full (each,  a  “Subsequent  Monthly Payment”).   Such  Initial

Monthly  Payments  and  Subsequent  Monthly  Payments  shall  be  credited  to  payment  of

the  Settlement  Amount  and  Remaining  Balance,  with  payment  being  first  applied  to

accrued and/or outstanding interests, then to principal.

Line  of  Credit  Payments:   In  the  event  that  Digi-Data  obtains  a  new  line  of  credit

subsequent  to  the  Effective  Date  under  terms  acceptable  to  Digi-Data  in  the  amount  of

Three  Million  Dollars  and  No  Cents  ($3,000,000.00)  or  greater  it  shall,  within  fifteen

(15)  calendar  days  upon  obtaining  such  funding,  pay  the  full  Remaining  Balance  to

iGambit  (the  “LOC  Payment”).   In  the  event  that  Digi-Data  obtains  a  new  line  of  credit

subsequent to the Effective Date under terms acceptable to Digi-Data for any amount less

than   Three   Million   Dollars   and   No   Cents   ($3,000,000.00)   that   is   secured   by   its

receivables  it  shall,  within  fifteen  (15)  calendar  days  of  obtaining  such  funding,  pay

Twenty-Five  Thousand  Dollars  and  No  Cents  ($25,000.00)  to  iGambit  (the  “Receivables

Payment”).   Such  Receivables  Payment  shall  be  credited  to  payment  of  the  Settlement

Amount  and  Remaining  Balance,  with  payment  being  first  applied  to  accrued  and/or

outstanding interests, then to principal.

Digi-Data  Sale:    In  the  event  of  a  Digi-Data  Sale,  iGambit  shall  be  paid  the

Remaining  Balance  at  closing  of  any  such  Digi-Data  Sale  as  provided  in  paragraph  2,

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below.   iGambit  acknowledges  that,  if  the  Digi-Data  Sale  is  a  sale  or  sales  of  the  Digi-

Data  Assets,  there  may be  insufficient  proceeds  to  pay the  Remaining Balance  in  full.   If

the  Digi-Data  Sale  is  a  sale  or  sales  of  the  stock  of  Digi-Data  and  there  are  insufficient

proceeds  at  closing  to  pay  the  Remaining  Balance  in  full,  iGambit  shall  continue  to

receive the Subsequent Monthly Payment until the full Remaining Balance is paid.

Allied Airbus, Inc.

On November 1, 2011,  we 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,  we  received  payment  of  the  total

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

Financial Advisor Contract

Brooks, Houghton & Company, Inc. (BHC)

We  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  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,  BHC  initially  felt  entitled  to  $300,000.  We  have  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.

ITEM 4.  (REMOVED AND RESERVED)

12



PART II

ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY

SECURITIES

MARKET INFORMATION

Effective  March  19,  2011  the  Company’s  common  stock  is  quoted  on  the  Over

the  Counter  Bulletin  Board,  a  service  maintained  by  the  Financial  Industry  Regulatory

Authority, under the ticker symbol “IGMB”.

HOLDERS

As   of   March   31,   2014,   there   are   25,044,056   shares   of   our   common   stock

outstanding,  held  of  record  by  158  persons.   We  have  275,000  common  stock  warrants

outstanding and 1,268,900 common stock options outstanding.

As  of  March  31,  2014,  approximately  21,737,018  shares  of  our  common  stock  are

eligible to be sold under Rule 144.

DIVIDENDS

We  have   never   declared   or   paid   any  dividends   on   our   common   stock.   Any

determination  to  pay  dividends  in  the  future  will  be  at  the  discretion  of  our  Board  of

Directors  and  will  be  dependent  upon  our  results  of  operations,  financial  condition,

capital  requirements,  contractual  restrictions  and  other  factors  deemed  relevant  by  the

Board  of  Directors.  The  Board  of  Directors  is  not  expected  to  declare  dividends  or  make

any  other  distributions  in  the  foreseeable  future,  but  instead  intends  to  retain  earnings,  if

any, for use in business operations.

EQUITY COMPENSATION PLAN INFORMATION

We  currently  have  one  equity  compensation  plan  outstanding  which  is  our  2006

Long  Term  Incentive  Plan.  The  Plan  was  adopted  by  our  directors  and  approved  by  our

stockholders  on  March 26,  2006.  The  Plan  permits  the  award  of  incentive  stock  options,

non-qualified stock options, stock appreciation rights, and stock grants. We  have reserved

10 million shares for issuance under the Plan, plus an annual increase equal  to 10% of the

number  of  outstanding  shares  of  our  common  stock  on  the  first  day  of  each  year,  but  in

no event more than 15 million shares of common stock in the  aggregate. As of December

31,  2009  the  Company  no  longer  has  the  ability  to  issue  shares  under  the  Plan.   As  of

December 31, 2009, there were 0 shares available for issuance under the Plan.

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

13



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.

The  following  table  describes  our  equity  compensation  plans  as  of  December 31,

2013:

Number of Securities

Remaining Available

for Future Issuance

Number of

Securities

under Equity

to be Issued Upon     Weighted Average      Compensation Plans

Exercise of

Exercise Price of

(excluding securities

Outstanding

Options,

Outstanding Options,

referenced in

Warrants and

Rights

Warrants and Rights

column (a))

Plan Category

(a)

(b)

(c)

Equity

compensation

plans approved by

our stockholders

(1)

296,900  $

0.08

0

Equity

compensation

plans not approved

by our

stockholders

372,000  $

0.08

0

(1) Equity compensation plans approved by our stockholders consist of our 2006

Long Term Incentive Plan.

RECENT SALES OF UNREGISTERED SECURITIES

During   2013   we   not   sell   securities   in   transactions   not   registered   under   the

Securities Act of 1933, as amended (the “Securities Act”).

ITEM 6.   SELECTED FINANCIAL DATA

Not Required

14



ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

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    our  financial  instruments,  including  cash  and  cash  equivalents,

accounts  receivable,  accounts   payable,  and  amounts   due  to/from  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

Our  revenues  from  continuing  operations  consist  of  revenues  derived  primarily

from   sales   of   products   and   services   rendered   to   real   estate   brokers.   We   recognize

revenues  when  the  services  or  products  have  been  provided  or  delivered,  the  fees  we

charge  are  fixed  or  determinable,  we  and  our  customers  understand  the  specific  nature

and terms of the agreed upon transactions, and collectability is reasonably assured.

Contingency  payment  income  was  recognized  quarterly  from  a  percentage  of

Digi-Data’s vaulting service revenue, and is included in discontinued operations.

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

15



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.  No

reserve for bad debts was charged to operations for the year ended December 31, 2013.

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.

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, we performed

an  annual  impairment  study  and  determined  that  present  and  future  cash  flows  are  not

expected  to  be  sufficient  to  recover  the  carrying  amount  of  goodwill.    Based  on  our

evaluation  of  goodwill,  an  impairment  of  $111,026  was  charged  to  operations  during  the

year ended December 31, 2012.

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.

16



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.

Convertible Note

On  September  16,  2013,  the  Company  issued  an  8%  convertible  note  in  the  aggregate

principal  amount  of  $103,500,  convertible  into  shares  of  the  Company’s  common  stock.

The  Note,  including  accrued  interest  is  due  June  18,  2014  and  is  convertible  any  time

after  180  days  at  the  option  of  the  holder  into  shares  of  the  Company’s  common  stock  at

55%  of  the  average  stock  price  of  the  lowest  3  closing  bid  prices  during  the  10  trading

day period ending on the latest complete trading day prior to the conversion date.  Interest

expense on the  convertible note of $2,405  was  recorded for the  year ended  December 31,

2013.

Initially  the  Company  had  anticipated  repaying  the  obligation  prior  to  the  effective  date

of  the  holder  electing  to  convert.   Since  the  effective  date  of  the  election  to  convert  has

passed  the  Company  recorded  a  debt  discount  related  to  identified  embedded  derivatives

relating  to  conversion  features  and  a  reset  provisions  (see  Note  7)  based  fair  values  as  of

the  inception  date  of  the  Note.   The  calculated  debt  discount  equaled  the  face  of  the  note

and  is  being  amortized  over  the  term  of  the  note.   During  the  year  ended  December  31,

2013, the Company amortized $40,250 of debt discount.

Derivative Liability

During the year ended December 31, 2013, the Company issued a convertible note.

The  note  is  convertible  into  common  stock,  at  the  holders’  option,  at  a  discount  to  the

market  price  of  the  Company’s  common  stock.  The  Company  has  identified  embedded

derivatives  included  in  these  notes  as  a  result  of  certain  anti-dilutive  (reset)  provisions,

related  to  certain  conversion  features.  The  accounting  treatment  of  derivative  financial

instruments  requires  that  the  Company  record  the  fair  value  of  the  derivatives  as  of  the

inception  date  of  the  convertible  note  and  debt  discount  amortization  to  fair  value  as  of

each  subsequent  reporting  date.    This  resulted  in  a  fair  value  of  derivative  liability  of

$152,076  in  which  to  the  extent  of  the  face  value  of  convertible  note  was  treated  as  debt

discount with the remainder treated as interest expense.

17



The  fair  value  of  the  embedded  derivatives  at  December  31,  2013,  in  the  amount  of

$152,076,   was   determined   using   the   Binomial   Option   Pricing   Model   based   on   the

following  assumptions:  (1)  dividend  yield  of  0%;  (2)  expected  volatility  of  243.00%,  (3)

weighted average  risk-free interest rate of 0.09%, (4) expected lives of 0.72 to 0.75 years,

and  (5)  estimated  fair  value  of  the  Company’s  common  stock  of  $0.51  per  share.  The

Company  recorded  interest  expense  from  the  excess  of  the  derivative  liability  over  the

convertible note of $48,576 during the year ended December 31, 2013.

Based  upon  ASC  840-15-25  (EITF  Issue  00-19,  paragraph  11)  the  Company has  adopted

a   sequencing   approach   regarding   the   application   of   ASC   815-40   to   its   outstanding

convertible   note.   Pursuant   to   the   sequencing   approach,   the   Company   evaluates   its

contracts based upon earliest issuance date.

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  years  ended  December 31,

2013   and   December   31,   2012   Gotham   produced   approximately   $1,460,923   and

$1,528,822  of  revenue,  respectively.  We  are  focused  on  expanding  the  operations  of

Gotham  by  marketing  the  company  to  existing  and  potential  new  clients.  In  addition  to

Gotham’s  operations,  we  earned  $260  and  $65,064  in  technical  consulting  fees,  other

income   of   $755,000   from   the   IGX   Rescission   and   $30,000,   and   income   from

discontinued  operations  of  $317,625  and  $0  for  the  years  ended  December  31,  2013  and

December 31, 2012, respectively.

Year Ended December 31, 2013 as Compared to Year Ended December 31, 2012

Assets.   At   December 31,   2013,   we   had   $1,050,746   in   current   assets   and

$1,071,342  in  total  assets,  compared  to  $716,829  in  current  assets  and  $745,919  in  total

assets  as  of  December 31,  2012.    The  increase  in  total  assets  was  primarily  due  to  an

increase  in  assets  from  discontinued  operations  as  a  result  of  reversing  the  bad  debt

allowance  for  the  DDC  Judgment  and  the  receivable  due  from  the  IGX  Rescission

Agreement.

Liabilities.  At  December 31,  2013,  we  had  total  liabilities  of  $515,155  compared

to  $440,221  at  December 31,  2012.  Our  total  liabilities  at  December 31,  2013  consisted

of  accounts  payable  of  $316,566,  a  convertible  note  payable  of  $40.250,  a  derivative

liability for  certain  provisions  of  the  convertible  note  of  $152,076  and  a  note  to  a  related

party  of  $6,263,  whereas  our  total  liabilities  as  of  December 31,  2012  consisted  of

accounts  payable  of  $433,958,  and  a  note  to  a  related  party  of  $6,263.  The  increase  in

liabilities  was  primarily  due  to  a  derivative  liability  recorded  for  the  issuance  of  a

convertible note payable to an unrelated party. We do not have any long term liabilities.

18



Stockholders’   Equity.   Our   Stockholders’   Equity   increased   to   $556,187   at

December 31,  2013  from  $305,698  at  December 31,  2012.  This  increase  was  due  to  a

decrease  in  accumulated  deficit  from  $(2,448,346)  at  December  31,  2012  to  $(2,197,857)

at   December   31,   2013   resulting   from   net   income   of   $250,489   for   the   year   ended

December  31,  2013  compared  to  net  losses  of  $(1,623,895)  for  the  year  ended  December

31, 2012.

Revenue  and  Net  Income.  We  had  revenue  of  $1,461,183  for  the  year  ended

December 31, 2013, compared to revenue of $1,593,886 for the year ended December 31,

2012.  The  decrease  in  revenue  was  due  primarily  to  a  decrease  in  revenue  generated  by

our  Gotham  subsidiary  as  result  of  transitioning  out  our  customer  technical  services

division  and  focusing  more  on  the  real  estate  photography  division.    In  addition  to

Gotham’s  operations,  we  earned  $260  and  $65,064  in  technical  consulting  fees,  other

income  of $755,000  and  $30,000  , and  income  from discontinued  operations  of $317,625

and  $0  for  the  years  ended  December  31,  2013  and  December  31,  2012,  respectively.

Our  net  income  was  $250,489  for  the  year  ended  December 31,  2013,  compared  to  a  net

loss  of  $(1,623,895)  for  the  year  ended  December 31,  2012.      Therefore  net  income

resulted  from  a  decrease  in  our cost  of  goods  sold  for  the  year  ended  December  31, 2013

due  to  a  decrease  in  the  cost  of  the  outsourced  photography vendors  utilized  by  Gotham,

other   income   from   the   IGX   Rescission   Agreement   and   income   from   discontinued

operations as a result of the DDC Judgment Award.

General  and  Administrative  Expenses.  General  and  Administrative  Expenses

decreased  to  $1,692,556  for  the  year  ended  December 31,  2013  from  $2,383,568  for  the

year  ended  December 31,  2012.  For  the  year  ended  December 31,  2013  our  General  and

Administrative  Expenses  consisted  of  corporate  administrative  expenses  of  $269,596,

legal  and  accounting  fees  of  $153,113,  payroll  expenses  of  $1,082,212,  Directors  and

Officers  Insurance  of $40,381, employee  benefits  expenses  of  $117,079  (medical, dental,

retirement   plan,   and   life   insurance),   and   business   advisory   fees,   commissions   and

expenses   primarily   associated   with   the   IGX   purchase   and   rescission   transaction,   of

$30,175.   For   the   year   ended   December 31,   2012   our   General   and   Administrative

Expenses   consisted   of   corporate   administrative   expenses   of   $456,097,   legal   and

accounting  fees  of  $184,848  consulting  fees  of  $45,660,  payroll  expenses  of  $1,161,861,

Directors  and  Officers  Insurance  of  $37,076,  goodwill  impairment  expense  of  $111,026

and  business  advisory fees,  commissions  and  expenses  associated  with  the  IGX  purchase

and  rescission  transaction,  of  $387,000.  Therefore  the  decreases  from  the  year  ended

December 31, 2012 to the year ended December 31, 2013 relate primarily to a decrease in

payroll  and  corporate  administrative  expenses.  In  the  event  the  company  effectuates  an

acquisition   in   2014   we   anticipate   additional   professional   fees   associated   with   the

acquisition.

LIQUIDITY AND CAPITAL RESOURCES

General

As  reflected  in  the  accompanying  consolidated  financial  statements,  at  December

31,  2013,  we  had  $26,870  of  cash  and  stockholders’  equity  of  $556,187.   At  December

31, 2012, we had $104,721 of cash and stockholders’ equity of $305,698.

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Our primary capital requirements in 2014 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  used  by  operating  activities  was  $183,151  for  the  year  ended  December

31,  2013,  compared  to  net  cash  used  by  operating  activities  of  $518,687  for  the  year

ended  December  31,  2012.  Our  primary  source  of  operating  cash  flows  from  continuing

operating   activities   for   the   year   ended   December   31,   2013   was   from   our   Gotham

subsidiary’s  revenues  of  $1,461,183,  and  $1,528,822  for  the  year  ending  December  31,

2012.   Additional  contributing  factors  to  the  change  were  from  a  decrease  in  accounts

receivable  of  $23,149,  a  decrease  in  prepaid  expenses  of  $122,487  and  a  decrease  in

accounts  payable  of  $117,392.    Net  cash  provided  by  discontinued  operating  activities

was   $0  for  the  year  ended   December  31,  2013  and   cash   provided   by  discontinued

operating  activities  was  $250,000  for  the  ended  December  31,  2012.   For  the  year  ended

December 31, 2012  we  received  $250,000  in  cash  payments  from  DDC  which  was  offset

by   a   decrease   in   accounts   receivable   included   in   the   Assets   from   Discontinued

Operations.

Cash   provided   by   continuing   investing   activities   was   $1,800   and   $417,735

respectively,  for  the  years  ended  December  31,  2013  and  December  31,  2012.   For  the

year  ended  December  31,  2013  the  entire  source  of  cash  provided  by  investing  activities

was  a  decrease  in  deposits.  For  the  year  ended  December  31,  2012  the  primary source  of

cash  provided  by  investing  activities  was  from  the  repayment  of  notes  receivable  due

from Allied Airbus Inc.

Cash  provided  by  financing  activities  was  $103,500  for  the  year  ended  December

31,  2013  compared  to  cash  used  by  financing  activities  of  $19,127  for  the  year  ended

December  31,  2012.   The  cash  flows  provided  by  financing  activities  for  the  year  ended

December  31,  2013  was   from  the  issuance  of  a  Convertible  note  payable  to  at  an

20



unrelated   party.

The   cash   flows   used   by   financing   activities   for   the   year   ended

December 31, 2012 was from a repayment of loans payable to a related party.

Supplemental Cash Flow Activity

In   the   year   ended   December   31,   2013   the  company  paid   interest   of   $3,524

compared to interest of $1,884 in the year ended December 31, 2012.

OFF BALANCE SHEET ARRANGEMENTS

We have no off balance-sheet arrangements.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

MARKET RISK

Not Required.

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements required by this Item 8 are included in this Report beginning

on page F-1, as follows:

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheet as of December 31, 2013 and 2012

F-2

Consolidated Statement of Income for the years ended December 31, 2013 and

F-3

2012

Consolidated Statement of Changes in Stockholder’s Equity for the years ended          F-4

December 31, 2013 and 2012

Consolidated Statement of Cash Flows for the years ended December 31, 2013

F-5

and 2012

Notes to Financial Statements

F-7

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.  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

21



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

15d-15(e)  under the  Exchange Act as  of December 31, 2013.  Based upon  that  evaluation,

our  Chief  Executive  Officer  and  Chief  Financial  Officer  concluded  that  our  disclosure

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

Management’s Annual Report on Internal Control over Financial Reporting.

We  are  responsible  for  establishing  and  maintaining  adequate  internal  control

over  financial  reporting.  Internal  control  over  financial  reporting  is  defined  in  Rule 13a-

15(f)  and  Rule  15d-15(f)  promulgated  under  the  Exchange  Act  as  a  process  designed  by,

or  under  the  supervision  of,  our  Chief  Executive  Officer  (our  principal  executive  officer)

and  Chief  Financial  Officer  (our  principal  accounting and  financial  officer),  and  effected

by  our   board   of   directors,   management   and   other   personnel,   to   provide   reasonable

assurance  regarding  the  reliability  of  financial  reporting  and  the  preparation  of  financial

statements   for   external   purposes   in   accordance   with   generally   accepted   accounting

principles.   Our   internal   control   over   financial   reporting   includes   those   policies   and

procedures that:

§     Pertain  to the  maintenance of  records  that, in reasonable detail, accurately and

fairly reflect the transactions and dispositions of our assets;

§     Provide  reasonable  assurance  that  transactions  are  recorded  as  necessary  to

permit   preparation   of   financial   statements   in   accordance   with   generally

accepted  accounting  principles,  and  that  our  receipts  and  expenditures  are

being  made  only  in  accordance  with  authorizations  of  our  management  and

our directors; and

§     Provide  reasonable  assurance   regarding  prevention   or   timely  detection   of

unauthorized  acquisition,  use  or  disposition  of  our  assets  that  could  have  a

material effect on the financial statements.

Our  internal  control  system  was  designed  to  provide  reasonable  assurance  to  our

management  and  board  of  directors  regarding  the  preparation  and  fair  presentation  of

published  financial  statements.  Because  of  its  inherent  limitations,  internal  control  over

financial  reporting  may  not  prevent  or  detect  misstatements.  Also,  projections  of  any

evaluation  of  effectiveness  to  future  periods  are  subject  to  the  risk  that  controls  may

become  inadequate  because  of  changes  in  conditions,  or  that  the  degree  of  compliance

with the policies or procedures may deteriorate.

Our  management  assessed  the  effectiveness  of  the  Company’s  internal  control

over   financial   reporting   as   of   December 31,    2013.   In   making   this   assessment,

management  used  the  criteria  set  forth  in  the  Internal  Control    Integrated  Framework

issued  by  the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission

(COSO).  Based  on  management’s  assessment,  we  concluded  that,  as  of  December 31,

2013, our internal control over financial reporting was effective.

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Change in Internal Controls

During the quarter ended December 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.

ITEM 9B.  OTHER INFORMATION

None.

PART III

ITEM 10.   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

DIRECTORS AND EXECUTIVE OFFICERS

Our board of directors manages our business and affairs. Under our Articles of

Incorporation and Bylaws, the Board will consist of not less than one, nor more than

seven directors. Currently, our Board consists of five directors.

The  names,  ages,  positions  and  dates  appointed  of  our  current  directors  and

executive officers are set forth below.

Name

Age

Position

Appointed

John Salerno

75     Chief Executive Officer, President,    March 2009

Chairman of the Board, and

(appointed Chairman

Director

and Director in

April 2000)

Elisa Luqman

49     Chief Financial Officer, Executive     March 2009

Vice President, General Counsel,

(appointed Director

and Director

in August 2009)

James J. Charles

71     Director

March 2006

George G. Dempster

74     Director

January 2001

John Keefe

71     Director

July 2013

John  Salerno,  Chief  Executive  Officer,  President,  Chairman  of  the  Board,

and  Director.  Mr.  Salerno  is  a  seasoned  hands-on  executive  with  over  40 years  of

experience    with    public    and    private    computer    software    and    service    companies.

Mr. Salerno  built  a  multi-million  dollar  business  from  a  start  up,  servicing  the  real  estate

industry.  The  business  was  sold  in  1984  and  Mr. Salerno  provided  consulting services  to

a  wide  range  of  clients  through  1995.  In  1996, along with  his  daughter and  a  small  group

of  private  accredited  investors,  he  co-founded  the  Company.  Mr. Salerno  was  President

and  CEO  of  the  Company  from  April 1,  2000  until  February 28,  2006.  After  signing

contracts with Verizon and Cablevision, the Company sold its assets in 2006 to Digi-Data

Corporation.  From  March 1,  2006  thru  February 2009  Mr. Salerno  served  as  President  of

23



the  Vault  Services  Division  of  Digi-Data  Corporation.  Upon  the  expiration  of  his  3 year

contract the Vault Services Division was at a revenue run rate of $12 million annually. As

of March 1, 2009,  Mr. Salerno returned to his full  time management roll  at  the Company.

Mr. Salerno is an ex — US Marine Corps, Crypto/ Communications Officer and has a BS

in Mathematics from Fordham University. Mr. Salerno is Elisa Luqman’s father.

Mr. Salerno was nominated as a Director because  if his intimate  knowledge of the

Company  and  its  history  as  a  founder.    Additionally,  Mr.  Salerno’s  mathematical  and

technical background as a data center manager early in his professional career and later as

a  software  developer  offers  the  board  hand’s  on  technical  experience  in  both  operations

and  software  analysis.     Mr.  Salerno  utilized  his  experience  and  contacts  to  secure  the

major  customers  driving  the  sales  that  generate  the  Company’s  payment  stream  from

DDC.   Moreover,  Mr.  Salerno  adds  value  to  Gotham  through  his  40  plus  years  serving

the  New  York  Real  Estate  industry.   He  is  thoroughly  familiar  with  the  unique  workings

of  the  New  York  real  estate  industry  and  has  many  contacts  within  that  community  that

are a benefit to Gotham.

Elisa  Luqman,  Chief  Financial  Officer,  Executive  Vice  President,  General

Counsel,  and  Director.  Ms. Luqman  is  a  computer  literate  attorney  with  over  18 years

experience  with  intellectual  property  and  computer  software.  Prior  to  co-founding  the

Company,   Ms. Luqman   was   president   of   University   Software   Corp.,   a   software

development  company  focused  on  a  wide  range  of  student  educational  and  intellectual

applications.  Ms. Luqman  was  Chief  Operating  Officer  of  the  Company,  from  April 1,

2000   until   February 28,   2006.   From   March 1,   2006   through    February 28,   2009

Ms. Luqman  was  employed  as  Chief  Operating  Officer  of  the  Vault  Services  Division  of

Digi-Data  Corporation,  the  company  that  acquired  the  Company’s  assets  in  2006,  and

subsequently  during  her  tenure  with  Digi-Data  Corporation  she  became  the  in-house

general  counsel  for  the  entire  corporation.  In   that  capacity  she  was   responsible  for

acquisitions,  mergers,  patents,  and  employee  contracts,  and  worked  very  closely  with

Digi-Data’s outside counsel firms, DLA-Piper, the  Law Offices of Sandra T. Carr and the

patent  firm  of  Jordan  and  Hamburg.  As  of  March 1,  2009,  Ms.  Luqman  rejoined  the

Company in her current  capacities. Ms  Luqman  received  a BA degree in  Marketing, a JD

in  Law,  and  a  MBA  Degree  in  Finance  from  Hofstra  University.  Ms. Luqman  is  a

member   of   the   bar   in   New   York   and   New   Jersey.   Ms. Luqman   is   John   Salerno’s

daughter.

Ms.  Luqman  was  nominated  as  a  Director  because  of  her  intimate  knowledge  of

the  Company  and  its  history  as  a  founder.   Additionally,  as  an  attorney,  Ms.  Luqman’s

legal  background  enables  her  to  provide  counsel  to  the  Company.  Her  experience  as

general  counsel  to  the  Company  provides  her  with  a  unique  insight  into  the  Company’s

contracts  with  customers  and  vendors,  intellectual  property  assets  and  issues,  financing

transactions  and  shareholder  transactions.    Moreover,  having  been  through  the  merger

and  acquisition  process  on  both  sides  of  the  table,  Ms.  Luqman  offers  the  Company  in-

house  guidance  throughout  the  acquisition  process.  That  combined  with  Ms.  Luqman’s

MBA  in  Finance  aids  in  providing  the  Board  with  more  efficient  analysis  of  input  from

outside auditors and  legal advisors.

24



James  J.  Charles,  Director.  Mr. Charles  is  a  high  profile  financial  executive

with  a  broad  base  of  experience  with  firms  ranging  in  size  from  $24MM  to  $180MM  in

annual revenue. He  worked closely with  management  and Boards of Directors on  matters

ranging  from  mergers  and  acquisitions  to  stock  restructurings  and  spin-offs.  Mr. Charles

has  been  a  self  employed  Certified  Public  Accountant  from  1999  to  present.  From  1994

to   1999   Mr. Charles   was   the   chief   financial   officer   of   Interpharm   Holdings,   Inc.

Interpharm   Holdings,   Inc.,   through   its   subsidiary,   Interpharm,   Inc.,   engaged   in   the

development,  manufacture,  and  marketing  of  generic  prescription  strength  and  over-the-

counter  pharmaceuticals  in  the  United  States.  It  also  focused  on  the  development  of

products  in  the  areas  of  female  hormone,  scheduled  narcotic,  soft  gelatin  capsule,  oral

liquid,  products  coming  off  patent,  and  other  products.  From  1966  to  1994  Mr. Charles

was  a  Senior  Managing  Partner  with  Ernst  &  Young.  Mr. Charles’  education  includes

studies   and   management   programs   at   Harvard   University   and   Williams   College.

Mr. Charles received his BBA in Accounting at Manhattan College.

Mr.  Charles  was  nominated  as  a  Director  because  of  his  financial  expertise.  He

has  been  involved  in  the  practice  of  public  accounting  for  over  forty  years.   During  his

tenure  as  a  Senior  Managing  Partner  at  Ernst  &  Young  he  spent  considerable  years

analyzing  potential  acquisition  targets  for  corporate  clients  and  has  particular  experience

and  skills  on  matter  such  as  mergers  and  acquisitions,  stock  restructuring  and  spin-offs.

He has also been a Chief Financial Officer of a public company.

George  G.  Dempster,  Director.  Mr. Dempster  was  Commissioner  of  Commerce

for  the  State  of  New  York  from  1979  to  1983.  He  served  as  the  Chairman  of  the  Finance

Committee  for  Hofstra  University  for  25 years  from  1976  through  2001,  and  is  currently

Chairman  Emeritus  of  the  Board  of  Trustees.  Mr. Dempster  has  been  the  Chairman  of

Tran-Leisure  Corp.  since  1983,  and  was  its CEO from 1983-2002.   Tran -Leisure  Corp  is

a   diversified   holding   company   with   interests   ranging   from   helicopter   services   to

manufacturing.  From  1969  to  1973  Mr. Dempster  served  as  the  CEO  of  Cybernetics,  a

major  computer  software  developer.  Mr. Dempster  served  as  a  marketing  manager  for

IBM from 1961 to 1968. Mr. Dempster has a BA in business administration from Hofstra

University.

Mr.  Dempster  was  nominated  as  a  Director  because  of  his  strong  administrative,

financial  and  economic  background.   Having  served  as  Commissioner  of  Commerce  for

the  State  of  New  York  for  4  years  and  on  the  Board  of  Hofstra  University  for  over  25

years,  Mr.  Dempster  provides  the  Company  with  extensive  experience  in  commerce  and

administration  in  both  the  private  and  public  sectors.     Moreover,  during  his  tenure  at

Hofstra   University   Mr.    Dempster   was   intimately   involved   in   several   financing

transactions  to  maintain  the  University in  a  solvent  and  profitable  manner.   Additionally,

having been  CEO of a  diversified holding company, Mr. Dempster is thoroughly familiar

with   the   merger   and   acquisition   process.   He   offers   years   of   experience   analyzing

business, their models and economics, and identifying the appropriate financing vehicles.

John  Keefe,  Director.  Mr.  Keefe  is  an  investment  banker,  venture  capitalist,  founder

of  three  businesses,  and  a  turnaround  consultant  to  businesses  in  trouble.   Since  2011  to

Present,  Mr.  Keefe  is  the  Founder  and  Chief  Development  Officer  of  Security  Capital

25



Advisors  LLC,  located  in  Jersey  City,  NJ.    Security  Capital  Advisors  LLC  is  a  firm

providing  indirect  financing  to  local  governments  in  the  US.     From  2007  to  2011  Mr.

Keefe  was  Managing  Director  of  Nachman  Hays  Brownstein,  located  in  New  York,  NY.

Nachman   Hays   Brownstein   is   a   national   turnaround   management   firm,   assisting

underperforming   and   troubled   companies,   maximizing   value   for   owners,   investors,

creditors  and  employees.  Mr.  Keefe  was  also  a  founding  General  Partner  of  a  venture

capital   firm,   a   founder   and   CFO   of   a   computer   software   company,   a   Senior   Vice

President  of  an  investment  banking  firm,  and  emergency  CFO  and  Chief  Restructuring

Officer of several distressed businesses. He is a  graduate of Harvard College and Harvard

Business School.

Mr.   Keefe’   was   nominated   as   a   Director   because   of   his   financial   expertise

combined  with  his  strong  technical  background.  He  started  his  career  as  a  computer

software  engineer  and  designer  for  IBM,  General  Electric,  and  Litton  Industries.  He

evolved  into  the  financial  arena  serving  many  years  a  corporate  Chief  Financial  Officer.

He   is  now  involved  in  the  practice  of  venture  capital  and  investment  banking   He  has

particular   skills   acting   as   a   turnaround   consultant   to   businesses   in   trouble   being   a

‘Certified  Turnaround  Professional’  by  the  Turnaround  Management  Association.  He

offers  years  of  experience  analyzing  business,  their  revenue  models,  and  identifying

appropriate financing vehicles.

On  April  22,  2013,  the  Board  of  Directors  (the  “Board”)  of  iGambit  Inc.  (the

“Company”)  accepted  the  resignation  of  Mr.  John  Waters  from  the  Board  and  related

responsibilities  on  the  Audit  and  Compensation  Committees.   Mr.  Waters’  resignation  is

not  the  result  of  any  disagreement  with  the  Company  on  any  matter  relating  to  the

Company’s operations, policies or practices.  Mr. Waters was replaced by Mr. Keefe.

COMMITTEES OF THE BOARD

The  Board  has  established  an  Audit  Committee  and  a  Compensation  Committee.

The   Board   does   not   currently   have   a   Nominating   Committee.   The   work   typically

conducted by a Nominating Committee is conducted by the full Board.

Audit Committee

The    Audit    Committee    presently   consists    of    Messrs. Charles,    Keefe    and

Dempster,   with   Mr.   Charles   serving   as   chairman.   Our   Board   has   determined   that

Mr. Charles  qualifies  as   an  “audit  committee  financial  expert”  as  defined  under  the

federal securities laws. The Audit Committee is responsible for monitoring and reviewing

our  financial  statements  and  internal  controls  over  financial  reporting.  In  addition,  they

recommend  the  selection  of  the  independent  auditors  and  consult  with  management  and

our  independent  auditors  prior  to  the  presentation  of  financial  statements  to  stockholders

and  the  filing  of  our  forms  10-Q  and  10-K.  The  Audit  Committee  has  adopted  a  charter

and it is posted on our web site at www.igambit.com.

26



Compensation Committee

The  Compensation  Committee  presently  consists  of  Messrs.  Charles,  Keefe  and

Dempster,   with   Mr. Keefe   serving   as   chairman.   The   Compensation   Committee   is

responsible for reviewing and  recommending to  the  Board the  compensation  and  over-all

benefits  of  our  executive  officers,  including  administering  the  Company’s  2006  Long

Term  Incentive  Plan.  The  Compensation  Committee  may,  but  is  not  required  to,  consult

with  outside  compensation  consultants.  The  Compensation  Committee  has  adopted  a

charter and the charter is posted on our web site at www.igambit.com.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Based  solely  upon  a  review  of  Forms  3  and  4  and  amendments  thereto  furnished

to the Company under Rule 16a-3(d) of the Securities Exchange Act of 1934, as amended

(the  “Exchange  Act”)  the  Company  is  not  aware  of  any  person  that  failed  to  file  on  a

timely basis,  as  disclosed  in  the  aforementioned  Forms,  reports  required  by Section  16(a)

of the Exchange Act during the year ended December 31, 2013.

CODE OF ETHICS

The  Company has  adopted  a  Code  of  Ethics  that  applies  to  its  principal  executive

officer,  principal  financial  officer,  principal  accounting  officer  or  controller,  or  persons

performing  similar  functions.    A  copy  of  the  Code  of  Ethics  is  attached  as  an  exhibit  to

this  report.    A  copy  of  the  Code  of  Ethics  is  available  on  the  Company’s  website  at

www.igambit.com.    Any  amendments  to,  or  waivers  from,  the  Code  of  Ethics  will  be

disclosed on the Company’s website at www.igambit.com.

27



ITEM 11.  EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation received by our executive

officers, for their service, during the year ended December 31, 2013.

Current

Nonqualified

Officers

Non-equity

Deferred

Name &

Option

Incentive Plan      Compensation

All Other

Principal

Salary      Bonus     Stock     Awards      Compensation

Earnings

Compensation

Total

Position

Year

($)

($)

($)

($)

($)

($)

($)

($)

John

Salerno

2013     200,000

0

0

0

0

0

10,237(1)

210,237

CEO,

President

2012     225,000

0

0

0

0

0

10,237(2)

235,237

Chairman

& Director     2011     225,000

0

0

0

0

0

10,087(3)

235,087

Elisa

Luqman

2013     200,000

0

0

0

0

0

30,125(4)

230,125

Acting

CFO,

2012     200,000

0

0

0

0

0

27,795(5)

227,795

EVP,  GC

and

2011     200,000

0

0

0

0

0

26,887(6)

226,887

Director

(1)    Includes $6,168 in health insurance premiums and $4,069 in life insurance

premiums.

(2)    Includes $6,168 in health insurance premiums and $4,069 in life insurance

premiums.

(3)    Includes $6,018 in health insurance premiums and $4,069 in life insurance

premiums.

(4)    Includes $30,125 in health and dental insurance premiums..

(5)    Includes $27,795 in health and dental insurance premiums.

(6)    Includes $26,887 in health and dental insurance premiums.

Employment Arrangements with Named Executive Officers

The  Company  does  not  currently  have  any  employment  agreements  with  it  executive

officers.

28



Compensation of the Board of Directors

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

OPTION AWARDS

STOCK AWARDS

Equity

Equity

Incentive

Incentive

Plan

Market

Plan

Awards:

Value      Awards:     Market or

Equity

of

Number

Payout

Incentive

Number     Shares

of

Value of

Plan

of

or

Unearned    Unearned

Awards:

Shares

Units

Shares,

Shares,

Number of

Number of

Number of

or Units

of

Units or

Units or

Securities

Securities

Securities

of Stock     Stock

Other

Other

Underlying

Underlying

Underlying

That

That

Rights

Rights

Unexercised     Unexercised     Unexercised     Option

Have

Have     That Have   That Have

Options

Options

Unearned      Exercise      Option

Not

Not

Not

Not

(#)

(#)

Options

Price      Expiration     Vested     Vested

Vested

Vested

Exercisable    Unexercisable

(#)

($)

Date

(#)

($)

(#)

(#)

Name (a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

James Charles

59,000

0

0

$0.10    7/21/2020

0

0

0

0

James Charles

100,000

0

0

$0.10    7/11/2021

0

0

0

0

George Dempster

113,000

0

0

$0.10    7/21/2020

0

0

0

0

George Dempster

100,000

0

0

$0.10    7/11/2021

0

0

0

0

The  following  table  sets  forth  the  compensation  received  by  our  directors,  for  their

service as directors, during the year ended December 31, 2013.

Nonqualified

Fees

Non-equity

deferred

earned or

Stock

Option

incentive plan

compensation

All other

paid in

awards

awards

compensation

earnings

compensation

Total

Name

cash ($)

($)

($)

($)

($)

($)

($)

John Salerno (1)

-

-

-

-

-

-

0

Elisa Luqman (1)

-

-

-

-

-

-

0

James J. Charles

$3,000

-

-

-

-

$3,000

George G. Dempster

$3,000

-

-

-

-

$3,000

John Waters

$3,000

-

-

-

-

$3,000

John Keefe

0

-

-

-

-

-

0

(1)  These  individuals  serve  as  executive  officers  of  the  Company,  and  do  not

receive   any   compensation   for   the   services   they   provide   as   directors   of   the

Company.

Members of our Board receive $1,000 per quarter for their service to the Company.

29



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The  following  table  sets  forth  information  known  to  us,  as  of  March  31,  2014,

relating to the beneficial ownership of shares of common stock by:  (i) each person who is

known  by  us  to  be  the  beneficial  owner  of  more  than  5%  of  the  Company’s  outstanding

common   stock;   (ii) each   director;   (iii) each   executive   officer;   and   (iv) all   executive

officers  and  directors  as  a  group.  Under  securities  laws,  a  person  is  considered  to  be  the

beneficial  owner  of  securities  owned  by  him  (or  certain  persons  whose  ownership  is

attributed  to  him)  or  securities  that  can  be  acquired  by  him  within  60 days,  including

upon the exercise of options, warrants or convertible securities. The Company determines

a   beneficial   owner’s   percentage   ownership   by   assuming   that   options,   warrants   and

convertible  securities  that  are  held  by  the  beneficial  owner  and  which  are  exercisable

within 60 days, have been exercised or converted.  The Company believes that  all persons

named  in  the  table  have  sole  voting  and  investment  power  with  respect  to  all  shares  of

common  stock  shown  as  being  owned  by  them.  Unless  otherwise  indicated,  the  address

of  each  beneficial  owner  in  the  table  set  forth  below  is  care  of  iGambit  Inc.,  1050  W.

Jericho  Turnpike,  New  York,  11787.  The  percentages  in  the  following  table  are  based

upon 25,044,056 shares outstanding as of March 31, 2014.

Amount and Nature

of Beneficial

Name of Beneficial Owner

Ownership

Percent of Class

John Salerno, C.E.O., President, Chairman

of the Board, and Director

5,616,900(1)

22.4%

Elisa Luqman, C.F.O., Executive Vice

President, General Counsel and Director

5,715,000(2)

22.8%

James J. Charles, Director

600,000(3)

2.4%

George G. Dempster, Director

605,000(4)

2.4%

Mehul Mehta

2,450,000

9.8%

Executive Officers and Directors as a

Group:

12,539,900 (4)

50%

1.    Includes: options to purchase 46,900 shares of common stock at $0.01 per share held by John L.

Salerno, Mr. Salerno’s son; and options to purchase 100,000 shares of common stock at $0.01 per

share held by Dean T. Salerno, Mr. Salerno’s son.

2.    Includes 245,000 shares of common stock held by Muhammad Luqman, Ms. Luqman’s husband.

3.    Includes options to purchase 159,000 shares of the common stock at $0.10 per share.

4.    Includes options to purchase 213,000 shares of the common stock at $0.10 per share.

5.    Includes the disclosures in footnotes 1 through 4 above.

ITEM 13.   CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND

DIRECTOR INDEPENDENCE

30



RELATED PARTY TRANSACTIONS

None.

BOARD INDEPENDENCE

The Company has elected to use  the independence standards of the  NYSE AMEX

Equities   Exchange   in   its   determination   of   whether   the   members   of   its   Board   are

independent.  Based  on  the  foregoing,  the  Company  has  concluded  that  Mr. Charles  and

Mr. Dempster  are  independent.  The  Board  has  established  an  Audit  Committee  and  a

Compensation  Committee.  The  Board  does  not  currently  have  a  Nominating  Committee.

The  work  typically  conducted  by  a  Nominating  Committee  is  conducted  by  the  full

Board.

ITEM 14.   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The  following  table  shows  what  Fiondella,  Milone  &  LaSaracina,  LLP  billed  for

the  audit  and  other  services  for  the  year  ended  December  31,  2013  and  December 31,

2012 respectively.

Year Ended  Year Ended

12/31/ 2013    12/31/2012

Audit Fees

$

45,000  $

45,000

Audit-Related Fees

-

---

All Tax Fees

---

Other Fees

---

Total

$

45,000  $

45,000

Audit Fees — This category includes the audit of the Company’s annual financial

statements,   review   of   financial   statements   included   in   the   Company’s   Form   10-Q

Quarterly Reports  and  services  that  are  normally provided  by the  independent  auditors  in

connection with engagements for those  years.

Audit-Related  Fees    This  category  includes  assurance  and  related  services  by

the  independent  auditor  that  are  reasonably  related  to  the  performance  of  the  audit  or

review of the  Company’s  financial  statements  and  that  are  not  reported  under the  caption

“Audit Fees.”

Tax  Fees    This  category includes  services  rendered  by the  independent  auditor

for tax compliance, tax advice, and tax planning.

All  Other  Fees    This  category  includes  products  and  services  provided  by  the

independent  auditor  other  than  the  services  reported  under  the  captions  “Audit  Fees,”

“Audit-Related Fees,” and “Tax Fees.”

31



Overview      The   Company’s   Audit   Committee,   reviews,   and   in   its   sole

discretion  pre-approves,  our  independent  auditors’  annual  engagement  letter  including

proposed  fees  and  all  audit  and  non-audit  services  provided  by  the  independent  auditors.

Accordingly,  all  services  described  under  “Audit  Fees,”  “Audit-Related  Fees,”  “Tax

Fees,” and “All Other Fees” were pre-approved by our Company’s Audit Committee. The

Audit  Committee  may  not  engage  the  independent  auditors  to  perform  the  non-audit

services  proscribed  by law  or  regulation.  The  Company’s  Audit  Committee  may delegate

pre-approval  authority to  a  member  of  the  Board  of  Directors,  and  authority delegated  in

such manner must be reported at the next scheduled meeting of the Board of Directors.

PART IV

ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheet as of December 31, 2013 and 2012

F-3

Consolidated Statement of Income for the years ended December 31, 2013 and

F-4

2012

Consolidated Statement of Changes in Stockholder’s Equity for the years

F-5

ended December 31, 2013 and 2012

Consolidated Statement of Cash Flows for the years ended December 31, 2013

F-6

and 2012

Notes to Financial Statements

F-8

(b) Exhibits

Exhibit No.   Description

3.1(i)     Certificate of Incorporation, filed with the Delaware Secretary of State on

April 13, 2000 (1)

3.1(ii)

Certificate of Merger, filed with the Delaware Secretary of State on

April 18, 2000 (1)

3.1(iii)

Certificate of Amendment Changing Name, filed with the Delaware

Secretary of State on December 19, 2000 (1)

3.1(iv)

Certificate of Merger filed with the Delaware Secretary of State on

February 17, 2006 (1)

3.1(v)    Certificate of Amendment Changing Name filed with the Delaware

Secretary of State on April 5, 2006 (1)

3.1(vi)

Certificate of Amendment Increasing Authorized Common Stock to 75

Million Shares, filed with the Delaware Secretary of State on December 2,

2009 (1)

3.2

Bylaws (1)

4.1

Form of Stock Certificate (2)

4.2

Common Stock Purchase Warrant issued to Roetzel & Andress (3)

10.1

iGambit Inc. 2006 Long Term Incentive Plan, Amended 12/31/2006 (1)

10.2

Employment Agreement between Digi-Data Corporation and Mr. Salerno

32



(2)

10.3

Employment Agreement between Digi-Data Corporation and Mrs. Luqman

(2)

14

Code of Ethics (5)

21

Subsidiaries (1)

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 incorporated by reference into any other filing

under the Security Act of 1933, as amended, or by the Security Exchange

Act of 1934, as amended.)

32.2

Certification of the 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 incorporated by reference into any other filing

under the Security Act of 1933, as amended, or by the Security Exchange

Act of 1934, as amended.)

(1)  Incorporated by reference to Form 10 filed on December 31, 2009.

(2)  Incorporated by reference to Amendment No. 1 to Form 10 filed on June 11, 2010.

(3)  Filed with initial Form 10-K on June 15, 2010.

(4)  We hereby agree to furnish the SEC with any omitted schedule or exhibit upon

request.

(5)  Filed with Form 10-K/A (Amendment No. 1) on September 13, 2010.

33



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the

registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by

the undersigned, thereunto duly authorized, in the City of Hauppauge, New York, on

March 31, 2014.

iGambit Inc.

April 1, 2014

By:   /s/ John Salerno

John Salerno, Chief Executive

Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this

Annual Report on Form 10-K has been signed by the following persons in the capacities

indicated:

Signature

Title

Date

/s/ John Salerno

Chief Executive Officer and

Director

April 1, 2014

John Salerno

/s/ Elisa Luqman

Chief Financial Officer, Executive

April 1, 2014

Vice President, General Counsel,

Elisa Luqman

Principal Accounting Officer and

Director

/s/ James J. Charles

Director

April 1, 2014

James J. Charles

/s/ George G. Dempster

Director

April 1, 2014

George G. Dempster

/s/ John Keefe

Director

April 1, 2014

John Keefe

34



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

iGambit, Inc.

Smithtown, New York

We  have  audited  the  accompanying  consolidated  balance  sheets  of  iGambit,  Inc.  (the

Company)  as  of  December  31,  2013 and 2012,  and  the related consolidated  statements

of  operations,  changes  in  stockholders’  equity,  and  cash  flows  for  each  of  the  years  in

the   two-year   period   ended   December   31,   2013.   The   Company’s   management   is

responsible  for  these  consolidated  financial  statements.  Our  responsibility  is  to  express

an opinion on these consolidated financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  the  standards  of  the  Public  Company

Accounting  Oversight  Board  (United  States).  Those  standards  require  that  we  plan  and

perform  the  audits  to  obtain  reasonable  assurance  about  whether  the  consolidated

financial  statements  are  free  of  material  misstatement.  The  Company  is  not  required  to

have,  nor  were  we  engaged  to  perform,  an  audit  of  its  internal  control  over  financial

reporting. Our audits included consideration of  internal control over financial reporting as

a basis for  designing audit  procedures that  are appropriate in the circumstances,  but not

for  the  purpose  of  expressing  an  opinion  on  the  effectiveness  of  the  company’s  internal

control  over  financial  reporting.  Accordingly,  we  express  no  such  opinion.  An  audit  also

includes examining, on a test basis, evidence supporting the amounts and disclosures in

the  consolidated  financial  statements,  assessing  the  accounting  principles  used  and

significant  estimates  made  by  management,  as  well  as  evaluating  the  overall  financial

statement  presentation.  We  believe  that  our  audits  provide  a  reasonable  basis  for  our

opinion.

In  our  opinion,  the  consolidated  financial  statements  referred  to  above  present  fairly,  in

all  material  respects,  the  financial  position  of  the  Company  as  of  December  31,  2013

and 2012, and the results of its operations and its cash flows for each of  the years in the

two-year  period  ended  December  31,  2013  in  conformity  with  accounting  principles

generally accepted in the United States of America.

/s/ Fiondella, Milone & LaSaracina LLP

Glastonbury, Connecticut

March 31, 2014

F-1



IGAMBIT INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,

2013

2012

ASSETS

Current assets

Cash

$

26,870

$

104,721

Accounts receivable, net

135,292

158,441

Prepaid expenses

10,590

133,077

Due from rescission agreement

239,779

--

Assets from discontinued operations, net

638,215

320,590

Total current assets

1,050,746

716,829

Property and equipment, net

11,176

17,870

Other assets

Deposits

9,420

11,220

$

1,071,342

$

745,919

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

316,566

$

433,958

Convertible note payable, net

40,250

--

Derivative liability

152,076

--

Note payable - related party

6,263

6,263

Total current liabilities

515,155

440,221

Stockholders' equity

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

issued and outstanding - 25,044,056 shares in 2013 and 2012,

respectively

25,044

25,044

Additional paid-in capital

2,729,000

2,729,000

Accumulated deficit

(2,197,857)

(2,448,346)

Total stockholders' equity

556,187

305,698

F-2



$

1,071,342

$

745,919

F-3



IGAMBIT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,

2013

2012

Sales

$      1,461,183

$

1,593,886

Cost of sales

496,008

783,505

Gross profit

965,175

810,381

Operating expenses

General and administrative expenses

1,692,556

2,383,568

Loss from operations

(727,381)

(1,573,187)

Other income

Interest income

--

13,235

Interest expense

(54,505)

--

Amortization of debt discount

(40,250)

--

Income from rescission agreement

755,000

--

Miscellaneous income

--

30,000

Total other income

660,245

43,235

Loss from continuing operations before income tax

expense

(67,136)

(1,529,952)

Income tax expense

--

93,943

Loss from continuing operations

(67,136)

(1,623,895)

Income from discontinued operations

317,625

--

Net income (loss)

$

250,489

$    (1,623,895)

Basic and fully diluted earnings (loss) per common

share:

Continuing operations

$

.00

$

(.07)

Discontinued operations

$

.01

$

.00

Net earnings per common share

$

.01

$

(.07)

F-4



Weighted average common shares outstanding - basic

25,044,056

23,957,034

Weighted average common shares outstanding - fully

diluted

25,987,956

23,957,034

IGAMBIT INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

YEARS ENDED DECEMBER 31, 2013 AND 2012

Additional

Common stock

Paid-in

Accumulated

Shares

Amount

Capital

Deficit

Totals

Balances, December 31, 2011

23,954,056     $

23,954     $

2,403,090     $

(824,451)     $

1,602,593

Common stock issued for

services

1,090,000

1,090

325,910

--

327,000

Net loss

(1,623,895)

(1,623,895)

Balances, December 31, 2012

25,044,056

25,044

2,729,000

(2,448,346)

305,698

Net income

250,489

250,489

Balances, December 31, 2013

25,044,056     $

25,044     $

2,729,000     $

(2,197,857)     $

556,187

F-5



IGAMBIT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

250,489

$     (1,623,895)

Adjustments to reconcile net income (loss) to net

cash used by operating activities

Income from discontinued operations

(317,625)

--

Depreciation

6,694

8,750

Debt discount interest expense

48,576

--

Debt discount amortization

40,250

--

Stock-based compensation expense

--

327,000

Goodwill impairment

--

111,026

Satisfaction of notes receivable from stockholder for services

--

17,000

Deferred income taxes

--

184,185

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

23,149

110,912

Prepaid expenses

122,487

(74,428)

Due from rescission agreement

(239,779)

--

Accounts payable

(117,392)

170,763

Net cash provided(used) by continuing operating activities

134,474

(768,687)

Net cash provided (used) by discontinued operating activities

(317,625)

250,000

NET CASH USED BY OPERATING ACTIVITIES

(183,151)

(518,687)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

--

(8,057)

Decrease (Increase)in deposits

1,800

(8,720)

Repayments of notes receivable

--

434,512

NET CASH PROVIDED BY INVESTING ACTIVITIES

1,800

417,735

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from convertible note payable

103,500

--

Repayment of loans payable to related party

--

(19,127)

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

103,500

(19,127)

F-6



NET DECREASE IN CASH

(77,851)

(120,079)

CASH - BEGINNING OF YEAR

104,721

224,800

CASH - END OF YEAR

$

26,870

$

104,721

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:

Interest

$

3,524

$

1,884

Non-cash investing and financing activities:

Debt discount

$

103,500

$

--

F-7



IGAMBIT INC.

Notes to Consolidated Financial Statements

Years Ended December 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.

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  were  included  in  the

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  $570,590  and  $320,590  as  of

December   31,   2013   and   December   31,   2012,   respectively,   and   of   accrued   interest

receivable of $67,625 as of December 31, 2013.

Accounts Receivable

Assets  from  discontinued  operations,  net  includes  accounts  receivable  which  represents

50% of contingency payments earned for the previous quarters. The reserve for bad debts

of $250,000 charged to operations  in 2010 was reversed in  connection with the Summary

Judgment  and  Forbearance  Agreement  described  in  Note  11.  Also  included  is  accrued

interest receivable of $67,625 recorded for interest  granted on the balance due  from Digi-

data through December 31, 2013.

F-8



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.    The  Company recognizes  revenues  when  the  services  or

products  have  been  provided  or delivered,  the  fees  charged  are  fixed  or  determinable, the

Company  and  its  customers  understand  the  specific  nature  and  terms  of  the  agreed  upon

transactions, and collectability is reasonably assured.

Advertising Costs

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

ended December 31, 2013 and 2012 were $5,786 and $26,439, respectively.

Cash and Cash Equivalents

For  purposes  of  reporting  cash  flows,  cash  and  cash  equivalents  include  checking  and

money market accounts and any highly liquid debt instruments purchased with a maturity

of three months or less.

Accounts Receivable

The   Company   analyzes   the   collectability   of   accounts   receivable   from   continuing

operations   each   accounting   period   and   adjusts   its   allowance   for   doubtful   accounts

accordingly.   A  considerable  amount  of  judgment  is  required  in  assessing  the  realization

F-9



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.    Allowance   for   doubtful   accounts   was   $17,865   and   $37,954   at

December  31,  2013  and  2012,  respectively.   There  was  no  bad  debt  expense  charged  to

operations for the  years ended December 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  $6,694  and$8,750was  charged  to  operations  for  the  years  ended

December 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.  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

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

F-10



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 – 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.

Years Ended

December 31,

2013

2012

Stock options

--

1,268,900

Stock warrants

--

275,000

Total shares excluded from calculation

--

1,543,900

F-11



Note 5–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  and

amortized  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.  The  Plan  expired  on  December  31,  2009,  therefore  as  of  December  31,

2013,  there  was  no  unrecognized  compensation  cost  related  to  non-vested  share-based

compensation arrangements granted under the 2006 plan.

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

of  common  stock.  8,146,900  options  have  been  issued  under  the  plan  to  date  of  which

7,157,038  have  been  exercised  and  692,962  have  expired  to  date.  There  were  296,900

options outstanding under the  2006 Plan on its expiration date of December 31, 2009. All

options issued subsequent to this date were not issued pursuant to any plan.

F-12



Stock option activity during the  years ended December 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

Cancelled during 2012

(1,500,000)

0.01

0.06

Options outstanding at

December 31, 2012

1,268,900

0.08

0.10

6.16

Expired

(600,000)

0.10

0.10

Options outstanding at

December 31, 2013

668,900

$

0.06

$

0.10

4.69

Options outstanding at December 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 11, 2011

100,000

100,000

$0.10

July 11, 2021

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

Total

668,900

668,900

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.

F-13



Warrant activity during the years ended December 31, 2013 and 2012follows:

(1)Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Warrants

Grant-DateFair

Outstanding

Exercise Price

Value

Life (Years)

Warrants outstanding

at December 31, 2011

275,000

$

0.94

$

0.10

7.42

No warrant activity

--

--

--

Warrants outstanding

at December 31, 2012

275,000

$

0.94

$

0.10

6.42

No warrant activity

--

--

--

Warrants outstanding

at December 31, 2013

275,000

$

0.94

$

0.10

5.42

(1)  Exclusive of 25,000 warrants expiring 2 years after initial IPO.

Warrants outstanding at December 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

Note 6 – Convertible Note Payable

On  September  16,  2013,  the  Company  issued  an  8%  convertible  note  in  the  aggregate

principal  amount  of  $103,500,  convertible  into  shares  of  the  Company’s  common  stock.

The  Note,  including  accrued  interest  is  due  June  18,  2014  and  is  convertible  any  time

after  180  days  at  the  option  of  the  holder  into  shares  of  the  Company’s  common  stock  at

55%  of  the  average  stock  price  of  the  lowest  3  closing  bid  prices  during  the  10  trading

day period ending on the latest complete trading day prior to the conversion date.  Interest

expense on the  convertible note of $2,405  was  recorded for the  year ended  December 31,

2013.

Initially  the  Company  had  anticipated  repaying  the  obligation  prior  to  the  effective  date

of  the  holder  electing  to  convert.   Since  the  effective  date  of  the  election  to  convert  has

passed  the  Company  recorded  a  debt  discount  related  to  identified  embedded  derivatives

relating  to  conversion  features  and  a  reset  provisions  (see  Note  7)  based  fair  values  as  of

the  inception  date  of  the  Note.   The  calculated  debt  discount  equaled  the  face  of  the  note

F-14



and  is  being  amortized  over  the  term  of  the  note.   During  the  year  ended  December  31,

2013, the Company amortized $40,250 of debt discount.

Note7 - Derivative Liability

Convertible Note

During  the  year  ended  December  31,  2013,  the  Company  issued  a  convertible  note  (see

Note 6 above).

The  note  is  convertible  into  common  stock,  at  the  holders’  option,  at  a  discount  to  the

market  price  of  the  Company’s  common  stock.  The  Company  has  identified  embedded

derivatives  included  in  these  notes  as  a  result  of  certain  anti-dilutive  (reset)  provisions,

related  to  certain  conversion  features.  The  accounting  treatment  of  derivative  financial

instruments  requires  that  the  Company  record  the  fair  value  of  the  derivatives  as  of  the

inception  date  of  the  convertible  note  and  debt  discount  amortization  to  fair  value  as  of

each  subsequent  reporting  date.    This  resulted  in  a  fair  value  of  derivative  liability  of

$152,076  in  which  to  the  extent  of  the  face  value  of  convertible  note  was  treated  as  debt

discount with the remainder treated as interest expense.

The  fair  value  of  the  embedded  derivatives  at  December  31,  2013,  in  the  amount  of

$152,076,   was   determined   using   the   Binomial   Option   Pricing   Model   based   on   the

following  assumptions:  (1)  dividend  yield  of  0%;  (2)  expected  volatility  of  243.00%,  (3)

weighted average  risk-free interest rate of 0.09%, (4) expected lives of 0.72 to 0.75 years,

and  (5)  estimated  fair  value  of  the  Company’s  common  stock  of  $0.51  per  share.  The

Company  recorded  interest  expense  from  the  excess  of  the  derivative  liability  over  the

convertible note of $48,576 during the year ended December 31, 2013.

Based  upon  ASC  840-15-25  (EITF  Issue  00-19,  paragraph  11)  the  Company has  adopted

a   sequencing   approach   regarding   the   application   of   ASC   815-40   to   its   outstanding

convertible   note.   Pursuant   to   the   sequencing   approach,   the   Company   evaluates   its

contracts based upon earliest issuance date.

Note 8 - Income Taxes

The  Company  follows  Accounting  Standards  Codification  subtopic  740,  Income  Taxes

(“ASC  740”)  which  requires  the  recognition  of  deferred  tax  liabilities  and  assets  for  the

expected  future  tax  consequences  of  events  that  have  been  included  in  the  financial

statements  or  tax  returns.  Under  such  method,  deferred  tax  assets  and  liabilities  are

recognized   for   the   future   tax   consequences   attributable   to   differences   between   the

financial  statement  carrying amounts  of  existing assets  and  liabilities  and  their  respective

tax  bases  using  enacted  tax  rates  in  effect  for  the  year  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 income tax provision (benefit) at December 31 consists of the following:

F-15



2013

2012

From Continuing Operations:

Deferred tax expense (benefit):

Federal

$

--

$184,185

State and local

--

--

Total from continued operations

--

184,185

Current tax expense (benefit):

Federal

--

(90,242)

State and local

--

--

Total from continued operations

--

(90,242)

From Discontinued Operations:

Current tax expense (benefit):

Federal

--

--

State and local

--

--

Total from discontinued operations

--

--

Total

$

--

$   93,943

The  difference  between  income  tax  expense  computed  by  applying  the  federal  statutory

corporate tax rate and actual income tax expense is as follows:

Years Ended

December 31,

2013

2012

Statutory U.S. federal income tax rate

34.0%

34.0%

State income taxes, net of

federal income tax benefit

1.9%

0.0%

Tax effect of expenses that are not

deductible for income tax purposes

1.3%

(0.8)%

Return to Provision Items

12.8%

0.0%

Other

0.5%

(0.2)%

Change in Valuation Allowance

(50.5)%

(39.1)%

Effective tax rate

(0.0)%

(6.1)%

At  December 31,  the  significant  components  of  the  deferred  tax  assets  (liabilities)  are

summarized below:

2013

2012

Deferred Tax Assets:

Net Operating Losses

$612,173

$765,578

Other

3,258

3,258

Total deferred tax assets

615,431

768,836

F-16



Deferred Tax Liabilities:

--

--

Total deferred tax liabilities

--

--

Valuation Allowance

(615,431)

(768,836)

Net deferred tax assets

$

--

$

--

As   of   December   31,   2013,   the   Company   had   federal   and   state   net   operating   loss

carryforwards  of approximately $1.3  million  and  $3.1  million, respectively,  which  expire

at  various  dates  from  2023  through  2033.  These  net  operating  loss  carryforwards  may be

used  to  offset  future  taxable  income  and  thereby  reduce  the  Company’s  U.S.  federal  and

state income taxes.

In  accordance  with  ASC  740,  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  as  of  December  31,  2012  has  been

established  as  Management  believes  that  the  Company  will  not  realize  the  benefit  of

those deferred tax assets.

The   Company   complies   with   the   provisions   of   ASC   740-10   in   accounting   for   its

uncertain  tax  positions.   ASC  740-10  addresses  the  determination  of  whether  tax  benefits

claimed  or  expected  to  be  claimed  on  a  tax  return  should  be  recorded  in  the  financial

statements.  Under  ASC  740-10,  the  Company  may  recognize  the  tax  benefit  from  an

uncertain  tax  position  only  if  it  is  more  likely  that  not  that  the  tax  position  will  be

sustained  on  examination  by  the  taxing  authorities,  based  on  the  technical  merits  of  the

position.  Management  has  determined  that  the  Company  has  no  significant  uncertain  tax

positions requiring recognition under ASC 740-10.

The  Company  is  subject  to  income  tax  in  the  U.S.,  and  certain  state  jurisdictions.  The

Company  has  not  been  audited  by  the  U.S.  Internal  Revenue  Service,  or  any  states  in

connection   with   income   taxes.   The  Company’s   tax   years   generally   remain   open   to

examination  for  all  federal  and  state  income  tax  matters  until  its  net  operating  loss

carryforwards  are  utilized  and  the  applicable  statutes  of  limitation  have  expired.  The

federal  and  state  tax  authorities  can  generally  reduce  a  net  operating  loss  (but  not  create

taxable  income)  for  a  period  outside  the  statute  of  limitations  in  order  to  determine  the

correct amount of net operating loss which may be allowed as a deduction against income

for a period within the statute of limitations.

The  Company  recognizes  interest  and  penalties  related  to  unrecognized  tax  benefits,  if

incurred, as a component of income tax expense.

F-17



Note 9 -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  years  ended  December  31,  2013  and  2012

were $14,572 and$8,714, respectively.

Note 10 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham  had  sales  to  two  customers  which  accounted  for  approximately  45%  and  24%,

respectively   of   Gotham’s   total   sales   for   the   year   ended   December   31,   2013.   One

customer  accounted  for  approximately  53%  of  accounts  receivable  at  December  31,

2013.

Gotham  had  sales  to  three  customers  which  accounted  for  approximately  42%,  15%  and

10%, respectively of Gotham’s total sales for the year ended December 31, 2012.  Two of

the  customers  accounted  for  approximately  43%  and  14%,   respectively  of  accounts

receivable at December 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

December  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 December 31, 2013 and December 31, 2012, respectively.

Note 11 - Fair Value Measurement

The  Company  adopted  the  provisions  of  Accounting  Standards  Codification  subtopic

825-10,  Financial  Instruments  (“ASC  825-10”)  on  January  1,  2008.  ASC  825-10  defines

fair  value  as  the  price  that  would  be  received  from  selling  an  asset  or  paid  to  transfer  a

liability  in  an  orderly  transaction  between  market  participants  at  the  measurement  date.

When  determining  the  fair  value  measurements  for  assets  and  liabilities  required  or

permitted  to  be  recorded  at  fair  value,  the  Company  considers  the  principal  or  most

advantageous  market  in  which  it  would  transact  and  considers  assumptions  that  market

participants  would  use  when  pricing  the  asset  or  liability,  such  as  inherent  risk,  transfer

restrictions,  and  risk  of  nonperformance.  ASC  825-10  establishes  a  fair  value  hierarchy

that  requires  an  entity  to  maximize  the  use  of  observable  inputs  and  minimize  the  use  of

F-18



unobservable  inputs  when  measuring  fair  value.  ASC  825-10  establishes  three  levels  of

inputs that may be used to measure fair value:

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

Level  2    Observable  inputs  other  than  Level  1  prices  such  as  quoted  prices  for  similar

assets  or  liabilities;  quoted  prices  in  markets  with  insufficient  volume  or  infrequent

transactions  (less  active  markets);  or  model-derived  valuations  in  which  all  significant

inputs  are  observable  or  can  be  derived  principally  from  or  corroborated  by  observable

market data for substantially the full term of the assets or liabilities.

Level  3    Unobservable  inputs  to  the  valuation  methodology  that  are  significant  to  the

measurement of fair value of assets or liabilities.

All  items  required  to  be  recorded  or  measured  on  a  recurring  basis  consist  of  derivative

liabilities and are based upon level 3 inputs.

To  the  extent  that  valuation  is  based  on  models  or  inputs  that  are  less  observable  or

unobservable  in  the  market,  the  determination  of  fair  value  requires  more  judgment.  In

certain  cases,  the  inputs  used  to  measure  fair  value  may  fall  into  different  levels  of  the

fair  value  hierarchy.  In  such  cases,  for  disclosure  purposes,  the  level  is  the  fair  value

hierarchy  within  which  the  fair  value  measurement  is  disclosed  and  is  determined  based

on the lowest level input that is significant to the fair value measurement.

Upon  adoption  of  ASC  825-10,  there  was  no  cumulative  effect  adjustment  to  beginning

retained earnings and no impact on the financial statements.

The  carrying  value  of  the  Company’s  cash  and  cash  equivalents,  accounts  receivable,

accounts  payable,  short-term  borrowings  (including  convertible  note  payable),  and  other

current assets and liabilities approximate fair value because of their short-term maturity.

As  of  December  31,  2013  and  2012,  the  Company  did  not  have  any  items  that  would  be

classified as level 1 or 2 disclosures.

The  Company  recognizes  its  derivative  liabilities  as  level  3  and  values  its  derivatives

using  the  methods  discussed  in  Note  7.  While  the  Company  believes  that  its  valuation

methods  are  appropriate  and  consistent  with  other  market  participants,  it  recognizes  that

the  use  of  different  methodologies  or  assumptions  to  determine  the  fair  value  of  certain

financial  instruments  could  result  in  a  different  estimate  of  fair  value  at  the  reporting

date.  The  primary  assumptions  that  would  significantly  affect  the  fair  values  using  the

methods  discussed  in  Note  7  are  that  of  volatility  and  market  price  of  the  underlying

common stock of the Company.

As   of   December   31,   2013   and   2012,   the   Company   did   not   have   any   derivative

instruments that were designated as hedges.

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The derivative liability as of December 31, 2013, in the amount of $152,076 has a level 3

classification.  Further,  there  were  no  changes  in  fair  value  of  the  Company’s  level  3

financial liabilities during the year ended December 31, 2013.

Fluctuations  in  the  Company’s  stock  price  are  a  primary  driver  for  the  changes  in  the

derivative  valuations  during  each  reporting  period.  As  the  stock  price  decreases  for  each

of  the  related  derivative  instruments,  the  value  to  the  holder  of  the  instrument  generally

decreases,    therefore    decreasing    the    liability    on    the    Company’s    balance    sheet.

Additionally,  stock  price  volatility  is  one  of  the  significant  unobservable  inputs  used  in

the   fair   value   measurement   of   each   of   the   Company’s   derivative   instruments.   The

simulated  fair  value  of these  liabilities  is  sensitive to  changes  in  the  Company’s  expected

volatility.  A  10%  change  in  pricing  inputs  and  changes  in  volatilities  and  correlation

factors  would  currently  not  result  in  a  material  change  in  value  for  the  level  3  financial

liability.

Note 12 - 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  December  31,  2013  and  2012,  respectively.

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

Note 13 – 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  at  a  monthly  rent  of  $1,560

with 2% annual increases.

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

August  2,  2012  at  a  monthly  license  fee  of  $4,025.    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:

2014

$  18,720

2015

19,080

2016

19,440

2017

3,240

$60,480

Rent  expense  of  $74,988  and  $92,522  was  charged  to  operations  for  the  years  ended

December 31, 2013 and 2012, respectively.

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Contingencies

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

owed   to   the   Company   totaling   $570,590   at   December   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").The  Verizon  Patent  Litigation  is  a  result  of  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   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.   On   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

F-21



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

authorized to file a Surreply without Court order.

On  December  13,  2013  the    Court  Granted  Summary  Judgment  in  iGambit’s  favor

against  Digi-Data  in  the  amount  of  $570,590,  plus  interest  at  the  Maryland  legal  rate  of

6% per annum from August 31, 2012, and post judgment interest at the Federal statutory

Rate.   Furthermore, Digi-Data’s Counterclaim was dismissed.

On  February  24,  2014  the  Company  entered  into  a  Forbearance  Agreement  with  Digi-

Data   pursuant   to   which     Digi-Data   shall   pay   to   iGambit   Six   Hundred   Forty-Six

Thousand,  Six  Hundred  Sixty-Eight  Dollars  and  Sixty-Seven  Cents  ($646,668.67)  (the

“Settlement Amount”) in full satisfaction of the Judgment.

Initial  Payment:  Digi-Data  shall  pay  the  Settlement  Amount  by  delivering  Twenty-Five

Thousand  Dollars  and  No  Cents  ($25,000.00)  to  iGambit  upon  the  execution  of  this

Agreement  (“Initial  Payment”),  and  delivering  the  remaining  Six  Hundred  Twenty-One

Thousand,  Six  Hundred  Sixty-Eight  Dollars  and  Sixty-Seven  Cents  ($621,668.67),  plus

interest  at  a  rate  of  6%  per  annum  (calculated  at  Actual/360)  (the  “Remaining  Balance”)

to iGambit.

Monthly  Payments:   Commencing  thirty  (30)  calendar  days  after  the  Effective  Date,  and

continuing  for  the  three  following  months,  Digi-Data  shall  make  monthly  payments  of

Twelve Thousand, Five Hundred Dollars and No Cents ($12,500.00) to iGambit (each, an

“Initial  Monthly  Payment”).   Thirty  (30)  calendar  days  after  the  fourth  Initial  Monthly

Payment  is  made, Digi-Data shall commence  making a  monthly payment  of  Twenty-Five

Thousand  Dollars  and  No  Cents  ($25,000.00)  to  iGambit  until  the  Remaining  Balance  is

paid  in  full  (each,  a  “Subsequent  Monthly  Payment”).   Such  Initial  Monthly  Payments

and   Subsequent   Monthly   Payments   shall   be   credited   to   payment   of   the   Settlement

Amount  and  Remaining  Balance,  with  payment  being  first  applied  to  accrued  and/or

outstanding interests, then to principal.

Line  of  Credit  Payments:    In  the  event  that  Digi-Data  obtains  a  new  line  of  credit

subsequent  to  the  Effective  Date  under  terms  acceptable  to  Digi-Data  in  the  amount  of

Three  Million  Dollars  and  No  Cents  ($3,000,000.00)  or  greater  it  shall,  within  fifteen

(15)  calendar  days  upon  obtaining  such  funding,  pay  the  full  Remaining  Balance  to

iGambit  (the  “LOC  Payment”).   In  the  event  that  Digi-Data  obtains  a  new  line  of  credit

subsequent to the Effective Date under terms acceptable to Digi-Data for any amount less

than   Three   Million   Dollars   and   No   Cents   ($3,000,000.00)   that   is   secured   by   its

receivables  it  shall,  within  fifteen  (15)  calendar  days  of  obtaining  such  funding,  pay

Twenty-Five  Thousand  Dollars  and  No  Cents  ($25,000.00)  to  iGambit  (the  “Receivables

Payment”).   Such  Receivables  Payment  shall  be  credited  to  payment  of  the  Settlement

Amount  and  Remaining  Balance,  with  payment  being  first  applied  to  accrued  and/or

outstanding interests, then to principal.

Digi-Data  Sale:   In  the  event  of  a  Digi-Data  Sale,  iGambit  shall  be  paid  the  Remaining

Balance  at  closing  of  any  such   Digi-Data  Sale   as   provided  in   paragraph   2,  below.

iGambit  acknowledges  that,  if  the  Digi-Data  Sale  is  a  sale  or  sales  of  the  Digi-Data

F-22



Assets,  there  may  be  insufficient  proceeds  to  pay  the  Remaining  Balance  in  full.   If  the

Digi-Data