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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ

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

ACT OF 1934

For the Quarterly period ended June 30, 2014

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

For the transition period from

to

Commission file number 000-53862

iGambit Inc.

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

Delaware

11-3363609

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1050 W. Jericho Turnpike, Suite A

Smithtown, New York 11787

(Address of Principal Executive Offices)(Zip Code)

(631) 670-6777

(Issuer’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)

of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the

registrant was required to file such reports), and (2) has been subject to such filing requirements for the past

90 days. Yes þ     No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,

if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was

required to submit and post such files). Yes þ     No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated

filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and

“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  Accelerated filer

Non-accelerated filer

Smaller reporting 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 12b-2 of the Exchange

Act). Yes     No þ

The Registrant had 25,583,990 shares of its common stock outstanding as of August 13, 2014.



iGambit Inc.

Form 10-Q

Part I — Financial Information

1

Item 1.

Financial Statements:

1

Consolidated Balance Sheets

1

Consolidated Statements of Income

23

Consolidated Statements of Cash Flows

3

Notes to Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of

Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

Part II — Other Information

26

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults upon Senior Securities

28

Item 4.

Removed and Reserved

28

Item 5.

Other Information

28

Item 6.

Exhibits

28

EX-31.1

EX-31.2

EX-32.1

EX-32.2



IGAMBIT INC.

PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

IGAMBIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

JUNE 30,

2014

DECEMBER 31,

2013

(Unaudited)

(Audited)

ASSETS

Current assets

Cash

$

589,689

$

26,870

Accounts receivable, net

97,406

135,292

Prepaid expenses

12,335

10,590

Due from rescission agreement

--

239,779

Assets from discontinued operations, net

--

638,215

Total current assets

699,430

1,050,746

Property and equipment, net

10,819

11,176

Other assets

Deposits

12,132

9,420

$

722,381

$

1,071,342

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

329,836

$

316,566

Convertible note payable, net

--

40,250

Derivative liability

--

152,076

Note payable - related party

--

6,263

Loan payable - stockholder

3,100

--

Total current liabilities

332,936

515,155

Stockholders' equity

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

issued and outstanding - 26,583,990 shares in 2014

and 25,044,056 shares in 2013, respectively

26,584

25,044

Additional paid-in capital

2,797,566

2,729,000

Accumulated deficit

(2,434,705)

(2,197,857)

Total stockholders' equity

389,445

556,187

$

722,381

$

1,071,342

1



CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

THREE MONTHS

SIX MONTHS

ENDED

ENDED

JUNE 30,

JUNE 30,

2014

2013

2014

2013

Sales

$

310,424

$

411,719

$

550,637

$

774,540

Cost of sales

123,703

149,608

226,615

265,378

Gross profit

186,721

262,111

324,022

509,162

Operating expenses

General and administrative expenses

387,972

428,261

660,239

877,926

Loss from operations

(201,251)

(166,150)

(336,217)

(368,764)

Other income (expenses)

Income from rescission agreement

--

755,000

--

755,000

Gain on derivative liability

152,076

--

152,076

--

Amortization of debt discount

(28,750)

--

(63,250)

--

Interest expense

(3,521)

--

(6,988)

--

Total other income (expenses)

119,805

755,000

81,838

755,000

Income (loss) from continuing operations

(81,446)

588,850

(254,379)

386,236

Income from discontinued operations

6,176

--

17,531

--

Net income (loss)

$

(75,270)

$

588,850

$

(236,848)

$

386,236

Basic and fully diluted earnings (loss) per

common share:

Continuing operations

$

.00

$

.02

$

(.01)

$

.02

Discontinued operations

$

.00

$

.00

$

.00

$

.00

Net earnings (loss) per common share

$

(.00)

$

.02

$

(.01)

$

.02

Weighted average common shares outstanding

- basic

25,439,660

25,044,056

25,242,951

25,044,056

Weighted average common shares outstanding

- fully diluted

25,439,660

25,987,956

25,242,951

25,987,956

2



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30,

(UNAUDITED)

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$     (236,848)

$

386,236

Adjustments to reconcile net loss to net

cash provided (used) by operating activities

Income from discontinued operations

(17,531)

--

Depreciation

2,383

3,211

Debt discount amortization

63,250

--

Stock-based compensation

21,106

--

Uncollectible portion of due from rescission agreement

50,779

--

Gain on derivative liability

(152,076)

--

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

37,886

(48,740)

Prepaid expenses

(1,745)

26,336

Due from rescission agreement

189,000

(331,000)

Accounts payable

7,007

(41,594)

Net cash used by continuing operating activities

(36,789)

(5,551)

Net cash provided by discontinued operating activities

655,746

--

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

618,957

(5,551)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(2,026)

--

(Increase) decrease in deposits

(2,712)

2,850

NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES

(4,738)

2,850

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from stockholder's loan

3,600

--

Repayments of stockholder's loan

(500)

--

Repayments of convertible note payable

(54,500)

--

NET CASH USED IN FINANCING ACTIVITIES

(51,400)

--

NET INCREASE (DECREASE) IN CASH

562,819

(2,701)

CASH - BEGINNING OF PERIOD

26,870

104,721

CASH - END OF PERIOD

$

589,689

$

102,020

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$

6,988

$

1,548

Non-cash investing and financing activities:

Note payable converted to common stock

$

(49,000)

$

--

3



IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Six Months Ended June 30, 2014 and 2013

Note 1 - Organization and Basis of Presentation

The  consolidated  financial  statements  presented  are  those  of  iGambit  Inc.,  (the  “Company”)  and

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

incorporated  under  the  laws  of  the  State  of  Delaware  on  April  13,  2000.  The  Company  was

originally  incorporated  as  Compusations  Inc.  under  the  laws  of  the  State  of  New  York  on

October  2,  1996.   The  Company  changed  its  name  to  BigVault.com  Inc.  upon  changing  its  state

of  domicile  on  April  13,  2000.    The  Company  changed  its  name  again  to  bigVault  Storage

Technologies  Inc.  on  December  21,  2000  before  changing  to  iGambit  Inc.  on  April  5,  2006.

Gotham  was  incorporated  under  the  laws  of  the  state of  New  York on  September  23,  2009.   The

Company   is   a   holding   company   which   seeks   out   acquisitions   of   operating   companies   in

technology  markets.   Gotham  is  in  the  business  of  providing  media  technology  services  to  real

estate agents and brokers in the New York metropolitan area.

Interim Financial Statements

The  following  (a)  condensed  consolidated  balance  sheet  as  of  December  31,  2013,  which  has

been  derived  from  audited  financial  statements,  and  (b)  the  unaudited  condensed  consolidated

interim   financial   statements   of   the   Company   have   been   prepared   in   accordance   with   the

instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all

of  the  information  and  footnotes  required  by  GAAP  for  complete  financial  statements.  In  the

opinion  of  management,  all  adjustments  (consisting  of  normal  recurring  accruals)  considered

necessary  for  a  fair  presentation  have  been  included.  Operating  results  for  the  six  months  ended

June  30,  2014  are  not  necessarily  indicative  of  results  that  may  be  expected  for  the  year  ending

December   31,   2014.   These   condensed   consolidated   financial   statements   should   be   read   in

conjunction  with  the  audited  consolidated  financial  statements  and  notes  thereto  for  the  year

ended  December  31,  2013  included  in  the  Company’s  Annual  Report  on  Form  10-K,  filed  with

the Securities and Exchange Commission (“SEC”) on April 1, 2014.

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.

4



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  $0  and  $570,590  as  of  June  30,  2014  and  December  31,  2013,

respectively,  and  of  accrued  interest  receivable  of  $0and  $67,625  as  of  June  30,  2014  and

December 31, 2013, respectively.

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

$85,156 recorded for interest granted on the balance due from Digi-data through May 2014.   The

entire  balance  including  accrued  interest  totaling  $655,746  was  repaid  to  the  Company  by  Digi-

data in the six months ended June 30, 2014.

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.

5



Advertising Costs

The  Company  expenses  advertising  costs  as  incurred.    Advertising  costs  for  the  six  months

ended June 30, 2014 and 2013 were $2,233 and $3,018, respectively.

Cash and Cash Equivalents

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

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

months or less.

Accounts Receivable

The Company analyzes the collectability of accounts receivable  from continuing operations  each

accounting  period  and  adjusts  its  allowance  for  doubtful  accounts  accordingly.   A  considerable

amount of judgment is required in assessing the realization of accounts receivables, including the

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

of  past  due  balances.   The  Company  evaluates  specific  accounts  when  it  becomes  aware  of

information  indicating  that  a  customer  may  not  be  able  to  meet  its  financial  obligations  due  to

deterioration  of  its  financial  condition,  lower credit  ratings,  bankruptcy or  other  factors  affecting

the  ability  to  render  payment.   Allowance  for  doubtful  accounts  was  $17,865  at  June  30,  2014

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

the six months ended June 30, 2014 and 2013, 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$2,383  and  $3,211  was  charged  to  operations  for  the  six  months  ended

June 30, 2014 and 2013, respectively.

Stock-Based Compensation

The Company accounts for its stock-based awards  granted under its employee compensation plan

in  accordance  with  ASC  Topic  No.  718-20,  Awards  Classified  as  Equity,  which  requires  the

measurement  of  compensation  expense  for  all  share-based  compensation  granted  to  employees

and  non-employee  directors  at  fair  value  on  the  date  of  grant  and  recognition  of  compensation

expense  over  the  related  service  period  for  awards  expected  to  vest.  The  Company  uses  the

Black-Scholes  option  pricing  model  to  estimate  the  fair  value  of  its  stock  options  and  warrants.

The  Black-Scholes  option  pricing  model  requires  the  input  of  highly  subjective  assumptions

6



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.

7



Three Months Ended

Six Months Ended

June 30,

June 30,

2014

2013

2014

2013

Stock options

1,518,900

668,900

1,518,900

668,900

Stock warrants

275,000

275,000

275,000

275,000

Total shares excluded from

calculation

1,793,900

943,900

1,793,900

943,900

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  2006Long-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   June30,   2014,   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.

Stock option activity during the six months ended June 30, 2014 and 2013 follows:

8



Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-DateFair

Life

Outstanding

Exercise Price

Value

(Years)

Options outstanding at

December 31, 2012

1,268,900

$

0.08

$

0.10

6.16

No option activity

--

--

--

Options outstanding at

June 30, 2013

1,268,900

$

0.08

$

0.10

5.19

Options outstanding at

December 31, 2013

668,900

$

0.06

$

0.10

4.69

Options granted

850,000

$

0.04

$

0.09

7.44

Options outstanding at

June 30, 2014

1,518,900

$

0.06

$

0.10

5.27

Options outstanding at June 30, 2014 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

June 9, 2014

213,000

213,000

$0.03

June 9, 2024

June 9, 2014

159,000

159,000

$0.03

June 9, 2024

June 9, 2014

600,000

600,000

$0.03

June 9, 2024

June 6, 2014

250,000

250,000

$0.05

June 6, 2019

Total

1,518,900

1,518,900

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.

9



Warrant activity during the six months ended June 30, 2014 and 2013 follows:

(1)Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Warrants

Grant-DateFair

Outstanding

Exercise Price

Value

Life (Years)

Warrants outstanding

at December 31, 2012

275,000

$

0.94

$

0.10

6.42

No warrant activity

--

--

--

Warrants outstanding

at June 30, 2013

275,000

$

0.94

$

0.10

5.92

Warrants outstanding

at December 31, 2013

275,000

$

0.94

$

0.10

5.42

No warrant activity

--

--

--

Warrants outstanding

at June 30, 2014

275,000

$

0.94

$

0.10

4.92

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

Warrants outstanding at June 30, 2014 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  was  due  June  18, 2014  and  was  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

$2,042 was recorded for the six months ended June 30, 2014.

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

10



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  was  amortized  over

the  term  of  the  note.    During  the  six  months  ended  June  30,  2014,  the  Company  amortized

$63,250 of debt discount.  During the six months  ended June 30, 2014, the note holder converted

$49,000  of  the  principal  balance  to  1,539,934  shares  of  common  stock,  and  the  Company repaid

the remaining note balance of $54,500 and accrued interest of $5,646 on June 18, 2014.

Note 7 - 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.    A  gain  on  derivative  liability  of  $152,076  was  recorded  during  the  six

months ended June 30, 2014 for the satisfaction of the convertible note.

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

Quarter Ended June 30,

2014 2013

Effective tax rate

0.0 % 0.0 %

11



A  full  valuation  allowance  was  recorded  against  the  Company’s  net  deferred  tax  assets.  A

valuation  allowance  must  be  established  if  it  is  more  likely  than  not  that  the  deferred  tax  assets

will  not  be  realized.  This  assessment  is  based  upon  consideration  of  available  positive  and

negative  evidence,  which  includes,  among  other  things,  the  Company’s  most  recent  results  of

operations and expected future profitability. Based on the Company’s cumulative losses in recent

years,  a  full  valuation  allowance  against  the  Company’s  deferred  tax  assets  has  been  established

as  Management  believes  that  the  Company  will  not  realize  the  benefit  of  those  deferred  tax

assets.

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   six   months   ended   June   30,   2014   and   2013   were   $3,581   and$9,744,

respectively.

Note 10 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham  had  sales  to  one  customer  which  accounted  for  approximately  65%  of  Gotham’s  total

sales  for  the  six  months  ended  June  30,  2014. The  customer  accounted  for  approximately 62%of

accounts receivable at June 30, 2014.

Gotham   had   sales   to   two   customers   which   accounted   for   approximately   44%   and   21%,

respectively of Gotham’s  total  sales for the  six  months  ended June 30, 2013.   The  two customers

accounted for approximately 46% and 17%, respectively of accounts receivable at June 30, 2013.

Cash

Cash  is  maintained  at  a  major  financial  institution.  Accounts  held  at  U.S.  financial  institutions

are  insured  by  the  FDIC  up  to  $250,000.  Cash  balances  could  exceed  insured  amounts  at  any

given  time,  however,  the  Company  has  not  experienced  any  such  losses.   The  Company  did  not

have any interest-bearing accounts at June 30, 2014 and December 31, 2013, 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,

12



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  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 consolidated 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 June 30, 2014 and December 31, 2013, 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.

13



As   of   June   30,   2014   and   December   31,   2013,  the   Company  did   not  have  any  derivative

instruments that were designated as hedges.

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 six months ended June 30, 2014.

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  which  was  due  on  December  31,  2013  from  an  entity  that  was

previously  a  related  party.  The  balance  of  $6,263  has  not  been  paid  and  is  accordingly  included

in accounts payable at June 30, 2014.

Loan Payable - Stockholder

A  stockholder/officer  of  the  Company  made  cash  advances  totaling  $3,600  on  behalf  of  the

Company.   Repayments  of  $500  were  made  during  the  six  months  ended  June  30,  2014.   The

loan does not bear interest and will be repaid by December 31, 2014.

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  $1,500  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:

14



2014

$   9,420

2015

19,080

2016

19,440

2017

3,240

$51,180

Rent  expense  of  $34,453  and  $37,258  was  charged  to  operations  for  the  six  months  ended  June

30, 2014 and 2013, respectively.

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  Company.  No

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

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

this  Order  or  the  settlement  agreement  between  Verizon  and  the  Plaintiff.   On  April  4,  2013,  an

Order  of  Dismissal  in  the  Verizon  Patent  Litigation  was  filed.   The  Dismissal  is  with  prejudice

with  each  party  to  bear  its  own  costs  and  fees.   On  May  24,  2013,  the  Company  filed  a  Motion

for Summary Judgment with the  Court asking the  Court to move in its favor against DDC for the

entire  outstanding  balance  due  along  with  attorney’s  fees  and  post  and  pre-judgment  interest  as

applicable  under  Maryland  Law.  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

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

entirely   upon   the   Affidavit   of   a   Vice   President   of   Digi-Data   for   its   evidentiary   support.

Notwithstanding,  Digi-Data  failed  to  produce  documentary  support  for  its  alleged  damages  and

to explain why it failed to disclose such information during the discovery period or thereafter.

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

Court  of  Digi-Data’s  apparent  litigation-by-ambush  tactic  such  as  withholding  allegations  of

damages  until  the  end  of  discovery  and  attempting  to  use  such  previously  withheld  information

to  defeat  summary  judgment,  and  the  legal  inadequacy  of  same.    Pursuant  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

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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  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.  On  May  12,  2014,  Digi-Data paid  the  full  balance  due on  the  judgment  plus  all

accrued interest upon the sale of Digi-Data.

Financial Advisor Contract

Brooks, Houghton & Company, Inc. (BHC)

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

advisory services in connection with the Company’s proposed business combinations and related

fund  raising  transactions.  As  part  of  that  agreement  BHC  would  be  entitled  to  a  “Business

Combination  Fee”  equal  to  three  percent  of  the  amount  of  the  company’s  total  proceeds   and

other  consideration  paid  or  to  be  paid  for  the  assets  acquired,  inclusive  of  equity  or  any  debt

issued;  however  the  fee  was  to  be  no  less  than  $300,000.  As  a  result  of  the  IGX  transaction,  as

described  in  Note  14,  BHC  initially felt  entitled  to  $300,000.  The  Company has  taken  a  position

that  since  the  transaction  has  been  rescinded,  that  the  fee  is  has  not  been  earned  and  thus  not  to

be paid.  While the ultimate outcome of this matter is  not  presently determinable, it  is the opinion

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

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

Note 14 – Rescission of Purchase Agreement for Acquisition of IGX Global Inc. and

IGX Global UK Limited

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

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

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

Global  UK  Limited  (“IGXUK”)  and  Tomas  Duffy  (“DUFFY”)  the  sole  shareholder  of  both

IGXUK and IGXUS.

Under  the  Purchase  Agreement,  the  Company  intended  to  purchase,  as  of  December  31,  2012,

substantially  all  of  the  assets  of  IGXUS  and  all  of  the  issued  and  outstanding  shares  of  IGXUK

and  thereby  the  acquired  business  operated  by  IGXUS  and  IGXUK  (the  “Acquired  Business”).

The original agreement called for a $500,000 payment at closing, a $1,000,000 Promissory Note,

assumption  of  certain  liabilities  of  the  IGXUS  up  to  $2,500,000  and  3.75  million  shares  of

iGambit  stock  to  be  earned  over  a  three  year  period  based  upon  certain  revenue  and  earnings

targets. The Company had arranged financing at the original effective date of the purchase to pay

the $500,000 payment and payoff certain liabilities of IGXUS.

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

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

each  to  the  positions  they  were  respectively  prior  to  entering  into  the  Purchase  Agreement.  This

included IGX obtaining financing to pay off the entire balance of the financing the Company had

obtained  to  fund  the  upfront  payment  and  certain  liabilities  at  the  original  closing date;  IGX also

assumed  and  paid  certain  expenses  related  to  the  purchase.  Also  as  consideration  for  iGambit’s

expenses  and  inconvenience,  the  Company  received  $130,000  prior  to  the  effective  date  of  the

rescission  from  IGX,  and  upon  the  effective  date  of  the  rescission,  an  additional  payment  of

$275,000, and will receive an additional $350,000 payable in equal monthly installments over 18

months.  The  consideration  from  IGX  totaling  $755,000  is  reported  as  Other  Income  in  the

Statements  of  Operations  for  the  year  ended  December  31,  2013.   The  balance  due  from  IGX  of

$225,779  was  settled  for  $175,000,  which  was  received  on  June  16,  2014.    The  uncollectible

balance of $50,779 was charged to operations.

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

Operations

FORWARD LOOKING STATEMENTS

This    Form   10-Q   includes    “forward-looking   statements”   within   the   meaning   of

Section 27A  of  the  Securities  Act  of  1933,  as  amended,  and  Section 21E  of  the  Securities

Exchange  Act  of  1934,  as  amended.  All  statements,  other  than  statements  of  historical  facts,

included  or  incorporated  by  reference  in  this  Form  10-Q  which  address  activities,  events  or

developments  that  the  Company expects  or  anticipates  will  or  may occur  in  the  future, including

such  things  as  future  capital  expenditures  (including  the  amount  and  nature  thereof),  finding

suitable  merger  or  acquisition  candidates,  expansion  and  growth  of  the  Company’s  business  and

operations,  and  other  such  matters  are  forward-looking  statements.  These  statements  are  based

on  certain  assumptions  and  analyses  made  by  the  Company  in  light  of  its  experience  and  its

perception  of  historical  trends,  current  conditions  and  expected  future  developments  as  well  as

other factors it believes are appropriate in the circumstances.

Investors  are  cautioned  that  any  such  forward-looking  statements  are  not  guarantees  of

future  performance  and  involve  significant  risks  and  uncertainties,  and  that  actual  results  may

differ  materially  from  those  projected  in  the  forward-looking  statements.  Factors  that  could

adversely  affect  actual  results  and  performance  include,  among  others,  potential  fluctuations  in

quarterly   operating   results   and   expenses,   government   regulation,   technology   change   and

competition.  Consequently,  all  of  the  forward-looking  statements  made  in  this  Form  10-Q  are

qualified  by  these  cautionary  statements  and  there  can  be  no  assurance  that  the  actual  results  or

developments  anticipated  by the  Company will  be  realized  or,  even  if  substantially realized,  that

they  will  have  the  expected  consequence  to  or  effects  on  the  Company  or  its  business  or

operations.   The   Company   assumes   no   obligations   to   update   any   such   forward-looking

statements.

CRITICAL ACCOUNTING ESTIMATES

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

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

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

financial  statements  may  require  us  to  make  estimates  and  assumptions  that  may  affect  the

reported  amounts  of  assets  and  liabilities  and  the  related  disclosures  at  the  date  of  the  financial

statements.  We  do  not  currently  have  any  estimates  or  assumptions  where  the  nature  of  the

estimates  or  assumptions  is  material  due  to  the  levels  of  subjectivity  and  judgment  necessary  to

account  for highly uncertain matters  or the  susceptibility of such  matters  to change  or the  impact

of  the  estimates  and  assumptions  on  financial  condition  or  operating  performance  is  material,

except as described below.

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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  collection  history  and  the  related  aging

of  past  due  balances.  We  evaluate  specific  accounts  when  we  become  aware  of  information

indicating that a customer may not be able to meet its financial obligations due to deterioration of

its  financial  condition,  lower  credit  ratings,  bankruptcy  or  other  factors  affecting  the  ability  to

render payment. There was no bad debt expense charged to operations for six months ended June

30, 2014 and 2013, respectively.

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

$85,156 recorded for interest granted on the balance due from Digi-data through May 2014.   The

entire  balance  including  accrued  interest  totaling  $655,746  was  repaid  to  the  Company  by  Digi-

data in the six months ended June 30, 2014.

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

20



accounts and any gain or loss is credited or charged to income.

Depreciation  expense  of  $2,383  and  $3,211 was  charged  to  operations  for  the  six  months

ended June 30, 2014 and 2013, respectively.

Stock-Based Compensation

We  account  for  our  stock-based  awards  granted  under  our  employee  compensation  plan

in  accordance  with  ASC  Topic  No.  718-20,  Awards  Classified  as  Equity,  which  requires  the

measurement  of  compensation  expense  for  all  share-based  compensation  granted  to  employees

and  non-employee  directors  at  fair  value  on  the  date  of  grant  and  recognition  of  compensation

expense  over  the  related  service  period  for  awards  expected  to  vest.  We  use  the  Black-Scholes

option  valuation  model  to  estimate  the  fair  value  of  our  stock  options  and  warrants.  The  Black-

Scholes option valuation  model requires the input  of highly subjective assumptions including the

expected  stock  price  volatility  of  the  Company’s  common  stock.  Changes  in  these  subjective

input assumptions can materially affect the fair value estimate of our stock options and warrants.

Income Taxes

We  account  for  income  taxes  using  the  asset  and  liability  method  in  accordance  with

ASC  Topic  No.  740,  Income  Taxes.  Under  this  method,  deferred  tax  assets  and  liabilities  are

determined   based   on   differences   between   financial   reporting   and   tax   bases   of   assets   and

liabilities, and are  measured using the  enacted tax  rates  and laws that  are  expected to be in  effect

when the differences are expected to reverse.

We  apply  the  provisions  of  ASC  Topic  No.  740  for  the  financial  statement  recognition,

measurement  and  disclosure  of  uncertain  tax  positions  recognized  in  the  Company’s  financial

statements.  In  accordance  with  this  provision,  tax  positions  must  meet  a  more-likely-than-not

recognition  threshold  and  measurement  attribute  for  the  financial  statement  recognition  and

measurement of a tax  position. Management  has  determined that  the Company has  no significant

uncertain tax positions requiring recognition and measurement under ASC 740-10.

Convertible Note

On  September  16,  2013,  we  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  was  due  June  18, 2014  and  was  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

$2,042 was recorded for the six months ended June 30, 2014.

Initially  we  anticipated  repaying  the  obligation  prior  to  the  effective  date  of  the  holder

electing to  convert.   Since  the  effective  date of the  election  to  convert  passed we  recorded  a  debt

discount  related  to  identified  embedded  derivatives  relating  to  conversion  features  and  a  reset

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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  was  amortized  over  the  term  of  the  note.   During

the  six  months  ended  June  30,  2014,  we  amortized  $63,250  of  debt  discount.   During  the  six

months  ended  June  30,  2014,  the  note  holder  converted  $49,000  of  the  principal  balance  to

1,539,934  shares  of  common  stock,  and  we  repaid  the  remaining  note  balance  of  $54,500  and

accrued interest of $5,646 on June 18, 2014.

Derivative Liability

Convertible Note

During  the  year  ended  December  31,  2013,  we  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.  We  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  we 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.  We  recorded  interest  expense  from

the  excess  of  the  derivative  liability  over  the  convertible  note  of  $48,576  during  the  year  ended

December  31,  2013.    A  gain  on  derivative  liability  of  $152,076  was  recorded  during  the  six

months ended June 30, 2014 for the satisfaction of the convertible note.

Based  upon  ASC  840-15-25  (EITF  Issue  00-19,  paragraph  11)  we  adopted  a  sequencing

approach  regarding  the  application  of  ASC  815-40  to  its  outstanding  convertible  note.  Pursuant

to the sequencing approach, we evaluate our 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

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real  estate  industry.  We  are  focused  on  expanding  the  operations  of  Gotham  by  marketing  the

company to existing and potential new clients.

Assets.  At  June  30,  2014,  we  had  $722,381in  total  assets,  compared  to  $1,071,342  at

December  31,  2013.  The  decrease  in  total  assets  was  primarily  due  to  the  decrease  in  accounts

receivable, the receivable  due from discontinued operations and the receivable due from the  IGX

Rescission Agreement.

Liabilities. At June 30, 2014, our total liabilities were $332,936 compared to $515,155 at

December  31,  2013.  Liabilities  consist  of  accounts  payable  of  $329,836  and  a  loan  payable  to

stockholder   of   $3,100,   whereas   our   total   liabilities   as   of   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  payable  to  a  related  party  of

$6,263.  The  decrease  in  liabilities  was  primarily  due  to  the  repayment  and  conversion  of  the

convertible note payable, and the write-off the derivative liability.  We do not  have any long term

liabilities.

Stockholders’  Equity.  Our  stockholders’  equity  decreased  to  $389,445  at  June  30,  2014

from  $556,187  at  December  31,  2013.    This  decrease  was  primarily  due  to  an  increase  in

accumulated  deficit  from  $(2,197,857)  at  December  31,  2013  to  $(2,434,705)  at  June  30,  2014,

resulting from a net loss from operations of $(236,548) for the six months ended June 30, 2014.

THREE  MONTHS  ENDED  JUNE  30,  2014  AS  COMPARED  TO  THREE  MONTHS

ENDED JUNE 30, 2013

Revenues  and  Cost  of  Sales.  We  had  $310,424  of  revenue  during  the  three  months

ended  June  30,  2014  compared  to  revenue  of  $411,719  during  the  three  months  ended  June30,

2013.  The  decrease  in  revenue  was  due  primarily  to  a  decrease  in  revenue  generated  by  our

Gotham  subsidiary  as  result  of  closing  down  the  Team5  division.  We  also  earned  other  income

of  $119,805  for  the  three  months  ended  June  30,  2014  primarily  due  to  the  gain  on  derivative

liability,  compared  to  $755,000  in  other  income  from  the  IGX  Rescission  Agreement  for  the

three  months  ended  June  30,  2013...  In  addition  to  Gotham’s  operations,  we  had  income  from

discontinued operations  of $6,176 and  $0 for the  three  months ended June  30, 2014 and  June 30,

2013,  respectively.   The  decrease  in  our  cost  of  sales  for  the  three  months  ended  June  30,  2014

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

General  and  Administrative  Expenses.  General  and  Administrative  Expenses  decreased

to $387,972 for the three months ended June 30, 2014 from $428,261 for the three months ended

June  30,  2013.     For  the  three  months  ended  June  30,  2014  our  General  and  Administrative

Expenses  consisted  of  corporate  administrative  expenses  of  $68,022,  rent  expense  of  $16,997,

legal and accounting fees of $12,628, employee benefits, consisting primarily of health insurance

expense  of  $15,416,  $26,106  in  consulting  fees,  payroll  expenses  of  $198,024  and  a  bad  debt

write  off  of  $50,779  as  part  of  a  settlement  for  the  receivable  balance  on  the  IGX  rescission

agreement. . For the three months ended June 30, 2013 our General and Administrative Expenses

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consisted  of  corporate  administrative  expenses  of  $65,062,  rent  expense  of  $16,689,  legal  and

accounting  fees  of  $55,420,employee  benefits,  consisting  primarily  of  health  insurance  expense

of  $24,676,  and  payroll  expenses  of  $266,414.  The  decreases  from  the  three  months  ended  June

30,  2013  to  the  three  months  ended  June  30,  2014  relate  primarily  to:  (i) a  decrease  in  payroll

expenses;   (ii)   a   decrease   in   rent;   and   (iii) a   decrease   in   general   and   administrative   costs

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

salaries  and  the  operation  of  our  Gotham  subsidiary  should  remain  level  going  forward,  subject

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

corporate administrative expenses.

Other  Income  (Expense)  and  Taxes.  We  also  earned  other  income  of  $119,805  for  the

three  months  ended  June  30,  2014  primarily  due  to  the  gain  on  derivative  liability,  compared  to

$755,000  in  other  income  from  the  IGX  Rescission  Agreement  for  the  three  months  ended  June

30, 2013

Six Months Ended June 30, 2014 as Compared to Six Months Ended June 30, 2013

Revenues  and  Net  Income.  We  had  $550,637  of  revenue  during  the  six  months  ended  June

30,  2014,  as  compared  to  $774,540  of  revenue  during the  six  months  ended  June  30,  2013.   The

decrease  in  revenue  was  due  to  a  decrease  in  revenue  generated  by  our  acquired  subsidiary

Gotham as a result of closing down the Team5 division.  The decrease in our cost of sales for the

six  months  ended June  30, 2014 was  due to  a decrease  in the  cost  of the outsourced photography

vendors utilized by Gotham.

General  and  Administrative  Expenses.  General  and  Administrative  Expenses  decreased  to

$660,239  for  the  six  months  ended  June  30,  2014  from  $877,926  for  the  six  months  ended  June

30,  2013.  For  the  six  months  ended  June  30,  2014  our  General  and  Administrative  Expenses

consisted  of  corporate  administrative  expenses  of  $110,176,  rent  expense  of  $34,453,  employee

benefits,  consisting  primarily  of  health  insurance  expense  of  $37,338,  legal  and  accounting  fees

of   $48,964,   business   insurance   expenses   of   $23,500,   consulting   fees   of   $26,106,   payroll

expenses  of  $328,923,  and  a  bad  debt  write  off  of  $50,779  as  part  of  a  settlement  for  the

receivable balance on the  IGX rescission agreement. For the six months ended June 30, 2013 our

General   and   Administrative   Expenses   consisted   of   corporate   administrative   expenses   of

$141,828,  rent  expense  of  $37,258,  employee  benefits,  consisting  primarily  of  health  insurance

expense  of  $49,085,  legal  and  accounting  fees  of  $82,704,  business  insurance  expenses  of

$21,334,  and  payroll  expenses  of  $545,717.  The  decreases  from  the  six  months  ended  June  30,

2013  to  the  six  months  ended  June  30,  2014  relate  primarily  to  a  decrease  in  payroll  expense,

health  benefits  and   corporate   administrative  expenses.     Costs   associated  with  our   officers’

salaries  and  the  operation  of  our  Gotham  subsidiary  should  remain  level  going  forward,  subject

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

corporate administrative expenses.

Other  Income  (Expense)  and  Taxes.  We  had  other  income  of  $81,838  primarily due  to  the  gain

on  derivative  liability  for  the  six  months  ended  June  30,  2014,  compared  to  $755,000  from  the

IGX Rescission Agreement for the six months ended June 30, 2013.

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LIQUIDITY AND CAPITAL RESOURCES

General

As  reflected  in the  accompanying consolidated  financial  statements, at  June  30,  2014, we

had  $589,689of  cash  and  stockholders’  equity  of  $389,445  as  compared  to  $26,870  of  cash  and

stockholders’ equity of $556,187 at December 31, 2013.

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 provided by operating activities was $618,957 for the six months ended June 30,

2014, compared  to  net  cash  used  by operating activities  of $5,551  for  the  six  months  ended  June

30, 2013. Net  cash used  by continuing operating activities was $36,789  for the six  months ended

June 30, 2014, compared  to net  cash used by continuing operating activities of $5,551 for the six

months  ended  June  30,  2013.  Our  primary  source  of  operating  cash  flows  from  continuing

operating  activities  for  the  six  months  ended  June  30,  2014  was  from  our  Gotham  subsidiary’s

revenues  of  $550,637  and  $774,540  for  the  six  months  ended  June  30,  2013.    Additional

contributing  factors  to  the  change  were  from  a  decrease  in  accounts  receivable  of  $37,886,  an

increase in prepaid expenses of $1,745, an increase in accounts  payable of  $7,007 and a decrease

in  the  receivable  due  from  the  IGX  rescission  agreement  of  $189,000.    Net  cash  provided  by

discontinued  operating activities  was  $655,746  for  the  six  months  ended  June  30,  2014  and  cash

provided   by   discontinued   operating   activities   was   $0   for   the   six   months   ended   June   30,

2013.Cash   provided   by   discontinued   operations   for   the   six   months   ended   June   30,   2014

consisted of $655,746in  cash payments  received from DDC against  accounts receivable included

in the Assets from Discontinued Operations.

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Cash  used  by  investing  activities  was  $4,738  for  the  six  months  ended  June  30,  2014

compared  to  cash  provided  by  investing  activities  of  $2,850  for  the  six  months  ended  June  30,

2013.   For  the  six  months  ended  June  30,  2014  the  primary  use  of  cash  provided  by  investing

activities was from purchases of property and equipment of $2,026 and an increase in deposits of

$2,712.    For  the  six  months  ended  June  30,  2013  the  primary  source  of  cash  provided  by

investing activities was from a decrease in deposits.

Cash  used  by  financing  activities  was  $(51,400)  for  the  six  months  ended  June  30,  2014

compared  to  $0  for  the  six  months  ended  June  30,  2013.  The  cash  flows  used  by  financing

activities   for   the   six   months   ended   June   30,   2014   was   primarily   from   repayment   of   the

convertible note payable.

Supplemental Cash Flow Activity

In  the  six  months  ended  June  30,  2014  the  company  paid  interest  of  $6,988  compared  to

interest of $1,548 in the six months ended June 30, 2013.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

the Exchange Act under the supervision and with the participation of our management, including

our  Chief  Executive  Officer  and  Chief  Financial  Officer,  of  the  effectiveness  of  our  disclosure

controls  and  procedures,  as defined in Rules 13a-15(e)  and 15d-15(e) under the  Exchange  Act  as

of  June  30,  2012.  Based  upon  that  evaluation,  our  Chief  Executive  Officer  and  Chief  Financial

Officer concluded that our disclosure controls and procedures were effective as of June 30, 2014.

Change in Internal Controls

During the six months ended June 30, 2014, there were no changes  in our internal control

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

internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.   Legal Proceedings.

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

26



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  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, 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

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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.

On  May  12,  2014,  Digi-Data paid  the  full  balance  due on  the  judgment  plus  all  accrued  interest

upon the sale of Digi-Data.

Item 1A.   Risk Factors.

Not required

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

In  connection  with  the  convertible  note  payable  (see  Note  6),  on  April  1,  2014,  the  note  holder

elected to convert $10,000 principal amount of the Note into 90,909 shares of common stock at a

conversion  price  of  $.11  per  share.   On  April  24,  2014,  the  note  holder  elected  to  convert  an

additional  $12,000  principal  amount  of  the  Note  into  112,888  shares  of  common  stock  at  a

conversion  price  of  $.1063  per  share.   On  June  2,  2014,  the  note  holder  elected  to  convert  an

additional  $12,000  principal  amount  of  the  Note  into  427,046  shares  of  common  stock  at  a

conversion  price  of  $.0281  per  share.   On  June  11,  2014,  the  note  holder  elected  to  convert  an

additional  $15,000  principal  amount  of  the  Note  into  909,091  shares  of  common  stock  at  a

conversion  price  of  $.0165  per  share.   We  repaid  the  remaining  note  balance  of  $54,500  and

accrued interest of $5,646 on June 18, 2014.

Item 3.    Defaults upon Senior Securities.

None

Item 4.   Removed and Reserved.

Item 5.   Other Information.

None

Item 6.

Exhibits

Exhibit No.

Description

31.1    Certification of the Chief Executive Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

31.2    Certification of the Chief Financial Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

32.1    Certification of the Chief Executive Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or

otherwise subject to the liability of that section. Further, this exhibit shall not be

deemed to be incorporated by reference into any filing under the Securities Act of

28



1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.2    Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or

otherwise subject to the liability of that section. Further, this exhibit shall not be

deemed to be incorporated by reference into any filing under the Securities Act of

1933, as amended, or the Securities Exchange Act of 1934, as amended.)

29



SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be

signed on its behalf by the undersigned, thereunto duly authorized, on August 13, 2014.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer

30



Exhibit Index

Exhibit No.

Description

31.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

31.2

Certification of the Interim Chief Financial Officer Pursuant to Section 302 of

the Sarbanes-Oxley Act of 2002.

32.1

Certification of the Chief Executive Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or

otherwise subject to the liability of that section. Further, this exhibit shall not be

deemed to be incorporated by reference into any filing under the Securities Act

of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.2

Certification of the Interim Chief Financial Officer Pursuant to Section 906 of

the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or

otherwise subject to the liability of that section. Further, this exhibit shall not be

deemed to be incorporated by reference into any filing under the Securities Act

of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

31